Operations, Quality and Risk Management - Fonterra Case Study

This report analyzes the risk factors based on the policies adopted by Fonterra for managing their operations and the level of severity of each of these risk factors on the business process of the organization. It identifies the risks associated with the environmental policy, diversity and inclusion policy, and ethical behavior policy. It also includes a risk assessment log and analysis on the probability and potential impact of operational risks on Fonterra’s operational objectives.

Running head: OPERATIONS, QUALITY AND RISK MANAGEMENT
OPERATIONS, QUALITY AND RISK MANAGEMENT
Name of the Student
Name of the University
Author Note

1OPERATIONS, QUALITY AND RISK MANAGEMENT
Table of Contents
Task 2...............................................................................................................................................2
Introduction..................................................................................................................................2
Identification of risk based on the policies..................................................................................2
Management policies of Fonterra............................................................................................2
Environmental Policy..............................................................................................................2
Risk Associated with Environmental Policy...........................................................................3
Diversity and Inclusion Policy.................................................................................................4
Risk in Diversity and Inclusion Policy....................................................................................4
Ethical Behavior Policy...........................................................................................................5
Risk in Ethical Behavior Policy...............................................................................................5
Conclusion...................................................................................................................................6
Task 3...............................................................................................................................................7
Analysis on the probability and potential impact of operational risks on Fonterra’s operational
objectives.....................................................................................................................................7
Risk Assessment Log...................................................................................................................7
References........................................................................................................................................9

2OPERATIONS, QUALITY AND RISK MANAGEMENT
Task 2
Introduction
A business organization depends entirely on the management of operations, maintaining
the quality of the operations and managing any impending risk factors working in the business
process that might have a potential to derange the entire operations and business process
(Maliket al., 2018). Therefore, it needs to be greatly taken care of when it comes to the
operations management of any industry or organization. This report would thus contain an
overview of the risk factors based on the policies adopted by the organization Fonterra for
managing their operations and the level of severity of each of these risk factors on the business
process of the organization.
Identification of risk based on the policies
Management policies of Fonterra
Fonterra is a dairy industry based organization. About the operational management of the
entire organization there is a noticeable advantage in the entire business process system that that
an organization is practically involved in every part of policy making. Following would be an
analysis on all the policies adopted by the organization of Fonterra and how the company has
fallen to out of identifying the risk based on these policies. Father would be an identification of
risk based on the policies to identify the severity of the risk in later half of the report.
Environmental Policy
The environmental policy of Fonterra deals with the collection of milk from natural
resources making sure that they do not have any hazardous or harmful substance engrossed
within it. The policies to work closely with the farmers to ensure that there is no negative impact

3OPERATIONS, QUALITY AND RISK MANAGEMENT
within the operation on the environment. The tree the farmers as a suppliers as well as the
shareholders and ensure that the collection of made from natural resources are also expanded to
ensure that less energy emission is used from the manufacturing of the plants.
Risk Associated with Environmental Policy
The primary risk that has a possibility to occur in the retaliation of environmental policy
is the deposition of solid waste. There is a huge possibility that the use of various resources for
the collection of the dairy products from the farmers has a huge amount of solid waste as a
byproduct. This can be described with a statistics as below:
Figure 1: Solid Waste Statistics
(Source: Created by the Author)
Taking the solid waste statistics into consideration, it can be said that the organic
waste has the most contribution in the environment which needs to be taken care of or it would
10%
10%
22%
6%
43%
9%
Solid Waste Statistics in New Zealand
Rubber Non-ferrous Metal Glass
Sanitary Products Organics Plastic

4OPERATIONS, QUALITY AND RISK MANAGEMENT
create a huge problem for the environment which the organization is initially trying to curb with
their Environmental Policy.
Diversity and Inclusion Policy
Employing the devotion and inclusion policy within the business operation system of
Fonterra, the organization keeps in mind that there is no unexplainable pay gaps between the
male and female workers investing that time and efforts for a similar kind of job. This is
implanted in the operational policy in the organization for the ways to workers regardless of the
business in which they are employed.
Risk in Diversity and Inclusion Policy
As per the statistics in New Zealand, it can be said that the existing gender gap in New
Zealand has a huge impact in the country and increasing the basic pay would increase the unrest.
It is also noted that across the five biggest working areas the proportion in which the females are
being paid are somewhat higher than the basic pay of a male worker which implies that a female
worker is paid a bit higher than the male workers. Within the local farmers and workers it can be
a point of MS judgment where the female workers are paid a bit higher. Therefore it can be an
impending problem within the workers causing unrest with this issue that the women workers are
being paid higher than the men although they have almost similar kinds of jobs to offer the
organization. The statistics in the past few years in New Zealand according to the pay gap
problem for genders can be displayed as below:

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Figure 2: Gender Pay Gap problem in New Zealand
(Source: Qian & Olsen, 2018)
Ethical Behavior Policy
The organization of Fonterra has a very strict policy regarding ethical behavior it
disregards all the impending probability of corruption, gifts in business and conflict of interest
situations and entertainment. The Board Charter of Fonterra has a set of code of ethics that
includes these three factors and the research and development team walk on the general policies
of the organization.
Risk in Ethical Behavior Policy
The risk that can occur in this case is the advantage of the intrinsic trust resulting to Asset
Misappropriation in regards to the Ethical Behavior Policy. In case of a business, these factors
form a huge risk since this cleans the natural honesty and integrity of worker within the
organization. For Fonterra, the honesty and integrity culture within the organization is essential

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because the product it delivers to its customers is there in nutrition sources. If any kind of man
handling of the product occurs due to the ethical behavior of workers in the organization, all the
customers would be affected by it tarnishing the reputation of the entire organization eventually.
Figure 3: Statistics for Asset Misappropriation in New Zealand
(Source: Qian & Olsen, 2018)
Conclusion
In conclusion it can be said that the operational policies that the organization of Fonterra
utilizes has scopes of risk but mostly it offers as an advantage to the business operations. The
organization has been doing pretty well with the planned organizational structure and the
implemented policies and this has been found out with a thorough analysis done on three of the
organizational policies adopted.

7OPERATIONS, QUALITY AND RISK MANAGEMENT
Task 3
Analysis on the probability and potential impact of operational risks on Fonterra’s
operational objectives
The objectives that the organization of Fonterra has put forward for their customers and
for the internal operations of the organization as well, clearly states that the organization only
believes in delivering the best products to the customers with the help of refreshing the internal
operation of the organization (Qian & Olsen, 2018). The probability of operational risk within
the organization with regards to the policies adopted by the company is considered very low as
per the analysis but there are few risk factors present. This will be assessed as per a risk log in
the latter half of the report.
Risk Assessment Log
Risk Factors Impact on the Operation
Policies
Severity
Solid Waste This would impact greatly about
the environmental policy, since
wastage of organic solid
products has a high chance of
occurrence given the
maintenance and resources of
the product quality.
High
Gender Pay Gap This would impact greatly about
the diversity and inclusion
policy, since a particular gender
is paid high attention and this
has a high chance of occurrence
of unrest within the
organization.
Medium
Asset Misappropriation These factors form a huge risk High

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since this cleans the natural
honesty and integrity of worker
within the organization.

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References
Malik, R., Knapman, R., Mann, R., & Director, C. O. E. R. (2018). RAPID BENCHMARKING
AT FONTERRA USING THE TRADE BEST PRACTICE BENCHMARKING
METHODOLOGY.
Qian, X., & Olsen, T. L. (2018). Operational and Financial Management in Agricultural
Cooperatives. In Finance and Risk Management for International Logistics and the
Supply Chain (pp. 193-216). Elsevier.