Risk Management Assignment: Organizational Management of Vivo Energy

Question

Task:
To prepare the risk management assignment, you need to address the parts below:

Part 1: Written report.

Description of Assessment Task and Purpose:

This element of assessment is worth 60% and should be 2,000 words. 

Required

Critically discuss your organisation’s implementation of corporate social responsibility, governance structure and regulatory compliance.

This should include:

• an analysis of your organisation’s CSR policies, implementation and reporting. Your recommendations for the improvement of this.
• An analysis of the governing body (board or other) of the organisation, the structure of board and management and the delegation of responsibilities.
• An awareness of the regulatory framework which applies to your organisation and an analysis of how this is reported upon.
• Communication with various stakeholders.
• Thorough linking with academic literature.

Part 2: Risk report and reflection

Description of Assessment Task and Purpose:

This element of assessment is worth 40% and should be a report and piece of reflective writing which totals 1,000 words (+/- 10%).

In the week 5 discussion board, you discussed the risk management of one decision or issue in your organisation and other students in your critical action learning group took on the role of consultant in their responses. In the week 7 discussion board you looked at communication with stakeholders, one aspect of which is stakeholder feedback to mitigate reputational risk.    

Required:

In this part of the assessment, you should include the following sections:

1. Analyse an issue or a decision in your organisation which is in line with your organisation’s strategic objectives, this can be in the past, present or future.

   Critically discuss the risks (these could be organisational, reputational, financial or other risks) and evaluate their impact upon the issue or decision.

   This part should take the form of a short report.

2. Critically reflect on your understanding of risk within your organisation and how this has changed and developed during this module.

   This part should take the form of a piece of reflective writing.

Answer

Risk Management Assignment Part 1

Introduction

Vivo Energy Plc even known as Vivo Energy is a British downstream petroleum company with the headquarters in London. The company operates in 23 countries and across Africa that covers the supply, distribution and the retail segment of the petroleum products. The company was established in the year 2011 and contains a massive network of more than 2400 service station (Vivo Energy 2020). The company is even engaged into export of lubricants to different African countries.  The retail segment of the company comprises of lubricants, fuels, card services and non-fuel services.  Fuels and LPGs are provided to the business customers across different sectors such as mining, manufacturing and marine. Jet fuel is sold via collaboration with Vitol Aviation.  Further, the company is a pioneer in the distribution of the shell and Engen branded fuels to the customers across the continent. It operates in robust, as well as growing market and thereby helps the customers in gain rewarding experience. Moreover, the company is engaged into maintaining a conservative balance sheet to provide highest future flexibility that adds to the major element of the strategy. 

An analysis of my organisation’s CSR strategy 

The CSR strategy of the company can be defined with the help of Carrol model. Carrol model can be defined as the level to which the business addresses the issue and the obligations to the stakeholder at large. 

• Economic responsibility

Business has responsibility not only to make profits but also to contribute positive to the environment. In the challenging and cut throat market scenario, Vivo Energy profit increased significantly in 2019 by 25% and the volume enhanced by 8% (Vivo Energy 2019). Hence, the economic dimension of Vivo must be provided adequate consideration to the position it performs that is carefully evaluating the value process and reporting the same in a manner that adds to transparency. 

• Legal Responsibility

Vivo adheres to the rules and the regulations in the country of operation. Moreover, the company does not accept or give, directly or indirectly bribe or any improper advantage (Vivo Energy 2020). In lieu to this, even the employee does not give or receive any gift or payment that might constitute a bribe. The code of conduct determines the operational standards that the company follows. 

• Ethical Responsibility

Secondly, as per the annual report, it is witnessed that the company comprise of a well-structured ethics and compliance that is witnessed by the whistle-blowing helpline for employees, contractors and customers. The presence of Ethics and compliance evaluated the Covid-19 donations made during the year ensuring relevant approval were taken. Further, the committee is engaged in overseeing the approval process of non-audit services by the external auditor (Vivo Energy 2020). This helps in safeguarding the independence and objectivity of the auditor. 

