Enterprise Risk Management at Cisco

 
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Case Details:

Case Code : ERMT-014
Case Length : 16 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Cisco
Industry : Information Technology
Countries : Global

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Enterprise Risk Management | Case Study in Management, Operations, Strategies, Business Ethics, Case Studies

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Excerpts

Overview of Risks

Political turmoil in many parts of the world, including terrorist and military actions, had increased global economic uncertainty. These adverse economic conditions worldwide had contributed to slowdowns in the communications and networking industries and could affect Cisco's business in various ways:

• Reduced demand for the company's products as a result of a decrease in capital spending by customers, particularly service providers.

• Increased price competition for the company's products, partially as a consequence of customers disposing of unutilized products.

• Increased risk of excess and obsolete inventory...

Enterprise Risk Management | Case Study in Management, Operations, Strategies, Enterprise Risk Management, Case Studies

Technology Risks
Rapidly changing technology, evolving industry standards, launch of new products, and evolving methods of building and operating networks characterized the markets for Cisco's products. Cisco's competitive position depended on its ability to develop and introduce new products in existing and new markets...

Marketing Risks
A substantial portion of Cisco's business depended on the growth of the Internet. The economic slowdown and the reduction in capital spending by telecommunications service providers on Internet infrastructure had adversely affected Cisco's business...

Risks Associated with Strategic Alliances and M&As
Cisco had several strategic alliances with large and complex organizations and other companies with whom it worked to offer complementary products and services. These arrangements were generally limited to specific projects, typically to facilitate product compatibility and adoption of industry standards...

Operations Risks
Cisco's growth and ability to meet customer demand depended on its ability to obtain timely delivery of parts from its suppliers. In the past, Cisco had experienced component shortages that had adversely affected its operations. If shortages or delays persisted, the prices of these components might increase, or the components might not be available at all...

Supply Chain Risks
Effective management of the supply chain was a critical factor in Cisco's business. There had been occasions when Cisco's shipments had exceeded net bookings. Costs increased when there were irregular shipment patterns. There might be periods of underutilized capacity and periods when overtime expenses might be incurred...

Political Risks
Cisco had major operations in many countries outside U.S.A. Cisco depended heavily on the overseas operations of its contract manufacturers and distribution partners...

Regulatory Risks
In the early 2000s, few laws or regulations applied directly to the Internet. Cisco might be adversely affected by changes in regulations relating to matters such as voice over the Internet, encryption technology, and access charges for Internet service providers...

Human Resources Risks
Cisco's success depended significantly on its ability to attract and retain highly skilled technical, managerial, sales, and marketing personnel. In spite of the economic slowdown and job losses, competition for good people remained intense, especially in Silicon Valley where the company was based...

Catastrophe Risks
Cisco's corporate headquarters, and some of its R&D and manufacturing facilities, were located in Silicon Valley, a region known for seismic activity. Some of the company's facilities were located near rivers that had experienced flooding in the past...

Financial Risks
Equity Risk
Cisco had invested in numerous privately held companies, many of which were in the startup or development stages. These investments were inherently risky as the market for the technologies or products they had under development might not materialize. The possibility of losing the entire initial investment in these companies could not be ruled out...

Exhibits

Exhibit I: Cisco: Segment Information and Major Customers
Exhibit II: Cisco: Product Wise Breakup
Exhibit III: Cisco: Sales Distribution Geography Wise
Exhibit IV: Cisco: Break Up of Important Expenses
Exhibit V: Cisco: Acquisitions Completed In Fiscal 2002 And 2001
Exhibit VI: Cisco: Interest Rate Sensitivity of Financial Instruments
Exhibit VII: Cisco: Equity Risk
Exhibit VIII: Cisco: Currency Forward & Option Contracts
Exhibit IX: Interview with: Jackie Hair, Director, Global Risk Management, Cisco Systems
Exhibit X: Cisco: Consolidated Statements of Operations
Exhibit XI: Cisco: Five Year Financial Highlights
Exhibit XII: Cisco: Stock Price Movement


 

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