MSC Management: Enterprise Risk Management Report on the Airbus Group

This report provides a detailed analysis of the risk management practices employed by the Airbus Group. It begins by outlining the company's approach to enterprise risk management, highlighting the use of IT tools and the Active Risk Management (ARM) methodology, including ARM5, to identify and mitigate risks. The report classifies various risks, such as financial, environmental, operational, security, and reputational, and assesses their impact using a risk management chart and score card. Key risks, including security, ergonomics, environmental, and IT-related issues, are identified as high priority. The report also examines the application of the COSO framework and ERM risk governance in Airbus Group's operations. Furthermore, it discusses the company's risk appetite and the opportunities available for maintaining a competitive market position and mitigating identified risks, such as using advanced software for data protection and skill audit charts for reputational management. The report concludes with an overview of how Airbus Group addresses legal requirements and promotes employee engagement to reduce risks and achieve success.

BPP Coursework Cover Sheet
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before the cover/title page of your submission.
Programme MSC Management with streams
Module name Enterprises Risk Management
QAA Level 7
Schedule Term Second Term
Student Reference Number (SRN)
Report/Assignment Title “Airbus Group”
Date of Submission
(Please attach the confirmation of any
extension received) 26th April 2016 at 11:59 PM
Declaration of Original Work:
I hereby declare that I have read and understood BPP’s regulations on plagiarism and that this is my
original work, researched, undertaken, completed and submitted in accordance with the requirements
of BPP Business School.
The word count, excluding contents table, bibliography and appendices, is __2699_ words.
Student Reference Number: BP00 Date: 26/04/16
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and awards for programmes. Please note, submission is your declaration you are fit to sit.
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BPP Business School
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Enterprise Risk Management
(Group Report)
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EXECUTIVE SUMMARY
Risk management is the practice of managing the risks which may affect the operation
of enterprise in a negative way. In addition to this, it can also be said that risk management is
being regarded as the systematic process wherein manager of firm identified varied risks
which are associated with its operation and accordingly it will make measures with respect to
mitigate the same in an effectual way. For the enterprise, it is very essential that it should
assess different type of business risks. This is because; if the given thing is not done by the
corporation at that time significant impact will be seen upon the sales and profits of enterprise.
Furthermore, lack of consideration of varied risks by firm will also lead to hamper the brand
image of firm in the competitive business environment. In the given assignment, different
type of risks are assessed which is being faced by the firm named as Airbus. Here, in order to
depict the number of risks, a risk management chart has been prepared. In addition to this,
with an aim to assess the seriousness of the assessed risk score card has been used. Herein,
risk which rated high has been considered as major risk which needs to be considered by
Airbus at first. Likewise, ranking has been allotted to other risks too.
In accordance with the given context, from the conducted analysis it is analysed that
there are some risks which are rated above 15 points. These risks include security, ergonomics
and environmental, operation in context of IT etc. Hence, these given risks should be
considered by the corporation at first. Besides this, there are some other risks also which are
rated between 10-14 score. It consists of operational, technological, reputational and data
protection etc. However, there are some other risks also which does not cause much impact
upon Airbus but will lead to hamper the sales and profits of enterprise in some sort of way. It
includes economic risk. Here, with an aim to present all these given risks in an effective
manner, risk map has also been prepared in the respective project. In addition to this, it has
also been assessed from the given risk resister that the risks which are highlighted in red needs
to be considered by the firm at first. This is because; lack of consideration of the same will
lead to direct impact on the operations of the cited company.
Moreover, it has been identified in the report that the Airbus is facing various issues in
regard to organisational factors that impacts the working of organisation in diverse manner.
Analysis of various risk has been conducted and identified that the factors that are rated over
15 are not acceptable and can harm business in diverse manner. In addition to this, the factors
that are scaled as a high risk factor are classified as breach of security, environmental,
cybercrime, employ life risk and financial. At the scale of moderate risk are referred as
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operational, technological and data protection issue. Economic risk is the only factor that is
considered as risk appetite.
Furthermore, it has also been found from the risk register that the risk which is
highlighted in red cannot be acceptable by any company. It is the reason because of which
firm should address the given risks at first and after that, it can take actions for the other risks.
After that, organization should give consideration to others which are highlighted in yellow.
These risks consist of operation, data protection along with the health and safety. However,
the risks which are in green colour should be addressed by the firm at last. Furthermore, there
are some opportunities identified which can be utilized by the manager of firm such as Airbus
with an aim to maintain its competitive position in market and mitigate the assessed risks. The
opportunities include using advanced software with an aim to protect the important data of
firm from any mis-happening. Furthermore, firm also has the opportunity with respect to
manage the reputational issue by using skill audit chart. With the help of given chart,
information about that skill can be gained by corporation in which its firm is hindering.
