Risk Managment full assingmetn free essay sample

Executing a Risk Management Plan is a challenging task for the management of organizations all over the world. This is happening because of globalization, delimitation of economic boundaries and the malpractices of governance gaining prominence in the administration of public as well as private sectors. Organizations all over the world are facing risks concerning political uncertainty, scarcity of finance and wider diversification of markets. This is because the organizations need to expand and diversify in order to achieve high growth rate. The objective of this paper is to looks into the risk factors that these factors pose for Travco Travel Company (TTC), a private sector, closely held company with aspirations and potential to sustain growth. TTC is a professionally managed company and its growth has been exponential. The company is part of a 33 year old multinational group, The Travco Group, headquartered in Egypt . The group offers travel services and has allied business ventures, such as Cruise Liners, Luxury Coaches, Resorts and Luxury Hotels, spread across the Middle East and China. We will write a custom essay sample on Risk Managment full assingmetn or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page TTC, having reached the zenith of success in the Middle East is now embarking on a journey of economic cohesion and management integration in the international field for expanding its integrated commercial activities . This report has, after considerable deliberation, focused on three core areas of risk which can be cause of potential economic threat for TTC and The Travco Group, its parent group organization and these are – Financial, Marketing and Political. The strategic threat scope has been analyzed as per the guidelines set out in Risk Management-Principles and Guidelines of AS/ANZ ISO 31000:2009 and as defined in The Risk Assessment Technique Standard of IEC/ISO 31010. The strategic threat to Finance has been chosen because the company, which was established in the year 1979, has still to consolidate its financial roots for embarking on an international expansion spree. The indicates that the company is proposing to expand into totally alienated regions, where it is yet to establish itself as a cohesive, integrated and well-knit entity. The Political factor is based on the fact that its base country, Egypt, is constantly witnessing political uncertainty and is believed to be getting into unstable economic conditions because of this political apathy, disorientation and administrative vacuum. The author of this report has progressively discussed the organizational needs of TTC for risk management, progressing towards the need to propose a secured, rational process for formulating a risk management plan. The aim is to finally conjure a program that the company can manage to have an effective control over its expansion plans while minimizing risk potentials across all its business streams. The conclusions arrived at through this report are neither exhaustive nor are meant to provide any guidelines for TTC or for that matter any other company. The views expressed are the conclusive views of the author, who is of the opinion such conclusions, can be effectively used by companies as means of averting risk threats in their commercial ventures 2. Introduction Company Background Travco Travel Company of Egypt, this is how the founder Mr. Hamed El Chiaty christened his first venture when he entered into the travel service business in 1979. The company slowly but steadily consolidated its position in Egypt and with associates spread across whole of Middle East, soon became the top company in its field. It became a wholly owned subsidiary of The Travco Group and was renamed as Travco Travel. Its business interests are spread across Travel Services; Management of Luxury Hotels and Resorts; Cruise Liners; Luxury Coaches; Conducting Corporate Tours throughout the Middle East, Japan and Mainland China . The company now proposes to expand extensively in Asia and for that it is in the process of formulating a strategy to control the risk factors which its expansion may have to face in the future. The aim of this report is to suggest the company a Risk Management Plan which it can adopt across all sections of its functioning parameters. Business Objectives An expanding organization, such as Travco the need is to focus on financial, administrative and marketing policy matters. For such a dynamic organization, the task of choosing a well-defined risk management plan is a serious issue. The potential of the risks it may have to face while on the expansion spree can be internal as well as external. It is very difficult for the management to make an assessment of the perils of the expansion and to evaluate them before it begins the formality of another expansion is altogether a task which needs to be looked into deeply and carefully. Although the management can make efforts to understand internal, device ways to regulate and control them by formulating rules, regulations and policies, the external risk factors cannot be assessed as they are out of the company’s regulations and policies. Although, across all