TITTLE:
STURBUCKS´ RISK MANAGEMENT ASPECTS TO BE ATTENDED, DECEMBER 2nd,
2013.
I. INTRODUCTION
Planning is
the foremost need of every business organization. It is done at all levels of management. No
matter what type or extent of planning a manager does, the important thing is
that planning takes place. Even though planning takes place and everyone in the organization is doing their job perfectly, there will always
come a time when risks enter the organization.
Managers have to make decision
that will always lead to a success or a failure of the organization´s goals.
Hence, Starbucks has a management plan to address some possible failures called
Risk management plan.
II. RESEARCH QUESTION
What aspects in the Starbucks´ risk management plan do need attention?
II. METHODOLOGY
Risk definitions
Risk is incorporated into so many
different disciplines from insurance to engineering to portfolio theory that it
should come as no surprise that it is defined in different ways by each one.
Risks are usually related to
probabilities, threats, positive and negative outcomes.
Risk = Probability * consequence
in lost money/deaths
In contrast, risk in finance is
defined in terms of variability of actual returns on an investment around and
expected return, even when those returns represent positive outcomes
Types of risk
There are many different types of
risk that risk management plans can mitigate, these risks can vary
from business to business and there are some risks most businesses have in common
like:
- · Compliance risks.
- · Employees risk.
- · Environmental risks
- · Financial risks
- · Health and safety risks
- · Political and economic risk
- · Strategic risk
Causes of risk
There are three basic causes:
- Physical causes, it is a tangible or material item failed in some way
- Human causes, it happen when people do something wrong or did not do something required.
- Organization causes, it is a system, process or policy that people use to make decisions in doing their work is faulty.
Why manage your risk?
An organization should have a
risk management strategy because:
- · People are now more likely to sue. Taking the steps to reduce injuries could help in defending against a claim.
- · Courts are often sympathetic to injured claimants and give them the benefit of the doubt.
- · Organizations and individuals are held to very high standards of care.
- · People are more aware of the level of service to expect, and the recourse they can take if they have been wronged.
- · Organizations are being held liable for the actions of their employees/volunteers.
- · Organizations are perceived as having a lot of assets and/or high insurance policy limits.
Enterprise Risk Management (ERM)
Businesses face risk every day.
In fact, without risk a business or organization would not grow and thrive.
Risk Management is the process
which aims to help organizations understand, evaluate and take action on all
their risks with a view to increasing the probability of their success and
reducing the likelihood of failure.
Risk management gives comfort to
stakeholders (shareholders, customers, employees and so on) that the business
is being effectively managed and helps the organization confirm its compliance
with corporate governance requirements.
A risk management plan includes strategies and techniques for
recognizing and confronting these threats. Good risk management doesn’t have to
be expensive or time consuming; it may be as uncomplicated as answering these
three questions:
- What can go wrong?
- What will we do, both to prevent the harm from occurring and in response to the harm or loss?
- If something happens, how will we pay for it?
Risk management requires a
detailed knowledge and understanding of the organization and the processes
involved in the business.
ERM improves traditional risk management
ERM focuses on a global array of
risks:
- · Strategic
- · Operational
- · Financial
- · Environmental
- · Human capital
- · Reputation
- · Technology
- · Compliance
ERM is able to
improve strategic decision making by addressing: strengths, weaknesses, threats
and opportunities. It integrates risk management into strategic planning
process.
Deployment of
ERM in strategic planning seeks to maximize value when setting goals, find
optimal balance between performance goals and targets to related risks
ERM also
considers how one strategic initiative might introduce risks that are
counterproductive to goals associated with another strategy. It may reveal
areas where organizations is being too risk averse or ineffectively responding
to some of their risks.
Benefits of ERM
Enterprise Risk Management
provides a clear and structured approach to identifying risks. Having a clear
understanding of all risks allows an organization to measure and prioritize
them and take the appropriate actions to reduce losses.
Risk management has
other benefits for an organization, including:
- · Enhance decision makings.
- · Increase management accountability.
- · Break down business silos.
- · Saving resources: Time, assets, income, property and people are all valuable resources that can be saved if fewer claims occur.
- · Protecting the reputation and public image of the organization.
- · Preventing or reducing legal liability and increasing the stability of operations.
- · Protecting people from harm.
- · Protecting the environment.
- · Enhancing the ability to prepare for various circumstances.
- · Reducing liabilities.
- · Assisting in clearly defining insurance needs.
- · Develop business continuity.
ERM creates Value
Governance + Innovation + Financial viability = Value
ERM six steps approach
Risk culture
Risk culture is the attitude
taking on risk in relation to the appetite and tolerance level of the organization.
Risk appetite is the manner in
which an organization and its stakeholders collectively perceive, assess and
treat risk
Risk tolerance requires a company
to consider, in quantitative terms, exactly how much capital it is prepared to
put at risk.
IV. STARBUCKS´ RISK MANAGEMENT PLAN
Introduction to Starbucks Crisis Management Plan:
The purpose of a Starbucks Crisis
Management Plan is to communicate the needs of the company to important members
of the Starbucks organization as well as members of the community. A crisis can
consist of a variety of occurrences and can come on suddenly with no warning.
The crisis plan will guide our organization and its partners in the event of a
crisis to allow for the quickest recovery with the least amount of damage done
to the organization, the brand and the community.
The crisis plan is used not only
to deal with a crisis but also to help prevent and avoid any such crisis from
ever occurring.
The following crisis management plan contains
the company’s course of action for the three most likely scenarios. The
scenarios can apply to situations beyond their circumstance and are used as
guidelines based on industry research. As with any crisis, good judgment is
needed in order to tackle crisis that occur. In the event of any crisis,
regardless of its nature, the following principles should always be upheld when
addressing the media, stockholders, consumers, and employees.
Starbucks
Principles:
• Provide customer service that develops satisfying
relationships with our customers.
• Embrace the changing ways of our community and strive to
impact the environment in a positive way.
• Maintain a level of commitment to our brand that creates a
successful organization.
Starbucks Company Goal:
Mission: “to inspire and nurture the human spirit – one person, one cup
and one neighborhood at a time.”
Here at Starbucks, it is all
about quality. Starbucks strives for excellence and taste in roasting the
highest quality Arabica bean and Robusta coffee in the world. The company's
passion is expressed throughout its products and being the best part of the day
for its customers, from the very first sip.
As a global company, Starbucks
goal is to make sure each location is part of the neighborhood in which it is.
Starbucks is a place for people to gather and offer a “cup of coffee with an
outstretched hand.” Since Starbucks first opened, its responsibility is to make
a positive impact with its coffee in each neighborhood in which its customers
reside. As brand growth has become so exponential, the company hopes it can use
the increase in growth to make everyone thrive.
On a global scale the company hopes to
energize its partners and stakeholders along with its customers, suppliers, and
non-profit partnerships. Starbucks also hopes to keep expanding in new
directions in 2013.
To maximize its growth and potential, the Starbucks
brand also hopes to minimize its environmental footprint and help its farmers
and independent suppliers run their businesses in an environmentally friendly
way. Starbucks’ global responsibility report was to reflect on the impact it
made on 2012, and hopes to continue to make a difference within the future.
Liabilities
Starbucks strives for immediate action and
outreach to all parties that may be affected should a crisis occur within the
company. Starbucks focuses on people who are both directly and indirectly
affected by a given crisis and centers its strategy within the limits of the
company and with the goal of minimal backlash.
Starbucks places the utmost
importance on the safety and well being of its partners, which is the brand’s
top concern during an emergency situation. The company strives to send live
information throughout its departments as soon as possible to reassure its
partners that they are the heart of each operation within the Starbucks brand.
• Direct knowledge and regulate accurate
information flow
• Communication systems are of
key importance
• Email blasts and newsletters
• Social media
• Starbucks meetings with
partners and crisis team
Starbucks customers are advised
to remain calm as the company works to take immediate, appropriate and
effective steps to protect its customers and the business. Starbucks manages
information to flow at a quick and effective rate, to address any concerns or
questions that its customers may have in order to keep fear and panic levels at
a minimum.
We work to assure the community the following:
• Accurate knowledge of the event.
• A commitment to control &
containment of any issue or crisis.
• A truthful report to news
media.
Confidentiality
All employees and partners may come in contact
with sensitive information in regards to the Starbucks brand. All information
is for the use of performing duties in line with the employment agreement and
individuals privileged should exercise caution when discussing daily or
delicate matters with any members of the public or media.
Certain information is only to be used to
perform daily tasks and duties. Only designated personnel should be handing
communication to the media or any outside person/s. No employee of Starbucks
should ever take it upon oneself to contact members of the media in regards to
activities or information that one is privy to through employment.
Risk & Vulnerabilities
Based on industry research the following
studies show possible vulnerabilities in the areas the crisis management team
has deemed “potential threats” most likely to apply to the Starbucks
organization.
Starbucks strives to maintain a positive brand
image within the community. Assessment by the crisis management team has placed
excess vulnerability, within the Starbucks brand and in large-scale companies
providing perishable and non-perishable consumer goods, has led Starbucks to
place the greatest risk in the following areas:
1. Food Mislabeling
Any and all food-mislabeling
crisis that represents a threat to public safety will be announced to the media
as soon as the threat is confirmed. Starbuck’s will do everything in its power
to reach any and everyone that could be potentially put at risk.
2. Government Regulation:
Starbucks will adhere to the laws and
regulations set forth by the government. Starbucks will continue to provide the
highest quality goods and services to its loyal consumers; however, the needs
and wants of the consumers may not fall in line with the needs and wants of the
government. Starbucks will adhere to regulations while doing its very best to
still maintain the consistent quality that the consumers are accustomed to when
associated with the Starbucks brand.
3. Disgruntled Employees:
The hiring process at Starbucks
is strict and thorough. We provide extensive training to ensure that employees
of the Starbucks Corporation are happy and treated with respect. We want
employees to represent the brand with honesty, integrity and in a manner that
is consistent with our mission statement and company goals. The company cannot
control the actions of employees and understands that the attitudes and actions
of those representing Starbucks can harm the brand and promote a negative image
to the public. The prevention of these situations is a high priority.
Starbucks, in the event of a crisis, will take action against any employee that
attempts to harm the brand.
Starbucks is constantly scanning
the environment for risk and goes to great lengths to ensure that all employees
and corporate staff are prepared to handle any type of emergency.
Crisis: Food Mislabeling
Starbucks strives to meet the highest
standards when serving food and beverages to its clients. The trust of our
loyal consumers is of the utmost importance to our success and future success
as a brand. We are dedicated to providing all necessary information about our
ingredients to consumers. The crisis management team scanned the industry
patterns for food mishandling and determined the following goals and objectives
for the Starbucks brand to maintain in the event a crisis of this nature
occurs:
Goal:
To the best of its ability,
Starbucks is dedicated to providing information that is accurate and timely
when ingredients and products that are of sub-par quality or condition have
reached or were at risk of reaching any consumer.
Objectives:
• To follow the guidelines Starbucks sets to
deliver quality products that meet safety and standard FDA food regulations.
• To contain the crisis or
contamination, if one should occur, to limit or prevent the number of consumers
affected by any such contamination.
• To notify the public in the
event of a crisis as soon as the details of the crisis are confirmed.
Case Study:
Starbuck’s Uses Food Coloring Containing Beetles
Problem:
The dye used in food and beverage
items at Starbucks to give a brightly colored reddish hue is derived from tiny
crushed beetles. The dye, known as cochineal dye, is used in many other
products such as lipstick, yogurt and shampoo. The use of this dye makes the
consumption of these food or beverage items not vegan-friendly. A petition
started on Change.org that prompted Starbucks to reformulate the products
containing this dye with a replacement using lycopene, which is derived from
tomatoes.
Strategy:
Starbucks acknowledged that the dye used in
certain products contained the cochineal dye. However, the dye is used
frequently in many companies and products so Starbucks did not apologize for the
use of this ingredient but reported that the company underwent a thorough
evaluation and decided to remove it from the ingredient list. The Change.org
petition had received a lot of attention and with over 6,000 signatures
gathered, which was the main motivation for Starbucks to make the change.
Starbucks, in keeping accordance with their mission statement and drive to be
environmentally friendly, decided to head the potential crisis head on and
rectify the problem before it received any more negative attention from
consumers or the media. Starbucks acknowledged the issue and then used
bolstering and corrective action to move forward with the change.
Solution:
Starbucks identified a specific time frame in
which the new reformulated beverages can be expected in store- June 2013. The
Starbucks Company took notice of the influx of negative feedback for the use of
cochineal dye and announced the change on their company blog. The evaluation
and consideration of feedback from loyal consumers prevents the issue from
becoming a crisis or creating any negative media attention.
The Wall Street Journal reported
that the company's U.S. president, Cliff Burrows, said that "after a
thorough, yet fastidious, evaluation, I am pleased to report that we are
reformulating the affected products to assure the highest quality possible.
V. CONCLUSION
The result of this research shows
that all risk aspects are considered in the Risk Plan of starbucks and the organization is prepared to face the risks that will come with the outcome of
a decision.
SOURCES
What aspects in the Starbucks´ risk management plan do need attention? STARBUCKS´ RISK MANAGEMENT PLAN The purpose of a Starbucks Crisis Management Plan is to communicate the needs of the company to important members of the Starbucks organization as well as members of the community. Starbucks Company Goal; Checkout this profile : https://supportforums.cisco.com/users/carewebcouk
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