Internal Control and Risk Enterprise Management Strategic risk can be divided in

Question

Internal Control and Risk Enterprise Management

Strategic risk can be divided into seven major classes: industry, technology, brand, competitor, customer, project, and stagnation.

Choose a company that you would like to research, and consider their strategic risk management of one of the seven major classes listed above. Imagine you are an executive at that company who is responsible for risk management. Write a memo to the company president identifying at least one competitive advantage that the risk program has had for the company, or a disadvantage that the lack of a program could create.

Explanation / Answer

The company that i have selected is Volkswagen. The one major class that i have selected is - brand.

The Volkswagen brand has been suspectible to the risk of brand erosion after the "cheat device" fiasco. The company was involved in making diesel cars that were fitted with devices/softwares that showed false and lower emissions from its cars, thus cheating the emission tests. This clearly demonstrates poor strategic risk management towards the brand from Volkswagen. There was no effort to redefine the scope of Volkswagen brand by focusing on the quality of the product, immediately after the scam. Apparently, there was no training of employees (specially at the production front) to reject business opportunities that could generate risk.

Memo to the president Volkswagen: The disadvantage of the lack of risk program towards our brand is that the economic value associated with the brand has taken a hit. It has declined considerably post the scam and in the absence of an effective risk management program, shoring up the brand value seems to be an uphill task. In the absence of an effective risk program, the public opinion is now against the Volkswagen brand and will take quite some time to turn the public opinion in favor of the brand.

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