Risk Management Framework For MacVille’s Toowoomba Branch

PEST Analysis

Discuss about the Risks And Manage Macville Toowoomba Branch.

The aim of this report is to evaluate the potential risks and manage MacVille’s Toowoomba branch. This report shall be divided into three tasks- risk review report and communicating with the CEO, risk analysis report and risk treatment, and monitoring report.

This assessment task shall help assume the role of Brisbane store Assistant Manager who has been promoted to be manager of a new store at Toowoomba. This report is written for the CEO while outlining the MacVille Risk management Framework. This report also describes the scope of risk management required in the assistant manager’s role. The critical success factors are also identified while addressing the goals and objectives for the areas included in the scope. The internal and external stakeholders are identified such as CEO, store supervisor and others. The role played by the stakeholders is also analysed. An external and internal analysis is conducted using the PEST and SWOT framework.

1. Effectiveness of Risk managementframework at MacVille Pty Ltd

The risk management framework at MacVille Pty Ltd involves multiple elements to be effective. It includes the policies and procedures relating to human resources, finance and corporate governance. The different policies are Staff Travel policy, Parental Leave Policy, Equity/ Discrimination Policy, WHS Policy, Bad Debt policy, Board Protocol and various others. It also includes business planning and budgeting, audits and reviews that support the ISO 31000: 2009 standards. This standard is an effective guideline as it involves different risk management techniques in the organization. The standard helps in reliable decision making and planning while practically advising on the ways MacVille can manage risk.

1. Scope of Risk Management

The management of MacVille decided to expand its operations in Queensland and purchasing and-rebranding their existing café in Toowoomba. There is a huge scope for assessing strategies for risk management factors. The manager at the café can undertake an annual review for assessing the effectiveness of the system. The manager shall also be responsible for updating and reviewing the risk management strategies for decreasing the chances of failure and losses. Therefore, the risk management shall include identification of risks, planning and management.

1. Critical Success Factors

The critical success factors involve commitment level from the top management, effective communication, good organizational culture and behaviour. Further, the critical success factors also include effective utilization of information technology, smooth flow of information within the organization. The senior managers are involved for identifying gaps in the risk management procedure. There must be effective communication from the top management, employees and customers. Another critical success factor is good organizational culture as it shall facilitate smooth flow of information. Effective training in the organization can smoothen transition with the organization. The top management shall require less effort in applying risk management strategies.

SWOT Analysis

The main goal of the senior manager in the risk management process is identification of risks. The manager is responsible for identifying the issues in the risk management strategy. The goal also involves managing risks in the operation of Toowoomba store. The goal also involves smooth transition to the MacVille systems.

1. Role of Internal and External Stakeholders

Stakeholder	Internal/ External	Role in Process	Stake in Process
The board	Internal	Overall risk management	They are at stake as there is a risk of loss of tangible and intangible assets.
Ron Langford	Internal	Councillor and Landlord	There is a potential loss of tenant.
Goldsmith Partners	External	Legal and Compliance Advice	The firm may lose a client and there is potential for being sued for a wrong advice.
James Mansfield	Internal	Hurley’s Store Supervisor	The store supervisor may lose employment.
Queensland management team	Internal	Management team in the transition and ongoing management.	There team has its promotion and reputation at stake.
Hurley’s staff	Internal	The employees play the role of running the café and serving its customers.	Only loyal employees can participate in the risk management process because they have some care for the organisation. They can participate in the risk management procedure by providing some advice and their expectation from the organisation.

The PEST analysis is conducted as under:

PEST	Analysis
Political	The by-laws are related to water conservation and a huge amount of penalty can be imposed upon excessive water usage.
Economic	Due to global recession, the profitability of Toowoomba café may decline. The currency exchange rate, taxation and economic environment in multiple markets can also affect the café. As Toowoomba is becoming an effective place for retirees, global recession won’t affect them thereby not impacting the facilities of the café.
Social	As customers are becoming more health conscious, their preferences of food and beverage are changing. There is a need to bake fresh food but the two-hour transportation time is discouraging the customers
Technological	With the advent of technology, broadband can enable video conferencing and teleconferencing. Free internet services can attract a large number of customers in the store.

