Apple Inc Risk Management
Executive Summary
The report presented in the paper has discussed the enterprise risk management of the global entity Apple Inc. Different risk factors, the threshold level, the aim, and background of the organization have also been presented in the report. A brief risk register table has also been shown to understand the firm’s current risks and impacts. In the end, a set of recommendations has also been presented to ensure that the organization can work on the area in a much better way.
Table of Contents
Introduction
Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services. It is considered one of the Big Tech technology companies alongside Amazon, Google, Microsoft and Facebook. Apple Inc. is a global business giant having the highest position in the worldwide business market in terms of MNC size. The Net profit of the organization in 2020 has been 22.25 billion USD (Rothkopf, et al.,2020). The company has been dominating the global market with its enormous brand value and equity and premium products. It is also one of the biggest smartphone sellers in the world. Apple has grand popularity worldwide, and smart devices like iPhones, Macbooks, etc. are the best selling in the US market. Currently, the global business giant is spread across 175 countries of the world and planning to spread the reach to 20 other countries (Ahmar, 2016).
With such an enormous size and impact on the global citizen, the organization also has some major responsibilities and impacts on its versatile and huge stakeholders. There are certain risks that the organization has faced and may face in the business process. Therefore, it is crucial to determine and identify the probable risks that can approach and prepare for them.
Risk is a type of uncertainty that every human being, every organization faces while operating their required operation for growth and achievement. Risk-taking is essential for growth and advancement and on the other hand, it is also the source of loss of prosperity, assets, equity, and so on (Al Ayubi, et al.,2016). Hence, it is crucial to understand the risk and how to mitigate them and prioritize them based on their severity.
Aims of the Organization
The global MNC Apple Inc. aims to provide consistently premium-quality smart devices to the customers to allow them to experience excellent services which are innovative in every means, whether software, design or hardware of the products. Thus, the main aim is to manufacture products that are both user friendly and innovative. Hence, the company’s objective is to maintain all these measures while bringing new products into the market. The company continually works on its design and techniques to meet the aim that is the ultimate area to be obtained.
Risk threshold
The organization is one of the largest and top organizations globally. It has various sources and various risks that are appearing and affecting the performance and risking the business purpose and growth to a certain extent. Threats are often considered as a negative term, but it also has some positive impacts which cannot be denied. However, in this chapter, the paper’s focus would be subjected to the risks that harm the organization. The negative impacts are of different types in general such as, bad reputation or loss of brand equity, financial losses, issues related to project management, budget allocation, and scheduling, facing legal suits, health, and safety-related issues, waste management, environmental issues, etc. These areas can potentially threaten the performance and sustainability of an organization (Aven, 2016). In this particular case of a business organization, the sudden outbreak or occurrence of such incidents may not threaten the sustainability or longevity of the company. as it has a great span of business and one particular risk can not determine the fate of the world’s largest firm, it can cause uncertainty and negativity in the business.
The risk threshold is defined as a project management tool to measure the degree of uncertainty and the level of impact in which a stakeholder or organization may have an interest. As the name implies, it sets a specific value that the stakeholder or organization will accept a particular risk or not. Simply put, it is the amount of risk that organizations and stakeholders are willing to take. The term simply means the expected risk, which is acceptable by an organization. It is closely related to the ideas of Risk Appetite and Risk Tolerance. The risk threshold is the highest when an organization can take a risk or tolerate one (Bettini et al.,2016).
Apple has a great brand value in the global market, which is 309.53bn, pretty high USD, and the organization is aware of the potential risks that the organization may face in the future. Hence, Apple has a certain level of risk calculated for the operation they can face and can manage (Butt, et al.,2016). The organization is capable of facing a few risks and can sustain easily after the occurrence of the same. Certain risks have been examined and categorized by the organization as part of the Risk Threshold, which means the company and its stakeholders are capable of facing these risks in a certain intensity. The threshold is the parameter which is set by the company to differentiate how much risk is acceptable and from what level it will not be accepted, and proper risk mitigation measures would be implemented. However, specific hazards are inevitable to be faced. Hence, a below table would be drawn to identify and discuss the parameter or Risk Threshold of Apple Inc (Eyland, and Thibeault, 2016). The company is exposed to various risks in the global market, and few of the risks can be considered part of the risk threshold.
