The case that has recently gone viral, namely that a passenger's lawsuit against the Garuda Indonesia airline
Question:
The case that has recently gone viral, namely that a passenger's lawsuit against the Garuda Indonesia airline deserves to be studied and learned from. The number of lawsuits filed is no joke, B.R.A Kosmariam Djatikusomo sued PT Garuda Indonesia Tbk (Persero) for Rp 11.25 billion.
If this lawsuit is won by Kosmariam, of course this will be more burdensome for Garuda Indonesia's finances. Moreover, we recently learned that last year Garuda Indonesia had not succeeded in making a profit. In 2017, Garuda suffered a net loss of US$213.4 million. This figure is lower than the net profit obtained by Garuda in 2016 of 9.36 million US dollars.
Operational risk
The above case is part of the operational risk. Operational risk is the risk due to insufficient and/or malfunctioning internal processes.
This risk is caused by the absence or malfunction of work procedures, human errors, system failures and/or external events that affect the company's operations.
The following is a statement from the plaintiff's attorney:
"We judged that Garuda flight attendants were negligent, because the flight attendants who provided the food were chatting with each other, thus spilling hot water," he said.
Based on the information above, it is clear that this operational risk incident was caused by human error.
Are there errors in carrying out work procedures? Of course we have to ask Garuda Indonesia.
Is "chatting" when serving food and drinks to passengers already regulated in their service SOP? If it is set, is it allowed?
If it is not allowed, then it is clear that this is an operational risk which is also caused by malfunctioning work procedures.
Market risk
Is the risk of changes in market prices in portfolio positions (shares in JCI) and off balance sheet accounts, including derivative transactions.
From my personal observation, on March 5, 2018, at least the share price of Garuda Indonesia (GIAA) on the stock exchange floor touched Rp 320 per share.
However, due to the high volume of news on this case in the media, GIAA's share price at the close of yesterday, Friday, March 13, 2018, was only 296, or down about 7.5%. Not a small decline when viewed from the point of view of stock investors.
We must understand very well that as long as the company still has products and services, the company will always be in the shadow of operational risk. Worse yet, from one risk can lead to another risk.
Question:
Analyze the case examples above, what do you think are the most effective risk management techniques or tools used by the company to deal with the cases mentioned above and how to implement them!
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen