Case Study Analysis: Managing Risk for Air Canada

Case Study Analysis

Table of Contents
Table of Contents.......................................................................................................................2
Definition of the problem...........................................................................................................3
Alternative Solutions to the Problem.........................................................................................4
Evaluation of Alternative Solutions...........................................................................................4
Final recommendation................................................................................................................6
References..................................................................................................................................7

Definition of the problem
The financial turndown in the year 2009-2010 brought several complications for Air Canada
as well, along with many other Airlines in the world. The main problem for the airlines sector
was decrease in the passenger volume and revenue and increase in the operating costs. These
lead to decease in the profits for the company. The Board of Directors of the company took
various financial tools into consideration to measure the problems or risks faced by the
company in that tenure. But, the major problem which was identified by the case study
analysis included the insufficient contribution of the Board of Air Canada in designing risk
management policies in an effective manner. The Board of the company needs to develop
more strategic and stringent approaches for identifying the sources of risks apart from just
identifying the risks. Risk management is a very important issue for an airline company. They
have to manage the risk to maintain the normal functioning of the financial operations as well
as earn reasonable profits for the company. The major risks which need to be managed by the
Board of the company are related to avoidance and controlled loss as these risks have high
frequency and high severity. These risks are posed due to frequent changes in pension
reserves, interest rates, severe weather, costs of the fuel, and foreign exchange and stock
prices of the company. These can also be considered to be the operational risks of the
organization. The Board of the company has been focusing on the development of policies
related to risk management, but the policies are not designed in a way to bring profit for the
organization and give it a competitive advantage in the business. They are acting defensive to
keep the organization working. Thus, the profit of the company has been low and the
management needs to resolve the issue as early as possible.