| Risk Matrix | ||||||
| Potential Consequences | ||||||
| Not Significant | Minor | Moderate | Major | Severe | ||
| Likelihood | Almost Certain | Economic Uncertainty | ||||
| Likely | Manufacturing and Designing risks | Legal compliances related risks | ||||
| Possible | Safety and Health | |||||
| Unlikely | ||||||
| Rare | Legal compliances related risks | |||||
Table 1: Risk Matrix
(Created by the Learner)
| Risks | Priority | Type and Details | Reason for priority |
| Economic Uncertainty | High | There are certain uncertainties always there regarding industrial areas. It has been observed that to manage a business in such high order there are still some risks, such due to tom supply faults or manufacturing faults or due to economic crisis and ups and downs in the share market can impose certain risks to the organization, but the company must be prepared for such risks and set the budget accordingly. | The threshold level for this particular aspect must be set with high priority because financial or economic risks can directly impact the organization’s growth.
Steady fall in the organization’s net profit rate for three consecutive quarters can not be considered under the risk tolerance level of Apple Inc. |
| Legal compliances related risks | Low | Organizations like Apple are always prone to be subjected to various legal cases, as manufacturing and marketization every process is bind by some legal compliances, and when the organization performs in the market, they face legal matters from the competitors or other entities. Therefore, the costing for those unavoidable cases is considered in the particular level of risk management. | Setting up a level of to what extent the company can face cases and manage those risks is low because, the organization maintains all the legal compliances and performs according to the advice of the Corporate Legal officers. Therefore, the chances of the same are not very high for the company, and this is why setting up a parameter is not very much essential. Facing cases for an average of 20 per year can not be tolerable under the threshold parameter. |
| Environmental uncertainty | Moderate | Environmental uncertainty such as changing in the market performance, the eruption of a natural calamity or pandemics like COVID-19 or any other such unfortunate occurrence can lead to some potential risks, and the rate of risks and the impact of the same on the organization can be different (Gvili, 2020). These risks and their consequences are, therefore, needed to be understood for the better performance of the organization. | Even though the occurrence of such environmental or contextual risks are widespread, setting a parameter or limit till where the organization can tolerate and from where it would not be tolerable needs to be decided, and it is essential. Yet it holds lesser importance than the economic risks or uncertainty. It can be considered as a moderately needing area to be found under the threshold. The loss of supply and demand of the product must not go beyond a certain level, such as steady low incapacity, and manufacturing for two months in a row can not be considered under the tolerance level. |
| Market Uncertainty | Moderate | The market is continually changing, and so is the competitive business market, as there are some significant competitors of Apple are Samsung, Huawei, etc. who are taking the smartphone market, which is concerning, but to a certain level, it is tolerable for the company. | Market competition and other uncertainties are not always in the hands of the company. The company is indulged in various product manufacturing, so taking the possibility for risk and settling the level until what the organization can do the same is essential.
|
Table 2: Risk Threshold
(Created by the learner)
There are undoubtedly other risks the organization faces or may face in the operation process yet. These are the three main areas that occur more often, and therefore, threshold measurement is necessary.
