How Technology Can Be Introduced in Management Practices for Better Results - Case Study Example

MGT8077 PROJECT RISK MANAGEMENT ASSIGNMENT 2 MARK SHEET Student name (insert your full name) Student number (starts with 00) (insert your student ID) It is recommended that you start writing your assignment on the last page of this document. Alternatively, you can attach your assignment to this mark sheet but be careful that formatting is the same for both documents before doing so. Assignments submitted without this mark sheet will lose marks. This mark sheet: provides students with details of the marking criteria for this assignment including penalties for non-compliance with specific requirements, acts as a checklist to ensure that students have addressed all requirements, and is used by markers for providing feedback and marks for the assignment. FORMATTING You may have to adjust the page formatting before attaching your assignment. It is suggested that you use the following formatting for your assignment before pasting it onto the last page of this mark sheet: TOP MARGIN – 2.5 cm BOTTOM MARGIN – 2.5 cm SIDE MARGINS – 2.5 cm FILE NAMING / RENAMING GUIDELINES With the use of EASE for assignment submission, there is no need to include your name nor student number in the file name. EASE inserts this information automatically. Your assignment file name should simply be MGT8077_2016_S1_A2 IMPORTANT NOTE Remember to submit a copy of your assignment (without this mark sheet and appendices) to Turnitin and to obtain an Originality Report for submission through EASE www.turnitin.com See the Introductory Materials for more information MGT8077 ASSIGNMENT 2 MARK SHEET – PROJECT RISK MANAGEMENT (Note to markers – indicate level of achievement for each row by highlighting relevant text or cell - do not provide a numerical score for each row) Non-compliant Poor/inadequate Basic Adequate Good Excellent Mark ASSIGNMENT REQUIREMENTS (out of 70) 0 0 to 34 35 to 45 46 to 52 53 to 59 60 to 70 /70 Executive summary (ES): (see assignment 2 requirements for details of what is required for each section) No ES provided. Poor quality ES that does not provide the required information Basic ES that provides limited information, or does not provide information in a clear and concise manner Adequate ES that provides sufficient information Good ES providing the required information in a clear and concise manner Comprehensive ES providing the required information in a clear and concise manner, and able to function as a stand-alone document and/or presentation to a CEO 1. Introduction No introduction provided Poor introduction provided, or irrelevant information Basic introduction provided Adequate introduction provided Good clear introduction provided Clear, concise and comprehensive introduction providing essential details 2. Background and environment of project No background provided Inadequate information provided Basic or limited background information provided Appropriate level of detail provided Good level of detail provided Clear, concise and comprehensive background providing essential details 3. Risk management processes No discussion on the topic Poor or inadequate discussion on the topic Basic discussion on the topic, with limited use of theory to support the discussion Adequate discussion on topic using appropriate theory Good discussion on topic using appropriate theory Clear, concise and comprehensive discussion on the topic, supported by appropriate theory, figures and tables. 4. Risk identification No discussion on the topic Poor or inadequate discussion on the topic Basic discussion on the topic, with limited use of theory to support the discussion Adequate discussion on topic using appropriate theory Good discussion on topic using appropriate theory Clear, concise and comprehensive discussion on the topic, supported by appropriate theory, figures and tables. 5. 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Risk management integration No discussion on the topic Poor or inadequate discussion on the topic Basic discussion on the topic, with limited use of theory to support the discussion Adequate discussion on topic using appropriate theory Good discussion on topic using appropriate theory Clear, concise and comprehensive discussion on the topic, supported by appropriate theory, figures and tables. 