Question

The “environment” changes so rapidly that is difficult to identify all the changes that could affect a business in terms of risk management.

A. Evaluate the company for which you work, or company which you’re familiar. What is happening today in the environment (i.e the economic and legal, technological,competitive, social, global business environment?

B. How do the changes you have identified increase the necessity for risk management of this firm.

C. What action can firm take to minimize the risk of loss from this change?

Answer 1

(a): I work for a company called Procter and Gamble (P&G). The company makes products like soaps, shampoos, body lotions, faces creams etc. and sells them in different countries across the globe. The environment today for the company has become highly dynamic and challenging due to developments on different fronts like economic front, legal front, technological front, global business environment etc. On the economic front the company is facing new challenges due to recent economic uncertainty and economic downturn across the globe. Consumers are buying only necessities and cutting down on aspirational consumption and hence P&G is facing challenges in the form of driving sales volume. The business landscape is become more competitive with every passing day as well. Legal changes taking place are manifesting themselves in the form of increased level of government regulation.

(b): The changes that I have identified increase the necessity for risk management of P&G. This is because these changes that I have mentioned above are threatening the company’s earnings potential and its capital. New risk factors have cropped up for the operations and business of P&G and if they are not controlled and managed effectively they have the potential to derail the company’s business and operations in the long run.

(c ): To minimize the risk of loss from this change the company will have to develop a proper risk management framework. Using this framework the company will be able to identify, assess and then control threats that it is exposed to. It will be able to do this in a systematic manner. As mentioned above the threats and risks could be in the form of financial uncertainty or legal liabilities or management errors etc. The risk management framework will help the company to establish procedures that will help it to avoid potential threats and to minimize the impact of these threats if they do occur. It will also help the company to be in a better position to cope with the after-effects of a threat.