Looking after people is another CSR activity undertaken by the company. The company believes that the integrity, honesty and respect is needed for the attainment of becoming the most respected energy company. Vivo has transformed the culture from process driven to a decentralized one where the individuals are influenced to undertake decision and hence rewarded accordingly.  Training further influences the people to do the correct thing at the correct time (Vivo Energy 2020). It denotes that the company is prepared for the years ahead. The can-do attitude is an asset for the company and will help to attain the best result. However, much dependence on the event-based programme can lead to major miss of the meaningful actions. 

• Philanthropic Responsibility

The company aims to provide a positive addition to the communities or the place nearest to the operations.  Vivo has strived to provide a positive impact for the overall purpose. The company promote cleaner, as well as more efficient fuels followed by the lubricants through the business channels and the access of LPG wherever needed so that replacement can be done for the intensive fuels (Vivo Energy 2019). Furthermore, the company uses renewable technologies in the operations and provides solution to the customers.  

The company has undertaken several initiatives that denote the company’s contribution to the society at large. VEML financed an organic garden located at Northlands Pre-Primary and Primary school in Triolet. Further the company has established a road traffic playground at Rampersad Goburdhun Government School in Vue Maurel. However, awareness about CSR is low when it comes to SMEs however many of them carry CSR with the intention of doing the correct thing. 

Recommendation

To ensure that the CSR is effective and beneficial it is imperative that the company grow on a sustainable basis and ensure fairness to all the stakeholders. Moreover, the allocation of finance for the treatment must be considered as an investment where returns are expected. Vivo should monitor the CSR activities and liaise with different partners like the NGOs so that initiatives deliver to the best of result.  A long-term perspective that covers the commitment to both internal and external stakeholders will be vital to the CSR success and the skills of the company to deliver the goals. 

Vivo Energy alike other companies has its ups and downs but the sole aim of the company is to be the most respected energy business and doing in the best form. Many companies have ethical, moral and legal pressure from different sources including the internal ones so it is imperative not to irritate the company rather understand the potential. This potential can be understood through the CSR report that the company produces.  Vivo Energy can redefine or project the world in what manner the process of transitioning from a responsible company to a well-defined CSR company can be beneficial in the long run, both for the community and the company.

Analysis of the governance 

The Corporate Governance Principles lays down the General Principles with reference to the Governance Structure, Composition of the Board, Director Appointment procedures, duties and remuneration of the directors, risk governance and internal controls, reporting with integrity, audit and relationship with stakeholders (Vivo Energy 2020). Public sector organizations are required to comply with the Code. Vivo group has rightly adopted the CG principles by ensuring that the senior management and Board is a pool house of talent and diversity, there are persons from various nationalities which enables the business to have a holistic and global approach. The benefit of having foreign directors on the Board is that is opens up the talent, ideas and approachability to international markets. The diverse senior management with different levels of skillsets, experience and background enables the Board to take informed decisions on the challenges faced and formulate strategies in the light of key factors (Goergen 2018). 

The Group strongly believes that long-term success with sustainability can be achieved only by delivering long-term value for the stakeholders. It is this emphasis on delivering value that differentiates Vivo from its competitors. The purpose, culture and values have been revised to comply with the Code and the same has been communicates across the organization. The various committees like remuneration committee, nomination and governance committee and audit and risk committee regularly monitor and review the performance of the organization in the light of the set principles and suggest changes on a timely basis (Vivo Energy 2020). 

The organization complies with the governance mechanisms to the extent that it is headed by a multi-national Board that is committed towards building a positive relationship with the stakeholders at all times. The roles and responsibilities of the various committees are revised from time to time with careful monitoring of the activities and the review of the strategic issues (Mallin 2019). 

The Board carries out a review of the activities relating to strategy and finance, people and culture, governance, compliance and risk and other standing agenda items. This results in the overall development of the organization by addressesing of the key issues in the various departments. The roles and responsibilities of the various key personnel are set out in writing based on the best industry practices and it is also available on the company website (Tricker 2019). The Board evaluation process is undertaken under three stages to review the effectiveness and analyse the positive contribution of the Board. 