8. Findings and recommendations No conclusions or recommendations provided Poor or inadequate conclusions and/or recommendations provided Basic conclusions and recommendations provided Adequate conclusions and recommendations derived from the preceding analysis Good conclusions and recommendations derived from the preceding analysis Clear, concise and comprehensive conclusions and recommendations derived from, and justifiably supported by, the preceding analysis RESEARCH & ACADEMIC THEORY (out of 20) 0 0 to 9 10 to 12 13 to 14 15 to 16 17 to 20 /20 Critical analysis uses appropriate theoretical principles as a framework for analysis No use of theoretical principles Poor or inadequate use of theoretical principles Basic use of theoretical principles Adequate use of theoretical principles Good use of theoretical principles Extensive use of theoretical principles and appropriate application to the project and its environment Argument is well structured, logical, and well-reasoned (compelling) No logical argument provided Poor or inadequate structure and argument Basic structure and argument Appropriate structure and argument Good structure and argument Well structured, logical, and well reasoned Figures and tables are effectively used and adapted in the analysis to clearly illustrate/compare/contrast theoretical principles with project practices. No use of tables and/or figures where their inclusion was justified Poor or inadequate usage of figures and tables Basic usage of figures and tables Adequate usage of figures and tables Good usage of figures and tables Excellent usage and adaptation of figures and tables Evidence ofresearch is provided to support the analysis and argument. No evidence of research into the topic Poor or inadequate evidence of research Basic evidence of research Adequate evidence of research beyond the study materials and set text Good evidence of research beyond the study materials and set text Evidence of extensive research beyond the study materials and set text to support the analysis and argument Evidence ofknowledge of study materials and general knowledge of the project management domain is provided No indication of knowledge of study materials Poor or inadequate indication of knowledge of study materials Basic indication of knowledge of study materials Indication of adequate knowledge of study materials Indication of good knowledge of study materials Evidence of extensive knowledge of study materials and of PM domain Quality of resources – evidence of use of research resources from quality sources (e.g. journal articles, texts, conference papers, etc.) No use of research resources Poor quality sources of reference materials (e.g. websites, Wikipedia, etc.) Basic quality sources of reference materials (e.g. websites, Wikipedia, etc.) Adequate quality of sources of research Good quality of sources of research Excellent sources of research resources, including journals, texts, conference papers, etc. Citations are effectively and appropriately provided (and consistent with the Harvard referencing system) No use of citations Poor or inadequate use of citations within the text Basicuse of citations within the text Adequate use of citations within the text Gooduse of citations within the text Extensive and appropriate use of citations to reflect use of theory in analysis and argument List of references is providedand shows quality sources No list of references Poor or inadequate list of references (10) Comprehensive list of relevant references Harvard referencing system is used and conforms to Harvard style as defined on USQ Library website (e.g. alphabetical order) No use of Harvard referencing system Poor or inadequate use of Harvard system of referencing Basic use of Harvard system of referencing Adequate use of Harvard system Good use of Harvard system Comprehensive use of Harvard system in accordance with conventions of AGPS 6 style PRESENTATION OF REPORT (out of 10) 0 0 to 4 5 to 7 8 to 10 /10 Cover sheet (in addition to the mark sheet) No cover sheet provided Limited information provided Adequate information provided Comprehensive information provided with no errors nor omissions. 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Marks to be deducted for... Range of penalty Actual deduction Mark sheet – to be attached to front of assignment No mark sheet 10 Turnitin Report – to be submitted with assignment No Turnitin originality report (mark of 1/100 allocated until report submitted) 10 ** Total Deducted Mark (TDM) Overall Results * Total Assessment Mark (TAM) ** Total Deducted Mark (TDM) Final Assignment Mark = TAM – TDM (capped at 1/100 until Turnitin originality report received) Comments and feedback from Marker: Ways to improve: The balance of this page should be left blank. Please start or attach your assignment on the following page (which has been separated by a Section Break) (please start typing or attach your assignment here) VOLKSWAGEN GROUP Student’s Name Course Professor’s Name University City (State) Date Volkswagen Group Executive Summary The report is on the analysis of the Volkswagen Group’s risk as per the emission scandal. The study evaluates the risks to highlight the major areas to determine the success and failures of the company’s management. Volkswagen Group emission scandal was relating to its integration of software on its vehicles that enabled them to cheat the