Business Risk Assessment - Case Study Example

Business Report Part 2 (1435 words) Name Tutor’s Name Course Title Executive Summary Business risk assessment is important because it enables managers to prevent the occurrence of risks in the future. The decisions a manager makes are also key in the prevention of risk. The basic steps that managers follow in the assessment of risks include 1. identification of the risk 2. measuring the extent to which the risk will affect the business 3. finding solutions that will help prevent the occurrence of the risk 4. evaluating the solutions 5. choosing the best course of action 6. implementing the course of action 7. monitoring the effectiveness of the course of action Managers who apply the above steps make the right decisions that will help the business in future risk management. This report identifies the various actions that the management of Rio Tinto Japan would apply in order to deal with the issues of the earthquake that affected their operations. It is essential to identify the causes of the earthquake in order to prevent. Earthquakes are common in Japan where Rio Tinto is situated (Thomson and yaven 2012). This implies that the same is likely to occur in the future. If these actions do not be implemented in the future, the earthquakes will cause financial losses and other damages to the company. The company also has ethical issues, which decisions must be made in order to retain employees and promote their well-being. Introduction Various issues are facing Riot Tinto. This evident in the video where Vibert Dermot a worker at Rio Tinto responds to some questions. Some of this includes the low number of employees, staff use long hour trains to work and the risk of earthquakes. Managers should make a decision in order to achieve the objectives of an organization Decision Criteria A right decision made by a manager is safe to both the business and the employees. There are several actions that the management at Riot Tinto can consider in dealing with issues facing them. The decision that a manager shall make should consider the objectives and goals of a firm. In this case, evaluation of the possible risks that face an organization would facilitate the achievement of organizational profits. This is because risk mitigation would be securing unplanned costs (Amitai 1996). In the end, the business reports high profits. Alternatives A. Dealing With The Ethical Issues The manager can increase the number of employees. However, this should consider the budgeted costs on wages of an employee. The annual budget of Rio Tinto should guide them to know whether increasing the number of employees would be a right decision. The main aim of an organization is to make profits (Thomson and yaven 2012). The costs should be kept as low as possible in order to make high profits. Direct labor cost should be minimal. The managers can also training the existing workers in order to diversify in their skills. This will enable employees to have different responsibilities. For example, Dermot is the manager and has other responsibilities. Lack of proper training can lead to wrong decision-making (Thomson and yaven 2012). Trained workers can mitigate risks arising in the business premises. Monitoring of the welfare of employees is necessary if they are to perform the duties effectively. Dermot who id the manager of the Rio Tinto has to board a train in the morning in order to arrive at the business early as expected. The company should have staff vans or cars that are given to workers. Even though, this would increase the expenses of the business, the employee will also be motivated to work. Motivation of employees is necessary because it increases their interest in their jobs B. Dealing with the Risk of Earthquakes The organization should realize that measure should be taken today in order to avoid future problems caused by earthquakes. This is because businesses affected with earthquakes suffer great financial losses. This affects the shareholders wealth (Elton 2007). Some of them withdraw their investment and sell their shares. The income of the business also decreased. First, the business should try to help the employees who were also affected by the disaster (Reed 2011). The step that Rio Tinto should do is to insure the business against the risk of earthquakes. Insurance help to compensate businesses when affected by the risk they insure. Necessary training should be done to create awareness to the employee on the risk of earthquakes (Helbling 2012). The company should take up corporate responsibility and train the community on the importance of dealing with earthquakes. This would improve the reputation of the business. Technology can play a key role in the prevention of future losses caused by earthquakes (Elton 2007). Rio Tinto can research and find the right machines that would help mitigate losses. This would be achievable through the acquisition of proper machines that would survive even when the earthquake occurs. Even if, the cost of the machine will be expensive, in the end it would