MANAGING RISK

The Smoking Gun Theory
The Right Corporate Strategy Manage People

Insurance Against The Risk

Risk Management

Manage Processes

Monitor The Risk

Spread The Risk

The Right Corporate Strategy
These days every company faces challenges of competition. Any new market offering can be introduced to the market every day allowing the market to continuously develop. This impose a great danger to companies. The most basic threats of all is finding that customers no longer want the product that the company sells. This is why having the right corporate strategy and policies can reduce risk. Conglomerate were once seen as a way of reducing risk. According to Wikipedia, conglomerate is defined as Conglomerate can reduce business risk because if one market is doing poorly, the company can benefit from the other market. But not all company are very successful in implementing conglomeration. One of the company that has successfully in implementing conglomeration is Bakrie.

Setting the Risk Policies
A good company will have a policy for each area of risk . Those risk include the SHE (safety , health, environment) risk and policy on fraud and computer failures. These policy should be as brief and simple as possible so that everybody could read and understand. A risk policy should be translated into strategy statement which are implemented at the lowest suitable level ; for example, a SHE policy should be implemented in each manufacturing plan.

Manage Process

Implement documented management system for all major risk A management system involves writing down a company’s main procedure and ensuring that they are adopted by the staff.. Standard for quality like iso 9000 ( a standard of maintaining product quality) are used by companies to avoid crises. Prepare for problem The company should carry out emergency drills to check it’s preparedness Introduce safer solution Achieving safer solution may involve improving storage facilities, abandoning a risky process or exiting from an unstable market. Isolate the treats Creating Physical barrier or creating fire walls to separate one business to another are examples how risk are isolated Protect the asset Companies can minimize the damage that will be caused if the threat materialize. For example, sprinkles will minimize the spread of fire.

Managing People
 Set standard from top
   

Allocate responsibility for risk management Risk manager Training people Devolving responsibility and a culture of opennes

Set Standards From The Top

Top management must be involved in setting business policy on risk and be committed to it Managers must be given responsibility for managing the risks within the area of their responsibility and staff must understand the kind of risks they’re facing and also how to manage them.

Set Standards From The Top
Management must be ready to act quickly to changing circumstances  Management team must also be balanced and experienced

Allocate Responsibility For Risk Management
Each risk must be someone’s responsibility and it must lie with line managers and the workforce  Risk Management has traditionally been the responsibility of the company secretary and the finance director

Risk Manager

 

Companies are increasingly allocating the management of more of these risks to one manager, the risk manager Risk management decision making is becoming more centralized. Most small companies can’t afford to have a specialist in each area. Problem with grouping risk is that 1 person may be an expert in 1 field but not on other field

Training people To Be Aware of Risk and to Reduce Error
Risk Manager should provide a training program in risk awareness

Devolving Responsibility and a Culture of Openness
‘If a corporate value systems place too much emphasis on penalizing failure than rewarding success, people will not take risks’

Spreading The Risks
Companies can lessen their risk by developing new technologies which could co-exist with their present one. But every change also create new risk.

Monitoring The Risk

Measure the risks
Taking measurements lets the business see where it is vulnerable, and where losses are occuring

Have an early warning system
The company should have trading information available within days of a transaction. It is no longer adequate to wait until the end of the month. A rapid information is a great importance in risk management.

Keep documentation
1. Procedure manuals

2. Insurance policies 3. Maintenance records 4. Plans of specific premises, plus maps, photographs, flow charts and other information recording drains, stopcocks, hazards, etc 5. Loss records

Audit the risks
An audit program may use a checklist to ensure that risk are identified and managed

Insurance Against The Risk
Insurance should not be neglected, for this is part of the contigency plan. Having put in place risk management procedures, companies should seek a reduction or stabilization of insurance premiums. Different forms of insurance are emerging. Larger companies are now setting up their own captive insurance companies, which keeps the cash in the business and provides insurance at reasonable rates, thereby saving the profit margin that would have gone to an outside insurance company.

Study Case PT. Bakrie & Brothers
Brief History Bakrie & Brothers began its long and distinguished history as a general commodities trading firm in 1942. Today Bakrie & Brothers is one of Indonesia's foremost corporations with a scope of business interests that spans such profit centers as infrastructure, telecommunication, and plantations.

Study Case PT. Bakrie & Brothers
Choosing Corporate strategy & spreading the risk Bakrie& Brothers Choose to conglomerate their business by entering 3 different type of industry such as infrastructure, telecommunication, and plantations. This has helped the bakrie&rothes to reduce their business risk and generate more income. For example, bakrie as the owner of PT. Lapindo suffers a great loss from the “Lumpur lapindo” case. But their Bakrie Telecom and Bakrie Sumatra Plantation is doing very well so that they will still make profits.

Study Case PT. Bakrie & Brothers
Managing Process One of Bakrie’s compant Pt. SPIJ has been certified by the American Petroleum Institute under API SCT and API SL certifications. SPIJ is also certified for ISO 9001 by the American Petroleum Quality Registrar (APIQR). SPIJ has been audited and listed as qualified supplier of carbon steel and CRA (Corrosion Resistance Alloy) casing and tubing (OCTG) for the most important international oil companies. Beside using quality sources for High Alloy Grade, Chrome Grade, and Carbon Grade pipes from its global suppliers, SPIJ is also one of the most state-of-theart companies in the word who uses advanced technology in overall production process. SPIJ has also isolate their threats by separating their worker from their pipe process facilities by using CNC Machine and PMC Large and Small Finisher Machine

Study Case PT. Bakrie & Brothers
Monitoring the risk PT. Bakrie Brothers is a major example why companies should monitor their risk. One of their sub company PT. Lapindo has failed to measure their risk of drilling a pipe which has cause them millions o dollars.

Study Case PT. Bakrie & Brothers
Insure against the risk In covering their risk PT. Bakrie&Brothers set up PT. Bakrie life to insure their asset. But from our sources they also use other Insurance companies because their asset can not be covered by PT. Bakrie Life alone.

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