Requirements of an SQF 2000 Compliant Food Safety Management System

The SQF 2000 Code places an emphasis on the application of HACCP. The implementation of a Level 2 SQF 2000 compliant food safety management system addresses requirements using CODEX Alimentarius Commission and the National Advisory Committee on Microbiological Criteria for Foods (NACMCF) HACCP Guidelines to develop safety plans.

An SQF 2000 compliant quality management system needs to comply with 3 key sections of the SQF Code, SQF 2000 System Requirements, Food Safety Fundamentals - Building and Equipment Design and Construction and Pre-requisite Programs.

Section 4 SQF 2000 System Requirements prescribes the expected contents of a food safety management system. Firstly Senior Management needs to demonstrate commitment to complying with the Code and producing safe products. A documented Management Policy needs to reinforce this commitment and be effectively communicated. Senior Management is required to allocate responsibility and authority, appoint an SQF Practitioner, document job descriptions and ensure adequate training. The Quality Management System should be documented in the form of a Food Safety Manual and include the scope of the system. The documents and records of the management system need to be controlled.

Requirements of an SQF 2000 Compliant Food Safety Management System

Senior Management is required to conduct management reviews, establish a system to manage complaints and document business continuity plans.

The SQF 2000 Code requires the safety management system to include specifications for and control Raw Materials, Packaging, Contract Service Providers, Contract Manufacturers and Finished Product.

Section 4.4 Attaining Food Safety requires compliance with Food Legislation (Regulation), for an organisation to establish Safety Fundamentals, Safety Plans, control Incoming Goods and Services, establish Corrective and Preventative Action procedures and a Non-conforming Product/Equipment procedure. Control of Product Rework, Product Release and rotation of Stock is also required.

Section 4.5 addresses Verification and Validation requirements.
Responsibility, Frequency and Methods for Verification, Validation
Verification of Monitoring Activities, Product Sampling, Inspection and Analysis and Internal audits should be documented and included in a Verification Schedule.

The rest of section 4 of the SQF 2000 Code covers the requirements for Product Identification, Trace, Withdrawal and Recall, Site Security
And those for Identity Preserved Foods.

Section 5 of the SQF Code outlines the standards required for Building and Equipment Design and Construction much of which is as per CODEX guidelines. Fundamentally Sites should be approved and in a suitable location or the environment managed to prevent safety risk. There is an emphasis on the building construction standards expected in food handling areas. The standard prescribes standards for equipment, utensils, protective clothing, hand washing facilities and vehicles. Section 5 also addresses the control of water and ice supply, storage facilities, separation of functions, on-site laboratories, staff amenities, first aid facilities and waste disposal.

Section 6 of the SQF 2000 Code clarifies the expected pre-requisite programs including personnel practices, training, calibration, pest control, maintenance, cleaning/sanitation, the monitoring water quality, control of physical contaminants, supplier approval, transport/delivery, waste management and allergen control.

Requirements of an SQF 2000 Compliant Food Safety Management System
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You can read more about the SQF 2000 Code at our website where you will find more details of that and a number of other quality management systems.

Effective Management Through Leadership

Leadership and Management

Leadership and management skills are essential throughout our working life with leaders found in industry, commerce, sport, and even social settings. The aim is the same wherever they are found, leading a group towards a common goal or set of stated objectives. The essential leadership and management skills can be learned through training courses or from studying textbooks, though the very best learning comes through on their job experience.

Effective leadership: Everyone Working Together

Effective Management Through Leadership

It is only possible to truly appreciate the complexity and skills involved in effective leadership in guiding a group, through practising leadership and management in the field. Those following the leader will be disparate in many ways having different skill sets, motivations, personalities and tastes. Everyone is different, but it is essential that they work together. An effective leader is able to bind the group together in whatever setting, sports, school, the workplace, or even socially.

Companies need effective leaders to ensure their success. This is why we find many companies sending their management staff on leadership and management courses. Even those with substantial experience are likely to benefit from refresher courses. This helps keep managers motivated and channel their experience and knowledge in a positive way in encouraging those around them.

Effective leadership is important in schools too, with teachers needing leadership and management skills in order to go about their work to best effect. It is vital that they can motivate the pupils, encouraging them to learn and recognise learning opportunities from problems and challenges. The pupils will need to be excited by the various topics presented to them in order that they retain that knowledge and learning. If not, the teacher will have failed them - a burdensome responsibility.

Effective team leaders are needed for sports teams too, without them then morale may be depressed and the team then working as a bunch of individuals. This may make itself known in terms of poor results against possibly a less skilful set of individuals but organised as a successful team working together.

Leadership and Preparedness

All of the above examples show us where leadership and management courses may help us. They assist in preparing us to make on the fly decisions, responsive and appropriate to the circumstances. They show us how our collective power is only unleashed through co-ordinated team action, focusing our energy positively towards shared goals. We can train ourselves to be good leaders, prepared for any eventuality. By preparing for the worst that may happen, we are also preparing for success.

Effective Management Through Leadership
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Mark J Emslie has been a business leader most of his working life. There is more useful information and additional resources on Leadership Coaching at www.Leadership4All.com.

Corporate Risk Management - The Importance of Risk Management in Business

Corporate risk management is an essential part of any business. It is imperative for bigger businesses because these businesses require reaching out to many different parts of the globe. The failure of big corporations can have a negative impact and the consequences can be felt all over the world. Hence it is very important to for a business to acquire knowledge related to various kinds of risks while running a specific type of business.

The risk management is a technique that is used to handle risks within a company and enhance the overall wellness and security at a workplace. This kind of risk management primarily focuses on introduction and implementation of varied techniques within a company. This works towards handling various risks related to the expansion and profit prospects of a business.

Here is an overview of some of the crucial steps carried out by a business owner to ensure successful risk management program.

