Enterprise Risk Management - Bauer Automotive Engineering Pty Ltd - Case Study Example

ENTERPRISE RISK MANAGEMENT by In business, enterprise risk management (ERM) includes the processes and methodsimplemented by organizations to seize opportunities and manage risks related to their goals. A framework for risk management is provided through the ERM, which involves typical identification of a particular circumstance or event that coincide with the goals of the organization that is (opportunities and risks), analyzing them in terms of magnitude and likelihood of impact, monitoring progress and determining a response strategy. By proactively addressing and identifying risk opportunities, organizations create and protect value for their customers including employees, society, regulators, customers and owners in general (Dafikpaku, 2011:34). The Bauer Automotive Engineering Pty Ltd does not have an effective strategy since the one they currently have cannot be diversified to the international standards of manufacturing. SWOT analysis can be described as a process by which the management team detects the external and internal factors that will mainly influence future performance of the company. It will help the company since it is regarded as part of the general corporate process planning, in which operational, financial goals are established for the next year, and effective strategies are put in place to achieve the goals. The company evaluating its strengths would help it to effectively determine how they will allocate its resources in a manner that will promote profit and revenue growth. It would also help them know which areas of their operations need changing. In addition, it would help with handling risks, competitive competition and discovery of opportunities (Hung, 2006:5). Relevance of culture in an organization is on the fact that it plays important roles in most key areas such as how quickly the organization can adopt or react to changes in the market, how major initiatives are executed, and if the organization can survive main shifts in business environments (Madu, 2011:65). The Bauer Automotive Engineering Pty Ltd has characteristics of a market organizational culture, which places importance on results, with focus on achievement, competition and results. This type of organizational culture seems to ignore the importance of employees and this can affect the company’s overall production, due to the disconnection between the management and employees (Copper & Speh, 2011:45). For efficiency in the implementation of the ERM, communication has to be well established between the different levels of management to guarantee that everyone involved understands the risks since it has a direct effect in almost all areas of production and the running of the company. Efficiency in communication that monitors complains should be effective since if some cases are not handled in time, they would affect the company’s image, or put entire company at risk, as in monitoring systems (Hardy, 2010:23). Communications that deal with people should be effective since if not, people can lose their lives, for instance in the case of an accident. This requires that the communications channels should be effective so that the mitigations and control systems can be implemented in time. The same can be said in terms of reporting control effectiveness, culture, skills, resource capability, and compliance reporting, which all are lacking in terms of the communication channels. All that this means is that the process should be easy and fast without the bureaucracy that is demonstrated in the company (Hardy, 2010:76). A general strategic direction to SME/ Business management can be gained through the strategic planning, which can also help it from becoming outdated. This is mainly because it helps give the business a specific direction in areas like organizational development strategy, financial strategy, human resource strategy and marketing strategy. For the Bauer Automotive Engineering Pty Ltd, their developed strategy actually supports future sustainability since they have managed to buy out their competition to become the main suppliers to Holden and Ford. They have also implemented Lean resourcing methodology that has streamlined their workforce to be more efficient and easier to manage, and their thought of expanding to international markets help ensure their continuity (Veskaisri, Chan & Pollard, 2007:35). Within the Bauer Automotive Engineering Pty Ltd, the CEO mainly owns the ERM strategy implementation and CFO’s who are in charge of both the development and implementation of the strategy. Leadership within the company is significant since it is relied upon to provide the direction for the company in terms of long and short term objectives. Culture is also critical since it brings in the general picture of the company in terms of how people interact; view the company, and shared company vision, loyalty and feelings in general. Culture mainly plays a major role in molding the leadership virtues and worldview especially where different cultures are represented. Some of the areas that the company should change include improving their systems of communication and response, improving their employee relation with the management and considering initiating lessons for the employees to know how to work with the new machines. Others include creating HR department to handle most of the logistics and management to get more involved with daily operations to improve the company culture in general (Ogbonna, & Harris, 2000:767). The management at Bauer Automotive Engineering Pty Ltd can use relevant cost analysis as a tool to know if they should discontinue or add product line operations. Accounting-based costing techniques can also be tools used to know the necessary activities needed to service and produce successful production lines. The strategic issues identified include having a rigid and backdated model for business that cannot be spread to international manufacturing expectations. The ERM challenges include underlying uncertainty that goes with its implementation, harmonizing of the risk management practices after the strategy implementation (Lee & Pines, 2008:15). The organization does not use a strategic planning and decision-making processes for mitigating its ERM strategy. However, it can improve its general decision making abilities by enhancing its planning process. Subconscious biases like group think, excess optimism and loss aversion if left uncheck will undermine strategic decision-making in the organization. They can analyze their organizations general behavior strategy, which would provide a guideline on how to address the effects of the biases within the organization management channels. They can also better succeed if they clearly determine who should be in charge of the strategic planning processes (Mattie, 2007:90). To prevent obsolesce; the company is trying to integrate IT systems into its manufacturing operations to improve its products. It is also trying to find new markets and diversify on its products, it is also buying out its competitors to make it dominant within the area and increase its service market and product share with major car companies. Strategic focus has also been centralized towards attaining lower costs and higher quality efficiency standards