Master of Business Administration
For decades, the encumbrance of evaluating the potential of organizational risks and exposures has been assumed insurance specialists both internal and external to the company. For instance, risk handling mechanisms particularly self-insurance and insurance have provided some degree of comfort to organizations that could be otherwise be incapable of withstanding financial impacts associated with disasters. Sadly, false confidence cases have led to multiple problems for small and big firms within the insurance industry. In order for companies to efficiently execute functions related to pre-incident risk assessment and find the at-need operational crisis directions, majority of firms have developed corporate offices specifically designed for directors of crisis management (Luecke and Barton, , 2004, pg. 16). As such, they are able to obtain a synergy that presents both opportunities and challenges for the insurance community and facility managers.
Equally important is the aspect of risk management among business organizations because risk has become and inherent part not only to the public life but also to businesses (Kerzner, 2005, pg. 60; Mulcahy, 2003, pg. 21). The changing and dynamic market relations have increased the uncertainties within the business environment and for public organizations. For this reason, keeping up with the high market competencies calls for organizations to implement initiatives aimed at the delivery of particular outputs. The degree of realizing such outputs determines the level of risks within the activities of such organizations. Risk is an aspect that affects all levels within an organization and hence, they must be included at all levels within the management (Luecke and Barton, 2004, pg. 24. Efficient management of risks is dependent on the either changes affecting organizations directly or indirectly (Sapriel, 2003; 349). This proves that the majority of changes that happen within organizations call for increased attention during the process of identifying and controlling risks.
This project aims to create awareness for corporate risks by getting to know the theory of Risk Management and Crisis Management. It would cover the aspect of incentive travels for insurance consultants in an insurance company; discuss the advantages and disadvantages of incentives and present the ideal process of analysing the available options in relation to the future of the industry. Additionally, the project will also explain the importance of risk and crisis management with practical experiences being drawn from the project.
Risk Management at Hamburg Mannheimer
Hamburg Mannheimer is one of the largest accident and life insurance companies in Germany and belongs to the ERGO group of insurance. In this project, the area of managing incentive travels for insurance consultants for the Hamburg Mannheimer would be addressed. Of significance importance is the aspect of managing risks associated with the management of risks. Lately, the German incentive travel market has been a subject of controversy due to mix-ups relating to the financing of customer deposits. The German market is a crucial destination for the organization of incentives with particular specifications being placed on incentive travel. Majority of customers prefer travel incentives as the ideal incentive that offers value and memorable moments. It is argued that is the best instrument for offering employee engagement, motivation, and leadership performance. As such, it enables staff members to improve their future performance and as well, examine their past performances.
However, most of German companies believe that incentive programs exceeds their running costs and hence, value has to be distinguished based on the type of program being implemented within the company. Customers feel that incentive travels have to be financed using customer deposits while insurance companies hold the view that customers should be responsible for contributing to the costs of incentive travels. Travel incentive programs can be financed in a number of ways that include partial payment of the trip, complete payment of the trip, payment for additional benefits, and offering subsidies. Majority of companies are aware of the risks associated with travel incentive programs due to a multiplicity of risks associated with the program.
Travel incentive programs are associated with several problems that must be effectively addressed in order to ensure the success of such incentive programs. Examples of problems that must be overcome in travel incentive projects include the following. First, the increased competition in the industry is a herculean cause for causing demotivated employees and hence, there is a need for employee attachment. This can be solved by offering programs that offer incentives at various levels to enable employees to be motivated. Secondly, ‘worn effects’ resulting from repeated competitions brings new challenges that must be incorporated in travel incentive programs that are developed by the company (Sapriel, 2003, pg. 348). Third, the need to develop additional opportunities for employees who have never participated in incentive programs becomes a necessity and this increases the costs associated with the travel incentive programs. The fourth challenge is associated with the effects private life interference from incentive programs. Other challenges that affect travel incentive programs include the inclusion of taxes on the travel incentives believing that it forms part of their income. Additionally, union or work councils perceive reward participation among employees is a strategy aimed at weakening the strengths of the workers.
Risk Management and Planning
The process of designing of designing an efficient and effective employee reward system often presents huge challenges to corporate organizations such as Hamburg Mannheimer Insurance. The idea of developing and organizing incentive travels for the insurance consultants at Hamburg Mannheimer involves a lot of planning and logistics. However, with a thorough understanding of risk and crisis management, the entire process of designing and implementing travel incentives for insurance consultants can be an easy process as it will enable project planners to minimize the burdens associated with the planning process (Mulcahy, 2003, 45-61).
