Change, Risk Management, PESTLE

Define internal environment change and give some examples

The internal environment is affected by a firm’s management policies and styles, business culture and employee attitudes. Unlike external factors, the business usually has some degree of control over these factors

• Change in business ownership

• Change in business size

• Change in management style

• Introduction of new technologies by the business

Define external environment change and give some examples

The external environment are all of the factors that are outside the direct influence and control of the business but which impact the firms operations. A business must be flexible with their strategies to respond to external opportunities and threats.

• Advances in technology

• Labour market change

• Change in competition

• Change in economic conditions

• New legislation

• Consumer tastes

• Market changes (supply and demand)

Define planned change

Planned change is created internally and is structured and timetabled. Clear objectives for the change are established, timelines created and resources applied to creating change.

Define unplanned change

Unplanned change occurs in response to a shock to the business and is often unstructured and under-resourced. A shock could be external, such as introduction of new technology by competitors, or internal, such as the death if a manager.

What are the potential negative impacts of change to a business

• Shorter product lifecycles

• Diminished brand loyalty

• New products need to be developed

• Change in production methods

• Need to retrain workforce

• Need a flexible workforce

• Increased costs due to new legislation

Why is change resisted within an organisation (Kotter and Schlessinger)

• Self-interest

• Misinformation or misunderstanding

• Different assesment of situation

• Low tolerance and inertia

What three steps are used when creating and re-enforcing change (Lewin’s three step process)

Stage 1 - Unfreezing

• Creating motivation for change

• Unfreezing current approach

Stage 2 - Transition

• Moving away from current approach and towards new approach

• Difficult time for employees

• Lots of management support needed

Stage 3 - Refreezing

• Establishing stability

• New methods must be fully integrated before new change occurs

What are J Storey’s Four Methods of Implementing Change

1. Total negotiated package

All proposed changes are introduced together as one complete package and are fully agreed with employees or trade unions before implementation.
This approach aims to gain commitment and reduce resistance but can be time-consuming.

2. Total imposed package

All changes are introduced at the same time as a single package but are enforced by management without employee or union agreement.
This allows rapid change but often creates strong resistance and low commitment.

3. Negotiated piecemeal initiative

Changes are introduced gradually in stages, with each stage negotiated and agreed with employees or unions.
This builds trust and flexibility but can slow the overall change process.

4. Imposed piecemeal initiative

Changes are introduced step by step over time, with management imposing each stage without consultation.
This reduces immediate shock but may cause ongoing uncertainty and resistance.

Define risk

Business risk is a circumstance or factor that may have a significant negative impact on the operations of the profitability of a given business

What are the types of risks a business could face

• Natural disasters

• Employee error

• Equipment failure

• Product failure

• Economic factors

• Legal challenges

• Public relations failure

• Supply problems

Define risk management

Risk management refers to the practice of identifying potential risks in advance, analysing them and taking precautionary steps to minimise a firms exposure to the risk.

Define internal risk and give some examples

An internal risk is one where the organisation has the power, within the firm to prevent the risk.

Examples could be:

• Employee error

• PR failure

• Product failure

• Equipment failure

Define external risk and give some examples

A risk is considered to be external when an organisation has little or no control over if, when or how it might occur

Examples could be:

• Natural disasters

• Supply chain problems

• Economic factors

• Legal challenges

Define insurable risk

Risk can be planned for and measures can be taken to minimise the effects of such risk on a business. The risk is quantifiable

Define uninsurable risk

The probability of the risk occurring is impossible to quantify. Insurance companies are unable to price the risk

Define risk assessment

Risk assessment is the systematic process of evaluating the potential risks that may be involved in a projected activity or undertaking . A risk assessment will protect both employees and the business, as well as helping to comply with the law.