Table 1: PEST Analysis

Strengths ·         The location in the corner of two streets gives more accessibility to the local customers. ·         There are healthy and innovative  food options such as rice wraps giving a competitive edge.	Weaknesses ·         No effective sales promotion techniques. ·         Computer is not password protected that gives access to the financial records. ·         Risk of cash embezzlement as the register is not well maintained. ·         No written evidence for policies and processes as it is stated verbally.
Opportunities ·         Cafe may be opened in nearby locations such as Clifford Gardens and K-Mart Plaza. ·         New business opportunities are rising for the retirees in Toowoomba. ·         There is opportunity of expansion on the footpath dining	Threats ·         There are huge penalties involved in excessive water usage. ·         Intense competition exists in the region as other cafes might open in Toowoomba to serve the customers.

The main information for PEST and SWOT analysis is gathered using the secondary document thereby reflecting upon the strategic position of the organization. The different organizational policies and procedures, external audits and review of risk management techniques are also used to prepare the SWOT and PEST analysis. For conducting the PEST and SWOT analysis, a number of analysis was done. The risk management framework of Toowoomba store encompasses a number of elements that was useful to the manager in conducting operations. The elements include monthly reports of MacVille Pty Ltd, multiple organizational policies and procedures, review of risk management techniques and external audits. Additionally, the strategic position of the café can be identified using survey of employees and the frequent visitors at the Toowoomba café.

According to the case scenario, the café involves human resources management risk. There are no written policies and procedures due to which there is manual and limited staff training. There is a risk of errors and inappropriate actions. Further, as the authorisation system is unclear, it could result in fraudulent activities. There is no or less sales promotion technique that impacts the financial viability of the stores. It is also analysed that there are financial operations risk. As there is no separation of duties, it could result in fraud. The café lacks cash register maintenance which is an unacceptable behaviour as it shall result in misappropriation of funds. As banking was not done on a regular basis, it has a high risk of theft. Also, due to lack of promotional strategies, the other café and restaurant have a competitive advantage over MacVille.

Moreover, it is analysed that there is Occupational Hazard risks. The manager has to drive for two hours for his weekly meeting that adds to the risk of physical injury. The interior and exterior of the café is very poor. There are unstable and broken chairs that may lead to compliance breach, reputation loss and suing by the customers. The carpet was also torn and was stuck using gaffer tape. This is also a compliance breach and the customers can sue the café. There is no established process for dealing with the injuries happening at work that can result in poor reputation and suing by the union.

Key Risks Identified

According to the case scenario, the café is located in the corner of two main streets of Toowoomba city. This allows the café to attract a large customer base. However, the two-hour transportation time makes it impossible for the customers to get freshly baked products. This adds to the supply chain risk. Apart from the above, there is local governance and compliance risk cover. The company can be penalized for using excessive water resulting in brand loss. Water utilization for the dishwasher costs $6000 and their dual flush system $7,500. The incomplete employment records can bring upon a fine up to $50,000 as the unions can sue the firm. As the records are accessible, it can lead to privacy law breach due to no guarantee of confidentiality of the records.

The key risks identified in this case scenario are:

• There is lack of internal control as the cash management is poor. There is low monitoring of the flow of cash.
• There is lack of concentration in the written policies and procedures which acts as a guideline for the staffs.
• There is lack of concentration in the promotional strategies that can help the organization prosper.
• There is lack of professionalism in handling the business as it is run by family members and not the paid staff or employees.
• The café does not meet the compliance standards related to privacy, industrial relationships and others.
• The café fails to monitor the external environment such as strengths, weaknesses, opportunities and threats.