Studies have proven that travel incentives are an efficient but expensive way of improving motivation levels among employees in addition to improving their productivity levels. Crisis and risk management enables companies organizing for the travel incentives to develop a solid foundation for controlling their budgets and manage any changes associated with the delivery and administration of the entire project. This is also critical for ensuring that the company is not exposed liability risks and all other risks associated with the travel incentive program.
Assessments of the risks associated with the incentive travel industry revolve around bankruptcies, contract cancellation, and other liabilities. The most important factors that must be considered when designing a travel incentive program for Hamburg Mannheimer calls for awareness and understanding in areas such as cancellation and attrition, under booking, the financial status of incentive suppliers, and the level of services provided. First, the incentive industry is affected by massive cases of cancellation and attritions leading to the need for higher deposit requirements. Second, organizing travel requirements is marred by cases involving under booking of spaces for employees and this often presents a huge challenge for the performance of the company. The third factor that must be allocated significant contribution entails the assessment of financial stability of incentive suppliers. Worse case scenarios that include bankruptcy must be evaluated before implementing the travel incentive programs. This covers the type and credibility of hotels that should be used to house the insurance consultants. Important facts such as the level of property upkeep and maintenance and as well the staffing levels should be questioned before selecting a particular hotel or supplier. Finally, site inspections should be undertaken to guarantee the safety of the incentive program participants.
Risk Identification
The process of identifying risks within the travel incentive project for insurance consultants can be identified from a number of sources. Risks are often prevent projects from realizing the planned goals or prevent projects from being nearing completion (Seymour, & Moore, 2000, pg. 15). While other sources are obvious and can be identified before the project begins, others will be identified as the project progresses (Kerzner, 2005, pg. 69). The risks can be related to the project or might come from external sources, which are beyond the control of the entire team (Mulcahy, 2003, 61). Risk identification for travel incentive project for insurance consultants is necessary in order to analyse their characteristics and effects on the project. Eventually, they should be brought to the attention of the project team and project managers. Examples of possible risks for this project include cancellations, bankruptcies, hotel risks, price fluctuations, and among other liabilities.
Risk Analysis and Risk Quantification
The identified risks should be subjected to further evaluation through the process of risk quantification and risk response development depending on the appropriate action. The incentive travel project manager should be informed of all risk factors or risk events using all possible forms of communication. In turn, the manager will be responsible for taking the initiative of logging the risk to the risk register. The risk analysis and risk quantification project involves the description of the risk factor by ascertaining the effects of the risk on project resources, delays, or financial issues.
Quantification will be based on ascertaining the probability of occurrence of the risk. For instance, the risk of hotel reservations being cancelled can be estimated on a 50% chance or there is a high likelihood of the company failing to project. Equally, the risk can be analysed and quantified in terms of the schedule impact. For instance, the time of delaying the project can be assessed based on the time the project is likely to be delayed. Other important aspects that should be analysed and/or quantified include the scope of the risk impact, the quality of the impact, and the cost of the impact. Scope impact entails the extent with which the project is likely to affect the accomplishment of the project. Quality impacts will depend on the effects it will have on the performance of the project. Finally, cost impact involves the assessment of the risks with regard to effects on the project budget.
Qualitative risk analysis involves analysing risks based on the available data relating to the risk. This includes comparing the risks with past incentive travel projects and determining the probability of the risk occurrence by using the available data (Mulcahy, 2003, 106).
. During the qualitative analysis of risks, each possible risk is compared with the accompanying sets of parameters including the strategies that were employed to provide solutions. If the events of past risks were properly registered, it provides easier information for assessing the current and future risks.
Quantitative risk analysis involves determining the likelihood of the project being completed within the projected time and the available budgets. As such, it involves the identification critical parameters within the project that are most likely to influence the project schedule, success rates, and future decisions regarding the project (Mulcahy, 2003, 134).
Risk Response Planning
Response planning entails the development of options and determination of actions that are designed to enhance the opportunities within a project while at the same time minimizing on the threats associated with the project. As such, responsibilities should be assigned to particular individuals or groups within the project in order to facilitate the provision of response for each risk within the project (Luecke and Barton, 2004, pg. 68). The criteria that should be followed during the provision of risk response will be determined by the level of proportionality to risk sensitivity, the cost effectiveness of the strategy, the level of acceptability, and timeliness (Mulcahy, 2003, 156).