sections of business there are laws, standards and regulations which are imposed by regulating authorities and associations, even then situations do arise which are difficult to premeditate. Hence every management team has to learn from its own experience. Every organization has to experiment with its resources and produce best results within its own policy framework. TTC Group has experience, resources and its founder Mr. Hamed El Chiaty has gone through many ups and downs in these 33 years since he formed his first company in Egypt . There are many areas in the day to day operations of a company where risks are faced by the management. Such risk factors may be of minimum intensity or may attain dangerous proportions in due course of time. It is not always possible for the management to foresee these situations, but if the management has a good, working risk management plan in place and it enforces strict rules, it is possible for the management to keep the scale of the risk at a minimum level. In our opinion that a well thought Risk Management Plan of a company with progressive thinking shall control ‘uncertainty’ and manage ‘opportunity’ more effectively. After carrying out extensive research, the author has inferred that if the resources of a company, such as Travco travel are managed effectively than an integrated implementation of its risk management plan can create far reaching, positive and long lasting results for its financial, human and social growth. Having an understanding of the business it is in is essential for the management and equally important is to understand its adversities, competition in the trade. It is essentially important that the management formulates a risk management plan after taking into account the environmental and social pattern of the country where it intends to expand its operations. Research on Travco Group has shown that the vision of its founder to search newer opportunities for expansion and diversification across Middle East and now in Asia has been acute, accurate and well calculated . Business Strategy The company has formulated a well-researched business strategy for its diversification, expansion and future growth. Under the guidance of its able, experienced and dynamic chairman, Mr. Hamed,El Chety the group has drawn plans to adopt the culture of ‘Corporate Governance’ for its present and future projects. This will make the group aware and responsible to its internal as well as external stakeholders. The group has acquired a broad and exhaustive policy of risk management plan for all its group companies, whether presently under its fold, whether required to be acquired, merged or floated as new ventures, with or without the participation of its other associates, provided these prove to be gainful for its stakeholders in the future. The group has established a strong base of cultural roots and is committed to its stakeholders with a deep sense of corporate responsibility and a commitment towards better customer relations. The group management has a progressive outlook and is always on the lookout for newer avenues of vertical growth, both inside and outside the group’s organizational framework. The management is firmly of the belief that investing in human power is equally important as investing in equipment for a sustained all round growth of the group companies . Business Mission Multi-dimensional growth, multi-service diversity and multi-cultural outlook are the factors which the management of the Travco Group are determined to pursue for all its group companies. The management has envisaged a vision for growth and is being governed by a risk management policy which is growth-oriented and makes the group dedicated towards a secure future. The Group and its associate entities, whether associated directly or indirectly with the group, have a clear mission to rise above their competitors; to take calculative financial risk and to remain prepared for all eventualities. 3. Risk management glossary and terms Risk Risk is defined as the chance of something happening which can have negative or positive impact on the organization. (Risk Management Dictionary, 2010) Risk Assessment The identification, evaluation, and estimation of the level of risk and hazards or their up- gradation through a systematic and practical approach. (Risk Management Dictionary, 2010) Risk Management The identification, analysis, assessment, manage, and avoidance, minimization the chance of negative events or maximized the chance of positive events. (Risk Management Dictionary, 2010) Risk Management Framework A set of components that assist and continue RM through an organization. There are two types of components Foundation includes your RM objectives, policy, mandate, and loyalty. Organizational arrangements include relationships, plans, resources, accountability, activities and processes you used to manage your organizational risk. (Risk Management Dictionary, 2010) Risk Management Policy A policy statement defines a general commitment and overall intentions and direction of the organization related to its risk management. (Risk Management Dictionary, 2010) Risk Management Plan An organization’s RMP on how it intends to manage risk. (Risk Management Dictionary, 2010) Risk Management Process A RM process is a systematic application of management policies, procedures and practices including activities of communicating, consulting, establishing the context, and identifying, analyzing, evaluating, treating, monitoring and reviewing risk. (Risk Management Dictionary, 2010) Risk Criteria Term of reference which signifies the risk to be evaluated, these are used to determine whether a specified level of risk is acceptable or tolerable. (Risk Management Dictionary, 2010) Risk Identification Process of finding, recognizing and describing the risk that could be affects the achievement of an organization’s objectives. (Risk Management Dictionary, 2010) Hazard What ever source which could be of potential impairment Risk Owner- Entitiy or person who would taking accountability and authority to manage the risk. Risk Analysis Process that is used to be aware of the nature, source and causes of the risk that you have identified and to estimation the level of risk. (Risk Management Dictionary, 2010) Consequences Outcome of an event affecting objectives. (2009, risk management dictionary 2010) Likelihood Chance is that something might happening. (2009, risk management dictionary 2010) Probability- Chance of occurrence expresed as the a number between 0 and 1 where 0 is impossibility and 1 is absolute certainty. (business dictionary. com n. d. ) Risk matrix Table used in risk analysis in which row shows the risk and colums show their chance occureance and their impact. (business dictionary n. d. ) Level of risk magnitude of a risk, expressed in terms of the combination of consequence. ( 2009, risk management dictionary 2010) Risk Evaluation Process of compaaring the results of risk analysis with risk criteria to determine whether the risk or its mangnitude is acceptable or tolerable. ( 2009, risk management dictionary 2010) Risk Profile Written descrption of any set os risks. .( 2009, risk management dictionary 2010) Risk Attitude General organizational approch to assess and eventually pursue, retain, take or turn away from risk. Risk Aversion Investor attitude to turn away from risk. (Business Dictionary, n. d. ) Control is any measure or action that is modifying risk. Risk Avoidance- It’s techniques of RM to take steps to remove hazards and engage in alternative activity. (business dictionary n. d. ) Risk Sharing- RM is method in which the cost of consquences of a risk is syndication between several participant in an organization. (business dictionary n. d. ) Residual Risk- It’s the risk remaining after treatment, removed the souce of the hazard, transform the concequences, changed the probabilities, transferred the risk or maintain the risk. (2009, risk manageent dictionary 2010) Monitoring- Supervising Frequent checking, critically observing or determining the status in order to identify change from the performance level required or predictable. (2009, risk manageent dictionary 2010) Review- Activity undertaken to determine the adequacy, suitability and effectiveness of the subject matter to achieve established objectives. (2009, risk manageent dictionary 2010) Risk Reporting- Communication metohd to inform about the current state of risk and its management to internal and external stakholders. Risk Appetite- it’s the quantity to which the organization is ready to take the risk to achieve its business objectives. It is often said that more risk more gains. But the risk receiving of every organization differ depending upon its financial backup. Risk Tolerance- Organization’s or stakeholder’s readiness to bear the risk after risk treatment in order to achieve its objectives. Risk Treatment- The processes used by the organization to identify and treat the risks to bring the non-desired outcomes to the minimum in the chance of their occurring. This is basically done by following principal called ACAT (Avoid, Control, Accept, and Transfer) of the risks. (Business Dictionary, n. d. ) Risk Transfer- It’s defined as transferring a risk of negative impact to another organization that is willing to take on this risk with common understanding. (Business Dictionary, n. d. ) Stakeholders- A person or an organization that can affect or be affected by a decision or an action of the organization. AS/ANZ ISO 31000:2009 distinguishes between internal and external stakeholders. (Business Dictionary, n. d. ) 4. Objective of risk management Plan The group has a clear vision for its objectives and after having an established business network with a diversified outlook towards its policies, it has successfully accelerated its growth. This now naturally prompts the management to look at the next logical step of preserving all these aspects with a fully integrated risk management plan. Here, it is required from the management to initiate steps to control the inherent risks and it is advisable for the management that it follows the guidelines proposed in AS/ANZ ISO 31000:2009 (Risk Management-Principles and Guidelines) which should be implemented along with the strategic guidelines proposed in IEC/ISO 31010 (Risk Management-Risk Assessment Technique Standard) to identify such inherent risks. The Travco Group, having now attained a