regulations on emission through the production of excess nitrogen (iv) oxide into the atmosphere. In 2015, the environmental regulators identified the scheme and forced the company to adjust the system of its vehicles and it was also fined. The study found that the despite the detailed risk management framework that the company had, it was not efficient enough thus allowing for the emission risk that negatively affected its reputation. The risk led to the fall of the market shares of the company and the sales. The recommendation of the project includes improving the reputation of the enterprise, integrating risk management into the organizational system, and conducting of internal audit and control using appropriate tools and techniques. Reputation makes the public trust the company thus an improvement in sales. Integration of the risk management system into the firm ensures proactive measures as opposed to reactive ones while internal audit and control ensure efficiency. List of Figures Figure 1: Annual Standard Governance, Risk, and Compliance Process 15 Figure 2: 'Three Lines of Defense' Approach 16 Figure 3: Risk Occurrence Affecting the Market 20 Figure 4: Vehicle Sales in 2009 22 Source: McGee (2016) Figure 5: Estimated Cost of Fixing the Scandal Cars 24 Figure 6: Estimated Cost of Fixing Volkswagen Cars in the United States 25 Figure 7: Share Price of Volkswagen 27 List of Tables Table 1: Diesel Passenger Car Emission Standards 18 Table 2: Vehicles Affected by the Emission Scandal Mitigation Measures 18 Table 3: Worldwide Automobile Efficiency Standards 23 Table of Contents Executive Summary 9 List of Figures 10 List of Tables 10 1. Introduction 12 2. Background and Environment of the Project 13 3. Risk Management Process 14 4. Risk Identification 17 5. Risk Analysis and Evaluation 20 6. Risk Treatment 23 7. Risk Management Integration 26 8. Findings and Recommendations 29 Reference List 31 1. Introduction The paper aims to analyze how technology can be introduced in management practices for better results. It uses the scenario of Volkswagen Company as the case study. Volkswagen Company admitted in 2015 for tampering with emission control systems of more than half a million vehicles in the United States and more than eleven million globally (Mamalis, Spentzas & Mamali, 2013). As a result, the Company has been making efforts to make things right. The act aims to restore the tainted image and make the Company’s automotive manufacturing process environmental friendly. The project, therefore, seeks to analyse the Company's reaction and its viability. The contents of the report entail the project's environment and background; the process of risk management; identification, analysis, and evaluation of risks; and risk treatments. Furthermore, the paper took into account the integration of the risk management. Lastly, it took consideration of the research findings and the suitable recommendations that relate to the Volkswagen Company Vehicle Emission Systems project. 2. Background and Environment of the Project Volkswagen, a locomotive company, has been reacting to a scandal relating to emission cheating. Some of its vehicles had software that gave false data relating to the amount of emissions the cars produces. The false information showed that the vehicles' emission is lower that what they generate. The realization of the rigging system tainted the image of the Volkswagen Company. As a result, the company decided to start a project dubbed Vehicle Emission Systems that would see an upgrade to the emission testing and gain the public trust once more. It aims at returning the engine to minimize carbon emissions. However, the plan was just to be implemented upon winning the Environmental Protection Agency approval. The method used is known as "selective catalytic reduction system" (Kieler 2015). The system's technology entails the use of a urea-based fluid that purifies the exhaust's emissions. The installation of the technology, therefore, needs qualified and trained software development engineers that will capacity build the employees to enhance risk management activities. 3. Risk Management Process Volkswagen used the mitigation principle to identify the opportunities and risks associated with their automobiles. The mitigation measure was put in place to ensure that the negative publicity relating to intended emissions was controlled. The project “selective catalytic reduction system” based on the company’s holistic internal control system and risk management system (Kieler 2015). The risk management system and internal control system of Volkswagen Group are based on the internationally recognized enterprise called Committee of Sponsoring Organization of the Treadway Commission Enterprise Risk Management Framework. The risk management approach integrates the compliance management system, internal control