The Impact of Risk Management on Organization Efficiency (a Case Study of Dunlop Nigeria Plc)
CHAPTER ONE
OBJECTIVES OF STUDY
The objective of this study is to find out the impact of risk management on organization in order to enhance their efficiency, with a particular reference to Dunlop Nigeria Plc, Ikeja.
The study is designed to:
- Determine the degree to which risk can be managed effectively in order an organization.
- Identifying the risk, analyze them and suggest ways and technique to be applied or take into consideration in managing the risk in a cost effective manner.
- Make recommendation for further improvement in the area of effective management of risk that would reduce the degree of catastrophe in an organization.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
CONCEPT OF RISK
Risk as a socio-economics phenomenon means different things to different individual in different circumstance. This is the reason why there is confusion in the literatures to what constitute the essential characteristic of risk situation.
Man, in his quest for improved standard of living, involves himself in various endeavours and professions amongst which are:
- Merchandizing:
- a) Local Training;
- b) International Trading
- Manufacturing:
- a) Finished goods for local use;
- b) Production of raw materials for others;
- c) Finished good for exports
- Explorations:
- a) Solid materials
- b) Petroleum and
- c) Gas
- Professionalism:
- a) Services like legal, accounting, banking, education
- Recreation:
- a) Village or town meetings, social clubs
- Defence:
Armed forces, Police, etc.
As fortunes abound in every human endeavour mentioned above and others, not mentioned so are misfortunes could be encountered when involve in any of them. Some of the misfortunes are avoidable while others are not. Those that could not be avoided could be dealt with in some other ways with the overall aim of minimizing the inherent misfortunes.
Everyman tends to be prudent in the way he lives his life and so will rather engage in an endeavour which is void of misfortune but his inability to know with certainty what the future holds in every situation makes a man what he is, finite!. No one knows what next second of an hour will be. There is uncertainty for second of an hour that is before us.
A quick survey of some of the definitions usually encounters in prominent textbook will clarify what risk is. The misfortunes, which are inherent in man’s endeavours, constitute the risk he is exposed to. However, risk is defined in multi-ways, but here will adopt some:
Willet et al (1951), state that “The Objectivity uncertainty as to the occurrence of an undesired event”.
Arthur and Hein (1956) state that “Risk is the variation in the outcome that could occur over a specified period in a given situation”.
David B. Houston et al (1964) state that “Risk is a concept indicating variability of possible outcomes, it may be studied from either the individual or probably insurers point of view. Risk in an individual context is probably best analyzed in terms of modern decision making theory within this theory, risk may be defined as the standard deviation of the monetary outcomes of an action. To the insurer, risk is a function of distribution and the number of exposures unit and may be defined by the standard error of the mean of the premium distribution.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
RESEARCH DESIGN
The research design is a survey one which involve actual visitation to the field and collection of relevant data.
At the preliminary stage, a visit to the company will remain to study the environment and see how the worker relates to each other.
The second stages, is the preparation of a relevant of questionnaire that will be used to collect the relevant information from the respondent.
The final stages will involves going into the field with the questionnaire to collect the required information.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSISINTRODUCTION
This chapter deals with the analysis of data collected through the use of questionnaire to find out “The Impact of Risk Management on Organization Efficiency”. The first part of the analysis deals with the socio-economic characteristics of respondent which was analyzed using frequency and percentage count while the hypothesis were tested using chi-square.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
SUMMARY
If we could know the future, there would be no risk and hence no need for risk management. In our perpetual state of uncertainty we must make the best guesses possible about what the future will hold and always be ready to modify our ideas in the light of events. This pattern applies to all human activity. Risk management sets out to provide an ordered way of making those guesses about the threats to the assets and earnings of a company, and of making plans to counter them based on the guesses. In this way, it seeks to increase the confidence a company can have in its ability to attain its corporate goals
Risk that may threaten the operation of a business include natural perils which is due to the damage by fire, windstorm and natural catastrophe, loss of personnel due to an injury or death suffered by an employee, labour risk due to the availability of suitable labour, liability risk due to the injury sustained by the third party, technical risk due to the negativity and positivity result obtained from the introduction of a new process methods, marketing risk due to the introduction of a new product, political risk due to the nationalization or government intervention in the operation of the business, and finally, environmental risk due to the inadequate control of pollution, effect on the public.The management risk in an organization is not the responsibility of a single individual and in order to enhance an organization effectiveness, the introduction of risk management must be incorporated into the policy statement of the organization and should be adequately supported by the top management. Also the company’s style must be adequately put into consideration.
