Read the pdf attached and write a discussion as per the below question

Suppose General Motors wants to replace one of their traditional lines of vehicles with all electric models. How could GM use game theory to identify and assess the major risks to this decision? Identify two major risks that would result from GM converting an existing line to an all-electric line. Provide a brief discussion of each risk, and your assessment of the levels of inherent, current, and residual risk, using GM’s five point scale.

ITS 835
Chapters 30, 31, 34
Miscellaneous Case Studies on ERM and RIsk
Enterprise Risk Management
Professor Michael Solomon
• Three case studies

Alleged Corruption at Chessfield
Bon Boulangerie
Building an ERM Program at General Motors
• Different scenarios and organizations
• Useful in examining broader implications
• Look for similarities
Alleged Corruption at Chessfield
• Chessfield

Fictional private American company in sports and entertainment
“Good ol’ boys” board
• Informal governance
• Whistle-blower

CEO compensation very high (4x comparable peers)
Potential environment for excessive risk taking
• Chessfield CEO requested independent governance
Chessfield, cont’d.

Review included

Document review – minimal documentation
Interviews – substantial discontent and lack of confidence in
CEO compensation

Limited documentation to support decision
Basis seemed to be long relationship with decision makers
Industry standard metrics missing
Risk management

Few risk management protocols or controls
Most processes were manual (i.e. no IT)
Chessfield, cont’d.
• Review resulted in 45 recommendations

43 from reviewer
2 added by regulator
• All but 2 recommendations were accepted, which were

3 longest serving board member resign
A female be selected for directorship and compensation
• Identify broad implications of this case
Bon Boulangerie
• Bakery in Oakville, Ontario

When purchased, single site retail and café
Ray Pane added wholesale operation
• Plan to expand wholesale business

From 20km to 120km coverage
Include grocery stores
Add product line
Goal: triple profits in 3 years
• What are the operational risks?
Building an ERM Program at General
• Background
• GM approach to ERM
• Game theory
• Looking forward
ERM at GM Background
• ERM program began in 2010
• ERM to help achieve competitive advantage

GM bankruptcy in 2009
• CRO appointed

Financial and Risk Policy Committee formed
• Risk officers identified and aligned to all CEO direct
• GM embraced aggressive ERM
GM Approach to ERM

ERM built on GM’s vision

Design, build, and sell the world’s best vehicles
Identify and manage key risks

Bottom-up approach
Focus on “what can go right”
Lessons learned

Gave responsibility of assessing risk probability and impact to senior
Replaced ranked risk list with tiered list
Implemented a 5 point scale to measure

Inherent risk
Current risk
Residual risk
Game Theory
Looking Forward
• Top risk attention in place

Ready to add focus on day-to-day operational risks
• Developing program for operational control selfassessment (CSA)
• Approach is a policy-based CSA

Starts with simple yes-no questions to line managers
• Benefits of a policy-based program

Policy can be leveraged to ensure results
Helps to educate teams on larger scope objectives
Ensures that policies are current and effective

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