Question

Discuss three (3) of the levels of risk assessment as they could be applied to your company. For example, Home Depot:

       1.    Operational risk assessment: Home Depot faces the risk that their employees are not adequately trained to meet the needs of its customers.

       2.    Supply chain risk assessment: Home Depot faces the risk that the quality of the products offered by any supplier declines.

       3.    Customer risk assessment: Home Depot faces the risk of another housing downturn that places financial stress on homebuilders and lowers overall sales.

Answer 1

1. Operational Risk Assessment

Stages Of Operational Risk Management

• Risk Identification: As mentioned earlier, understanding the risks specific to your business is key, but there are also many potential risks that affect any kind of business and you need to identify all of them, both those that are recurring and those that can be one-off events. The identification process needs to involve staff from all levels of the business if possible, bringing a variety of backgrounds and experiences to make a cohesive result. Risks that can be identified by work floor staff will be very different and no less critical than those identified from the boardroom.
• Risk Assessment: Once the risks have been identified, they need to be assessed. This needs to be done from both a quantitative and qualitative perspective and factors like the frequency and severity of occurrence need to be taken into consideration. The assessment needs to prioritize the management of these risks in relation to those factors.
• Measurement and Mitigation: Mitigating these risks (if not actually eliminating them altogether) is the next stage, with controls put in place that should limit the company’s exposure to the risks and the potential damage caused by them.
• Monitoring and Reporting: Any Operational Risk Management plan must have something in place for the ongoing monitoring and reporting of these risks if only to demonstrate how effective the plan has been. Most of all, it’s to ensure that the solutions put in place are continuing to be effective and doing their job in managing the risks.

There are other processes and models out there, particularly in the banking world, but most follow similar approaches to the one listed above. As long as you are picking an approach that suits your specific needs and situation, you will be on the way to a successful Operational Risk Management strategy.

Conclusion

The US Department of Defence has drilled down Operational Risk Management into four key principles, which are as follows:

• Accept risk when benefits outweigh the cost
• Accept no unnecessary risk
• Anticipate and manage risk by planning
• Make risk decisions at the right level

Taking those principles together with the approaches demonstrated above should ensure that Operational Risk Management is embedded within your organization and you can start reaping the benefits.

2.Supply Chain Risk Assessment

Supply chain risk management (SCRM) is the coordinated efforts of an organization to help identify, monitor, detect and mitigate threats to supply chain continuity and profitability.

Threats to the supply chain include cost volatility, material shortages, supplier financial issues and failures and natural and manmade disasters. SCRM strategies and software help an organization foresee potential issues and adapt to both those risks and unforeseeable supply chain disruptions as quickly and efficiently as possible.

1. Automate processes involved in supplier risk management (SRM) to collect, analyze and manage supplier information.
2. Include supplier performance information in your analysis for insight into potential financial issues.
3. Identify red flags that may indicate problems and use technology to automate their early detection.
4. Integrate SCRM platforms with procurement and supply chain management (SCM) software systems including software for spend visibility, e-sourcing, purchase-to-pay, contract management and compliance.
5. Provide dashboards that track and report on supply risk metrics to give the executive team access to real-time observations into risk factors.

SCRM may require collaboration and coordination among an organization’s sales, marketing, production, development, procurement, finance and IT departments

3. Customer Risk Assessment

The focus on customer relationship management (CRM), also known as customer care or customer service, has been growing steadily for the last few years. Companies must implement robust CRM solutions to ensure that they are competitive now – and in the future. Customer service entails every aspect of selling and servicing a customer in both the pre-sale and post-sale stages, from merchandise questions to credit card security and delivery status to processing refunds, exchanges and returns.

CRM concentrates on the retention of customers by collecting data from every interaction each customer makes with a company from all access points, whether they are phone, mail, web or field. The company can then use this data for specific business purposes, such as marketing, service, support or sales, while concentrating on a customer-centric approach rather than a product-centric approach.

Customer Service

Customer service is an essential but often overlooked aspect of business that is rapidly becoming a requirement in order to remain competitive. It is the key to retaining and nurturing the unique opportunities that each customer presents. Until now, merchants generally have regarded customer service as a costly but necessary part of conducting business, and they have only offered it when a customer actively signaled a need for support. At this point, vendors are stepping into reality; they are coming to grips with customer issues. As various customer service vendors have emerged, their focus is on new solutions.

Business Risks Related to Customer Service

Risks posed by inadequate customer service and relationship management include:

• Fragmented customer relationship management
• Underutilized methods to improve customer service and reduce related costs
• A lack of knowledge on the part of one section of an enterprise regarding interactions with a customer on the part of another, leading to customer frustration and embarrassment
• A lack of integration among order-entry systems or infrastructures, causing an inability to respond to market demands
• A lack of visibility of the order status along the whole supply chain
• A lack of true integration of supply chain management (SCM) and CRM systems
• Inefficient routing protocols that send voice calls and emails into a black hole where they are never retrieved or responded to
• Inadequate staffing that provides an overloaded workforce where responses to inquiries may be unacceptably delayed or never answered at all
• Static web pages that do not respond to customer needs and demands