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Risk Management at Toyota Case Type: risk management strategy
Industry Coverage: automotive
Case Prompt
After two unexpected disasters did great damage to Toyota’s reputation and finances,
the company has engaged your consulting team to develop a risk management
By 2009, Toyota’s world class production methods and reputation for manufacturing
quality cars pushed it past GM to take the lead as the world’s number one vehicle
seller. But its stay at the top would not last long. Jammed gas pedals that caused a
sudden and unstoppable acceleration in the cars were first discovered in its Lexus
brand vehicles. After fatalities occurred, Toyota was ordered to recall over four
million vehicles and replace the faulty pedals. Subsequent recalls spread to other
Toyota brands and pushed the total much higher. The recalls were costly but didn’t
come close to the damage to Toyota’s reputation for quality that was central to its
Another unplanned ”disaster” hit Toyota in 2011. It was the magnitude nine East
Japan earthquake and tsunami. The Tohoku region is an auto making center that
suffered great damage and loss of life. Toyota had to shut down four assembly plants
that made vehicles for Japan. On top of that, many of the small suppliers in the region
used by Toyota to source parts and components had to close their doors. That put a
great strain on Toyota’s supply chain, which would have to be reconfigured.
It was clear by then that risk management was going to need a new emphasis at
Toyota. To give risk management visibility, Toyota appointed a C-level executive, the
Global Chief Risk Officer (CRO), to lead the way. Below the Global CRO are
Regional CROs responsible for risk management in their particular part of the world.
At the company headquarters, each functional department has a risk manager. These
risk managers coordinate and cooperate with the Global CRO.
The Global CRO has tasked your consulting team to formulate
recommendations to strengthen Toyota’ risk management capabilities in the
Information security area.
Five pages.

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