system, and risk management system to form a management strategy. The strategy is known as Governance, Risk, and Compliance Strategy (Volkswagen 2013). Refer to Figure 1 below. The Group Board of Management is the body centrally managing the risk relating to Vehicle Emission System Project. The central management of the project acts as a precautionary principle that helps curb duplication of efforts that would lead to wastage of resources. The goal of the board is to examine the opportunities and risks in connection with the several processes that do exist. In addition, that audit committee holds the internal control system and the risk management system accountable through receiving of reports regularly relating to their duties. The review of the report is used to ensure the effectiveness of the two bodies of risk management in the company thus enabling it determine its progress. Source: Volkswagen (2013) Figure 1: Annual Standard Governance, Risk, and Compliance Process Volkswagen Group is implementing the Vehicle Emission System project through tripartite defence lines. Its procedures and structures are embedded in the daily activities of the Group. The defence lines are categorised into three. First, the defence line is based on the function of the brands, companies, and divisions (Volkswagen 2013). The paths allow for the revealing of the daily risk status of the company as through reports. The risk management was, therefore, implemented in the planning, implementation, monitoring, and evaluation phases of the project. Furthermore, the guidance instrument that governs the project is usually issued as a single document so as to ensure uniformity in the Group. The process also allows for the timely notification of the project’s risks. Second, is the department dubbed Group Governance, Risk, and Compliance? The department’s role is to set standards for risk management system or internal control system and coordinates the Governance, Risk, and Compliance processes annually. The process allows for the updating of the holistic nature of risk associated with the project and determines how effective the project is. The output is usually a report indicating the qualitative and quantitative assessment criteria and is issued by the Group's Board of Management. The third line of the risk management process is the internal audit of the Group. The internal audit allows for the regular monitoring of the project and risk management system implementation through an independent angle. Refer to Figure 1 below. Source: Volkswagen (2013) Figure 2: 'Three Lines of Defense' Approach The project addresses one of the significant risks that might tremendously affect the company. Despite being something of a higher probability of occurrence, the emission mischief would lead to large financial costs. The mischief if not reversed can lead to significant affect the Groups market trends and unit sales for genuine parts and vehicles (Barrett et al. 2015). Furthermore, the Group had created a product that does not address the public demand. The Groups products, therefore, was of poor quality. 4. Risk Identification The risk entailed Volkswagen group installing elaborate software to its 482,000 vehicles that are sold in the United States (Plumer 2015). The software fooled the regulators on the emission rate of the vehicles. The 2009 Group’s leadership developed a short cut that would see the restrictions passed at the expense of the environment. The pollution controls introduced only worked when there was an emission testing being conducted after which, the vehicle would continue to emit hazardous and compounds that form smog. Volkswagen had been using an intricate code to track pedal and steering movement since 2009. The movements recorded suggested that the vehicles were being tested for the omission of nitrogen oxide in a laboratory while in the real sense, the car had the capacity to turn off its pollution control system automatically while on the road and on during the test. The International Council on Clean Transportation identified the problem after noticing the discrepancy between the Volkswagen diesels models’ road performance in Europe and the laboratory tests. The independent group worked in conjunction with West Virginia University’s researchers in the probe of the vehicles exhaust pipes. The researcher drove the vehicles from San Diego to Seattle and identified that Jetta and Passat model were emitting more pollution compared to lab results. Jetta model emitted 15 to 35 times more nitrogen as per the recommended while Passat was rated at 20 times (Plumer 2015). In 2014, Environmental Protection Agency issued a warning to Volkswagen, but the company never took heed despite claiming it had addressed the concerns. The agency, therefore, grilled Volkswagen Group threatening not to approve its 2016 clean diesel vehicles. It is