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Disaster

ERM implementation- A real case example and comparison

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ERM implementation- A real case example and comparison

            ERM is regarded as a business strategy that is prepared to assess hazards and potential disasters in the future. The hazards might interfere with the operations of the organization, and it is essential for the corporation to identify the risks beforehand. Risk identification can help in risk management, and leaders or executives can prepare an action plan as well. ERM is useful across various industries such as airlines, construction, and finance or insurance (Hampton, 2009). Here, a real case study of an organization Delta that operates within the airlines’ industry shall be considered. The process of ERM shall be compared with Intuit, another company that also implemented ERM to mitigate risks.

Description of real use case

Delta operates within the airlines’ industry, and it came across a future risk that required to be mitigated immediately. The business would have faced serious consequences and unprofitable outcomes, if it would not have done something against the rising fuel prices. Airlines companies like Delta previously used traditional methods of risk management in order to predict the market trends of fuel prices. Thereafter, the companies would have used price hedging to resolve the risks. However, Delta implemented the ERM model and purchased a refinery so that it can address the concerns of rising fuel prices (Nyce, 2002). Having and using a personal refinery saved the additional costs that the company might have to bear. It is different from a traditional technique, and it can be regarded as one of the best solutions in the 21st century.

Delta focused on mitigating the risk rather than focusing on the occurrences that are not likely to happen in the future. The methodology or approach of Delta was not complex because traditional ERM focuses on ways to save from a catastrophic event. However, there might be hundred other risks associated with it that conventional methods do not take into account. The model used by Delta was flexible and agile that help detecting unforeseen events such as fluctuations in currency or any sudden accident. The modern ERM model of Delta has considered historical events as well as possible future events. Delta dealt with the risk before its occurrence, and therefore, it did not spend substantial financial or human capital. Hence, adequate ERM implies recognition and action rather than predictions (Dickinson, 2001).

Comparison of the real case with textbook use case

The given case study on Intuit can be compared with Delta Airlines because certain similarities and differences can be identified in their individual approaches. Intuit started to manage firefighting or completely prevent its occurrence. Therefore, it started by acting on its core principles. These are creating a framework that can be applied within the enterprise and focusing only on the significant risks. This approach is similar to Delta Airlines because it also focused on the rising fuel prices, one of the significant risks. Intuit considered the importance of being accountable and measuring the performance of the implemented plan. It is also evident that Intuit’s ERM model is far more organized because its maturity model clearly shows that enhancing the value of stakeholders will increase the capability of risk management. Delta also considered the value of stakeholders and therefore focused on purchasing a refinery. However, Delta ignored the benefits of monitoring and measuring performances.

Intuit clearly stated its KPIs that involve flexible, tangible, objective focused, and standardized measures. Intuit mainly prioritized the business objectives and used qualitative and quantitative KPIs, unlike Delta, that acted only after predicting a possible risk. Lastly, Intuit categorized the reporting into three crucial evolutions and managed risks objectively. Both the companies disregarded the traditional techniques of ERM.

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