Solved by verified expert:Risk Mitigation StrategiesAccording to the article presented by EY (“Turning risk into results,” 2013), “Our point of view is that companies with more mature risk management practices out perform their peers”. Our client experience, research and study results strengthen that perspective.” (“Turning risk into results,” 2013, p. 1). This suggests that companies that development an ERM (Enterprise Risk Management) plan -have a much better chance of managing and mitigating their business risks. So what should DRD do to mitigate these risks? EY suggests a three-prong approach which includes (1) focus on ERM (2) reducing the cost of controls (3) create value (“Turning risk into results,” 2013). Additionally, EY’s research recommends that business risks should be communicated internally and externally ensuring employees and stakeholders are made aware of the risks, risks and their acceptance levels are identified and tracked and controls are in place to capture and communicate metrics regarding the risks, and that technology is leveraged to monitor and report risks (“Turning risk into results,” 2013). Examples of Risk Mitigation StrategiesSpecifically, for DRD, this means that they may need to establish new processes to track, monitor, manage, report and communicate their risks (1) competition (2) income (3) products (4) sales distribution channels. Each risk should be owned by someone in the company responsible for monitoring and tracking specified metrics which they will measure against acceptable risk tolerances (“Turning risk into results”, 2013). Examples of metrics that DRD may need to track is the increase in the number of new competitors. This metric may help them determine at what point they believe competition could eroding their market share. In addition to developing the risks, and devising risk tolerance metrics, they need to develop a risk mitigation strategy for each risk so that they are prepared with an action plan and know when to execute it.. Conclusions In order to turn “risks” into “results”, EY has identified a multifaceted approach including; Enhanced Risk Strategy, Embedded Risk Management, Optimized Management Functions, Improve Control Processes, Enable Risk Management Communication ((“Turning risk into results,” 2013). Setting up and ERM program for many companies is very complex, due to the size and distribution of employees. However, in this case, I believe DRD actually has an advantage – as they are a small family run business with limited staff. I believe the key for DRD is to assign clear ownership of the risks, devise metrics to track, monitor and report on them, and to ensure risks are effectively communicated to employees and stakeholders.ReferencesBeamish, P (2016). Deep Roots Distillery. Richard Ivey School of Business Foundation (2016-03-09 ).Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2017). Foundations of business (5th ed.). Boston, MA: Cengage Learning.Turning risk into results – How leading companies use risk management to fuel better performance (2013). Retrieved from www.EY.COM Please complete on the study attachedSummarize the risks the company is exposed to.What strategies can the company use to mitigate these risks or turn them into opportunities?http://www.ey.com/Publication/vwLUAssets/Turning_r…ATTACHMENTS Case study
montasary_case_study__1_.pdf
Unformatted Attachment Preview
For the exclusive use of C. Hendrickson, 2017.
W16144
LONG-TERM ORIENTATION IN THE BENEDICTINE MONASTERY OF
ADMONT
Dietmar Sternad wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2016, Richard Ivey School of Business Foundation
Version: 2016-03-21
On a cold winter’s day in February 2015, the twin towers of the abbey church were hardly visible in the
heavy snowstorm. Helmuth Neuner, long-time business director of the Benedictine monastery of Admont
in Austria, was trudging through the snow over the monastery’s main courtyard. His attention was on one
of the Admont Monastery’s businesses, the wooden panel production company STIA Holzindustrie
GmbH (STIA), which was facing a rapidly changing market environment. Chinese producers of cheap
wooden and laminate floors were putting pressure on the price levels. With its comparatively high labour
costs, STIA had a considerable cost disadvantage. For the last two years, the company had reported losses
(see Exhibits 1 and 2).
“I do not demand the same high returns from all our businesses,” thought Neuner. “But this is about the
long-term viability of the company. We do not need to take any dividends out of the business.
Nevertheless, we need to earn at least enough to be able to invest into the future.”
Neuner saw it as one of his major challenges to keep STIA afloat in a stormy market over the next
decade. He knew that the company had certain advantages: in particular, a loyal labour force — people
who had a deep attachment to the product and their employer. But was it enough to survive in the long term?
THE FIRST 871 YEARS
In 1074, based on an endowment of Saint Hemma of Gurk, the Benedictine monastery of Admont was
founded in a remote location amidst the Ennstal Alps in the northern part of the Austrian province of
Styria. Following the famous motto of their order’s founder, Saint Benedict of Nursia, “ora et labora et
lege” (“pray and work and read”), the Benedictines soon developed Admont Monastery not only into a
widely known centre of spirituality and literacy but also into an important economic base for the region
(see Exhibit 3). The original endowment had included vast forest lands. These forests and the monastery’s
vineyard estate, established in 1139 in the village of Jarenina (Slovenia), remained the main sources of
income for centuries. Timber had long been in high demand, and the monastery’s wine was highly
renowned and consumed from the Austrian royal court to England.
