Miscellaneous Case Studies on ERM

Question :

presented three mini-case studies on ERM and risk. Each one presented a slightly different risk scenario. Suppose General Motors wants to replace one of their traditional lines of vehicles with all electric models. How could GM use game theory to identify and assess the major risks to this decision? Identify two major risks that would result from GM converting an existing line to an all-electric line. Provide a brief discussion of each risk, and your assessment of the levels of inherent, current, and residual risk, using GM’s five point scale.

To complete this assignment, you must do the following: Suppose General Motors wants to replace one of their traditional lines of vehicles with all electric models. How could GM use game theory to identify and assess the major risks to this decision? Identify two major risks that would result from GM converting an existing line to an all-electric line. Provide a brief discussion of each risk, and your assessment of the levels of inherent, current, and residual risk, using GM’s five point scale.

A) Create a new thread. As indicated above,

ANSWER ALL OF THE QUESTIONS ABOVE IN YOUR THREAD

B) Select AT LEAST 3 other students' threads and post substantive comments on those threads, evaluating the pros and cons of that student’s recommendations. Your comments should extend the conversation started with the thread.

ALL original posts and comments must be substantive. (I'm looking for about a paragraph - not just "I agree.")

Answer :

The GM accompany has the ability risks which are accompanied by the change they may be looking ahead to making. Changing from the conventional line to a new line is one way or the other complicating and challenging since one can not be able to expect the reactions of the clients towards the latest merchandise. However, GM can use the sport principle inside the identification of the dangers and demanding situations they can have and the ways of managing those dangers. A agency that has reliable and powerful ERM has an extended-run competitive benefit over those who control and ERM in my opinion (Grody, & Hughes, 2016) — being capable of measure and manage the risks in a regular and systematic manner by means of giving their managers incentives and information so that they'll be capable of optimize tradeoffs and return.    After assessing the potential dangers, then it will be up to the employer to apply all strategies to manipulate these risks. One of the techniques that the business enterprise can use is chance transfer via coverage.  The company might also pick out to outsource several departmental desires as they retain handling commercial enterprise management by itself. 

The fuel automobile market is nicely advanced inside the marketplace, and it is far well aggressive; transferring to the electric one would suggest that the agency will automatically file the client’s loss. It is also glaring that growing a proper EV tech car could be very costly, to imply that the price of the vehicles will cross up, hence lowering the income (Abdalzaher et al., 2016).  Since widespread automobiles' aggressive competition is the most crucial among all the other forces inside the enterprise surroundings, the enterprise has positioned up strategies that improve the aggressive gain of the agency. The organization has, therefore, carried out measures that might be intended to maximize technique efficiencies, so one can lead to cost leadership and certainly an aggressive gain.  This can be finished via cost advent as well as technological records.

Reply 

GM theory has been used properly but the very first requirement to show hot it could be useful to the company in new decision is not clear. There is complicated writing with more focus given on the less useful things rather than the requirement. However there has been deep understanding of the topic, but its demonstration is not significant according to the requirements. Risks could be reflected more precisely and readers could get fast and clear understanding from the demonstrated things. 

Game theory is a theoretical framework for conceiving social situation among competing players. In some respect, Game Theory is the science of strategy, or at least the optimal decision making of independent and competing actors in a strategic setting. If General Motors (GM) replaces one of their traditional line of vehicles with all electric motors, it pursued six risk management procedure to create, structure and sell their vehicles in the market, identify key risks, assess and prioritize, develop risk and executive plan etc.

The ERM process was built with GM's vision in mind: to design, build and sell the world’s best vehicle. The scope of GM’s initial ERM program intentionally did not

 fit the typical ERM definition of an all-encompassing holistic approach. As a bottom up implementation, senior leadership wanted ERM to focus on those elements of risk and opportunity that were most important to the company.

The ERM environment at GM was an open forum where people could share freely. The first main point that emerges from utilizing Game Theory, is how to bring down the cost of electric vehicle in the market in contrast with the rivals and how to handle the value war. At GM, the unique perspective within ERM is made more valuable with a set of tools that helps decision makers better understand and evaluate issues involving external risk and opportunities and thereby improve their decision.

The actual risk that made GM to change over the line is, the existing to a line that is all electric is the remaining risk and the inborn risk. It has been observed that the left-over risk is for the most part, the amount of risk that is fundamentally connected with the activity that stays after the natural risk which decreases by the assistance of the risk control. The present risk as name is given priority with current arrangement of control.

