Case study
In analysing risk at General Motors (GM) for the upcoming 2007 model range (in late 2005),risk management specialists had become somewhat blasé about the American automobile buyer. SUV-type trucks and pick-ups remained big-sellers, as did inefficient fuel guzzling V8sedans and sports cars. The likelihood of sales lost to hybrid and fuel-efficient vehicles (eventhough these had just been released to the market and were already making an impact) wasassessed as very low, as were the consequences of these lost sales. This was exacerbated by the lack of appreciation of the looming financial trouble.
1. Knowing now that GM suffered massive losses as a result of badly misjudgingthe mood of the US consumer and the impact of the global financial crisis,what basic rule of thumb for assessment of consequence should GM haveapplied in this case?
2. With rising oil prices, falling confidence in the finance markets and raised environmental concerns among the general public, what likelihood and consequence would you assign to this situation, and what resultant overall risk priority would you generate?
Assessment activity 4 – Selecting and implementing risk treatments
1. What risk control options might you select for the following risks. a) Increased competition b) Decline in demand for the organisation’s services. c) Expenditure exceeds budget forecast d) IT system doesn’t meet company requirements e) High staff turnover
2. Research what type(s) of risk reduction or sharing strategies may be appliedor are available if you are looking to address the risk of litigation from theactions or inactions of you or your staff.
3. Name four business areas for which there may be a legal requirement to retainor destroy documentation. Give examples.
4. List the information you would include in your risk management action planand explain the purpose of this information.
5. Explain the role a manager plays in monitoring and evaluating their riskmanagement action plan and storing the information.
6. In one or two sentences, describe why you need to maintain communicationwith stakeholders and/or participants throughout the risk managementprocess.
7. What difficulties do you think might arise when implementing the plan?Provide solutions to the difficulties you have identified.
Case study
The companyPolyMake Pty Ltd is a medium sized (250+ staff), publically listed NSW-based plastic formingcompany that makes components for the automotive industry. They are well established intheir Castlereagh HQ, and have just finished upgrading to a new warehouse and formingmachinery that will allow them to take on extra capacity.The situationThe Board of PolyMake Pty Ltd has approached several large boat builders with the intentionof expanding into marine plastics, a relatively mature sector (particularly in Sydney). Theapproaches were well received, with some reservations regarding the company’s experiencein the salty, full UV-exposure of the marine environment. PolyMake is well financed(underwritten) but is carrying some debt (around the sector average) and has minimal cashreserves. There is a quality leadership team in place, but together they have little experiencewith marine plastics.The risksThe risk management team at PolyMake Pty Ltd conducted a risk assessment and foundseveral areas of risk that could affect their move into the new market. These include:1. Technology risk – although they have upgraded their plant, is it suited to marine plastics?2. Product risk – will the products from the new player be embraced by the market?3. Financial risk – with minimal reserves and some debt from the upgrades, if they areunable to produce a competitive product quickly they may face financial difficulties.4. Reputation risk – what effect will the move to diversify have on their brand?5. Commercial/market risk – the most obvious risk, moving into a saturated market, howwill they perform?6. Management risk – does management have sufficient experience to be able to adjust should the marine sector reject their new product?
1. Research the different types of risk treatments available to the business toprovide risk coverage for the identified risks.
2. Determine which risk treatment would best suit each risk, with a brief explanation (one or two sentences) justifying your decision.
3. Prepare this as a written report outlining the options and suggesting animplementation plan (including time line) to the CEO of PolyMake Pty Ltd.
