Chapter 18 presented special risk management issues with Blue Wood Chocolates, and chapter 19 presented various financial risks at Kilgore Custom Milling. If Blue Wood Chocolate and Kilgore Custom Milling are to develop a risk management framework, who should lead the process at each company? Should a Chief Risk Officer (CRO) be appointed? If so, to whom should he/she report and have access to? How could smaller companies without the resources for a dedicated CRO deal with ERM? What is the role for the board in such a process? To complete this assignment, you must do the following: A) Create a new thread. As indicated above, if Blue Wood Chocolate and Kilgore Custom Milling are to develop a risk management framework, who should lead the process at each company? Should a Chief Risk Officer (CRO) be appointed? If so, to whom should he/she report and have access to? How could smaller companies without the resources for a dedicated CRO deal with ERM? What is the role for the board in such a process? 700 Words

The development of a risk management framework is crucial for companies like Blue Wood Chocolates and Kilgore Custom Milling, as it enables them to effectively identify, assess, and mitigate risks that could impact their operations and financial stability. To lead this process, it is recommended that both companies consider appointing a Chief Risk Officer (CRO) who will be responsible for overseeing and implementing the risk management framework.

A Chief Risk Officer should possess a deep understanding of the company’s operations, industry dynamics, and the specific risks that the company faces. They should have the ability to analyze and assess risks, develop appropriate strategies to address them, and ensure that risk mitigation measures are effectively implemented throughout the organization.

In the case of Blue Wood Chocolates, the CRO should ideally report to the Chief Executive Officer (CEO) or the board of directors. This ensures that the CRO has direct access to the senior management and decision-making authorities, enabling them to effectively communicate the risks and drive the integration of risk management into the company’s overall strategy. The CRO should also have access to relevant data and information from all departments and levels of the organization to ensure a comprehensive understanding of risks.

For Kilgore Custom Milling, a similar reporting structure is recommended, with the CRO reporting to the CEO or the board. However, the CRO may also need to have access to other key stakeholders within the company, such as the operations manager, finance manager, and other department heads, to gather relevant information and ensure the effective implementation of risk management strategies.

Smaller companies that may not have the resources for a dedicated CRO can still implement an effective enterprise risk management (ERM) approach. In such cases, it may be necessary for the CEO or another senior executive to take on the responsibilities of the CRO alongside their existing duties. This individual should have a thorough understanding of the company’s operations and the risks it faces and should receive adequate training and support to effectively manage risks.

Additionally, smaller companies can consider hiring external consultants or risk management experts on a part-time or project basis to provide specialized expertise in developing and implementing the risk management framework.

The role of the board in the risk management process is critical. The board should provide oversight and guidance to ensure that the company’s risk management practices align with its strategic objectives and risk appetite. The board should regularly review and assess the effectiveness of the risk management framework, and provide the necessary resources and support to the CRO or the individual leading the risk management process. The board should also ensure that there is a robust process in place for reporting risks and that appropriate risk reporting mechanisms are in place to facilitate informed decision-making.

In conclusion, the appointment of a Chief Risk Officer can greatly enhance the effectiveness of the risk management process for companies like Blue Wood Chocolates and Kilgore Custom Milling. However, smaller companies without the resources for a dedicated CRO can still implement an effective risk management framework by assigning the responsibilities to a senior executive or hiring external consultants. The board plays a crucial role in overseeing the risk management process and providing the necessary support and resources to ensure its success.

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