Risk & Value Management - Case Study Example

? A case study related to RISK & VALUE MANAGEMENT Table of Contents Risk profiling of hazards due to operation of AutoPlast Ltd. 4 Political 4 Economic 5 Social 5 Technological 5 Legal 6 Environmental 6 Competitive 6 Disaster Recovery Plan 7 Environmental hazard 7 Hazard 1 7 Risk profiling 7 Disaster response 7 Hazard 2 8 Risk profiling 8 Disaster response 8 Technological hazard 8 Hazard 1 8 Risk profiling 8 Disaster response 9 Hazard 2 9 Risk profiling 9 Disaster response 9 Value chain analysis for performance improvement 9 References 12 Bibliography 13 Risk profiling of hazards due to operation of AutoPlast Ltd. The business risk of a company involves the uncertainty of earning profits, more specifically lower than the anticipated profits. The risk of the company describes the possibility of incurring a loss rather than profit. AutoPlast, the company under consideration, is a manufacturer of plastic products for automobile industry in the European Union. The major risks of the company may arise to decrease in sales of plastic products, reduction in per unit price of plastic products, difficulty in coping up with the competition in the market, economic scenario, regulation and intervention of authorities, political intervention, social climate, competitive technology, environmental surroundings and legal issues. Let us consider each of these categories of risk separately for AutoPlast Ltd (Jones, 2010, p.19). Political Considering the present scenario of chemical leakage from the storage plant of AutoPlast Ltd. and contamination of water of River Cruze and subsequent outbreak of fire leading to the health problem of the surrounding housing estates, village and fish market, there is a dominant upheaval from the local community against the operation of AutoPlast Ltd. It is evident that there would be political intervention due to mismatch and fulfilment of interest of the political parties leading to several agitations and discussion between the management of AutoPlast Ltd. and the political entities. Political intervention would lead to demand of hefty compensations for the health-affected people and any disagreement on mutual points would lead to unplanned expenditures of the company that is likely to affect the profit margin of AutoPlast Ltd (Coleman, 1988, p.11). Economic Although AutoPlast Ltd. is considered to be a major player in the local economy employing several local people surrounding the river Cruze, the present scenario of fire outbreak due to the operations of the company leading to respiratory and health issues of local mass would generate a sense of disloyalty and hatred towards the brand of AutoPlast Ltd. and hence they would have a tendency to reject its products leading to the fall in production and price of AutoPlast Ltd. Thus, the economic risk of AutoPlast Ltd. in the present scenario needs to deal with in a strategic manner by the management of the company (Shapiro and Glicksman, 2004, p.106). Social Considering the present scenario of AutoPlast Ltd., the society has shown some tolerance to the company as it employs a majority of the workers in the local community. But considering the extent of damage in terms of life and death and the psychological impact on the society due to presence of stimulants, the extent of risk that AutoPlast Ltd. is going to bear in terms of goodwill and subsequent volume and value of sales is considerable. Technological Considering the present scenario, AutoPlast Ltd. would run the risk of devaluation and distrust of the technologies used in its industrial operation and process of manufacturing plastic products. The company would need to reconsider its cost on research and development of the technologies used. The up-gradation of technologies would need to be looked upon by the management so that there is no further chemical leakage from its storage during operation. The decisions of the management would ensure that AutoPlast Ltd. adheres to its corporate social responsibility. Legal Due to the present scenario, the company would need to face legal issues with the local authority and planning authorities as well as other counter-parties involved. In this situation, compensations, demands of negotiators may not be mutually agreed and hence there would be a risk for AutoPlast Ltd. from the legal perspective. Environmental AutoPlast Ltd. in the present scenario has disturbed its surroundings which is very much necessary for its existence and sustenance. The water of river Cruze has got contaminated due to leakage of chemicals that would affect the fish market in its surroundings. This would again lead to health disorders and misbalance in the earnings and economy of fish market. Competitive Considering the present scenario, the market