Risk Management 2 Contemporary Risk Management CS Ch'2

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Risk Management2 Contemporary Risk Management
(CS Ch.2 WSY Ch.2)
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Lecture Outline

• 2.1 Risk Management Today
• 2.1.1 Risk Management Courses offered by the US
  Universities
• 2.1.2 Risk Management Courses offered by Hong
  Kong Universities
• 2.1.3 Risk Management of Corporations
• 2.1.4 Professional Organizations in Risk
  Management

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Lecture Outline - cont (1)

• 2.2 Cultural Effects on Risk Management
• 2.2.1. Risk Management and Culture
• 2.2.2 Effects of Chinese Business Practice on
  Risk Management
• 2.3 Information Technology and Risk Management
• 2.3.1 Application of Information Technology in
  Risk Management
• 2.3.2 Trend of Information Technology and Risk
  Management

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Table of Content - cont (2)

• 2.4 Crisis Management
• 2.4.1 Immediate Response
• 2.4.2 Reputational Management Concerns
• 2.4.3 Contingency Plan
• 2.4.4 Corporate Communication during Crisis
• 2.5 Post-Crisis Risk Management
• 2.5.1 Immediate Response
• 2.5.2 Post-Crisis Strategy

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2.1 Risk Management Today

• 1. Risk Management Courses offered by the US
  Universities
• BBA or MBA
• e.g. MBA (Finance) - International Financial Risk
  Management offered by the University of Chicago
• e.g. MBA (Finance) - Financial Risk Management
  offered by the Harvard University

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2.1 Risk Management Today - cont (1)

• 2. Risk Management Courses offered by Hong Kong
  Universities
• e.g. BA Business Studies - Risk Management
  offered by the HKPU
• e.g. MSc in Investment Management - Corporate
  Financial Risk Management offered by the HKUST

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2.1 Risk Management Today - cont (2)

• 3. Risk Management of Corporations
• Please refer to pages 20-22 of CS Ch.2 for the
  practice of RM in some US/HK Companies
• 4. Professional Organizations in Risk Management
• e.g. Global Association of Risk Professionals
  (GARP), Risk Insurance Management Society

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2.2 Cultural Effects on Risk Management

• 1. Risk Management and Culture
• managers from different countries and cultures
  have different styles in handling company
  problems (Laurent, 1983)
• Even a multi-national company tries to enforce a
  standard on all its branches from different
  countries, each branch has its own culture and
  value (Hofstede, 1970)

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2.2 Cultural Effects on Risk Management - cont
(1)

• 1. Risk Management Culture (cont)
• Different branches give different meanings to a
  head-offices policy because of cultural
  difference (Hofstede, 1970)
• So, different cultures will lead to different RM
  practices

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2.2 Cultural Effects on Risk Management - cont
(2)

• 1. Risk Management Culture (cont)
• Hofstede identified 5 different types of cultures
• Power distance
• Uncertainty Avoidance
• Masculinity/Feminity
• Individualism/Collectivism
• Long-term/Short-term orientation
• Uncertainty Avoidance is directly related to RM
  practice

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2.2 Cultural Effects on Risk Management - cont
(3)

• 1. Risk Management Culture (cont)
• For high uncertainty avoidance (e.g., in Japan,
  France), people will accept companies which have
  more strict regulations and will exhibit less
  high-risk behaviour
• For countries with high individualism and high
  market-orientation (e.g., US), people will be
  more risk-tolerance. (Douglas Wildavsky, 1982)
  More strict risk-management practice is expected.

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2.2 Cultural Effects on Risk Management - cont
(4)

• 2. Effects of Chinese Business Practice on Risk
  Management
• Guanxi (i.e. relationship) is important in China
  Business
• May use illegal methods to obtain business
• More difficult to identify and assess risk

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2.3 Information Technology and Risk Management

• 1. Application of Information Technology in Risk
  Management
• Risk Management Communication System
• 4 elements a risk management information system,
  analytical tools, a decision supporting system
  and a system for information communication and
  reporting

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2.3 Information Technology and Risk Management -
cont

• 2. Trend of Information Technology and Risk
  Management
• Integrated vs Standardized Module
• Use of Internet to assess websites for RM
  procedures and practice
• e.g., http//risk.ifci.ch/

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2.4 Crisis Management

• Four methods to deal with crisis
• Immediate Response
• crisis team must work to prevent the crisis from
  spreading and to limit its duration (Mitroff,
  1994)
• effective and efficient communication is needed
  in the containment and recovery phrases
• preceptions of control and compassion are the key

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2.4 Crisis Management - cont (1)

• Immediate Response (cont)
• inform the stakeholders
• report the progress towards the recovery
• prove to stakeholders the crisis is in control
• show concern for victims (Frank, 1994 Mitchell,
  1986)

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2.4 Crisis Management - cont (2)

• Reputational Management Concerns
• communication affects how stakeholders perceive
  the organization in crisis (Allen Caillouet,
  1994 Benoit, 1995, 1997 Hearit, 1994, 1996)
• must select the best communication strategies

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2.4 Crisis Management - cont (3)

• Reputational Management Concerns (cont)
• choose the best system based on 3 points (Benson,
  1988)
• (I) choose from a list of communication
  strategies
• (II) have a system for categorizing the crisis
  situations
• (III) have a system for selecting the strategies
  that best correspond to a particular crisis
  situation

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2.4 Crisis Management - cont (4)

• Contingency Plan
• all the connected departments must take part in
  the progress. e.g. the production dept. must keep
  producing outputs, the HR dept. must ensure there
  is enough staff to keep production
• the organization, the staff and the partners such
  as suppliers must co-operate to keep continuous
  operation

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2.4 Crisis Management - cont (5)

• 4. Corporate Communication during Crisis
• During crisis, the stakeholders and the
  spokesperson must keep continuous communication
• by proper media to report the latest news and
  progress
• the goal is to lower the stakeholders anxiety
  and to gain their understanding and belief

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2.5 Post-Crisis Risk Management

• 4. Corporate Communication during Crisis (cont)
• Evaluate the crisis management performance for
  future improvement
• documentation of crisis information
• The crisis team must help in continuing
  investigations, keep the flow of follow-up
  information to stakeholders and track the crisis
  continuously (so, crisis management is also an
  ongoing process).

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Additional reading materials for 2.2

• Earley, P.C., Self or Group? Cultural Effects of
  Training on Self-efficacy and performance,
  Administrative Science Quarterly, 1994, p.89-92
  and p.112-115
• Terence Jackson, Cross-cultural management,
  Butterworth Heinemann, 1995

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Additional reading materials for 2.2

• Managing cultural differences, p.61-67
• Organizational design and management norms a
  comparative study of managers perceptions in the
  Peoples Republic of China, Hong Kong and
  Canada, p.79-83
• A cross-cultural comparison of managerial
  styles, p.125-134

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Additional reading materials for 2.2

• Cross-cultural interactions, p.211-216
• Negotiation lessons from behind the Bamboo
  Curtain, p. 293-304

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Additional reading materials for 2.4 and 2.5

• W. Timothy Coombs, Ongoing Crisis Communication,
  SAGE Publications, 1995, p. 2-4
• Handouts for Crisis Management and Post-Crisis
  Risk Management