Analyzing Risks Management of Risk Rating Scale

Question: Discuss about the Analyzing Risks Management of Risk Rating Scale. Answer: Part A Likelihood of risk according to risk rating scale (AE; extremely likely, likely, possible, unlikely to rare). Product malfunction causing injury to a consumer rare (E) Malfunction in the product is highly unlikely to happen but in exceptional circumstances it may occur Worker injured on-the-job from tripping on loose carpet square possible (C) Injury to worker while performing certain job might occur at some time due to carelessness while performing the task. Interest rate rise increases repayment costs on business borrowings possible (C) Increase in repayment cost due to increase in interest rate might occur. If due to market forces the interest rate is increased then, it will result in increase in cost at which the company repay its borrowings. One of your product component suppliers goes into receivership unlikely (D) The company knows well in advance about the credibility of its suppliers so receivership is not expected but due to unexpected crises it may occur. Staff fraud due to possible software loopholes/backdoors - unlikely (D) Frauds are not expected from the staff employees but due to some loopholes it may occur (Southern Cross University, 2015) b) Level of impact value (15; insignificant, minor, moderate, major to catastrophic) Product malfunction causing injury to a consumer -minor (2) It may cause minor injury which requires medical treatment. Also, it will be covered by local media coverage. Worker injured on-the-job from tripping on loose carpet square - minor (2) Minor injury will result in loss of some days of work. This will cause inconveniency and local media coverage. Interest rate rise increases the repayment costs on business borrowings moderate (3) Significant level of financial and corporate impact on the company One of your product component suppliers goes into receivership - moderate (3) It would cause significant impact on the corporate objectives of the company. Staff fraud due to possible software loopholes/backdoors - major (4) Due to staff fraud, major financial impact is caused and the business is interrupted as the critical system becomes unavailable for minimum one day. It will result in adverse and extended national media coverage. c) Overall risk priority for treatment (high, medium, low) Product malfunction causing injury to a consumer high Because customer is the essential part of the business and if the issue remains unsolved then, mouth publicity will affect the overall sales of the product. Worker injured on-the-job from tripping on loose carpet square high Proper treatment of worker must be the top priority as the injury would result in loss of some days of work and also loss of trust of workers. Interest rate rise increases repayment costs on business borrowings medium As interest rate is affected by market phenomenon, the company could do less towards solving this problem. One of your product component suppliers goes into receivership medium Supplier receivership matters cannot be solved immediately as it involves various parties. Staff fraud due to possible software loopholes/backdoors high Fraudulent activities must be taken into consideration on high priority basis as it involves financial loss to the company. Also, proper action must be taken to stop these activities to occur in future (Broadleaf, 2014). Part B Knowing now that GM suffered massive losses as a result of badly misjudging the mood of the US consumer and the impact of the global financial crisis, what basic rule of thumb for assessment of consequence should GM have applied in this case? Due to incorrect judgment of the mood and taste of the consumers in the United States, General Motors suffered a great loss. Even though there was demand of hybrid and fuel efficient vehicle, the company wrongly assessed the trends in the market and preferences of the customers. Financial crisis was also one of the important reasons of the shift in demand of consumers adding to the further lowering of demand(Sturgeon Biesebroeck, 2010). The basic rule of thumb that GM should have applied for assessing consequences is acquiring adequate and important information and data about the current needs of its customers. Risk management specialist must have knowledge about the current trends in the automobile sector and needs to know what actually a customer is demanding(Carmohn, 2010). Also, information about various releases in the market by the competitors must be collected and updated, so that customer reaction can be noted and further action can be taken according to the impact created by the other automobile release (Xu, 2005). With rising oil prices, falling confidence in the finance markets and raised environmental concerns among the general public, what likelihood and consequence would you assign to this situation, and what resultant overall risk priority would you generate? Due to rise in the prices of oil, the automobile industry is facing a competitive pressure in the market. Due to global financial crisis the confidence of people in the financial markets is falling(Rosenfeld, 2009). Also, now the customers demand for fuel efficient vehicles due to rising concern about environment. The government has also made various regulations related to environment safety and emission control (National Academies Press, 2016). The likelihood of occurring of this situation is unlikely. Because the event is not expected to occur but at the same time, there is a slight possibility of its occurrence sometimes. When we talk about the consequences, it has catastrophic impact on both financial and corporate objectives of the company. It demands for major steps on the part of management to deal with the situation. Business is interrupted to a great extent and international media coverage plays a major role in affecting the image of the company (Popov et al., 2016). High risk priority is generated for this situation as it calls for immediate actions and counter actions to be taken to save the company from the major impact of increase in oil prices and global financial crises. References Broadleaf, 2014. Setting priorities for risk treatment and assurance of controls. [Online] Available at: https://broadleaf.com.au/resource-material/setting-priorities-for-risk-treatment-and-assurance-of-controls/ [Accessed 13 September 2016]. Carmohn, S., 2010. An analysis and explanation of the failure of General Motors on the basis of the theoretical framework of path dependency in the field of Crisis Management. GRIN Verlag. National Academies Press, 2016. Impacts On The Automotive Industry. [Online] Available at: https://www.nap.edu/read/1806/chapter/7 [Accessed 13 september 2016]. Popov, G., Lyon, B.K. Hollcroft, B., 2016. Risk Assessment: A Practical Guide to Assessing Operational Risks. John Wiley Sons. Rosenfeld, H., 2009. The North American Auto Industry in Crisis. [Online] Available at: https://monthlyreview.org/2009/06/01/the-north-american-auto-industry-in-crisis/ [Accessed 13 september 2016]. Southern Cross University, 2015. Risk Likelihood and Consequence Descriptors. [Online] Available at: https://scu.edu.au/risk_management/index.php/4 [Accessed 13 September 2016]. Sturgeon, T. Biesebroeck, J.V., 2010. Effects of the crisis on the automotive industry in developing countries : a global value chain perspective. [Online] Available at: https://www.researchgate.net/publication/46443928_Effects_of_the_crisis_on_the_automotive_industry_in_developing_countries_a_global_value_chain_perspective [Accessed 13 September 2016]. Xu, J., 2005. Market Research Handbook: Measurement, Approach and Practice. New York: iUniverse.