Enterprise Risk Management is defined as “the process of identifying and analyzing risk from an integrated, company-wide perspective. It is a structured and disciplined approach in aligning strategy, processes, people, technology and knowledge with a purpose of evaluating and managing the uncertainties the enterprise faces as it creates value” (Woon, Azizan, & Samad, 2011, p. 23). Had Non-Linear Pro utilized Enterprise Risk Management, the company would have been able to reduce their liability exposure. Quick Takes Video is in the position of having a legitimate claim against Non-Linear Pro for breach of warranty.
The salesman informed Hal that his employees would be able to operate the software in one to two days. After two weeks of attempting to utilize Non-Linear Pro’s product, Hal’s employees have come to the conclusion that the product cannot perform as promised. They state that the program has insufficient memory, and can only edit 5 minutes of high definition video at a time. Additionally, it does not appear that the difficulties with Non-Linear Pro are simply the result of the limits of available technology.
Hal’s employees mention a competing program used by other companies which appears to far outperform Non-Linear Pro. This further strengthens Quick Takes’ potential claim for breach of warranty. Although it is reasonable that there will be differences between competitors’ products such as features and the abilities of software, it is also reasonable to assume that the product will be able to perform the necessary functions it was designed for, in this case, editing video. The 7 steps of Enterprise Risk Management are: 1) Management commitment ) Communication and consultation 3) Policies and procedures 4) Training and education 5) Effective and efficient framework 6) Risk Management is applied in practice 7) Ongoing monitoring and review (Harb, 2008) Management Commitment: If Non-Linear Pro is going to embrace Enterprise Risk Management (ERM), all employees need to be on board with the program, starting with senior management. If the firm is simply looking to go through the motions and is not willing to ingrain risk management into the corporation’s culture, employees will quickly see through the ruse.
For a program such as this to be successful, all employees need to understand how ERM will benefit the company. Communication and Consultation Non-Linear Pro should have provided Quick Takes Video a more realistic expectation of their product’s abilities and limitations. Hal’s employees mention a competing product that performs better, but it also seems to be more expensive. It is reasonable to expect a lower priced product to perform at a lesser level than its more expensive counterpart. The problem arose when Non-Linear Pro’s sales person oversold his product and made promises his product could not deliver.
Also during the video, Non-Linear Pro’s salesman does not appear to have been involved after the sale. The items were delivered, and Quick Takes Video’s employees were utilizing the manual and their prior knowledge of editing software to learn the new product. Had Non-Linear Pro’s salesman embraced ERM and viewed his role as more of a sales consultant, rather than a sales person, he would have executed the proper follow up and assisted Quick Takes Video’s employees with the learning curve inherent in utilizing any new product.
By providing training after the sale, Non-Linear Pro’s salesman may have been able to avoid some of the problems that arose in the video. Policies and Procedures: Non-Linear Pro’s greatest risks in their situation with Quick Takes Video are tort liability for breach of warranty, strict liability for Janet’s cut and subsequent infection, litigation costs if the dispute is not resolved, and the potential costs of negative publicity to future sales.
In addition to these potential consequences, Non-Linear Pro also faces the possibility of losing the sale of the product to Quick Takes Video, as well as any future sales that may have been generated through repeat business. The key elements of ERM are the policy itself, the strategy, and the plan (Harb, 2008). If Non-Linear Pro had embraced and implemented a successful ERM plan, many of these negative consequences could have been avoided. Effective and Efficient Framework Harb suggests that firms have a well documented ERM policy and plan (2008).
Had Non-Linear Pro had such a policy and plan in place, they would have been able to anticipate many of the problems Quick Takes Video is encountering with the editing software and addressed these difficulties before they became full size problems. A well laid ERM plan would have involved on-site set up and training for Quick Takes Video’s staff, along with follow up to ensure everything was working smoothly and as expected. Risk Management is Applied in Practice Non-Linear Pro needs to not only assess their possible risks, but also apply this assessment in practice.
The salesman is directly responsible for over promising and under delivering on this editing software, therefore creating a possible breach of warranty. It is more likely that he is a poor salesman, as opposed to having acted with negligence or malicious intent, so any attempt to hold him personally responsible would likely fail. But as he was acting in the course of his employ with Non-Linear Pro, and was Quick Takes Video’s direct contact person with the company, the errors of the salesman belong to Non-Linear Pro, and the company as a whole is ultimately responsible for the breach of warranty.
Ongoing Monitoring and Review ERM is a “regular process and not just a one-time event” (Harb, 2008). Were Non-Linear Pro to make ERM an integral part of their business, it would require a top down commitment. Management has to be willing to expend the resources in both time and money to properly train employees and ensure the company’s products are capable of performing as intended. Employees also need to be an active part of ERM, as only with their commitment can the company’s goals be achieved while also minimizing risk.
Non-Linear Pro’s overall approach to their sale to Quick Takes Video was the source of the many difficulties that followed. The lack of training and follow up has led to problems with the product while the poor communication has led to a combative relationship between the companies. As the relationship rapidly deteriorated, the possibility of salvaging the original deal has decreased dramatically while the likelihood of an expensive legal battle is now on the horizon.