To: P. Kinski- CEO

Subject: Identified Risks and Further Risk Management Processes

Thank you for the opportunity of becoming manager of the new Toowoomba store. I understand the importance of the tasks and have commenced several actions as specified by you. I propose to include the risks identified and further risk management processes. This email is to inform you about the risks that were identified during my research:

• Financial Risk- As there is no separation of duties, it could result in fraud. The café lacks cash register maintenance which is an unacceptable behaviour as it shall result in misappropriation of funds. As banking was not done on a regular basis, it has a high risk of theft.
• Supply Chain Risk- The café is located in the corner of two main streets of Toowoomba city. This allows the café to attract a large customer base. However, the two-hour transportation time makes it impossible for the customers to get freshly baked products.
• Human Resource Management Risk- The café lacks cash register maintenance which is an unacceptable behaviour as it shall result in misappropriation of funds.
• OHS Risk- The manager has to drive for two hours for his weekly meeting that adds to the risk of physical injury. There are unstable and broken chairs that may lead to compliance breach, reputation loss and suing by the customers. The carpet was also torn and was stuck using gaffer tape.
• Local Governance and Compliance Risk- There is local governance and compliance risk cover. The company can be penalized for using excessive water resulting in brand loss. The incomplete employment records can bring upon a fine up to $50,000 as the unions can sue the firm. As the records are accessible, it can lead to privacy law breach due to no guarantee of confidentiality of the records.

There is a need to manage the above identified risks and I am looking forward for a discussion with you about the same. Moreover, I am looking forward to your input on any other additional risks.

Regards

In the meeting, the following points were discussed with the CEO:

• Findings were discussed and the CEO suggested improving the human resource policies and procedures.
• Explained the risk management process.
• The CEO suggested providing written policies and procedures as a priority.
• The lifestyle of eating out is trending because of which the products at MacVille may be designed.
• Additional risk inputs include product quality, market demands and infrastructure.
• The café needs to promote itself using marketing strategies and techniques.

The aim of this assessment task is to analyse the risks identified in the MacVille business scenario. The role of a Brisbane Assistant Manager is to analyse and treat risk after the identification process. In the last section, the risk was identified and reviewed. In this task, the information is gathered from the previous section to examine the likelihood and consequence of the risks. The risk management plan shall be developed accordingly.

1. Likelihood of Risk Occurring

After the identification of the risks, the next step is determining the likelihood of the risks. The potential vulnerability needs to be exploited so that the risks can be managed effectively. The manager or auditor needs to consider the source of threat, motivation behind it and capability of the source. Further, the likelihood of the risks can be described as rare, unlikely, possible, likely and frequent. Rare risks are exceptional in nature that probably won’t happen. Unlikely risks are not expected but it may occur in some time. The possible risk might occur as there is a history of casual occurrence associated with it. Likely risk depicts the strong possibility of the event and there may be a higher frequency of occurring. Frequent risk is one in which the likelihood is very high. The event is expected to occur at a high frequency.

Type of Risk	Likelihood	Analysis
Human Resource Risk	Unlikely	After the acquisition, the risks related to human resource shall be low as MacVille shall have effective written policies and procedures. The staff training can be improved and the risk of errors shall be low.
Financial Risk	Likely	There s a possibility of theft of cash on the premises. After MacVille acquires the café, cash shall be handled in a better way. The cash register is likely to be well maintained that shall help the café in handling the funds in an appropriate manner.
By-Law Compliance Risk	Likely	There is moderate risk intensity. If the organization does not comply with the standards of the organization. However, the risk shall be low as the policies and procedures would be in a written format rather than stated verbally. Moreover, if the company uses excessive water, it shall be liable to pay a fine of $50,000.
OHS Risk	Unlikely	The manager has to travel for his routine weekly meeting. The meeting ends late in the evening. However, there is a low chance of the manager meeting with an accident or having a physical injury. There is a possibility for the manager as it is a two-hour drive on a steep narrow climb up range.

