Organisational Risk, Integrated Risk Management - Coursework Example

Student Name: Tutor: Title: Organizational Risk Institution: Due Date: Introduction Strategic approach to identify, analyze and address organizational risk within an organization requires a consistent cultivation of a risk culture throughout the organization. Therefore, risk culture is at the focal point of every human decision made on the day to day activities of risk management in an organization. Risk culture is the norms of behavior for a team and individuals in an organization that drives the collective capability to identify, understand, openly discuss as well as act on the current and future risks of an organization. Therefore, risk management is a continuous process of identifying risks as well as implementing plans to effectively address them. With the on-going global economy footing, a number of organizations are still in the lock-down mode because they concentrate their efforts on surviving within the changes environment. This is commonly identified in the activities of stemming losses, cutting costs as well as stabilizing their own revenue base (Beck 2007). In cases where a focus is to address risk, it is more on improving the available risk management systems as well as the models rather than implementing the underlying culture. Although the burden of contemporary short-term economic pressures seems to be undeniably heavy and more time consuming, leaders in the organizations need to understand that strong risk culture is a critical aspect of organizational risk management. It determines the health and performance of an organization. Thus, risk culture should be among the best practices that managers must consider as their organization evolve through the economic cycle (Jones 2008). The study examines employee labor-turnover as an organizational risk with a focus on Kenya Airways’ engineers labor turn-over as the basis to analyze, improve and control future risks, the likelihood cause factors of labor turn-over and their respective actions identified, a detailed workforce analysis is considered as the suggestive approach to assess the size as well as the scope of labor restructuring to ensure the health and good performance the organization. The significance of controlling the risk of labor turn-over in an organization is assessed based on the effects of engineer turn-over in Kenya Airways as the selected organization case of study. Manpower is influential for an aircraft industry, and thus its shortage would lead to a big challenge to both the tourism and hospitality industry multifaceted through the ideas of staff retention and job satisfaction. The hospitality and aircraft industries are faced with the challenge of restructuring. This is particularly within an increasingly competitive landscape that is dominated with the aspects of career development opportunities, matching of the industry growth with talent as well as service levels and changing structures of monetary and non-monetary reward to employees (Cole 2002). It is important, therefore, to examine the context of employee turnover within the hospitality or aircraft industry so as to undertake the relevant benchmark practices on how to combat the operational and managerial challenges posed by the increased chances of turnover. The objective of the study is to explore and assess the impact of employee turnover as a risk in a key organization within the hospitality and aircraft industry (Bae & Lawler 2000). The information obtained from the risk analysis will enable the organization in this case Kenya Airways to apply the relevant strategies that will assess and control the high rates of employee turnover while increasing the chances of staff retention by improving the recruitment means, job satisfaction and productivity, promote employee-organizational commitment as well as excellence and quality service (Xin 2011). Kenya Airways is an air transport organization based in Nairobi. The organization provides hospitality services to tourists in addition to operating as Kenya’s flag carrier. Kenya Airways is commonly recognized of its fleet of Boeing narrow as well as the wide-body aircraft enhanced by its global carrier routes and the Embraer E170 Jets operating in regional routes. This indicates that the organization operates an extensive network of both international and regional services in Kenya, Africa and flights to Asia, the Middle East as well as in Europe. The principle activities of Kenya Airways Groups include the global, regional and domestic carriage of the passengers and cargo by air means delivers the ground handling services to the rest of other domestic and international airlines, hospitable services to guests and handles the import and export cargo. Kenya Airways is faced with the risk of high turnover of engineers in contrast to other staff cadres. This seriously affects its internal capability to maintain as well as service its aircrafts. Currently, all the major aircraft servicing and maintenance are obtained from outside parts of the world, particularly in Europe and Asia with the hourly cost of labor is identified to be higher than of Kenya. Due to high labor turnover much of the needed revenue is being lost to other countries, indicating the shortage of the engineering competence at Kenya Airways. The emerging attribute to this labor trend is that the organization