In the vibrant city of Johannesburg, South Africa, a once-thriving cosmetic manufacturing firm finds itself at a crossroads. This company, known for producing a range of high-quality cosmetics tailored specifically for women, has a rich history of serving both local and international clients. However, it now faces a series of substantial challenges that threaten its stability and reputation.

The company, whose name has been synonymous with quality cosmetics for several decades, has been actively involved in international trade. Its clientele extends far beyond South African borders, with foreign clients in various countries around the world. Locally, the firm has managed to establish a strong presence by distributing its products through eleven stores across South Africa. This combination of international and local trade has been a hallmark of the company’s success for many years.

At its peak, the company employed a dedicated workforce of 214 employees. However, recent events have significantly impacted its operations. The firm operated without documented policies and procedures, which has led to organizational inefficiencies and operational challenges. Furthermore, the Chief Financial Officer (CFO) has been suspended due to ongoing financial irregularities, casting a shadow over the company’s financial integrity. Additionally, the auditors, concerned about the financial discrepancies, have resigned, further straining the company’s accountability and transparency.

In recent months, product defects have come to light, causing a decline in customer satisfaction and trust. This has led to a decrease in sales and has damaged the company’s once-pristine reputation. Moreover, the company lacks an in-house legal team, leaving it exposed to potential legal disputes and liabilities arising from product defects and other issues.

Adding to the company’s woes, it has been significantly impacted by South Africa’s recurring issues with load shedding, which have disrupted production and resulted in revenue losses. In a cruel twist of fate, a severe hailstorm recently damaged the company’s manufacturing facilities, further compounding its woes, and threatening its ability to meet market demands.

In the face of these multifaceted challenges, the cosmetic manufacturing firm in Johannesburg is in dire need of a strategic turnaround plan. The company’s once-proud legacy and its commitment to delivering quality cosmetics to women locally and globally hang in the balance. As it navigates these turbulent waters, the firm must act swiftly and decisively to regain its footing, restore its reputation, and chart a course towards a brighter and more sustainable future.

With reference to the case study above, explain the operational risks that the risk manager should consider and include in the risk management plan that should be presented to the board of directors to assist the company to rebuild trust and to re- establish operational stability. (20)

Explain how risk financing as the final step in the process of risk management affects the activities prioritized by the divisional risk champions (20)

This is a research-based assignment. You are required to adequately cite the research and to provide answers in your own words and your own interpretation of the sources consulted.

An important principle of risk management is the tailor-made response to identified risks, especially in big organisations. To practically implement and monitor loss control programmes, management should apply the principles of all three risk responses. Distinguish, by including practical examples, the risk responses formulated by management during the risk management process. (5)

Discuss how the world’s dependence on technology and systems causes significant system risks in an operational risk assessment of a professional services industry. (15)

The PFMA, Companies Act and the King Code requires that executive management and the board of directors prioritize corporate governance and act in a transparent and accountable manner. Explain how the corporate governance principles and requirements informs the enterprise risk framework of an organisations. (10)

Answers to Above Questions on Cosmetic Manufacturing Case Study

Answer 1: Risk management plan is one of the most important responsibilities of a risk manager, and in the given case study the risk manager is required to consider the operational risk faced by the cosmetic manufacturing firm in Johannesburg so that trust can be rebuilt and operational stability can be achieved. As a part of the management plan, the risk manager is required to consider the operational inefficiency and lack of policies in the organisation, lack of transparency in the process, defects in the product and other major operational issues.


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