Identify Risk and Risk Management Project based on Stationery and office requirement

Business

Business overview- sales supervisor who manages a fun and energetic sales team of six at a
successful family owned stationery and office requirements business. You have a wealth of
experience and knowledge in the industry. It is your role to ensure the sales team are actively
and successfully seeking new business while maintaining their existing clients and looking
for ways on how to improve the services. Most of the customer contact is made over the
phone, with one sales representative on the road who visit’s clients.
The sales team reports back to you with this month’s customer feedback. It is obvious there is
an enormous growth in mistakes. Several clients have complained about picking errors or not
receiving their deliveries at all.
1.Context Risk Management: - 1.PPE-Persnal protective equipment
2. Eliminate
3.Isolate
4.Admin
* Risk identification tools: -
* Consult with team member-

* Consultation with the customer reparative-

* What policies and processor- How to manual handling the things, how’s the things left we
are?
* Refund and replacement policy- If any complaint or wrong things about the customer
what plan or policy we are apply.
*Risk management guide lines-
The guidelines on risk management in organisations are issued by ISO 31000:2018. Any
company and its scope can change the implementation of these directives.
ISO 31000:2018 offers a common approach to risk management and is not sector-specific.
ISO 31000:2018 may be used for any activity, including all levels of decision-making,
throughout the organization's lives.
2. Formal meeting and conference or video conference-
We are planning a risk management project into the final stages of opening up the new Phils
Stationery enterprises retail outlet in the Grandville Mall to reduce level of stock loss. it was
estimated that there was an $11.3 million negative discrepancy between stock records
(purchases minus sales) and the outcome of physical stock takes across the organization.
These are aims of the project
 Keep the right goods and materials that customers want and that business needs
 Stock goods that sell quickly
 Keep the right amount of stock – not too much, nor too little
 Prevent stock from being misplaced
 Keep stock in good and orderly condition
 Prevent stock from being lost through theft or breakage
 Re-order stock at the right time in the right quantity.

Possible risks:
Thieves and shoplifters. Keeping stock secure, where it is located and how much it is worth
- so good records are essential. Stock that is portable, does not feature the business' logo, or is
easy to sell on, is at particular risk.
Theft by staff. Theft by employees can sometimes be a problem so company will come up
with inventory record with limited access to the stock.
Concerned persons
Stock manager: He will organize and monitor inventory levels to maximize efficiency.
Stock clerks: He will take merchandise that has arrived, unpack merchandise from the
warehouse, check for damage or mislabelling, and get it where it needs to be.
Informal risk identification tools
Some established 'formal' tools for identifying risks are as follows:

Risk identification Description

tool

 Brainstorming Gather a range of stakeholders (internal representatives from each

key functional area of the project, suppliers, customers, end users,
industry experts and so on) to meet under the direction of a
facilitator to generate as many potential risks as possible. You
can brainstorm against each stage of the product/project lifecycle,
or against each type of risk category.

 Stakeholder Using interviews, surveys or questionnaires you can consult each

 consultation stakeholder group to get their input about possible risks.

 Benchmarking Review what happens in other like businesses working on similar

projects. Determine the risks that arose for them.

 Document review Published reports (secondary data) can provide information to

identify possible risks. Sources could include the Australian
Bureau of Statistics, government, local council,
industry/professional groups, newspapers and journals. The
Internet now makes so much of this data readily accessible.

 Reviewing project This includes reviewing information from the current project
information (plans, analysis and designs) as well as reviewing information
from past projects (plans, progress reports, communication
between stakeholders, final report or audit) that can provide some
insight into the current project.

 Observation If your project involves a physical process (such as

manufacturing) you could observe the process and note any
possible sources of risk.

Formal risk identification tools

Risk identification tool Description

A series of items that need to be checked or approved before a project can

 Checklists
start. For example, airline pilots must work their way through a preflight
checklist to ensure that all is in working order before takeoff.