global exposure to business practices should now look into the methods of defining its objectives for a risk management plan on a global level. The main objective of plan is to identify mechanism of RMP, which will be implemented to manage and control the possible threat that may have negative effect on any of the business areas, increase the organizational performance, having strong presence in the market, strong relationship with partners, strong comparison team, timely feedback, observing competitors, having, quick decision making and positive action . These plan objectives are, identification, assessment, mitigation, contingency Planning, treatment and monitor and review Further risk which could be faced due to globalization of business nature it has made the group to face international competition and this exposes the group companies to threats and risks at a global level . In AS/ANZ ISO 31000:2009 (Risk Management-Principles and Guidelines), it can be perceived that the following are the areas of concern for the company which is now trying to establish itself on a broader platform and therefore must have clear objectives for its Pre- and Post-expansion plans. Risk Management Objectives to be observed by a Company Pre-Operative ObjectivesPost-Operative Objectives Economic FactorsOperational Continuity Social FactorsMaintaining Growth External ObligationsCustomer Responsibility Internal Conflicts of ViewsMarket Survival Tactics The risk threats for the Travco Group into three important areas which can be the cause of concern for it – (a) Financial Forces; (b) Political Forces; and (c) Market Forces and the purpose of this report is to highlight and discuss them on this platform . Risk Management Objectives to be observed by Travco Financial ForcesPolitical ForcesMarket Forces Economic FactorsSocial FactorsOperational Continuity Maintaining GrowthExternal ObligationsCustomer Responsibility Internal Conflicts of ViewsMarket Survival Tactics 4. 1Financial Forces Financial forces that are external in nature, always pose threats at the least expected time. The central control station of the Travco Group is located in Egypt and as it opens up new business locations which are far and further from its central control station, the chances of the company becoming target of external risks, because of circumstances beyond its control, becomes greater. Hence the management has to be extra cautious in financial matters and should exercise the option of more control through a robust Internal Audit Systems. It is advisable that the management adopts the policy of greater management and reporting transparency at all levels. It has been observed in financial matters and explained in the Risk Management-Risk Assessment Technique Standard of IEC/ISO 31010 that any change in policy or functional strategy can prove to be futile for the group. Hence the management has to take care that it makes its moves regarding financial, manpower and equipment after due diligence. A focused risk management plan is required at this stage which makes the optimal use of the company’s available resources and propagates further its social responsibility and corporate governance . 4. 2Political Forces It has been observed all over the world that a political change in government often leads to changes in the policies of the government. When a company, such as Travco is expanding into foreign lands its management should take extra care in dealing with the changes as the new policies are often pro-domestic and anti-foreign investment. The management of the Travco Group should keep in mind that recently even Egypt has undergone turmoil in its political circles and the Asian countries are prone to be affected by such changes. The management has also to keep a watch on the external affairs policies of the present government in its home country, as these would determine the future outcome of the group’s overseas ventures . 4. 3Market Forces It is evident that the Travco Group will have to face intense competition from the domestic sector of the country where it diversifies its business activities. This will be faced by the group even inside Egypt, where it is expanding its operations and adding new markets to its expanding. The group has to deal with such situations with utmost care and should endeavor to maintain flexible relations with its clients and associates at all levels 5. Creation of risk management Policy It is important that Travco Travel, its other associates and its parent group pursue policies according to the guidelines of AS/ANZ 31000:2009 for a competitive risk management plan, which it can make applicable to all its units across all sectors, whether domestic or foreign. This should be done by the management with a view to maintain linear growth of the group and to ensure that regulations are followed and group policies are not affected. 5. 1Role of the Board The Board of Directors of all companies of the group must take directions from the central governing body of the group, which functions under the guidance of Mr. Hamed el chiaty its founder and Chairman of Board. The central board should give out clear and bold decisions concerning financial control, marketing strategies and employee empowerment. 