Locate an article or example of a real use case based on this week’s lesson. If you can’t find an article or use case example make one up. Write a summary of the use case and describe how it is similar or different from the use case described in this week’s lesson.

Be sure to include the following requirements in the paper.

• Description of real use case
• Comparison of real use case and textbook use case. 

Your writeup should include:

• Title Page
• Content
• References (if applicable)

ITS 835 enterprise risk management
Chapter 6

Strategic Risk Management at the LEGO Group

University of Cumberlands.

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introduction
LEGO Group history
Strategy
Legacy risk management
Enterprise risk management at LEGO
Initial ERM
Monte Carlo simulation
Active Risk Assessment of Business Projects (AROP)
Preparing for Uncertainty
The PAPA model
Risk management ROI
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University of Cumberlands.

Lego group history
Headquarters in Billund, Denmark
Family owned
Second largest toy manufacturer (globally)
Founded in 1932
Iconic bricks first introduced
Bricks manufactured since 1958 fit with one another
2400 different brick shapes
Manufactured in plants across four countries
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University of Cumberlands.

Lego strategy
LEGO mission
“Inspire and develop the builders of tomorrow”
LEGO vision
“Inventing the future of play”
Growth strategy
Innovation strategy
4
University of Cumberlands.

ERM at lego
Risk management developed in 4 stages
Step 1: Enterprise risk management
Step 2: Monte Carlo simulations
Step 3: Active Risk & Opportunity Planning (AROP)
Step 4: Preparing for Uncertainty
Order is by initiation sequence
Steps 1 & 2 are damage control
Steps 3 & 4 are proactive

5
University of Cumberlands.

Erm Step 1: enterprise risk management
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University of Cumberlands.

ERM Step 2: Monte Carlo Simulations
Monte Carlo simulation
Method of evaluating the effect of input variances on a model of a complex system
In short, it helps to see how input variances affect outcomes
Helps to define risk tolerance
Implemented in three areas
Budget simulation
Credit risk portfolio
Consolidation of risk exposure
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University of Cumberlands.

Erm step 3: arop
Active Risk Assessment of Business Projects (AROP)
Formal approach to defining and handling project risk
Includes multiple steps
Identification
Assessment
Handling
Reassessment
Follow-up
Reporting
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University of Cumberlands.

Erm step 4: preparing for uncertainity
Preparing for Uncertainty
Defining and Testing Strategies
Workshops precede strategic planning sessions
Four scenarios
Agree on two key drivers of uncertainty
Describe each of four quadrants of 2×2 matrix
Define strategic issues
Actions to take
“who is doing what by when?”
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University of Cumberlands.

The papa model

Park, Adapt, Prepare, Act: PAPA
Park
Adapt
Prepare
Act
10
University of Cumberlands.

Risk management roi
Strong support from upper management
Efforts have resulted in value
Many LEGO key planning processes now include risk management
More visibility of enterprise risk
More opportunity to address risk
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University of Cumberlands.

summary
Risk management is not risk aversion
ERM allows LEGO to take risks when appropriate
Grow
Create value
LEGO strategic risk management mission
“Drive conscious choices”
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University of Cumberlands.