Operational level
Monitoring of risks at the operational level includes the basic day-to-day running of the organization. Lack of monitoring is unlikely to be a specific threat to the organization initially, but continued errors or risks will add to reputation risk over time. For example, lack of specific items to sell because sales patterns have not been monitored will result in customers choosing alternatives, or moving to other suppliers in the short-term. However, continued lack of key goods will increase customer dissatisfaction potentially resulting in significant and ongoing decreases in sales.
(ii) Risks that the BTS company should be aware of include:
Strategic-IT failure
The company is heavily dependent on its IT systems. Failure in this area would mean that the company cannot sell its products via the website, or indeed process orders or make payments to suppliers.
To mitigate this risk, BTS needs to ensure that mirrored servers are available (so if one breaks then the second server starts processing immediately from exactly the same place) There is also the need to ensure that appropriate disaster planning and backup facilities are implemented. Strategic-distribution systems
BTS is also heavily dependent on the reliability of its distribution system to maintain customer confidence in the company. Given the increasing number of customer complaints, it appears that confidence in the FastCour firm is decreasing. However, at present there is no evaluation of alternative couriers or systems to use.
To mitigate this risk, the board should investigate alternative delivery solutions e.g. use of a different courier firm or even purchase of their own vans for delivery. If the service from the existing couriers continues to fall then switching delivery methods should be seriously considered.
Tactical – key staff
Production of chairs and sofas is under the supervision of two key members of staff, Mr. Smith and Mr. Jones. While it is essential to have skilled members of staff available to maintain production efficiently, there is the risk that one or both of these staff members could leave the company. If this happens the ability of BTS to continue production at current levels could be jeopardized.
To mitigate this risk, the knowledge of the production controllers should be codified into a production manual which means it will be possible for another staff member to take over production duties. Mr. Jones and Mr. Smith must be made aware that this step is being taken, not because they are not trusted, but simply so BTS has a full record of all its activities.
Tactical – suppliers
BTS is very dependent on the Woody company for supply of wood for its products. However, the relationship with the supplier appears to be inappropriate – late payment and lack of warning regarding future orders means that Woody cannot plan supplies to assist BTS and may not be inclined to help anyway given the late payment. If Woody decide to stop supplying BTS then production would be adversely affected while a new wood supplier is located. To mitigate this risk, BTS should attempt to enter into more of a partnership with Woody. Providing future wood requirements and paying on time would help Woodyto look on BTS more favorably and help BTS guarantee supply of wood.