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TABLE OF CONTENTS
RISK Management Practice in Airbus Group.............................................................................6
RISK MAP................................................................................................................................27
LIST OF RISK TABLE.............................................................................................................28
REFERENCES..........................................................................................................................29
Appendix...................................................................................................................................32
Risk rating............................................................................................................................37
Risk impact...........................................................................................................................38
Conceptual framework for risk assessment..........................................................................39
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RISK MANAGEMENT PRACTICE IN AIRBUS GROUP
In order to overcome risk, the management of Airbus Group has started focusing on
wide use of IT tools to support its enterprise risk management approach. Moreover, the
business firm has also concentrated on Active Risk Management. It helps organization to
strengthen the enterprise risk management in diverse manner (Olson, 2008). Current risk
management process of the Airbus Group plays a key role in decision making process of the
management. ARM 5 is structured method that is adopted by the organization to provide
functionality and security.
ARM method is also considered as a flight safety risk method that helps organizations
to overcome various risks. It focuses on various risks that can impact overall business.
Classification of risk can be as financial risk, environmental risk, reputation risk, operational
risk, security risk, etc. It overcomes risk in three different contexts such as individual safety
risk, identification of safety issues and safety assessment. With an improved focus on these
three steps the management of Airbus can overcome diverse security issues that impacts
overall work culture. Safety Issues may need to be re-assessed on a regular basis to ensure
that the risk is maintained at or below the acceptable level. ARM Unplugged ensures data
integrity and delivers the complete view of risk exposure for management. Its ease-of-use that
will help in drive adoption of a common risk process. It also removes the risk silos keeping
risk information fragmented. In addition to this, it can be said that the ARM5 will also assist
in overcome risks that are associated with the financial and operational aspects. It also allows
management of Airbus to work effectively in order to defeat the safety issues. It is a system
that improves the transparency in an organization and improves various development
opportunities. It also enhances the personal engagement within organisation so that risk can be
overcome in more effective manner. Present risk management practice within business
provides collective information across multiple networks and entities. Present risk
management practice within business provides collective information across multiple
networks and entities. It has been spotted that the security is one of critical risk within
organization because it has various government contracts in military industry (Chitakornkijsil,
2010). Company also considers standard software implementation as critical aspect in order to
maintain the elements. Risk management practices within Airbus Group are performed in
integrated manner at both risk and company level. Organization also focuses on COSO
standards that are refereed as programme driven company. Server systems are well maintained
according to standards and frameworks of integrated risk management. Reporting process also
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plays significant role in risk management practice of Airbus group.
In addition to this, COSO framework gives description about different types of steps
which firm can adopt with an aim to identify different types of risks which are occurring in
the cited firm. The process starts with setting up of objective. For example, Airbus has the
objective to deliver high quality products to the buyers. Here, after setting the objective,
manager of firm should identify different events which lead to create hurdle in the task for
attaining the framed objective. For example, firm will not be able to achieve the given
objective if its employees would not possess the skills of producing high quality of goods and
services. On the completion of given step, different types of risks will be assessed by the
manager. In the next step, firm will give an effective response towards the assessed risk and
thereby, controls the activities which are occurring in the corporation. Hence, it is correct to
say that COSO frameworks play an important role in the task of assessing and managing the
risks which is being faced by the enterprise. Furthermore, the manager of cited firm can also
take help from ERM risk governance. It is the hierarchical structure wherein each person has
to fulfil different types of roles and responsibilities (Chapman, 2011). Enterprise risk
management is the business activity that involves different methods and processes used within
firm in regard to manage the risks and opportunities related to the attainment of their
objectives. However, ERM provides a framework for risk management that typically includes
various events or circumstances to business objectives and attain desired targets. Hence,
through identifying the risks and opportunities it helps business in protecting and creating
value for their stakeholders. ERM risk governance helps in integrate risk management into
their business and strategic processes to enable them to take risks in order to create value and
respond to mitigate the risks. It is essential for business to implement ERM program so that
firm can identify and quantify all the risks and not just compliance with that in order to attain
desired results. It also identifies emerging risks more quickly and enhance the capabilities of
the risk management system so that it can be handled effectively and efficiently.
Risk appetite can be defined as the level of risk which firm is prepared to accept and
thus it benefits firm to build innovation and the threats that change inevitably brings. It is
essential for organization to identify the risk appetite so that the risks which are acceptable, no
mitigation need to be provided for them. Here, from the below designed table of risk
management practice, it can be evaluated that within economic risks, risk of recession lies
under risk appetite/threshold. However, it assesses that at the time when there is low demand
of helicopters it causes dropping in profits and if Airbus Group makes high investment
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therefore, it helps in rising the defence level of country. Furthermore, the economy of the
country is fluctuating its demand and supply of aircraft's which does not get affected because
of high demand of defence instruments. Thus, adopting such risk threshold influences firm to
achieve high sales and profitability and thus no mitigation is provided to such risk factor.
Legal requirements are also considered in optimistic manner to ensure about
outcomes through use of Active Risk Management practice (Lam, 2014). Company also have
mapping according to four key elements. Classification of factors can be as strategy,
operations, reporting and compliance. Organization also promotes engagement of employees
to cut down the risk and lead business to impressive level of success (Hoyt, 2011).
