(Answered) Risk Management Frameworks SCMG301

Week 5 Discussion: Risk Management Frameworks

CO5: Gain knowledge on emerging risk management frameworks along with tools, techniques and approaches
Discussion Prompt:

1. Several elements are required of successful ERM systems. Take a look at this video on Enterprise Risk Management, which offers an overview of ERM.Section five details some requirements of successful ERM’s. Choose and summarize two of these elements. Could one of these be more important than another?
2. Ch. 10 offers examples of probabilistic modeling. How does scenario planning at DuPont offer an example of a company becoming outward looking in managing supply chain risk?

Expert A+ Answer Risk Management Frameworks

Policy and reporting structures are two essential elements of successful Enterprise Risk Management (ERM) systems.

The policy provides the framework for identifying, assessing, and managing risks. At the same time, the reporting structure ensures that information about risks is conveyed to the appropriate decision-makers promptly and accurately.

Policy refers to the written guidelines and rules that set out the organization’s approach to risk management.

A comprehensive policy will define the scope of risk management, outline the roles and responsibilities of those involved, and establish the risk management framework, including the risk appetite and tolerance levels.

Reporting Structures refer to the processes by which risks are identified, assessed, and reported throughout the organization. These structures ensure that risks are effectively communicated to decision-makers and that appropriate action is taken to manage them.

Both policy and reporting structures are important elements of an ERM system, as they provide a foundation for effective risk management.

However, if I had to choose one, I would say that policies are perhaps the most important element. Policies provide the framework and guidance for how risks should be identified, assessed, and managed within an organization.

They establish the tone from the top and set the expectations for risk management practices throughout the organization.

DuPont’s scenario planning approach, which incorporates external events and factors thatmay impact its supply chains, is an example of the company becoming outward-looking in managing supply chain risk.

Scenario planning involves identifying potential future scenarios that could impact the organization and developing strategies to address those scenarios.

By actively incorporating external events and factors in its scenario planning approach, DuPont is stress-testing its supply chain and preparing for potential disruptions before they materialize, which helps to mitigate the risk and maintain operational continuity.

Furthermore, by involving stakeholders in the scenario planning process, DuPont has developed a shared understanding of the risks it faces and a risk-aware culture within the organization.

References

Enterprise Risk Management – Introduction Training (2008) – https:/ /www.youtube.com/watch?v=QgyiRWcZYS4

Schlegel, G. L., & Trent, R. J. (2014). Supply Chain Risk Management: An Emerging Discipline. Boca Raton: Taylor & Francis Group.

Risk Management Frameworks

This week We viewed a video on Enterprise Risk Management Systems (ERM). This film was published in 2008 by Risk Central. The topic of ERM is usually discussed between directors and managers of Corporations.

A well-conducted ERM plan reduces the risks in companies but does not eliminate them. ERM does not have a standard design system.

Exercising Risk management is the proposed continuous process. Hard elements provide leaders with the 5 ws, who, what, when where and why.

Hard elements are usually a document. These documents include information such as methods, policies, tools, rules, and guidelines. The risk management techniques listed in these documents are crucial to business msuccess.

Within the policies information regarding strategy, objectives, roles, responsibilities, and the organizational vision can be studied. The tools and methods include action plans along with risk assessments.

The rules and guidelines indicate when, how, and the proper way in which leaders should manage risks. The Information management involved goes over risk action plans, risk registers, rules and ERM policies and procedures.

Then we have motivational elements which assist with enabling all to adhere to the set forth rules and guidelines. This includes Key performance indicators, reporting structures, performance reviews and perception value.

The reporting structure involves requirements and management meetings. Key performance indicators within risk management are used by senior management.

With all being said, the most important aspects of ERM are having accurate assessment methods, systematic reviews, and proper management requirements.

These important pieces are broiled within motivational and hard elements of ERM. All the elements discussed are equally important to have effective ERM systems in place.

References:
Enterprise Risk Management – Introduction Training (2008) – https://www.youtube.com/watch?v=QgyiRWcZYS4
Schlegel, G. L., & Trent, R. J. (2014). Supply Chain Risk Management: An Emerging
Discipline. Boca Raton: Taylor & Francis Group.

Risk Management Frameworks

Effective ERM systems need both a rigorous approach at the highest levels and accurate risk assessment. A systematic strategy guarantees that all material risks are identified, analyzed, and managed (Risk Central, 2016).

Before appropriate controls can be implemented, risks must be recognized, assessed, and prioritized. To efficiently distribute resources, accurate risk evaluation is essential. Inaccurate risk evaluation may lead to resource misallocation and inappropriate prioritization or management of risks.

Businesses need a proper risk assessment to efficiently manage supply chain hazards. One approach used by DuPont for supply chain risk management is scenario planning. DuPont is a company going outside its boundaries to reduce supply chain risk.

DuPont uses scenario planning to minimize possible difficulties in the company’s supply chain. This method entails developing hypothetical scenarios based on a variety of criteria.

They may therefore make better-informed decisions and plans for the future by recognizing and assessing various risks and their possible consequences.

DuPont can boost its competitiveness and performance by methodically detecting, evaluating,
and managing supply chain risks. (Schlegel & Trent, 2014).

The approach allows DuPont to transition from a reactive to a proactive risk management strategy. This highlights the use of probabilistic modeling to mitigate supply chain hazards.

Both are required for efficient ERM systems; however, accurate risk quantification may be more important. Resource misallocation and risk prioritization or management are conceivable without exact risk estimates.
The firm’s risk profile may grow, exposing it to higher potential losses. As a result, firms must establish credible risk quantification tools to direct their resources where they will have the most effect.

References

Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management: An emerging discipline. Crc Press.

Risk Central. (2016). Enterprise Risk Management Training (2008).

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