5. 2Role of the Risk Management Office As the Travco Group has started expanding its operations on international levels, it is very essential for it to set up a separate risk management and control office which should monitor, regulate and implement the group’s risk management plans across all the segments of the group. Such an office should have full backing of the central board of the group. It is advisable and also recommended by the Risk Management-Risk Assessment Techniques Standard policy of IEC/ISO 31010 that all the individual board members, who are fully conversant with their company’s internal and external risk threats and who have been designated with powers to control, are involved at the central board level in maintaining and correlating the various measures needed to ward-off internal and external risks. 5. 3Role of Internal Auditors This is a very essential and is a mandatory requirement as per the guidelines of the Risk Management-Principles and Guidelines of AS/ANZ ISO 31000:2009. The risk committee will on below. 5. 4Risk Committee CEO and Senior management In case where the risk leave is extreme, risk mitigation plan is required, risk is unacceptable, detailed research and management planning required at senior levels 5. 5Senior Management In case where the risk is high mitigation plan required, senior management attention needed, decision on acceptance of risk to be made by Process Owner and Process Manager 5.6 Middle line manager (supervisors) Management responsibility must be specified, decision on acceptance of risk to be made by Process Manager 5. 7Staff and Contractors Where the risk is low and acceptable which is monitored and managed by routine process 5. 8Policy Requirements How the policy is overviewed on quarterly basis if it needs to be changed, add new addendum to make sure it’s will upda ted with market place. Further how the policy is circulated with all staff within the organization 5. 9Review and approval Policy has to be approved by the risk committee 6. Interdependency of risk management with strategic planning Once the objectives have been set and policies have been formulated, the company should then concentrate on a ‘Strategic Plan’ so that the objectives and policies can be implemented effectively. At this stage, when it is in an expansion mode, it is essential and imperative for the group management to finalize its strategic plan so that it can consolidate its current resources and focus on future risk management. Under these circumstances, the decision making process of the group should have an inbuilt strong work culture which should form an integral part of the central management team. It has been observed that during such expansion phases, the management of individual companies has to take extra precaution, as far as the issues of internal and external risk threats are concerned. The Travco Group is a service oriented group and the management has to be alert about the ever changing trends in customer’s demands . Travco has to maintain a steady clientage, a loyal workforce and a trustworthy group of associates for future growth. Risk management is about – ? Maintaining Financial Strength; ?Maintaining Loyal Workforce; ?Maintaining Steady Clientage; ?Maintaining Supportive Associates. Strategic planning is also about the above mentioned factors and the Travco Group has to focus on the satisfaction of its clients by maintaining competitive prices and provide quality service. Easy communication facilities across the internet combined with new technologies not only benefits the Travco Group but also exposes it to the global competitors. Therefore it is essential that Financial gains, market control and risk management plans are controlled simultaneously for a sustained growth †¢Increase the number of clients from all the incoming outgoing sectors †¢Try to retain all upcoming markets share from new emerging markets †¢To maintain satisfaction and reliability image with partners and shareholders †¢To preserve the safety and security of gust assets and employees. †¢To expand the TUI / Travco group around the globe. 7. Relationship with Corporate Governance The management structure of the group has been built with a view to provide compliance with the Risk Aversion Policies of the group. The aim of such a governance structure is to control implementation of rules, effective implementation of the management’s decisions and to have quick and appropriate actions which ensure that the group progresses, attains its targets to fulfill the aspirations of stakeholders, employees and customers. The group should adopt such measures on a daily basis and managers at all levels should be involved to identify risk areas, establish management control procedures and implement the risk management plan. As shown below, accountability, authority, responsibility and skill management values should be maintained in the company hierarchy Responsibility The organization has to take full responsibility in case any of its employee’s action and stand by them. Ethical work atmosphere- lt should develop policies to differentiate all illegal and immoral practices within and outside the organization which comes under its scope of works.