The book tells us that LEGO Group uses a stepped process to determine the return on investment. The steps are traditional ERM then Monte Carlo simulations, which leads to active risk assessment of business projects (AROP) more uncertainty testing that uses the park, adapt, prepare and act (PAPA) modeling. (Fraser et al., 2014) That was as informative as reading tea leaves in the morning drink stop, so I went further to try to get something more intelligent to understand.

Now the supplied supplemental material was the cover story and repeated the same information and was of little help. (Frigo & Aessoe, 2012) The reality was a company stuck in the past and not willing to change for the future, and that had to change, or the company would fail. (Robertson & Breen, 2013)   Traditionally the LEGO Group was very risk-averse and very conservative. Now what we need to realize is all of this is simply a methodology to give a standard tool for the company to use when it looks for new projects. What we also need to realize is that all of this is not a magic bullet, for ERM and what LEGO Group does is heavily dependent on the culture shift and leadership support. (Kimmel & Anderson, 2010) Any number of simulations or projects can be shunted back or moved forward properly if the leadership understands the standardized risk reports the LEGO Group uses.

The reality is that LEGO Group was at the brink of failure in the 1990s. This entire reinvention with ERM was only made possible by the licensing deal it made with Lucasfilm for the Star Wars licensing. (Feloni, 2014) That is what brought LEGO Group out of near bankruptcy. Only since the early 2000s has, it used these simulations to adjust and risk appetite and to unify projects under on formalized structure. The processes that LEGO Group uses shook the company out of its very conservative ways and into a new way of thinking. It was to push LEGO Group out of the past and into the future. (Schmidt, 2014)

I understand many would have taken this time to explain the droll ERM style, but it is a risk simulation model that is used to justify what the LEGO Group should approve for a new project or to shelve it. The Monte Carlo model that LEGO Group uses is only as accurate as of the number of iterations the model run. The increasing number of iterations does improve accuracy, but it will never be more than 95% accurate. (Oberle, 2015) LEGO Group has indeed moved from a conservative position to a more forward-looking or larger risk appetite project model that is supported by the list of activities I started this post with. Now what is also true is the market changed for the LEGO Group. The users of LEGO are no longer just children, but people of all ages and the company had a core audience still and evergreen products. The old culture in LEGO Group had to be broken and then reborn, the ERM is just a small piece of that restructuring and change at the LEGO Group. (Robertson & Breen, 2013)

Simulations are great for games, but since we are never going to exceed 95% accuracy, why does LEGO Group use it? It was a toolset used to bring a standardized process to replace what was holding the company back. The market changed on them, and they were late to the party. While the book uses the party example for its risk scenario, it also shows how a company needs to be flexible and forward-thinking. Any additional research into LEGO Group has demonstrated it is heavily dependent on evergreen products such as the Caste and Space lines that are now licensed creations.(Schmidt, 2014) LEGO Group’s modeling process has allowed it to move forward using simulation. There is one caveat, budgeting, as that is not a simulated process and uses another method that is not documented.  (Fraser et al., 2014, p. 98) The question asks about ROI, but we have no basis for that as we do not know how each project is budgeted. Projects may use this stepped process, but when the money comes into the equation, we are a bit in the dark. Now, if we are talking about the ROI on the toy sets themselves, that is a different discussion. (Moore, 2019)

1.Evaluate one pro and con above proposed description.

Response Requirements:

1. Be 2 paragraphs in length

2.Be supported by the required textbook and one additional reference

Points deducted if the submission: 

Does not use the required textbook as one of the two reference sources 

• You CANNOT use Wikipedia, LinkedIn articles, blogs, paid vendors, certification websites, or similar sources in academic writing. You CAN use reputable industry articles from publications similar to ComputerWeekly, PCMag, Wall Street Journal, New York Times, or similar sources. Academic journals and popular industry articles are accessible in the university’s library databases and Google Scholar. All references should not have a publication date older than 2005.

• Does not respond to the question(s) thoroughly meaning with more than 2 paragraphs

• Primarily consists of bullet points

• Uses statements such as “I have gone through your post,” “I have gone through your discussion,” “adding a few more points,” “based on my knowledge,” “according to me,” “as per my knowledge,” or similar

• Contains contractual phrases, as an example “shouldn’t” “couldn’t” or “didn’t,” or similar

• Uses vague words or phrases such as “proper,” “appropriate,” “adequate,” “it is obvious,” “it is clear,” “in fact,” or similar to describe a process, function, or procedure

• As an example, “proper incident response plan,” “appropriate IT professional,” “adequate security,” or similar. These words are subjective because they have different meanings to different individuals.