Corporate Risk Management - The Importance of Risk Management in Business

1. Integrating risk management policies into the company's core values.
2. Maintaining those values via actions.
3. Performing risk analysis.
4. Implementation of various strategies to minimize it
5. Building of screening systems to encourage early warnings related to prospective risks.
6. Periodic analysis of the management program.

There are various companies that offer management services to the organization. These services and programs are designed in a way to determine the types of risks involved in a business. They promote techniques to alleviate and remove these risks from the company to avoid potential disasters. It is important to have a clear understanding of the type of these issues that can be fatal to a business in the long run.

Risk management helps in recognizing, reviewing and sorting varied risks towards an organization. It also offers adept help and assistance to control and reduce all kinds of unexpected events or circumstances that may occur. Once an organization develops an understanding for the potential issues and various ways in which these risks can be managed, there is an increased probability of survival of the business.

Companies offering the management services understand various risks that a business may suffer from and manage these in a way to help the business operate without any loss and interruption. Implementation of corporate risk management can work towards saving your business from potential risk and increase profit prospects to a significant amount.

An organization that wants to survive all odds and risks must focus on employment of risk management services. It is imperative to learn about various ways to reduce potential risks to your business to ensure its smooth running.

Corporate Risk Management - The Importance of Risk Management in Business
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Know more about corporate risk and how a legal company might be able to help you deal with such cases. Knowing more about any avoidable risks can be beneficial for your company.

Supplier Management - What is a Supplier Relationship Management Programme?

A Supplier Relationship Management (or SRM) programme can deliver significant benefits for both the supplier and the buyer. But exactly what is a SRM programme and how does it deliver value? Here are some commonly asked questions and their answers.

Q. What exactly is SRM?

A. Type supplier relationship management into any search engine and the chances are that it will return several hundred thousand hits. The majority of these will be related to software applications. Yes, you may need an application to track details about your suppliers but a real SRM programme is far more than this. It is a way of working with your critical and strategic suppliers to systematically identify opportunities to reduce cost, improve service and quality and innovate. These opportunities are then run as projects with team members from both sides.

Supplier Management - What is a Supplier Relationship Management Programme?

Q. Why is SRM needed?

A. In more and more situations it is no longer individual organisations that win but the supply chains in which they operate. Businesses (and increasingly public sector and not-for-profit organisations) cannot survive in isolation. They need to form strong alliances with partners up and down the supply chain and together find innovative ways to serve their end customers better by being better, faster and cheaper. This is the reason and basis for SRM.

Q. Who should you partner with?

A. If SRM is to work it has to deliver benefits for both the buying and supplying organisations. This means that you have to partner with those suppliers with whom you can forge a mutual benefit. This might be because you can drive out cost by merging operations (this is at the core of the reason for outsourcing) or because together you can develop superior products (take a look at industries such as automotive) or because you need each other to win profitable business (much as IT related companies form alliances to bid for work).

Your starting point to identify SRM partners is to create your supply positioning matrix (importance of the things you buy versus the supply risk or complexity) and identify the suppliers for your categories in the strategic quadrant. Then look at the preferencing of each of these suppliers (whether or not the market is important to them and whether or not you are seen as a key account). Where there is a match between the category being strategic for you and a supplier who also sees the market and you as core to them then you have a potential SRM partner.

Q. How do you go about starting a SRM programme?

A. When you have selected a potential SRM supplier check with them that this is a strategic intent for them as well. Decide how you are going to baseline the relationship and then measure where you are. Identify the gaps and start to drive out projects that will close the gaps. Supplement this with an exercise to map each side's goals against the other and see if this suggests ideas for developing a mutual benefit.

Supplier Management - What is a Supplier Relationship Management Programme?
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Do you want to learn more about effective supplier management?

If so, download my brand new free ebook "The 6 Steps to Effective Supplier Management" here:

http://www.SourcingStrategyWizard.com/Supply_Mgt.htm.

Steve Carter is an experienced procurement practitioner and published author and runs online training and coaching courses.

Risk Management Within an Organisation

Introduction

This manual is written to advise on an approach to managing risk, with regards to procedures to follow in conducting risk analyses and treatment.

Background of my Organisation

Risk Management Within an Organisation

I will focus my attention on the management of risks for my company in general. My company is involved in the trading of steel products, mainly for construction purposes, as well as the sales and purchases of agricultural products such as beans, maize and rice. With regards to these products, letters of credit (LCs) have to be initiated regularly for such products to be sold overseas. As part of the accounting and finance function, my responsibilities are not only in the proper accounting treatment of such transactions, but also as part of the team involved in a new trade financing project to ensure the smooth flow of these transactions from the opening of LCs, the financing as well as the delivery of these products. Such a flow will involve the cooperation of both the operations and the accounting and finance departments.

Purpose of Risk Management

Business risk relates to exposure to certain events that will have a negative impact on the strategies and objectives of the company. Hence business risk is due to two factors: the probability of an event occurring as well as the seriousness of the consequences (Bowden, Lane and Martin, 2001). There are several risks that are more specific to my organization, and are shown as follows:

1. Strategic risk, such as poor marketing strategy and poor acquisition strategy, as a result of poor planning (Bowden et. al, 2001). Poor marketing and acquisition of different grades of steel and agricultural products can prove the downfall of the organization.

2. Financial risk, such as lack of credit assessment and poor receivables and inventory management, as a result of poor financial control (Bowden et. al, 2001). Inadequate credit assessment of potential trade and other debtors as well as low debtors' turnover can be a poor reflection of the company's strategy and objectives.

3. Operational risk, such as poor practices and routine actions, as a result of poor human actions (Bowden et. al, 2001). Non-conformity to the organization's safe practices or even willful actions by employees can create potential operational and financial losses to the company.

