Question

Six months ago, Albert was named director of his family's company; a factory dedicated to the production of parts for automobiles. When the company was founded, it was a resounding success because it was one of the first factories devoted to this production. However, over time, good competitors have been born, and the factory has had to deal with a series of serious problems that still entails and that Albert has proposed to face to recover stability and bonanza of previous years.

Some of the problems that Albert needs to solve are:

• Recover old customers who have gone to the competition and attract new audiences.
• Break with old customs and adapt to a changing market.
• The current production system has become outdated. Each department works independently, causing that tasks must often be repeated.
• There is no system for reviewing the processes so that failures are not detected until the product has been manufactured.
• Over time the facilities have been deteriorating, as well as the machinery, which has become old and outdated.
• Competitors are gaining ground quickly, offering a personalised service, adapted to the customer and at lower prices.

However, and despite these problems, it is essential to highlight some elements that the company has in favour, and that must be used to solve its problems:

• Workers involved with the company and who have many years of experience.
• A long history in the production of parts for automobiles, a fact that gives them extensive experience in the sector.
• It is a very dear company and valued in its city of birth.
• Although it has lost customers, it works with some of the most prestigious companies in the automotive sector.
• It has a large factory owned, as well as adjacent lands that are suitable for building.
• Despite the losses, the company has no debts.

FORMULATE

1. Carry out an analysis of the current situation of the company, naming the aspects, both positive and negative, that affect it internally and externally.
2. Based on the results obtained in the analysis, you must set a whole series of strategic objectives in the short, medium and long term.
3. We will focus on risk management so we will have to carry out a risk management process that will encompass the following activities:

1. Explains what a risk management process and its phases is.
2. Detects the risks that can affect the company, both internally and externally.
3. It establishes how to respond to the detected risks. Here we must name the solution proposal, as well as the resources (human and material) necessary to face the risk.
4. Explain how you would carry out the process of risk monitoring and control, to verify that actions to deal with risks give the expected results.

4. The company is located in an area with a tendency to suffer heavy rains, causing even some significant floods. This situation is a foreseeable risk, but not preventable, so it is crucial to be prepared.

To do this, you must plan an action such as:

1. Prevention strategy
2. Reduction strategy
3. Transfer strategy.
4. Acceptance strategy

Answer 1

a. In business and operation, risk management practices help us to minimize the impact of the risk if it takes place. The process aims at identification, monitoring, and management of the risk. The risk management process has the following 5 phases.

1. Identify the risk: This is the first step wherein we conduct the situational analysis and identify the risk and its probability.

2. Analyze the risk: Once all types of probable risks are identified now we need to analyze each of the risks.

3. Evaluate the risk: Each type of risk will have its own impact therefore we need to evaluate for the severity of impact for each of the identified risks.

4. Control, treat and mitigate the risk: We should try to control the reason that could lead to the even classified as probable risk takes place and if it takes place we must have a mitigations action plan in place.

5. Monitoring and review: All the risk management efforts should be monitored.

b. In this case, the internal risk that can affect is the lack of finance for new machinery or lack of technical knowledge to operate the new machinery. External risk and not gaining the customer confidence to come back and probably the company may not get the old customers back.

c. we will have to create an action plan to manage the risk identified, like for the lack of finance the financing options need to be explored and for the manpower, the training on a new production system needs to be initiated. For external risk of not able to gain the confidence of the customers, we need to make arrangement to visit the customers to the new production system and the opportunity of creating a strategic alliance need to be explored.

d. The risk can be managed through four types of strategy which are prevention, reduction, transfer, or acceptance of the risk. However in this case all the risk identified can be prevented or reduced therefore to do that the company needs to have a proper action plan in place and the stakeholder's participation is a must achieve the desired results.