The key areas for future development and focus includes obtaining an additional understanding of the stakeholder’s interests, an improved understanding of the markets and its competitors, continues focus on the risk appetite and key risk factors relevant to the organization, allocation of more time to strategy with a renewed focus on the alternative energy sources and increasing trends (Goergen 2018). 

Thus, it can be said that the organization complies with the CG codes and conduct to a larger extent and it has led to a positive contribution to the society within which it operates. Apart from reaping the benefits in terms of increased revenue and profits, it also increases the market value and reputation of the organization. Hence the company can be said to be a sustainable and ethical organization. 

Recommendations for improvements

As times changes the world witnesses’ new changes on an everyday basis. Businesses have to change from time to time to adapt and keep pace with the changing market conditions and requirements. The stakeholder theory is effectively followed by the organization as it takes into consideration the interests of the stakeholders in the governance process. The Tricker’s Board management theory can be applied more effectively where the board is expected to engage with the relevant stakeholders to understand the ground issues. Though there are a lot of corporate governance models, the Tricker’s model requires the Board to be outward looking, future focussed, inward looking and past and present focussed. Thus, apart from compliance and performance roles, they have internal and external roles also to cater. All the strategy formulation and policy making is to be oriented on this basis. These are the few recommendations for improvement towards the Governance model. 

Communication with stakeholders

 Stakeholders always feel valued and heard when their complaints and opinions are taken in a positive sense by the company. There are various modes and opportunities that the organization gets to communicate with the stakeholders. It includes communication of the annual report at the AGM which offers a fair chance to the stakeholders to discuss the matters relevant to the company. Apart from this, the company has an effective whistle blower mechanism in place to identify the wrong doings and take the necessary action. Community events are also encouraged and the organization takes an active participation in the same (Pan & Seow 2016). Thus, it has always adopted a transparent policy towards its stakeholders which has resulted in long-term value creation. 

Conclusion

As seen from the overall discussion and the research that corporate social responsibility and Corporate governance is the need of the hour. Both help the company to maintain a positive image and goodwill in the eyes of the stakeholders. As concerned with the CSR of Vivo Energy it can be commented that Vivo energy has high and low but the sole aim of the company is to be the most respected energy business and doing in the best form. This is where the company has performed and provides the best result to the stakeholders. As regards Corporate governance, the company has complied with the governance mechanisms to the extent that it is headed by a multi-national Board that is committed towards building a positive relationship with the stakeholders at all times. 

Risk Management Assignment Part 2 Risk Report 

Introduction 

The company followed a decentralized model meaning that the entire emphasis was on having the right people on the ground so that reaction can be quickly provided to the changing scenario. Vivo Energy announcement that Vitol Group and investment vehicle will enhance the ownership from 36% to 100% was a major announcement.  Vivo is a standalone company that its own separate management, treasury and funding.

Discussion of the risk

The group’s capital management aim is to have a sound and consolidated financial position statement with the aim of attaining the maximization of the net cash to the shareholders whereas maintaining the capitalization level that is commercially defensible and leading to optimization of the working capital structure (Hopkins 2016).  Vitol is an investment vehicle comprising of 47.5% of VIP II investments and other minority institutional investors.  It is possible that under the private ownership, Vivo might evaluate the capital allocation policy and change the balance when it comes to shareholder distribution and higher growth. Moreover, the dividend by the company was increased to 50% pay out from the earnings that is attributable. The main aim of the capital management of the group is to have a sound consolidated financial statement that enables maximization of the net cash to the shareholders.

The SWOT analysis for the Investment policy can be defined as such :

Strength 

• Clearly defines the goals of the organization
• Outline the roles and duties of the parties involved in the process of investment 

Weakness

• Requirement of risk adjustment techniques
• Performance report does not comprise of testing process

Opportunities

• Revision of policy for reflection of changes after doing an analysis of asset allocation

Threats

• Regular revaluation needed for changing market scenario
• Policy metrics is missing  when it comes to annual financial statement 

2Stakeholder engagement 

Customers/Consumers

Vivo Energy prioritizes customers as the top stakeholders that helps in CSR. This group of stakeholder comprises of individual and organizational buyers. The main interest of customer is to have effective and efficient products that are priced in a reasonable manner. Here the increment of the stake from the Vitol group will be beneficial for the company and hence customers will be pleased.

