Rolls-Royce Plc Risk Management
This assignment is an individual assignment. This assignment requires you to consider the case study below:
CASE STUDY: Rolls-Royce Plc
Assignment brief
Using your knowledge of Risk Management, you are required to systematically approach the following task: You are a graduate consultant working for a large risk management consulting firm, and have been asked by the board of directors of Rolls-Royce Plc to prepare a report in response to a number of questions that have been raised by an investment analyst (who will be making recommendations to his clients in terms of your company being a potential investment). Your report should cover the following areas: a) Identification of FIVE key areas related to credit risk, and, in doing so, discuss the impact such risks may have on investors’ willingness to invest in your financial instruments. b) As part of your report, you are required to evaluate the current business continuity strategy implemented by Rolls-Royce Plc, and, in doing so, recommend any further improvements to such a strategy as part of the Group’s overall Business Continuity Management (BCM). This document is for De Montfort University use and should not be passed to third parties or posted on any website. Assignment Brief Template Page 2 of 5 c) Addressing the shareholders, the board of directors for Rolls-Royce Plc provide the following statement of compliance: “The Board considers that the company has complied in full with the provisions of the UK Corporate Governance Code 2018 (the ‘Governance Code’).” As part of your report, you are required to: i. Highlight and discuss areas where the company clearly demonstrates strong governance in terms of leadership, effectiveness and remuneration in line with the UK Corporate Governance Code. Provide suggestions where improvements could be made in the areas discussed in part (c) (i) above
CASE STUDY: Rolls-Royce Plc Risk Management
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Table of Content
Introduction......................................................................................................................4
Credit Risk analysis....................................................................................................4
Rolls Royce Business Continuity..............................................................................................5
Business continuity Management Recommendations........................................................................................6
Leadership ................................................................................................................6
Conclusion...................................................................................................................................8
References..................................................................................................................................9
CASE STUDY: Rolls-Royce Plc Risk Management
Introduction.
The purpose of this report is to prepare a report that will answer investors’ reports on credit risk, business continuity, and a statement of compliance by the board of directors to drive investment. Rolls Royce PLC is a multinational Public Limited company that provides a solution to aviation and other industries by designing, manufacturing, and distributing power. it was incorporated in 2011. Being a multinational company exposes it to different risks that when not well mitigated can lead to great loss. Some of the threats include; product development risks, interest rate risks, commodity risks, foreign exchange risks, and marketing risks. Every enterprise, huge or small is prone to threats, and how an individual company is prepared or invented in risk management, is what makes them strive and prosper, or perish in the event of a threat.
According to Marchetti, 2012), identifying risks, entail analyzing risks, prioritizing, implementing, and monitoring them. Rolls Royce has experienced some risks before, which include business continuity, competitor action, major product program delivery, a market shock, and IT vulnerability.
Credit Risk Analysis
Credit risk is the inability of a company or borrower to pay a loan from the lender and the investor risks losing their money. Credit risk for a given company is determined by credit history, collateral involved, capital, and assets available. Thus, a company ought to score better on the credit risk, assessment which is done by a third party or an agency. The credit rating of a company is based on the payment history, public record, linked address, and electoral roll ( Bessis,2010 pg 452). This means a company with a good credit score attracts more investors as the chances of bankruptcy and defaulting are minimal and the company can easily pay the loan on agreed terms.
Rolls Royce is a limited company, which means its expansion and growth rely on loans and investment. In the 2022 second fiscal semester, the company was reported to be in accumulative debt of £5.2bn. It was evaluated by FitchRating, a credit score rating agency, and the results were positive compared to the previous rating of being stable. This meant that the company could manage long-term investments and loans. However, to avoid fluctuation of Rolls Royce's credit score fluctuation and instill confidence in investors, the company should strive to reduce the available loans.
Current Business Continuity
Business continuity is the criteria that face Rolls Royce based o innovation and risk-taking. The company’s investment is in its consumers and suppliers. According to Eliot et al, business continuity is set planning that intends to identify when an organization Is in the exposure to external and internal risks. This set of planning ensures that crucial functions of the business will continue regardless of the risks by synthesizing soft and hard assets. This provided efficient prevention of the threat and recovery for the firm while maintaining a competitive advantage.
The current strategy Rolls Royce is using as business continuity management is understanding its energy. This helps Rolls Royce understand its inefficacies and what can be done in ca...