has not been in a position to attract and retain qualified engineers, while the existing engineers leave Kenya Airways for greener pastures in some other competitor organizations (Wiseman 2000). The research carried out on the level of employee turn-over shows that the risk of engineer turn-over at Kenya Airways is generally high and there is no likelihood for the risk to slow down due to lack of immediate remedial plans. With the increasing trend of engineer turn-over since 2002, it has been analyzed that Kenya Airways may be subjected to a serious lack of engineers, a risk that may lead to other related risks of employee turn-over in the few years to come unless the rend of the risk is checked and controlled. The table below provides some of the likelihood causes of engineer turn-over and the possible actions to be taken. Probable causes Possible actions to be taken Low salaries Increase on salary Overworked Enhance communication among the management staff Lack of training and motivation Implement on the agreements and proposals made by engineers Lack of reward and recognition Provide promotional benefits to good performers Greener pastures March the employee experience, performance and qualification with salary Based on the above risks analysis on engineer turn-over, it is important for Kenya Airways to take immediate action to ensure that the working conditions of its engineers are improved. This is in particular with the salary issue that seems to be a key factor causing engineer turn-over. For instance, Kenya Airways can benchmark its employee terms and conditions with other major players within the industry so as protect its engineers or employees being tempted to leave the organization and join them. The increased risk of engineers’ flight to the organization’s competitors is a clear indication of better terms and conditions of employment compared to Kenya Airways (Smith & Fischbacher 2009). For Kenya Airways to develop a strong risk culture, it is important for the organization to adopt more critical as well as mutually reinforcing aspects such as developing a clearly communicated risk strategy, rapid escalation of the labor threats, visible and progressive role-modeling of the standards and desired by the managers at higher levels of management. In addition, the human resource management of Kenya Airways should provide incentives which encourage its employees to do the right thing as well as focus on the overall development of it to become a health organization (Sexton & Linder 2010). This calls for a continuous and positive use of challenging actions and preconceptions at all the organizational levels. Therefore, successful use of risk culture models should account for all the significant interactions that occur inside the organizations, for instance, between individuals and among groups of individuals that act in teams, across the business units and interactions at corporate level between senior management and the existing strategic decision-making processes (Glebbeek 2004). Integrated Risk Management Integrated approach to risk management addresses the various risks that occur across the different levels of an organization, opportunities and threats as well as strategy and tactics. Therefore, poorly defined organizational objectives and inadequate attention to proactive management of risks are probable factors which account for high labor turn-over in organizations. This indicates that effective implementation of an integrated approach to risk management can provide numerous benefits to the organization that are not readily achievable from the normal limited-scope risk process. Kenya Airways should utilize integrated approach to risk management in order to minimize threats as well as maximize opportunities that can increase the likelihood of achieving the tactical and strategic objectives, such as employ job satisfaction and retention. However, a well-developed risk-mature culture that recognizes the existence of labor turn-over risk at all levels of the organization is required so as to proactively manage the risk in order to deliver the benefits of aircraft services (Miller 2001) Since strategy and tactics of human resource management are associated through organizational objectives as well as affected by uncertainty, the risk of employee turn-over may occur at strategic and tactical levels. The management of Kenya Airways should apply an integrated approach to its problem of engineer turn-over so as to create a sustainable strategic advantage of employee morale by bridging the existing strategy-tactics gap of human capital. As a result, the organization will have the capability to deal with future threats and opportunities connected to the risk of employee job dissatisfaction (Vaughan 2005). It is important to note that integrated approach to risk management allows a considerable amount of risk to be taken intelligently by an organization, though with the full awareness of the level of uncertainty as well as its potential effects on the objectives of the organization. This creates the way to achieve high rewards which are connected to safe risk-taking. From the organizational point of view, it can be argued that an effective risk management framework result in various benefits that lead sustained production in the organization. For instance, formalized risk management framework enables the