Business Continuity Issues Faced by LomaxLenses - Research Paper Example

Business continuity issues faced by LomaxLenses Key risks There is no internationally recognised and established agreed definition of risk (Lee, Jones, 2004, p.2). Traditionally, risk has been defined as likelihood of an event taking place along with the unfavourable or negative consequences of the event occurring (Conrow, 2003, p.435). Currently, LomaxLenses faces numerous risks and their subsequent effects on the business performance and business operations. In the sales, the risks include sales verification process, website security and incorrect sales order. In the order management, the risks encompass mismatched product delivery and unauthorised access to catalogue. In the inventory management, the risks comprise of the absence of inventory management system, inventory theft and unauthorised dispatch. In the purchasing, the risks include unbudgeted purchases and unauthorised purchases. Sales Sales verification Process (Risk) Verification has been defined as confirmation of the system along with the data accuracy (Matthews and Shilling, 2008, p. 12).Numerous organizations prefer to put in place a strong sales verification process. In which, sale is cross checked and verified by someone other than the salesperson. Verifying and inspecting sales on a routine basis ensures that sales is appropriately recorded and is properly reflected by the accounts. However, LomaxLenses has not put in place this very important sales verification process. The company has been performing well and healthy sales forecast has been made but in the absence of any strong checks on the sales, the company faces strong sales risks and may be experiencing unhealthy business continuity. Business impact and risk score Actual monthly and annual sale information will not be available. In which, it would be considerably difficult to ascertain number of units sold during a particular month or year. Subsequently, this would create a situation in which annual financial statements would not be correctly developed and announced. Even if, the financial statements are prepared, the auditing firm may raise many questions about the accuracy of the sales figures and the number of units sold in the particular period of time. Hence, the company would be heavily affected by the severe effects of the absence of sales verification process. The risk score of absence of verification is eight out of ten, which is eighty percent. The rationale behind suggesting the risk score is that the company has not put in place the sales verification process in the company. Although it is using e-business structure, the chances of accurate and representative data remain marginal. Recommended solution Inspection team must be formed to verify daily sale transactions. The team must be comprised of individual who are not part of call centre staff. They must be given tasks to ensure accuracy and verification in the sales process. It would be time consuming to routinely check and verify sale performance; the team should pay surprise visits and inspection of daily sale. In the sale verification process, the inspection team should check the accuracy of sale order details and they must be cross checked and compared with the catalogue information as well. Risk (website security) The risk of hacking cannot be ruled out. Hacking is defined as unauthorised access to data held on a computer system (Heathcote, 2003, p. 46) or it is defined as an electronic break-in into a company data (Jahankhani et al., 2010 p.160). .The recent online history highlights a surprise increase in the website security attacks and hackings. In which, the hackers invalidate and destroy the website security mechanism and steal business sensitive information. After stealing the sensitive information, the hackers severely damage the internal system of websites, making it permanently useless. LomaxLenses has not put in place strong measures for website security. Although the provided knowledge maintains that the company has hired an e-commerce software company for developing and maintaining applications, the absence of any strong focus on the company website increases the website vulnerability. Business impact and risk score The business operations may be severely affected in case of any virus attack or any hacking attempt. There are numerous e-business experts who opine that the attack risks on the land of the Internet are more severe than the terrorist attacks in the real world. The entire sale structure is carried out through the use of Internet in which the website is visited by the online customers and they place order using the content placed on the company website. In case of hacking attempt, the entire website functionality would be severely compromised and the routine business transactions would not performed. Subsequently, this would also influence on the other segments of business operations. The warehouse and distribution centres would not receive any order details and other customer details. Subsequently, they would find no other way to suspend their business operation till the website repair. The risk score of website security is six out of ten. This is mainly based on the rationale that software house companies also put in place certain security measures to protect and prevent any such attacks. Recommended solution Website security must be assigned to companies providing security and integrity to websites. There are various companies who offer services to maintain and ensure website security. They put in place strong security mechanism in which different firewalls are provided to protect website content and the integrity of website information. The company should introduce and assign the website security task without losing much time as the website is the main source of generating sale. The cost of interruption in the website would be considerably higher and put substantial effect on the business operations. Risk (incorrect sales order) The risk of incorrect sales order may not be avoided as the company only (there is