Management of Risk and Strategy

Question: Discuss about the Management of Risk and Strategy. Answer: Introduction Risk in the business refers to the situation that the organization will have lower profit that the company was anticipated due to various reasons. These reasons are called the risks or the risk factor (Dionne 2013). In this regard, the management of risk is a crucial aspect for any business organization. Management of risk or risk management is the process to forecast and evaluate the risks involved in the business. The next step in risk management is to develop the ways by which the risks can be mitigated or minimized (Sadgrove 2016). There are the major stages in any kind of risk management process. Logistics business is one of the growing businesses all over the world. Todays logistics businesses are providing advance solution part from delivering various kinds of goods. They are planning of the successful execution of worldwide meetings, senior meetings, various kinds of meetings and others. Due to the increase in the field of operation for the logistics companies, the risks have also been increased. Hence, it is the utmost responsibility of those logistics companies to implement an effective risk management strategy in order to minimize the business risks (Lam 2014). Risk Management Strategy As discussed earlier, management of risk is one of the major aspects of any business organization. In case of the logistics businesses, the nature of the business increases the amount of risks. Hence, it is needed for the logistics organizations to prepare an effective risk management strategy. In this regards, Risk Management Life Cycle is a major approach in order to minimize the risks involved in the businesses (Ghaffari, Sheikhahmadi and Safakish 2014). In the process of Risk Management Life Cycle, there are four stages. They are identification of the risks, the assessment of the impact of the risks, risk prioritization analysis and risk mitigation planning, implementation and monitoring of progress (Hopkin 2017). Figure 1: Risk Management Life Cycle (Source: Haimes 2015) As per the figure, it can be seen that there are four stages in the Risk Management Life Cycle. The first step is the identification of potential risks in an international organization. In this process, the risk management team identifies the business events that are the potential of risks in the organization. After that, those identified business activities are analyzed in order to measure the extent of risks. This is done in order to identify the risks in the organization. The output of this particular step is that the risks in the organization can be identified with the help of this step. The second stage in the risk management life cycle is to assess the impact of those identified risks on the business. In this step, the impact of those risks is measured in terms of costs, technical performance and others. This step is done in order to measure the risks in respect of various aspects in the organization. As the output of this step, the identified risks are ranked based on the impa ct of them on the organization (Pritchard and PMP 2014). The next step in this process is to prioritize the indentified risk in order to make appropriate strategies. In this step, the identified risks are ranked based on the nature. The prioritization of the risks is the output of this step. The last step in this cycle is to plan, implement and monitor the process of risk minimization. In this process, as per the priority, the risk minimization strategies are developed and implemented. After that, a monitoring process is implemented. The main output of this step is the minimization of the risks identified. The risk management team is solely responsible for the success of this step (Chance and Brooks 2015). Risk Management Strategy of WACO Global Logistics The main aim of the study is to develop a risk management strategy for an international logistics company. For this purpose, WACO Global Logistics Company is taken into consideration. WACO is a global logistics company that arranges various types of conferences, senior meetings that involves high-level delegations (waco-system.com 2017). As per the above discussion, it can be seen that one of the major business activities of WACO Global Logistics is to arrange high level of conferences, meeting and events. In this kind of business activities, there are two major kinds of risks involved. The first risk is the Theft and Corruption of important data from business. The second risk is the withdrawal of sponsorship from the major event or conferences. These two major risks are identified from the business activities of WACO Global Logistics. There are instances that the major data and information from an important meeting has been lost due to various reasons. It can be theft of those important data and information; on the other hand, they can be corrupted due to major technical faults. Whatever, the reasons are, it can be said that this is major risk. The second risk is sponsorship withdrawal. It can be happened that due to the some major issue, the sponsors of an important conference or event refuse to fund that particula r event. This is a major risk for WACO Global Logistics as it can hamper the profitability of the organization along with the goodwill of the company. This is the reason this is considered as a manor risk for the logistics organizations. based on the above discussion, it can be observed that there is a need for effective risk management strategies in order to minimize these two major risks in the organization. In order to make the necessary strategies to mitigate these two risks, some steps need to be followed. They are discussed below: Identification of Potential Risks There are various kinds of methods to identify the risks in an organization. There is no exception of this fact in case of WACO Global Logistics. The above study shows the two kinds of major potential threats in the business of WACO Global Logistics. In case of the first risk that is the theft and corruption of important data and information, the comprehensive database of the past events has been taken into consideration. As per the past data, it can be seen that there are several instances in the past where there were cases for the loss of important data and information. As per the investigation, it has been seen that the major reason behind this was the theft and corruption of data and information. Due to this, the organization had to face many difficulties. That is why this is considered as a major potential threat for WACO Global Logistics as it has a high probability of occurrence with high impact on the business. In case of the second risk, the database of the organization along with the interaction with the employees of WACO Global Logistics is used for the purpose of identification of the potential risk. The database of the company helps show the instances of this kind of risks that took place in the past. In addition, this kind of risk can be identified by interacting