Ford Motor Company Risk Assessment Term Paper

Protecting this proprietary pricing process is critical for the future of Ford's ability to win sales into the future. Ford Motor Company must focus on how to alleviate the many potential areas of pricing itself and pricing processes being compromised. What's needed is a risk management plan aimed at the dealer channel to alleviate the many financial risks to Ford Motor Company from trimmings its dealer ranks throughout the United States.

Ford's Need for a Risk Management Plan

The risks specific to the Risk Management Plan will include the following key sections, highlighting the need to manage risks by the probabilities of their occurrence, according to Risk Management completed by the Department of Energy as it relates to best practices in risk mitigation and disaster recovery al;so apply to Ford Motor Company's dealer channel Department of Energy (2005). While specific to another industry the applicability of these key concepts are well applicable to the Ford Motor Company dealer channel.

The focus first on isolating risks and defining potential losses from both business events and natural disasters needs to be defined using Net Present Value Analysis according to Carnegie-Mellon (1996). The focus on providing discounted cash flows from operations to accurately assess the financial impact of these resources, regardless of how they are lost. The following table illustrates the Net Present Value of key information assets Ford Motor Company has exposed as they downsize their dealer channel:

Net Present Value Today (Dealer Channel)

Estimated Cost to Replace (Company-Wide)

Cash & Incentives

3,000 a car

600M

Dealer Mgmt. Systems 2M

1.2B

Pricing Exception Processes

1.1B

Fleet Sales

100M in dealer profit

3B in corporate profit

Sales Pipelines

Varies by dealer but typically $20M

6B

Through either natural disaster or the attrition and the trimming of the dealer ranks, Ford Motor Company is in a highly risky situation right now as it relates to these core assets. Managing risk by focusing on the value of these assets and the need to protect these core intellectual properties is a core requirement for Ford going forward.

References

Carnegie-Mellon (1996) - Definition of Software Risk Assessment Concepts and Directions: -Retrieved from the Internet on October 15, 2006 at http://www.sei.cmu.edu/pub/documents/96.reports/pdf/tr012.96.pdf

Department of Energy (2006) - From the CIO's website for the U.S. Department of Energy, Retrieved from the Internet on October 15, 2006 at http://cio.doe.gov/ITReform/sqse/index.html

Risk Management (2005) - Acquisition and Program Risk Management Guidance - Volume 2: Chapter 4 -Retrieved from the Internet on October 15, 2006 at http://nasdocs.faa.gov/nasiHTML/risk-mgmt/vol2/04_ch_v2_01.html.....