My Questionnaire URL: https://survey.napier.ac.uk/n/zz599.aspx QUESTIONNAIRE This is my questionnaire, please read all
My Questionnaire URL: https://survey.napier.ac.uk/n/zz599.aspx
This is my questionnaire, please read all the question and make sure you understand,
when I collect all 50 response please follow the collection data to write the part of Findings, Analysis, Conclusion and Recommendation.
Please add all new references in the References List Part during the process of your modifying.
2. Have you bought any Apple products?
3.（i.）If your answer is Yes above, can you remember how many times you bought Apple products? (Repeated buying)
A. Once (Rarely) B. Twice-Three times(Occasionally)
C.Four- Five times(Frequently) D. More than five times (Very frequently)
(ii.) If yes, how was the purchasing experience?
A. Very positive B. Positive C. General D. Negative E. Very negative
5. Will this experience influence your perception about the apple brand and your future purchasing decision?
A. Very positive B. Positive C. General D. Negative E. Very negative
Mobile phone brand preference:
6.Which mobile phone brand are you presently using?
What was the major influence on your decision to purchase the present brand of phone you’re using?
Visual image of the phone
Personal factors (Income, Gender, Age)
Are you willing to spend more for powerful brand in the market?
If yes Why__________________________
Do you agree the nature of brand itself will affect your purchase decision?
Strongly agree B. Agree C. Neither agree nor disagree D. Disagree E. Strongly disagree
Where did you purchase your Apple mobile phone?
Apple Physical Store B. Gift C. Apple Online Store D. Other Online Shopping Store (Amazons)
How did you come to be aware of Apple’s products?
A. TV B. Radio C. Internet D. Print Media E. Personal Recommendation
Do you agree that Apple advertising will affect your purchase?
A. Strongly agree B. Agree C. Neither agree nor disagree D. Disagree E. Strongly disagree
How do you think of the prices of Apple’s products?
Cheap B. Average C. Expensive D. Very expensive
The impact of Branding on consumers buying decisions
What influences your purchase decision in the purchase of a smart-phone or its equivalent?
Value expectation After purchasing:
(i)Do you think your Apple product produces effectual value?
Yes B. No
(ii)How has the Apple Brand and products met your expectations? ____________——————————————————
What motivates you to purchase a particular mobile phone brand on the market?
Product utility features
After sales services
Explain which of these are the most important to you_______________________
10 Insurance Law ; Critical Analysis of Flood Re Critical Analysis of
PART 1: This is for Year 11 STANDARD ENGLISH. The topic you will cover in the unit is COMMON Writing Assignment Help 10
Insurance Law ; Critical Analysis of Flood Re
Critical Analysis of Flood Re
The insurance regime in the UK is guided by the principles of contract law such as offer, acceptance, consideration, capacity and intention to create legally binding relationships. Insurance law often plays a major role in the relationship that exists between the state, the people and the market. A citizen should be capable of accessing insurance services with little effort. In this research paper, a critical analysis of Flood Re is presented, including the advantages and disadvantages of Flood Re to the insured party as well as the insurer. Additionally, a discussion of changes to the Flood Re is also discussed and whether any change is necessary in the first place. The role of Flood Re in areas such as those covering the cost of floods especially on residential buildings has also been outlined.
1.1 The Flood Re
Flood risk subsidy can be traced to a period where there was failure by the market prices in providing the much required security for households against losses resulting from floods. The state at that time was reluctant to offer a guarantee. With Flood Re, the state stepped in but the guarantee on the individuals who are not insured has not been dealt with.
Flood Re is a statutory scheme that was developed under the Water Act 2004. It is concerned with the role that Flood Re plays as an insurer. Under section 63 (3), the Secretary of State is empowered to make provision on the levels of reinsurance premiums that are payable by the relevant insurers under an FR scheme. The draft regulations under this section provides for different pricing structures that cover Scotland, Wales, England and Northern Ireland.
