Understanding Business
12th Edition
ISBN: 9781259929434
Author: William Nickels
Publisher: McGraw-Hill Education
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Jacob is the owner of Jacob’s Jam. What started as a hobby, quickly turned into a successful business. Jacob initially started selling his jams at local markets. The demand for his products grew quickly. He could no longer use his own kitchen and moved into a rental space in the industrial area. This allowed him to increase production and accommodate his new employees. He now supplies local stores and he also started selling online. He is also considering an offer from a venture capitalist. This would allow Jacob’s Jam to expand internationally.
He knows that as his business is growing rapidly, he is exposed to more risks. Recently his business was a near victim of cyber-crime. He wants to know more about risk management. He came to you with a few questions relating to risk management, corporate governance and operational risk. You decided that you will compile a report that answers all his questions. The report should follow the following format:
Q.1. Provide some background information and a summary of what is to follow in the report. The introduction should entice the reader to continue reading.
Q.2 Provide a definition of what enterprise risk management is. Identify the fundamental concepts that this definition reflects. Relate the definition to Jacob’s Jam.
Use below fundamental concepts and link to the case study
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Definition
Enterprise risk management is a rigorous and coordinated approach to assessing
strategic and financial objectives. This includes both upside and downside
and responding to all risks that affect the achievement of an organisation's
risks.
Most of the definitions reflect certain fundamental concepts:
Firstly, ERM is a process, which means that it is a set of continuous actions
actions are pervasive and inherent in the way management runs the
designed to meet the risk management and corporate objectives. These
business.
Secondly, ERM should be applied across the enterprise, at every level and
unit. To successfully do this, an organisation must take all its activities into
account. ERM considers activities at all levels of the organisation, from
strategic planning and resource allocation to marketing, human resources,
production and credit review.
Thirdly, it is designed primarily to manage downside and exploit upside
risks in direct relation to an organisation's strategy and risk appetite. ERM
integrates risk management activities with strategic management and
business planning processes so that the organisation:
identifies the opportunities for creating value that present the most
attractive risk/reward trade-offs
designs a business model that is responsive to these opportunities
obtains a holistic, enterprise-wide understanding of the risks inherent
in the firm's assets, processes and the information used in decision-
making
acquires the capabilities to manage the risk
collects and analyses the data to produce timely business risk
information
selects and implements the best strategy for exploiting desirable risks
while concurrently mitigating undesirable risks
supports units to achieve their goals in a controlled environment.
Fourthly, it includes risks from all sources (financial, operational, strategic)
and also the risks created by 'natural hedges' and 'portfolio effects' from
treating these in the collective.
Fifthly, it involves the coordination of risk management activities. This
spans:
risk assessment (including identification, analysis, measurement and
prioritisation)
risk mitigation (including control processes)
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