Managing Risks - ISO 3100 - Case Study Example

Name Course Instructor Date Managing Risks 1.1.1 ISO 3100 ISO 3100 refers to a set of standards organised by the International Organisation for Standardization that relate to risk management. It provides the process, principles and framework for groups or individuals to follow in managing risks. It can also be used to guide both internal and external audit programmes of an organisation. 1.1.2. Purpose of ISO 3100 The business environment is full of uncertainties and risks which can affect economic performance of an organisation and its professional reputation. This means risk management is very important. ISO 3100 aims to provide universally acceptable guidelines for organisations and practitioners who are developing risk management plans. This means is can be applied and adapted by any institution, organisation or individual, public or private, in any industry or field. It helps companies increased the probability of achieving its goals, identify and deal with threats through the efficient use of available resources. 1.1.3. Documents required to ensure compliance to current risk management standards In order to confirm that an organisation’s risk management procedures comply with current risk management standards, a risk assessment report should be provided. The report should contain the risks identified in the organisation’s environment as well as the assessment of the risk to determine the extent of the risk. The methodology should be included. The report should further document what amount of the risk is tolerable then provide the steps or procedures for the management of the risk, taking into account the different types of risks involved. 1.2.1. Different types of risks and scope definition. I believe understanding the different types of risks can assist in defining the scope. Knowledge and understanding of the different types of risk will help in categorising the risks during risk identification. This makes formulating a risk management plan much easier. It also helps define the risk criteria to be used when defining the scope since the categories of risks to be evaluated are already outlined. 1.2.2. Considerations when defining the scope of a risk management plan When defining the scope of a risk management plan, it is important to consider: 1. The objectives or goal of the risk management plan 2. Categories of risks to be evaluated 3. The character and type of cause and implications 4. The likelihood or probability of risk occurrence 5. The level at which the risk becomes tolerable or acceptable 6. Possibility of combination of multiple risks, and which combinations are more likely to occur. 1.2.3. Importance of scope definition (Example) Determining scope in any organisation or project is extremely important. For example, if the management of a food processing factory wishes to develop a risk management plan, one of the most crucial steps is to define the scope. The scope will include the objective of the plan, the methods to be used and the extent to which the risks can be managed. The different types of risks involved will be defined for example, direct and indirect health and safety risks to the staff and financial risks from accidents such as machine failures or calamities such as fires. A well-defined scope, acts as a guide to ensure the objectives of the project are achieved. In this case, the factory processes quality good for the consumers in an environment that is suitable for its staff without compromising the economic aspect (profits). 1.3.1. Internal stakeholders In any organisation, there are people who are devoted to serving the organisation, otherwise known as internal stakeholders. These include, 1. Board members 2. Staff 3. Volunteers and donors 1.3.2. External stakeholders External stakeholders are people who are not part of the organisation but are affected by its work. For example, 1. Clients 2. Community partners 3. Suppliers 4. Lenders 1.3.3 Case Study I believe the driver is at risk. It has been stated that the good are volatile which means the demand for the good is unpredictable. Although at the moment there is a high demand of the product, there is no telling what will happen next. Should the current trend take a turn for the worse, he risks losing an important client. 1.4.1. PESTLE analysis PESTLE analysis refers to framework in marketing and strategic management that gives a bird’s eye view of different aspects of an organisation. It is a mnemonic for the different factors that influence an organisation where P is for Political, E is for Economic, S is for Social, T is for Technological, L is for Legal and lastly E is for Environmental. All these aspects are important for an industry hence the method is necessary and a better alternative to the SWOT analysis. Over the years, scholars have come up with different variations of the mnemonic such as STEEPLED which in addition to the seven factors includes ethnic and demographic factors. When doing a PESTLE analysis, an organisation looks into the different factors and their influence on its operations. Depending on the industry and the goods or service provided by an industry, the importance of the model’s factors will vary. Factors more relevant or more likely to affect the future of a company are given importance over less consequential factors. For example, consumer companies are more influenced by social factors and economic factors such as inflation rates. It is an important tool for studying market trends, a company’s current position, its capacity for growth and the best direction its operations should take. 1.4.2. Impact of two factors of PESTLE in an organisation The government and the political situation of the country the organisation operates has influences on the organisations to a great degree. For example, taxes required of an organisation may change over time. New taxes and duties may be imposed by the government and the organisation has to comply. Similarly, trade policies and fiscal policies influence to a great extent the business environment. Political stability provides a good environment to carry out business and is good for foreign investors. Economic factors affect an organisation directly and many have long lasting effects. For examples, the economic situation in a country may result in increased inflation rates. This will directly influence a company’s pricing on their goods or services. Moreover, the demand/supply patterns may change as the consumer’s purchasing power is affected. Other economic factors that will affect the business environment include foreign exchange rates, interest rates and economic growth patterns. Interest rates influence the extent pf business expansion since it affects the cost of capital. 1.5.1. SWOT analysis of an organisation The following is the SWOT analysis of a soft beverage company Positives Negatives (Internal factors) Strengths 1. The company has experience since it has been in the market for a long time. 2. The products are of excellent quality. 3. There is a variety of products to choose from. 4. They have a pleasant taste hence attractive to the consumer. 5. They are affordable for most consumers 6. They have a long shelf life. Weaknesses 1. It is considered unhealthy (External factors) Opportunities 1. Events such as festivals and sport events 2. Fast food joints 3. Supermarkets Threats 1. Other soft beverage companies 2. Healthy drinks such as fruit juices 3. Dairy products such as yoghurt 3.1.1 Relevant parties in risk identification. When identifying risks, other relevant parties should be involved. People who can help in risk identification include employees, managers, experienced operators and technical experts. Service providers, insurance agents, clients or consumers and members of the public. These may also be referred to as the stakeholders, both internal and external. In the development of a risk management plan, it is important to involve others because most people of them will be involved in the implementation of the plan. To avoid opposition and sabotage during the implementation process it is crucial that relevant parties are involved. Moreover, they are directly or indirectly part of the organisation and are affected by the risks. They are therefore in a good position to recognise the risks. 1.1.2. Invitation of relevant parties Relevant parties may be invited to participate in the development of a risk management plan through: 1. Team meetings where members of the team are given the opportunity to air their views. 2. Public surveys through newspapers or the company’s website 3. Interviews 4. Questionnaires 1.1.3. Quantitative and qualitative research in context of risk management Qualitative research provides understanding of the problem, such as the primary reasons, motivations and opinions. From this understanding, hypothesis or theories are formed. Methods used include individual interviews, focus groups and observations. Quantitative research aims to generate numerical data or statistics. It manipulated measurable date to come up with facts and patterns. The methods used are more structured than in qualitative research and include surveys and online polls. In risk management, one of the most important steps is risk identification. This process requires that research is conducted and relevant parties involved hence both methods may be employed. Qualitative methods be used first which focus on smaller groups of people so as to develop which are then tested through quantitative research methods which are more accurate. Work cited International Standards Organisation. Web. 27 July 2016. O’Loughlin, Tanya. 2012. “Manage Risk”. Software Publications. Web. 27 July 2016 “Identifying internal and external stakeholders.” The Denver Foundation. Web. 27 July 2016. Read More