as stipulated by other international automotive companies. These are all strategies that mainly depend on effective decision-making techniques to work (Mikes & Kaplan, 2013:87). The importance of integration of online emerging capability for the Bauer Automotive Engineering Pty Ltd would be the fact that it would help it to manage effectively its supplies and production as well as meet the new efficiency and quality expectations that would be required in the international market that they aim to venture in. It would also help them with their inventories by improving aspects like the supply delivery platform systems (JIT), 3rd party suppliers dependence is also reduced mainly through implementation of the in-house e2e product delivery and development system. However, even with all these benefits the company stands to gain the managerial approach for the adoption of the new technology is not encouraging since their communication channel is poor there is no effective guidance that would lead the company towards the implementation and adoption of the new technology. IT considerations and mitigations that are necessary for the IT adoption within the company would include the company management first appreciating the impact that the implementation would create by understanding its cost value and the on-premise assets. They can view this in terms of the applications, Infrastructure and the support the application would need. They, secondly, look at that nature of the necessary applications, in that some of them can be moved and be operated from the cloud, while others can be saved on the premise such as the financial details and other confidential details of operation and production. Some of the IT considerations would include management considering the implications it would have on its security, compliance considerations and integration cost of the new systems. Some of the mitigations that they should implement include protecting their equipment and data through making sure that access controls are adequate to handle any risk presented, those related with access, mitigating the risk of an unauthorized intrusion, limiting the access of legitimate employees to need to know, and keeping effective back-up systems for their important data (Singleton, Tommie, 2010:57). Bauer Automotive Engineering Pty Ltd leadership model is one that practices a top down model that has governance that is characterized by minimal interaction with staff. It’s through the appointed team leaders who get the management’s message and passes it to their respective teams leaders and team members for compliance; example is on the changes to processing. All the regulatory issues, however, are handled under the quality manager and since the HR department is non-existent, the CFO has to address all the MIS resources reporting and compliance needs. The company manages to review, report, and monitor its external and internal environment while accessing the factors that can affect its sustainability mainly through relying heavily on the external advice provided by the outsourced third parties; this is like this because they don’t have in-house audit or risk assessment roles. The impact of the outsourcing and 3rd parties ion the company would include helping the company to improve capacity, increase capacity, increase productivity and profitability, lower innovation risks and costs, improve financial performance, and improve organizational competitiveness. However, they also present some problems to the company like lessening its controls over delivery of certain services, which would result in increasing the liability exposure of the company (Corbett, 1999). Within the Bauer Automotive Engineering Pty Ltd, the market organizational culture is practiced and it centralizes more on the company attaining profits as compared to focusing on values and behavior of the employees and management. Its impact is evident with the breakdown on communication and the bullying reported to the union. On ERM strategy, organizational culture impact can be seen by the lack of an effective internal environment in the company that has shown that there is no attention being given to protecting the entrepreneurial behavior and enterprise value, which has led to the uncomfortable situation in the company. In regards to governance and compliance, the reputation and brand impact of the Bauer Automotive products has shown that with careful implementation that the company can actually improve employee retention, reputation value and still increase their revenue. This is shown by their management ability to effectively upgrade their Tier status, expand their brand reach, and alliance with other major companies like Ford and Holden. The communication process at the company is through a top down approach, with little interactions between the different levels of people at the company, this was intended to reduce the bureaucracy and reporting lines. Some of the changes transformations implemented at the company include; outsourcing and amalgamation of some of the expensive parts of the business, reduction of staff and implementation of a lean system, increasing services and market shares as an automotive supplier. The companies training impact analysis shows that the company has not shown any interest in scheduling any training for its employees and as such no transfer or accreditation process of learning instigated especially on its new machinery. The company’s operational effectiveness has a lot of room to improve since however it can be considered successful, because it managed to achieve a long-term strategic goal of upgrading the company’s initial status to a preferred Tier 1 supplier. Reference List Copper, T & Speh, C. (2011) Creating a Culture of Risk Management Wolters Kluwer. Waltham, MA Corbett, MF 1999, Multiple factors spur outsourcing growth. www.Outsourcing- Journal.com/issues/jan.1-6. Dafikpaku, E 2011, The strategic implications of enterprise risk management: A framework. In 2011 Enterprise Risk Management Symposium. Hardy, K 2010, Managing Risk in Government: An Introduction to Enterprise Risk Management. IBM Center for the Business of Government. Hung, LNQ 2006, Using SWOT Analysis to Understand The Institutional Environments: A Guide For Can Tho University. Essays in Education, 18(1), 1-11. Lee, E, Oh, JY & Pines, E 2008, Practical managerial decision making tools: Operations research. Journal of Applied Business and Economics, Texas A&M University– Kingsville, Edward Pines, New Mexico State University. Madu, BC 2011, Organization culture as driver of competitive advantage. Journal of Academic & Business Ethics, 5. Mattie, J 2007, Meeting the Challenges of Enterprise Risk Management in Higher Education. National Association of College and University Business Officers. Mikes, A & Kaplan, RS, 2013, Towards a Contingency Theory of Enterprise Risk Management. Ogbonna, E, & Harris, LC 2000, Leadership style, organizational culture and performance: empirical evidence from UK companies. International Journal of Human Resource Management, 11(4), 766-788. Singleton, T 2010, The Minimum IT Controls to Assess in a Financial Audit (Part II), ISACA Journal, vol. 2 Veskaisri, K, Chan, P & Pollard, D 2007, Relationship Between Strategic Planning and SME Success: Empirical Evidence from Thailand. Asia and Pacific DSI. Read More