development of a common understanding of various across the organization’s operations (Bonabeau 2007). Kenya Airways should apply a formalized risk management as it can facilitate the creation of a common risk lexicon. This will ensure that the organization identifies its risks and take appropriate as well as timely actions to address the general threats to other risks a part from labor turnover. The organization will be required to prioritize its risks in order to allocate the appropriate resources to the most significant risks, for instance, labor turnover. However, the number of assets potentially identified to be at risk often outweighs the available resources allocated to manage them. The management of Kenya Airways should make careful decision on where to apply the existing resources to mitigate all its future risks, including engineer turnover that it is currently faced with. This ought to be implemented in a more cost-effective as well as efficient manner by utilizing the technique of risk assessment to assign relative priorities to be used in the mitigation plans and implementation (Miller & Philip 2004). Systems Thinking A good number traditional risk analysis tools such as the root cause analysis and Pareto diagrams depend on a reductionist approach. Such tools are guided by the notion which states that understanding of an outcome or an end event can be obtained by “working backwards” as well as dividing the event into various constituent parts. However, this approach has got its own limitations because it may not be useful in capturing the essence of the emerging risk as being dynamic due to the evolving, complex as well as systemic factors that are influenced by the human behavior (Wiseman 2000). While examining dynamic risk, the management of Kenya Airways need to consider that the outcome of organizational events, particularly those linked to employee-job satisfaction may be greater compared to the sum of risk constituent elements. Thus, understanding dynamic risk, it is necessary for Kenya Airways to operate both downward and upward so as to not only capture the essential elements of the existing and emerging risks, but also determine the complexity generated through their dynamic interactions (Cole 2002). This implies that through the removal of artificial barriers between the constituent parts of any system, systems thinking become a valuable tool to overcome the limitations of which affect the performance of the commonly used risk analysis tools. Kenya Airways should find this concept critical, especially in exploring its emerging risks, where reactions and solutions are mostly uncovered through accepting the dynamic interactions as well as examining both the functioning elements and their associated interactions within uncustomary ways (White 2000). According to Boyatzis (2006) systems thinking corresponds to certain cognitive competency which may be relevant to the identification as well as handling of the emerging risk within an environment that dominated by high relational complexity. This clearly indicates that systems thinking create a framework for achieving a well-developed understanding of both dynamic and interconnected nature of the complexity breakdowns increasingly dotting the scene and approach to modern risk management. Since the emerging risk reflects lack or insufficiency of past data, this defies predictive modeling as well as forecasting. Intuitively, strategic foresight approaches to risk management can be of great importance in addressing the challenges posed by the emerging risk (Rothstein 2006). While the management of Kenya Airways is taking immediate actions to identify and control its future risks, it is important for its leaders to understand that emerging risk creates a special set of operational challenges for the organizations as they endeavor to effectively identify, assess and manage their general risk portfolios. From the practitioner point of view, one major challenge is the need to how to organize the various set of tools and approaches required to manage the emerging risk. The possible solution, involves embedding the tasks accomplished in the management of the emerging risk into a holistic approach to enterprise risk management (ERM) framework (Dickinson 2001). Work Force Analysis In order for Kenya Airways to assess the size and scope of its labor structuring, it is necessary for the organization to use work force analysis which comprises of various tools that help in bridging between the details of staff audits carried out, benchmarking as well as the entire organization design issues. Work force analysis is developed on staff audits so as to analyze and forecast to provide work force structure and match it to the requirements of enterprise infrastructure (Wang 2003). Kenya Airways should make use of the work force analysis to identify the appropriate requirements of their staff either at operational or unit level, and thus enable its managers to implement agency. In addition, this approach to risk management will help the organization to identify the competency levels and types staff needed, in this case experienced engineers either for the current or future requirements within the operating units. As a result, the organization will be capable of protecting itself from risk employee turnover or loss of critical skills. Through the use of work force analysis, Kenya