Risk Register
Apple Inc is a global organization whose risk register would be presented in the below table mentioning all the impacts and aspects of the particular risks which the organization tends to face in operation (Leidner, et al.,2016). Hence, the below table will depict the dangers and the various aspects of them in details,
| No. | Risk Description | Existing Controls | Likelihood (1-5) | Impact (1-5) | Risk Rating | Mitigation Actions |
| 1. | Market Competition | The company Apple has efficient teams to manage risks and other managerial bodies to manage the risks that are approaching or likely to approach from the sides of the competitor exists in the market (Papke-Shields, and Boyer-Wright, 2017). | 3 | 5 | 15 | There are specific ways to mitigate the risks that are approaching. The organization first needs to understand and identify the hazards that can contact the competitors of the market, or critically, the main competitors need to be identified. Identification of the competitive advantages of the company that are performing in the market and potentially threatening the market demand company needs to be taken into consideration and imply the same or identify the alternatives that can be used by the company to eliminate the risk (Hopkin, 2018). |
| 2. | Market Context | The marketing management team, Risk management teams, meet at a regular interval to understand and identify the different market context risks and work on them to deal with the same. | 3.5 | 5 | 17.5 | There are processes such as identification, analysis of the same, and their impacts, work on the same such as using Business Continuity strategy or reversing the budget is part of the mitigation process. The strategy-making based on the identified risks and their impacts and monitoring of the process is a crucial part of mitigation (Olechowski, et al.,2016). Preparation prior to the changing market context is a wise step to mitigate the effectiveness of the risks is part of the process. |
| 3. | Manufacturing and Designing risks | The manufacturing and innovation & designing of the hardware and software teams take responsibility for the same, as the technical team that designs the devices revise the process together before launching the products into the market. After confirmation on mass production, if faulty products are supplied, it is managed by the risk management and the manufacturing teams. | 2.5 | 4 | 10 | When a risk approaches due to manufacturing or designing fault, the reputation and the brand value of the company suffer. Therefore, first, if there is any complain related to a model of the brand, the manufacturing team must check manufacturing details and models which are still at the warehouse of the company, make a trial check on that, and that must involve all the teams that are included in the process (Lockamy III, 2017). Thus, the first step is to identify the faults related to the model and its design. If the problems are identified, in the next stage, the organization must cancel the orders and clear the model from the market and refund those who have bought them already. After that, a clarification on the same must be initiated along with transparency, so that the people can trust the products, and the brand value does not suffer. |
| 4. | Safety and Health | Health and Safety managers, along with the legal team is responsible for the supervision of the safety and health risks, and if there are any such risks identified, along with the risk management teams, those factors are handled. | 1 | 3 | 3 | If there is any risk or issue occur due to the lack of safety measure whether in the case of the employees or in the areas or localities where the factories are situated, Apple must take the necessary steps such as internal teams or experts must be commissioned who will thoroughly check the situation and present a report on the same, and if the faults are from the side of the company, adequate compensation measures must be undertaken by the company (Addonizio, 2017). It may cost high, yet it will help the company to become a responsible corporate leader, and at the same time it will eliminate the scope of facing legal cases, but all the steps must be undertaken by the company with the help of the legal, health and safety management teams of the organization. |
| 5. | Inventory Risks | Inventory related risks are handled by the operation managers team, supply management, and risk management teams, and they appraise the intensity and impact of the risk on the organization and take the necessary steps to address the same (Fujita, and Hamaguchi, 2016). | 2 | 3 | 6 | If any inventory-related risks take place for the organization, the first step of the process would be to identify the problem or danger that is either approaching or already have approached, and after identification of the same, the organization must indulge the organizational bodies that are there to look after and appraise the issues and then advice on the same, how and to what extent the problem can be mitigated (Tupa et al., 2017). The company has a significant market presence geographically, hence managing supply of the mass-produced items and raw materials timely and adequately needs to be ensured with proper supervision and the usage of advanced technologies. |
Table 3: Risk Register
(Created by the learner)
It has been observed from the table, as mentioned above, that there are certain risks the global leader Apple Inc has been facing risks that are affecting the performance of the organization and its customer segmentation. Each of the five risks mentioned in the above table has various levels of impact and their risk ratings have also been mentioned in the table. It can be opined from the same that the risk rate for market context is highest and therefore, it needs to be mitigated from the very beginning so that the company can sustain with much more efficiency and betterment (Heagney, 2016). A stand by the team of risk management must be there to look after the risks that are approaching. Once they are there, the company must take the necessary steps to mitigate the same, along with the help of those departments responsible for those particular areas. On the other hand, safety and Health-related risks have been rated as the lowest. The reason behind such a low score is that the company has not faced certain risks so far as much as it has faced the other risks in the operational process of the company.