 Diagrammatic You can use various types of diagrams (fishbone diagram,

techniques process/environment, flowchart and so on) to inspire questions about
possible risks. For example, you may draw a fishbone diagram for one
particular outcome of a project.
This type of diagram shows all the inputs required to get to this outcome.
At each of these inputs you can ask questions about what could go wrong.

 Quantitative If you have lots of information/data about a project and predetermined

modelling or scenario risk indicators you can model various outcomes by developing scenarios.
building

 Computer Sophisticated software can simulate your exposure to risk should certain
simulations circumstances occur. You need to determine the likely circumstances.

Types of risks (Internally)

 INTERNAL

Risk category  Types of risk

Manufacturing  Inadequate supply of raw materials

 Machinery breakdown

Marketing and sales  Launch campaign delayed

 Failure to secure sales with major customers
 Product oversold

Finance  Funding changes

 Unanticipated cost fluctuations
 Cash flow problems

Distribution  Lack of storage space on site

 New channels requiring redesigned methods

Human resources  Lack of appropriately skilled staff

 No skills training in place
 Communication problems
 Key staff leaving

Information technology  Software or system problem

 lost information

WHS  Accidents or incidents

Legal  Patent and copyright issues

 Public liability claim

EXTERNAL

Risk category  Types of risk

Economic  Interest rate change

  Currency change
 Employment rate change

Political  Change of political party in power

 Regulation or legal changes
 Funding change
 Change in policy with supplying country

Environmental  Natural disasters

 Unseasonal weather

Technological  New breakthroughs affecting market

 E-commerce uptake

Competitor  Merger or acquisition

 Price fluctuations
 New offerings
 Marketing/advertising activity

Customer  Enters liquidation

 Buys from competitors first
 Insists on exclusivity

Supplier  Fails to deliver raw materials on time

 Faulty materials
 Price rise

This project is touching on several legal issues, including:

 Potential for theft of stock by staff
a. Identify and mark expensive portable equipment (such as computers). If possible, fit
valuable stock with security tags - such as Radio Frequency Identification tags - which
will sound an alarm if they are moved.
b. Don't leave equipment hanging around after delivery. Put it away in a secure place, record
it and clear up packaging. It is a good idea to dispose of packaging securely -leaving
boxes in view could be an advertisement to thieves.
c. Take regular inventories.
d. Put CCTV in parking lots and other key locations.
2. Potential for fraud and theft of stock by delivery agents

