BISHOP STUART UNIVERSITY

COURSE UNIT: SUPPLY CHAIN MANAGEMENT

COURSE WORK: 1

YEAR: TWO

SEMESTER: ONE

LECTURER: MR. NKAMUHAYO DENIS

NAME REG NO.

MUGANGA NICKSON 22/BSU/BPSCM/0569

KAMURINDA BENON 22/BSU/BPSCM/0382

ASIIMWE DAPHINE 22/BSU/BPSCM/0654

NATUKUNDA PEACE 22/BSU/BPSCM/0995

The following are the benefits of business risk management as explained below.

See risks that are not apparent. Many of the real risks facing an organization cannot be
gleaned from a textbook. A comprehensive preventive risk management programme leverages to
a team of experts to identify and provide a deeper understanding of all types of risks.

Provide insights and support to the Board of Directors. Board of Directors may find it
difficult to identify risks outside their areas of expertise and experience. Providing resources and
advisory services to the board and its committees charged with risk management will make them
better able to discharge their duties.

Get credit from cooperation. Many regulatory agencies have policies where they “give credit”
to companies under investigation for having aa compliance or a risk prevention program in place.
While it is impossible to avoid risk and the manifestation of the risk into potential programs,
regulators want to see that an event is not due to a systemic breakdown and that the company has
measures in place such as proper leadership, training and eartification to prevent such activity.

Build a better defense to class actions. Plaintiffs in class actions and other downstream
litigation often rely on their ability to convince triers of fact that the development have been
negligent. This is harder to prove when the company can point to a preventive risk mitigation
program that is in place to minimize the risks.

Reduce business liability. Regulators and shareholders increasingly view litigation risk as a
business liability. Reducing litigation of risks upfront makes the company a more attractive
investment.

Frame regulatory issues. Preventive risk management programs provide a greater insight into
insurance, indemnity and liability issues and allow the company to better focus and structure its
inquiry.

Increased awareness of the risk across the organization that is the risk management team is
always ready and alert of any occurrence of risk in an organization which reduces risk surprises
and more compliance to any outbreak of the risk.
Better and more efficient compliance with regulatory and internal compliance is coordinated.

Improved operational efficiency through more consistent application of risk processes and
control.

More confidence in organizational objectives and goals because risk is factored into strategy.

The following are the reasons for poor risk management as explained below;

Poor risk management refers to where the time, effort and cost invested in the project are
wasted and project objectives have not been met.

Lack of transparency that is not being open to each other so the risk management team fail to
communicate to each other due to some grievances inside the management team which threatens
the daily operations of the organization.

Over emphasis on efficiency vs resiliency. Greater efficiency can lead to bigger profits when
all goes well. Doing things quicker, faster and cheaper by doing them the same way every time,
however can result in a lack of resiliency, as companies found out during the pandemic when
supply chains broke down.

Poor governance that is lack of updated policies for handling risks in an organization and failing
to put in place multiple risk control measures thus leads to poor risk management.

Limitations of risk analysis techniques. Many risk analysis techniques such as creating a risk
model or simulation require gathering large amounts of data. Extensive data collection can be
expensive and is not guaranteed to be reliable. Furthermore, the use of data in decision making
processes may have poor outcomes if simple indicators are used to reflect complex risk
situations.

Lack of risk analysis expertise. That is the expertise that can be cost effective, but they require
highly trained personnel to accurately understand the generated results.

Illusion of control. Risk models can give organizations the false belief that the can quantify and
regulate every potential risk. This may cause an organization to neglect the possibility of novel
or unexpected risks.
Improper risk metrics which includes inaccurate measurements also lead to poor risk
management thus improper risk metrics result into meaningless information that is consistently
used in management which also ends up bringing in a lot of risks in an organization.

Insufficient capital to invest in risk management for example purchasing risk analysis
expertise and to inject in training personnel responsible to look after the risks in the management.