Reference:

Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons.

Reply

There has been clear demonstration of the game theory but how it is useful to the GM is not explained properly. There could be use of the headings which could easily grab the attention of the readers. There are several discussions about the Game theory, however its alignment with the management or the managers is not done properly. A clear structure could be provided so that it could be easily readable and clear insight could be withdrawn from it. 

As far back as the monetary emergency of 2008, when hazard administrators on Wall Street observed weakly as their organizations liquefied down, expanding consideration has been paid to big business chance administration. Numerous organizations have since propelled new ERM programs or emptied more assets into existing ones, pushed to some degree by expanding administrative and rating-office investigation of corporate hazard administration.

It's nothing unexpected that numerous ERM programs — which take an all-encompassing perspective of an organization's heap dangers, recognizing the material ones and contriving approaches to tame them — are centered on hazard shirking. Be that as it may, if some hazard supervisors long for dark swans and fat tails, others have dreams of lower expenses and piece of the overall industry. At a developing number of nonfinancial organizations, similar to Lego, Safeway and General Motors, endeavor hazard administration is a methods for making esteem and upper hand.

"Generally, chance offices have frequently been viewed as the division that says no, acquired toward the finish of a choice procedure to approve a strategy," says Steve Culp, overseeing chief of Accenture Management Consulting's danger administration gathering. "In any case, on the off chance that you trust you have to improve to develop, you should likewise comprehend that you require hazard with you from the earliest starting point, to comprehend what new difficulties will come and how you can best moderate those."

To guarantee that the "right dangers" are taken, ERM and technique ought to be adjusted, say specialists. For instance, says Culp, an organization should need to enter China with the objective of having 30% of its incomes originate from that point in five years. Be that as it may, it stands a decent possibility of fizzling except if it comprehends the dangers required with entering that market — concerning apparatuses, innovation, staffing, contenders, changing client needs et cetera.

General Motors has custom-made its hazard program to its specific needs. "We built up our model to line up with our key goals and friends structure," says Thelen. "Our hazard officer structure incorporates official delegates from each capacity answering to the CEO, and in addition from every one of our major geographic locales." Product improvement, buying and store network, and fund groups additionally communicate with chance administration.

Notwithstanding requesting contribution from practical pioneers about key and rising dangers, "we work with them to help create chance moderation exercises," Thelen says. "We give instruments to choice help, for example, war gaming, diversion hypothesis, situation arranging, push testing, et cetera." GM additionally looks for sees about its dangers from outer gatherings, says Thelen.

Venture chance administration at GM implies checking and relieving hazard on one hand and discovering openings in chance on the other. "Dan Ammann has tested us to be inventive in distinguishing rising or blind side dangers that we may not typically consider," says Thelen, while "Dan Akerson is lined up with our view that hazard isn't generally a negative." Without a doubt, Thelen says GM's ERM program is giving an upper hand. Without going into specifics, the CRO says the program empowers the automaker to recognize certain dangers that additionally influence its rivals, at that point alleviate them before the opposition can.

Would gm be able to decipher the effect of ERM into comprehensively utilized monetary measurements, for example, return on capital or EBITDA? "Certain dangers will better loan themselves to these quantifiable measurements, while others are harder to quantify," answers Thelen. "In stretch testing situations, we do attach our work to our built up key execution markers to enable the organization to settle on educated choices among choices." And when a venture is expected to moderate hazard, he includes, "money related contemplations are in every case some portion of the money saving advantage examination to decide how much remaining danger we will acknowledge."

Up until now, it is hard to measure the effect of the program on GM's cost of hazard, says Thelen. In any case, he calls attention to that it has helped the organization settle on better choices, which eventually results in enhanced execution.

References:

Walker, P. L., Shenkir, W. G., & Barton, T. L. (2003). ERM in practice: examples of auditing's role in enterprise risk management efforts at five leading companies shed light on how this new paradigm is impacting audit practitioners. Internal Auditor, 60(4), 51-55.

Max, M., Karl, S., & Mcdougal, T. G. (1944). U.S. Patent No. 2,360,257. Washington, DC: U.S. Patent and Trademark Office.

Dabari, I. J., & Saidin, S. Z. (2015). Determinants influencing the implementation of enterprise risk management in the Nigerian banking sector. International Journal of Asian Social Science, 5(12), 740-754.