This document is authorized for use only by Carmen Hendrickson in OL-501 Business Foundations 17TW2 taught by Lindsay Conole, Southern New Hampshire University from November
2017 to May 2018.
For the exclusive use of C. Hendrickson, 2017.
Page 2
9B16M045
Based on its strong economic basis, the monastery flourished in the 17th and 18th centuries, founded a
high school, was widely acknowledged for its school of broidery art, and created the world’s largest
monastery library room: a Baroque masterpiece that blended architecture, frescoes, sculptures, and books
into one unique, holistic piece of art.
The monastery experienced much harder times in the 1930s. Following a collapse of timber prices during
the Great Depression, Admont Monastery was unable to pay wages and bills. It had to sell precious works
from its famous art collection to survive. Just a few years later, in 1939, the monastery was expropriated
by the Nazi regime. The monks had to wait until the end of World War II to return, but parts of the
property — most notably the monastery’s vineyards — remained lost.
DIVERSIFICATION INTO INDUSTRY
After the events in the early 1930s, the convention of monks realized that it was too dangerous to rely on
agriculture and forestry as the sole economic pillars. They decided to diversify the monastery’s business
operations. Hydroelectric power stations and utilities, ski lifts, a museum, a care home, a market garden,
restaurants, real estate development, and service businesses were added to Admont Monastery’s portfolio.
In the 1970s, the monastery also started to diversify into industry. Out of a felt responsibility for the
development of the region and for providing jobs, but also as part of an overall vertical integration
strategy, it invested in timber-processing plants.
STIA was founded in 1972 with 13 employees for the industrial production of formwork panels. Soon the
company specialized in higher-quality natural wooden panels (used by furniture makers and for facades)
and triple-layered floorboards under the “Admonter Naturboden” brand name. The company established
itself well in both the domestic and international markets, especially in the years after 1990 when it
developed its widely renowned wide plank floors.
In 1973, the Admont Monastery, together with a joint venture partner, established DANA: Austria’s first
industrial producer of wooden doors. Due to the partner’s bankruptcy, the monastery took over full
ownership of DANA in 1979. In the 1980s and early 1990s, under new management headed by Neuner,
the company doubled the number of employees, tripled its revenues, and achieved a market share of over
60 per cent in its home market of Austria.
Based on his successful performance at DANA, the convention of monks decided to appoint Neuner as
the monastery’s business director in 1994. (The monks decided democratically on all fundamental
business matters, including the appointment of the top management or the approval of the yearly budget,
based on the principle of majority rule.) In his new role, Neuner was responsible for all of Admont
Monastery’s business activities. From this new perspective, he soon realized that DANA no longer fit into
the monastery’s portfolio:
I knew that the Admont Monastery would not be able to manage such a company well in the long
term. The industrial business is far too volatile. Moreover, DANA was becoming too big for
Austria, but at the same time, we did not want to take the investment risk involved in further
internationalizing the business.
Thus, in 2005, the monastery decided to sell DANA — which, by that time, had developed into a more
than €50 million1 business — to a U.S.-based globally active windows and doors corporation.
1
€ = EUR = euro; all currency amounts are in € unless otherwise specified; €1 = US$1.13 as of February 9, 2015.
This document is authorized for use only by Carmen Hendrickson in OL-501 Business Foundations 17TW2 taught by Lindsay Conole, Southern New Hampshire University from November
2017 to May 2018.
For the exclusive use of C. Hendrickson, 2017.
Page 3
9B16M045
FROM DOORS TO HOUSES
The Admont Monastery invested all the proceeds from the sale of DANA into real estate. “It was a
change of paradigm,” said Neuner, as the monastery deliberately decided against a further investment in
its traditional forestry business, in which Admont Monastery was among the top five in Austria. Neuner
explained the decision:
In forestry, the yield is well below 1 per cent. In real estate, I had a yield of 5–6 per cent from the
beginning: returns that I cannot guarantee in industry. A 0.5 per cent difference in yield will
double your assets in a century. Thus, if I invest in real estate, I have the same substance as in a
forest, but a much higher chance to accumulate property. I cannot be sure of a sustainable 4–5 per
cent rate of return over decades in industry. Also, with real estate, I do not have a full guarantee.
In the early 1900s, for example, an Austrian law set maximum house rent limits. If legislature
interferes, the returns can also diminish in real estate. The substance, however, remains intact.
