Risk Management and Planning in Apple Inc - Term Paper Example

Risk Management and Planning in Apple Inc Executive Summary In every firm there are some key decisions about management, which play a pivotal role indetermining the performance of an organisation. Managers have the ability to control these variables in their attempt to optimize on various things that affects an organisation. One of these practices is the risk management. In every business, the managers often find themselves faced with a wide range of risks. The success of an organisation is determined by its ability to manage these risks. This study gives an analysis of the risk mitigation efforts which have been applied by Apple Inc. in its risk management process. The study indicates that Apple Inc. Company has not applied risk management strategies effectively. This study proposes some of the risk mitigation strategies which the organization can apply in order to maintain high level of performance in the current competitive market. PART A: Current Risk Management Process in an Organization In many cases, an organisation may be forced to take a risk as a way of advancing its efforts to realize its goals or visions. In other words, leaders in an organisation may take steps of which they are not sure of their possible consequences. In such cases, an organisation takes a risk. In this case, Apple Inc Company is sometimes forced to make some decisions of which it is not sure of their respective results to the company. In such situations, the actions taken may bring profit to the company or even lead to devastating loses. As Ferreira (not dated) notes, the action taken in such situation may help an organisation in releasing profits and it may also dip it into losses. It therefore needs risk management skills to anticipate and prepare for such risks. Apple Inc. is a multinational company which is involved in the manufacturing and designing electronics and other products related with software. The company was initially developed in California in 1976 from where it spread its services to other parts of the world (Anonymous, 2008). The company is now involved in development and sale of portable media, mobile phones, computer hardware and software and personal computers. The company provides employment for more than 20,000 people world wide both as permanent and temporary workers (Anonymous, 2008). The company has also a well developed market for its products through advertisement campaigns, which has contributed in developing its brand. Organizational Goals The main goal of the Apple Inc. is to maintain a steady process of creating and releasing in its market networks more consumer friendly electronics. The other main goal is to open more stores around the world to reach as many people as possible. Mission Statement Apple Inc. is determined to come up with one of the best personal computing experiences to students, creative professionals, students and all its consumers around the world through innovation in its products. Company Description and Risk Management Approach Apple Inc. is engaged in an industry in which there are very many players in the world. There are a significant number of companies which are offering similar or related products in the global market. The company therefore faces a very high level of competition in its effort to maximize its level of sales. This is one of the main risks which the company faces in its operations. In order for Apple Inc. to be able to attain its goals and objectives, the company must be able to manage its risks. As already noted, Apple Inc. is a multinational company, which implies that it extends its services to other parts of the world. The international markets are characterized by a very high level of competition among the players. It is therefore important to have an effective risk management process. The company has employed several measures in an attempt to mitigate risks. As already noted, competition is one of the risks which faces Apple Inc. The company is sometimes forced to venture in a competitive market (Reiner, 2011). When the company chooses to invest in such a market, there is a high level of uncertainty because it is hard to predict on the results of the venture. In this case, the company may incur huge losses in case the venture fails. On the other hand, the company may realize substantial profits in case the venture is successful. Current Risk Management Process Apple Inc. has been using outsourcing as a strategy to avoid some of the risks it is exposed to in its supply chain. As already noted, Apple Inc. has extended its operations in many places around the world. In order to avoid the risks associated with the supply chain, the company has opted for outsourcing its distribution functions. The company has been outsourcing its distribution functions for a very long time from the past (Anonymous, 2010). This method has significantly helped the company in reducing the risks associated with the chain management. Branding is one of the common methods which the company has applied in its effort to improve on its performance. Over the past, many companies have been using branding for their goods ands services to overcome the risk posed by unknown level of competition in new markets. Branding is one of the most effective tools which have indicated recommendable results over the past. The branding strategy has helped Apple Inc. in creating a close relationship between the company’s brand and its customers. Mbuya (2003) observed that good customer relationship can significantly increase an organization’s performance by increasing the level of sales in the market. This helps the company in overcoming the risk of uncertainty in a competitive market. In other words, an organization is able to attract many customers even in a highly competitive market. This suppresses the impacts of high competition to the company (Lore & Borodovsky, 2000). By creating a brand, consumers will be thinking about the company’s product in case the need rises. Branding also involves creation of connection between the symbols and insights with the services and products provided by the company with an aim of cultivating loyalty from consumers. This will help in differentiation of the company’s products and services from those offered by its competitors. Another strategy which Apple Inc. Company has applied in risk management process is innovation. According to Culp (2001), innovation plays a very significant role in determining the performance of an organisation. Over the past, Apple Inc. has been involved in continuous research which has enabled the company supply new products in the market continuously. This is characterized by efficiency and quality improvement. While venturing in an international market, Apple Inc takes a high risk as there are many companies providing the same or similar products in the market. By