has seen competitors from Eastern Europe to offer plastic products at cheaper prices. Adding to the discontent and unhappiness of the local people due to respiratory problems happening due to its operations in the recent past, there would enough opportunity for the competitors to penetrate the market and capture adequate market share. In that case, AutoPlast Ltd. is likely to run the risk of loosing its major share in the market and economy. Disaster Recovery Plan The disaster recovery plan under the present scenario of AutoPlast Ltd. has been discussed below. Here we have taken aspects on the environmental and technological hazards that AutoPlast Ltd. would face and contingency plans for recovery and response to each of these hazards (Mitchell, 1996, p.134). Environmental hazard Hazard 1 Due to leakage of chemicals from the storage plant, the chemicals would mix with river water and this would lead to the contamination of water of river Cruze. These chemicals which are harmful for lives would be consumed by marine animals and fish. This is risky for human lives as those fishes are available in the local market which caters to the surrounding village and housing estates. Risk profiling The risk associated is that there may be legal cases filed against the company leading to financial losses and subsequent risk. Disaster response As a disaster response, the company should set up a processing plant for refinement of river water and its fishes to make them free from the hazardous chemical polymers. Also the local citizens and the fish market need to be made aware of the hazard. The fish market should collect fishes only after due refinement in the processing plant. Hazard 2 Chemicals leaked in the surrounding land have a chance of being mixed with underground water. The underground water when used by the local people would affect the habitat. Risk profiling The risk of negative publicity is associated with the company in this case. This would lead to the damage of their brand image. Disaster response Local people need to be made aware of the disaster and should be advised to avoid use of underground water directly. The company should inform local municipal body for refinement of water against chemicals for supply to the surrounding community (Sullivan and Krieger, 2001, p.466). Technological hazard Hazard 1 The leakage of the storage plant may lead to accident of their staff in terms of injury, life and death. Risk profiling The risk of workplace accident is bore by the company in this case lead to loss of their human resource. Disaster response In order to compensate and maintain the human resource, the company would offer appropriate compensation to their staff and their family to restore normalcy. Hazard 2 The leakage of chemicals in their storage plant may lead to the damage of their operating machines and systems and infrastructure of their set up. Risk profiling The company would run the risk of not being able to maintain their product safety. Disaster response The company should look at restoring the systems and storage for being able to resume operation without much loss. As a contingency plan, the company should decide on the optimal storage of chemicals in order to avoid recurrence of such events (Pichtel, 2010, p.438). Value chain analysis for performance improvement Value chain refers to the chain of activities that a company would perform in a particular industry to order to meet the demands of producing valuable products or goods. The product passes through each activity in the chain and gains value through each activity by the time the end product is developed. The concept of value chain analysis forms the fundamental of quality certification of each company like AutoPlast Ltd. Let us look at the chain of activities for AutoPlast Ltd. and the areas which can be focussed to improve its performance considering the present scenario. The chain of activities for AutoPlast Ltd. would include research and development on plastics making it compatible with the automobile industry, design of plastic product parts and services, implementation of the plastic production process, marketing and sale of plastic parts, distribution to the automobile manufacturers, service to their automobile clients (Fitzroy and Herbert, 2007, p.76). All these steps in the value chain of the company add value to the plastic produced for the automobile manufacturing industry. In the present scenario of AutoPlast Ltd., possible reasons of chemical leakage from the storage has to be identified and addressed through research and development activity. Through research and development, effective mechanisms may be put in place for up gradation of the storage system which would indicate levels of optimal storage beyond which leakage may occur, design