Risk Management In Business: Analysis And Mitigation Of Risks

Risk Review Report

Risk management is an integral part of any business set up. It basically refers to the process of identifying, assessing and controlling the several threats that threaten the organization’s capital and earning. It refers to the analysis of the existing or the upcoming risks lying ahead of the business. These risks, if not mitigated on right time, might hinder the process of growth and development of the business. Risks can be of many types. Risk management occurs everywhere in the financial world. These threats or risks could stem from a wide variety of reasons like legal liabilities, financial uncertainty, strategic management errors and also natural disasters.

Since the 2000s, all the companies have increased their risk analysis methods, internal audits and other means of risk management. Risk management standards have been developed by several organizations. These standards help the organizations to assess and deal with the risks and find out the appropriate solutions to it. These standards also help in achieving the goals and objectives of the company; It can also provide guidance for the internal and external risk audits. In other words, it provides the sufficient resources for the risk treatments.

Following the principles of the ISO 31000:2009, might turn out to be really helpful. It can be used by any public, private organization, association, groups, and individuals, these principles can be applied throughout the life of an organization, it also involves a wide range of decisions, functions, processes, projects, products, services  and assets which it can utilize to access, analyze and mitigate the risks. While implementing these principles, the company must also take into consideration, the varying needs of a particular organization. These methods can be applied to solve the risks of any sorts, whatever the nature of the risk may be, whether having positive or negative consequences. It also does a thorough analysis of the operations, structures, products and the specific needs and demands of the company. As Macville private Ltd. Deals in beverages and has recently decided to expand their business, it becomes all the very essential for them to do a thorough analysis of the unforeseen expenditures that may arise.

Financial risk

As the company has recently started expanding its business of cafes it needs to be very alert regarding any risk that it might incur, it can incur credit risks by lending credit to its customers and also purchases and then providing financing of purchases to their customers because there is a possibility that a customer may default on payment. This company must also ensure that it has got sufficient cash flow to pay its accountable bills within the given stipulated period of time ( Farsalinos and Polosa 2014).

 Various risks can also arise from the day to day ordinary business activities, problems like law suits, fraud risk, personal problems and business model risks. There can also be several other risk for a new setup like poor product quality; consequently, there will be no customer satisfaction. There can also be some communication oriented risks. Customers nowadays are not only in search of good quality products at a lower price but also they are in search of easy, customer friendly services, there can also be some risks related to the physical health and fitness of the employees. If the employees are somehow rendered sick, then they will not be able to provide proper services to the customers. There can also be some problems with the logistic; there can be several issues in carrying the goods and services to and from one place to another.

Financial Risk

There can also be several problems related to the behavior of the superiors including the board of directors; there can often be a clash of the opinions and interests of the officials, more so in this case because the organization has recently advanced on a new venture of opening the new branch of their chain of café.

Establish the context- It is essential to do a thorough judgment of the impending risks of the company, it is very crucial to do an in depth analysis of the market conditions that or the state of the existing competitors, which might hinder the process of the growth and development of the company.

There are usually risks of various types, financial, operational, credit oriented etc. Hence, it really becomes very much essential for the organization to find out the particular kind of risk that the company is going through or might go through in future. It is only then, that the com company will be able to implement the proper tools needed for mitigating the risks.

It is also very much essential to predict beforehand the causes and the probable consequences of the impending risks.

There must a thorough evaluation of risks that the company might incur as it has stepped into a totally new venture. In the process of this evaluation, the company might do a research on the geographic location that is whether the location where they have decided to setup the new café is suitable or not, whether the age and income level of the customers living in that area will be inclined towards their products or not and apart from this external risks, there can also be some internal issues regarding the quality of the product and the price at which it is to be sold.

The most important aspect of the risk management chain is mitigating or overcoming the risks.

Monitor and review

 Even after applying the tools to overcome the risks, it is the prior duty of the organization to check the way in which the risk management system is progressing and whether the changes that have been made are beneficial.

The company rests on its stakeholders for its entire running; hence, it is the duty of the organization to inform and update their employees with each and every detail of the risks that the company is going through or is likely to go through and also about the level of and the effectiveness of the risk management tools.