A risk register is a tool in risk management and project management. It is used to identify potential risks in a project or an organization, sometimes to fulfill regulatory compliance but mostly to stay on top of potential issues that can derail intended outcomes. The risk register includes all information about each identified risk, such as the nature of that risk, level of risk, who owns it and what are the mitigation measures in place to respond to it. The above register has been presented to identify and understand the risks the global marketers’ Apple is about to face or face in general for their regular functioning and processes (Heldman, 2018). The risk register highlights various areas of the risks such as the risk level, mitigation process, and the impact of the risks, etc. In the above table, five risks have been registered on the basis of their frequencies and their likelihood. All these risks and their mitigation processes have been discussed in the table so that the necessary steps and responsible bodies can proceed accordingly, yet the risks have not discussed the positive impacts of the risks.
The risk management is a constant process, and organizations like Apple who are leading the global economy to great extent are always at the edge of various risks and for the betterment of the performance, these risks are an essential part, hence, register of the risks time to time only helps the organization to improve its performance and reach a sustainable position. It facilitates continuous improvement for the company. The Risk management bodies are, therefore, responsible for preparing a risk register and revise them on a regular interval so that the performance can be increased and the risks and their advancement can be updated along with the time, as the effects and impacts do not stay the same all throughout (Register, 2017).
Recommendations
There are certain recommendations which need to be undertaken by the company in order to ensure that it can mitigate risks at a certain level and with efficiency,
Regular Risk Appraisal
It has been observed from the above discussion that there are certain risks which are faced by Apple. Apart from the mentioned five risks, there are certainly other risks that can threaten the organization s performance in the global market if not properly identified in time. Hence, it is essential for the organization and its risk management team to regularly check and appraise the existing risk factors along with the other possible risks that can affect the performance of the company to a certain level. Thus, it is essential to appraise all the possibilities of risks. The risk management teams’ efficiency and ability to appraise the performance of the existing risk factors and their mitigation measures shall also be considered. Identifying the risk mitigation process is not enough, for the performance of the organization’s development. The team must also monitor the measures that have been taken and update on the same so that the company can effectively eradicate the issues.
Using Risk Estimation tools and regular upgrade
Usage of risk estimation tools and techniques is essential to make the process of risk management much more efficient as the estimation tools can calculate the risks with statistical analysis and data that can provide a more calculative and accurate idea of the risks and can differentiate between two closely situated risk factors. The installation and operation process of the tools can be expensive at the initial stage but as the company has a large customer base and great market share, using tools of such kind can only facilitate the performance.
On the other hand, it needs to be understood not only bringing a tool can work if they are not updated time to time, but Apple must also insist on the application of the tools and upgrade the same regularly to ensure that the risk identification and the impact rate calculation are just and accurate. Hence, it will eventually help out the risk management team to work with much more satisfaction and adequacy for the organization.
Conclusion
After discussing all the different areas and aspects of the organization it has been observed that risk management is an essential part of the business and for the advancement, the various organization often take risks which can be beneficial for the growth of the organization itself, but at the same time, it can lead to a threat to the sustainability and longevity of the organization. In this particular report, the discussion has been made on the global business giant Apple Inc. which is a global manufacturer and supplier of premium quality smart devices like smartphones, Laptops, and Computers. The organization has been performing with ease in the global market. Here, the company’s aim has been discussed, and it has been observed that the company is inclined to provide quality products that are unique in design and user-friendly as well. However, certain risk factors are faced by the company in the global market, and those risks have been discussed in the chapter thoroughly (Willumsen, et al.,2019). The chapter shows that the risk threshold is a concept that deals with the level of tolerance in terms of risks. Four risks and their threshold have been mentioned.
Similarly, a total of five areas of risk have also been discussed briefly in the risk register. The risk register has been presented based on the risks the company is likely to face or face in the current scenario. Hence, a set of recommendations has also been mentioned in the report, which can help Apple make its risk management process much more efficient than now and ensure that it can timely identify the risks that the company is likely to face in the future. If it can work on these areas and take the necessary steps, the company is likely to hold the position for a longer period.
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