Chapter 19 explained ERM and Kilgore Custom Milling. Do you agree with the approach to implement an ERM and why? If you could change anything about the reasons to implement ERM in this case study what would that be and why? Would you implement the same ERM approach in your current organization (or future organization)?To complete this assignment, you must do the following:A) Create a new thread by Thursday. As indicated above, reflect on the ERM implementation in Kilgore Custom Milling, make recommendations and determine if it can be implemented in your current or future organizations.B) Select AT LEAST 3 other students’ threads and post substantive comments on those threads, evaluating the pros and cons of that student’s recommendations. Your comments should extend the conversation started with the thread. Replies should be completed by Sunday.ALL original posts (4 in total) and comments must be substantive. (I’m looking for about a paragraph – not just “I agree.”)NOTE: These discussions should be informal discussions, NOT research papers. If you MUST directly quote a resource, then cite it properly. However, I would much rather simply read your words.The discussion must be zero plagarism
chapter_19_slides.pptx
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ITS 835 ENTERPRISE RISK MANAGEMENT
CHAPTER 19
ERM – KILGORE CUSTOM MILLING
UNIVERSITY OF CUMBERLANDS
1
INTRODUCTION
 Background
 The management team
 The company
 The new contract
 The financial risk management meeting
UNIVERSITY OF CUMBERLANDS
2
BACKGROUND
 Kilgore Custom Milling

Small private manufacturer

Power window assemblies

Based in southern Ontario, Canada
 Pursued contracts to supply plants in the U.S.

Successful in negotiating a contract with Japanese manufacturer
 Previous international contracts resulted in loss

Due to currency volatility
UNIVERSITY OF CUMBERLANDS
3
THE MANAGEMENT TEAM
 Owner and CEO

Steve MacLinden

Left day-to-day operations for the rest of the team
 Manufacturing and Plant operations

 Sales and Client relationships

Casey Dobblestyn
 Treasurer and CFO

Cathy Williams
Rory Sullivan
UNIVERSITY OF CUMBERLANDS
4
THE COMPANY
 Privately owned

100% by Steve MacLinden

Planning to retire in 5 – 10 years
 Main focus is cash flow management
 Concerns with currency related cash flow issues
 Additional concern about inflation differences

Between U.S. and Canada
UNIVERSITY OF CUMBERLANDS
5
THE NEW CONTRACT
 Dramatically increase sales

Over 100% for 5 years
 Complex and exacting specifications
 All proceeds in U.S. dollars

Kilgore must manage financial risk
 Contract could be extended for 3 years

But at the same price, benefitting the buyer
UNIVERSITY OF CUMBERLANDS
6
THE FINANCIAL RISK MANAGEMENT MEETING
 U.S. and Canadian dollars near par

Caused concern over U.S. competition
 Multiple options to deal with currency risk

Long term swap contracts

Short term forward contract

Currency options
UNIVERSITY OF CUMBERLANDS
 Management team lack understanding of the
options
 More open questions than answers
 Lots more to do …
7

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