be helpful to the business. Solutions The best way that Rio Tinto can deal with ethical issues is training and motivation of employees. Having few employees could be a strategy that the organization is using to minimize its costs (Hume 2011). Training and development of employees is costly in the short run but profitable in the end. This could help solve the issues of workers having various responsibilities without the skills and expertise. Motivation of employees could also be a way of promoting a good relationship between managers and employees (Amitai 1996). Teamwork is the key in dealing with problems affecting a business. Rio Tinto should provide the various resources required by employees in order to perform their duties. A good and conducive environment helps to improve the performance of employees. Increasing the number of employees could also be a solution but the costs associated with that are expensive. Hiring of new employees requires time to train them and outline the objectives of the business to them (Swanepoel 2011). Employees that are hired will possibly not perform their duties competently. The best way of dealing with the issue of earthquake in the future is to insure against it. Training of employees is not a good preventive measure. Rio Tinto suffered huge financial loss after the earthquake. The shares of Rio Tinto decreased after a three million U.S. dollars loss in 2011 (Hume 2011). This implies that the share lost value. The shareholders wealth declined after the loss. Insuring of the risk would restore the business to its financial position in the event an earthquake occurs (Berman 2006). This would ease the obligation of the management in dealing with the aftermath of the disaster. Implementations Managers should identify effective ways of implementing decisions they make. Change in an organization is crucial if a business is to continue making profits (Singh 2012. The manager can first train a few employees and assign other duties to them before training others. This strategy would help analyze the recreation of the other employees toward training. The training programs should be suitable for all employees. This would avoid the refusal of attendance by some employees. The training programs should benefit all employees. The duties and responsibilities assigned to workers should be rewarded fairly (Singh 2012). The wages paid to workers at Rio Tinto seem not to be standard wages. This is because the manager himself does not own a vehicle and he has to board a train in order to arrive at work in time. The rewards offered to employees act as motivating factors and should be able to sustain their standards of living (Berman 2006). Shareholders must accept the insurance of the business against earthquakes. An annual general meeting should be held by Rio Tinto in order to discuss the importance of insuring the business. The premiums should be paid annually to the insurance firms in order to avoid future problems. Lack of payment of premium can lead to non-compensation of the business (Amitai 1996). Therefore, the management should ensure their employees also try to mitigate the losses created by the earthquake. Conclusion The risks of a business if not assessed will cause many problems to the business. The reputation of the business helps to improve the performance of a business. Corporate responsibility also plays a key role in enhancing the public image of a company. Rio Tinto reported losses after the earthquake. However, this would not be so if the management had identified the risk and implemented several measures to prevent its massive destruction. Shareholders are interested in businesses that perform well in the stock market. Therefore, it is necessary for mangers to strive at remaining competitive. References Amitai, Ernest. 1996. Macro Social Economics: From Theory to Activism. New York: Prentice Hall Press. Print Beach, Michael. 2010. Disaster Preparedness and Management. United States of America: F.A. Davis Company. Print. Berman, Karen. 2006. Financial Intelligence. Boston: Harvard Business School Press. Print. Elton, Edward. 2007. Modern Portfolio Theory and Investment Analysis. United States of America: Wiley publishers. Print. Helbling, Titus. 2012. “Commodities in Boom”. Finance and Development 49(2): 30-31 Hume Neil. 2011. Rio Tinto Vow after Its Biggest Loss Ever. Financial Times. Accessed May 16 2013, http://www.ft.com/intl/cms/s/0/831b1bd2-7669-11e2-ac91-00144feabdc0.html#axzz2TTDIeeMs Reed, Phillipa. 2011. “Dealing with Post-Quake Stress”. New Zealand Business Journal 3(7) 2011 Singh, S. 2012. “Rio Tinto Intends To Maintain Spending Plan”. American Metal Market 120(6): 32-34. Swanepoel, Esmarie. 2011. Japan Earthquake Crisis Could Affect Pilbara Expansion – Rio Tinto. Mining Weekly. Accessed May 16 2013, http://www.miningweekly.com/article/japan-earthquake-crisis-could-affect-pilbara-expansion-rio-2011-04-01 Thompson, Andrew and Yaven, Peter. 2012. Peace of Mind in Earthquake Country: How to Save Your Home, Business and Life. California: Chronicle Books. Print. Read More