4. Technical risk, such as equipment and infrastructure breakdown and fire destruction, as a result of failure of physical assets (Bowden et. al, 2001). Such risks can be prevalent in my organization if appropriate actions are not taken to prevent these technicalities. Unfortunately, many organizations tend to focus too much on the performance and cost dimensions of technical risk and manage them too heavily (Smith and Reinertsen, year unknown).

5. Market risk, such as inadequate market research, which is the risk of not meeting the needs of the market, assuming that the specification has been satisfied (Smith and Reinertsen, year unknown). This risk may be more important compared to others, however it is less manageable due to the risk being less objective and quantifiable compared to say technical risk

As a result of such risks mentioned above, coupled with the advancement in technology and competitive pressures, risk management has taken a more important role in the existence of businesses today (Bowden et. al, 2001). Risk management relates to the logical and systematic way of establishing context, identifying risks, analyzing risks, evaluating risks and lastly, treating risks. This approach also involves communicating and consulting the findings as well as monitoring and reviewing the treatment of risks. This approach to managing risks is known as the AS 4360 method (Bowden et. al, 2001).

Risk Management

Step 1: Definition of Context

This relates to the establishment of context in terms of strategic, organizational and risk management (Bowden et. al, 2001). The strategic context is concerned with the relationship between the organization and its parameters in terms of financial, operational, competitive and social context (Bowden et. al, 2001). In the case of my organization, we are concerned with our financial objectives (i.e. sales turnover of US million with a profit margin of at least 12% annually), products with high quality and good customer satisfaction, as well as good market position (one of the top suppliers of steel in the regional construction industry). The strategic context also requires the organization to identify the stakeholders, which includes the owners, employees, customers, suppliers as well as the local community (Bowden et. al, 2001). In addition to that, my organization will have to be accountable to our shareholders and the media as well, since we are a local listed company.

The organizational context will be concerned with wider goals, objectives and strategies of the company as a whole (Bowden et. al, 2001). In this context, we have to establish and implement sufficient key performance indicators (KPIs) and critical success factors (CSFs) that are suitable to the different aspects of the business. There are a couple of KPIs that are commonly used in my organization:

1. Revenue and profit targets: These are mentioned above.
2. Customer satisfaction: Surveys are sent quarterly to our suppliers and customers to ensure at least 90% customer overall satisfaction.
3. Stocks update and on-time deliveries of goods: Sufficient stocks are maintained and retrieved from suppliers and deliveries have to be made on time to customers at least 98% of all sales orders.
4. Timely submission of monthly accounting and sales records to head office: The deadline of submission of such reports is usually the 5th of each month, which has to be strictly adhered to.

On a wider basis, such KPIs are also linked to CSFs in my organization, which includes the following:

1. Maintaining a healthy position in our markets: This is mentioned above.
2. Supportive top management open to marketing and financing ideas: The directors and senior management have a fortnightly meeting with lower management on possible ideas and brainstorming on ideas and possible financing from banks on certain products.
3. Sufficient funds and resources in place: Funds have to be in place for LCs, which are converted to trust receipts, which have to be settled within certain tenure, coupled with adequate manpower and technologies for proper functioning of the organization.

With these KPIs and CSFs in mind, the various activities of the can be further segregated into smaller teams and activities to provide a more logical flow for better analysis (Bowden et. al, 2001). In my organization, the sales teams are broken up into smaller groups in charge of various products for steel and agricultural aspects. This is also done likewise for the finance department, which has smaller teams in charge of receivables, payables and other administrative functions.

Step 2: Identification of Risks

This process aims to identify all events, which might affect the organization as a whole. In such a scenario, there is a need to identify all causes and potential situations (Bowden et. al, 2001). After which, we will proceed to link the risks, both threats and opportunities, with key criteria that will have a direct impact on the organization (Bowden et. al, 2001). There is also a requirement to approach these risks with proactive and reactive responses (Bowden et. al, 2001). There are several tools that can help with identifying risks, namely brainstorming, checklists and judgements based on experience.

In my organization, there are several tools used to identify risks. For the finance department, there is a quarterly checklist used on different risks involved, which can include the amount of tax incurred and tax credits agreed with the tax authorities, the amount of receivables and stock updates and how efficient their respective turnovers are. Provisions for such items are also raised based on prior experience. For the marketing and operations department, weekly meetings are conducted whereby brainstorming and systems analysis are used to identify possible risks with regards to competition, changes in prices and tastes of customers as well as the safe-guarding of stocks at our premises. It is further recommended that a product plan with a product manager be put in place, with rankings are given to the priority of such risks and the inputs, processes and outputs should be investigated in greater depth (Bowden et. al, 2001).

It is mentioned that a test market will be useful if there is a high degree of uncertainty about the eventual sales of the new product as the launch date approaches (Cooper, year unknown). My organization is currently looking at possible new sales of liquor and diesel for its overseas markets. However, these possible sales are not considered new products in the existing markets. With speed and the competitive environment being important facts, a test market may not be applicable in our scenario (Cooper, year unknown).

In addition to the launch of possible new products, there are several pitfalls in considerations for my organization:

1. Lack of market orientation. These are possible risks considering insufficient market analysis and not understanding customer needs and wants.
2. Poor quality of execution. With regards to my organization, the grades or quality of the flammable new products might be filled with deficiencies, hence not meeting customers' needs.
3. Moving too quickly. A too hasty approach to launch these products might render too many mistakes in the process and compromise the quality and timing of the promotional activities (Cooper, year unknown).

Step 3: Risk Analysis

This step involves the estimation of the likelihood and consequence of possible risk events. These are often evaluated using the current controls in place (Bowden et. al, 2001). Such controls are needed to ensure effective operations, reliable reporting systems and proper compliance with rules and regulations (Bowden et. al, 2001). In my organization, controls in place will include past records, market analysis given by traders from different countries, published literature in the form of accounting and marketing magazines and internal and external auditors' reports.