On the part of the mainland jurisdictions, these regulations have produced very progressive pricing models; where prices have risen from A and B Council Tax Property to Band G. Band H, which are the most expensive households was however not included under the Regulations. The government has however stated that it is now ready to make such inclusion. Each of these bands has a cap on the rates that are chargeable by the insurer for accepting of the attendant risk and thereby providing very effective price cap that applies even to the homes situated in areas that are prone to floods.
On the part of individual insurers, they will have the freedom to make decisions on whether they want to cede the risk to Flood Re. this decision however will be influenced by among other factors, the availability of insurance based on the capped rates. Flood Re faces a number of issues as discussed below;
First, it is a corporate body created by statute and charged with performance of quasi-public roles though it does not technically form part of the executive. It is classified as a public body charged with the collection of mandatory fees and other administrative duties. Secondly, the cost of delivery is replaced with the actuarial cost of insurance against flood risks; this varies from neighborhood to neighborhood. Flood Re will set a maximum price to be charged in order to cover flood risk and will be branded as a component of the product supplied by the insurer and the consumer will not be aware of Flood Re. this means that the contract of insurance is between the property owner and the insurer. With respect to the contractual principle of privity, Flood Re will not be a party to this contract.
Thirdly, there is a subsidy of a refund for those who will be charged exorbitant amounts and therefore a levy is imposed on all the purchasers of properties to cover the subsidy.
1.2 What Flood Re means for insurers
Insurers are treated as the owners of the scheme. It is the insurers who have the mandate to set the retail prices. The insurer also has the sole responsibility of making decisions on the risks they will leave exclusively to Flood Re. the Flood Re collects levies from all insurers annually and are then responsible for compensating flood victims who are covered by the plan. Flood Re according to the plan therefore will cover most of the residential properties while other properties will be covered by insurers. Properties built on or after January 2019, small businesses and leasehold properties are however not covered under the scheme. This scheme therefore has led to duplication since both the insurers and Flood Re are involved in the insurance of flood risks. There are no cost cutting as premium is paid to insurers; the scheme has created a lot of discriminatory practices that have excluded certain properties from the application and benefit from the scheme.
1.3 Risk Classification of Flood Re
Private insurance policies can be provided otherwise on a mutual basis, hybrid model as well as a solidarity basis. Mutual market would allow a free floating price where it is assumed that insurers would engage in competition based on their underwriting processes and based further on the risk covered by the insurer. A solidarity type of market on the other hand would not base its price on the risk and would not base its charges on a flat rate basis or any other available variable. A hybrid market on the other hand allows certain risk factors to determine and control the market prices.
Flood Re is hybrid as it offers property insurance that is subsidized though partially subsidized. It represents a modern market in insurance. In insurance business, the intervention of the state is a normal practice in most jurisdictions which is however a political question. The involvement of state in controlling insurance business has led to several research and inquiries on the position of an insurer. Insurers prefer to be in control of insurance businesses and decisions and maintain it as a pure contractual relationship. Flood Re intends to introduce government supervision unnecessarily. Insurers’ main objective is to minimize and lower government intervention.
1.4 Council Tax bands
Flood Re intends to cap prices by referring to the Council Tax bands. These capped prices are planned to be amended over time so that they equal the market pricing. However, there are concerns how long the process of amendment will take to achieve the pricing. The problem with this is the band levels of houses which vary from region to region which represent differences in the value of the properties. This process is likely to take quite a considerable number of years making Flood Re not effective in the circumstances.
1.5 The principle of pooling risks
The insurance industry needs to seek to establish a kitty aimed at subsidizing the cost of insurance. The insurance industry in doing this divorce from the state which is hell bent in introducing crude methods through the Flood Re in the insurance industry. Currently, the levy stands at £ 10.50 does not seem to have a major effect on the uptake of insurance.
There is however challenges associated with this in the United Kingdom. From the ONS data up to one quarter of the residents have no access to insurance cover especially in populations that are considered as low income earners. The value of £ 10.50 therefore has a major impact on the decisions to purchase insurance perks and cover. Flood Re therefore would only assist persons who are able to access insurance who in this case are the minority groups in the society. Flood Re therefore is not the best idea as the majority will be left without cover when insurance is made a government’s responsibility.