Neuner was aware that entering new business segments did not come without risks:
Many others who thought that they needed to diversify failed. Their new pillars were breaking
away because they did not have the necessary skills to manage them. If you do not understand
anything about real estate, you will not be happy with it. You need to build the skills to
successfully manage a new business segment.
The Admont Monastery created its own real estate development department. Several employees
successfully graduated from a real estate academy. In the beginning, Admont Monastery entered into a
partnership with a local insurance firm that had a reputation for being a long-standing expert in real estate.
The first projects were developed together, with the monastery taking the junior partner role with a share
of 30 to 35 per cent. After the successful completion of three joint projects, the monastery started its own
projects. Sensing that closeness to customers was a key success factor in the business, it also set up a
property management department.
In the meantime, the monastery also offered its real estate development and property management
services to third parties, mainly other church-related organizations, as Neuner explained:
At first, our sister and brother organizations were quite skeptical, as they saw that we did
something in which they had not been able to proceed. We could change that perception over
the years, however. Now we help them to develop their own real estate. We never pull them
over the barrel. We are transparent, open, honest, and very correct. That’s our highest credo.
Thus, others can participate as well. Now that we have built a reputation, more and more
potential partners are asking us to cooperate with them.
Within two decades of Neuner’s tenure as a business director, Admont Monastery had invested in real
estate with a value that was equivalent to the 60,000 acres of forest land that had formed the basis of the
monastery’s prosperity for over eight centuries.
RE-ENTRY INTO THE WINE BUSINESS
In 1991, the Slovenian government passed a denationalization law that enabled the privatization of
businesses that had been in state ownership in the Communist era. The Admont Monastery saw this as an
opportunity to regain its former vineyard estate around Jarenina, although the vineyards were abandoned
This document is authorized for use only by Carmen Hendrickson in OL-501 Business Foundations 17TW2 taught by Lindsay Conole, Southern New Hampshire University from November
2017 to May 2018.
For the exclusive use of C. Hendrickson, 2017.
Page 4
9B16M045
and the buildings desolate. After some years of juridical quarrels over the rightful ownership, Admont
Monastery reacquired the estate. Twelve million euros were invested in re-cultivating 170 acres of
vineyards, restoring the buildings (including a representative castle), and setting up a new production site.
Forty-three people were employed in the winemaking business in 2015.
After more than 15 years of investment, the vineyard estate was still not profitable, despite producing a
rather large quantity — 300,000 litres — of wine per year. Neuner explained the rationale behind this
unusual investment that had remained unprofitable for a long period:
It is not our intention to make profits right away. That is our most important advantage
compared to other investors who need to earn their money back in a very short time. If you
contribute to the development of a region — even if it is only a small region — for a long time,
you have a responsibility. In the time between 1139 and 1938, the monastery engaged in
regional development, built schools and roads, and made sure that the people could live and
survive. The wine brought added value to the region — value that could also be sold well to the
benefit of the Admont Monastery. We want to assume this responsibility again. In the long run,
we, of course, also want to earn something again, but at the moment, we focus on building the
substance, improving the substance, and creating value in the substance. If we would sell it
again today, we would not get anything for it. But how will it look in 200 years? I am convinced
that food staples — and I consider wine a food staple — are something that we will always
need. In the long term, when we are able to improve our name and make the wine more known
again, we will also get returns. We just need to establish our new brand — Dveri Pax. It takes
time, but we will take our time.
The vineyard estate was named Dveri Pax instead of bearing the name of the monastery in order to enable
the people in the region to identify with their own local brand. In addition to developing the estate’s
brand, Neuner also saw the need to better position Slovenia as a wine-growing country in global markets:
It just takes time — or money. But in this respect, we are conservative. We do not want to take
too much money into our hands to push it in the short term. It will happen automatically. You
just need to take your time — and that’s what we do.
The Dveri Pax estate engaged in some marketing activities including wine presentations, a bar-showroom
in the nearby city of Maribor, and invitations to journalists. However, a stronger focus was set on
ensuring the quality of the product than on marketing, as Neuner explained:
We will build trust and credibility only with consistency and quality. Only high quality lasts. It
will become apparent. People will taste the wine and will buy it if it is good. We will provide
high quality every year, or we won’t offer the wine to the market at all. Thus, we will reach at
least a balanced business result within the next five to ten years.
INVESTMENT AND LEADERSHIP PRINCIPLES
Just like a typical corporation, the Admont Monastery also held capital assets that it invested on the stock
market. When doing so, Neuner followed some basic rules:
We try to invest as ethically as possible, although we use a wider definition about what we
consider an ethical investment. I also do not see us as a shareholder who wants to profit from
This document is authorized for use only by Carmen Hendrickson in OL-501 Business Foundations 17TW2 taught by Lindsay Conole, Southern New Hampshire University from November
2017 to May 2018.