There are several techniques that are used to establish likelihood and consequence, namely structured interviews, multi-disciplinary groups of experts, assessments using questionnaires and computer modelling (Bowden et. al, 2001).

The decision tree technique can also be used whereby the expected net present value (NPV) of cash flows associated with each individual outcome is shown (Vlahos, 2001). This technique is useful for the following reasons:

1. It improves our understanding of each outcome and makes assumptions more forthcoming.
2. It is useful for documenting and communicating thoughts on uncertainty and also helps generate alternatives for better value enhancement.
3. Managers can monitor each stage of the project and make appropriate analysis with regards to decisions made at each point
4. The outputs in terms of expected NPVs generated can be used as potential inputs for projects selection (Vlahos, 2001).

This technique is highly recommended for my organization in two ways:

1. This can be used in decisions made by the marketing department in terms of which products to obtain for potential markets.
2. The finance department will also find it useful in terms of the different ways of financing (i.e. direct cash financing, using LCs or trust receipts) in consideration for the building of the trade finance project.

There are two types of risk analysis, mainly qualitative and quantitative (Bowden et. al, 2001).

Qualitative Technique

A qualitative method makes use of words or descriptive scale and comes in the form of a ranking structure, alternating between Rare and Almost Certain. Such a method is concerned with raking likelihoods and consequences (Bowden et. al, 2001). With regards to construction projects, which can be applicable to my organization, the consequences can range from insignificant (whereby there is no injuries and minimum financial loss), moderate (injuries with medical help required and moderate financial loss) to catastrophic (death with significant financial loss). Such a qualitative table with various likelihood and risk levels matrix can be useful in the following scenarios:

1. Initial screening guide to identify possible risks for further analysis.
2. Where the level of risk does not justify the time and effort required for more analysis.
3. Insufficient numerical data, which renders a quantitative analysis useless.

For the qualitative analysis, the management and staff with regards to the risk events at different levels must work through the risk-ranking matrix. Each likelihood and consequence criteria should be considered in order to put events in the appropriate category (Bowden et. al, 2001).

However, there are several disadvantages associated with this technique:

1. It may not be too accurate as events within the same category may have substantially different levels of risk.
2. There may not be a common basis for comparison of risk i.e. on dollar basis or number of deaths.
3. There is no clear justification with regards to the process of 'weighing' risks
4. There could be different interpretations with regards to the meaning of different consequences i.e. the word catastrophic can mean a great deal to some people, while others might take it more lightly.
5. It can be difficult to translate the findings from this technique to match that of a quantitative method (Bowden et. al, 2001).

With these pitfalls mentioned above in mind, I would think that it will be better to consider the qualitative technique as more of an initial screening exercise which should be used concurrently with the quantitative technique.

Quantitative Technique

This approach takes the product of likelihood and consequence, with the consequence expressed as an actual variable (Bowden et. al, 2001). Such a technique is more reliable as it relies on numerical values, with estimates of frequency being made in terms of event frequency (Bowden et. al, 2001).

There are several drivers of risks, namely, technology, people, systems, organizational factors and external factors (Bowden et. al, 2001). In my organization, some drivers of risk might include how updated my computer versions of accounting and sales systems, the competency and educational levels of the employees, the number of new ideas by lower management accepted by higher management and possibly the amount of pollution our products might cause to the environment.

The quantitative analysis is further broken down into likelihood and consequence criteria. For the likelihood criteria, it is expressed as a probability instead of frequency, thus ensuring that risks are compared on a similar basis (Bowden et. al, 2001). With similar small events likely to occur, the likelihood of them occurring can be considered as one event. With regards to my organization, examples of such similar events might include:

1. 20 deliveries which are not made on time (more than 30 minutes) to customers resulting in losses of ,000 each for transportation costs
2. 5 deliveries of wrong grades of products to customers resulting in losses of ,500 for transportation and bank charges.

For the consequence criteria, it can be considered in terms of an event leading to possible death or severe losses i.e. financial or reputation losses. In the case of the two examples for likelihood criteria given above, the related consequence criteria are as follows respectively:

1. Free deliveries made for the next trip.
2. Appropriate discounts given for these batches of products sold.

The consequence criteria can also be expressed quantitatively in terms of non-performance or failure to achieve certain KPIs, reflecting on the organisation's priorities in accepting varying degrees of risks. In my organisation's case, the free deliveries and discounts given could jeopardize not only the revenue and profit targets, but also in terms of customer satisfaction (which are important KPIs). As such the consequence criteria can be expressed as the mean or expected value (Bowden et. al, 2001). This is consistent with the Monte Carlo method, which can be used to obtain the distribution of the project or product value associated with trading operations (Vlahos, 2001).

Step 4: Risk Evaluation

Risk evaluation is concerned with identifying which risks must be treated and can be calculated using the product of likelihood and consequence (Bowden et. al, 2001). The risks can be compared with previously established criteria. Different softwares such as the Monte Carlo approach, the sensitivity analysis and the probability distribution can be used to show the effects of major risks for evaluation (Bowden et. al, 2001).

Step 5: Treating Risks

There are several methods of treating risks, namely avoidance, accepting, reduction and transfer of risks (Bowden et. al, 2001).

1. Avoiding risks. In my organization, avoiding such risks would involve possibly not importing highly flammable products such as liquor or diesel (which are part of the consideration for new products) as part of sales and speculating in foreign exchange fluctuations.
2. Accepting risks. Certain risks may be unavoidable. In my organisation's case, we have huge sales transactions in Myanmar, which has just experience a major military and governmental coup. Hence sales in Myanmar may be volatile. These are potential risks, which are already factored in our business considerations.
3. Reducing risks. Currency fluctuations are imminent when trading with overseas counterparts for my organization. Hence LCs and hedging are done frequently in order to mitigate such risks for products purchased and sold to other countries.
4. Transfer risks. For my organization, this is done in terms of insurance coverage for stocks, which are housed in our premises.

Some other popular treatment of risks will include audit compliance programs, contractual obligations and conditions, preventive maintenance, quality assurance and contingency planning (Bowden et. al, 2001). Such treatments of risk are also maintained within my organization.

The different options for treatment of risks should be evaluated and risk treatment plans should be planned and prepared (Bowden et. al, 2001). Such a plan should consider detailed base implementations, risk assessment in terms of threats and opportunities in terms of priorities and recommended proactive and reactive contingency plans. (Bowden et. al, 2001).

The risk treatment schedule and action plan should include the following:

1. The different duties and responsibilities for implementation of plan. Preferably, the plan should involve a project leader and different members in charge of one aspect of the project reporting to the leader.
2. The resources to be utilized.
3. Work breakdown structure for the activities
4. Budget allocation
5. Schedule for implementation
6. Details of the mechanism and frequency for proper compliance to the treatment schedule (Bowden et. al, 2001).

Step 6: Communicating and Consulting

For this stage, stakeholders need to have a common understanding of the project or product situation. Consultation from stakeholders as well as experts is required for better opinions, with communication needed for better coordination (Bowden et. al, 2001).

Such an approach is required for several reasons:

1. To prove that the process is conducted in a systematic manner.
2. To provide records of risks and proper organizational records.
3. To provide relevant decision makers with a proper risk management and action plan for approval and implementation.
4. To provide accountability.
5. To facilitate further monitoring and review.
6. To provide audit trail.
7. To share information (Bowden et. al, 2001).

This report should include the following:

1. Executive summary
2. Scope of project
3. Methodology of study
4. Contextual issues of the project including the restraints
5. Success factors chosen
6. KPIs for each success factor chosen
7. Target and tolerance
8. Any assumptions
9. Top ten risks across all CSFs for the project or product plan
10. Vulnerabilities in phases of the project
11. Responsibilities for managing risks in phases
12. Primary and secondary drivers triggering each risk
13. Existing controls
14. Tables and figures (Bowden et. al, 2001)

Step 7: Monitoring and Reviewing

For the final step, there is a need to develop and apply mechanisms to ensure ongoing review of risks i.e. project leaders should provide a consistent update of the current situations (Bowden et. al, 2001). The effectiveness of the risk management process should be consistently monitored and reviewed (Bowden et. al, 2001).

Conclusion

Risk should be managed on an active basis. Risk management will involve identification of areas of high risks ahead of time, interpreted to the greatest degree possible, with the best technical or marketing talent allocated to the problem, have the problems solved as quickly as possible, and be provided with a contingency plan in case something cannot be resolved (Smith and Reinertsen, year unknown).

Reference List

Bowden, A., Lane, M. and Martin, J. (2001) Triple Bottom Line Risk Management. Wiley.

Cooper. (year unknown). New Products: Problems and Pitfalls. Pg 22-49.

Cooper. (year unknown). To test or Not to Test. Pg 123-129.

Smith, P. and Reinertsen, D. (year unknown). Managing Risk. Pg 207-21.

Vlahos, K. (2001). Tooling up for Risky Decisions. Pg 47-52.

Risk Management Within an Organisation
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Basic Management Skills - What Makes a Good Manager?

Basic management skills are necessary to run a small business. Some business owners believe that leading vs managing is most important. In reality, you need to be able to both lead and manage.

What makes a good manager? There are definite business management styles and skills to focus on; specifically for small business owners. If you're the owner or manager of a small business, it's important to understand what those basic management skills are and to try to incorporate them into your own behaviors. Why? Because some skills are more successful than others and because some styles will engage your employees, while others will dis-engage them.

Business management skills such as planning, decision making, problem solving, controlling and directing, and measuring and reporting are needed for the daily operation.

Basic Management Skills - What Makes a Good Manager?

Using their small business plan, effective managers direct the business operation. Communications, benchmarking, tracking and measuring are tactics and strategies that they use to check their direction, to adjust the plan (if necessary), and to move the business forward. Good managers act to achieve the desired results; and they manage people and resources to get where they want to go.

Understanding what makes a good manager, means understanding what motivates employees.  How do you build an environment and culture that encourages employees to participate? How do you increase employee productivity and employee satisfaction; simultaneously? How do you recruit the best talent, and then keep them? How do you train your staff to solve problems, make decisions, and involve others in the process? These are just some of the challenges, and responsibilities, of managing.

As a manager, you need to understand what the common business management styles are (autocratic, paternalistic, democratic, and passive are the most common styles). And you need to understand what your style is, and how that style affects business results.

Four Business Management Styles:

Autocratic: The manager makes all the decisions; a "command and control" (militaristic) management style. Focus is on business; doesn't want any personal 'stuff' to get in the way. The benefit is that decisions are made quickly. The cost is in high employee turn-over as employees find this style difficult, and stressful. Paternalistic: The manager makes all decisions (or most of them) but focuses on what's best for employees. The benefit is that employees feel the business is taking care of them. The cost is that employees don't take care of business - they are uninvolved and have little at risk. Democratic: The manager wants input from the whole 'team' and majority rules. Often good decisions are made and employees feel involved in the business (the benefit to this style) but the process is very slow and you can't always make everyone happy. Passive: The manager abdicates responsibility to the employees; and calls it delegation. The benefit is that employees often step forward and learn in this environment. The cost is that the direction is scattered and there can be numerous false starts because there is no real manager.

