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RMI 2302 FINAL STUDY GUIDE

MODULE 9-14

MODULE 9
I. Strategy
a. Strategy- What an organization can do to benefit society. Strategy
makes companies more Competitive, Alert, and Resilient
b. Strategic Risk- Huge risks that can not only effect a single company
but can take down multiple branches and corporations involved.
(domino affect) ex. 2008 financial crisis
II. Financial Crisis
a. Banks loan money to people for 20-30 year mortgages
b. Banks need more money to loan to more people
c. Government sponsors Fannie Mae & Freddie Mac, they buy
bundles of loans/mortgages from the bank. Then they put those
bundles into bonds to sell on the open market (Mortgage
Securities)
d. This created a Secondary Mortgage Market
e. Banks started to take advantage of this process and started giving
out more and more loans to riskier and riskier clients (conforming
mortgage)
f. Lehman brothers arose for Fannie Mae/Freddie Mac to secure the
credit of the mortgage loans-Credit Default Swap (if someone
defaulted on their payment Lehman brothers would step in and
pay it)
g. More and more people started defaulting on their mortgages and
Lehman brothers could not keep up Causing the whole system to
crash (Domino Affect)
III. Competitive Advantage
a. Companies do not stay on top of the food chain for too long
anymore ex. For every Facebook there is a Myspace
b. In recent times competitive advantage is shortening
IV. Adaptive Strategy
a. Create fluid/volatile ongoing business stragtegies to keep up with
changing times
Strategy cannot ignore risk, Systemic Risk is real
Just-In-Time delivery- on the call delivery and supply (companies not keeping
inventory on stock just ordering when needed)
New problem arising with Supply-Chain efficiency
Shareholder Value is a result, not a Strategy
II. Supply-Chain
a. Supply-Chain- A system of organizations, people, activities,
information & resources involved in moving a product or service
from supplier to the customer
b. Forecast Error- not ordering enough inventory to meet demand
Risk Management relies on looking at historical Data to estimate frequency &
severity of future losses
Risk with low probability/high impact risk management struggles with
entirely
The Risk Management models changed to determine Supply-Chain problems.
They are using Big data and imputing them into Models to calculate Supply-
Chain problems
TTR (time to recover)- how quickly our supplier can get the product to us
Risk Exposure- the plotted results of if each supplier couldnt deliver how
that would affect the company.

Benefits to Model Approach


1. Identify hidden exposures
2. Avoids the needs for rare event predictions
3. Reveals dependencies & Bottlenecks
4. Promotes discussion & learning
5. More Focused RMI
6. Key suppliers properly managed
7. Small suppliers used to be overlooked

MODULE 10 A&B