Risk and Risk Management Essay

Submitted By Angelma1997
Words: 1353
Pages: 6

Background of McDonald
According to McDonald (2010), McDonald is the world's largest chain of quick service restaurants organisation in the world, serving tens of millions of customers daily worldwide.

There are more than 30,000 restaurants in 120 countries worldwide.

According to McDonald's Corporation Annual Report (2009), revenue has reached a record more than US$20 billion and US$6.8 billion income and 390,000 employees.

McDonalds operates according to four values which are quality, service, convenience and value. Part of organisational culture is the quality of the food and service wherever the branch is located. The good reputation of the company and the expectation of an excellent service no matter which branch people eat is a marketing strategy of McDonalds. McDonalds set a standard applicable to all branches worldwide. However the company also gives a way for innovation by allowing the branches to integrate culture into food and service increasing market share. McDonald's tries to operate on a cost leadership basis by offering low priced goods with higher profit margins. Most of the efficient strategies adopted by McDonald's associate with this strategy of low cost.

Since McDonald's operates in 120 countries on 6 different continents, they offer different food selections because of different needs in each country, due to religion, diets, and resources of each individual country. This flexibility and knowledge allows McDonald's to achieve global targets and compete with the other competitors. It shows that the company predict customer needs and handled well to risk.

Global company and risk management
Brindley (2004) suggest that global competition, technological change and the continuous search for competitive advantage are the primary motives behind organisations turning towards risk management approaches in the international chain industry. Furthermore, the increase in economic activity at the global level encourages business organisations to seek a competitive advantage by accessing new markets and expanding their operations. According to Porter
(1990), the term competitive advantage refers to the strategies that allow successful companies to create profits in their sector of economic activity which is main objective and goal of most organisations. Dalgleish & Cooper (2005) support that organisations manage their operations on a day-to-day basis and risk management does not naturally add value to this activity. Its application is, however, becoming more focussed with organisations identifying a sense of purpose and making proper use of the assessments. This has resulted in its adoption within the internal control systems of organisations in making informed decisions, improving communication with the board and improving their understanding of the risks and controls within the business.

Therefore, risk identification is the first stage in any organisation's risk management. It is a base for correct future work of the organisation with regards to developing and implementing new programmes for risk control. According to George (2009), risk management is the process of planning, organising, directing, and controlling resources to achieve given objectives.

Brown (2000) recommends that boards or responsible directors should consider the key risks and assess how they have been identified, evaluated and managed, and assess the

effectiveness of the system of internal control. As a result, directors should have responsibility for all aspects of control and a duty to establish a strong system of risk management, designed to identify and evaluate potential risks in every aspect of the business operation. Risk management is fundamental process in every organisation, which includes control systems to inform managers that organisation has being exposure to risks, and guarantee that strategic risk management is properly implementing.

Financial risk
According to…