Risk Management in Subsidiaries

Running head: RISK MANAGEMENT IN SUBSIDIARIES
Risk Management in Subsidiaries
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Review of MacVille’s risk management policy and risk management report:...............................4
Scope:..........................................................................................................................................4
Goals:...........................................................................................................................................4
Financial strength:...................................................................................................................4
Well established organizational structure and FARM committee:..........................................5
Strong communication across the hierarchy:...........................................................................5
Risk analysis of the subsidiaries prior to actual buyout:.........................................................5
Stakeholders:................................................................................................................................6
Analyses:......................................................................................................................................8
PESTEL of Australia:..............................................................................................................8
SWOT of MacVille:..............................................................................................................10
Research:....................................................................................................................................11
Describe:....................................................................................................................................11
Meeting with the assessor:.............................................................................................................12
Develop (Communication of the risk management process with the stakeholders):.....................13
Assessment task 2. Risk analysis and management plan:..............................................................15
Risk management process:............................................................................................................17
Communication of the risk plan to organisation (MacVille Pty Limited):....................................18
Assessment task 3-Evaluation of risk management plan:..............................................................18

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Conclusion:....................................................................................................................................21
References:....................................................................................................................................22

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Introduction:
Acquisitions and mergers are one of the most effective business expansion strategies
which business organisations adopt to expand their markets and reduce competition. Business
organisations acquire smaller firms to upsize their business operations and strengthen their
market presence. Nelson [1] defines merger and acquisition as the process by which enable
larger firms to acquire the assets of smaller firms. Rust and McKinley [2] point out that
acquisition enables larger firms acquire their smaller competitors which in turn leads to reduction
in market competition. However, acquisitions and mergers have their own risks as well. Angwin
and Meadows [3] point out that in order to implement the A&M strategy successfully in order to
ensure business expansion, the larger firms have to ensure strategic fit with their subsidiaries
being acquired. Low level of business risk management in subsidiaries can actually pose threat to
the acquiring firm post acquisition. That is why firms conduct risk management analysis of their
target subsidiaries prior to buying out the latter. The research would be set against the
background of risk management analysis of the target subsidiary by the acquiring firm prior to
the actual buyout. The aim of the study would be conducting risk management analysis of the
target subsidiaries in order to identify the risks prevailing in the subsidiary and implement
appropriate risk implementation strategies to establish strategic fit. The research would consider
two companies namely, McVille Pty Limited, the acquiring firm and Hurley’s Café, the target
subsidiary. The research in totality would be presented from the perspective of the assistant
manager, Queen Street store, Brisbane who would be promoted to the post of the manager of
Hurley’s Café post buyout and has been entrusted with the responsibility of conducting risk
management analysis of the latter.
Assessment Task 1-Risk review.

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Review of MacVille’s risk management policy and risk management report:
A risk management analysis of MacVille Pty Limited would uncover the following facts:
Scope:
The scope risk management which the manager of the Hurley’s Café would require to
identify would include the different risks which might prove to be challenges before
establishment of strategic fit. The risk management strategy which the future manager of
Hurley’s cafe would be required to consider would follow the risk management strategies
established by the apex management of MacVille Pty Limited. The risk management approach
would include identification of risks and reporting them to the management. The management
would analyze the risks on the grounds of the impacts which they may have on the company. It
must also be pointed out that the management of MacVille had a dedicated committee called
Finance, Audit and Risk Management (FARM) to deal with risk management under the
leadership of the CEO.
Goals:
An analysis of the case study reveals that the risk management strategy of MacVille had
several success factors which attributed the company with a strong risk management framework.
The following are the main success factors of the risk management strategy of MacVille:
Financial strength:
MacVille was financially strong which enabled the firm to acquire the resources required
to establish strong risk management strategies. This is evident from the fact the MacVille held
chains of cafés in Brisbane, Queensland and Sydney. It can be inferred from this fact that the
firm was able to generate high revenue by catering to customers in these three markets.

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Moreover, the firm adopted M&A strategy to acquire Hurley in Toowoomba to rebrand it under
its brand name. This once again points out that MacVille was financially strong.
Well established organizational structure and FARM committee:
The second success factor of MacVille’s risk management strategy was its well
organizational structure with CEO at its helm. This is evident from the email which Paula
Kinski, the CEO sent to the to-be manager of the café. The CEO informed the future manager
that he would be required to visit the Hurley’s Café to analyse the risk management strategies in
the latter. The CEO also informed the new manager that he would be assisted and guided by the
FARM committee, which oversaw the risk management operations of MacVille under the
supervision of the apex management with the risk analysis. Thus, it is evident that the strong
organizational structure of MacVille and presence of a dedicated committee to identify, manage
and audit risks was undisputedly a success factor of the risk management policies of the
company.
Strong communication across the hierarchy:
The third success factor which attributed the risk management of MacVille with success
was strong communication between employees all through the length and breadth of the
organizational structure. This fact can be established on the ground that Paula intimated the
future manager of Hurley to conduct a risk management analysis of the latter in a formal email.
Secondly, the CEO mentioned explicitly that manager would hold meetings with the FARM
committee to discuss the findings from the risk analysis of Hurley. Thirdly, the fact that Paula,
the CEO also informed that the manager would be getting opportunities to hold regular meeting
suffices the fact that MacVille had a very strong communication.