of alarm systems when the pre-fixed optimal storage limit is crossed, etc. Thus in value-chain analysis, this step is found to add value to the product and process of manufacturing plastics. The activity of designing products and services and process will also add value. Any changes required in the process of production may be implemented in terms of periodic monitoring of the process, checking the quality of systems and operation staring from input to processing of raw materials, end product to storage and delivery. Production chambers may be redesigned and safety shelter chambers may be incorporated for temporary safety of working personnel. Marketing and sales along with monthly updates need to inform to the stakeholders through professional spokesperson of the company. The spokesperson should also convey the strategies being adopted to deal with the several types of risk and hazards associated with recent event of chemical leakage. This would help the company in effectively facing the competition in the market and would reduce its risk of devaluation of company shares and profits. Customer service has to be given more attention as compared to earlier situations as unhappiness of the local society and its customer could only be revoked with the help of excellent customer service that would live up to the expectations of their customer and the goodwill built over the years. The company must focus at its duties as a part of their corporate social responsibility. This would include providing education to the children of the deceased, providing necessary medical facilities to the families affected with respiratory diseases and other symptoms due to their chemical leakage, offering employment or compensation to the families who have suffered due to their activities during production of plastic. Security in all steps of operational procedure in manufacturing plastics need to be tightened to have a constant eye of the process and reporting to the supervisor of any abnormal indications in the process. Training of workers, personnel of the company highlighting the effects on the local economy and society because of the leakage occurred, loopholes in the existing process, areas of improvement for tightening the process of production, new or additional implementations put in place for preventing further recurrence of such leakages and their accountability in case of lapse in duties need to be communicated by AutoPlast Ltd. Thus, identifying the non-value adding activities and re-enforcing the value adding activities in their chain of operation, AutoPlast Ltd. can improve their performance in the market and gain competitive advantage (Kannegiesser, 2008, p.65). References Coleman, W. D. 1988. Business and Politics: A Study of Collective Action. McGill-Queen's Press; Canada. Fitzroy, P. and Herbert, J. M. 2007. Strategic Management: Creating Value in a Turbulent World. John Wiley & Sons; USA. Jones, R. F. 2010. Strategic Management for the Plastics Industry. CRC Press; USA. Kannegiesser, M. 2008. Value Chain Management in the Chemical Industry: Global Value Chain Planning of Commodities. Springer; Germany. Mitchell, J. K. 1996. Long Road to Recovery; Community Responses to Industrial Disaster. United Nations University Press; Tokyo. Pichtel, J. 2010. Waste Management Practices: Municipal, Hazardous, and Industrial. CRC Press; USA. Shapiro, S. A. and Glicksman, R. L. 2004. Risk Regulation At Risk: Restoring A Pragmatic Approach. Stanford University Press; USA. Sullivan, Jr., J. B. and Krieger, G. R. 2001. Clinical Environmental Health and Toxic Exposures, 2e. Lippincott Williams & Wilkins; USA. Bibliography Canadian Plastics. 2013. Despite political risk, chemical companies expect big gains in emerging markets: survey. [Online]. Available at: http://www.canplastics.com/news/despite-political-risk-chemical-companies-expect-big-gains-in-emerging-markets-survey/1001717383/. [Accessed on 23 February 2013]. Environmental Health News. 2011. The environmental toll of plastics. [Online]. Available at: http://www.environmentalhealthnews.org/ehs/news/dangers-of-plastic. [Accessed on 23 February 2013]. FEMA. 2013. Technological Hazards. [Pdf]. Available at: http://www.fema.gov/pdf/areyouready/technohazards.pdf. [Accessed on 23 February 2013]. PIER System. 2013. Technological Hazards | HAZARDOUS MATERIALS. [Online]. Available at: https://www.piersystem.com/go/doc/3603/986795/. [Accessed on 23 February 2013]. PreventionWeb. 2013. Technological hazards. [Online]. Available at: http://www.preventionweb.net/english/professional/terminology/v.php?id=507. [Accessed on 23 February 2013]. Riley, J. 2012. Value Chain Analysis. [Online]. Available at: http://www.tutor2u.net/business/strategy/value_chain_analysis.htm. [Accessed on 23 February 2013]. Read More