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Risk Management and Apple

Risk management is the process of prioritizing risks based on probability and impact. For a company like Apple, risk management is used to evaluate risks of new products and services. Developing a risk management plan involves identifying potential risks, assessing probability and impact, and determining ways to mitigate risks and reduce impact through contingency planning. The risk management process helped Apple evaluate risks of introducing innovative new products like the iPod when the company's future was uncertain.

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663 views

Risk Management and Apple

Risk management is the process of prioritizing risks based on probability and impact. For a company like Apple, risk management is used to evaluate risks of new products and services. Developing a risk management plan involves identifying potential risks, assessing probability and impact, and determining ways to mitigate risks and reduce impact through contingency planning. The risk management process helped Apple evaluate risks of introducing innovative new products like the iPod when the company's future was uncertain.

Uploaded by

deviant24x
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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RISK MANAGEMENT

(WITH APPLE AS AN EXAMPLE)


Brandon Russell
WHAT IS RISK MANAGEMENT?
Risk Management is the process of prioritizing risk
with the greatest loss and the greatest probability
of occurrence. While it is often associated with
economics, risk management can be applied to a
wide range of disciplines such as psychology,
social sciences, engineering, statistics, and more.
HOW CAN IT BE USED FOR A COMPANY LIKE
APPLE?
Risk management in a company such as
Apple Inc. would be utilized to answer
such questions as:
• How will introducing new products
affect their profits?
• What the cost of expanding their
services and if that cost is excessive,
is it a good time to expand?
• How can they effectively compete for a
larger segment of the market?
• What kinds of products and services
are Apple’s customers looking for, and
at what price?
DEVELOPING A RISK MANAGEMENT PLAN
• Event: What could happen?
• Probability: How likely is it to happen?
• Impact: How bad will it be if it happens?
• Mitigation: How can you reduce the Probability (and by how
much)?
• Contingency: How can you reduce the Impact (and by how much)?
• Reduction = Mitigation X Contingency
• Exposure = Risk – Reduction
WHAT IS EXPOSURE?
Exposure is the amount of risk that
can’t be simply avoided, otherwise
known as threat or liability. Often
risk management can be as simple
as a cost versus benefits formula.
Any action that you take has a
certain level of risk; the important
thing is to determine whether the
risk of implementing a change will be
higher or lower than the risk of not
implementing the change.
WHAT WAS THE RISK FOR APPLE?
In the case of Apple, there was a
substantial amount of risk producing
a new product (like the iPod/iPhone)
outside of their standard products;
however, there was also a large
amount of risk associated with not
assuming the risk of implementing a
change. At the time Apple came out
with the iPod, they were close to
bankruptcy and required an
investment of $150 million dollars
from Microsoft to get the company
back on its feet.
HOW THE RISK MANAGEMENT PROCESS
WORKS FOR APPLE
• Event: What could happen?
Producing the iPod could be successful and change the image of Apple, and
the kinds of products that are produced by Apple, or could be a flop and taint the
company’s image, as well as be a drain by using money without making a profit.
• Probability: How likely is it to happen?
Is the product innovative? Will it be a draw to customers and produce profits for
the company? Or is the risk of failure too high in relation to the cost of producing
the product?
APPLE’S RISK MANAGEMENT CONT…
• Impact: How bad will it be if it happens?
If the company fails to produce a product that is a success, will it bankrupt the
company? If Apple wasn’t able to produce something new and innovative, would
it be able to compete with other computer companies?
• Mitigation: How can you reduce the Probability (and by how much)?
What steps can be taken to prevent a new product from failing? How can Apple
ensure quality, how can the company determine the potential customers of the
new product and how can they market the product to bring attention to those
potential customers?
APPLE’S RISK MANAGEMENT CONT…
• Contingency: How can you reduce the Impact (and by how much)?
If the iPod is unsuccessful and doesn’t sell, what can Apple do to prevent the
product failure from bringing down the entire company?
• Reduction = Mitigation X Contingency
If the product fails despite reducing the probability of failure through research
and product development, what can Apple do to adapt and change the product
to better suit the customer’s needs?
THE BIG QUESTION
• Exposure = Risk –
Reduction
After the company has done
everything possible to reduce
risk, how much is left? Does
the remaining risk outweigh
the possible benefits of going
forward?

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