Risk and Crisis Management: A Case Study on KFC's Actions

This case study examines KFC's response to a 2005 food poisoning incident involving a 7-year-old girl who suffered paralysis after consuming a KFC twister. The assignment analyzes the types of risks faced by KFC, including organizational and legal risks stemming from operational failures and potential violations of food safety regulations. It assesses the level of risk to the business, considering potential loss of goodwill and unfavorable word of mouth. The study then explores KFC's risk management approach, specifically the 'Treating' and 'Terminating' aspects of the risk framework, detailing the company's legal actions and eventual compensation to the affected family. The analysis highlights the importance of quality management, health hazards, and maintaining goodwill in the fast-food industry, offering insights into effective crisis management strategies.

Running head: RISK MANAGEMENT
Risk Management
Name of the Student
Name of the University
Author Notes:

1RISK MANAGEMENT
Table of Contents
Risk Description..............................................................................................................................2
Risk Assessment..............................................................................................................................3
Treatment of Risk............................................................................................................................4

2RISK MANAGEMENT
Risk Description
Back in 2005 a meal in KFC left a 7 year old girl based in Villawood paralysed
(News.com.au 2019). It has been found that the girl who had been started suffering from illness
after the latter and her family had consumed KFC twisters. The girl was severely ill and her
illness had gone to an extent that had led to paralysis and had even damaged certain parts of her
brain. The claims were even stronger as other family members of the girl also needed urgent
hospitalisation after they had shared part of the twister that they eaten from the girl. The name of
the girl was Monika Saman and her family had been in court with KFC for nearly 7 years.
During this period the fast food giant had been rejecting and not considering any claim aimed at
them by the family of the girl (Abc.net 2019). The risk that was posed by KFC as a result of the
same was that the company were threatened by the potential loss of goodwill and were subject to
unfavourable word of mouth. Hence, there arose a need for management of the risk through
which the company could be on same terms with the family of the girl and also avoid loss of
reputation based on one incident that seemed to have taken the world by storm.

3RISK MANAGEMENT
Risk Assessment
Functions Actions Assess Impact Functions priority
(1=Most important,
5=Least important)
Risk Level if the
functions are out for
service
Comments
Total Quality
management
Management of
quality of the food
coming out from
Leading to
difficulties in terms
2 High
Directly affecting the
health of the customers
Violation of quality will
lead to the development of
unfavourable experiences
from the part of the
consumers.
Health hazard Mitigation of
possibility of
issues leading too
provision of food
that is safe
Ailments in the
consumers of the
product that are
produced by the
company.
1 High This risk could harm the
sustainability of the
company in gaining
favourable outcomes from
Production
department
Creation of food in
the kitchen of
KFC serving
different products
to the consumers.
The quality
associated to the
development of the
food coming out
from the kitchen
poses threats to
harm the
sustainability of the
company in the
long run.
3 Medium Posing risk in the said area
affects the viability of the
organisation as the product
coming out of the kitchen is
one of the biggest reason
behind the sustainability of
a company in the fast food
sector such as KFC.
Goodwill and
reputation
The aim of the
company is to
sustain the aims of
the stakeholders
and the latter can
be achieved by
bolstering the
goodwill
associated to the
company. The
same can be
achieved through
favourable
Damaging the
goodwill associated
with the company
will harm the
sustainability of the
company in the
long run.
3 Medium The risk associated with
the loss of goodwill of the
company can take place,
however, it can be said that
the company has built a
favourable goodwill in the
industry that is hard to
loose.

4RISK MANAGEMENT
operations from
the part of the
operational
department of
KFC.
Treatment of Risk
Based on the nature of the risk, the risks can be treated using the risk framework. The risk
teamwork consists of 4Ts- Transferring, Tolerating, Treating and Terminating (Bizikova et al.
2019). Treating and Terminating the risk are the two components of the model adopted by KFC
in the said case.
Treating: The Company hired lawyers in order to treat the issue that was in hand. For more
almost 7 years the company had been contesting the case and stating that there could be no proof
behind the fact that consumption of KFC twisters had led to the ailment and thus they kept on
contesting.
Terminating: As a procedure of terminating the risk, the company realised that they must
mitigate the issues. The latter carried out the same by arriving at a decision to pay the family of
the girl with $8 million as a compensation for what had happened (News.com.au 2019). Even if
KFC did not agree on the decision of the court, they had to comply with the same which finally
ended the case.

5RISK MANAGEMENT
REFERENCES
Abc.net (2019). Sydney family wins KFC food poisoning case. [online] ABC News. Available at:
https://www.abc.net.au/news/2012-04-20/sydney-family-wins-kfc-food-poisoning-case/3963680
[Accessed 24 Aug. 2019].
Bizikova, L., Roy, D., Swanson, D., Venema, H.D. and McCandless, M., 2013. The water-
energy-food security nexus: Towards a practical planning and decision-support framework for
landscape investment and risk management. Winnipeg, Manitoba: International Institute for
Sustainable Development.
News.com.au (2019). COURT TIPS A BUCKET ON KFC: $8m payout to paralysed girl.
[online] NewsComAu. Available at: https://www.news.com.au/national/court-tips-a-bucket-on-
kfc-8m-payout-to-girl-paralysed-by-poison-chicken/news-story/
d28977a821f35a478cbccc415ca365f7 [Accessed 24 Aug. 2019].