1.6 Mandated Disclosure
Insurers have the mandate to make disclosures to customers on the amount or rate of subsidy that is available. This method is commonly used in regulated interventions by governments and public bodies. However, this system is ineffective as it has been ignored by insurers especially where the insured does not insist on being given the associated data. This data is important as it is applied in the evaluation process. It is therefore necessary to provide consumers with the need to take the data and use them in the valuation process. Where this is not done, it will lead to waste.
1.7 Eligibility for consumers
The water Act 2014 was designed exclusively for households. This means that business premises are not covered under the Act. The insurance scheme is left to be designed by the secretary of state and the criteria for such design mechanism or process is not clear. It has however been stated that with the introduction of Flood Re, there will be establishment of rules, laws and regulations especially on borderline premises which cannot be classified as household premises or business premises with precision. House hold premises can be described as a dwelling place under the cover of an insurance policy and is in line with the criterion that has been set in the FR scheme. But on a close consideration of Flood Re, nothing much has changed. The definition given to household dwelling is vague and is not regulatory. Flood Re has a novel requirement that individuals should first be integrated into household premises before submitting an application for insurance.
The issue which is likely to cause unprecedented conflict is the uncertainty that surrounds what amounts to a household dwelling. On this Flood Re has not solved any problem and has instead created confusion in flood insurance which is likely to lead to legal battles. The different categories and differentiation between households and all other properties is an important aspect that has been left out by Flood Re as it is an important consideration when it comes to pricing. Where this is not settled, Flood Re will not offer solutions to the people and it is likely that it will cede risk without any form of question.
The most significant problem with the adoption of Flood Re is that it attempts to formalize the previous practices in the insurance industry without taking into account the nature of the intervention it intended to introduce. The intervention no longer respects the practice of the lowest cost in the industry but is applied as a taxation measure which is not grounded around any principles. Most people remain uninsured since the insurance cost plus the guarantee introduced by the government through the Flood Re is still prohibitive.
Additionally, it will be difficult to adjust the price caps since the purchasing patterns normally differ substantially and as a result, it is difficult to set a national pricing plan. The aggregate annual liability for Flood Re is said to be capped to a value that is equal to a loss of 1 to 200 in a year. This alone cast doubts on the ability to compensate victims as the source of funding is not clear. There is also a proviso that Flood Re could request funding from the Insurance industry as a levy or a contribution which is not certain. The cap on the liability therefore raises questions that relate to lack of funding and the inability to satisfy claims.
There are insurers who do not have any form of association with Flood Re. it is difficult in the circumstances for insurers to limit their services exclusively to those policyholders who have a reinsurance arrangement with Flood Re. there is therefore a lot of uncertainties in the mode of operation of the scheme under the Flood Re as well as their relationship with insurers.
The Flood Re program has in effect created unnecessary exclusion of properties leaving certain properties not covered by insurers. The program has in effect excluded properties that were built after January 2009. It is said to be a measure that discourages investors from building in flood prone areas so as to limit the damage likely to be occasioned by floods. This action is however arbitrary, reflecting the failure by the government and other regulatory authorities on preventing constructions and buildings in areas prone to flooding.
1.8 Advantages associated with Flood Re
It is said to reduce the cost of flood insurance for persons who live in flood prone areas by cutting costs of insurance against the risk of floods.
It enables the insured to access a competitive market in the insurance industry and thus reducing significantly the cost of premiums payable for insurance cover.
It has established a scheme from where compensation claims will be payable without following the tedious required by insurers before a claim is paid.
Flood Re makes it easier and faster to find an affordable insurance plan for homes for individuals living in areas that are prone to flooding.
1.9 Disadvantages associated with Flood Re
The cost remains expensive since it the insurers who are charged with the role of setting the retail prices. The effect of the subsidy brought about by Flood Re therefore is not felt by the insured. They continue to pay premiums set by the insurers as before.
The scheme has been accused of discriminating on small business owners as well as homes on leasehold properties as it does not cover them. This has been a major disadvantage of the Flood Re scheme.
