RISK MANAGEMENT STRATEGIES FOR WESFARMERS
Background of the organization
Wesfarmers is an Australian company that started as a co-operative society for farmers, but over the years, it has grown quite significantly into one of the largest companies in Western Australia, in fact, it is ranked number one out of the top 2000 companies located in the country. This is a well-known organization that covers many business operations including department stores, office and home improvement supplies, industrial businesses involving chemicals, fertilizers and energy, gas processing equipment, safety products and many more. The Wesfarmers organization has been a key contribution in generating employment opportunities in Western Australia, as it employed over 100,000 workers while developing.
With approximately 495,000 shareholders, Wesfarmers has managed to establish itself into an out-sanding company in terms of its sustainability and performance. The main objective of the company is to ensure satisfactory returns to its investors and shareholders. In the past year, the company has managed to generate large revenue estimated at $67,166,000,000 including its sales. The number of employees working in the company has also managed to improve tremendously, therefore placing the current figure at 217,000.The Chief Executive Officer of Wesfarmers is known as Mr. Scott Rob, while the chairman of the company is a re-known business-man, Mr. Michael Chaney.
Surprisingly, this very company has an interest of 50% in investment bank and corporate advisory services, whose provider is Gresham Partners and Gresham Equity fund. In addition to these, the company holds a 50% interest rate in the plantation saw miller located in Western Australia. This and many more features within Wesfarmers Company related to retail, energy and insurance, makes the company stand out as a kingfish among the rest.
RISK MANAGEMENT PLAN
For any company, business or organization to thrive in its daily processes and evaluation, there is a constant need for a well-structured risk management policy. A good risk management policy should involve the entire process of identifying a risk, monitoring as well as managing the specific risk. This will significantly help in minimizing the unexpected results, or negative impacts the risks may have on an organization. There are several risks involved in many businesses such as data loss which is very common, system failures, security issues, financial risks and many more.
Risk management structure
The Wesfarmers organization has a Risk Management Institution that is reviewed every year by the Board, and approved annually during the month of May. The structural details contain basic principles and risk management operations that are entailed in the organization’s procedures and reporting systems, with the divisions between the board, Audit and risk committee, Managing director and the Chief Financial officer.
A risk management structure has its major subdivisions :
1. Strategic risk management.
It is well-known that any thriving business should ensure it covers a comprehensive plan that is well-figured out. Even after the plan is perfect, it becomes a genuine fact that many aspects involved begin to change. A plan that you may have considered your best may begin to seem either inefficient or outdated, and this is what is referred to as a strategic risk. It is quite common that a business strategy that had been put in place begins to become more and more ineffective. This could be due to a number of issues such as competitive environments, technological changes, a decline or shift in the consumers demand, or maybe the pricing of raw materials move higher.
Many companies in history such as Kodak, Coca-Cola and many others have faced various strategic risk issues, and Wesfarmers is not an exception. Due to this reason, the company has put in place a formal corporate planning group which involves each group assessing the trends in the market place, which may affect the ongoing operations within the company. Failure to adapt to strategic risk may eventually lead to bankruptcy, and since Wesfarmers knows this, the organization to manage the risk is well enhanced.
2. Compliance risk management
Laws and regulations come in handy, to help establish well managed relationships between various companies, their customers and many more. By the fact that there are current laws put in place at the moment, we may continue to constantly face additional regulations in the future. This is because laws tend to change time after time. As a company grows, there may be constant need to comply with new rules. For this reason, Wesfarmers has a Group compliance reporting system that is backed up by many guidelines and rules covering ethical issues, legal opinions, technology and the environment. This process involves identification, analyzing and filing of a report related to the risk above.
3. Operation risk management
An operation risk refers to a failure or mishap that occurs unexpectedly during the daily operations within a company or organization. This could be due to internal factors such as technical issues, resources, taskforce or even process failure. In other instances, it may develop from external factors that are beyond control such as natural disasters. For this reason, the Wesfarmers organization has Operating cycle and divisional documents which simply explain the Board committees and presents reports required for a thorough analysis of the companies or organization.
4. Financial/ investment risk management
Financial risk specifically refers to the potential of a loss occurring, due to the in and out flow of cash within the business. Most of the other risks revolve around this, and so it is very crucial for it to be properly managed. Activities such as having huge debts may negatively affect any business environment and so, Wesfarmers has a committee that prepares monthly, as well as yearly budgets. It also files reports for all businesses within the company, to monitor progress at every stage.
From our findings, we note that most of the risks can be controlled or rather minimized by having a well-developed risk management structure. It is a very crucial step in identifying, analyzing and mitigating risks that may affect a project. If an organization focuses on developing a good risk management policy, it will eventually lead to the success of the project.
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