Executive Summary
This paper identifies a management problem in Apple Inc and presents a plan that integrates effective financial and operational decision making to resolve the crisis. The study evaluates the challenge of risk management in the company. It presents an organizational risk management strategy that examines how Apple can address its risks through an integrated approach.
A risk management framework may be essential in resolving these issues and propelling the company to high performance in the digital and personal computers’ markets. The risk management design utilizes a structure of identification and analysis of risks and response measures.
The strategy acknowledges the essence of integrating company shareholders and effective financial and operational decision making to eliminate organizational risks. This study underscores the need for companies to adopt measures that can secure them in competitive business contexts.
Introduction
A common management problem in organizations, in the modern world, is operational risk. Organizational managements find it difficult to keep continuous surveillance of the dynamics of the market and external environments and plan according to prospective changes. A rapid overview of the Apple Company reveals several management threats relating to risks. Apple is one of the leading companies in the electronics sector.
The business creates and sells electronic products, personal computers and software. A number of the risk challenges that currently face the Apple Company include technology stagnation, leadership and competition. This assessment reviews the management challenge of risks facing the Apple Company and adopts a strategy that defines effective financial and operational decision making to resolve the challenge (Business Wire, 2008).
The research formulates a risk management plan for the Apple Company. The strategy seeks to minimize Apple’s organizational threats and enhance its ratings in the market. The design is a strategic model that can solve the threat of risks posed to managers on a daily basis in different organizations.
The organization Apple Inc
Steven Paul Jobs and Stephen Gary founded Apple Inc. They developed their inaugural Apple computer in April, 1976. The entrepreneurs integrated the business in 1977. The organization is a personal computer manufacturing “giant” and is famous for products like Power Mac, Apple I to Apple III and Macintosh lines.
It currently manufactures and designs mobile communications and other media electronics like personal computers, music players and other digital devices. The business provides software, applications, networking solutions and digital content. The business also provides support services relating to digital communications. It runs various digital content applications like the iTunes and Mac App stores and the iBookstoreSM.
The management challenge: Organizational risks
Apple remains one of the leading phone companies in the world. The business is a popular brand among investors and clients. Clients rate Apple’s products as the best because the company integrates technology and art in its products. Investors prefer Apple’s to other companies’ stocks because of their high performance in the financial markets.
However, several management challenges seem to derail Apple’s commercial development (Bullen, 2013). This fact is evident in the manner in which clients and investors have begun showing disinterest in Apple’s newest product, the iPhone 4S. This decline in clients and investors’ interest points to the organization’s risks that threaten to slow its growth.
Organizational risks may refer to categories of uncertainties like investment, legal liabilities, inventory, budgetary, information systems and program management risks. Organizational risks are parts of the critical management problems that companies struggle to overcome.
A number of the organizational risks facing the company include technological, leadership, competition and economic risks. Apple Inc faces a technology risk because transformations in innovation threaten to become obsolete. The features of the latest iPhone 4S show that the business is almost running out of ideas. The product undergoes a marginal transformation from its previous ones in terms of technological capacity and physical attributes.
The Apple Company is also going through a period of leadership change. This aspect casts doubts about the company’s future performance. Steve Jobs’ death left massive gaps of experience, vision, and technology and market knowledge in the company. The business also faces the risk of competition from rival firms like Nokia and Samsung. In addition, the organization faces the challenge of an economic digression that can affect the sales of its products.
Apple’s management must find the appropriate balance between financial and operation decisions. This aspect may help the company to make collective judgments that can inspire the organization into further economic prosperity. Organization risk management starts with taking personal accountability for strategic planning and coordination of daily operations of the organization to mitigate the occurrence of any risks (Arens & Loebbecke, 2013).
Risk management underscores preparedness for uncertainties. It entails daily learning processes through which organizational managements safeguard companies from different threats. Managerial needs can be explicit about the accountability needed to control organizational risks. Risk management denotes acquisition of defensive strategies against negative happenings like financial crises and disasters.
Risk management can also an offensive tool that an organization can use to defend itself from its business rivals. Curbing risk problems may be one of the fundamental priorities of companies. Managements may improve their performances through risk management plans.
They ought to adopt effective financial and operational decision making to control uncertainties. Businesses may also focus on minimizing their risks to improve corporate performance. Therefore, an effective risk management plan is a fundamental tool in improving the comparative advantage of a company over its market rivals.
The plan: Organizational risk management strategy
This organizational management strategy for Apple Inc explains the prospective risks the organization faces and remedies for minimizing them through an integrated method. The draft incorporates effective financial and operational decision making strategies. The plan outlines the risks and relevant solutions.
Purpose of the plan
The purpose of the organizational risk management plan is to interrogate risk priorities of the Apple Company. It also endeavours to implement appropriate risk control measures for the business. The strategy transfers risks from Apple’s investors and customers to the insurer. In addition, it intends to establish a system that can monitor and evaluate the different aspects that threaten Apple Inc.
Objectives of the strategy
The organizational risk management plan of the Apple Company may contain different objectives. The first one entails integration of effective financial and operational decision making in the management of the company’s risks. The plan aims at leading the business to make strategic decisions through sustainable financial and operational frameworks. The plan intends to contribute positively to the management of Apple’s risks and facilitate the company’s continued financial and operational success across the globe.
The draft also plans to allocate the company’s resources and management to counter hazards that may derail its development. It also endeavours to adopt timely and professional advice that can contribute to the making of informed management decisions. It also provides a competitive framework of operations to promote a culture of professionalism and employee motivation to deliver the mandate of the organization.
Risk management as a concept of Apple Inc
The organizational risk management of the Apple Company endeavours to protect the company’s assets, operations and strategic position as a leading manufacturer of personal computers and digital content products. The risk strategy intends to fund its operations through effective financial and operational decision making.
This aspect can be applied through the categorization of risks that may have an impact on Apple’s financial and operational objectives. The Apple Company needs to recognize risk management as a significant aspect of sound management and governance. The organization must outline structures and processes for the management of risks, internal and external review processes, financing risk management and a framework of responsibilities and actions that regulates and prevents organizational risks.
The risk management framework
This risk management draft of Apple Inc underscores the need to have a collective effort of all the stakeholders of the company. It advances that risks ought to be combated to regulate their occurrence. The plan is also an essential function of all departments and managers within the organization. Regulation of risks must be ranked top in the priorities of the organization through a reflection of procedures, policies and guidelines that inform a risk management framework.
The structure is necessary in the fight against organizational challenges. The first element constitutes a risk management policy. Apple Inc needs to formulate a risk management regulation that may guide the organization on how it ought to address the problem. The guideline must feature within the context of the organization’s culture and values. The business may appoint a risk management committee as the cardinal authority to regulate its risk control practices.
The organization must keep a risk management register to record the prevalence of different threats. It must also draft response measures to address prospective hazards. This fact can only be effective through the help of internal or external auditors of the organization.
Apple Inc needs to conduct a quarterly review of the organization’s risks. This aspect can help in the identification of potential and existing challenges that threaten to hamper the progress of the business. The Audit and Governance Unit of the company should also report losses to keep track of the progress of the business. Certain finances meant for risk management can be drawn from commercial and self-insurance. This framework can provide a necessary basis for risk management within Apple Inc.
Fundamental pillars of the plan
Operational issues
The operations of the organization include physical requirements, communications, employee management, processes, systems, equipment and organizational facilities. It is crucial for the company to find the appropriate pool of human resources as a critical requirement that can sustain it. Finding the right people for the business requires competitive hiring procedures, appropriate legal obligations and effective human resource management strategies.
The organization’s systems and processes also need to be reliable. This aspect leads to success of the business as a result of efficient planning and designing to enhance its operations. The plan must include proper delegation of duties to human resources and efficient governance structures. Processes and systems may also comprise of the organizational facilities and equipment, records management and procedures and policies that run the entire organization.
Organizational equipments ensure an efficient flow of operations. The company must incorporate the appropriate range of equipment for the purposes of production, administration and communication. The equipments must fit into the context of the operations of the business. In addition, the company needs facilities in the right location to ease accessibility of the operations of employees, clients and general functions.
Risk management within the domain of operations is crucial. It encompasses the factors that may disorient the operations of the organization (Caplan, 2009). These aspects may include natural disasters, employee movements, demand and supplier disabilities, litigation, inefficient cash flow, family emergencies, bad debts and failure in occupational safety and health.
Financial challenges
Certain factors can determine the success of the Apple risk management plan. The first pillar entails the development of a financial enabling plan for the organization. The Apple Company operates within an environment of heavy financial investment (Byrne, 2008). The business needs to secure adequate finances to oversee its operations and product manufacturing.
The financial plan must be aligned to the needs of the company. It also needs to cater for the short and long term financial needs of the business. The financial plan may outline the projected maintenance cost of assets and outcomes through proper accounting strategies.
Effective financial management and decision making must engage relevant tools that can promote the development of Apple Inc. The organization can fail due to inappropriate decisions and poor financial management. The key obligation of the company is to meet its financial demands.
