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Risk Management - Assessment 2

Introduction to Nike Corporation Analysis 

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

Risk

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.).

Australian Risk Management Standard AS 4360:2004

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

  • How much the risk level stand against the standard of level of acceptable risk.
  • Is the risk level so low as to no treatment is required? (ALARP- as low as reasonably practicable)
  • What is the comparison of opportunities with that of the threats so that the risk might be justified?
  • What is the cost of treatment of risk and is there a treatment available or not (Broadleaf 2007)?

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).

Examples

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

Risks

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.

Product demand

The main business of the company runs on its products and services, it’s the product and is sale which generates revenue.

Likelihood of The Risk Occurring

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.

Communication

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).

Risk Management - Assessment 3

  1. Risk management standards are designed and updated timely so that he who carries the risk management processes for the potential has the guide to help him work. Risk management standards are the set of Standards or norms are the voluntary set of guidelines, specifications, protocols and processes with the aim to avoid unnecessary risks and to provide safe consistent and reliable systems. They cover a span of subjects to avoid any unwanted and unnecessary incident, are based on the best practices and calculated risks (Kaplan & Mikes, 2012).
  1. Key factors of risk management standards-
  • Objectives- what the firm want to achieve in a timeline
  • Identification of the event
  • How much the risk level stand against the standard of level of acceptable risk.
  • The likelihood impact and possibility of the risk
  • Reponses strategy and control activities.
  • Recording information, communication and evaluation (Kaplan & Mikes, 2012).
  1. These include-

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).

  1. Organizational policies and processes used for management of the risk are like the rules governing a game. It is to ensure that every worker should have a safe place to work and to avoid maximum possible hazards and risks in the operation of the business. Jobs do come with particular risks, but it is the task of the employer to utilize the policies of the organization for risk management to ensure that the amount of risk for every stakeholder be as less as possible. This includes equipment precautions, inspections of the equipments and detailed reports, screening and hiring of the employees, detailed records of the training schedule of employees, contingency plans, accident reporting procedures, disciplinary actions etc. (Akhigbe & Amyot, 2016).
  2. The information needed to analyze and conduct risk management-
  • Identifying the hazards and risks i.e. anything which may cause harm to the objectives?
  • Decision regarding who may be harmed and to what extent
  • Assessing the risk and taking relevant actions.
  • Making a record on the information about the findings.
  • Review of the assessment taken.

6.Four examples of the stakeholders-

  • Community from which the resources come (external)
  • Suppliers (external)
  • Employees (internal)
  • Director’s government (external)
  1. The support should be taken from all the stakeholders of the company of which risk assessment is being done, communication of the plan and strategy to each and every person who has a chance to be affected by the risk, all these stakeholders along with the top management should be included in identifying and planning for risk mitigation(Kaplan & Mikes, 2012).
  1. Likelihood of the risk to occur-

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).

  1. Monitoring risk, along with track of the identified risks and evaluation of the performance is crucial process to risk mitigation action plan. The monitoring of the process continuously is important to ensure that it will meet the changing needs of the organization, not doing the same would mean that the risk has been unconsciously accepted (Aven, 2015).
  1. Evaluation of a plan is definitely time consuming process but is necessary in that without evaluation, it will result in total wastage of time and a new risk strategy will consume as much time and risk of mitigation of risk as possible. To mitigate the hit and trial method, evaluation will better give the analysis of to what extent the strategy has been successful in mitigation of the risk and future plans be molded according to the needs of the new risk without making many amendments, and the evaluation will guide as guidelines for future plans. A specialized team of risk manages can make this task easy for the management (Kaplan & Mikes, 2012).

References for Risk Management

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

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Management Assignment Help

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