Airways will be required to utilize tools such as staff audit and benchmark merging, carry out a functional and productivity review, make a ratio analysis of the staff data as well as involve in supply forecasting of the staff, for instance, by categorizing employees particularly with engineers known of skill shortages (Deephouse & Wiseman 2000). The impact of managing the risk throughout the organization As a matter of urgency, the organization should have a consultative meeting with all its engineers so as to address the issues of concern, in this case the employee poor terms and conditions of working that causes them to look for green pasture in other organizations that are competitors of Kenya Airways. As a result, the organization will have an opportunity determine, analyze and take immediate action to control as well as avoid the likelihood of engineers’ departure to other attractive or competitor airlines. It is also critical for Kenya Airways to carry out a review of its current human resource management as well as leadership style so as to make it more facilitative and enabling, promote good communication links with its engineers and encourage constructive suggestions from them. Such interventions will be important in creating training opportunities and improve its aircraft maintenance to mitigate the risk of employee turn-over in Kenya Airways (Hillson 2002). It is a view of this critical issue that Kenya Airways operates in a more competitive environment identified with many players. This will enable the organization to involve in a continuous benchmarking of its operations as well as practices based on those of the leading players, and thus a major steps towards reducing the general risk of employee turn-over. Although various factors seem to be influential or causes of the risk of engineer turn-over at Kenya Airways, the remuneration of the engineers is identified to be the outstanding cause. This implies that the organization must focus its attention on improving the remuneration package which should range from their basic salary to allowances. Other benefits connected to employee jobs, in particular engineering must be considered as an effort to ensure that such job opportunities are acceptable and more attractive to not only engineers but also to rest of other employees (Dahms 2010). Since the safety of the traveling public entirely depends on to the engineers who release an aircraft, it is important that Kenya Airways through its human resource management attracts and retains a large number of qualified and experienced engineers. According to the investigation carried out in the organization, it was reported that Kenya Airways lost 30 engineers to its competitor organizations in the period between 2004 and 2007. As a result, its aircrafts are being maintained outside the country, mostly in European and Asian countries where the cost of workforce is relatively high in comparison to Kenya. An integrated approach to risk management is required to investigate the factors causing engineer turnover in Kenyan Airways. The organization must focus on the need to establish and evaluate the influence of rewards on the labor turnover of employees within the organization. It is also important to determine the extent to which the practices of poaching and competition as well as leadership style and working conditions result in labor turnover of employees, particularly engineers in Kenya Airways (Hillson 2002). The regulations of Kenya Civil Aviation Authority require organizations such as Kenya Airways to resource and retain a sufficient as well as competent number of licensed engineers who are appropriate to the organization’s maintenance ratings. In cases where such organizations fail to adhere to the regulation, they are subjected to the risks of being closed down. Naikuni (2007) examined that the high rate of engineers turn over in Kenya Airways has been the greatest challenges the organization is faced with. Naikuni added that licensed aircraft engineers were the most affected employees who left the organization for better employment opportunities in other companies. In addition, the number of engineers has not increased in tandem with the development of aircraft fleet. In 2008, three major Airlines were introduced into Jomo Kenyatta Airport further complicating the risk of engineer turnover since the new air lines have the likelihood of poaching engineers from Kenya Airways (Naikuni 2007). It is apparent that high employee turnover is a reflection of low morale as well as poor or dissatisfying working condition amongst the employees. Armstrong (2001) in this view contends that high turnover within the organization is a clear indication of a risk that may cause a serious problem in that particular organization. Therefore, high rate of employee turnover causes a negative publicity to any organization which in turn leads to dissatisfaction amongst the employees with the final result being negative production. This implies that the organization’s major asset and indeed any country’s strength rely on its existing human capital. All organizations whether operating in public or private sector are entirely confronted with the task of identifying, evaluating, managing, monitoring as well as reporting the manner in which they are exposed to risks (Hillson 2003). Ivancevich (2003) defines labor turnover as a situation