Employees

The main interest of the stakeholder is adequate compensation and career development. Employee as a stakeholder group is vital as it ascertain the human resource capabilities for innovation and developing profitable products (Henry & Hicks 2015). Hence, the deal deems to be prospective thereby beneficial for the employee as a whole

Investors

Excellent financial performance is the sole need of the investors. The investors are interested in the return maximization and the Vitol deal is expected to bring benefits to them. 

Employees of Suppliers and Distributors

Workers in Vivo supply chain is also a major consideration. The workers can be said as indirect stakeholders but plays a major role in the success. Compensation and job security is the main need which can be attained with good performance. 

Recommendations

Vivo Energy has a strong performance when it comes to the satisfaction of the stakeholders. The company satisfies their interest and thereafter looks after various opportunities for the benefit of the organization as a whole. Various code of conduct and group’s capital management plan is expected to provide strong financial performance.  Hence, the company should abide by the principles that will help the stakeholders in attaining better return and rewards. 

Reflection

Through the module and the entire study I have learnt a lot about risk management strategy.  As seen from the study and the company in study that is the Vivo Energy, the group is exposed to different risk that is the financial risk, market risk, credit risk and the liquidity risk.  The risk management program aims to stress upon the unpredictable nature of the financial market and the minimization of the adverse impact on the Group financial performance. 

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, price risk, cash flow interest rate risk and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance 

The risk management strategy leaning gave me profound knowledge of the techniques used by the company and how the same helps the stakeholder at large. Priority to the stakeholders is essential because that determines the success of the business. The learning I received from the module and the company in question is that the group capital management needs to be intact so that the company can manage any issues that concern the stakeholders. Further, risk analysis can be better predicted with the aid of the SWOT analysis and for Vitol stake involvement the same has been done to understand the risk. 

References

Crane, A. (2019). Business Ethics 5th edition. Oxford : Oxford University Press. 

Goergen, M. (2018) Corporate Governance: A global perspective. Andover: Cengage. 

Henry, B., and Hicks, M. (2015) A survey of perspectives on the future of the accounting profession: Certified public accountant. The CPA Journal, 85(8), 10-12. Available from https://www.proquest.com/scholarly-journals/survey-perspectives-on-future-accounting/docview/1712288049/se-2?accountid=30552

Hopkins, M. (2016) CSR and Sustainability: From the margins to the mainstream. Sheffield: Greenleaf Publishing. 

Hopkins, M. (2016) CSR and Sustainability: From the margins to the mainstream.

Mallin, C. (2019). Corporate Governance. 6th edition. Oxford: Oxford University Press

Pan, G., and Seow, P. (2016) Preparing accounting graduates for digital revolution: A critical review of information technology competencies and skills development.risk management assignment Journal of Education for Business, 91(3), 166. Available from  https://www.proquest.com/scholarly-journals/preparing-accounting-graduates-digital-revolution/docview/1776620804/se-2?accountid=30552

Tricker, B. (2019). Corporate Governance: principles, policies and practices. 4th Ed. Oxford: Oxford University Press 

Vivo Energy (2019). Vivo Corporate governance. Available from: https://investors.vivoenergy.com/corporate-governance [accessed 8 December 2021]

Vivo Energy (2020). Vivo Energy 2020 annual report. Available from: https://investors.vivoenergy.com/~/media/Files/V/Vivo-Energy-IR/reports-and-presentations/2021/vivo-energy-annual-report-and-accounts-2020.pdf [accessed 8 December 2021]

Bibliography

Ghafran, C. and Sullivan, N. (2013) The Governance Role of Audit Committees: Reviewing a Decade of Evidence. International Journal of Management Reviews, vol. 15, 381–407. 

Kaveh, M., Khalili, M., Ghorbani, A. and Sourosh, M. (2014) Professional Ethics in Accounting and Auditing. World Essays Journal  vol. 1, no. 2, pp. 85-93, 2014. 

Kowalewski, O. (2016) Corporate governance and corporate performance: financial crisis. Management Research Review, vol. 39, no. 11, pp. 1494-1515.