In conclusion therefore, Flood Re was a good idea at inception. However, its application has not been uniformly applied. The monopoly given to the insurers to set the retail prices has not contributed to cut prices for insurance. More people are left out of the scheme as they cannot afford even after the subsidy claimed by Flood Re.
Water Act 2004
Flood Re Insurance Regulations Scheme
Burling, Julian, Julian M. Burling, and Kevin Lazarus, eds. Research handbook on international insurance law and regulation (Edward Elgar Publishing, 2012)
Baker, Tom, and Kyle D. Logue Insurance law and policy: cases and materials (Wolters Kluwer Law & Business, 2017)
George, Caroline. “Federal government tightens live-in caregiver regulations.” (2011): E539-E540.
Kousky, Carolyn, and Howard Kunreuther “Addressing affordability in the national flood insurance program” Journal of Extreme Events 1, no. 01 (2014): 1450001
Law, Michael R., Jillian Kratzer, and Irfan A. Dhalla “The increasing inefficiency of private health insurance in Canada” Canadian Medical Association Journal 186, no. 12 (2014): E470-E474.
North, Daniel. “Private Drones: Regulations and Insurance.” Loy. Consumer L. Rev. 27 (2014): 334.
Penning-Rowsell, Edmund C., Sally Priest, and Clare Johnson “The evolution of UK flood insurance: incremental change over six decades.” International Journal of Water Resources Development 30, no. 4 (2014): 694-713
Petrolia, Daniel R., Craig E. Landry, and Keith H. Coble “Risk preferences, risk perceptions, and flood insurance” Land Economics 89, no. 2 (2013): 227-245
Surminski, Swenja. “The role of insurance in reducing direct risk: the case of flood insurance.” International Review of Environmental and Resource Economics 7, no. 3-4 (2014): 241-278
Stempel, Jeffrey W., Peter N. Swisher, and Erik S. Knutsen. Principles of Insurance Law (LexisNexis, 2011)
Thoyts, Rob. Insurance theory and practice (Routledge, 2010)
Jordan & Messner’s Article Summary Bureaucracy is a characterization of complex institutions
Jordan & Messner’s Article Summary
Bureaucracy is a characterization of complex institutions with designed multi-layered systems and processes aimed at enhancing operational control and uniformity across the establishment. There are two forms of bureaucracy- enabling and coercive (Adler & Borys, 1996). Enabling bureaucracy permits employees to master and deliver on their job functions whereas coercive bureaucracy constitutes processes and efforts applied to reinforce employees’ performance or compliance. These bureaucracies can be referred to as workflow formalization.
In a previous study (Adler & Borys, 1996) had examined workflow formalization from a negative (coercive) and positive assessment (enabling) attitudinal point of view. Jordan & Messner furthered the study, drawing valuable insights from it, to examine management’s varied attitude towards performance indicators. Specifically; the research queried the problem of incompleteness in KPIs in appreciation that despite management’s effort, these indicators cannot fully encompass all aspects of performance. A case in point being the reliance on accounting information, which in itself has a bias towards financial performance metrics and as such is incomplete on other performance metrics like quality of service.
The researchers conducted a qualitative empirical study on a division, LeanOrg, of one of the metal and plastic manufacturing companies in Austria. LeanOrg was ideal as its new leadership was implementing a 4-point lean KPI based on delivery time, efficiency, productivity and quality metrics (Jordan & Messner, 2012).
The study established a heightened sensitivity, and growing negative attitude, towards these (incomplete) KPIs from managers. A perceived increasing degree of emphasis on KPIs transformed them from ‘means to an end’ to ‘ends’ in themselves- and as such transitioned from enabling to coercive controls.
Adler, P. S. & Borys, B., 1996. Two types of bureaucracy: Enabling and coercive. Administrative Science Quarterly, 41(1), pp. 61-85.
Jordan, S. & Messner, M., 2012. Enabling control and the problem of incomplete performance indicators. ScienceDirect – Accounting, Organizations and Society , Volume 37, p. 544–563.
