Risk Management Enterprise and A Case Study on Starbucks

HOW TO CREAT A RISK INTELLIGENT ENTERPRISE

Presenter: Karen Ning

Case Study: Starbucks’ Penetration Into Asia Market

AGENDA

1. A Quick Recap of The Risk Intelligence Enterprise 2. Case Study: Starbucks Entering Asia Market 3. Four Risk Areas: Starbucks Case 4. Conclusion: 3 Pillars to Create/Sustain A Intelligence Enterprise

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¢  Protect existing assets & create future value. Understands that risk management must be built into core ways of protecting existing assets and of creating future value

¢  Consider interactions among multiple risks. Considers interactions among multiple risks instead of focusing on one single risk, and considers the impact that could result from multiple threats

¢  Treat turbulence as inevitable. Assumes turbulence is inevitable and emphasizes prevention and preparedness to improve both resilience and agility

¢  Create common language. Create common language of terms and metrics for value and risk, and a culture in which people account for value and risk in every key decision and activity

A RECAP OF THE RISK INTELLIGENCE ENTERPRISE Organizational Characteristics

Organization

A RECAP OF THE RISK INTELLIGENCE ENTERPRISE Risk Intelligence Enterprise Framework

A RECAP OF THE RISK INTELLIGENCE ENTERPRISE Four Risk Areas

• Risks related to legal and regulatory compliance

• Risks in financial reporting, market, liquidity, and credit risks

• Major risks that affect the organization’s ability to execute

• Risks both to and of the organization’s objectives

Strategic Risks

Operational Risks

Compliance Risks

Financial Risks

How Starbucks Enters Asia Market Successfully Utilizing Risk Intelligence Enterprise

AGENDA


¢  How does Starbucks achieve a similar profitability in Asia compared to the US market?

¢  What does the coffee giant has to do to prepare for an unknown environment?

Case Study: Starbucks Entering Asia Market Starbucks and China Market Background

“We’re talking to a lot of companies that are saying, ‘I’m ready. How do I come?’ ” (Max Magni, McKinsey & Company China)

Risks Advantages

Chinese consumers’ saving habits

Chinese government backing spending spree

Consumption in smaller cities lagging far behind larger ones

China’s nouveau riche and emerging middle class

Complex national distribution Salary raise to encourage consumption

Marketing/Advertising largely local

Government’s plan to create long term economy growth

Case Study: Starbucks Entering Asia Market Starbucks and China Market Background Continued

Case Study: Starbucks Entering Asia Market Apply the Framework

Risk Governance

Direct & Oversee

• Howard Shultz, CEO plus 11 others

Board of Directors


Risk Ownership

• Identify risks related to consumer behaviors – question for example

Risk Process/Risk Classes

Business Units

Can Starbucks coffee survive in traditional tea-drinking countries?


• Develop strategies according to the identified risks • Menu modification • Flavor Profiling

Risk Infrastructure

Common Risk Infrastructure

Executive Management

Menu Modification: •  Local tea options available •  Alishan Oolong, Ruby Black

tea, Bi Luo Chun, Oriental Beauty Oolong

Flavor Profiling: •  Red Bean Green Tea Cream

AGENDA


FOUR RISK AREAS: STARBUCKS CASE

¢ Strategic Risk – Serve more food ¢ Operational Risk – Slow down services ¢ Financial Risk – Publically traded company ¢ Compliance Risk – 2008 Chinese Milk Scandal

Strategic Risk

Operational Risk

Financial Risk

Compliance Risk

FOUR RISK AREAS: STARBUCKS CASE

Starbucks, Tapei Medical University Hospital

Starbucks, Central, Hong Kong

AGENDA

1. A Quick Recap of The Risk Intelligence Enterprise 2. Case Study: Starbucks Entering Asia Market 3. Four Risk Areas: Starbucks Case 4. Conclusion:3 Pillars to Create/Sustain A Risk Intelligence Enterprise

CONCLUSION: 3 PILLARS TO CREATE/SUSTAIN A INTELLIGENCE ENTERPRISE

¢  Pillar 1: Process ¢  Pillar 2: People ¢  Pillar 3: Information Technology

Q & A