Combating different risks with an effective erm solution part i


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Globalization, technological advancements and outsourcing have benefitted enterprises in many ways.

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Combating different risks with an effective erm solution part i

  1. 1. Combating Different Risks with an Effective ERM Solution Part IThis is a two-part article that looks at the different risks faced by enterprises today and the need ofeffective solutions to mitigate these risks.Globalization, technological advancements and outsourcing have benefitted enterprises in many ways.On one hand, they have been able to reduce the mounting costs by transferring the costly core businessfunctions to low cost regions and on the other hand, they have been able to improve performance andoperational efficiency by accessing the myriad of global talent available around the world. However, ithas increased enterprise risks many folds. For instance, for enterprises outsourcing to low cost regions,there is a greater risk of counterfeits, gray market sales and lower than MAP sales.Product CounterfeitingThe Federal Bureau of Investigation (FBI) has named product counterfeiting as the crime of the newdecade in view of its considerable growth and sales. It is estimated that the annual counterfeit salesamount to a whopping $300-600 billion. Counterfeit products ranging from breakfast cereals tomedicines have caused injuries and sometimes even death for some unsuspecting customers. Frompharmaceutical, high tech to retail luxury goods companies, there is not a single industry that has notexperienced the outcomes of counterfeiting. According to the United Nations Office on Drugs andCrime (UNODC), drug counterfeiting is one of the most harmful forms of counterfeit goods with salesfrom Asia to South-East Asia and Africa alone amounting to some $1.6 billion per year. The reasons forthis are the easy profits and relatively low risk of prosecution and penalties. Statistics show that thecounterfeit drugs cause 100,000 deaths worldwide each year and provide approximately $75 billion inrevenue, for illegal operators. Counterfeiting is a disease that easily corrodes the real brand’s image andreputation, derails global business, counterfeiting ensures loss of brand, revenues and jobs.Gray Marketing“When authentic branded products reach the consumer through marketing channels other thanthat of the authorized distributor” it is referred to as gray marketing. Though gray market productsare authentic products unlike counterfeit goods, which are fakes, it can be as damaging and costly
  2. 2. as counterfeits to the manufacturer. This is because the sales of these grey market products have anegative impact on customers who are expecting the original manufacturer’s warranty. Besides, theentire grey market sales process takes sales away from new products and affects distributor loyalty. Thisresults in loss of revenue and legitimate channels as well.In the second and concluding part of this article, we will look at some other enterprise risks and how tocombat these risks with an effective Enterprise Risk Management (ERM) solution.Read More About: brand management, Anti-Counterfeiting