whereby employees consider themselves as unwanted individuals in the organization. This is in relation to Armstrong and Tina (2005) who emphasized on what Karlmax (1865) argued in Das Kapitas that to determine the value of goods and services, it is significant to consider the amount of labor and its cost incurred on them and not only focusing on the market place to determine their prices. It is important to argue that a worker’s knowledge and skills comes from education, training and development on the job to acquire experience to generate a stock of competent or productive human capital. It is the same human capital that is currently eluding Kenyan Airways as. Goldsmith et al (1997) argues in view of the principles of employee recruitment and selection, equal opportunities, staff health and welfare, health and safety in the workplace, training and development, employee involvement, productivity, pay and reward systems, performance appraisal as well as disciplinary and complaint procedures. Goldsmith identifies them as contributing factors to attract and retain staff in the organization (Brundage & Koziel 2010). However, such factors may cause higher rates of employee turnover in cases where the labor needs are poorly or not properly managed. The organization’s capability to acknowledge and immediately react to its emerging risk may be obstructed by the reluctance to withdraw from its goals and objectives which are totally justifiable. Boella (2000) discusses the labor turnover as well as termination of employment, where he noted that addressing the employee turnover and staff retention rates may cause detrimental effects as the industry consists of several sectors yet there are many differences existing within those sectors. According to Boella, this is a major challenge to the hospitality industry. Furthermore, the author supports that several other factors exist which are influential to labor turnover, including the nature of the industry in which the employees work for, the nature of specific units as well as individual managers including the high ratio of workers. Management of risk frameworks is critical to the achievement of organizational objectives. Based on the suggestions made on how to identify, evaluate and mitigate the risk of engineer turnover in Kenya Airways, it is clear that enterprise risk health check is essential for all the organizations to ascertain how they are managing their risk. Therefore, the organization need to create time for a risk health check so as to monitor the strategies put in place to mitigate the risk of engineer turnover as well as other emerging risks. Since organizational risks occur and overlap at distinctive levels in a business, it is rare to find risks materializing at a single but to create major and subsequent impacts at different levels of the organization. While implementing the various frameworks to manage the risk of engineer turnover, the management of Kenya Airways will ascertain a consistent understanding of various risks across all its parts as well as organizational levels (Bromiley et. al.2001). Conclusion Risk culture is at the center of every human decision made on the day to day activities of risk management in an organization. Strong risk culture is a critical aspect of organizational risk management because it determines the health and performance of any organization. Most organizations are still in the lock-down mode because they concentrate their efforts on surviving within the changes environment. Manpower is important for an aircraft industry, and thus its shortage creates a big challenge to both the tourism and hospitality industry reflected through the ideas of staff retention and job satisfaction. The major asset or strength of an organization relies on its existing human capital. Increased rate of employee turnover is a reflection of low morale as well as poor or dissatisfying working condition amongst the employees. It causes a negative publicity to any organization which in turn leads to dissatisfaction amongst the employees with the final result being negative production. A major challenge of organizational risks management is how to organize the various set of tools and approaches required to manage the emerging risk. All organizations are entirely confronted with the task of identifying, evaluating, managing, monitoring and reporting the manner in which they are exposed to risks. Understanding of dynamic risk is necessary for Kenya Airways to operate both downward and upward so as to capture the essential elements of the existing and emerging risks as well as determine the complexity generated through their dynamic interactions. The ability to manage the frameworks for mitigating risks is essential in achieving the objectives of an organization. Bibliography Armstrong, M. & Tina, S., 2005, A hand book of Employee Reward Management And Practice (1st Ed), London: Kogan Page Limited. Beck, U., 2007, World at risk, Polity Press: Cambridge. Bae, J & Lawler, J.J., 2000, Organizational and HRM strategies in Korea: Impact on firm performance in an emerging economy, The Academy of Management Journal 43(3), 502-517. 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Xin, W., 2011, Constructing a decision support system for management of employee turnover risk, Information Technology and Management, pp. 1-10.Retrieved December 15, 2011 from, Read More