Sappi Case Study
According to Edmund (1949, 47), traditionally risk has been defined as the likelihood of an event occurring coupled with the negative consequences of an event occurring. In other words risk is a potential problem. However, according to Valsamakis (2010, 29) risk is defined as the variation of the actual outcome from the expected outcome. If this definition is accepted, then the standard deviation is an appropriate measure of risk. Risk therefore implies the presence of uncertainty. Valsamakis further says that risk management is a managerial function aimed at protecting the organisation and its people, assets and profits against the physical and financial consequences of risk.
Sappi is a global paper and pulp group. They are …show more content…
It is in this step that the problem is identified, a risk profile is elaborated that the strategies for the conduction of the risk assessment are planned and that the work on the risk assessment is commission. Furthermore Fabech says, in the risk evaluation step, the risk assessment is returned from the risk assessors and results are considered. In risk revaluation it is important that the directors realise that they are in fact risk managers and they cannot be considered as independent. Risk evaluation according to Valsamakis (2010, 16) entails quantifying the risk and determining its possible impact on organisation.
Sappi also takes record of how their risks may interfere with their organisations success. With Sappi, the inability to recover increasing input costs through increased prices their products has had an adverse impact on their profitability.
Catastrophic events, such as fire affecting their plantation may adversely impact their ability to supply their South African mills with timber. Sappi operates in a cyclical industry that may cause substantial fluctuations in their results.
2.4 Risk control
According to Valsamakis (2010, 16) minimise risk practically through the implementation of a physical risk management programme. The programme aims to achieve the following goals:
• Reduce the magnitude of the exposure.
• Reduce the frequency of the loss-producing events.
• Dealing …show more content…
From the 6 elements we were able to identify the risk and challenges faced by the company. We could see that their objectives are aligned with its mission and the risks they face could decrease the profitability of the company. Furthermore Sappi was able to list ways to control their risks, the policies they are enduring to face an increased output and the procedures they are taking to make sure the risks are avoided. Although some of their assets cannot be insured they are able to list ways to eradicate them. Risk management is an important activity in the running of any company because it protects them and make sure their performances are always on the right track. It is with a company like Sappi that we realise the importance of management in companies that are mostly producing goods and are capital