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APPLE INC. RISK MANAGEMENT ANALYSIS 9
8. Culture risk Effect of different market preferences and consumer behaviors As company goes global, its risk management should be assessed from top to bottom which is structured around ethical and risk-intelligent behaviors, considering the differences in culture in each of the area it is operating in. Different markets have its own preferences and behaviors, failure in identifying the differences would lead to potential losses in product failures (case of iTunes in countries that are exposed to high level of piracy). Action Prioritizing based on probability and impact (qualitative risk analysis) After identifying the risks that are relevant to the MNE, the next step is to do a qualitative risk analysis in which the risks will be prioritized and ranked based on the likelihood and also potential impact towards the company. Based on the two criteria (probability and impact) here are the ranks of the identified risks:1. Over regulation risk 2. Security risk 3. Financial risk 4. Third party risk 5. Operation risk 6. Market, geopolitical, culture risk The top three risk in the list are ranked based on past occurrences and possible potential impact towards the company. Regarding over regulation, as mentioned previously, Apple has been investigated by the FBI regarding tax avoidance in the past. According to Thielman (2016), if the allegations are proven to be correct, Apple would have owed an estimate of USD eight billion in taxes. Moreover, a change in tax regulation overseas would also adversely impact Apple’s net earnings since it is currently enjoying a very low tax rate. Next, regarding security risk, Apple has had an issue in the past in which its iCloud’s security was breached. This case cost Apple an estimated USD 23 billion in total losses (Matthew, 2014). The third high ranked risk, which is financial, has been and will continue to be one of the main risks of MNEs. This is due to the volatility of exchange rates in each market in which an MNE provides its products and services will always pose a threat towards the MNE’s performance.Adoption Controlling risks The next step in the international risk management process is to control the risks. This step refers to the past and current risk responses that has been successfully carried out by the company. These includes the risk that has successfully been mitigated or exploited in the past, which are mostly the lower priority risks that has been ranked in the previous section. This helps an MNE to focus on which risks are manageable and which are in need for more attention.APPLE INC. RISK MANAGEMENT ANALYSIS 10
Assurance Planning risk responses After identifying and prioritizing the relevant risks towards the MNE, the next step is to plan the appropriate responses towards the risks. In order to plan the appropriate responses, we need to take into consideration which are the key drivers that are relevant to the MNE (the eight identified risk categories). Next, we also need to understand the main factor affecting it, which is the 13 forces of globalization which has significantly increased the continuum of risks. Last, we also need to take into account the core concept, which is the principle of international risk management itself.