Banyan Tree Holdings Risk Analysis
Using the Risk Analysis technique from BABOK 9.24, demonstrate:
1. Your understanding of the risk tolerance levels of the organization
Enterprise risk management (ERM) has become a critical practice in organizations that are dedicated to managing uncertainty and its effect on achieving organizational objectives. ERM helps organizations focus on the most relevant risks to achieving an organization’s goals and objectives, both from an operational, as well as a strategic, perspective. How much risk an organization assumes—either knowingly or unwittingly— plays a large part in whether that uncertain future outcome actually improves or worsens the organization’s position. It is therefore crucial for an organization to define and determine its Risk tolerance levels since it will help the organization make major decisions based on what has determined to be acceptable risk.
So in order to determine risk tolerance for Banyan Tree, the organization needs to look at outcome measures of its key objectives. Based on the company’s performance and growth strategy over the past years (up to 2006), below is one possible way the organization could have defined the outcome measures for some of its key objectives for the Banyan Tree expansion project:
Revenue Growth – Based on the strategy of investing revenues generated by property sales (with a stunning 254% growth - S$50M in 2005 to s$130M in 2006) to fund the expansion project, target an estimated revenue growth of 20% in 2007
Market Share – Establish a market share of 1% in their growing Chinese property sector to catch up with market leading firm China Vanke
Global Expansion target – By 2010, expand the company’s footprint to 81 locations in 29 countries from 44 location in 20 countries
Property Sales - Target property sales in six countries by 2012 starting from property sales in one country post IPO in 2006
Earnings per share – Earnings per share to be S$0.002 by Q1 2007
Risk tolerance of an organization can be
1. Your understanding of the risk tolerance levels of the organization
Enterprise risk management (ERM) has become a critical practice in organizations that are dedicated to managing uncertainty and its effect on achieving organizational objectives. ERM helps organizations focus on the most relevant risks to achieving an organization’s goals and objectives, both from an operational, as well as a strategic, perspective. How much risk an organization assumes—either knowingly or unwittingly— plays a large part in whether that uncertain future outcome actually improves or worsens the organization’s position. It is therefore crucial for an organization to define and determine its Risk tolerance levels since it will help the organization make major decisions based on what has determined to be acceptable risk.
So in order to determine risk tolerance for Banyan Tree, the organization needs to look at outcome measures of its key objectives. Based on the company’s performance and growth strategy over the past years (up to 2006), below is one possible way the organization could have defined the outcome measures for some of its key objectives for the Banyan Tree expansion project:
Revenue Growth – Based on the strategy of investing revenues generated by property sales (with a stunning 254% growth - S$50M in 2005 to s$130M in 2006) to fund the expansion project, target an estimated revenue growth of 20% in 2007
Market Share – Establish a market share of 1% in their growing Chinese property sector to catch up with market leading firm China Vanke
Global Expansion target – By 2010, expand the company’s footprint to 81 locations in 29 countries from 44 location in 20 countries
Property Sales - Target property sales in six countries by 2012 starting from property sales in one country post IPO in 2006
Earnings per share – Earnings per share to be S$0.002 by Q1 2007
Risk tolerance of an organization can be