This aspect can be achieved through a relevant, realistic and sound financial budget. The company must undertake critical projections that can reveal the operating costs over the financial period to make sound decisions. The company must draft an initial start-up financial plan for to incorporate risk management.
The initial budget can include personnel costs that are capable of sustaining the organization prior to designing legal and professional fees, occupational charges and equipment. The budget can also incorporate aspects of supplies, advertising, promotions, salaries and wages, accounting, income, utilities and payroll expenses.
The business may also utilize an operating budget. This economic plan can reflect the priorities of the organization in terms of its expenditures (Fisher, 2008). The risk management plan includes the diverse projections about the organization. It must reflect a thorough overview of financial statements that can aid the organization to make effective plans.
This draft may advocate for four necessary strategies to control organizational risks. The first significant step is to prevent the risk. Secondly, the organization can make efforts to reduce the effect of the risk. The third measure denotes avoiding the occurrence or recurrence of the risk. The fourth strategic measure constitutes risk retention.
Integration process: Effective financial and operational decision making
An integrated effective financial and operational decision-making links interdependent processes of finance and operations to critical decision making aspects. The incorporation provides a cross-functional orientation and collaboration to enhance efficient and effective decision making processes that can propel the organization into improved performance.
The process of integration must also ensure functional collaboration that enhances cross-departmental linkages between financial and operation decisions. The company needs to draw a connection between organizational planning and budgeting and systems and operations (Heidari &Wu, 2009).
This effort can create a formidable channel through which an efficient risk management plan can succeed. Leading organizations benefit from the advantages of enhancing the association between the finance department and operations in controlling risks. This aspect enhances the prospects of the organization planning effectively to manage tasks that may result in diverse threats.
Different factors enhance the integration of financial and operational decision making. The first significant aspect entails the presence of data and flow of information between these sections. Data or information may be necessary in facilitating the functional integration of finance and operations department.
The data can be in the form of future projections or departmental plans. Information promotes the consistency of decisions across organizational departments. This aspect reduces the duplication of strategies and provides a critical assessment of situations through budgets and data projections. Sharing of data between departments in an organization enhances planning, reporting and risk management.
Technology can also be another fundamental enabling factor for the integration of effective financial and operations decision making to eliminate or reduce organizational risks. Technology acts as the medium of transferring, sharing and processing of information or data across departments.
Organizations with an integrated performance management may accrue several benefits like effective budgeting, planning, projections and risk management (Collins & Porras, 2011). An integrated performance management also makes the process of decision making easy and efficient. Technology relies on consistent information that helps in comparing information across units.
Organizations with an effective alignment of departments can control and manage their risks effectively with efficient decision making based on technological data. The alignment also allows for the assessment of personal objective performances and traces risks that may threaten the performance or growth of a company.
This linkage provides a basis for businesses to increase their efficiency of operations in relation to processes, functions, data and technical issues. This form of integration also promotes the quality of human resources in the delivery of their services and products to clients in an appropriate manner. Technology plays a critical role in improving effective financial and operations decision making.
The process of risk management
Establishment of the context
Apple Inc needs to establish and define the context in which it operates in the sector. It must define its strategic and organizational objectives in line with the strategic plan. This fact is because Apple’s risk management may take place within this context and the strategic plan can become an efficient tool of evaluating and controlling the occurrence of risks (Houtpt & Embersit, 2011).
The strategic elements for establishing the context may include Apple’s strategic goals and objectives, the political and economic environments of the company’s operations, sectors’ stakeholders, key players and the international reputation of the business. A number of the operational elements that may define and establish the context of the company include resources, space, research availability, human personnel and compliance.
Identification of risks
The second part of the risk management process of the plan involves the identification of the company’s risks. This stage can be a crucial component of the strategy as it may determine mechanisms of resolving different identified risks. The process can be undertaken using a structured format.
This intervention can create a list of events that can pose significant threats to the organization when they occur. The remedy may act as an indicator for identification of organizational risks. This effort is important because it creates a risk diagram that can help to identify effective interventions to manage the threats.
Risk analysis
The third step in this process constitutes the development of a risk analysis tool. Apple Inc may develop a risk evaluation tool that can allow challenges to be identified.
The tool may also enable one to conduct an evaluation and subsequent analysis of the challenges. The company’s managers may register the threats. They can also give values to different risks according to their nature in the analysis. The risk analysis may consider the potential impact of the difficulty (Hughes et al, 2009). It may evaluate past events relating to the threat and project on future impacts.
For instance, the analysis can estimate the impact of a potential future financial regression of the company using case studies of failed organizations. The analysis may explore the probability of the risk occurring within the existing frameworks and structures. The research may take into account an effective description to suit the probability of the threat happening. The third part of risk evaluation may involve a calculation of the difficulty by comparing the consequence and the probability ratings on the risk matrix.
