Risky Business: How Risk Factors Can Undermine a Successful Enterprise

Abstract
This paper explores the mistakes made in the past by The Big Three: General Motors (GM), Ford, and Chrysler and presents the risk factors that could potentially undermine GM again. GM made an enormous mistake when they ignored their customers’ demands for fuel efficient vehicles. GM primarily focused on the production and distribution of sport utility vehicles (SUV) because they could make a larger profit off of such a vehicle. With the downfall of the economy, customers were not looking to purchase a large vehicle that would be additionally costly in terms of fuel so they turned to such foreign competitors as Toyota. When all was said and done, GM incurred a financial loss of $69.6 billion. (Wikipedia) Learning from its mistakes, this paper will explore how the biggest risk facing GM is a repeat in history: bankruptcy as a result of foreign competition. GM must address the demands of a changing economy by a very focused, responsive, and resilient approach.

Risk Register for GM

Risk Source
Severity (1-3) +
Likelihood (1-3) +
Controllability(1-3)
=
Risk Level
1. Loss of employees
3
1
2
6
2. Loss of site
3
2
2
7
3. Loss of power
2
3
3
8
4. Loss of computing
2
2
2
6
5. Transportation disruptions
2
2
2
6
6. Loss of records
2
1
2
5
7. Inability to deliver supplies
2
1
2
5
8. Foreign Competition
3
3
3
9
1 represents the lowest risk and 3 represents the highest risk (1 = controlled, 3 = not controlled)

Foreign Competition
As evidenced through its previous financial collapse, GM’s greatest risk is that which foreign competition presents. With a global market for automobiles, it is important that GM considers the quality, demand, and fuel efficiency of their vehicles. In the past, GM’s greatest downfall was competing with such global competitors as Honda and Toyota. In fact, it was the competition with these two companies that lead to GM’s demise in 2008. According to Risk Factors Affecting the Auto Industry (2012), “A risk factor that needed to be addressed was not paying attention to foreign competition. For example, in years prior to 2008, Toyota began focusing on consumer trends by investing in the green economy-manufacturing fuel-efficient cars…GM continued to focus on bigger-producing robust trucks and sport utility vehicles (SUV). The move boosted Toyota to number one, but resulted in low sales for GM as consumers preferred more cost savings on fuel.” If GM had listened to the demand of the consumer as well as the increasing oil prices, instead of the hefty price tag that the sale of an SUV promised, they would not have been faced with the near collapse of their company.
Moving forward, it is important that GM becomes the trendsetter in terms of the global market or at least that they follow the lead of their global competitors. If the economy and environmental factors relating to air pollution dictate a more fuel-efficient vehicle, then GM must follow suit. If SUV’s, on the other hand, once again become a hot ticket item, then their marketing and production must be focused on SUV’s. According to IBM Consulting Services, increasing safety requirements and environmental commitments by the automotive industry will contribute to changes in the automobile industry as we know it. The size of a company is no longer a guarantee of its success. Only those companies that find new ways to create value will prosper in the future. (1) It is important, therefore, that GM remain on the forefront of technology as well societal, economic, and environmental demands.
Loss of Power
Losing power at a GM plant is ranked number two in regard to risk factors. A loss of power would ultimately put GM at a standstill for production and distribution. Loss of power could potentially be caused by a natural disaster or something as simple as heavy winds.