  It becomes essential for the company to follow the proper policies and methods to mitigate the impending risks that the company is likely to incur. This procedure includes several stages. The policies and procedures should be consistent along with the strategic directions, the aims, goals, and objectives of the company ( DeAngelo and Stulz 2015). These policies and procedures must also have something common with some other organizational policies dealing with some other aspects of the business organization.

There must be a strategic focus, and also a forward thinking and active approaches to management (Micha et al 2017).  There must also be a thorough analysis done regarding the possible risks that might suddenly crop up in the case of a beverage industry, particularly dealing in restaurants and café.

Operational Risk

 The most common and the initial risk that the company needs to be aware of is that of fire. Fire is an integral part of any business setup dealing in restaurants and coffee shops. Risk management is crucial to business survival; It is the very backbone of any business setup. Fire in the commercial kitchens is a very commonly seen and commonly faced issue that can have

 highly damaging and adverse effects, and particularly those kitchens as is seen in the case of a restaurant always stays busy, both with work and as well as with men stepping in and out of the kitchen every and then. So, there is a high chance for the kitchen to catch fire and then cause undesirable consequences, and in most of the cases, it has been investigated by the fire fighting agency that the cause of the fire is the cooking equipment.

 Another important area that needs a thorough look out is the use of electrical wires and the security and safety methods (Farsalinos and Polosa 2014). It is also very important to have a proper risk management system installed to check and mitigate these risks in case there are any ( Forouzanfar et al  2015) Apart from this, there are few other areas like, housekeeping, health, and safety that need a constant check.

The first and the foremost thing that a company like Macville needs to ensure is that their company is having a proper insurance and any endorsements that are applicable to it ( Micha et al 2017).It is this policy and the endorsement that will enable the company to know that what amount of money will be refunded by the insurance company in case of any accidents or emergencies (Chen, Sohal, and Prajogo2013). It is thus, very essential to get the company insured and also initiate the associates of the company to get a proper insurance policy so that they can be properly compensated in case of any unforeseen accidents and the loss that would happen as a result of it (Rehm et al 2016). In the case of any doubts regarding the insurance policy, it is very important to clear it out with the Insurance Advisor. Apart from these, it is also essential to ensure a thorough safety of the electrical wires and the entire electronic system that is being used in the café.

TO: The Stakeholders

 SUBJECT: Risk Management of Mackville’s new café outlet at Toowoomba

  Dear Stakeholders,

This is an official letter from the Deputy Manager Ash, of Mackville Pty.ltd, who is also a member of the Finance, Audit and Risk Management Committee, currently managing the Flagship Café, in Queensland, Brisbane and is also recently appointed with the charge of the new branch that the company has decided to set up in Toowoomba.

This is to notify and inform all the stakeholders (both internal and external) regarding the issues that the company might face in future. As it is already known to all that the company has decided to expand its business, it is likely to have its pros and cons. According to a recently made report on the risks that the company might go through in future are-

• Operational risks
• Financial risks
• Social and Environmental risks
• Governance risks
• Management risks

Risk Analysis Method

The company wants all its associates, both internal and external to understand those risks, their consequences, and thus, give their feedback and their suggestions (Florio and Leoni 2017).They are asked to help the company find out any further risks that might affect it in future along with the necessary tools that would be needed to mitigate them (Cole et al  2013).

Apart from this, the stakeholders are also asked to understand and act as per their roles in relation to the risk management (Malik, Willet and Hu 2013).

This company like any other company is largely dependent on its stakeholders and hence, it expects the active participation of each of them to help the company function smoothly.

To: The CEO of Mackville Pty.ltd.

SUBJECT: Requesting to review the risk analysis report and to arrange meetings for further discussions.

Sir,

This is to inform you that the company has recently conducted a risk management analysis regarding the new Toowoomba outlet. This report mainly consists of the different kinds of risks that the company might face in future. Along with this, a list of the different tools and measures for mitigating those risks has also been attached herein. It would be great if you review the report once and also arrange for some further meetings to discuss the issue.

 Thanking You in Anticipation

Ash

Deputy Manager

Mackville Pty. Ltd

Queensland. 

Stakeholder	Internal/external	Role in process	Stake in process
Trustees	Internal	Governing the proper working of the setup.	Analyze the risks and the tools of mitigating them.
Employees	Internal	Responsible for the entire running and functioning.	Working on the implementation of the safety methods.
Investors	External	Financing and investing.	Giving the necessary amount of money needed to install and use the safety tools.
Suppliers	External	Supplying safe and high-quality raw materials.	Help in lowering risks.
Board Committee Members	Internal	Decision making	Decision making regarding which risks are to be adopted to control them and what methods are to control them.
Customers	External	Utilizing the goods and services.	Cooperating with the company to solve the risks and keep their faith in the company.
Quality Assessors	External	Checking and assuring the quality of the inputs used.	Check and assure the quality of the raw materials, electronic system, kitchen equipment of the beverage company.

Risk	Assess risk(score)	Controls	Monitoring	Action Priority(1-5)	Timelines	Responsible
Equipment Risk management	1	Safety equipment	Using highly automated equipment	1	weekly	Kitchen stuff  and quality assurance
Spoilage coverage	2	Power backups	Keeping power backup during power outages	2	daily	Electricians
Supply chain risk	3	Supplier satisfaction, price management, proper infrastructure	Proper regulation of price, sound  infrastructure, storage systems	3	Monthly	Employees
Fire risks	4	Fire fighting equipment	Immediate usage of fire extinguishers and other fire fighting devices.	4	Monthly
Food safety and recall risk	5	Unadulterated food and good quality food preservatives.	Keeping fresh, un- contaminated food.	5	daily	Kitchen staffs, food inspectors.

It was also inferred from the meeting, that the deputy manager Ash had with the different other delegates of the company that there were pros and cons of establishing their new Toowoomba outlet.

It is inferred from the meeting with James Mansfield, that the geographic location of the store is great and is very nearer to the customers, not only the local customers but also tourists (Georgopoulou et al 2015). Similarly, there is also a disadvantage along with this advantage that is there is a concern in getting the company branded supplies as could have been easily done by the Brisbane store.

Apart from this, there is the water usage mismanagement, the dishwater is often miss used and is left running while the fruits and vegetables are washed under a huge and rapid water flow( Hoekstra 2014 ).The dish washer that is installed is a three star and not a five-star rating one, which shows a better quality dishwasher needs to be installed.  There is also the lack of a properly written code of the rules and policies of the company ( Amann et al 2013 ). Apart from this, one of the chefs has developed some brilliant skill of making delicious rice wraps which is better than any other that is available in any of the nearby stores, which is very much likely to attract a huge number of customers.

 There is also a lack of proper sales promotion methods, as a result of which it becomes a bit difficult to involve the staffs in the activity, and so James stopped trying to make it happen. There is also the absence of any proper medical aids for any kind of injury at work, which must be immediately looked after and taken care of (Lim et al 2013). The wage calculations also had several issues. Then, there was the lack of proper internet connection and a competitor can easily take this advantage and set another café with free wifi connection to enable the customers to use this facility free of cost (Bezzina, Grima and Mamo 2014).

Monitor and Review

There was a high chance of opening many new cafes in the nearby malls where it would be much easier for gathering more number of customers. But then again, Toowoomba was a favorite place of the retired people who found it hospitable, affordable and easily reachable and this increased the population of the retirees (Labell and Rouleau 2017).There is a current by-law which is due and it would allow the cafes to expand their footpaths for accommodating more chairs and tables outside (Tse et al 2016).

Thus, these are some of the risks that the company is going through currently or is likely to go through in future, and there lies a great responsibility not only on the superiors but also on the associates that is the stakeholders, both internal and external to identify the risks, understand their roles and take part in the risk management process and thus, help the company in mitigating the risks on time and function smoothly (Oikonomou,  Brooks and Pavelin, S., 2014).

Conclusion

Thus, it is evident from this paper that risk management is indeed a very essential and unavoidable part of the business setup. Each and every business organization is likely to face risks of various kinds and so it becomes immensely important for the organization to do a thorough analysis of the risks. It is only after the proper analysis of the different kinds of risks, that the organization will be able to implement the right tools and the right procedures for mitigating those risks.

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