Critical Analysis of the Business Drivers of Risk Management Introduction Risk management
Critical Analysis of the Business Drivers of Risk Management
Risk management can be defined as the identification of areas of exposure to some type of risk, and the subsequent strategic responses to avoid or mitigate the impact (loss) upon occurrence of such events (Brigham & Daves, 2016). In evaluating risks; three elements are important – probability of occurrence, impact on occurrence and the exposure. Probability is the likelihood of occurrence of an event with adverse effects to the organization. The impact of risk refers to a quantified value of loss that may arise upon occurrence of an adverse event. Exposure refers to the magnitude of risk that an organization is exposed to dependent on the probability and impact of an adverse event (Alberts & Dorofee, 2009).
Business drivers of risk management are the internal or external factors, processes or organizational rationales that prompts the firm to undertake certain strategic measures in response or anticipation of exposures to risk (Poole College of Management, 2007). These business drivers have a significant impact on the performance of the firm, and as such, their assessment and identification is imperative. Møller (2011) observed that these business drivers can be progessive or defensive. Progressive business drivers assume a proactive approach to risk and its management, whereas defensive drivers are reactive to risk management.
Evaluation of Key Drivers of Risk Management
The failure of some major financial institutions across the US and UK during the 2007/08 has been partly attributed to inefficiencies in their RM systems (Woods, 2011) including the Royal Bank of Scotland and AIG. In response to the recent financial crisis; most Western Governments and other regulatory agencies have made sweeping changes in their regulatory framework to better guide the corporate world in their risk management structures. The establishment of the Financial Stability Oversight Council brought about increased supervision on the ‘too big to fail’ corporations. The FSOC provided guidance on adequacy of cash reserves as well as development of comprehensive risk management strategies for wall street firms. This included an enhancement of the Sarbanes-Oxley Act that protects whistle-blowers, an element of growing importance in corporate good governance and prudent risk management. Another component of the FSOC was the creation of the Federal Insurance Office that monitors the big insurance companies, given their significant role in the financial crisis, to contain their risk appetite.
The American Insurance Group was lucky to bailed out, after the collapse of Lehman Brother, but has not escaped condemnation for its role in exacerbating the financial meltdown. The Financial Crisis Inquiry Commission concluded that AIG had substantially contributed to the crisis by engaging in risky behaviour via the use of collateralized debt obligations (CDOs) and default credit swap schemes, failure to set-up adequate capital reserves nor upfront collateral as well as a general failure in corporate governance and RM oversight (FCIC, 2011). In light of this findings; AIG has adopted an enterprise-wide CRM to guide its management of risk exposures, and encourage sensible risk-taking guided by appropriate trade-offs. This CRM enables AIG to identify, monitor and respond to risks in real time which was one of their undoing in the pre-financial crisis era RM framework. Other progressive development on their RM framework have emphasized on development of a measured risk appetite with controls on risk concentrations, stress testing and modelling, as well as a strengthened oversight and governance structure (AIG, 2013). In essence; the near-collapse experiences at AIG, during the 2007/08 financial crisis, became its core business driver in the adoption of a more responsive and updated RM framework.
In Australia; the implementation of the Solvency II regulatory regime, an improvement of the EU insurance laws, brought about fundamental changes in the insurance sector’s risk management structure. In compliance with the regulation; Australian insurers were expected to adopt a three-pillar risk assessment approach covering quantitative, qualitative and reporting and market discipline requirements (Arumugam, 2014). Accordingly; these insurers were also expected to develop an ERM framework that comprehensively examines risk from different perspectives including markets, health, life, general and non-life areas.
In essence; regulatory compliance as a business driver to risk management encourages firms to strengthen their risk assessment approaches, define an adequate risk appetite, develop risk ownership, governance and oversight structures from the board level as well as setting out continuous self-improvement and innovations to address emerging elements of market disclosures, transparent reporting and corporate integrity.