Managers typically use more than one style, depending on the situation. If brainstorming creative new product ideas is today's focus, then the manager may want to use a democratic or passive style. If a decision about keeping or firing an under-performing employee must be made, the manager may need to use an autocratic or paternalistic style (hopefully not a democratic or passive style).

In most small businesses, the business owner is also the manager and the leader. In your business, make sure that you have a good understanding of your own business management styles, skills and qualities and learn how to control them and use them as necessary.

Basic Management Skills - What Makes a Good Manager?
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To understand more about what makes a good manager, or the difference between leading vs managing, it is good to focus on the qualities of an effective manager as compared to the qualities of an effective leader.
Kris Bovay is the owner of Voice Marketing Inc, a business and marketing services company. Kris has 25 years of experience in leading large, medium and small businesses. For more pricing strategies and other small business resources and services go to the more-for-small-business website.
Copyright 2008 - 2009 Voice Marketing Inc.

Measurable Goals For Performance Management

In a recent email to me, mezhermnt subscriber Corina from Hong Kong asks:

"This will be the first year my company uses the SMART approach to do performance management. As a manager, I am supposed to set up measurable objectives for my subordinates. It's not a problem for me to set up measurable objectives for my assistant managers as they have deadlines to meet. But when it comes to my secretary and the clerical staff, I am not sure how to set measurable goals for them as their duties are very routine and tedious. Could you give me some examples?"

Are deadlines the only thing worth measuring?

Measurable Goals For Performance Management

Corina mentions that setting up measurable goals for her assistant managers is relatively easy because they have deadlines to meet. Does this mean that the only results worth measuring for the assistant managers is whether they complete things by their deadlines?

What about completing the right things, instead of wasting time and effort and money on doing things that really don't need to be done at all?

And what about completing things well, instead of rushing to get it done on time but producing an end result that falls below the standards required?

Spend the time to think about results, before thinking about goals and measures.

So this is the first key to setting measurable goals for performance management: first spend some time to define the most important results that the person, in their role, is responsible for achieving. And check that you've got the right balance among those results using a checklist something like this one:

* timeliness (finishing the work on time, or with as short as feasible cycle time or total effort)

* quality (the goodness of the output produced, perhaps in terms of customer expectations or standards)

* quantity (the total amount of work performed, or output produced)

* cost (the total amount spent to perform the tasks)

* efficiency or productivity (the best use of time and resources)

So what are some examples of measurable goals for a secretary or personal assistant?

First we need to talk about the results that are important for a secretary or personal assistant to achieve, rather than get hung up on the duties they perform. For example, rather than focusing on the duties of "send agendas for meetings" and "schedule appointments", one key result might be "their boss is always able to focus on the priorities and not distracted by administrative tasks".

Next, what could be some goals for a secretary to strive for over the coming year? One goal, in line with the above result, could be to "Reduce the proportion of administrative items that go into the boss's in tray or diary."

And lastly, how could you measure this goal? One way could be to add the total hours the boss spends on administrative tasks (or tasks that are not in their list of priorities) and divide it by the total time the boss works, to give a proportion of time spent in administrative tasks. Clearly the goal is to reduce this amount.

See how this thought process gets you monitoring important results, instead of just measuring activity, like how many agendas were produced or how many appointments were scheduled?

So next time you're setting goals and measures for your staff, make sure the conversation starts with a clear statement of the results they are responsible for producing, as opposed to the tasks they perform. Measure the results, not the tasks.

Measurable Goals For Performance Management
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Stacey Barr is the Performance Measure Specialist, helping people to measure their business strategy, goals and objectives so they actually achieve them.

Sign up for Stacey’s free mezhermnt Handy Hints ezine at http://www.staceybarr.com to receive your complimentary copy of her e-book “202 Tips for Performance Measurement”, and get more control over the destiny of your business.

What is Risk Management?

Risk management is the process of figuring out the risks in a certain situation, and hence reducing the possibility of its occurrence. In some cases, the amount of risk that is acceptable is nil, whereas sometimes it can be higher. These risks could be due to natural causes such as accident or even deliberate attacks.

In the corporate world, risk management is an organized activity that reduces uncertainty in the business. However, there are procedures that must be followed by people who are responsible for this risk management task in order to reduce the risk as much as possible.

In the public sector, risk management is used to figure out where the risks for the public and basic infrastructure lie and what measures should be taken in order to reduce or to avoid it at all. However, to be able to do this, in both the corporate and the public sector, following steps are to be taken.

What is Risk Management?

Firstly, it is necessary to figure out which are the most important things that need protection. Then the threats to these must be understood after which it is important to understand the likelihood of each threat, which could possibly turn into reality. Once the likelihood is determined, the risk factor can be calculated. After the risk has been calculated, people who work on risk management can easily figure out ways to reduce the risk and prioritize the risk reduction measures based on strategy that is developed. These strategies can include transferring the risk to another person, avoiding the risk completely, taking measures to reduce the impact of the risk, or accepting the consequences of the risk.

Transferring of risk is what is done every day when you buy car insurance. You understand that there is a risk of an accident, but you transfer the risk onto the insurance company and they pay for your losses. Avoiding the risk means diminishing the activity, for instance not allowing a flight to take off in bad weather due to risk of an accident. Risk reduction is what is done every day in factories where sprinklers are installed to reduce the damage from fire. Finally, accepting the risk means understanding the risk, but accepting the possible losses since the cost of avoiding it could be higher.

Traditional risk management programs are focused on figuring out the risks that result from physical or legal factors like natural disasters, fire, death or lawsuits. The financial risk management programs focus on risks that can be managed through financial tools.

When managing risks, the most common process is to first take care of the risks with the greatest loss and the greatest probability of happening. After this, the risks with lower probability and lower loss are handled. However, it can be difficult to determine these costs and probability, so the chances of mismanagement in this field usually remain high.

It is also very difficult to figure out how much resources must be allocated into risk management. On one side, this has the potential to save money and/or lives should the risk become a reality, but on the other hand it seems that the money spent on this can be spent on activities that can help in earning money for the company or government. Therefore, there is an opportunity cost to risk management, and it is very important to figure out how much expenses it requires.

What is Risk Management?
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To get best guidance and advice from Risk Management Consultants based in Manchester UK, visit us online.

Management By Objectives - A New Way Of Management

In 1965, George S. Odiorne completed a textbook titled, Management by Objective. The fact that the term "Management by Objective" has now become common nomenclature to company executives around the country attests to the success of Odiorne's literary efforts.

Management by Objectives (MBO) is a practical application of the reasoning behind the notion of goal-setting theory. MBO is a process in which employees participate with management in the setting of goals or objectives. An essential feature of an MBO program is that it involves a one-on-one negotiation session between a supervisor and subordinate in order to set concrete, objective goals for the employee's performance. During the session a deadline is set for the measurement of accomplishment, and the paths to the desired goals and the removal of possible obstacles are discussed. After an established period of time has elapsed (typically six months or year), the supervisor and subordinate meet again to review the subordinate's performance using the agreed-upon goals as a measuring stick.

Odiorne's concept of management by objective is based on an underlying premise that any system of management is better than no system at all. A secondary premise states that to be workable, any management system must bridge the gap between the theoretical and the practical.

Management By Objectives - A New Way Of Management

Research at such organizations as Black and Decker, Wells Fargo, and General Electric has shown that, on the whole, MBO programs can succeed. Because MBO relies on the established principles of goal setting, it has great potential for improving performance. Real-world constrain however, can sometimes reduce the positive impact of a goal-setting system.

The notion that management activity should be directed towards the accomplishment of pre-established goals has considerable intuitive appeal. None of the conditions are at variance with acceptable manager conduct from either a social, legal, or common sense standpoint.

Odiorne's concept of management by objective is based on an underlying premise that any system of management is better than no system at all. A secondary premise states that to be workable, any management system must bridge the gap between the theoretical and the practical. A third important premise establishes that the appraisal of managerial performance is not an activity autonomous from other activities of the firm. In other words, it regards the appraisal process as only one of several sub-systems operating within the confines of a goal-oriented management system.

Before proceeding into a discussion of the basic elements of the management-by-objective system several "statements of condition" seem warranted. Each of the following statements relates to the environmental conditions with which managers are confronted and establishes the setting for later determining the practical relevance of the management-by-objective system:

A. Because the economic environment within which business firms operate has changed so drastically in recent years, a whole new set of requirements has been placed on companies and their managers.

B. The preliminary step in the management-by-objective system dictates that managers identify, in some manner, organizational goals designed to meet the new requirements noted in A, above.

C. Immediately following the identification of company goals, management must have available to it an orderly procedure for distributing or allocating responsibilities which are directed toward achieving those goals.

D. In the practical world of business management, managerial behavior must become predominant over managerial personality. Furthermore, in the final analysis, results of the behavior (measured against established goals) become the basic criteria for good performance evaluation.

E. Total management staff participation in goal-setting and decision-making is recognized for its social and political value even though its impact on production levels may be negligible.

F. There exist no one best system of management. Moreover, since managerial activity is dependent, to a large degree, on each manager's view of specific goals and the total economic system, his actions must be discriminatory.

In its briefest form, Odiorne's decision making system of management by objective contains the following basic elements: (1) Establish an objective before you begin; (2) Collect and organize all of the pertinent facts; (3) Identify the problem and its causes; (4) Work out a solution and some options; (5) Screen options through some decision criteria; (6) Establish some security actions to enhance the probable success of the solution; (7) Gain acceptance of the decision; (8) Implement the decision; and (9) Measure the results. Each of the nine elements shall now be considered in more detail.

A positive feature of an MBO system lies in its emphasis on establishing specific measurable goals. In fact, a goal is un-acceptable or inadmissible in an MBO system unless in is measurable You may think that this is impossible for all goals, especially those for those of top-level executives. Although it is difficult to set measurable goals at the higher levels of an organization, it is nonetheless possible. For example, one such quantifiable goal might be that an institutional will be ranked in the top ten by an annual polling of executives in the same industry. 0r the head coach of a college football team may set a goal of making the top 20 in the Associated Press's coaches' poll within the next five years. Some more typical goals would be to increase market share from 45 to 55 percent by the end of the next fiscal year, to increase annual production by 10 percent, or to increase profits after taxes by 3 percent. Some goals can be measured in simple yes or no fashion. For example, the goal of establishing a training program for sales personnel or completing a feasibility study by a certain date can he judged in a simple success or failure fashion when the deadline arises. Either such a project has been completed or it has not.

Advocates of MBO believe that everyone in an organization could and should be involved in goal setting This includes all personnel, from the chief executive officer (who may set goals in consultation with the board of directors) to the newest member of the clean-up crew. In practice, however, middle level managers and first line supervisors are more commonly involved in such goal-setting systems.

Proponents of MBO systems also believe that supervisors must play a special role in the goal-setting process. Supervisors should view themselves as coaches or counselors whose role is to aid their subordinates in goal attainment. This role of coach/counselor extends beyond merely helping to identify and remove obstacles to goal attainment (for example, using personal influence to expedite shipments from another department). It also implies that supervisor will serve as a mentor-someone to whom subordinates can go with their work-related problems and assume that they will be treated with respect and support.

One major obstacle to the success of an MBO program can be lack of support from top-level executives. If key people in the organization, especially the president and vice presidents, do not fully endorse MBO, their lack of support will likely he felt and responded to at lower levels. The net effect will be a decided lack of enthusiasm for the program.

