Nike Inc, an American multinational corporation which is primarily engaged in the business of design, development and manufacturing of apparels, footwear, various accessories and services etc. Company’s headquarter is located near Beaverton, Oregon. The organization is the world’s largest supplier of athletics materials and is a major sports equipment manufacturer also, with revenue of more than $40 billion in 2018 (news, 2018).
Nike’ Revenue worldwide from 2005 to 2019,
Last bar showing $39,117 million in 2019
To better handle the risks, Nike follows the strategy of splitting up of their money. Nike keeps record of all the expenses and revenue, of all kinds for the purpose of remaining insured, which it provides to its customers also in the form of insurance. Thus, in the case of dissatisfaction on account of customer, one can avail full refund with the conditions mentioned (nikeproduction, n.d.).
Broadleaf (2007) describes that this standard gives a fundamental guide for the management of risks. It clearly indicates the elements of risk management which can be applied to any industry or sector. Thus, the designing and management of risk needs to be changed and adapted to the needs of the organization, its products and services, its processes and practices.
Method to determine and evaluate a risk
Nike has an effective and comprehensive dynamically managed risk management plan. It has identified risks on the basis of affect on new initiatives, inhibition of business, and the shareholder value addition. A few threats which Nike has identified are jeopardizing of labor, brand image, product demand and manufacturing facilities. Nike has ranked these risks and has made strategies according to the level of risks they hold (news, 2018).
Risk avoidance-Nike would not open a manufacturing facility in the country of political economic or social turmoil or emergency.
Risk sharing- Nike can insure all of its facility of the manufacturing plant to avoid any losses due to fire or other casualty.
Risk reduction- If Nike may anticipate that due to weather conditions the raw material supply could suffer a shortage; it can stock up the raw material, to prepare for not losing any delivery. Risk reduction should be applied to a risk with high potential, but with lesser financial impact.
Risk retention- can be done by an insurance company or by a regular deductible amount for the potential risk, also if the risk is covered under third party will pay all the damages (Kaplan & Mikes, 2012).
Two major risks Identified
Rationale behind selection
Jeopardy of brand image
A brand’s image is everything for it to maintain its trust with the investors, the customers, the shareholders and suppliers.
The main business of the company runs on its products and services, it’s the product and is sale which generates revenue.
Zhang (2015) says brand image is something which is dependent upon many of the business operations and even things related with the business. Thus sustainable goods, ethical practices, philanthropy, customer value addition are susceptible at any time, at any place of Nike’s facility and a single incident may create a high risk. The risk of brand image from appendix 1 can put into high risk as major consequences and possibility likelihood.
Products trends very fast specially the wears and comfort giving accessories. Thus enough technology be adopted dynamically to maintain the demand of the goods, in case arrival brings a revolutionary substitute, demand may heavily impacted which will impact finances. The risk can be put into tolerable level with major consequences and possibility in likelihood (nikeproduction, n.d.).
Treatment of the risk
For the demand risk, option are risk reduction, retention, avoidance and sharing.
Nike can adopt the strategy of risk retention whereby a small deductible be saved for future potential threat which is a high risk on money.
For the brand value risk- options-
Brand building through philanthropy, labor welfare, sustainable processes, green implementation, advertisement (Zhang, 2015).
This type of risk is high in nature of finances and occurrence as rivals and competitors attempt to take stakes of the market. Mix labor welfare and green implementation strategies will maintain the goodwill of the image.
Action plan for implementing risk management- A systematic strategic plan on the managerial level be made and an annual budget be passed for the risk retention of demand risk at regional level. While to manage the second risk, top management level instructions be given to apply the brand maintain strategies in the field.
Demand risks will be communicated to the regional level and a new protocol to cover those risks be sent to every regional office.
For the brand value risk, a circular be passed to each and every employee of the company to be alert on this front and top management should communicate the relevant parties who will be stakeholders in brand making (Zhang, 2015).
Privacy laws, anti-discrimination laws, laws of equal opportunity, protection of the environment, health and safety of the stakeholders, civil liability and Industrial relations.
Legislations which includes disaster management, privacy of the worker, equal opportunity of employment, safety of woman.
There are regulatory requirements of the operating procedure, the procedures of the management and some emergency protocols to be fulfilled according to the local laws.
Then there is land use according to the planned framework, permits for building and planning, noise management, traffic limits and management, facilities for the community and event permits.
Laws have been made in such a way as to ensure that organizations and individuals meet a minimum standard of norms and guidelines made to avoid potential harm or loss (Akhigbe & Amyot, 2016).
6.Four examples of the stakeholders-
Risk equal to consequence multiplied by likelihood, where likelihood is the probability of the occurrence of impact which effects environment and consequence is the impact on environment when an event occurs. This method generates most relevant consequence of the occurrence of a risk and with this a risk score and rating can be made (Aven, 2015).
Akhigbe, O. & Amyot,D. (2016) Monitoring and Management of Regulatory Compliance: A Literature Review. International Journal of Information Processing and Management, 7(2).
Aven, T. (2015). Risk assessment and risk management: Review of recent advances on their foundation. European Journal of Operational Research. DOI: 10.1016/j.ejor.2015.12.023
Boadleaf.com (2007). Tutorial notes: The Australian and New Zealand standard on risk management, as/nza 4360:2004 . Retrieved from http://broadleaf.com.au/old/pdfs/trng_tuts/tut.standard.pdf
Kaplan, R & Mikes, A. (2012) Managing risks: a new framework. Retrieved from https://hbr.org/2012/06/managing-risks-a-new-framework
Lutz, A. (2015) Nike faces 3 obstacles that could threaten its global domination. Retrieved from https://www.businessinsider.in/finance/Nike-faces-3-obstacles-that-could-threaten-its-global-domination/articleshow/47870207.cms
News.nike.com (2018) Nike, inc. reports fiscal 2018 fourth quarter and full year results. Retrieved from https://news.nike.com/news/nike-inc-reports-fiscal-2018-fourth-quarter-and-full-year-results
Nikeproduction.weebly (n.d.) risk management Retrieved from https://nikeproduction.weebly.com/risk-management.html#:~:text=In%20order%20to%20reduce%20risk%2C%20Nike%20follows%20a%20specific%20strategy,in%20the%20way%20of%20returns.
standards.org.au (n.d.) What is a standard. Retrieved from https://www.standards.org.au/standards-development/what-is-standard
Zhang, Y. (2015). The Impact of Brand Image on Consumer Behavior: A Literature Review. Open Journal of Business and Management, 3(1) DOI: 10.4236/ojbm.2015.31006
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