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Risk Management Assignment
The following assignment contains the risk management plan so that the risk to the operations of the organisation could be mitigated by taking the corrective measures timely. The report discusses the risk of operations in the context of the organisation coca-cola so that effective strategy could be developed to make the production and selling function an easy and simplified one by eliminating all the risks that arise in this procedure.
Industry sector risk classification
Coca-cola being a big brand is spread over large part of the world and is delivering products to a different part of the world to meet the objective of increasing sales. Because of the variety of taste preference and desire of people coca-cola needs to consider a variety of demand to customise the product accordingly (Bayer&Bustad, 2012). This reflects the industry of Food and Beverages faces the risk of changing taste and preferences of the customers that directly affects the demand and supply of the product. Various other risks will also be discussed that are to be faced by the companies working in food and beverage industry and this raises the need of adopting some standard risk frameworks to ensure the quality of production and supply (Bayer&Bustad, 2012).
Organisationand industry standard risk frameworks
Industry standard risk frameworks involve the basic guideline so that the organisation working in the respective industry can follow it and minimise the defined risk to some extent. These standards of risk guide the performance of the several organisations so that the basic performance of the company could stay risk-free. These standards are mainly framed by the international standard bodies and industry groups so that the risk could be managed and minimised by the organisations in an effective and efficient manner.
Some of the basic standard risk frameworks are ISO 31000:2009, IRM 2002, ISO 31010:2009, and COSO 2004. Out of the many risk standards, the one selected by Coca-Cola are IRM 2002 and ISO 31000:2009 (Theirm, 2017).
The risk standard IRM 2002 suggests the company to focus greatly towards the profit maximisation so that the chances of failure become less and organisations every action should be towards the objective of maximisation of the profit. The ISO 31000 that has been designed in 2009 stated the concept of risk management as to coordinate business activities in a manner to minimise the amount of risk (Hopkin, 2017). The other risk standard that is COS 2004 has suggested the organisation to pay great focus over the internal functioning of the organisation and develops a culture of risk-awareness.
Quantitative and qualitative risk management tools, techniques, and approaches
For the identification of the qualitative and quantitative nature of risk, the risk analysis will be done. After the analysis, it has been found that the Quantitative risks could be measured on the basis of a scale so that the severity of the risk could be identified. On the contrast, the qualitative risks are the one that creates impact on the functioning and profitability of the organisation (Bansal, 2014).
After the identification of the quantitative and qualitative risks, these risks are required to be analysed and managed so that the impacts and severity could be pushed away from the business and its functions. This management of the risks become possible with the adoption of different tools and techniques that are as follows:
For the management of qualitative risk following techniques will be used
1. Risk probability and impact assessment:Identification of the risk would be done and the potential impact on the respective departments and function of the business will be identified. This enables the organisation to pay due attention to the function and department that is getting highly affected bythe risk so that actions could be designed before the negative impacts take place (Weber, et. al., 2012).
2. Risk categorisation:In this method the highly vulnerable area that will be affected by the negative impacts of the risk. After the identification, possible reasons in that specific area will be identified so that effective actions in against could be taken for the minimisation of the risk.
3. Expert Judgement:This technique of managing the risk suggests that the advice should be procured from the one that recently deals with the same risk in the same industry so that the additional changes could be made for minimising the risk to an increasing extent. With the help of expert judgment, the chances of the high negative impact of risks could be minimised (Aloini, et. al., 2012).
For the management of quantitative risks following techniques will be used
1. Probability distributions:This technique of risk assessment is used to analyse the risk of quantitative nature. With the help of this tool of measuring the amount of risk, the cost of the risk would be analysed and the time period that will be wasted because of the negative impact of the risks. So that the scenario or the decision could be taken in a manner that least wastes the time and money of the business.
2. Expected Monetary Value Analysis (EMVA):In this technique of assessing the amount and impact of the risk, the money value that is to be invested in the project will be compared with the outcome expected. The chances and amount of getting the money lost in the project will decide the amount and severity of the risk (McNeil, et. al., 2015). For the management, steps will be taken to minimise the amount of money that could be lost.
3. Modelling and simulation:The simulation of the project will be done using a model so that the uncertainties of an event could be transmitted in the impacts that would take place on the objectives of the business. This technique will enable the business organisation to deal with that event considering the respective department carefully.
4. Expert judgment:This tool of managing the risk enables the business to procure the expert advice so that the risk related areas, the impact on the business, the chance of success could be identified. And, after the identification of such factors effectiveness towards taking decisions related to the risk will be improved (Ericson, 2015).
Identification of the risk
The risk is defined as the vent that holds the chances of both the success and failure. The event of risk generally reflects the uncertainty nature of the event. Coca-cola being operating in the beverage industry and to design an effective supply chain to meet the demand of customers effectively three types of risk are to be faced. The major risksthat abide the development of effective supply chain are supply risk, demand risk, and company related risks.
Supply risk: The supply risk reflect the risks that came into evidence at the time of making supply such as damage in transition, the transportation does not have the matching condition according to the product, and lack of raw material.
Demand risk: The demand risk includes all the risks that arise from the side of the buyers. The risks such as, less demand comparative to the supply, change in taste of the consumer, and substitutes available at low prices are considered as demand risk (Samvedi, et. al., 2013).
Company related risk: This category involves the risks that are to be faced with the process and structure being followed in the Coca-cola. Some of the company related risks are the technology being used by Coca-cola is ineffective, and the risks that arise because of the structure of the company.
Determine the risk treatments
For the treatment and to effectively deal with the risks, various steps are been taken by Coca-cola so that the amount of risk could be minimised and the chances of profitability could be increased. For the treatment of supply risk, huge inventory is required to be maintained by the company. To deal with the company related risks, timely change in the technology and procedures are required to be made (Gunja&Brown, 2012). Similarly, for the demand risks, coca-cola is required to conduct continuous research to identify the new demand and behaviour of the buyers.
Explanation of monitoring risk controls
The strategies that are been developed to effectively deal with the uncertainties and risks are required to be monitored continuously. With the help of continuous monitoring, the new risks, the possible impacts of the existing risks, and the rate of the decline of the risks could be measured. Without the regular monitoring, the company may not be able to analyse the impact of risk and also fails to develop a strategy or to make a change in existing strategy to deal with the risk appropriately. Thus monitoring of the risk controls is necessary and important to deal with the risks effectively.
Evaluation of risk management outcomes
From the risk management outcome, it has been identified that coca-cola has a huge availability of the raw material and the resources required for production. This reflects that the company is not exposed to the risk of supply. But, the major risk that has been imposed over the operations and functions of the company is of demand risk that keeps on changing from area to area, and time to time.
Risk Management Plan
Critical level probability & impact
Procedure after changes
High inventory increases cost and problems
The management is done by the company on its own.
The responsibility to manage the inventory has been shifted to vendors
Contamination and damages to product in transportation
The transports that carry sugar and CO2 are been checked only.
All the products will be checked for lock and proper arrangements in the transport.
Proper inspection has never been done.
Regular inspection of the machinery will be done on weekly basis.
From the above report, various risk assessment and management tools have been identified that enables Coca-cola to identify the risks and guides towards taking the corrective measure either to minimise or remove the negative impacts of the risk from the business and its operations.
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