the threat that the company admitted of the malpractice. Table 1 below shows the emission standards among the diesel vehicles in the United States and that of European Union. Table 1: Diesel Passenger Car Emission Standards Source: Couture (2015) The regulator, Environmental Protection Agency, was notified of the research outcome. In reaction, the regulator announced in September 2015 that Volkswagen had been violating the Clean Air Act since 2009. The German firm was, therefore, ordered to fix the automobiles that were affected that included the Passat, Beetle, and Jetta. In addition, the firm was risking being levied fines of approximately $ 18 billion besides facing the criminal charges from the Department of Justice (Plumer 2015). The reaction on the scandal affected the Volkswagen and Audi vehicles. Refer to the Table 2 below. Table 2: Vehicles Affected by the Emission Scandal Mitigation Measures Year Models 2009 VW Jetta Sportswagen and VW Jetta, 2010 VW Jetta Sportswagen, VW Jetta, VW Golf, and Audi A3 2011 Audi A3, VW Golf, VW Jetta Sportswagen, and VW Jetta. 2012 VW Beetle Convertible, VW Beetle, Audi A3, VW Golf, VW Jetta Sportswagen, VW Passat, and VW Jetta. 2013 VW Beetle Convertible, VW Beetle, Audi A3, VW Golf, VW Jetta Sportswagen, VW Passat, and VW Jetta. 2014 VW Beetle Convertible, VW Beetle, Audi A3, VW Golf, VW Jetta Sportwagen, VW Jetta, and VW Passat. 2015 VW Passat, VW Beetle Convertible, VW Beetle, Audi A3, VW Golf, VW Jetta Sportswagen, and VW Jetta. Source: Modified from Spencer (2015) The cost incurred through the risk entailed the resignation of the Group’s chief executive officer, Martin Winterkorn. The sales of the clean diesel vehicles for the years 2015 and 2016 in the United States were halted. Furthermore, the company had to fix millions of its existing cars that would cost approximately $7.3 billion (Plumer 2015). Volkswagen’s stock price was experienced a dramatic fall. Refer to Figure 3 below. Source: Plumer (2015) Figure 3: Risk Occurrence Affecting the Market 5. Risk Analysis and Evaluation The analysis and evaluation conducted by the International Council on Clean Transportation and the West Virginia University were appropriate. The evaluation process was detailed and based on logic (Korff 2012). For instance, it was based on the information gap to which the Volkswagen vehicles were not detailing appropriately. In explanation, the investigation was based on the discrepancy of data during the laboratory testing of the automobiles and the road trip. The discrepancies led to the probe of the exhaust pipes of the vehicles. However, the focus was on trying to prove that the diesel used was clean and in the process, the risks were identified. The process was effective and efficient due to the availability of the tools that would see the process successful. For instance, the International Council on Clean Transportation entails experts in the environmentally friendly transportation system. It has got experienced civil servants, experts in the environmental and independent transportation policy field that come together to formulate the clean transportation global agenda. Furthermore, the organization as a great technical staff and approximately thirty program personnel and researchers that work at both the local, regional, and international platforms. Some of the international bodies that the experts are associated with include the International Civil Aviation Organization and International Maritime Organization. On the other hand, the West Virginia University has a Centre for Alternative Fuels, Engines, and Emissions that is fully equipped. The University, therefore, had the right equipment to help analyse the risk relating to Volkswagen Group. In explanation, the University had a portable system that was used to measure the emission system among the vehicles. The mobile system was stuck in the trunk of the car to allow the measurement of the fumes from the exhaust pipes. Figure 4 below shows the number of vehicles bought in 2009 per country that is directly proportional to emission rate. Source: The International Council on Clean Transportation (2016) Figure 4: Vehicle Sales in 2009 The practical part of the process made the method even more comprehensive. In explanation, the International Council on Clean Transportation and the West Virginia University conducted a test drive to allow for the analysis of the emission. The process was also to address the previous technologies that were used to cheat the emission tests. For instance, in 1988 companies like Volvo and Caterpillar had their long-haul trucks with systems that allowed the vehicles to emit more of the harmful nitrogen oxide into the atmosphere as they increased its mileage at a maintained speed. The researchers were, therefore, not taking chances in the process as they ensured that all loopholes were covered. In