However, the introduction of risk management cannot but involve some psychological problems which arise as a result of the reaction of people charged with the responsibilities, but with the diplomacy quality of the risk manager the problem can be solved.
The operations of any manufacturing company is therefore prone to various kinds of risk which are common to business in general. Some of the risk threatening the operations of Dunlop Nigeria Plc are risk of fire, explosion, accidents (both transportation and industrial) product adulteration and environmental pollution.
The study of risk management to enhance organization effectiveness was not limited to Dunlop Nigeria Plc, time was also taken to study the process and manner of the management of risk in other manufacturing industries which are associated Match Industry and Tower Aluminium Nig. Plc.
After carrying out adequate research both companies were facing similar or even the same type of risk which are being experiencing by other companies and the process of managing risk in the industry are similar.
CONCLUSION
In conclusion, it has been demonstrated that risk management entails more than insurance management. Insurance focuses on risk financing while risk management first identifies the risk, measure the frequency and severity of the risk and then employs insurance and other risks financing methods to handle the risks so identified and measured.
What is clear is that the days when a company and its risks were its own affair are gone. It is a part of the community and the community will increasingly demand a say in how it is managed. The consumer will decide more and more what it is to be produced, society will control ever more rigorously how it shall be manufactured, the employees will participate more and more in the company’s management. Risk management then will become more and more obviously a matter of charting a path for a company which avoids it getting so far out of line with what these various forces requires of it that it incurs crippling penalties, whether in the form of compensation for a legal liability, or of being prevented from operating in some way.
The researcher, therefore, arrived at a conclusion that the management in general do not run unnecessary risk which could be handled by the insurance economically and in order to enhance an organization effectiveness, the management of risk should not be the responsibility of a single individual in an organization but the responsibility of everyone.
RECOMMENDATIONS
The researcher, after conducting a thorough research study into the management of risk in the Dunlop Nigeria Plc, came up with important recommendation which the sincerely hope will be of immense help and assistance to the management in the manufacturing industries most especially the management of Dunlop Nigeria Plc.
The risk manager assumes an executive and advising role to and in conjunction with production engineers, transportation and distribution functionaries and other specialist in the manufacturing industry. For the efficient and effective performance of risk manager, co-operation, motivation and communication should be made essential that is why it is been said that the role of risk management is a staff function.
The risk manager should liaise with the finance and legal managers so as to determine appropriate techniques of risk financing and protection. He must ensure that the cost of pure risk are included in the capital budget decision of the industry and are provided for all contractual documents.
The speculative risk, which is the commercial risks, is the sole responsibility of the entrepreneur. With the introduction of proper risk management, it allows the entrepreneur to concentrate on the commercial aspect of the business with a peace of mind that the pure risk have been adequately handled by risk managers.
When risk management principle and practice are adopted, the amount spent on insurance and the subsequent direct and indirect cost of making claim to reduced. When insurance is the only option left, the risk management will with assistance of the insurance experts determine the type of cover and negotiate the best terms and conditions; appropriate price or premium to be charged.
RECOMMENDATIONS FOR FURTHER RESEARCH
As a result of certain constraints in the course of carrying out this research such as time, money and lack of cooperation among the employee when visit the company. Due to this, we could not touch some aspects in the organization and other private parastatals.
The study was limited to a section in the organization i.e. Insurance Department of Dunlop Nig. Plc Lagos. Due to the above mentioned constraints, I recommend the following for further studies to cover certain areas that this research is not up to cover.
BIBLIOGRAPHY
- Allan, H.W. (1951): The Economy Theory of Risk and Insurance (Philadelphia, University of Pennasylvania Press).
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- CIMA (1980): Risk Management (London: Staff of Jardine Insurance Broker Ltd).
- David B. Houston: Risk Insurance and Insurance (Cincinati Ohio South Western Publishing Company).
- Earl, R.B. (1977): The Practical of social Research (Belmount California; Wedsworth Publishing Company Insurance).
- Green, M.R. & Trieschamnn (1974): Risk and Insurance (Cincinnati Ohio South Western Publishing Coy).
- Chris (1979): Introduction to Statistics: A Non Parametric Approach for Social Science: New York John Willey and Sons.