call centre also that takes orders) facilitates the customer to order through the website. The company has not provided the subsequent steps essential to translate sales order into a product delivery. Normally, there is an accepted standard in the online businesses is that companies assign tasks to employee to take and record orders from website and forward the order details toward the relevant department. In this process, the employee is required to carefully note down the order details and verify the accuracy of total cost and per unit cost. If the employee finds discrepancy in the order details, the related customers shall be contacted and the customer will be appropriately guided further. Business impact and risk score Interruption in business operations cannot be ruled out. Although the call centre support is mainly established to assist the existing and potential customers to purchase products and services offered by the company, however the chances of recording incorrect sales order cannot be underestimated. If the call centre employee fails to appropriately guide a customer and the customer orders incorrect product requirements, the business interruptions may require to the warehouse employee to correct the order details. The risk score of interruption is five out of ten. Most of the time, the customers remain careful while ordering through website and they prefer to double check their information before finally uploading their order description. Recommended solution Sales order inspector must be hired to ensure sale order accuracy. The main work of inspector is not to record the daily sale orders but he or she would be responsible to ensure the accuracy on the daily basis. The inspection team and the sales order inspector have different functions. The sales order inspector is a part of routine sales transactions and would be working in coordination with the call centre staff. On the other hand, the inspection team would be like an audit team to critically examine the accuracy of weekly or monthly sales performance for the purpose of maintaining accuracy. Order Management Risk (mismatched product delivery) Risk of mismatched product delivery is not a remote possibility. Most of the time, it becomes very difficult to attach and dispatch product delivery as per the requirements mentioned in the customer provided purchase requirements. This work is mainly done manually as employees working at the warehouse and distribution centres are required to receive purchase order and they are required to collect products as mentioned in the purchase order. In the absence of any strong matched product delivery system, the risk of dispatching mismatched product delivery cannot be ruled out. Business impact and risk score Business cost, customer loyalty and business operations shall be severely affected by the mismatched product delivery. The business cost would increase as the company incurs cost while converting a sale order into a product delivery. In which, the warehouse employees receive sale order and they collect and forward the products mentioned in the sale order. Subsequently, they forward them toward the distribution centres. From there, the product delivery is sent toward the intended client. If this entire process is affected by the mismatched product delivery, it would certainly increase the business cost. Additionally, upon receiving the mismatched product delivery, the customer would be dissatisfied about the company services and the working standard of the company. And, the customer may not continue buying from the company. In addition to that, the business operations would be affected as the employees would be required to cancel the initial mismatched product delivery. For that purpose, they would be required to make adjustments in the inventory register but they would be required to adjust their sales record as well. The risk score of mismatched product delivery is four out of ten. Normally, the employees do not take this action lightly. They prefer to match sale order and forward products mentioned in the sale order. Recommended solution Matched product delivery should be introduced. At the warehouse, there would be two employees working. One employee would be required to bring the items mentioned in the sale order and place both the sale order and products at a particular place. The other employee would be required to match the sale order with the physical products. This would decrease the chances of mismatched product delivery and at the same time, matched products would be delivered. Risk (unauthorised access to catalogue) Risk of unauthorised access to catalogue cannot be undermined. Catalogue is a list of things or items that are offered by company. The significance of catalogue is that it is main source encompassing the products available for sale and mainly available at the warehouse and distribution centres. if the salesperson has authority to receive sales order and at the same time they are required to adjust the catalogue, this mismatched authorised squarely increases the chances of theft, embezzlement risk and embezzlement is defined as wrongful use of the property of another for one’s own selfish ends and embezzlement is defined as misappropriation of items with which a person has been relied or entrusted (Crockett, 2007 p.3).Currently, the company has policy suggesting a particular individual to manage, adjust and update the catalogue. In the absence of any particular employee committed to handle the catalogue affairs, the chances of unauthorised access become very stronger. Business impact and risk score The company products may be stolen and unnecessary changes may be included in the catalogue. The catalogue lists all the available items. From a business point of view, catalogue is of strategic importance as most of information is obtained and employed to purchase, process and receive quotations from the suppliers. In case any unauthorised access is committed, the company would not be able to get actual representative information about the available products in the warehouse and other places. The risk score of unauthorised access is eight out of ten. As the company has not put in place a strong surveillance on the business operations of employees, the chances of unauthorised access do not remain a remote reality. Recommended solution Authorised access to catalogue should be ensured. For this purpose, one employee should be assigned this task and that employee should neither belong to the warehouse nor work in the call centre support. A neutral employee should be there to adjust and update the catalogue on the routine basis. This would decrease the chances of unauthorised access to the catalogue and that would diminish the chances of embezzlement and other types of fraud. Inventory Management Risk: Absence of inventory management system (Cross verification with monthly sale demand and the required level of inventory availability). Organizations considerably value the activity of inventory management. In the absence of any strong inventory management system, the entire business structure remains largely vulnerable to meet possible higher demand. In addition, another important activity is a cross verification process in which monthly sale demand is compared with the available inventory. The main rationale behind employing the cross verification process is that the company management remains in touch with the demand and supply requirement and demand and supply gap. This enables management to keep a buffer inventory in order to meet any excessive demand. In this case, the company has not put in place the inventory management system and the absence of inventory management system creates risk that the company may not be able to meet possible fluctuation in the product demand. Business impact and risk score Audit activity may be taken in a professional manner and this would affect the business operations. Organizations carry out audit of their stock, accounts and useful physical and non-physical aspects of business goods and business operations as well. The main reason behind the audit activity is to ensure that the business goods are mainly used for the business purposes. In addition to that, audit provides a clear business picture about the accuracy of data claimed by the different accounts which collectively develop financial statements. Within this context, the inventory management system is a key business operation detailing different activity levels taking place in the inventory. As a result, the absence of inventory management system, the company may not be able to get a representative idea about the currently available inventory and inventory in-transit and products sold to certain number of customers. The risk score of non-representative inventory information remains eight out of ten. Although some companies do not give a due importance to the concept of inventory management system, however the effects of absence of inventory management system are so severe on the business operations that companies would find it difficult to continue performing effectively and efficiently without putting in place a very strong inventory management system. Recommended solution Establishment of inventory management system must be pursed on the war footing basis. The inventory management system has been a key research in operations research (Kahraman and Yavuz, 2010, p.viii) and it relies on the existence of an item master one or more plant master records for each stock item (Starinsky, 2001, p. 424).The inventory management system would enable the company management to manage order and store a required level of inventory. This would also benefit to reduce the chances of theft and other embezzlement as the system enables the senior management to track the location of particular inventory. At the same time, the company would be able to decrease the obsolete products, and avoid facing the cost of inventory waste. In a nutshell, the existence of inventory management system brings effectiveness and efficiency in the business operations. Risk (Inventory theft) The risk of inventory theft from the warehouse cannot be ruled. In the absence of strong monitoring and supervision application, some employees may steal inventory material from the warehouse and the distribution centres Business impact and risk score The business loss would be an eventual outcome of inventory theft. The business loss would appear in rising cost of doing business. For example, 500 units are purchased and stored in a particular month. Total cost of 500 units is $ 20,000. Out of 500 units, 200 units are stolen. The cost of total stolen units is $ 8,000. As a result, the company would be required to bear the cost of stolen units. This is a single example to show the effects of inventory theft in which the company incurs $ 8,000 business loss. In addition to that, the company loses the potential sale of the stolen units. Again, this brings another effect on the business. Similarly, if some of the units were already booked and they were about to be dispatched, the company would definitely lose the customer trust and potential customer loyalty. The severe ramifications on the business goodwill in the long run cannot be ruled out. The risk score of business loss is seven out of ten as the company has not put in place supervision mechanism. The inventory theft is a common threat in the business world and even in the presence of supervision or surveillance system, the chances of complete theft protection are considerably limited. Recommended solution Close circuit cameras must be installed. The close circuit cameras have become an effective mechanism to decrease the chances of inventory theft and protection of company assets. In the absence of cameras, it is nearly impossible to protect assets and reduce theft of inventory. The biggest benefit of close circuit cameras is that they remain operational day and night and record every activity that takes place in their view. By recording every activity, the theft of inventory would be diminished considerably and in case of inventory theft, the thief would be easily caught by the camera footage. Risk (unauthorised dispatch) Risks become stronger when unauthorised activities take place. In the business world, embezzlement can also occur through unauthorised dispatch in which the warehouse employees collude and issue unauthorised dispatches. Business impact and risk score Again, business loss, customer loyalty and business operations would be severely affected. The company records or catalogue may be reflecting availability of certain products in the warehouse but in reality, the products are unfound in the warehouse. Subsequently, the business loss would be recorded. For example, based on the catalogue information, the customer may place a purchase order. When the purchase order is received by the warehouse employees, they do not find the ordered product. For the company, it would be a challenging task to arrange the ordered product and ensure product delivery within 48 hours. The customer loyalty would be lost if the customer is unable to receive the product delivery on time. The employees shall Recommended solution The warehouse manager must be assigned to authorise all dispatches. Authorisation remains the most effective instrument of accountability as it extends certain decision making rights to employee and at the same time, the employee shall be accountable for every activity that takes place under his or her supervision. Every dispatch must be signed by the warehouse manager and it is the sole responsibility of the warehouse manager to ensure that every dispatch must not go out from the warehouse without the warehouse manager permission. Purchasing Risk (unbudgeted purchases) Traditionally, raw material purchases are budgeted based on demand of product. In the company, there is no framework requiring the provision of budgeted purchases of raw material. In such circumstances, the risk of unbudgeted purchases cannot be ruled out. In which, purchase department may purchase more or less than possible or budgeted demand. Business impact and risk score The business operations would not be carried out effectively. In a traditional business structure, planning and budgeting are carried out in light of expected demand of products and services. The planning and budgeting enable organization to meet and minimize the demand and supply gap. In order to maintain the demand and supply of products, the budgeted purchase of raw material is ordered to the supplier. This budgeting process enables the business to meet and manage seasonal demand and supply fluctuations. In the absence of budgeted purchasing system, the business operations would not be performed in a required professional manner. For instance, the company has 500 units stock in a particular business day. On the same day, a customer places an order of 600 units with an immediate delivery note. Under this situation, the company would not be able to manage and meet the customer requirements. This situation clearly highlights the shortcoming in the budgeted purchasing system. The risk score of business operations is nine out of ten. Currently, the company is not focusing on the budgeted and planned business operations particularly in the purchase of raw material and other items. The major focus relates to the sale of products. Under such condition, the severe effects of unbudgeted purchases on the business operations cannot be ruled out. Recommended solution Planning and budgeting must be introduced. Planning and budgeting are the key business aspects as they enable organizations to effectively manage their current and future business tasks and activities. In order to reduce the effects of future activities, planning provides a direction through which organization can manage the effects of future activities. At the same time, the organizations not only decrease the business losses but also increase the effectiveness and efficiency of business operations. The purchases should be budgeted by the purchase manager. He or she should meet with the sale department and obtain information about the budgeted annual sale. Based on the budgeted annual sale, the purchase manager should plan and budget purchase of raw material and other items. This would decrease the negative effects of unbudgeted purchases on the business operations. Risk (unauthorised purchases) In a routine business process, bulk purchases are always authorised by the senior management as it decreases the chances of waste or supplementary purchases. Business impact and risk score The chances of obsolete inventory may be considerably increased. The biggest benefit of authorised purchases is that company reduces the chances of growing losses caused by the obsolete inventory as only required and essential purchases are being made. On the other hand, the biggest drawback of unauthorised purchases is that the company begins to face business losses provided by the growing number of obsolete inventory. The risk score of obsolete inventory is eight out of ten. Fundamentally, the company is new and its main focus has been to increase sale and meet the budgeted sales figure. Due to the inadequate focus on the inventory management, the chances of obsolete inventory remain higher and the company faces the severe risk of incurring business loss mainly caused by the obsolete inventory. Recommended solution Purchase manager must be authorised to order and sign the authorised purchases. In the decentralised business structure, the purchase manager is authorised to develop and budget purchases. On the other hand, in the centralised business structure, the senior management provides directions to the purchase manager to budget purchases. Keeping both views in mind, the ideal business structure requires that the purchase manager should be authorised to budget purchases and make all necessary decisions relating to the purchases. As the purchase manager has more understanding and information about the material demand and raw material rates, it would not be an incorrect decision to allow the purchase manager to manage the purchases as he or she intends to. 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