a. Train staff about your security systems and your disciplinary policies and procedures.
Training about the cost of stock theft will help, as many people aren't aware of the
implications for company turnover and job security.
 b. Set up procedures to prevent theft. Staff with financial responsibilities should not be
in charge of stock records.
c. Restrict access to warehouses, stockrooms and stationery cupboards.
d. Regularly change staff controlling stock to avoid collusion or bad practice.
If action is taken to dismiss an employee without conducting a proper investigation or
without valid evidence and subsequently, the employee’s explanation is found to be
reasonable, the employee may have grounds to take action against the company.
Employers must inform employees of their rights before any interview. These include the
right to have a witness present and the right to remain silent. Also, if the employee in
question is a minor, ensure that an adult is present with the employee at all times when
conducting interviews.
Document, analyse, categories and evaluate the risks that are associated with this project.
Theft
Theft is one of the biggest risks with regard to inventory control, specifically when the
inventory is higher in value. If internal employees are involved in the theft, it is much more
difficult to identify as they know the entire system and would probably be wise enough to
erase all their tracks after the theft.
Inventory Waste & Damage
Inventory usually tends to get damaged while being used in the normal business processes.
Damaged inventory cannot be used and goes to waste, increasing the costs of the business. To
avoid inventory from being damaged and to reduce waste costs, companies create inventory
control policies to minimize the damage as much as possible as well as issue rules and
regulations regarding the effective use of inventory to prevent waste.
Inventory Loss
Inventory is a current asset to a firm. A loss of inventory means a reduction in the company
equity. Goods in the inventory can get lost if the inventory is not managed properly or if the
employees are not careful in handling inventory.
 Identify and evaluate control measures for all risks.
Tracking
The most basic step in inventory control is maintaining a catalo of exactly what a business
has and where it is. All inventory locations should be numbered and inventory items
identified with those numbers. Tracking systems should be in place.
Security
The reason that most businesses keep their inventory in a central location is that this allows
them to also keep it secure. Added measures such as locks and security codes can help ensure
that only certain trusted personnel have access to inventory. All deliveries from suppliers
require a count before they go into inventory so that discrepancies between deliveries and
purchase orders are immediately remedied. Periodic counts of small sections of inventory are
conducted to pick up any discrepancies.
Review
It’s important that a company maintain an up-to-date inventory. If supplies and items are
allowed to sit on shelves for too long they will lose value. It is better to sell some items at a
loss than allow them to sit any longer in inventory. The storage space that is wasted on out-
of-date inventory is a loss in profits for a small business that could instead be using that space
for a faster selling product.
Audits
Periodic audits of bills of materials, negative balances in inventory and scrap tracking will
offset inventory location errors, misallocation of raw materials, over purchasing and
overstatements of materials in inventory. For example, if materials are taken from one
warehouse, but mistakenly recorded as taken from a second, the second warehouse may show
a negative inventory balance, triggering automatic over purchasing, when in fact the materials
are still in the second location.
 Separate the risks and control measures into categories that can be managed at either the
retail outlet level by retail managers or at an organizational level by Phils Stationery
senior management.
Tracking: It could be managed by retail managers as it should be numbered and inventory
items identified provided.
Review: It can be managed at either the retail outlet level by retail managers or at an
organizational level by Phils Stationery senior management but primary review would be
retail manager before passing to senior management.
Audits: Senior management will have to deal with external auditor to inspect all inventory
process
 Develop treatment plans for risks that can be managed by the retail outlet manager for the
store.
1. reducing the likelihood of the risk happening - for example, through quality control
processes, auditing, compliance with legislation, staff training, regular maintenance or a
change in procedures
2. reducing the impact if the risk occurs - for example, through emergency procedures, off
site data backup, minimising exposure to sources of risk, or using public relations.
3. cross-training staff so that more than one person knows how to do a certain task and you
don't risk losing essential skills or knowledge if something happens to one of your staff
members
4. identifying alternative suppliers in case your usual supplier is unable to deliver
5. keeping old equipment (after it is replaced) and practising doing things manually in case
your computer networks or other equipment can't be used.
6. Prepare a review plan

Risk Assessment:
Assess the risks (the objective of this step is to separate the minor acceptable risks from
the major risks)
For each risk identified in Step 2 determine the existing controls and analyse the risk in
terms of consequence and likelihood in the context of those controls. The analysis
should consider the range of potential consequences and how likely they are to occur.
Consequence and likelihood are combined to produce an estimated level of risk.
Risk
Consequence
areas
<Risk Extreme risk –
area # detailed action plan
1> required
Serious
<Risk Minor High risk – needs
treatme Severity
area # No treatm senior management
nt of
2> treatment ent Need attention
required situation
required/ require treatment
<Risk / required Medium risk-
could d/ / could
area # signific immediate specify management
happen could happen
3> ant high treatment / responsibility
but happen occasion
probabil could
<Risk probably but ally Low risk – manage
ity happen
area # never will only by routine
could frequently
4> rarely procedures
happen
<Risk
area #
5>
Insignific Minor Moderat Major Catastrop
ant - 1 –2 e–3 –4 hic - 5
Is
Almos expected
t to occur in
6 7 8 9 10
certai most
n-5 circumstan
ces
Will
Likely
5 6 7 8 9 probably
–4
occur
Might
occur at
Possib
4 5 6 7 8 some time
le – 3
in the
future

