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Risk Management and Control Measures

Introduction

Risk management involves the assessment and quantification of risks in a business. After quantification, necessary steps should then be taken to ensure that there are measures to control or reduce these risks. On the other hand, risk assessment is the process of careful examination of the factors that are responsible for bringing these risks. This process can be achieved by following five steps. The first step involves the identification of the risks facing a business depending on the type and the size of the unit. The second step is the analysis of these risks and determining the level of impact to the operations of the company each of the risks will have. The other step involves the formulation of a plan that will treat these risks. The treatment process enables the risk manager to be to decide on the risks to be avoided and those to be reduced. Finally, the fifth process is the monitoring of the risks as they appear and ways of dealing with them. This process is ongoing and lasts the lifetime of the company (wisegeek).

In this case, International grain handlers (IRH), is a company that deals with the milling of grains to produce flour. They have been losing customers due to competition from other handlers who offer better products at cheaper prices. This company was established some time back and every system they use in manual. The company uses the old method of keeping records and all the accounting problems are done by hand. The weighing system is manual and has to be operated by several workers. The kind of machines the company uses are old, slow and have to be manually operated by many people. The machines, due to wear and age are also noted to be producing low quality flour. The management is disturbed by this trend and decides to completely overhaul the operations of the company. The management wishes to acquire new state-of-the art automatic machines. The problem with this is that they require only one person to operate. Computer systems are to be installed for fast record keeping and retrieval and also to compute the company’s finances. Apart from the secretaries, no one else in the company is computer literate. The management is also concerned with the loss of jobs and wants to minimize it as possible. It is paramount to perform a risk assessment because it means the new overhauls have to incorporate both the old employees and those to be employed (Borodzicz, 2005).

Risk management process

After the overhaul of the company, some risks within the company will likely have to occur. Those likely include the lack of trained personnel to operate the computers and machines. Secondly the company will be likely to incur huge costs due to training of the employees and paying severance to those laid off. Due to dismissal of some employees, the morale to work among the remaining employees will reduce leading to a low labor turnover. Finally, the company will likely be resisted to change by the union of workers and might end up having a court case. Each of these risks will have different levels of impact in the company. The most common across the board will be the usage of huge amounts of resources. This will have the impact of minimizing on the operating capital of the company vital to its survival. Due to lying off of workers, the company is likely to be impacted by low labor resources leading to reduction of output. This will be also affected by the lack of knowledge to operate the machines due to initial lack of training. Risks are then analyzed, can they be controlled or not? Some, like lack of morale among workers can be controlled while others like using of the organizations resources for training and pays cannot be controlled. Having analyzed the risks, the next step should be to come up with a treatment plan. With reference to (IGH), the overhauling process can be done in stages so as to avoid a complete shock of the system. This can be achieved by gradual replacement of workers to ensure a smooth transition from the old system to the new one (Altemeyer, 2004).

Standards used in the risk management process

The international standard organization requires that the process of risk management be able to minimize the risks. The standard also seeks to explain how the process of risk management and assessment should be carried so as to ensure that the process is done according to the agreed way thus the objectives of the risk management and the structure to be followed are clearly explained (Aimic). An example of a standard include AS/NZS ISO 3100:2009.The standard helps in achieving the levels of the proper organizational resilience thus enabling reliable decision making. This is instrumental in helping to achieve certainty in the competitive conditions the company will be in (standards). The one before it was AS? NZS 4360:2004. The new standard enhances some of the principles of management risk by trying to make them more understandable. Finally another standard in use today is the ISO/FDIS 3100:2009 (Avanesov). This standards seeks to emphasize the importance of minimization and management the risks by considering the environment in which the organization operates in. To minimize the risks, the company should perform a risk analysis so as to help the company anticipate any future uncertainty. The analysis should help the company to be able to anticipate resistance to change form the workers and the unions (Gorrod, 2004).

Threat analysis

Threat analysis is the process where there is systematic detection, identification and evaluation of the areas of concern in a system (business dictionary). In our case study a lot of threats are experienced in the company. First, the company could face court cases due to actions by workers and the unions. In the process they may lose credibility to the customers. In addition due to this cases and committing to engage in payouts of huge resources instrumental to the company’s survival it’s very easy for it to go under and declare bankruptcy. These threats should be analyzed thoroughly to avoid any unforeseen future circumstance. The impact these risks will have on the company should also be analyzed so as to determine the overall effect of the overhaul. It must be determined whether the overhaul will be good for the company or whether it will affect the company negatively (Sheedy, 2005).

Threat analysis

Bankruptcy can be the greatest threat due to the resistance of change from the workers who want to hold on to dear jobs. Through their unions they can move to court to block the overhauls. Bankruptcy might also occur due to the payouts that shall be done to train the workers and also due to the payment of severance to the laid off workers. The remaining workers due the low morale they can suffer, this can lead can lead to low labor turnover. The risk management plan that the company should have should be to foresee the risks involved and to ensure any action taken is done effectively (Altemeyer, 2004).

Conclusion

According to the risk assessment, the return from the overhaul far outweighs the risks involved due to the increased production the company will have. If the overhauling is done, it will lead improvement of the quality of services offered.

References

Altemeyer, L., 2004. A structured approach to Enterprise Risk Management (ERM) and the requirements of ISO 31000. Journal of ISO standards, 11 (26), pp. 238-255.

Altemeyer, L., 2004. Risk Management and Critical Infrastructure Protection: Assessing,

Integrating, and Managing Threats, Vulnerabilities and Consequences. Congressional Research Service Report, 3, (40), pp. 65-68.

Borodzicz, E., 2005. Risk, Crisis and Security Management. New York: Wiley.

Gorrod, M., 2004, Risk Management Systems: Technology Trends. Basingstoke: Palgrave Macmillan.

Sheedy, E., 2005. The Professional Risk Managers’ Handbook: A Comprehensive Guide to Current Theory and Best Practices. New York: PRMIA Publications.