Contents: 1. ISO framework: understanding of risk management process [Concept] 2. Managing enterprise/ organizational risk: awareness of

Transcription

1 Contents: 1. ISO framework: understanding of risk management process [Concept] 2. Managing enterprise/ organizational risk: awareness of international surveys on practices on risk [Building Knowledge] 3. Case demonstrations for reputation and human capital risks with customer delight [Examples] 4. Risk management tools: Stakeholder Analysis and Failure Mode Effects and Criticality Analysis or FMECA [Tools] 1

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4 ISO 31000: 2009 (International Standard for Risk Management) is a family of standards relating to risk management codified by the International Organization for Standardization. The purpose of ISO 31000:2009 is to provide principles and generic guidelines on risk management. Key Terms relating to Risk Management 1. ERMS - Enterprise Risk Management System 2. Risk - the effect (positive or negative) of uncertaintly on objectives. Risk is considered with reference to possible consequences and likelihood of occurrence. 3. Risk Management - co-ordinated activities to direct and control an organisation with regard to risk 4. Risk Owner - person or entity with the accountability and authority to manage a risk 5. Strategic risks - risks associated with the achievement of strategic goals 6. Operational risks - risks associated with the day-to-day operations of the business 4

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6 Risk management: asking and communicating the right questions! 6

7 Risk management: requiring the need to look at the future within own context 7

8 Transferring accountability gaps in enterprise risk management: ISO 31000:2009 gives a list on how to deal with risk. 1. Avoiding the risk by deciding not to start or continue with the activity that gives rise to the risk 2. Accepting or increasing the risk in order to pursue an opportunity 3. Removing the risk source 4. Changing the likelihood 5. Changing the consequences 6. Sharing the risk with another party or parties (including contracts and risk financing) 7. Retaining the risk by informed decision 8

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11 LCC share of capacity (% of seats) within Southeast Asia: 2001 to 1Q

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19 Source: Accenture-2013-Global-Risk-Management-Study 19

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22 Managing risk in your organization: awareness of international surveys as it is dynamic and changing Source: 22

23 Hierarchy of Risk 1. Link risk with performance. Risk involves both the cost of capital and the return on capital. 2. Recognize that risk is both a threat and an opportunity. Many companies have reversed their fortunes by adapting to shifting client and market demands. 3. Identify and escalate, through the company s governance structure, the analysis of the multiple faces of risk. Remember that a single event can have multiple risk dimensions. 4. Reaffirm the organization s risk culture and risk appetite by effectively communicating risk identification and strategic decisions taken on risk events. 5. Risk management is not a static decision. The system must remain flexible and adaptive. Challenge underlying risk assumptions. Reputational risk is a subjective assessment of the potential effect, both positive and negative, that a risk event can create. While many firms view reputational risk as solely a communication and public relations issue, recent studies, as well as recent history, have demonstrated that reputation is an intangible asset that may be responsible for up to 95% of market value. Source: 23

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29 From the Global Risk Management Survey: 1. Quality management relates directly to how well an organization managers its enterprise risk. 2. Quality depends on reputation and regulatory risks which contributes an organization s brand value 3. Quality represents the total efforts within an organization 29

30 Building Quality through Trusts (with Reputation) Is Customer Satisfaction Enough? Satisfaction Index 90% ABC ABC Ltd Ltd. 70% 1. The case with Cadillac and AT&T in the 1980's, when 80 to 90 percent of their customers rated themselves either satisfied"or "very satisfied", Yet both were losing market share. 80.4% Customer Satisfaction Measurement 17 The Leadership Factor Ltd 60% 50% 2. After analyzing the data, they found that only 40 to 60% of "satisfied" or "happy" customers were very willing to repurchase, but that percentage shot up to 80 to 90% when they were "very satisfied" or "delighted" customers. 30

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32 More on thetruth about Customers Customers are lost primarily due to indifference (66%) versus dissatisfaction (14%) (Reference: WSJ) Ten times more expensive to acquire a new customer than to keep a current customer (Reference: Bain & Company Research) Customer Delight means more than just feeling great about a product or service. Customer delight means the customer demonstrates high return and recommend rate behavior. Using Bart Allen Berrys Customer Satisfaction Behavior Curve (1 to 10 scale) customer delight correlates with the Return and Recommend rate percentages range from 65% to 90%, meaning that delighted customers will tell six to nine people out of ten about their satisfaction experience, and it is guaranteed that some of these folks will also tell others. (Source: 32

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34 Customer Delight, Quality, Risk, and Innovation For early 2000s 34

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42 Tools for Risk Management: Failure Mode Effects and Criticality Analysis (FMECA)- minimizing the impacts for mission/ functional accomplishment and safety 42

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47 Stakeholder Analysis and Communication Management: 1. Draws out the interests of stakeholders in relation to the project s objectives stakeholders who will be directly affected by, or who could directly affect, the project are clearly of greater importance than those who are only indirectly affected; 2. Identifies actual and potential conflicts of interest a stakeholder who is vital to your project may have many other priorities and you need to know this so that you can plan how to engage with them; 3. Identifies viability other than in pure financial terms (e.g. includes social factors) for example staff who will be using a new system might be worried about the change; 4. Helps provide an overall picture; 5. Helps identify relationships between different stakeholders helping to identify possible coalition. 47

48 Key Players - Manage them closely and keep them fully engaged Important Stakeholders - Keep them satisfied. Don t burden them with too much detail Affected Stakeholders - Keep them informed. Communicate regularly to check that no major issues are appearing Other Stakeholders - Monitor them. Communicate, but do not bother them with too much information Source: 48

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50 Assignment: From Slide 8, based on your best available knowledge, which item on the list is Finnair adopting at the moment for risk management? Add five decisions/ environment. You need to identify: Risk source: fuel price; fuel efficiency; labor cost; economy; competition within Europe and from Far East and Middle East; airport readiness in terms of size and speed; political situations; environmental regulation; etc. Then, you need to be aware of Finnair s business decisions and environment and try to match the findings with the list. 1. Acquisition of new aircrafts (A350): Risk sources: rising fuel price and regulatory requirement Risk decision: Removing the risk source 2. Establishment of Flybe Nordic: Risk source: rising competition within Europe Risk decision: Sharing the risk with another party or parties (with Flybe Group from the UK) 3. Outsourcing staffs ( OSM Aviation will initially provide flight attendants and stewards on Finnair s Hong Kong and Singapore routes. The Finnish flag carrier plans to expand its partnership with OSM ). Source: Risk source: rising labor cost and competition Risk decision: Changing the consequences 50