Honeywell, Inc. and Integrated Risk Management

Case Analysis

Submitted to: Prof. A. Kanagaraj

By Vivek Gupta
Section C, 944

Executive Summary:
Honeywell was a multibillion-dollar, International Corporation employing 53000 people and managing operations in 95 countries. It was the largest producer of control systems and products used to regulate heating and air conditioning in commercial buildings and of systems in avionics systems. Carrying out business in 95 countries firm faced a number of risks. Honeywell’s risk management activities were dispersed throughout the firm as shown in the table. Other risks were managed operationally.
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The committee voting for this new program depends on whether the anticipated savings of the program would be realized, and whether the coverage provided by the new contract would be adequate. The proposed plan is a first step in a firm wide integrated risk management program that would extend to cover all of Honeywell’s financial and operational risks, the finance committee’s decision would establish Honeywell’s risk management strategy for some years to come.

Honeywell’s existing strategy was consistent with its risk management objective of minimizing earnings volatility and its cost of risk. The team wondered about the applicability of the relatively new concept of enterprise risk management, which is grouping many risks together into a portfolio of risks, rather than managing each risk separately. The team thought that the new enterprise management concept could be implemented through an innovative insurance contract. Though the idea seems promising the organizational barriers involved in developing such a program were daunting.

A significant challenge for the Honeywell team members designing the new integrated program was finding out the optimal risk management structure in terms of appropriate