Risk Management Framework

If the risks are not addressed properly, it may lead from mere inconvenience to catastrophic consequence. The levels of consequence are insignificant, minor, major and catastrophic. The insignificant risk is a matter of little concern as it has negligible impact. Minor risk involves breach of internal procedures that may lead to asset damage, environmental impact and others at a low level. Major risk includes a higher rate of damage, loss of reputation and overall medium-term damage. The catastrophic risk includes a long-term damage of reputation, net revenue loss and others.

According to the case study, the consequence of banking risk is minor. The cash left on the premises is under the risk of theft. However, the risk of theft also puts the employees into trouble as they do not deposit the money in the bank regularly. The lack of proper rules gives space to the robbers thereby leading the café to run in losses. The café lacks cash register maintenance which is an unacceptable behaviour as it shall result in misappropriation of funds.

The case study analyses MacVille running through risk of by-law compliance. The consequence of the by-law compliance risk is moderate. The reputation of the firm may be damaged if the by-laws are not complied with. Moreover, the penalty for using excessive water is high thereby increasing the consequence of risk vulnerability. The penalty of $50,000 would be a financial loss for the organization along with the loss of reputation. The risks regarding the written policy can occur if the management lack focus on the development of the organization. These risks can also occur if there is no proper leadership strategy for controlling the employees.

The OHS risk can lead to catastrophic effects.  As the manager needs to travel for two-hours, there is a chance that he might end up in an accident. As the route is steep narrow up the range, it can lead to serious effects. The physical injuries increase the consequence of the travel risk for the manager. Moreover, there is a chance of physical injury as the carpet was also torn and was stuck using gaffer tape. If the customers sue the café, it shall have major consequences in the financial viability of the café.

The human resource risk is minor in nature. There is a chance that MacVille shall have errors due to the lack in written policies and procedures. There is no or less sales promotion technique that impacts the financial viability of the stores. It is also analysed that there are financial operations risk. The fraudulent activities consequence shall be minor in nature. There are risks regarding professionalism in the business. These risks shall also occur if MacVille fails to implement laissez faire leadership.

Conclusion

Risk matrix is an effective tool to evaluate the risks. It is a matrix that forms a part of risk assessment for defining the level of risk considering the category of probability against certain severity. The risk matrix can be obtained by combining the likelihood and consequence of the risk to determine the rating. Below is a risk matrix that shows the identified consequence and likelihood.

Likelihood	Consequence
Insignificant	Minor	Moderate	Major	Catastrophic
Almost certain	Low	Medium	High	Extreme	Extreme
Likely	Minimum	Low	Medium	High	Extreme
Moderate	Minimum	Low	Medium	High	High
Unlikely	Minimum	Low	Low	Medium	High
Rare	Minimum	Minimum	Low	Medium	High

The below table summarizes the likelihood and consequence of the risks associated with MacVille:

Type of Risks	Likelihood	Consequence	Risk Matrix
Human Resource Risk	Likely (4)	Minor (2)	Low
Banking Risk	Unlikely (2)	Minor (2)	Low
OHS Risk	Unlikely (2)	Extreme (5)	High
By-law compliance	Likely (4)	Minor (2)	Medium

 From the above table, it is analysed that human resource risk and banking is at a low priority. There is a need to address OHS risk at a priority as it has the most catastrophic effects on the event of occurring. The by-law compliance is at a medium priority.

The physical injury can have catastrophic effects and it must be addressed as a priority. It is suggested that the senior management must take action immediately as it may cause severe physical damage to the concerned person. Further, mitigation must be made in the by-law compliance as a second priority. This risk factor requires monitoring and review by the management so that the issues are aligned. Lastly, the banking risk and human resource shall be addressed at the latest as it is of low priority. These risks are accepted but not ignored.