Problems may also arise if managers are not interested in having subordinate to participate in the goal-setting process. Some managers prefer to retain an evaluative and superior posture and are uncomfortable with the notion of being a coach or counselor to their subordinates.

Personality conflicts between superiors and subordinates are another potential problem for goal-setting systems, as is competitiveness. A superior who feels threatened by talented subordinates may do little to help them be more successful and, consequently, more visible, In addition, subordinates may hesitate to set challenging goals for fear of failure and its consequences.

MBO systems also tend to emphasize the quantifiable aspects of performance while ignoring the more qualitative aspects. This is an understandable tendency, since participants in MBO systems are encouraged to focus on such dimensions of performance.

Qualitative aspects of performance, which are often more difficult to identify and measure, are likely to be overlooked or de-emphasized. For example, how can the quality of service that an organization provides or an organization's image in the local community be defined and measured? Because the success of an MBO system rests heavily on the quality of the relationship between supervisor and subordinates, the degree of trust and supportiveness that exists in a work unit is a central concern.

For an MBO system to be highly successful, these elements are critical prerequisites, The absence of trust and supportiveness severely restricts the system's effectiveness. Despite these many potential obstacles, the track record of MB0 has been fairly good, In a recent review of the research literature devoted to MBO, Robert Rodgers and John E. Hunter examined 70 reports that included quantitative evaluations of MBO programs. Their findings showed productive gains in 65 of 70 evaluation studies. The average productivity increase was 47 percent, while cost data showed an average savings of 26 percent. Employee attendance was also shown to improve by 24 percent. Follow-up surveys of the level of top-management support for the programs revealed that productivity increased by 57 percent when top-management commitment was high, 33 percent when commitment was average, and only 6 percent when commitment was low.

MBO has passed through several phases since its introduction in the l95Os. Initially, MBO was greeted with much enthusiasm by managers and management scholars, During the late 1960s and early 1970s, MBO appeared, so be "sweeping the nation." Presently, MBO is viewed more objectively by scholars and practitioners as a tool that can be most effective under specific favorable conditions. It is now becoming passé even to invoke the initials MBO. In fact, the principles and philosophies of MBO have become so emotion-laden in the minds of managers than an organization will often introduce an MBO system under a different label. For example, an organization may establish a program called START (an acronym for Set Targets and Review Them) or GAP (Goal Acceptance Program). The mechanics of such programs are likely to borrow heavily, if not totally, from the MBO approach. In short, the trend is toward putting old wine into new bottles, with recognition that mutual goal setting is not a panacea for all organizational problems under all possible circumstances.

This theory is helping in several ways.
Its capability for multiple management levels to set, assign, approve, comment, modify, deny or just view MBO metrics and scores. Its collaboration of performance metric settings between employees and managers. Its visibility of MBO status progressing through workflow steps. It configurable workflows to conform to internal business rules and processes. It automatically estimates bonus payouts based on objective scores. It is a simplified process to approve scores and manage updates.

Management By Objectives - A New Way Of Management
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How to Improve Working Capital Management

"Cash is the lifeblood of business" is an oft-repeated maxim amongst financial managers. Working capital management refers to the management of current or short-term assets and short-term liabilities. Components of short-term assets include inventories, loans and advances, debtors, investments and cash and bank balances. Short-term liabilities include creditors, trade advances, borrowings and provisions. The major emphasis is, however, on short-term assets, since short-term liabilities arise in the context of short-term assets. It is important that companies minimize risk by prudent working capital management.

What Affects Working Capital Management:

o Organizations are generally focused on cash, accounts payable and supply chain issues. On the hand, external issues like the legal and business environment, or internal mechanisms like organization structure, information systems, can significantly impact working capital.

How to Improve Working Capital Management

o Owing to market pressures, companies are led to paying a lot of attention to producing good quarterly results quarter after quarter. Undue focus on this may sometimes produce a flattering but inaccurate snapshot of working capital performance. This also happens in companies that have a marked seasonality of operations with working capital requirements varying widely from quarter to quarter.

Measures to Improve Working Capital Management:

o The essence of effective working capital management is proper cash flow forecasting. This should take into account the impact of unforeseen events, market cycles, loss of a prime customer and actions by competitors. The effect of unforeseen demands of working capital should be factored in.

o It pays to have contingency plans to tide over unexpected events. While market-leaders can manage uncertainty better, even other companies must have risk-management procedures. These must be based on objective and realistic view of the role of working capital.

o Addressing the issue of working capital on a corporate-wide basis has certain advantages. Cash generated at one location can well be utilized at another. For this to happen, information access, efficient banking channels, good linkages between production and billing, internal systems to move cash and good treasury practices should be in place.

o An innovative approach, combining operational and financial skills and an all-encompassing view of the company's operations will help in identifying and implementing strategies that generate short-term cash. This can be achieved by having the right set of executives who are responsible for setting targets and performance levels. They are then held accountable for delivering, encouraged to be enterprising and to act as change agents.

o Effective dispute management procedures in relation to customers will go along way in freeing up cash otherwise locked in due to disputes. It will also improve customer service and free up time for legitimate activities like sales, order entry and cash collection. Overall, efficiency will increase due to reduced operating costs.

o Collaborating with your customers instead of being focused only on own operations will also yield good results. If feasible, helping them to plan their inventory requirements efficiently to match your production with their consumption will help reduce inventory levels. This can be done with suppliers also.

Working capital management is an important yardstick to measure a company operational and financial efficiency. This aspect must form part of the company's strategic and operational thinking. Efforts should constantly be made to improve the working capital position. This will yield greater efficiencies and improve customer satisfaction.

How to Improve Working Capital Management
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Alexander Gordon is a writer for http://www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at .95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.

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