Series is the best-selling commercial jetliner in history. The first unit entered airline service in February 1968 and the 10,000th unit started flying in March 201 In the spring of 2011, however, Boeing faced an unthinkable defection: American Airlines, an exclusive Boeing customer for more than a decade, was prepared to place an order for hundreds of new, fuel-efficient jets from the world's other major aircraft manufacturer, Airbus.

The chief executive of American called Boeing's CEO, W. James McNerney Jr., to say a deal was close. If Boeing wanted the business, it would need to move aggressively, the airline executive, Gerard Arpey, told Mr. McNerney. It seemed that this shattering threat, changed the risk attitude in Boeing. To win over American, Boeing ditched the idea of developing a new passenger plane, which would have taken a decade. Instead, it decided to update its workhorse 737, promising that the plane would be airborne in six years. But months behind Airbus, Boeing had to play catch-up. Engineers were pushed to submit technical drawings and designs at roughly double the normal pace, according to former Boeing employees. Facing tight deadlines and strict budgets, managers quickly pulled workers from other departments when someone left the 737-Max project. Although the project had been hectic, current, and former employees said they had finished it feeling confident in the safety of the plane.

The menace of Boeing's chief rival was constant. Airbus had been delivering more jets than Boeing for several years. But losing the American account would have been gutting, costing the manufacturer billions in lost sales and potentially thousands of jobs.

The 737 Max was born a mere three months after the American's CEO call to Boeing's McNerney.

Then in March 2019, aviation authorities around the world grounded the Boeing 737 MAX after two new airplanes crashed within five months, killing all 346 people aboard.

During the race to beat Airbus and hence maintain the Boeing 737 market lead, Boeing mirrored Airbus' operations and mounted larger engines in existing models. The project change seemed straightforward: Make minimum changes to avoid the need for training in a simulator, decrease costs, and build the redesigned model quickly. Determine to beat Airbus, Boeing placed the larger engine (saving 8% on fuel) on the same body as the highly successful 737-800. To avoid the risk of the engine scraping the tarmac, they raised the engine. Engineers pointed out a high severity secondary risk: the re-position would impact the aerodynamics in the aircraft which will stall the aircraft on flight. In the scramble, they installed a new software, the Maneuvering Characteristics Augmentation System (MCAS) which was supposed to prevent stalling. This will add to the training costs for all pilots: Boeing declared that training was not necessary. The US regulators agreed. The aircraft started selling like hot cakes.

  

Long before the aircraft blueprints, the strategic plans would have shown that ultimately Boeing should not have abandoned what made it so popular in the skies: passenger safety. Fear, greed and possibly ego, distracted the C-Suite to gamble everything on the re-fitting of the old-reliable 737 model to compete against the innovative Airbus A320neo family.

However, in an effective Strategic Risk Management plan the C-Suite would have been advised that the strategic and life safety risks were clearly present and that training for pilots was indeed necessary. In addition, all such risks would have been assessed to determine whether they could be used to obtain a competitive advantage. For example, including vital safety features in the base cost of aircraft (as opposed to charging extra for them) and requiring a focus group of pilots with no financial relationship with Boeing to test the newly designed 737 MAX 8s and the MCAS system would have been a way to solidify Boeing's reputation for safety first. World media was quick to point out that Boeing's ad-hoc risk appetite: safety was an optional extra.

Even with two disasters, Boeing did not seem to stop and get back to its basic philosophies. A Strategic Risk Management plan, which monitors progress in achieving strategic objectives with a focus on continuous improvement, would have looked at the Indonesian Lion Air and the Ethiopian Airlines crashes as an opportunity to confirm that Boeing puts safety first by immediately grounding the 737 MAX 8s. Instead, Boeing urged the U.S. to keep flying its jets until after 42 regulators in other countries had grounded them and appeared to care more about economics than life safety.

Boeing's risk management strategies, if one existed, failed without full support from the C-Suite as it has not been integrated into the firm's business model and decision-making processes. The delivery may have been rapid, the sale may have gained short term profits: but without a strategic risk management plan, the company has a long, uphill climb to resolve its many challenges and rebuild its brand.

As Boeing wanted to maintain its competitive edge, they cobbled a large engine on an older body of the 737. The engines were too close to the tarmac, so they moved them up and forward. That fix was an aerodynamic mistake as the MAX tended to tilt upwards in mid-flight. They patched that problem with the MCAS, which repeatedly pushed the aircraft nose downwards. The untrained pilots had no control. Passengers died. Airlines have been told to ground their 737-MAX assets and Boeing lost money and reputation. On January 2021, Boeing agreed to pay $2.5 Billion in damages to resolve criminal charges related to a conspiracy to defraud the US Federal Aviation Administration. And then, in May 2021, Boeing was grounded again: this time for new flaws in the electrical power systems.

BASED ON RISKS BELOW- what risk(s) would you consider are of highest priority and should have been addressed first? Why?

Risk of losing business: When American Airlines threatened to place an order for new fuel-efficient jets from Airbus, Boeing faced the risk of losing a valuable customer and billions in potential sales.

Risk of falling behind schedule: To catch up with Airbus, Boeing had to push its engineers to submit technical drawings and designs at roughly double the normal pace, which increased the risk of falling behind schedule.

Risk of budget overruns: Tight deadlines and strict budgets meant that managers had to pull workers from other departments when someone left the 737-Max project, increasing the risk of budget overruns.

Strategic risk: Boeing's decision to update its workhorse 737 instead of developing a new passenger plane, to win over American Airlines, was a strategic risk that ultimately led to the 737-Max disaster.

Safety risk: Engineers pointed out a high severity secondary risk that the re-positioning of the engine in the 737-Max would impact the aerodynamics of the aircraft, which could lead to stalling, and this risk was not addressed adequately.

Operational risk: The installation of a new software, the Maneuvering Characteristics Augmentation System (MCAS), was an operational risk that was supposed to prevent stalling but ended up contributing to the crashes of the 737-Max.

Reputational risk: Boeing's ad-hoc risk appetite for safety as an optional extra resulted in a reputational risk, damaging its brand and causing public mistrust.

Legal risk: Boeing's failure to integrate a Strategic Risk Management plan into its decision-making processes led to a legal risk, resulting in criminal charges and a $2.5 billion settlement with the US Federal Aviation Administration.

Answer rating: 100% (QA)

Given the scenario described the risk of safety should have been addressed as the highest priority H... View the full answer