Priority	Analysis
Extreme	The travel risk for the manager is high as it is a long drive. For protection of the manager, the organization needs to send additional amount on insurance for supporting him.
Medium	The by-law compliance is of medium risk and it is important to use the water effectively. The organization may be liable to pay $50,000 that would be a financial loss for the organization along with the loss of reputation.
Low	The banking and human resource risks are of low priority as there is a possibility of theft. Also, it is dangerous for the employees. The limited  training of employees shall lead to errors, fraudulent activities and inappropriate actions which can affect the financial stability of the company.

Based on the likelihood, consequence and priority of the risks from the policies and procedures and monthly reports, the risk management process can be taken further for risk treatment. The existing Hurley’s café does not have sufficient number of employees and access to cash for being effective. The risk treatment process must be effective and it must strengthen the organization. Moreover, the promotional strategy shall be beneficial for the organization that can help in the treatment process. The following options shall be considered for treating risks:

Type of Risk	Risk Treatment Options
OHS Risk	·         The manager may be allowed an overnight stay in Brisbane as it gets late in the evening while driving back. This option is likely to be effective as the manager might not be able to stay overnight due to personal issues. ·         The manager may have the option of flying to Brisbane instead of driving that shall save time and risk. The option is feasible for the organization as flying shall add to costs. ·         The managers must finish the meeting early rather than ending in late hours. This option is likely to be effective as the manager may change the timing of meeting. ·         Toowoomba must use technologies such as video conferencing and teleconferencing that shall not require the presence of manager in Brisbane. This option is likely to be effective as it may add to the technological advantage.
By-Law Compliance Risk	·         The organization must install a water tank for storage. This option is likely to be effective as the cost of installation is not high. ·         Water saving devices such as dual flush toilet and 5 or 6 star rated dishwasher may be installed. This option is likely to be effective as this might be a permanent solution for MacVille café. ·         The working practices may be changed and fruits and vegetables may be washed in still water. This option is likely to be effective as training the employees shall add to the competitive advantage to the firm. ·         The dishwasher may run in economy cycle if light wash is required. This option is likely to be effective as it shall save tremendous cost of the organization.
Banking Risk	·         The banks may be changed to a closer location so that money is deposited in the bank with ease. This option is feasible as it may not be possible for the employees to deposit money on a regular basis. ·         A safe may be installed so that the cash is kept under security. This option is likely to be effective as it shall not add to much cost. ·         More employees must be hired with accountancy background so that they can manage the entries on cash register. This option is likely to be effective as a professional shall look into the books accurately.
Human Resources Risk	·         The human resources department must provide training and grooming to the employees so that there is more professionalism in the organization. This strategy is likely to be effective as the employees may be well groomed adding efficiency. ·         A professional must be hired for implementation of effective strategy and maintain professionalism.

Risk	Assess Risk (Score)	Controls	Monitoring	Action Priority (1-5)	Timelines	Responsible
OHS Risk	10	Complete work before 3pm so that manager does not have to drive during late hours.	Check the meeting timings	1	1 week	CEO
By-Law Compliance Risk	8	Educate the employees regarding effective water usage	Check monthly water bills and supervise employees	2	1-2 weeks	CEO, Store Manager
Banking Risk	4	Deposit money in the bank regularly	Generate a weekly bank statement	3	1-2 weeks	Finance Manager
Human Resources Risk	8	Grooming and training to the employees	Monthly performance review	4	2 weeks	Human Resource Manager

The risk management treatment plan must be implemented for manager’s travel risk. As the risk score is the highest for this risk, risk shall be treated for this factor. The implementation plan includes planning early. The manager may be allowed an overnight stay in Brisbane as it gets late in the evening while driving back. The manager may have the option of flying to Brisbane instead of driving that shall save time and risk. The managers must finish the meeting early rather than ending in late hours. Toowoomba must use technologies such as video conferencing and teleconferencing that shall not require the presence of manager in Brisbane.