Evaluation of the risk
The fourth step in the risk control process denotes threat evaluation. The goal of this intervention is to make a comprehensive decision that relates to the analysis of the risk. It must also underscore the priority of actions the company may adopt to address the threat.
Evaluation of the risk enables an organization to make a decision on the basis of the scientific outcomes of the challenge. This report outlines 4 common measures that organizations may integrate. The elements include avoidance, reduction, mitigation and transference of the risk.
Monitoring, review, communication and consultation
The fifth part of the risk control process entails monitoring, review, communication and consultation. The causes of risks change over time. The organization must monitor the progress of the risks through a surveillance mechanism to ensure that it is in control and running normally.
The company should conduct a quarterly review of all risks. The review may form a critical part of the risk control and treatment process. Communication and consultation among stakeholders in an organizational set up may be critical values at all stages of a risk management process. These components provide the appropriate coordination to understand and overcome risks. The risk regulation process requires continuous dialogue among shareholders in order to provide a holistic dimension to solutions.
Appropriate tools for implementation of the plan
The company can successfully implement the strategy through the use of useful instruments like the likelihood, the consequence, the level of the risk, risk matrix and evaluation scales (Philip & Marshall, 2010). The likelihood scale may be used in estimating the probability of the occurrence of the risk.
The consequence scale may evaluate the impacts of the risk according to its predicted nature. The level of risk tool can be used in prioritising the risks. In addition, the risk matrix may be essential in combining the consequences and probabilities of a risk. The scale of evaluation can be employed in the assessment of the level of risk.
Types of threats and their remedies
Origin: (Bullen, 2013).
Significance of the draft to Apple Inc
Apple comprises of three main departments. These components include the human resource, finance, marketing and production departments. The departments relate to the operations they undertake. In addition, the operations management can be equated to the production division’s activities. The human resources within the company work together on the basis of their professional expertise. This fact enables and propels Apple to discharge its objectives.
The present organization of Apple focuses on operations that reduce the cost of the organization and improve its flexibility (Rezaee, 2010). Managers in the business enjoy fundamental control of operations and flow of activities. The company decentralizes its responsibilities and accountabilities to the management.
It allows staff and unit heads at its lower levels to participate in the running of the organization. Apple’s efforts of devolving its operations improve control processes, planning and decision making. In addition, the company’s market approach on major innovative products like iPod and iTunes is a demonstration of accurate responsiveness to the nature of the contemporary world. Only practical and effective financial and operation decision making initiatives can minimize the organization’s risks and improve its performance in the industry.
The company’s finance section provides the economic principles for Apple. It operates in accordance to the company’s objectives and operations in the budget (SEC Litigation Release No. 17710, 2010). The section is in charge of financial and capital flows from international and domestic clients. It executes the mandate of risk management and liquidity of the organization. For instance, Apple places the role of the financial manager in a critical position within the company.
The finance section is in charge of raising extra revenue for the company. It improves the process of innovation and creation of new, quality products that can enhance the clients’ base. This organizational risk regulation plan can be an essential instrument. It helps to control possible difficulties that can derail the development of Apple. It promotes the process of integration of financial and operational decision making.
Costs and benefits
Apple’s costs may be linked to the resources it invests to safeguard itself from risks. A report released in 2011 by the European Union ranked the company in the 46th position globally for investment in research and development.
The report also indicated that the company accrued big returns on investment than its business rivals. The company plans to spend $10.6 billion in 2014 towards innovation of new products including assembly machinery. Apple Inc also plans to invest $468 billion in order to vary its smart phones and tablets from those of the Samsung Company. Apple invests $200 million in lawsuits against the Android Company due to business rivalry.
Apple Inc receives profits of 108% of the mobile sector as its competitors lose funds. The business benefited from profits of 57% of the smart phones in the third phase of 2013. This paper thus portrays Apple Inc as an organization that benefits in terms of costs and benefits analyses.
Conclusion
Apple’s problem of managing its risks can be addressed through this plan. The strategy provides a structure for controlling the various threats that can affect the development of the business (Wehinger, 2010). A combined effort of the stakeholders that own Apple can guarantee a successful fight against the risks the organization is facing.
The company needs to enact a strong risk control policy that helps the comprehensive pool of human resources and management team, to provide maximum value to the business. The paper evaluates the need for companies to integrate various mechanisms of risk management. Risks may be diverse in nature. An integrated approach in fighting threats as discussed in the paper may result in the desired outcomes for companies across the globe.
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