Risk Management: The Case Of General Motors

RISK MANAGEMENT: THE CASE OF GENERAL MOTORS Student’s Name Institutional Affiliation Date Prompt Three:Identify an incident where risk management failed. Complete a root cause analysis and critically discuss what happened and how stakeholders were managed. Suggest alternative approaches and lessons learnt making reference to the literature on accidents. Draw on your own experience and reflections resulting from your previous work and/or the seminar programme to critically discuss the strengths and limitations of various tools and techniques. Introduction Production of goods and provision of services to meet the needs of consumers requires that one takes into consideration the risks involved. Harvey, (J., p. 1) defines risk as the combination of the probability of an event and its consequences. The consequences of an event can either be positive or negative. In the business world, companies thrive on risks because they are not certain of the outcomes for the decisions they make. Businesses operate on profit goals and there is a need to make sure that the desire for profit does not override the risks involved. Any failure to cater for the risks involved may prove disastrous for a company and this may ruin all the achievements that the company may have made in its history. Management is defined as a process of dealing with or controlling things or people. Risk management is, therefore a process of understanding and controlling the probabilities and uncertainties of events in the organization. Since decisions in the management are often uncertain, companies are supposed to have risk management plans to make sure that they are always prepared in case risks emerge. Risk planning is meant to increase the probability of desirable positive events and suppress the probability of threats (Lecture two, n.d., slide 2). General Motors’ safety failure is an example of how poor risk management strategies can impact the reputation of a company. General Motors Safety Failure GM’s safety failure has gone down in history as one of the recent costly risk management failures to have ever happened in history. GM’s risk management failure came from a faulty ignition switch in the company’s automobiles. Between 2001 and 2013, thirteen deaths were reported involving GM’s vehicles (Shefrin, H., 2017, para. 3).The first death occurred on 29th July 2005 when a woman from Maryland after the ignition switch shut down the car’s electrical system, causing the car to crash into a tree and the airbag failed to deploy. By 2013, more than thirty-one crashes had been reported and in all cases, the airbags had failed to deploy. Thirteen deaths had been recorded in all accidents and GM had not done anything to notify the cause of the accidents or explain why the airbags were failing to deploy. A critical analysis of what happened and how the stakeholders handled the situation reveals that GM prioritized profits at the expense of safety. In so doing, the company as just foregoing the risk and did not make an immediate intervention to save the situation. GM’s Risk Management Failure According to Basu (T., 2014), GM detected the defect in the ignition switch in 2001 during the pre-production testing of Saturn Ion. In 2003, the service technician allowed t...