INTRODUCTIONThis report provides an introduction to the strategic approach used to manage the organisational risk within “TIP TOP Bakeries” in it’s canning vale branch in Western Australia for it’s new production line-up.
Tip Top is a part of the George Weston Foods Limited group of companies. George Weston is owned by Associated British Foods plc and with 34 per cent share of loaf market in Australia, it is ¬the second largest player after Goodman Fielder’s share of 42 per cent (Financial Review, 2017). George Weston Foods Limited Group entered the Australian market after World War 2. It’s products are available both in Australia and New Zealand with almost 3000 people working in the organisation to produce more than one million products including wholesome sliced bread, gourmet bread, muffins, crumpets, bakery snacks and cakes every day for distribution throughout Australia (Tip Top Website, 2018).Strategic Management of RiskStrategy to identify and managing the risk is very important for a business to succeed. By spending time and resources on risk management strategy, organisation can provide a safe workplace and reduce the chances of negative impacts on business (business.
gov.au, 2018). Strategic management of risk is a process in which we analyse and manage the risk present either within an organisation or any external risk which might have a potential to affect organisation’s operation or business. If this process is undertaken in a proper manner, it will increase the chance of an organisation or project to be successful in term of cost, time and performance.
Developing a successful risk management strategy requires a lot of maturity and understanding about the types of risks and their impacts on the organisation. In today’s era, most of the businesses are thriving on the digital revolution. The world boundaries are shrinking, and the world is becoming a single global market. A successful risk strategy prepares an organisation to perform effectively in today’s dynamic and complex world where things are changing so quickly, and new technologies and new threats and risks are coming to light very fast. A risk strategy is very important to successful during changing economic and political conditions. It helps in growing confidence and be successful with greater speed. “Mature risk management practices are holistic and efficient, working across the business, to support functions, to audit. Practices align with corporate strategies and objectives, corporate governance, employee education and communication, performance management, and provide dynamic updating and reporting to the Board, regulators, executives, and other stakeholders (like vendors).
Mature risk management practices also utilise and recognise the need to quantify risk. This is helpful in for example, in assigning capital based on the “riskiness” of the business.” (Ladd Muzzy, 2018). Also, the responsibilities of managing the risk at different levels of the organisation are also different.
While the Managing Director of the organisation is accountable to the Board, senior executives are responsible for strategic risk management within the areas which comes under their direct control. They need to ensure that the risk management strategy and system is implemented and maintained in accord with the Risk Management Policy.Different approaches on strategic management of risks.According to Mark S. Beasley in its 2016 publication with title “What is Enterprise risk management?”, there are two types of approaches when it comes to risk management. One is the traditional way of managing the risks, in which the department heads are accountable to manage risks within their areas of responsibilities. According to him, this type of approach to manage the risks is called as silo or stove-pipe risk management and this practice is being used for decades.
There is nothing new in it.Then there is the second approach which is called Enterprise Risk Management(ERM) which is relatively new. Enterprise risk management (ERM) is a business strategy which is based on the plan to identify, assess, evaluate, prepare and eliminate any kind of risk, hazard or any other potential danger that may affect and harm an organization’s operations and objectives. Over the 8-10 years, a number of business leaders have proactively accepted ERM as a business process to enhance how they manage risks to the enterprise. The ERM seeks to create an overall top to bottom enterprise view of all the possible and significant risks that have the potential to impact (both positively or negatively) the business and activity of the organisation.While traditional way of risk management has many loop holes and limitations while addressing the risk, ERM is the most effective kind of strategy to address the risks. The above figure is taken from COSO ERM-Integrating with Strategy and Performance, Executive Summary which was published in June 2017.
It shows that how Enterprise risk management is as much about understanding the implications from the strategy and the possibility of strategy not aligning as it is about managing risks to set objectives. (COSO, 2017) The Enterprise Risk Management strategy is not a one-time activity and need to work in loop for 24*7 to be successful. It is a 5-step process which includes: -1. Setting the strategy or objective: – It is very important to establish an objective or context to start the risk management process.2.
Identifying the risk: – Identifying the risks to an organisation can be done by thinking about what could go wrong, and how and why it could happen. It helps to look at past events and risks in hazard logs, incident reports and survey reports3. Risk assessment (analysing and evaluation of risk): – After identifying the risks, it’s important to find out which ones are urgent depending on the damage that the risk would cause and the likelihood of the risk happening. To evaluate a risk, we need to compare the level of risk against the risk criteria.
4. Risk response or treatment: – After following the above steps, it is important to act responsibly and address the risk in appropriate manner to either eliminate it or to minimise it. 5. Monitoring and review (24*7*365): – This feedback mechanism of monitoring and review is very important in this process to ensure that the organisation monitors the risk performance and learn from the experience. It is a continuous process and the success of the strategy depends on it.Below is the framework of Enterprise Risk Management provided by Mark S.
Beasley in 2016, which shows the process and strategy for risk management which is based on ISO 31000. ISO 31000 is a group of standards set by the International Organisation for Standardization in relation to risk management with the object to provide principles and generic guidelines on risk management. Practical Implications for the OrganisationBefore developing a successful and practical risk management strategy, it is very important to successfully identify the type of risks which have the potential to affect an organisation.
It might vary depending on the sector in which the organisation works. There might be internal risk, external risk, or strategic risks which might be affecting the business. Some are controllable and can be eliminated like internal risks while other risks cannot be controlled fully as they depend on many factors and can be only minimized at low level to reduce it’s impact on the business like external or strategic risks. The above figure is taken from www.pwc.com/resilience (Sharpening strategic risk management By Armoghan Mohammed and Richard Sykes) and shows the main types of risk a business is likely to face. As shown in the above figure, financial and Operational risks fall in internal risk category and are typically well controlled.
These types of risks vary from financial aspects like asset loss and accounting problems to operational aspects like supply chain issue and employee issue. These are part of the routine focus of board risk discussions and addresses issues from financial aspects as well as from health and safety issues where industry regulations and standards require. Hazard risks fall in the category of external risks and often arises from major exogenous factors, which affect the environment in which the organisation operates. While the strategic risks are normally categorised as an external risk.It needs attention to a lot of details to make a food business profitable as a very minor risk can also create a lifelong impact on the business. As Tiptop bakery works within the food sector industry and is a wholesale plant bakery with large numbers of products manufactured every day to meet customers need within Australian and New Zealand, it is vulnerable to a very wide range of threats or risks which may affect it’s operation and business. A lot of factors including quality of raw material, freshness of ingredients, skilled work force, the correct kind of equipment and a dedicated, customer-oriented mindset needed to make the food business thriving. But still a small mistake in any department can ruin the image and can destroy the business.
So, the organisations operating in food sector need to be extra careful when dealing with the risks as the food is a very important part of customer’s health and life, so they want it safe to consume, fresh, healthy and free from any type of contamination. Also, there are many laws made by state as well as central government for food industry and specifically bakeries to provide information for employers, apprentices, employees and managers to identify risks and suggest possible control measures to assist bakeries in meeting their obligation under the Act. (Department of Commerce, WorkSafe Division)