The pros of implementing an Enterprise Risk Management System are to forecast potential risks and prevent significant risks and work with the company’s culture to achieve the entity objectives. The cons of implementing an Enterprise Risk Management System are involved with too many resources, sometimes it is quite time consuming and hard to determine the possibility of the risks.
2.Use COSO’s eight ERM components – Internal Environment, Objective Setting, Event Identification, Risk Assessment, Risk Response, Control Activities, Information and Communication, and Monitoring ---to evaluate EDS’ risk management processes under Brown. Prepare a report using Simons’ (1999) risk exposure calculator to assess EDS’ internal environment and Simon’s levers of control when discussing their control activities.
Using Simons’ (1999) risk exposure calculator:
Growth = Pressures for performance + Rate of expansion + Inexperience of key employees = 4+4+1 = 9
Culture = Rewards for entrepreneurial risk taking + Executive resistance to bad news + Level of internal competition = 4+4+5 = 13
Information Management = Transaction complexity and velocity + Gaps in diagnostic performance measures + Degree of decentralized decision making = 5+4+1 = 10
In a total, the risk is 32. It falls into the caution zone.
3.Why did Brown fail? Was he just unlucky in the aftermath of 9/11 or were EDS’ issues more systemic?
There are two reasons that Brown failed. The first one is too focus on the short-term profit and did not pay attention to the long-term. Brown sacrificed the long-term profit to achieve a short-term boom. The second one is that he did not listen to other people’s advice towards the targets. He was just executive resistance to bad news. No, he wasn’t. No matter whether 9/11 happened or not, his strategy would fail.