Strategic Risk Management at the LEGO Group: Integrating Strategy and Risk Management

Introduction:

Its portfolio, which spotlights on LEGO blocks, incorporates 25 product offerings sold in excess of 130 nations. The name of the organization is a shortened form of the two Danish words leggo dt that signify "play well" The LEGO Group started in 1932 in Denmark, when Ole Kirk Kristiansen established a little production line for making wooden toys. After fifteen years, he found that plastic was the perfect material for toy creation and purchased the primary infusion embellishment machine in Denmark. In 1949, the block experience began. Throughout the years, the LEGO Group consummated the block, which is yet the premise of the whole game and building framework. Although there have been little modifications fit as a fiddle, shading, and configuration occasionally, the present LEGO blocks still fit blocks from 1958. The 2,400 diverse LEGO block shapes are created in plants in Denmark, the Czech Republic, Hungary, and Mexico with the best of accuracy and exposed to consistent controls. To comprehend vital hazard the board at the LEGO Group, you have to comprehend the organization's system. This is steady with the initial phase in creating strategic risk management in an organization: to understand the business strategy and the related dangers as portrayed in the vital hazard evaluation process. The LEGO Group's mission is" In tower and build up the developers of tomorrow." Its vision is" Inventing the fate of play. "To help achieve them, the organization utilizes a development methodology and an advancement technique.

1. Growth strategy.
2. Innovation strategy.

Support:

The LEGO Group has developed the Risk Management into Four Steps:

1. Enterprise risk management
2. Monte Carlo simulations
3. Active risk and opportunity planning
4. Preparing for uncertainty

The LEGO Group's mission is in tower and build up the developers of tomorrow. Its vision is Inventing the fate of play. To help achieve them, the organization utilizes a development methodology and an advancement technique. We gave and examined these senior administrations in 2009, preceding their meaning of 2015 systems, to help that they would take a gander at the potential universe of 2015 when characterizing techniques and not simply extrapolate present-day conditions. "Having done that, we at that point arranged to return to each key methodology vis-'a-vis every one of the four situations to distinguish issues (i.e., dangers and openings) for that specific system if the world resembles this specific situation. "This rundown of issues is then tended to by means of a PAPA model whereby a key reaction is characterized and inserted in the system.  During the previous two years, LEGO refined the procedure and utilized it effectively, the reason being that the first situations did in actuality not prompt much explicit action. Today a scenario session is a five-hour work shop where members center around one specific procedure. The workshop is with the supervisory crew that possesses the methodology and its usage.

PAPA Model: (Park, Adapt, Prepare, Act) On the off chance that the things that have low likelihood or low result we put those aside, we will utilize those in future. On the off chance that the realize that the things that will have in future, attempt to adjust those patterns. As the age transforms, we additionally comprehend kids resemble to adjust new patterns and advancements, we need to gradually move to that heading If the things have low likelihood, we must be prepared to confront it, we need to make a point to make elective arrangements for that. We need to apply early admonitions and whatever relief we can set up to ensure that we can cover these should they materialize, but they are not expected to If we do have the high possibly or result, we need to make a point to adjust. We generally need to relate the things with one another like that web had changed the world. The PAPA model gives the genuine case of a system that can prioritize dangers and set up for fitting activities.

Evaluation:

An incredible arrangement has occurred in the LEGO Group's way to deal with hazard the executives dependent on solid help from top administration (constantly expected to create procedures and approaches) and a solid core interest. They have shown an incentive from the endeavors they've made. They likewise have unequivocally inserted hazard the board in most of the key arranging procedures used to run the organization. "Risk Management isn't the driver of these changes," Hans proceeds. "I'm not even sure it's a big part. But it's one part. It's a part that has allowed us to take greater dangers and make greater ventures than we generally would have seen. The Monte Carlo reenactment has demonstrated to us what the vulnerability is and was a key component of changing the budgetary arranging procedure to a progressively unique estimation approach. The hazard resistance has demonstrated to us how much chance we are set up to take, between the top managerial staff and the corporate supervisory crew. This has implied that we have been set up to make greater production network ventures than we generally would have done and have had the option to accomplish greater development than we at any point envisioned we could have." It is this incorporation of hazard the board in methodology and procedure execution, and the mix of technique in hazard the executives, that can lift the estimation of ERM in an association.

