Enterprise Risk Management
The Problem
Diversified Assets Ltd. is a multinational asset management company with operations worldwide. The company and its subsidiaries manage more than £100 billion in assets for millions of investors around the world. Their clients include major institutions as well as private individuals.
Each year the company recruits thousands of graduate students across the globe. In 2004, they had to fill 550 positions within the Investment Management Operations division alone. To prepare new hires for management roles within a division, the company provides 12 months of on-the-job training across four different business areas. At the end of training, the new hires take up first-level managerial positions within the division.
Diversified Assets Ltd. looks to recruit graduates who are flexible and committed, who are self-starters and team players. Although it has had a good success rate in recruiting such graduates, it is becoming increasingly concerned about the risk profile of the graduates selected. In the past two years, several new first-level managers made risky decisions that turned out to be bad bets. As a result, the company suffered large losses.
The board of directors at Diversified Assets Ltd. has outlined a number of strategic objectives as part of the company’s growth strategy. For the strategy to be effective, first-level managers are still required to make risky decisions. However, to avoid similar losses to those suffered over the last two years, the company wants to identify graduates who can exercise balanced judgment by taking calculated risks.
The problem is that the company does not have a tool available to identify job candidates who possess the specific qualities they are looking for. It does not want to invest a large sum of money to devise and deliver one, but would like a third-party solution that can be implemented throughout its global operations.
The Solution
Diversified Assets Ltd. needs to identify graduate candidates who are able to make good decisions in risky situations, in line with the company’s strategic direction. Using Oxford Risk Rating, the company was able to pinpoint graduates who are highly competent at taking risky decisions: they show balanced confidence, consistency and sensitivity to the consequences and probabilities of possible outcomes. Additionally, Diversified Assets Ltd. benefits by being able to administer the Oxford Risk Rating online to candidates across the globe on 24 hours a day, seven days a week.
The Result
Diversified Assets Ltd. selected graduates that later became successful first-level managers who could implement the company’s growth strategy effectively by taking calculated risks. As a result, growth within the division was in line with company projections of 10% a quarter. Taking into account return-on-investment relative to cost of employment of each of the 550 new hires, the company netted a profit of £5,500,000*.