explanation, all the extraneous variables that would affect the experiment were controlled. A 1,300-mile trip was enough to reveal the discrepancies as per the previous technological setting. However, it is important to note that emission rate is directly proportional to the engine power (Lee et al. 2015). Volkswagen, therefore, might have cheated so as to enable their engine powers to be higher. But the company have never given a reason to why they engaged in the cheating activity. Table 3 below shows the some of the information that the International Council on Clean Transportation bases their emphasis when conducting a study. Table 3: Worldwide Automobile Efficiency Standards Source: Global Fuel Economy Initiative The International Council on Clean Transportation and the West Virginia University applied an outstanding technique in the identification of the risk. The integrated the modern technology and engaged the relevant authorities such as Environmental Protection Agency. 6. Risk Treatment The treatment of the risk as per the requirement of the United States was to fix approximately 600,000 vehicles that had the test-cheating software. In addition, Volkswagen has taken heed from the engineers and is working on installing appropriate software into the new products. Most of the intervention measures are to be conducted in the United States due to its tough regulations relating to emissions. The United States has, therefore, called the company to adjust the 584,000 Volkswagen cars that emitted nitrogen oxides forty times above the permitted levels. The adjustments are to meet the threshold of the Environmental Protection Agency, Department of Justice, and the California Air Resources Board. The cost of fixing the vehicles with software that defeated the emission regulatory devices is approximated to be € 6.7 billion (McGee 2016). However, the company could face additional costs on lawsuits and fines. Refer to Figure 5 below. Source: McGee (2016) Figure 5: Estimated Cost of Fixing the Scandal Cars However, arguments have been put in place on the practicality of the mitigation measure. In explanation, to reduce the nitrogen oxide emission entails retrofitting the older Volkswagen cars with modern components that are heavier. As a result, the process might increase the emission of carbon (iv) oxide in the atmosphere and make it more expensive for the owners to maintain (McGee 2016). The fix of the older models is, therefore, not only expensive but could also tamper with drivability and performance of the vehicles. Refer to Figure 6 below. Source: McGee (2016) Figure 6: Estimated Cost of Fixing Volkswagen Cars in the United States The cost is as per the engineering fix as the solution. However, Volkswagen and the United States still have two additional options to address the scandal. First, the regulators could allow some of the Volkswagen vehicles to remain in the market despite polluting more than recommended while the others are treated. In response, the company will have to pay hefty fines as a mitigation measure and invest more in the electric technology that would be a precautionary approach to the environmental concerns. Second, Volkswagen has the option of buying back all or most of its vehicles that are affected by the United States environmental regulations. The option is more costly even if only some vehicles will be bought back while the rest will have minor fixes on the software and the hardware. Another disadvantage associated with the buy-back option is that most of the Volkswagen owners if not all will demand equal treatment. In explanation, all will want new cars instead of the fixing. Volkswagen has also planned a switch to the urea-based technology to address the issues relating to the scandal. The technique entailed the use of urea chemical and named in the market as AdBlue. The use of urea rectifies the problem through breaking down the nitrogen oxide. Another technique that the company is opting for is the use of a lean nitrogen oxide trap that will limit the emissions (Häring 2015). Volkswagen chose to use the trapping technology as opposed to most of the car-making companies in the United States. The company focused on the traps because they were less costly to install and utilized less space compared to the urea system. After the scandal, Volkswagen switched in the use of urea-technology in North America and Europe. However, installing the technology for the vehicles already sold to meet the United States regulation would be expensive since it involves the installation of the urea tanks. Furthermore, the dealership would not have adequate experts that would install the AdBlue tanks thus requiring the customers to take the vehicles to the factories. 