Assume you are a risk manager who has recently been appointed by a large US-owned but EU-based engineering and general construction company called Bubbles PLC. The company has a number of offices around the world including a number in Europe and the US and relatively new offices in India and several locations in South East Asia. Bubbles PLC is structured around a number of main functional or business divisions including Infrastructure Development, Professional Services, Environmental Services and Facilities Management. Bubbles PLC operates a number of subsidiary companies that offer a range of services ranging from roads term maintenance contracts for Local Authorities as in the case of Moose Ltd to professional design services, as in the case of Blowers Professional Services. The company has an annual turnover of around K400m and is generally operating at a reasonable level, although growth has been slightly slower than expected over the past 2 years. As part of a long-term strategic review, the company CEO, Sir Tristram Gawain, has decided that the company needs to review its strategic risk management systems to bring them up to the highest operational standards so Bubbles PLC can compete at the most effective levels possible. It is expected that the review will require the development of a comprehensive enterprise wide risk management system (EWRMS) to cover the whole Bubbles PLC group of companies. It is expected this EWRMS will have a risk interdependency capability allowing the risk managers to model the impact of different decisions and strategies on the overall risk profile facing the organisation. It is likely that the Bubbles PLC risk profile will be represented as a risk interdependency field (RIF) that will be mathematically modelled. The new EWRMS and RIF approaches are being adopted during a period of considerable change for Bubbles PLC. As part of a former strategic plan, Bubbles PLC has recently acquired a number of smaller specialist companies in a range of different disciplines and geographical locations. As part of this strategy, Bubbles PLC is now actively considering making an offer to buy control of a specialist transport company called Deltic Ltd. Deltic Ltd is a specialised railway train operating company that currently holds a number of term service level agreement contracts for railway services in the UK, Sweden and Denmark. Deltic Ltd is currently mid-way through various franchise agreements for providing train services in these countries. Deltic Ltd is highly reliant on these franchises and it is imperative that the company performs well during the current franchises and is able to successfully bid for new franchises when the current agreements expire over the next few years. The long-term success of Deltic Ltd depends on there being a continued promotion of rail travel in the EU generally and on Deltic Ltd being successful in continuing to win service level agree- ment contracts from EU governments. As strategic risk manager for Bubbles PLC, one of your first responsibilities will be to design a suitable risk management system for the organisation as a whole. This will subsequently be upgraded to a full EWRMS over the next year or so after the basic risk management system is in place. . a) Discuss the main components that are likely to be included in the risk management system. You should explain what each element or component is and how each relates to the other elements or components that comprise the system. . b) Discuss the underlying rationale behind the philosophy of the enterprise wide risk management system (EWRMS) with particular emphasis on how this differs from a basic risk management system and the potential advantages it may offer Bubbles PLC. . c) Summarise the primary elements and stages that risk managers are likely to address in any scenario planning exercise. . d) Conduct a sample scenario planning exercise for the strategy venture from the point of Bubbles PLC in evaluating the likely success of the proposed acquisition of Deltic Ltd. You should stress the likely primary success and failure drivers that are likely to determine the commercial and political success or otherwise of the potential acquisition. . e) Discuss the concept of risk interdependency in the context of the risk profile facing Bubbles PLC in acquiring Deltic Ltd and explain how some of the likely risk interdependencies in this case could be considered in terms of a Risk Interdependency Field (RIF). . f) Discuss the concept of risk transfer as a risk treatment option and develop examples of two alternative possible risk transfer mechanisms that Bubbles PLC could consider for transferring strategic, operational, change and unforeseeable risks.
Assume you are a risk manager who has recently
been appointed by a large US-owned but EU-based
engineering and general construction company called
Bubbles PLC. The company has a number of offices
around the world including a number in Europe and
the US and relatively new offices in India and several
locations in South East Asia. Bubbles PLC is
structured around a number of main functional or
business divisions including Infrastructure
Development, Professional Services, Environmental
Services and Facilities Management. Bubbles PLC
operates a number of subsidiary companies that
offer a range of services ranging from roads term
maintenance contracts for Local Authorities as in the
case of Moose Ltd to professional design services, as
in the case of Blowers Professional Services.
The company has an annual turnover of around
K400m and is generally operating at a reasonable
level, although growth has been slightly slower than
expected over the past 2 years.
As part of a long-term strategic review, the company
CEO, Sir Tristram Gawain, has decided that the
company needs to review its strategic risk
management systems to bring them up to the highest
operational standards so Bubbles PLC can compete at
the most effective levels possible. It is expected that
the review will require the development of a
comprehensive enterprise wide risk management
system (EWRMS) to cover the whole Bubbles PLC
group of companies. It is expected this EWRMS will
have a risk interdependency capability allowing the
risk managers to model the impact of different
decisions and strategies on the overall risk profile
facing the organisation. It is likely that the Bubbles
PLC risk profile will be represented as a risk
interdependency field (RIF) that will be
mathematically modelled.
The new EWRMS and RIF approaches are being
adopted during a period of considerable change for
Bubbles PLC. As part of a former strategic plan,
Bubbles PLC has recently acquired a number of
smaller specialist companies in a range of different
disciplines and geographical
locations. As part of this strategy, Bubbles PLC is now
actively considering making an offer to buy control
of a specialist transport company called Deltic Ltd.
Deltic Ltd is a specialised railway train operating
company that currently holds a number of term
service level agreement contracts for railway
services in the UK, Sweden and Denmark. Deltic Ltd
is currently mid-way through various franchise
agreements for providing train services in these
countries. Deltic Ltd is highly reliant on these
franchises and it is imperative that the company
performs well during the current franchises and is
able to successfully bid for new franchises when the
current agreements expire over the next few years.
The long-term success of Deltic Ltd depends on there
being a continued promotion of rail travel in the EU
generally and on Deltic Ltd being successful in
continuing to win service level agree- ment contracts
from EU governments.
As strategic risk manager for Bubbles PLC, one of
your first responsibilities will be to design a suitable
risk management system for the organisation as a
whole. This will subsequently be upgraded to a full
EWRMS over the next year or so after the basic risk
management system is in place.
. a) Discuss the main components that are likely to
be included in the risk management system. You
should explain what each element or
component is and how each relates to the other
elements or components that comprise the
system.
. b) Discuss the underlying rationale behind the
philosophy of the enterprise wide risk
management system (EWRMS) with particular
emphasis on how this differs from a basic risk
management system and the potential
advantages it may offer Bubbles PLC.
. c) Summarise the primary elements and stages that
risk managers are likely to address in any
scenario planning exercise.
. d) Conduct a sample scenario planning exercise for
the strategy venture from the point of Bubbles
PLC in evaluating the likely success of the
proposed acquisition of Deltic Ltd. You should
stress the likely primary success and failure
drivers that are likely to determine the
commercial and political success or otherwise of
the potential acquisition.
. e) Discuss the concept of risk interdependency in
the context of the risk profile facing Bubbles PLC
in acquiring Deltic Ltd and explain how some of
the likely risk interdependencies in this case
could be considered in terms of a Risk
Interdependency Field (RIF).
. f) Discuss the concept of risk transfer as a risk
treatment option and develop examples of two
alternative possible risk transfer mechanisms
that Bubbles PLC could consider for transferring
strategic, operational, change and unforeseeable
risks.
Step by step
Solved in 5 steps