Risk ignorance that is not being aware of what risk is. Measures to minimize risks which result
into poor decision making in a management thus poor risk management.

Failure to communicate risks to the top management that the lower and middle management
fail to report to the top management for minimization thus poor risk management.

Failure to monitor risks that is organizations failure to put in place risk monitoring team to
always monitor the occurrence of risks in an organization.

Poor decision making in managing risks that is use of poor monitoring team, use of inaccurate
metrics and inaccurate data in decision making thus poor risk management.

Toxic work culture that is undermining each other.

The challenges faced in risk management are;

Mismeasurement of known risks. Risk managers sometimes make mistakes in assessing the
probability or the size of losses. Sometimes they could use the wrong distribution. For a financial
institution with many positions, the correlation between the different positions may be
mismeasured.

Failure to take known risks into account. It is very difficult to consider all the risks in a risk
measurement system, or it is costly to do so. This is because nobody can forecast future evens
perfectly.

Lack of risk decision making structure and lack of accountability for risk decisions in an
organization. Almost every business executive is comfortable with risk decision making,
however in many cases the right people are not making those decisions.

Fraud concerns. Those supply chain gaps have created holes that fraudment companies are
quick to fill.
Cyber risk is always top of mind when prioritizing issues amongst the many challenges facing
risk management. This has elevated risk due to less device control and increased points of
potential exploitation resulting from at-home assets being used by employees. Work from home
employees are a greater risk of lacking those in offices.

Lack of meaningful risk assessment process. There are organizations that consider risk
management something they have to do from compliance stand point who conduct super facial
risk assessment. Other just don’t have the right skills to develop a meaningful risk assessment
process.

Lack of open risk ware culture. In order to build a culture where business managers are willing
to be transparent to their executives the executives have to be careful to craft the kind of culture
that fosters this transparency.

Risk identification is a set of activities that detect, describe and catalog all potential risks to
impact business outcomes in terms of performance, quality, damage, loss or reputation.

Risk identification involves risk identification, risk analysis, risk analysis, risk evaluation, risk
treatment and risk monitoring.

Best practices that need to be implemented in risk identification include;

Involve stakeholders in order to effectively manage risk, you should involve the stakeholders
every step of the way, beginning with the initial risk assessment. Stakeholders can include people
such as managers, clients, employees, unions. Each individual represents different roles and
responsibilities within the organization.

Tone form the top that is creating a strong risk culture. Risk culture is defined as the values,
beliefs and attitudes about risks by a common group of people. Its responsibility pf management
and board of directors to clearly communicate the company’s culture and set the tone for
compliance from the top.

Communication. Good practices in risk assessment and risk management starts with
communication. Communicating risks throughout the organization is another crucial aspect of
risk management.
Continuous risk monitoring. In order to manage the risks, one must first know what ones risks
are. Clear monitoring processes must be established to ensure that any and all risk mitigation
efforts are working and effective.

Clear risk management policies. Having these clear policies develop will help the company to
identify all the potential risks that could affect the business, the likelihood and impact of those
risks.

Analyze customers’ complaints. Customers may help in risk identification as well. This
strategy is most useful for organizations where customers visit a physical location, such as a
store front. However, even solely digital customers may provide valuable feedback that can help
identify and mitigate against reputational risks.

Seek employee feedback regularly all employees, especially key stakeholders may have some
insights on risks that they encounter in day to day business practices that you would not have
otherwise consider.

Conduct external research that is organization could assess industry research or trend reports
that will highlight common risks, also they could pay attention to their competitors or companies
similar to theirs.
References

Vora P.P., (2001). Promoting A Sound, Healthy, Viable and efficient Housing Finance System.

Van Horne, J.C., (1998). Financial Management and Policy, Prentice Hall, 11 th Ed., Upper

Saddle River New Jersey.

Wayne, L., (1998). Loan Provisions Role in the Risk Environment, Bank Notes December, 1997.