7. Risk Management Integration The Volkswagen crisis is a result of culture failure and poor governance in risk management, internal controls, and market failure. The problem came to exist with the failure of the integration of the three elements of management. As a result, the company risked losing its reputation as one of the leading brands in the global car-making market (Adams 2015). In explanation, marketing is a critical element in a business, and environmental issues are critical. Negative environmental messages reduce the marketability of the company’s products thus reducing the sales. Figure 7 below shows the fall in the market share price of Volkswagen. Source: McGee (2016) Figure 7: Share Price of Volkswagen In the business environment, products are marketed through bragging based on the quality. However, failure of the Volkswagen Company to manage the environmental risks eliminated the bragging rights thus reducing sales. In explanation, the marketers’ public relations capability was negatively affected. Ultimately, most of the customers that bought the vehicles did so thinking that the products were environmentally viable. The mismanagement of the risk led to the marketing processes and approaches sound incorrect. As a result, consumers developed mistrust on the products which lead to the loss of reputation as a company. Even though the reputation can be rebuilt, the process is hard and long. The risk management process also affected the organization of the company. The globalization has led to an interconnected world courtesy of the internet world. The brands are, therefore, under public scrutiny, and a failure in the market as one corner of the world can easily reach the other part. Businesses, therefore, need to take consideration of the operation and financial risks. Large businesses such as Volkswagen that are multi-national have international footprints (Adams 2015). Such like organizations have greater risks relating to their reputation. The risks usually come from ethical concerns and environmental and social issues. The point explains why the emission scandal was given much attention. Even though the risks ought to be invisible, the case of Volkswagen was different. The risk was caused by an intentional negligence on the part of the management. It could, therefore, be managed and quantified if caution was put in place. On the part of the regulators, the risk took the time to appear on their radar. For so long they were not able to identify the risks associated with emission due to the software that falsified the data from the vehicles. The lessons that can be learnt from the Volkswagen scenario is that major threats that might affect the company's reputation should be incorporated into the risk register as the board should ensure that the managers take into account the potential threats that might affect the balance sheet of the company. A company branding itself as an eco-friendly environment but do not consider the environmental regulation is a call for the crisis. Volkswagen did not integrate risk management to the internal audit and control system of the company (Adams 2015). As a result, the management process should be embedded on the governance of the business. Volkswagen did not take consideration of the non-financial issues that could affect them significantly but rather focused on the financial aspect of the business. For the case of Volkswagen, the manipulating software ensured increased profitability and revenue through increased sales. In conclusion, the risk management framework of Volkswagen Group was not effective. If it could have been effective, the managers would not have been given a chance to cause such a scandal. The scandal, in turn, has affected the reputation of the company thus reduction of market shares and sales as indicated in Figure 3 and 7 above. 8. Findings and Recommendations A comprehensive integration of risk management is important on upholding the reputation of the company. The management intentionally failed to take into consideration the environmental issues thus giving a bad reputation to the company. It is appropriate that companies hold themselves accountable. In explanation, upon declaring that it is environmentally friendly, it should ensure that it sincerely meets the set threshold so as to maintain its reputation (Mamalis, Spentzas, & Mamali, 2013). Besides, the cost relating to the mitigation of the environmental concerns caused is enormous and can impact negatively on the company. Promoting environmental friendly initiatives is an economically viable approach to business since it not only improves the reputation of the company but also ensures that sales are increased as trust is gained among the consumers. Risk management should, therefore, focus on being proactive rather than reactive since a loss of reputation can be expensive to recover. All organizations should have risk management system. The digital world has ensured that the public is at liberty to scrutinise the