For the exclusive use of C. Hendrickson, 2017.
Page 5
9B16M045
rising share prices. I want to acquire a part of a business — a business that I understand, in
which I trust, and where I can assume that the management will work prudently to generate a
reasonable dividend yield. It is a nice side effect if the share price is also developing well.
In all investment activities, however, the monastery remained relatively risk-averse. For example, it
engaged in neither derivatives nor currency exchange transactions. “We do not enter any sphere of risks,”
said the monastery’s abbot, Bruno Hubl. “We cannot afford that for moral reasons.”2 Even the Internet
business was avoided: “We prefer real estate and forestry,” said Neuner.3
Although Neuner agreed that “a monastery is not programmed to deal with risks,” he was also convinced
about the need for courage:
The courage to make decisions is the first element of success. You need to have courage. Just
leaning back and not doing anything cannot work out well, even with a lot of substance. You
cannot win out of fear — not even if you are long-term-oriented. You need to keep the fire
burning — as they say — and not the ashes.
Keeping the fire burning over the long run was also a key principle in people management at the Admont
Monastery. Those who entered a management position in one of the monastery’s businesses usually
remained there for decades. Neuner therefore placed great emphasis on selecting the right people, as he
explained:
Personality and moral attitude are what really counts here. In conversations with employees,
attitudes, dignity, and humility are important — things that Saint Benedict also put into the
foreground. To my mind, humility is one of the most important elements of leadership — it’s
about letting the other person live, giving him or her the chance to develop, and taking delight in
how the other one is able to do something.
HIGHER PURPOSES
For the Admont Monastery, business played an important role — but as a means, not as an end. “It has a
serving function,” says Neuner. “The other tasks of the monastery have priority. Business is the bread.”4
The monastery’s other duties included pastoral care for 26 parishes; the only high school in the region
with over 550 students; a care home; a community centre; and a combined natural history, fine art, and
modern art museum with around 80,000 visitors per year. Neuner explained the importance of the
monastery’s work:
I do not serve shareholder value with my work here but purposes for which the monastery and I
take responsibility. As a farmer’s child, I had to run for miles to go to school, which makes the
monastery’s high school all the more important for me. It is the only option for getting a
secondary school leaving certificate5 around here. Or take our care home: We have just invested
€3 million for 35 care places. We will never see this money again, but that does not matter. I am
2
Klaus Höfler, “Abt Bruno Hubl: ‘Nur Schneller Gewinn – Das Kann Es Nicht Sein,’” DiePresse.com, August 13, 2009,
accessed February 13, 2015, http://diepresse.com/home/politik/innenpolitik/502019/Abt-Hubl_Nur-schneller-Gewinn-daskann-es-nicht-sein.
3
Anke Henrich, “Admont-Wirtschaftsdirektor Neuner: ‘Es Geht Auch Anders,’” Wirtschafts Woche, accessed April 2, 2015,
www.wiwo.de/unternehmen/interview-admont-wirtschaftsdirektor-neuner-es-geht-auch-anders-seite-2/5525220.html.
4
Andreas Kump, “Am Boden Bleiben,” Adoro – Your Admonter Magazine 2 (2012): 15.
5
Comparable to a high school diploma in the United States.
This document is authorized for use only by Carmen Hendrickson in OL-501 Business Foundations 17TW2 taught by Lindsay Conole, Southern New Hampshire University from November
2017 to May 2018.
For the exclusive use of C. Hendrickson, 2017.
Page 6
9B16M045
convinced — as are the Benedictine monks — that you can lead a company both in a humane
and a sustainably successful way.6
Abbot Bruno added another important purpose of the monastery’s businesses: “Not least, it is also about
creating jobs. Earned profits are also serving the common good.”7 He recognized the importance of
profitability for keeping a business alive: “Of course, we need enough to reinvest and renew. But the
thinking always needs to be sustainability-oriented. Only short-term profits — that is not the right way.”8
Admont Monastery’s monks, along with Business Director Neuner, always tried to keep the well-being of
the region in mind when making decisions about the monastery’s businesses, which provided close to 600
jobs in and around a small and relatively remote village of only 2,500 inhabitants. “It has been our
aspiration to develop the region around the monastery for almost a thousand years,” said Neuner. “Only if
the region is functioning, can we preserve education, jobs, or regional energy supply. The financial crisis
will throw the spotlight on the development of regions again.”9
STIA HOLZINDUSTRIE GMBH
After the sale of DANA, STIA (which stands for “Stift Admont,” the German name of the monastery)
remained the monastery’s single largest business unit i …
Purchase answer to see full
attachment