Going Concern of the Firm
The going-concern prompts firms to adopter ERM strategies that would ensure their survival into the near future by addressing their primary exposures to risk. Traditional risk management was premised on premised on preservation of value to the firm. However; in the post-financial crisis era, more and more Governments and independent regulators have been pushing the agenda for adoption of comprehensive RM frameworks with clearly outlined mitigation strategies and oversight from the board of governance (Renault, et al., 2016). Regulatory responses to the crisis such as the Dodd-Frank Act of 2010 (US) and creation of the Financial Policy Committee (UK) only serve as external forces driving the value-preservation approach to RM especially for the ‘Too big to fail’ entities
The avoidance of loss is a strong driver in the adoption of RM strategies. Loss aversion has been the subject of most literature in behavioural economics, having established that individuals, and now firms, give undue weight to potential losses relative to potential gains (Reeson & Dunstall, 2009). This observed phenomenon in most businesses is further exacerbated by a combination of two behavioural anomalies- endowment effect and status quo biases. Firms therefore operate in an environment where they want to avoid most risk, and maintain what they already have in terms of profitability, market share or revenues. This business driver of RM is most prevalent in matured or maturing markets.
Diageo PLC, a UK-based multinational, is the second largest distiller of alcoholic beverages, having recently been topped by Chinese Moutai. Diageo’s brands are a household name including Smirnoff Vodka, Bailey’s liquor, Guinness, Jonnie Walker and a host of other beers, spirits and wines. The multinational observes that a negative change in consumption patterns, a real or perceived decline in quality or tightening of alcohol legislations in its areas of operations could occasion profound losses to the firm. As such; the company has put in place a robust RM framework that addresses issues ranging from contamination of its products, counterfeiting of its brands, settlement of consumers’ liability claims, global expansion efforts to dilute unfavourable legislative risks in certain countries to real time assessment of changing consumer tastes, preferences and pricing. This RM approach ensures the beverage maker not only stays ahead of growing competition, but also guards its position from adverse events.
Most multi-nationals operating in different business environments with multiple risk elements rely on their bureaucratic control systems to ensure their continued survival in the different markets. Firms employ RM processes and initiatives to contain their known knowns and known unknown risk elements. Sometimes, it is this process that gives legitimacy to the RM outcome in what was characterized as ‘process rationality’ (Møller, 2011) As such, control-oriented RM approaches make more compliance sense as they clearly outline the do’s and don’ts in their policy framework. Firms operating in a business environment where there is need to guide organizational behaviour for reputational or safety concerns tend to prefer RM initiative that emphasize on controls. This include most firms offering financial or health-related services.
Colgate, the global toothpaste manufacturer, draws in excess of 75 percent of its net revenues from investments outside the US. This exposes the multi-national to a myriad of risks ranging from exchange rate fluctuations, uncertain regulatory regimes as was the case with their subsidiaries in Brazil and Venezuela, brand damage resultant from the over 115 court cases filed in the US or its territories over the Talcum powder scandal of the 1990s, political or economic instabilities in its countries of operations to disruption sin its global supply chains (Colgate-Palmolive , 2017). In light of this; the primary business drivers of Colgate’s RM framework are control and containment of these risk factors. Its RM policy permits the application of various strategies, tools and techniques to remedy various risk factors. These interventions include a calculated working capital management to ensure generation of adequate cash flows to fund its foreign investments, and selective hedging and local currencies’ borrowings to mitigate on exchange rate fluctuations. In exercising control in its RM policy; Colgate expressly prohibits the use of complex hedging instruments either for speculative or leveraging purposes to check on their potential risk compounding effects.
Future-minded firms may also leverage on RM initiatives to identify potential source of risk to the future business operations, financials or reputation. In 2017; the US biotechnology giant, Biogen, adopted a proactive future-oriented RM strategy to mitigate on risks associated with the America hurricane season (Resilinc Corporation, 2017). Biogen identified supply chain disruptions, communications breakdown and crisis management activities as the primary risks that the firm would be exposed to during the hurricane season. In response; the biotech firm implemented a proactive RM strategy that incorporated intelligent tools for scenario planning and sensitivity analysis, supply chain mapping and response models. This robust value-chain RM approach enabled Biogen to sail through three Hurricanes-Harvey, Irma and Maria- as well as earthquake in New Mexico, without significant disruptions to its supply chain.
In 2009; the Geneva-based ISO –developer and publisher of international standards- developed the ISO 31000:2009 to guide the practical implementation of an industry wide ERM structure. This ISO standard had five fundamental pillars that emphasizes a proactive approach to risk rather than mere compliance, a top-down ownership and implementation approach to ERM, linking of specific risks to corporate strategy and objectives, a holistic approach to risk focusing on both the upside and downsides as well as consistency and easy of adoption by different firms in different industries (Gjerdrum & Peter, 2009). The new standard was an improvement of the guiding principles enshrined in the Committee of Sponsoring Organizations (COSO) which emphasized on the assessment and enhancement of internal controls (Oduware Uwadiae, 2015). A primary difference between the ISO 31000:2009 and COSO framework being the expansion of the firms’ risk profile outside the traditional strategic, financial, credit and reputational risks.
In the same spirit; the International Auditing and Assurance Standards Board (IAASB) proposed a raft of new measures to address an expanded scope of new exposures to risk. The new standards –Enhanced Audit Reporting (EAR) and Key Audit Matters (KAMs)- are designed to enhance corporate transparency, relevance (value) of audit reports and provide insights about the firm’s operating environment from a risk perspective (McKee, 2015). As such, these industry-wide standards are a strong business driver for local firms towards the adoption formal risk management strategies. In Australia; where the new IAASB standards have been operational since the start of FY2017, firms audit committees of boards and other senior management are encouraged to identify and address KAMs as earliest as possible in the audit cycle. In its annual report; Westpac Group enumerative five KAMs including its IT and Control systems, and provision for contingent liabilities (Westpac Group, 2018 ). The Group’s risk-strategy assessment identifies exposures related to heavy reliance on a complex web of IT systems, as well as liabilities that could arise from their operations, legal or reputational aspects. Effectively; the KAMs approach enabled Westpac identify, assess and address these risks through an enhanced ERM framework.
Organizations may adopt, or amend, their RM framework based on past events or lesson learned from the experiences of peers. Different industries can adopt different ERM structures guided by institutional memories. This retrospective approach by a given industry is essential in the evaluation of exposures to risk, taking into account what has worked before, and what did not, in the development of an actionable futuristic ERM strategy. Different firms in a given industry can examine their interdependencies in exposures to risk, and aggregate these risks into a single portfolio for the whole industry. In light of this; the individual firms will be better placed to understand their overall exposure to risk within the industry, and adopt a most suitable industry standard ERM framework (Bohnert, et al., 2017). For instance; most construction firms have previously focused their risk management strategies on the project, at the expense of the enterprise. Zhao, et al. (2015) proposed that construction firms should adopt an industry level integrated ERM strategy that captures the entire risk portfolio of a firm, both at the project and enterprise levels. Furthermore; given the primal safety concern of the industry, this integrated ERM standard should be entrenched in the modern portfolio theory (MPT). First developed by Markowitz; the MPT advises on optimal portfolio selection at a different levels of market risk (Markowitz, 1952). This is essential for the risk-averse construction industry, as firms can maximiza their expected returns at given levels of risk. A catastrophic risk management (CRM) strategy has also been proposed for adoption by firms that have an abnormal exposure to certain risk factors (Kunreuther, 2012).
Some of the immediate benefits that would drive the implementation of a robust RM framework include the reduction of risk-associated losses and remedial costs, increased profitability from reduced volatility of cash flows (Chew, 2008) and earnings that are eventually delivered to shareholders as dividends (Fite & Pfleiderer, 1995). There are organizations, particularly in Tech, Pharmaceuticals, Emergent innovations and other high growth industries, that actively sought out risk as a potential source for creation of value to the firm (Bromiley, et al., 2015). In a working paper, presented in the 5th International Risk Management Conference in Rome, Andersen & Roggi (2012) observed that there was consistency in the valuation of the firm based on its PV of future cash inflows less financial distress costs like bankruptcy. Møller (2011) observed that for RM to create value to the firm, it must undertaken progressively and in a knowledge searching manner for it capitalize on existent opportunities.
From a decentralized RM approach spread across their numerous R&D and manufacturing facilities, Huntsman corporation –a global chemicals manufacturer, has in the past 5 years been implementing a more inclusive, structured and centralized framework. Regular risk assessments are undertaken periodically, and detailed discussions on specific risks undertaken every fall. The chairman, Huntsman Snr., affirmed that indeed the corporation had adopted an enterprise-wide RM structure to increase efficiency in goal seeking and capitalization of emergent opportunities (Milliman Risk Institute, 2014). Through its enterprise risk management, Huntsman is able to identify business opportunities, and weigh their expected returns against their potential risk exposures.
Business Culture and Leadership’ Oversight
At times; an active corporate culture in the assessment and strategic responses to risk are driven by the firm’s internal culture. A proactive leadership, keen to isolate different risks and assign them to different risk owners increases board oversight, employees’ accountability and reporting transparency. For instance; the increased domestic and international competition present in the UK’s retail sector has driven most retailers to adopt a pro-active business risk management culture that is closely linked to performance. The Boards of most retailers are charged with setting up effective bureaucratic controls, developing an appropriate risk appetite that would guide their operational and investment activities as well as taking full ownership of the overall risk oversight (Lee & Giang, 2018). In order to set the tone right from the very top, most risk oversight board committees are composed of experienced personnel in the fields of risk analysis, management or internal audit. These drivers are most common for firms operating across different industries, or as holding companies for semi-autonomous subsidiaries. As such; these firms develop their RM frameworks to enhance risk identification, cataloguing and mitigation measures across their different operational outlets. This proactive risk assessment enables the firms to identify what risks are increasing, relatively stable or decreasing, and hence appropriate remedial action can be initiated.
TESCO plc, the largest grocery stores retailer in the UK, has operation in multiple industries including general retail, banking and real estate. The retailer has established principle risks that would impact on its six strategic drivers of performance. To mitigate on its risks across these operational areas; TESCO operates a Group Risk Register through its RM framework. This framework outlines the Group key priorities – to regain competitiveness, to protect the balance sheet and to rebuild trust- then enumerates the principal risks that could adversely impact the realization of their primary objectives. The assessment of risk from the Group’s perspective establishes the critical areas with a high risk exposure based on their probability of occurrence and severity of impact. These areas include TESCO bank, the people, the brand, data security, liquidity and market competition (Tesco PLC, 2017). Lastly; this RM framework provides for a set of controls and key mitigation factors against the identified principal risks to the Group’s operations. The Group has a standardized oversight and governance hierarchy across all its businesses (UK and abroad) which ensures more consistency in strategic and RM processes. From a leadership oversight role; the giant retailer had a four team approach to risk: The Board had overall oversight over risk management, the Group’s CEO and Executive Committee was accountable for controls with individual members having specific risk ownership, the Audit Committee had oversight over the risk framework on behalf of the Board whereas the Group’s Compliance Committee oversaw regulatory compliance on behalf of the executive committee, and reported twice in a year to the audit committee.
There are multiple business drivers to risk management, and have firms can have preference to one or more. At the very basic level; firms would adopt ERM for compliance with prevailing regulations such as the Dodd-Frank Act (US) which supervises activities on Wall Street, and the FPC (UK) which monitors the risk preparedness of the UK financial system. The survival of the firm as a going concern ensures firms adopt ERMs strategies for loss avoidance and value preservation. Industry standards guide the adoption of acceptable best practices in ERM strategies whereas goal seeking drivers presume risks as potential sources of value or opportunities to the firms. At the very top of these business drivers is a sound business culture that is proactive to risk identification, assessment, mitigation and oversight. The Boards are in the forefront, ensuring the implementation of robust ERM frameworks with real-time monitoring and continuous accurate reporting to facilitate prompt, decisive and effective responses to risks.
AIG, 2013. Enterprise Risk Management, London: American International Group Inc.
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