How Tesla, Apple, NuBank and others MANAGE RISKS.

Summary

This video explores essential risk management techniques used by major tech companies like Tesla, Apple, and Netflix to navigate challenges and identify opportunities. It highlights the importance of categorizing risks, developing response strategies, and understanding risk appetite, using real-world examples to illustrate how firms like Chipotle and NewBank have either thrived or struggled in response to risks. The video emphasizes that effective risk management is a continuous process, encouraging viewers to adopt strategic tools and frameworks to mitigate risks and enhance decision-making.

Takeaways

• 😀 Understanding risk management is essential for companies to minimize failures and identify new opportunities.
• 📊 Major consulting firms like McKinsey, Bain, and BCG provide risk management tools that successful companies use.
• 🍔 Chipotle's e coli outbreak highlights the consequences of poor risk management in supply chains.
• 📋 Effective risk management involves categorizing risks as internal or external and managing them independently.
• 📉 Apple utilizes a risk register to document and respond to potential threats from emerging technologies.
• 💰 Netflix's high risk appetite allowed it to accumulate debt for growth, but it later adjusted strategies as subscriber growth slowed.
• 📈 Companies like Apple and Tesla demonstrate the importance of cash reserves as part of their risk management strategies.
• 💳 Risk avoidance can lead to missed opportunities, as shown by fintechs like Newbank targeting underbanked populations.
• 🔋 Tesla’s risk acceptance in developing the Model 3 revolutionized the electric vehicle market despite inherent challenges.
• 🔄 Risk management is a continuous process that requires ongoing evaluation and adaptation to changing market conditions.

Q & A

What major risk did Tesla face with the Model 3?

Tesla faced significant production risks due to the high quantity required for the Model 3, leading the company to build a new assembly line and enhance productivity.

How did Chipotle's risk management failures impact its business?

Chipotle suffered a 95% profit decline and lost about $8 billion in shareholder value due to inadequate risk management when switching to a decentralized vendor management system.

What is a risk register, and how is it used?

A risk register is a tool that documents identified risks, their likelihood of occurrence, impact, response strategies, and responsible parties, helping companies systematically manage risks.

What strategies did Apple implement to manage external threats?

Apple documented risks in a risk register, shifted production to China to cut costs, and diversified its services to reduce reliance on product sales.

How does Netflix's risk appetite influence its business decisions?

Netflix has maintained a high risk appetite to finance its content library through debt, correlating its growth potential with its ability to acquire new subscribers.

What are the benefits and drawbacks of risk avoidance?

While risk avoidance can prevent potential losses, it may also lead to opportunity loss, as seen with traditional banks avoiding high-risk customers and missing out on profitable fintech opportunities.

How has Tesla adapted its risk management approach in response to market competition?

Tesla has invested in securing raw materials for EV production and developed its own battery recycling processes to mitigate risks associated with supply chain and competition.

What role does cash on hand play in Apple’s risk management strategy?

Apple's significant cash reserves allow it to respond effectively to risks, such as relocating manufacturing or investing in research and development without immediate financial constraints.

What lessons can be learned from the risk management strategies of big tech companies?

Key lessons include the importance of identifying risks early, diversifying strategies to reduce dependence on single revenue streams, and the need for continuous risk assessment and adaptation.

How do consulting firms contribute to risk management practices in big tech?

Consulting firms like McKinsey, Bain, and BCG provide frameworks and tools to help companies like Google and Amazon identify and mitigate risks effectively, improving their chances of success.