Question

Eastern Company faces major competition and challenge from a global aluminum market and from foreign manufacturers who regularly "dump" aluminum into western markets at very low prices. Thus there is continuous risk in the business from forces out of the control of internal company and project management. To address the risks inherent in its business, Eastern prepared a risk-based strategic plan. Eastern faces eight risks and has developed eight strategic goals to address them.

Risk I. Required electric power will not be available at an affordable price.

Strategy I. Secure economically priced power to reduce the risk of power shortage.

Risk 2. Cost increase in aluminum manufacturing will increase faster than margin.

Strategy 2. Secure other resources at reasonable costs to offset the risk of cost escalation.

Risk 3. Customers will not be satisfied with Eastern's products.

Strategy 3. Cultivate customer awareness and promote customer satisfac- tion to avoid customer satisfaction risk.

Risk 4. Eastern's working environment will prove to be unsafe and the company will experience substantial loss of workforce and finance as a result.

Strategy 4. Create a safe working environment to control the risk of worker injury and associated costs.

Risk 5. The Eastern workforce will not grow with the technology available for continuous improvement.

Strategy 5. Build a responsible and knowledgeable workforce to avoid the risk of workforce instability.

Risk6. Eastern will not act to improve the technology of manufacturing in time to keep ahead of competitors.

Strategy 6. Improve technology and plant equipment to produce products more efficiently to control productivity risk.

Risk 7. Pollution from Eastern facilities will lead to noncompliance with government environmental requirements.

Strategy 7. Improve Eastern's impact on the environment to avoid the cost - ~ of pollution and noncompliance.

Risk 8. Increasing waste in the manufacturing process and workforce will lead to uncontrolled costs.

Strategy 8. Reduce waste and non-value-added costs to control the risk of wasted effort.

Create another risk that Eastern Company might be facing and develop a strategic goal to address your new risk. Provide background that illustrates why this risk is important and specifically how the strategic goal will address the new risk.

Answer 1

Risk 9:
Risk of foreign exposure while importing of raw material.

Strategy 9:
Enter into forward contract and lock in the current rates to protect the company from foreign exposure risk.

This risk is very important to be considered as various economic factors can impact the currency rate making the raw material costly for the company. By entering into forward contract the company can purchase raw material at a price determined in the contract at a future date.