with the employees of the organization. In this regard, the process of brainstorming is a useful tool to identify the risks. These methods are used to identify these two types of risks in WACO Global Logistics (Pinedo and Walter 2013). Assessment of the Potential Risks with the Help of Information After the process of risk identification, the next process is the assessment of these risks. In this particular process, various kinds of information within the organization are used to assess the impact of the risks on the various business operations of WACO Global Logistics. First, the financial and accounting information are required to assess the impact of these risks on the profitability of the company. After that, the information about the technical performance of the company is used to assess the impact of these risks on the performance of the company. Apart from these two sources of information, other sources help to assess the impact of the risks on the capability or the function ability of the company (Bromiley et al. 2015). Reasons for the Allocation of Risk Management Responsibilities It is utmost important for every business organizations to allocate the risk management responsibilities internally and externally. There are various reasons for the allocation of risk management responsibilities. Five of them are discussed below: For the successful development and implementation of risk management strategies, it is important to allocate the responsibilities among the internal and external members of the organization (McNeil, Frey and Embrechts 2015). It is important to allocate the risk management responsibilities on internal and external basis in order mitigate the potential risks of the organization. For the successful completion of the risk management procedures of an organization, it is important to allocate the risk management responsibilities among the members of the organization (Drennan, McConnell and Stark 2014). One of the most important reasons for the allocation of risk management responsibilities is that this process helps the risk managers to allocate the total process of risk management among the credible employees of the organization. The success of the risk management process vastly depends on this process (Slovic 2016). Another reason of allocating the risk management responsibilities is that it helps to improve the business processes of the organizations. Process of Communication of Identified Risks In the process of risk management, it is important to communicate the risk management strategy with the other member of the organization. This process helps to raise constructive feedback on the risk management process. There are some processes or methods to communicate the identified risks as per the operational objectives. First, it is important for the employees of the organization to understand the process of risk management. For the successful communication of risk management strategies, this is the first criteria. For the purpose of risk management communication, there needs to be a committee in the organization that will be responsible for the communication of risk management strategies. Small meetings are effective tools for the communication of risk management strategies. Meetings help to gather organizational people in the same place that helps the successful communication of risk management strategies. Brainstorming is another effective method of communicating the risk man agement strategies in an organization. This is the best process to get positive as well as constructive feedbacks of the risk management strategy. With the help of questionnaires and surveys, an organization can communicate the risk management strategies in an organization (Gutteling 2015). Risk Monitoring and Evaluation Strategy The development and implementation of risk management strategy is not enough unless there is are the strategies of monitoring and evaluation of that risk management strategy. In the case of risk monitoring, there is not any risk monitoring format. Different organizations adopt different kinds of strategies. In case of WACO Global Logistics, there need to be a team responsible for the monitoring of the risk management process. For this purpose, the risk tolerance team needs to establish a link between the risk appetite and risk tolerance of the organization. Based on this, the organization needs to develop the risk monitoring strategy. In addition, the risk monitoring team needs to update the latest status of the risk management process so that one can judge the progress of the risk management process (Saunders et al. 2015). After the process of monitoring, it is needed to evaluate the risk management strategy of the organization. As per the monitoring team, there will be team that will be responsible for the evaluation of the risk management strategy. This is the responsibility of the team to closely evaluate the performance of the risk management strategy. This can be done by observing the difference between the present situation and the wanted situation of the risk management process. This process will help the team to determine that whether there is any need for change or not. The further evaluation will help to determine what type of change will be needed in the risk management process (Li 2014). Risk Reporting Requirements As per the above discussion, there are two kinds of potential risks in WACO Global Logistics. There are some requirements the reporting of these risks in the organization. The first requirement is to disclose all the necessary risk related information for the purpose of risk management. Hence, the necessary disclosure of risk related information is necessary. The second requirement is to focus on the quantitative information about the risks of the organization. The detailed analyzed risk related information assist in an effective risk reporting. The third requirement is to maintain a list of the principal risks of the organization. In the case of WACO Global Logistics, both the major risks need to be mentioned in the risk documents. The next requirement is to highlight the current concern regarding the risk management of the organization. The last requirement of risk reporting is to review the risk management process of the organization on a regular basis (Bennett 2016). Conclusion and Recommendation Based on the total study, it can be said that there are for major steps in the risk management process of any business organization. They are risk identification, risk impact assessment, risk prioritization, development, and evaluation of risk management strategy. There are two major risks for WACO Global Logistics; they are the theft and corruption of important business data and information; and the withdrawal of sponsorship. A risk management strategy needs to be made in order to mitigate these two business risks of WACO Global Logistics. In case of WACO Global Logistics, the risk management process will include the identification of risks in the organization. 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