Unlik 3 4 5 6 7 Could
 occur but Like
ely – 2
doubtful lihoo
d
May occur
Rare - but only in
2 3 4 5 6
1 exceptiona
l cases

A list of key performance indicators that success can be measured against

Inventory Turnover
It is a measure of the number of times inventory is sold and replaced in a time period. This
ratio is calculated by dividing Sales by Inventory. The time period is typically a year, but can
be shorter.
Inventory Write-Off
Inventory Write-Off represents inventory that no longer has any value in the business (as
opposed to write down, where the inventory value has been reduced). Inventory could be
written off due to technological obsolesce, theft or damage. Inventory Write-off is simply the
dollar value of the stock to be written off
Holding Costs (sometimes referred to as carrying costs)
They are costs incurred in storing and maintaining inventory. They could include insurances,
costs associated with the space housing the stock, security, and associated equipment and
labour costs.
A recommended audit strategy that could be used by all retail outlet managers to determine
whether high-risk areas of stock loss are being effectively managed
Organizations that have stakeholders and shareholders independent of management (whether
publicly traded or privately held) should also have an audit committee that is independent of
management. The audit committee should be knowledgeable of the company’s fraud risk
exposure and aware of the steps management is taking to monitor and mitigate those risks.
Truly independent audit committees may also maintain healthy levels of scepticism to
promote continuous evaluations of the company’s anti-fraud programs and controls. The
audit committee has the responsibility to monitor the results of the annual audits and
quarterly reviews, and is also responsible for directing the activities of the internal audit
department (if one exists within the organization).
One purpose of a fraud risk assessment is to help focus management’s attention on the
significant fraud risks to be addressed. A fraud risk assessment can be recurring and
systematic, and it can involve various levels of management across all functions of the
business. An effective fraud risk assessment may include specific fraud schemes that could be
perpetrated against the organization, including the people or departments within the
organization that could commit each scheme, the likelihood of that scheme occurring against
the company in the current year, and the magnitude of impact that the scheme would have on
the organization.
 Retail outlet managers should also consider conducting periodic evaluations to determine
whether the whistle-blower hotline is effective, including benchmarking analysis against
competitors. The company should consider the use of an experienced outside agency
managing the whistle-blower hotline to enhance the perception of confidentiality.
Risk Treatment:
Assess the risks).
Treat the risks

Risk treatment options include:

 Avoid the risk by deciding not to proceed with the project or activity. This may
only occur within legislative requirements and business agreements.
 Reduce the likelihood of the occurrence. eg contract conditions, supervision,
technical controls, compliance programs, procedure manuals, quality control manuals, training,
etc.
 Reduce the consequence of the occurrence. eg contingency planning, fraud
control planning, relocation of an activity or operation, etc.
 Transfer the risk to another party. eg use of contracts, insurance, partnerships,
etc.
4.1 WHS treatment Occupational Health and Safety/ Work Healthy Safety (OHS/WHS) is
requires that all foreseeable hazards are identified and the risks arising
from these hazards are controlled. (australianbusiness 2015)

4.2 Risk transfer A transfer of risk is a risk management technique where risk is shifted
from one party to another.

Monitor and review As risks change constantly, the risk profile is continuously monitored, reviewed and
updated by management. New risks may be identified as more information becomes
available and existing risks may be eliminated through the effectiveness of the risk
treatments/actions. Record risks identified through regular audit on the risk audit log.
Record risk management activities on the risk management register.
Communicate and ● identify, evaluate, control and manage risks
consult
● ensure potential threats and opportunities are identified and managed
● inform directors, senior management and staff members about their roles,
responsibilities and reporting procedures with regards to risk management
● ensure risk management is an integral part of planning at all levels of the
organisation.
Performance ● Store is committed to achieving its vision, business objectives and quality
indicators
objectives by the proactive management of risk at all levels of the organisation,
acknowledging that embracing innovative ideas and practices carries with it
risks, but that these are identifiable and measurable and therefore capable of
being subject to realistic risk mitigation processes.