Risk Monitoring and Control
This process is required to facilitate the process of executing risk plans in addition to evaluating the effectiveness of such plans through risk reduction. Additionally, it facilitates the process of tracking the identified risks within the travel incentive project including the relevant watch list (Kerzner, 2005). Other activities involved during risk monitoring and assessment include the monitoring of causative conditions, residual risks, identification of new risks, and updating the risk management database (Kerzner, 2005). Examples of tools and techniques that can be used during the risk monitoring and control process include the variance and trend analysis, reserve analysis and holding status meetings. Monitoring ensures the evaluation and examination of implemented risk processes, evaluation of risk response actions, the validity of the risk process, and assessment of whether the policies and procedures were followed during the implementation of the risk management process.
SWOT Analysis of the Risk Management
This involves the tools and techniques that must be capitalized upon during response planning of the risk and crisis management (Luecke and Barton, 2004). Risks affecting an organization or a project are often as result of both internal and external factors. Internal factors involve factors within the project that can either weaken or strengthen the risk management process. Equally, external factors involve opportunities and weaknesses presented during the risk analysis. Opportunities involve the strategies for assessing positive risks while threats involve the negative strategies for assessing negative risks.
Strengths and weaknesses (Internal factors)
This entails internal factors that are crucial for providing a framework for the realization of project goals and objectives. Examples of internal factors include the intellectual capabilities of team members, the level of planning and research that has been channelled into the realization of the project, the rate of liquidity and cash flows within the project, the level of cooperation and integration among the project members, and the level of communication within the project. Other internal factors that can either strengthen or weaken the project include the number of individuals within the project, the type of products involved in the incentive travel, and the extent of supply of such factors into the project.
Opportunities and Threats (external factors)
Threatening factors in the risk and crisis management project involves factors such as the adopted strategies for avoiding, transferring, mitigating, and accepting the risk (Luecke and Barton, 2004). Risk avoidance entails the process of eliminating the risk, the rate of relaxing the adopted objectives for risk management, and the capacity for the group to avoid the risk (Bazerman, and Michael 2004, pg. 30). Equally, risk transfer involves entails the rate with which the risk is transferred to third parties and mainly involves financial aspects such as exposure to financially related risks. Risk mitigation is aimed at reducing the probability and impacts of the risk within the acceptable threshold. As such, the risk should be mitigated before the actual occurrence of the risk. The rate of appropriateness of the risk procedure should be accurate to enhance the level of improving the risk capability. Finally, risk acceptance involves the decision involved with making changes and adopting suitable strategies after the risks have been identified. It either involves the development of a contingency plan or taking no action.
Opportunities involved with the risk management project entail the process of ensuring that the risk happens after all uncertainties have been eliminated. This is aimed at taking advantage of the available opportunities that might be presented during the risk mitigation process (Bazerman, and Michael 2004, pg. 35). Examples of strategies that might be implemented in utilizing the opportunities presented by a risky situation include assigning qualified individuals to handle the risks, selection of the appropriate project delivery strategies, and provide of better quality services during the project. Opportunities can be capitalized through sharing of the risk, enhancing the likelihood of risk occurrence, and as well accepting the risk. By sharing the risk, risk ownership will be allocated to third parties who have better chance of realizing better results. It includes initiation of joint ventures and partnerships. Additionally, enhancing the risk prevention process involves increasing the likelihood of preventing the impacts of the risk.
References
Bazerman, M. H. and Michael D. W. 2004. Predictable Surprises. The Disasters You Should
Have Seen Coming And How To Prevent Them. Harvard Business School Press
Kerzner, H, 2005, Project Management: A Systems Approach to Planning, Scheduling, and
Controlling. John Wiley
Luecke, R. and Barton, L. 2004. Crisis Management. Master the Skills to Prevent Disasters.
Harvard Business School
Mulcahy, R, 2003. PMP: Risk Management: Tricks of Trade for Project Managers. RMC
Publications, Inc.
Sapriel, C. 2003. Effective Crisis Management: Tools and Best Practice for the New
Millenium. Journal of Communication Management 7 (4) 348-355.
Seymour, M. & Moore, S. 2000. Effective Crisis Management: Worldwide Principles and
Practice. London: Cassel.