The implementation plan includes weekly management meetings to finish by 3pm. The training program for assistant manager has been shifted in the morning so that the meeting finishes by 1pm. The implementation phase shall have preparation phase, tailoring phase, implementation phase and sustainment phase. It is important to modify the risk management process and coordinate the plan with the stakeholders. It is important to employ effective matrices, checklists and formats so that necessary training can be provided to the employees.

Type of Risk	Risk Treatment Options
OHS Risk	·         The manager may be allowed an overnight stay in Brisbane as it gets late in the evening while driving back. ·         The manager may have the option of flying to Brisbane instead of driving that shall save time and risk. The managers must finish the meeting early rather than ending in late hours. ·         Toowoomba must use technologies such as video conferencing and teleconferencing that shall not require the presence of manager in Brisbane.
By-Law Compliance Risk	·         The organization must install a water tank for storage. This option is likely to be effective as the cost of installation is not high. ·         Water saving devices such as dual flush toilet and 5 or 6 star rated dishwasher may be installed. ·         The working practices may be changed and fruits and vegetables may be washed in still water. ·         The dishwasher may run in economy cycle if light wash is required.
Banking Risk	·         The banks may be changed to a closer location so that money is deposited in the bank with ease. ·         A safe may be installed so that the cash is kept under security. This option is likely to be effective as it shall not add to much cost. ·         More employees must be hired with accountancy background so that they can manage the entries on cash register. ·         Take an insurance cover for cash on premises.
Human Resources Risk	·         The human resources department must provide training and grooming to the employees so that there is more professionalism in the organization. ·         A professional must be hired for implementation of effective strategy and maintain professionalism.

Type of Risk	Risk Treatment Options
OHS Risk	·         The meetings were finished close to 3pm to provide ease to the manager. ·         The assistant manager training time was changed so that the manager could leave early by 1pm.
By-Law Compliance Risk	·         An external audit was completed and report was presented after 6 months. ·         A new policy was implemented by the Toowoomba Council. ·         The dual flush toilets are introduced. ·         The dishwasher with 5-star WELS rating was installed. ·         A water tank is built in the courtyard. ·         An application to make-good by Goldsmith partners was accepted by the Toowoomba Council.
Banking Risk	·         The financial manager took $5,000 insurance cover on cash as planned. ·         The bank account was opened after 4 weeks of the shop opening between the corner of two streets. ·         Training on banking was successfully completed.
Human Resources Risk	·         A professional was hired for conducting training and assessment session in the organization.

Banking Risk- Cash is now rarely kept on the premises as there is insignificant consequence on the insurance cover.

OHS Risk- As the time of travel was changed by the manager to 1pm, the physical injury risk declined from extreme to low.

By-law Compliance Risk- The risk factor was initially rated moderate is now low due to the installation of water storage devices. Moreover, with the written policies and procedures, the risk of reputation and penalties declined.

Banking risk- the moderate risk can be decreased to low if the banking directives are 100% complied with. The removal of expensive insurance can help save cost for the company. The firm should directly deposit the money in the bank on a regular basis thereby decreasing the risk of theft.

OHS Risk- The introduction of teleconferencing and videoconferencing would decrease the travel risk to rare as it would eliminate the need of travelling for two hours. The CEO may provide an excusal letter so that the manager leaves at appropriate time.

By-law Compliance Risk- As the risk factor was rated high initially can now be reduced to moderate as Brisbane plumbers installed dual flush toilet within 2 weeks. Monitoring must be done on a regular basis to keep the staffs updated. However, internal audits are required frequently so that discrepancies are recognized at an appropriate time.

Mac Valle should implement the above recommendations in order to reduce the occurrence of various risks that may affect Toowoomba branch. This will help the company to address the various concerns that have been raised at various levels by the management team and the board of directors. The company lacks adequate controls with regard to making bank deposits as well as record keeping of sales, cash payments, and bank withdrawals. This exposes it to a chance of losing money through employees. More importantly, the approach used in addressing these risks should be based on the severity of individual risks. Since the manager’s travel risk is the most severe, strict measures should be undertaken to address this risk.