Enterprise Risk Management
Lowell Adkins, Garry Hardison Jr, Rickie Morgan, Tracy Ramos
July 11, 2012
Michael J. Mills, J.D.
Enterprise Risk Management
Non-Linear Pro is an organization that sells and leases video editing equipment. The company claims by using their editing system it will reduce work hours on a variety of projects. Non-Linear Pro recently leased its equipment on a trial basis to Quick Takes Video; a company that edits documentaries, sports, and various events. However, during the trial the employees of Quick Takes Video, along with management, claim the product did not function properly under the agreed leasing arrangement. Nonetheless, Non-Linear Pro ...view middle of the document...
The Chief Financial Officer (CFO) should lead the charge and oversee plans and relevant activities (Stuart, 2012). It is ultimately his responsibility for the financial results of the company, therefore, the risk management processes should be his to enforce.
Non-Linear Pro made an express warranty regarding how the product would work. Its salesperson stated clearly that Quick Takes Video’s editors should learn the system in a day and a half. It took them more than two weeks to learn the system, and the system did not work as promised. A properly implemented ERM would have trained the staff on the risks of making statements possibly construed as express warranties.
Communication and Consultation of ERM
Enterprise Risk Management needs proper communication throughout the organization. Executive management is responsible for implementation and education. They must assemble the proper staff, develop a comprehensive program, and educate the staff on how to implement and use the ERM (Stuart, 2012). Reckless risk-taking will occur if staff is not properly trained, and the ERM becomes standard operating procedure (Beaumier & DeLoach, 2011). Non-Linear Pro can mitigate future risk by training its sales staff to sell the attributes of its products without overstating the ease of use void of specific and credible evidence. The sales staff represents the organization. All claims made to potential customers should be founded in truth based on testing of its products. Finally, all management levels are responsible for communicating the ERM and ensuring their direct reports are adhering to same. Management is ultimately responsible when infractions occur.
Policies and Procedure of ERM
The ERM must contain the appropriate policies and procedures to be effective. Many organizations have ineffective risk assessments that do nothing to mitigate risks (Beaumier & DeLoach, 2011). The strategies and policies must be directly related to the business and transparent throughout the entire organization (Beaumier & DeLoach, 2011). Non-Linear Pro sales representatives clearly should have defined policies on how to communicate the attributes of its products. They can mitigate future risk by training the sales staff on the policies and procedures of ERM in their daily interactions. This transparency will help avoid future misunderstandings and possible litigation.
A written policy with all procedures, forms, and other pertinent information should be available and drafted in a manner clearly understood by its employees. The problem that many companies face is no formal risk management activities (Stuart, 2011). This leads to inefficiencies and lost opportunities. Non-Linear Pro could mitigate future risks and liabilities by proper implementation and training of a formal ERM program that clearly defines its attributes.
Training and Education
In the video, Product Liability, the salesman depicts the product as easy to master and...