Enterprise Risk Management Case Study

1200 Words 5 Pages
According to Chopra and Sodhi (2004), it is imperative that companies start by understanding the universe of risk categories and what influences them before they craft effective plans to reduce such SC risks. With the knowledge about the crucial risks to consider, the companies can advance to choose and formulate commensurate strategies to mitigate the risks.
Figure 8 below shows various categories of risk and their corresponding drivers: Figure 8: Categories of risk and their drivers (Chopra and Sodhi, 2004)

It is clear that there are a number of risks that need to be considered in order to improve the efficiency and the resilience of the company’s SC. According to Chopra and Sodhi (2004), there is no silver bullet strategy that can serve
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According to Oslon and Swenseth (2014), economically efficient SCs push the trade-off between cost and risk. They found that the lowest cost alternative usually is vulnerable to some kind of disruption. Some of the economic benefit from low cost has to be invested in means to enable flexible coping with disruption. It is therefore important to employ Enterprise risk management (ERM) as a systematic, integrated approach to managing all risks facing an organization. ERM seeks to provide the means to recognize and mitigate risks in a holistic fashion. Chopra and Sodhi (2004) further assert that the biggest test that confronts companies is attempting mitigating supply-chain risks without undermining financial performance. The company has to achieve the highest possible profits for a range of levels of risk and manage that efficiently. In reality, this involves …show more content…
This means that if one does well in one dimension, the other dimension is compromised. In this state, managers are left with the task of determining which of the dimensions they need to emphasise on. The ones that they seek to put emphasis on are the ones that will match the needs of the customers the most. Therefore, the notion of trade-off moves from the premise of compromise (Pagell, et al., 2000). This means that one has to decide on the relative priority of each performance objective under consideration. The idea of trade-off paradigm can be taken to extremes to imply that improvement in one aspect is achieved at the expense of another aspect (Pycraft, et al., 2007).
Figure 11 below shows how the trade-off paradigm notion can be demonstrated. It suggests that one performance objective can be traded off with another in a short term. However, as can be seen below, the performance of objective 1 is compromised at the expense of the improvement of objective 2. Like a see-saw, when one goes up, the other goes down. Figure 11: The trade-off paradigm (Source: Pycraft, et al,

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