enhancing innovation in its operations, Apple Inc facilitates its competitiveness in the global market. Its products will be in a position to stand from the shelves among product from various companies. In the contemporary market, consumers are getting more concerned about the quality of the products. Therefore, innovation has helped Apple Inc to suppress impacts of the risk in the global market. Risk Management Problems In an effort to suppress the risks to which it is exposed to, Apple Inc company has been faced by a number of problems. These problems have posed a big obstacle to the company in its attempt to achieve its goals. One of the main problems with the risk management in the company is that the strategies employed by the company do not cover all the risks to which the company is exposed to. For instance, the company has not come up with an effective strategy through which it can reduce the level of losses. This leaves the company still prone to these risks. In the global market, the company faces a major problem of imitation of its products. Product imitation is one of the biggest risks in the global market which can significantly destroy the brand image of a company (Kolakowski, 2011). In most cases, fake products are characterized by low quality. The company deals with electronics and other applications, which have high risks of imitation. However, the company’s risk management process has not fully solved this problem. There is a need for effective measures. PART B: Risk Management Plan for a Company As already noted, risk management process plays a very important role in determining the success of an organisation. The success of an organisation is significantly determined by the effectiveness of its risk management processes. Although Apple Inc has put some efforts in an attempt to overcome it risks in the organisation, there is a need for improvement of the entire process. There are several ways through which the organisation can maximize the effectiveness of its risk management process. Poor risk management can lead to a complete death of an organisation (Ferreira, not dated). The long term performance of an organisation is significantly determined by the company’s ability to detect and act upon any threatening risk. Risks can come from different angles. They can come from within an organisation (internal risks) as well as outside an organisation (external risks) (Sekhar, 2005). In the current business world, risk management has become more important than ever. The market has become highly competitive and therefore it requires every organisation to have the ability to detect the exposure to risks as well as the best methods to solve particular problems. Ability to manage risks has a significant impact on the competitive advantage. Risk Identification As already noted, the process of risk management plays a pivotal role in overall performance of an organisation. One of the most important steps in risk management is identification of the problem. This step is of great significance in risk management as it directs the risk managers on how to handle a certain problem. According to Bunyan (2006), it is necessary to consider whether a certain solution will solve the problem partially or completely. In order to have a successful risk management process, it is necessary to allocate adequate funding to the risk management program. All these decisions are significantly determined by the results of the risk identification process. Risk identification process is very significant in risk management process. Effective risk identification for the Apple Inc requires the company to have a continuous evaluation of the company’s resources. This will also include a critical calculation of the potential losses which can be associated with each of the identified resource. As already seen, this will be important in the risk management process because the managers cannot tackle unknown risk. The first step in risk management should be identifying these problems and then come up with the necessary measures (Alan & Dempster, 2002). The first step that Apple Inc. should consider therefore is a close evaluation and inspection of the operations and facilities. In order to ensure that all risks are considered, it is advisable for an organisation to fill risk analysis questionnaires. Through this form of evaluation, a company manages to capture all critical elements of a business whose performance can significantly affect the performance of an organisation. In order to have an effective risk identification process, it is advisable for every player in the company to be aware of what constitutes to these problems in an organisation (Rich & Tange, 2003). This will ensure that all risks are identified and dealt with accordingly. In risk identification process, company managers should promote communication. Application of this method in the case of the Apple Inc. will help the company in identification of all the risks which can significantly affect the company’s operations. After such identification, the company will be able to deviate from these risks. Risk Analysis In business, there are different types of risks. One of the main types of risk is venturing into a new market. In order to expand its market network, an organisation needs to invest extra amount of money. However, this poses a risk because the new market may fail. The managers are not hundred per cent sure that their product will succeed in the new market. Another type of risk is financial risk. In some cases, an organisation may be forced to take a loan in order to invest in a certain field with uncertainty (Segal, 2011). Such sources of capital carry risks because the organisation must pay with interests. The risk rises from the fact that an organisation is not always sure whether the new venture will end up to profits or losses. However, the risk managers should make the necessary assessment in the new market in order to minimize the impacts of risks. Risk Measurement In identification of the possible risk which faces an organisation, it is necessary to measure the value to the risk factor. This can be done by estimating the minimum and the maximum possible losses for each of the identified type of risk (Heng, 2006). The importance of risk measurement is to help the company in coming up with the most appropriate measures which can help in solving the problem at hand effectively (Fragnière and Sullivan, 2006). In the case of Apple Inc., risk measurement becomes complicated because the company is too large for manual computations. In this case, the company will be forced to employ computer in solving complex mathematical processes in order to come up with the best results. Some of the common measurements which the company can use include frequency, probability, severity, variation, and potential impacts. Frequency is used to measure how often a certain risk occurs. For