Question

An Evaluation of the Status of Risk Management in South African manufacturing Industries. The manufacture industry in South Africa is central to growing the economy but has faced stagnation as a result of external challenges such as the fall in value of the Rand to the US Dollar, rising fuel costs, high inflation and increasing power costs. The manufacture industry is considered risk inclined because project undertakings are dynamic and complex, with multiple local and international stakeholders. Studies have shown that risk management has been poorly implemented in
manufacture industries in South Africa, despite there being a strong knowledge base to support it. Risk management has now become a competitive advantage in the industry.
Discuss the following:
 Obstacles to risk management
 Significant risks in the manufacturing industry
 Significant constraints
 Lesson to apply in the future

Answer 1

Obstacles: A lack of risk decision making structure and lack of accountability for risk decisions in an organization. Almost every business executive is comfortable with risk decision making, however, in many cases the right people aren’t making those decisions. In many cases, big risk decisions are being made too low in organizations, with people who aren’t incentivized to make the right decisions for the organization. For example, a project manager may accept a large information security risk that can lead to compliance and reputational issues simply because they only thing they get incentivized on is getting the new product out the door. However, the executive in charge of the business unit, accountable for sustained results may make a very different decision.

The lack of meaningful risk assessment process. There are organizations that consider risk management something they have to do from a compliance standpoint who conduct superficial risk assessments. Others just don’t have the right skills to develop a meaningful risk assessment process. A meaningful process enables the identification of risks based on the goals of the organization and describes those risks in business terms either qualitatively or qualitatively through a common risk taxonomy. Enabling risks to be compared as apples-to-apples is extremely important for decision makers who need to be able to allocate resources across complex organizations. In terms of risk assessment effectiveness, organizations who take a control based approach to risk assessment are often missing the business context required to make the right decisions.

A lack of an open, risk -ware culture. In order to build a culture where business managers are willing to be transparent to their executives, the executives have to be careful to craft the kind of culture that fosters this transparency. Open dialogs about concerns, risks, and trade-offs necessary without “shooting the messenger” are often missing in organizations that lack effective risk management.

Risks in manufacturing industry: The quickening pace of technological advances presents significant challenges to risk professionals as well. Analytical tools and predictive modeling capabilities enable manufacturers to extract more meaning and direction from massive data sets. Cloud computing enables manufacturers to more fully benefit from robust IT capabilities. This is without having to maintain related software, hardware, and infrastructure in house. Social media allow for easy posting and sharing of information, but those capabilities may also spur crises. Technological advances, in general, place greater emphasis on data security and other vulnerabilities.

Constraints and Lessons to apply:

Organizations may not have dedicated personnel for managing risks fighting for budget, and monies are more likely to go for day to day operations than a security measure for a potential disaster.

Defend your security budget. Know what you need and how to sell it to the c-suite so they understand the money is being well spent. Investing in security upfront to mitigate risk will likely cost less than dealing with fallout from a crisis the organization wasn’t prepared to deal with.

If the people receiving the information don’t understand what it means or what to do with it, it’s of little use in risk mitigation.

Having a team or at least one known go-to person for risk management, and educating staff about who that person is, what they do and what they need to know, will help ensure information is going to the right place. Risk management may not be in everyone’s job description, but everyone needs an understanding of their part in identifying and alerting the right people with information about risks. Put procedures in writing and make them available so everyone knows who to contact and what to do.

Be aware of areas you can’t control. If it’s reasonable, put a backup plan in place to cover any shortfalls.

You can’t anticipate every risk, and even if you could, you couldn’t possibly mitigate them all. Fix what you can. Prioritize your risks and focus on what you can do. Take note of where you can make a difference and focus energy and resources there while also identifying your major obstacles, and work diligently to get past them where you can.