products in detail. Information is shared across border thus importance for care to be taken at all levels of the organizations. Furthermore, all the employees should be held accountable for their actions including the managers (Häring 2015). Businesses should look beyond the operational and financial risk and focus be placed on the nonmaterial risks. In explanation, non-material risks such as environmental concerns should be taken into consideration. In fact, the non-material concerns should be given priority since they are what determine the public perception of the company. In explanation, risks that come with the environmental and social facets and the ethical concerns need to be addressed as early as possible. Even though risk radar enterprise is often used to identify the risks, these risks might not appear on the radar since they are difficult to manage and quantify. Identifying the risks is also difficult since they do not fall in the business environment as such thus do not have expertise embedded in the business. The field falls outside the conventional expertise line in the business field. Business should, therefore, employ experts in the environmental and social field to help avert such risks. Internal audit and control should also be given much focus if risks are to be contained in a company. The process is only possible through embedding of the risk management framework on the governance structure and function (Korff 2012). Firms can ensure that risk is managed at the governance level through the use of probabilistic risk assessment tool that would approximate the probability of the risk occurring during the proactive phase. However, upon realisation of the risk, RiskAoA tool can be deployed to help in dealing with the mitigation measures. The tool will ensure that the most cost-effective measure is put in place. Firms also need to make use of the risk register tool and technique. The tool will allow for the cataloguing of the potential threats thus allowing for the development of governance controls and systems that would have a great financial impact on the company. Reference List Adams, C 2015, VW Scandal: ethics versus profit. Available from: < http://economia.icaew.com/business/december-2015/ethics-versus-profit >. [6 May 2016] Barrett, SR, Speth, RL, Eastham, SD, Dedoussi, IC, Ashok, A, Malina, R & Keith, DW, 2015, ‘Impact of the Volkswagen emissions control defeat device on US public health’, Environmental Research Letters, vol. 10, no. 11, pp.114005. Chapman, RJ 2011, Simple tools and techniques for enterprise risk management, Wiley, Chichester. Couture, R 2015, “The Wolf of Wolfsburg”- The Volkswagen Diesel Scandal and What it Means for the Future of Diesel- Part 2. Available from: < http://www.turnermason.com/index.php/future-of-diesel-part-2/ >. [6 May 2016] Global Fuel Economy Initiative n.d. National standards. Available from: < http://www.unep.org/transport/gfei/autotool/approaches/regulatory_policy/fuel_econo my.asp >. [6 May 2016] Kieler, A 2015, VW moving forward with new emissions system, electric power for future models. Available from: < https://consumerist.com/2015/10/14/vw-moving-forward- with-new-emissions-system-electric-power-for-future-models/ >. [5 May 2016] Lee, Z, Lee, K, Choi, S & Park, S 2015, ‘Combustion and Emission Characteristics of an LNG Engine for Heat Pumps’, Energies, vol. 8, no.12, pp.13864-13878. McGee, P 2016, VW faces looming deadline as potential costs of scandal mount. Available from: < http://www.ft.com/cms/s/0/b728967a-02ed-11e6-99cb- 83242733f755.html#axzz47tI933Vq >. [6 May 2016] Plumer, B 2015, Volkswagen’s appalling clean diesel scandal explained. Available from: < http://www.vox.com/2015/9/21/9365667/volkswagen-clean-diesel-recall-passenger- cars >. [6 May 2016] Spencer, P 2015, VW emission scandal: what’s it all about? Available from: < http://www.telegraph.co.uk/finance/newsbysector/industry/11884738/VW-emissions- scandal-whats-it-all-about.html >. [6 May 2016] The International Council on Clean Transportation 2016, About the ICCT. Available from: < http://www.theicct.org/about-icct >. [6 May 2016] Volkswagen 2013, Risk management. Available from: < http://sustainabilityreport2013.volkswagenag.com/strategy/risk-management >. [5 May 2016] Häring, I 2015, ‘Introduction to Risk Analysis and Risk Management Processes’, Risk Analysis and Management: Engineering Resilience, vol. 12, no. 7, pp. 9-26. Mamalis, A G, Spentzas, KN, & Mamali, AA 2013, ‘The impact of automotive industry and its supply chain to climate change: Somme techno-economic aspects’, European Transport Research Review, vol. 5, no. 1, pp. 1-10. Korff, D 2012, ‘Automated Processes of Identification, Behavioral Analysis and Risk Detection (Including Technologies for the Use of Images and Airport Security Control)’, Electronic Journal, vol. 12, no. 5, pp. 152-172. Top of Form Read More