Questions:

1.   What are the advantages of integrating ERM with strategy and strategy execution as described in this case?

Organizations are presented to an assortment of dangers identified with the advancement and execution of the business procedure. Disregarding the broad measure of writing about big business hazard management ERM, it is conceivable to watch a chance to break down how various types of hazard data can be unbiasedly considered by senior administration to improve corporate administration and have cool headed basic leadership forms. Resulting in these present circumstances Case the LEGO gathering, it created hazard the board in four stages.

1. Enterprise Risk Management
2. Monte Carlo simulations
3. Active risk and opportunity planning
4. Preparing for uncertainty

LEGO gathering accomplishes maintainable superior and makes partner an incentive by reliably executing the systems in Return-Driven Strategy Framework. The LEGO vital hazard the executive’s procedure consolidates various components like basic leadership, arranging and execution and connecting with outer partners. It is the combination of methodology and technique execution, and the coordination of system chance administration, can raise the estimation of ERM in association.

2. How does scenario analysis as described i nthis case help an organization to prepare for uncertainties?

Today, be that as it may, irregularity and vulnerability assume much more noteworthy jobs in deciding business achievement, to a great extent on account of the expanding significance of quickly developing interpersonal organizations, Prepare for various results. Instead of attempting to make the one right surmise with respect to what will in all probability occur, make numerous speculations. Put down numerous little wagers on an assortment of choices. Offer the perspectives and discuss in their own specific manner of that situation, since everybody has various perspectives the group ought to discuss and concur explicitly different perspectives to guarantee activity on the issue that the colleagues need to choose themselves is generally significant. Ought to pose more inquiries and should leave safe place, the procedure is significant for business arranging and technique definition. When we got chose what to do, we need to test the methodology whether it will work or not, a few systems will work quick, some will work moderate. We ought not generally consider single future, since its future we can't anticipate, so we need to think in different ways for various results.

3. What are the advantages of using the PAPA model to categorize risks?

The LEGO Group uses Park, Adapt, Prepare, Act (PAPA) model. On the off chance that the things that have low likelihood or low result we put those aside, we will utilize those in future. On the off chance that the realize that the things that will have in future, attempt to adjust those patterns. As the age transforms, we additionally comprehend kids resemble to adjust new patterns and advancements, we need to gradually move to that heading If the things have low likelihood, we must be prepared to confront it, we need to make a point to make elective arrangements for that. We need to apply early admonitions and whatever relief we can set up to ensure that we can cover these should they materialize, but they are not expected to If we do have the high possibly or result, we need to make a point to adjust. We generally need to relate the things with one another like that web had changed the world. The PAPA model gives the genuine case of a system that can prioritize dangers and set up for fitting activities.

4. How would you describe the “Strategic Risk Management Return on Investment” at LEGO?

A major ordeal has occurred in LEGO's gathering to hazard the board dependent on solid help from top administration they have said that they develop from 17 percent return on deals in 2006 to 34 percent return on deals in 2012. The benefit had grown great. This is all a result of hazard the board as well as the choices they have made and greater dangers and ventures they took. from Monte Carlo circumstance we comprehended what uncertainty is and what are the means we need to go out on a limb tolerance has demonstrated to them how much hazard they are set up to take. the development of the vital hazard the board at the LEGO gathering gives an extraordinary instance of how associations can build up their own ERM projects to fuse vital hazard the board and center competency inside. One of the key components was Integration. they have inserted the hazard the board in a large portion of the key arranging process:

1. strategy in business planning

2. the LEGO development process

3. the customer business planning process

4. the sales and operation

5. the performance management.

5. The mission of the strategic risk management team is to “Drive conscious choice.” How does the Active Risk and Opportunity Planning (AROP) element of strategic risk management at LEGO help to drive conscious choice?

At the point when the LEGO association executes business tasks of a characterized least size or level of unpredictability, its mandatory that the business case incorporates express definite and strategy for taking care of both the dangers and openings.

     1. Recognizable proof we need to view open doors just as dangers.

     2.Assessment-we do have the comprehension of the experience.

     3. Taking care of - we need to evaluate dangers and guarantee to take fundamental activities.

     4. Re assessment-make a point to reassess the hazard

     5. Follow-up - where we keep refreshed for entryway and achievement sessions.

     6. Detailing which is done naturally and completely dependent on the information.

The AROP procedure is an incredible case of coordinating danger evaluation as far as upside and drawback in the strategic basic leadership process. This fair way to deal with key hazard the board enables associations to make more partners esteem while brilliantly overseeing danger.

Sources:

• Frigo, M. L., & Laessoe, H. (2014). H ow can organizations manage strategic risks in a volatile and fast-paced. Implementing Enterprise Risk Management: Case Studies and Best Practices, 93.
• Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons.