Essay on "Risk Assessment and Contingency Planning"

Essay 4 pages (1530 words) Sources: 3

[EXCERPT] . . . .

Risk Assessment and Contingency Planning

Risk assessment is a common undertaking in many organizations where they look at the areas that need the allocation of resources most and allocate accordingly so as to have the maximum returns and help the organization recover from a downturn if there was any. These decisions to allocate are usually weighed since it is very crucial to have the correct decision on what to spend how much on. Through the risk assessment matrix the businesses will be able to achieve the following as Dan power, (2004) notes;

a) Be able to take note of the process and functions to be prioritized.

b) Pick out the possible hindrances that may come in the path of process and functions of the organization.

c) Identify the areas or sections in the organization that are most vulnerable.

d) Focus the due attention to the resources and personnel that require due attention so as to perpetuate the smooth running of the organization.

Contingency planning on the other hand is a systematic approach to identifying what can go wrong in a situation. It works against the principle of fate and hopes of things working the way one wants them. In every organization, there must be someone entrusted with planning and must always identify a contingency plan and strategy just incase things don't work out as desired.

Contingency planning operates on a "What if?" presumption and skill which is significant in all spheres of planning, but especially in contested and competitive sectors. The primary aim of contingency planning is not to perfectly pick out and formulate a plan for every possible challange since this would be impossible and would be thinking in the impractical realm, but rather the objective is to arm the organization with a possible response in case of an eventuality. Few eventualities actually turn out as foreseen however, organizations that have prioritized contingencies and possible solutions are more prone to reaching their major targets and goals successfully (Yuko Mitome & Karen D. Spree, 2001).

Taking our case of the overbooking of visitors into the same venue, this has proven to be a common problem and it is viewed as an indirect threat that is prone to causing ripple effects. It is not absolutely realistic to eradicate all the possible risks, but with appropriate planning an organization can minimize them. The following strategies can be employed incase double booking occurs or in a bid to avoid double booking;

Target the Value Chain

Most organizations have a process in place for looking into their economic eventualities and value chain risks that may be, however, they need to institute procedures aimed specifically at the most common indirect risks. This should then cover the daily running and the activities that take pace in an organization in relation to its competitive advantage as well as the strategic plan it has. This is one way the department in the above scenario will help it to identify which activities are best undertaken by the firm and decide on which one are best provided by others (outsourced) hence concentrate on the once it can best offer to the satisfaction of the customers and specialize in them to curtail overbooking.

Evaluate the Risk of Competitors

Competitors to any field of commerce are those who offer the same service as yours. When an organization has a structure that is gravely different from the competitors in the same market, they risk more. This though is not a tip to copy the competitors but incase the organization adopts a model that is very close in structure to another organization then there is need to pay attention to indirect risks that may come up.

Having an utterly different strategy from your competitor's directly means that in case your organization undergoes an indirect challenge or risk, the next competitor may be able to take over your market share (due to the grave difference in strategy). This can negatively affect the incomes of the organization in the long-term. This evaluation in our case will enable an organization to come up with a contingent plan to accommodate the extra visitors in other premises that has not exhausted its capacity without making the visitors feeling that they have been given a raw deal.

Consider Supply Chain Exposure

When creating a strategy for the organization, it is imperative to focus on areas of weakness in your supply chain. Consider if there are any indirect threats towards the procurement of necessary prerequisites be they in form of material or service. As in Our case what are the risks of sourcing rooms if so, could it create pricing and supply issues. Such matters can negatively impact on the ability of the customer to reach the organization's service and product, which can drive down sales. If customers can be affected, then it will be incumbent on the operations manager to avoid such circumstances in the future though he has to solve the current situation in the most amicable way possible.

Look out for Distribution Channel Risks

A distribution channel risk is yet another concept that managers must and should spend time evaluating its potential risks. These risks may stand on the organization's path towards reaching and fulfilling the customers' needs, pose a challenge to cost factors as well as posing a threat to the existing business model. In the accommodation industry like it is in this case, there should be comprehensive systems put in place like the property management system and the reservation management system among others that will help in the prevention of double booking of rooms and venues.

Anticipate Customer Response

One of the most difficult things in the commerce world is anticipating the customers' response hence there are bound to be so many factors involved in a customer's purchasing decision, for example it was difficult for the reservation department to determine the reasons why the customers decided to come at the same time hence putting pressure on the firm's limited resources, therefore leaving the firm with the choice of either to look for alternative means which include outsourcing which is normally associated with uncontrollable risks and possible losing of clientele to the competitor, or cancelling of excess reservations which is suicidal to the business as well. The marketing department should be able to anticipate the response of the customers so as to ensure that they fulfill the needs of the clients at all times.

Evaluating your Risk Profile

When creating risk response strategies, companies should and must carefully consider their risk patterns and flow. By forecasting how risks manifest themselves through the value chain and the most probable times, the organization will be in a position to prevent the "ripple effect" that comes when indirect risks aren't considered. It is however difficulty for the firm to comprehensively cover every aspects and challenges, but they can be as prepared as possible. This can be achieved through having in place the best possible and applicable in the organization risk assessment tool by identifying effectively and as accurately as possible the indirect threats, hence helping create more effective, corporate strategies. This could have helped the operations manager in our case scenario to anticipate the high influx in clients and appropriately prepare for it by spacing out the days among the clients, prioritizing the guests and any other procedure that would work best for the organization.

Conclusion

It is worth appreciating that Contingency Planning and Risk Assessment provides a business firm with an opportunity to focus on operational issues and identify constraints prior to the on-set of a crisis. It is evident also that an active contingency planning and risk assessment process enables individuals, teams, organizations to establish working relationships that can make a critical difference during a crisis

However good the plan and assessment may seem to be, there are… READ MORE

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