Implementing Risk Management Program

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Implementing Risk Management Program

Prima Industries Ltd. was a medium-sized Indian company operating in a mature market for about a decade. It had fully functional departments like, operations, quality assurance/quality control, product development, sales and marketing, engineering and maintenance, warehousing and distribution, and finance and IT. The company had business units in various sites, some own and some leased. The company used state-of-the-art process plant with modern equipment. Sometimes Prima hired or leased equipment. It availed various services from a number of contractors in the areas of transport, maintenance, storage, wholesale distribution, advertising, accounting and audit. In the wake of liberalization of Indian markets and increasing competition, the company was exposed to various risks arising from changing technology, vibrant markets and uncertain external environment. In this context, the board and executive management planned to develop and implement a risk management program through out the organization.

The board wanted a risk management program that could identify and monitor the organization's risks and assure the board and stakeholders that prudent and diligent measures were in place to minimize liabilities to the company arising from various risks.

Prima approached the development and implementation of the risk management program in five stages.

• Stage 1: All the employees were informed about the objectives/goals of the risk management program. A risk advisor was hired to develop the company's risk profile. He interviewed managers and employees from various departments to get a wide-ranging view of the organization's risk exposures and other weak spots or pitfalls in its present risk control system. The advisor, at this stage, mainly concentrated on preparing a 'risk register' listing various business and operational risks. All these risks were documented after being ranked depending on their severity.

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