Measurement of Cost & Benefit for Implementation of Risk Management in the Production Process

Muhammad Rosiawan, Moses Laksono Singgih, Erwin Widodo

Abstract


The paper aims to measure the overhead costs and economic benefits of risk management activities in the production process - a manufacturing company. This research uses Activity Based Management (ABM) approach to allocate and track overhead costs in risk management activities. The overhead costs of risk management activities include the costs of identifying, analyzing, evaluating and controlling risks in order to achieve the quality objectives of the production process. The company obtains economic benefits, first, from reducing overhead costs incurred per period from the results of improvements to non-value-added or high-cost activities; second, cost savings obtained from the achievement of quality objectives per period. The results of this study indicate that the ABM approach used is appropriate in measuring the overhead costs and economic benefits of risk management activities in a business process

Keywords


activity based management approach, risk management; cost and benefits

Full Text:

PDF

References


K. D. Miller and H. G. Waller, “Scenarios, real options and integrated risk management,” Long Range Plann., vol. 36, no. 1, pp. 93–107, 2003.

M. Bucelli, N. Paltrinieri, and G. Landucci, “Integrated risk assessment for oil and gas installations in sensitive areas,” Ocean Eng., vol. 150, pp. 377–390, 2018.

BSI, BS ISO 31000 : 2018 BSI Standards Publication Risk management — Guidelines. BSI Standards, 2018.

T. Assmuth and M. Hildén, “The significance of information frameworks in integrated risk assessment and management,” Environmental Science and Policy, vol. 11, no. 1. pp. 71–86, 2008.

M. Arena, M. Arnaboldi, and T. Palermo, “The dynamics of (dis)integrated risk management: A comparative field study,” Accounting, Organ. Soc., vol. 62, pp. 65–81, Oct. 2017.

A. Chiarini, “Risk management and cost reduction of cancer drugs using Lean Six Sigma tools,” Leadersh. Heal. Serv., vol. 25, no. 4, pp. 318–330, 2012.

E. Elahi, “Risk management: The next source of competitive advantage,” Foresight, vol. 15, no. 2, pp. 117–131, 2013.

S. Ni, Y. Zhuang, J. Gu, and Y. Huo, “A formal model and risk assessment method for security-critical real-time embedded systems,” Comput. Secur., vol. 58, pp. 199–215, 2016.

T. H. Kuethe and M. Morehart, “The profit impacts of risk management tool adoption,” Agric. Financ. Rev., vol. 72, no. 1, pp. 104–116, 2012.

B. Gurd and C. Helliar, “Looking for leaders : ‘ Balancing ’ innovation, risk and management control systems,” Br. Account. Rev., vol. 49, no. 1, pp. 91–102, 2017.

J. Tupa, J. Simota, and F. Steiner, “Aspects of risk management implementation for industry 4.0,” Procedia Manuf., vol. 11, pp. 1223–1230, 2017.

C. Callahan and J. Soileau, “Does Enterprise risk management enhance operating performance?,” Adv. Account., vol. 37, pp. 122–139, 2017.

A. Olechowski, J. Oehmen, W. Seering, and M. Ben-Daya, “The professionalization of risk management: What role can the ISO 31000 risk management principles play?,” Int. J. Proj. Manag., vol. 34, no. 8, pp. 1568–1578, 2016.

P. Falbo, D. Felletti, and S. Stefani, “Integrated risk management for an electricity producer,” Eur. J. Oper. Res., vol. 207, no. 3, pp. 1620–1627, 2010.

H. Akyildiz and A. Mentes, “An integrated risk assessment based on uncertainty analysis for cargo vessel safety,” Saf. Sci., vol. 92, pp. 34–43, 2017.

W. H. Tsai, “Quality cost measurement under activity-based costing,” Int. J. Qual. Reliab. Manag., vol. 15, no. 7, pp. 719–752, 1998.

R. S. Kaplan and S. R. Anderson, Time-Driven Activity-Based Costing : A Simpler and More Powerful Path to Higher Profits. Boston, MA: Harvard Business School Press, 2007.

S. R. Letza and K. Gadd, “Should activity-based costing be considered as the costing method of choice for total quality organizations?,” TQM Mag., vol. 6, no. 5, pp. 57–63, 1994.

W. Tsai, “Quality cost measurement under activity‐based costing,” Int. J. Qual. Reliab. Manag., vol. 15, no. 7, pp. 719–752, 1998.

J. Emblemsvåg and B. Bras, Activity-Based Cost and Environmental Management: A Different Approach to ISO 14000 Compliance. Boston, MA: Kluwer Academic Publishers, 2001.

J. M. Juran and A. B. Godfrey, Juran’s Quality Control Handbook. New York: McGraw-Hill, 1998.




DOI: http://dx.doi.org/10.12962/j23546026.y2019i5.6428

Refbacks

  • There are currently no refbacks.


View my Stat: Click Here

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.