instance, smaller losses occur more frequently than the larger losses. This measurement helps the managers in preparing in case of such risks. Severity measures the amount expected to be associated with a particular risk type. Continued observation helps managers to estimate the severity of a certain risk. On the other hand, variation gives an analysis of the past frequency and severity in determining the best course of action. Risk Mitigation Planning Risk mitigation is another important step in risk management process which determines the success of the risk identification process. Risk mitigation involves identification of various activities in an effort to reduce the probability of meeting risks and reducing the impact of adverse risk to an organisation. Risk mitigation also involves creation of feasible plans to deal with risks in case they occur in an organization (Northrop Grumman Corporation, 2007). It is important to note the fact that it is important to reduce the probability of an extreme risk occurring since it is cheaper than repairing an already occurred risk. For the Apple Inc., application of this method will significantly help in reducing the level of operational costs. However, some mitigation methods may also be too expensive to a Company which may affect the performance of an organisation negatively, contrary to what is expected. It is therefore necessary to consider these consequences while selecting risk mitigation methods. In order to have an effective risk mitigation exercise, every organisation may evaluate the process to ensure that the process is ending towards the right direction (Crouhy, Galai & Mark, 2006). In this case, Apple Inc. is advised to review its mitigation process in order to identify potential failures of each mitigation solution. In case any failure point is identified, it is advisable for the company to seek alternatives of correcting these inefficiencies. By so doing, the company will realize an effective risk mitigation exercise. Risk Monitoring and Control After identifying the risks to which it is prone to, the company should take the next step of controlling these risks in order to avoid their impacts to the company. There are various ways through which an organisation can tackle the identified risks. However, the choice of the method used will significantly be determined by the risk being controlled. Early risk identification is recommended in order to eliminate the risk early enough before the problem or the loss arises. Early risk identification leads to a corrective action which helps in either elimination or minimizing the impacts of such problems by implementing the appropriate measures depending on the problem. For instance, early identification of the problem will help Apple Inc. in repairing problems before reaching at the adverse stages. Another method that can be used in controlling risks is segmentation. This is a process where an organisation separates completely the processes and the assets hence reducing organization’s dependency on one individual asset in any particular location (Frenkel, 2005). These processes will help an organisation in reducing the level of losses in a particular location. To Apple Inc., this process is of great significance in eliminating risks in the company. For instance, this method will significantly help Apple Inc. in warehousing of inventory in various parts of the world with its market network. This will help in minimizing the risks to which the company is posed to. Another method through which risks can be reduced is through duplication. This is a process where an organisation keeps independent data back up of the company’s data. This method is important in reducing the risks associated with loss of company’s important data. According to Allen (2006), loss of some of the company’s data can cause huge losses or inefficiencies in an organisation. Apple Inc. can reduce the risk of data loss by maintaining outside the company backups of critical financial and other data, which is sorted in computers outside the working places. This will provide necessary data in case the origin data get spoilt or lost. This will help in improving the level of efficiency of the company to a great extent. Loss reduction strategy can also be useful in risk management process. This method of risk monitoring is aimed at minimizing the occurrence of losses whenever losses cannot be eliminated completely. In this case, an organisation should employ safety programs to put the level of losses below identifiable levels. In other words, it suppresses the impact of a certain risk to the company. Another method of risk control which the company can apply in risk management is Loss prevention. This strategy of risk management is aimed at preventing a risk rather than eliminating it. This involves designing of programs in order to reduce the frequency or to minimize the possibility of experiencing a certain problem. This method is of great significance to international companies like Apple Inc. By applying this method, the company will be able to come up with loss prevention mechanism (Purnanandam, 2007). Again, this will significantly help the company in reducing its operational costs hence maximizing its profits. However, this method suffers from the fact that it does not target elimination of a risk. It only controls the risk. In conclusion, this discussion has clearly shown that risk management is an important practice in every organisation. Risk management prepares an organisation in early risk detection, which reduces the impact of such risks to an organisation. Risks can be very dangerous to the overall performance of an organisation if not properly handled. It is therefore advisable for every company to take the necessary measures in order to improve their risk management processes. The risk managers are obliged with the responsibilities of detecting risks early enough and then acting accordingly to compress these risks. References Anonymous, 2008. Apple Inc. History. [Online] Available at: [Accessed 12 May, 2011] Anonymous, 2010. Supply Chain Compliance for Risk Mitigation. [Online] Available at: < http://scrmb.com/archives/33-Supply-Chain-Compliance-for-Risk-Mitigation.html> [Accessed 12 May, 2011] Alan, M. and Dempster, H. 2002. Risk Management: Value at Risk and Beyond. UK: Cambridge University Press. Allen, S. 2006. Financial Risk Management: A Practitioners Guide to Managing Market and Credit Risk. New Jersey: John Wiley and Sons. Bunyan, N., 2006. Managing Risk and Business Security. [Online] Available at: [Accessed 12 May, 2011] Crouhy, M., Galai, D, and Mark, R. 2006. The Essentials of Risk Management. New York: McGraw-Hill Professional. Culp, C. 2001. The Risk Management Process: Business Strategy and Tactics. New York. John Wiley and Sons. Ferreira, G., (n.d.). Best practices for Risk Management. [Online] Available at: Read More