UNIT SIX RISK MANAGEMENT

1. UNIT SIXRISK MANAGEMENT

2. Your personal attitude to risk

3. Match the business headlines to the types of risk they represent: strategic, operational, financial, compliance. Match the business headlines to the types of risk they represent: to the types of risk they represent: strategic, • Bad weather causes ferry cancellations - food shortages predicted • Union Bank of Scotland to buy Belgian insurance company • Convenience food withdrawn after tests show use of banned additives • Companies say rise in the value of the dollar will hit exporters Handout: typesofrisk

4. Key: • Headline 1: operational - as reflected in the image of trucks driving on a snowy highway • Headline 2: strategic – here the bank is investing in buying a foreign company in a different market sector • Headline 3: compliance - the convenience food ingredients do not comply with the law • Headline 4: financial - in this case the rise in the value of the dollar is a risk that is outside the control of companies

5. DISCUSSION: QUIZ SB p. 70, ex 1 VOCABULARY • tamper-proof packaging • to recall a product • to scrap a product • to charge double your normal fee Answers: SB p. 114

6. LISTENING SB P. 70, EX 2, 3 VOCABULARY MotherGooserules villain (perpetrator) victim vindicator pundit

7. INFERENCE SB, p. 70 ex. 4 MOTHER GOOSE • Traditional rules handed down from generation to generation without questioning- Mother Goose is a traditional book of stories that every child learns at his/her mother’s knee

8. INFERENCE SB, p. 70 ex. 4 HE WAS TOAST • he was ‘burnt’, he had no chanceofrecoveringfromthemistake

9. INFERENCE SB, p. 70 ex. 4 AL SHARPTON & JESSE JACKSON • Blackreligiousleadersand human rightsactivists

10. INFERENCE SB, p. 70 ex. 4 STONEWALL • to refuse to give information, i.e. to obstruct progress like a stone wall

11. INFERENCE SB, p. 70 ex. 4 PUT LISPSTICK ON A PIG • try to make something unpleasant look more attractive by artifical means

12. READING: DAMAGE CONTROL, p. 71 Ex 5 ANSWERS 1) The cell phone manufacturer’s stock dropped by 20%, Merck lost roughly $750 million in the fourth quarter of 2005 alone and was expected to have to pay between 54 billion and $18 billion in damages. Perrier lost its position as market leader, and Audi had very few salesinthe US marker for ten years. Dezenhallrefers to them as examplesof how crisismanagementcanbecrucial to a company’s survival. (Byimplication, Dezenhall is showing how his PR company’s fees are justified !)

13. READING: DAMAGE CONTROL, p. 71 Ex 5 ANSWERS 2) strong leaders- survivors are able to make difficult decisions feel-good gurus- survivors do not blindly follow conventional wisdomon reputation management climate shifts- survivors are flexible enough to adapt when necessary

14. READING: DAMAGE CONTROL, p. 71 Ex 5 ANSWERS 2) guarantees – survivors know there are no guarantees, even when major investments are made pain thresholds- survivors accept short-term losses in return for long-term gains baby steps- survivors do not try to solve everything at the same time self-knowledge- survivors are realistic and objective the little guy – survivors believe that the ordinaryy citizen does not have more rightrs than the corporation luck –survivors sometimes get lucky breaks

15. READING: DAMAGE CONTROL, p. 71 Ex 5 ANSWERS 3) In the past, crisis management was judged by financial and ethical standards; now a company’s handling of a crisis is judged by its stock price (Wall Street), its advertising campaigns (MadisonAvenue), its success or failure in court (theplaintiff’s bar) and its image on TV.

16. READING: DAMAGE CONTROL, p. 71 Ex 5 ANSWERS 4) The political model of crisis management assumes that a crisis is motivated by an opponentand must be resolved by fighting. The PR model ofcrisismanagementassumesthat a crisis is the result of accident or misfortune and thatit is resolvable through good communications.

17. READING :DAMAGE CONTROL, p. 71 Ex 5 ANSWERS 5) Dezenhall seems to be rather cynical about the media:he refers to hostile scrutiny used to fill the media vacuum on 24-hour-a day cable news, and suggeststhat radio and TV encourageexpertstocriticize crisis management on the grounds that successfully resolving crises doesn’t make for very good TV.

18. READING SB, p. 71handout-definitions VOCABULARY to purport to topple perch canard redemption grandiose to grieve a lucky break plaintiff • to lionize • short-seller • to be exempt from • scrutiny • messianic • to opine • to torpedo • stalker • whistleblower

19. REPHRASE • Perrier was toppled from its perch atop the bestselling bottled water mountaintop. • The future ofthe company is on the line. • Merck recalled the product. • They question conventional wisdom. • He has a high threshold for pain. • They purport to be standing up for the little guy. • He caught a lucky break. • The media space was once occupied by lionizing of messianic CEOs.

20. REPHRASE • No one is exempt from hostile scrutiny. • A company’s handlingofthe crisis is judgedby Wall Street, Madison Avenue, andthe plaintiff’s bar. • Experts opine that crisis is being mismanaged. • We endorse a political model of crisis management:thereis alwaysthethreatofmotivatedadversaries. • Corporatestalkerswant to torpedo you.