Risk threshold probability/ability
IMPACT
1 2 3 4 5
PROBABILITY
5
4
3
2
1
Impact Likelihood
1 Negligible Rare
2 Minor Unlikely
3 Considerable Possible
4 Major Likely
5 Catastrophic Almost contain
In addition to the probability, it can be said that the measure of the chance that event
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will occur and provide result in respect to the experiment. It is the quality or state of being
probable to the extent to which something is likely to happen or be the case. On the other side,
impact is the action of one object coming forcibly into contact with another. In other aspect, it
is a measure of change that an activity force on the factor. In order to have effective risk
assessment, it is significant for firm to consider these two aspect as critical factor. In current
process, if the likelihood and impact multiplication is above 15 then it will be not acceptable.
However, if total calculation is below 15 then it will have considered as acceptable risk and
threshold condition will be 15 in the risk assessment process. Acceptable risk means the risk
factor can be acceptable because it does not have great influence on the operational activities.
Threshold means the activities can impact the work performance in positive as well as
negative manner according to nature of the business.
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Ri
sk
N
o.
Risk
Category
Risk Description & Information
Sources
Current Mitigation Action Lik
elih
ood
Imp
act
Risk
Rati
ng
Acce
ptabl
e
ratin
g
Mitigation Response
1 Security Breach of security
Airbus Group deals in various
defence and space products with
different government authorities
(Driver, 2012). It can be assessed
that company is required to adopt
various security measures in order to
protect the company from outside
agencies and thus carry out effective
work within business. It is essential
for Airbus to protect their
environment by keeping passwords
so that confidential data cannot be
leaked. Also, it is essential for
company to undertake core
competencies such as Slack/Jhonston
in order to protect the data
effectively and thus carry out the
business properly. It helps firm to
develop competitive advantage over
rivals and attain business goals.
Organization is focusing on APT
security check and improved use
of ATOS technological tool in
order to meet goals effectively. X-
ray, B-ray telescope and 3D
technology is also considered
(Arena, 2010). It is not acceptable
because it the breach to security
that may impact its business in a
negative manner. Any kind of
security breach will influence its
relation with government
authorities and may create further
issues.
It is rated as 4 in likelihood
because the numbers of unethical
aspects are focusing on activities
that can breach the security
aspects. Its impact is rated as 5
because company deals with
government and any kind of
security breach may affect the
relation with government.
4 5 20 No Special monitoring
committee that
reduces the risk factor
in context to security.
Proper installation of
CCTV and other
security tools that
could ensure about the
monitoring process
(Wu, 2010).
(Refer to Appendix)
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2 Environme
ntal
Risk of emission compliance
Airbus group aircraft engine effects
the environment through air
pollution. It has been assessed that
the emission of the engines are
around 70% of CO2 and slightly less
than 30% of H2o and thus lowes by
1% of Nox which affects
environment.
Co2 emission risk
Airbus Group is one of leading
aircraft and helicopters
manufacturing firm so the carbon
increase issue in environment is one
of key issue (Scorecard, 2010).
Production of aircraft requires
various natural resources and
handmade materials such as fire,
metal, etc. Co2 emission is one of
critical risk for the environment
because it may cause health of public
(Mandaraka, 2014).
EU trade commissioner puts a
high pressure upon the company
directors to adopt additional
support packages for Airbus.
Hence, in order to avoid any legal
action taken by the firm it helps in
achieving desired targets.
Organization has set out target to
reduce the Co2 emission by 20 %
till the end of year 2020. Airbus
Group is looking forward for
technological up-gradation in
order to reduce the carbon ratio
during flights. Noise of air
engines has also reduced through
use of technological equipment’s
(Monahan, 2008). Engineers and
production team is working with
various experts to reduce carbon
footprint. Water treatment system
are also playing key role in
pollution control (Olson, 2008).
It is referred as 5 because the
carbon emission is one of the key
issues that affect the
environmental aspects. On the
other side, its impact is considered
at a scale of 4 because the
government and other authorities
are focusing on eco-friendly
aspects. Any kind of avoidance
will impact business at a wide
level.
5 4 20 No Special manufacturing
plant design is
advantageous to
reduce the resistance
of the Co2 in air.
Carbon measurement
systems or tools
adaptation can cut
down the risk factor in
context to
environmental aspects.
(Refer to Appendix)
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3 Operation
al issue
Risk of delay in production
Aircraft manufacturing company can
also face various issues due to
improper consideration on
operational activities
(Chitakornkijsil, 2010). Operations
in different geographical areas may
enhance the number of procedures
that may also increase operational
risks at different levels of business.
(Refer to Appendix)
Airbus Group is continuously
focusing on various developments
in its structure to ensure about
operational activities. Number of
technological updates and
alliances with ports, air academy,
etc., are beneficial for the
organization (Lam, 2014). Value
chain system improvement
actions are also taking as a critical
factor because it helps in
accomplishment of goals and lead
business to impressive level of
success (Chapman, 2011). (Refer
to Appendix) It is the reason that
it covers the scale of 3. Its impact
is referred at 4 because delay in
production may impact the
government’s working. It will
influence their relationship with
partners.
3 4 12 Yes
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