Applied Risk Management Techniques - Case Study Example

Risk Management First Assessment Selected Business Risks are associated with almost every business in the world. The business, which I have selected for risk management analysis, is related to construction industry. The name of the company is Bluestar Construction Company. The company runs the business of developing and selling well-designed houses to the public. The mission of the the company which holds this business is to provide the people with well-constructed and stylish houses. 2. Risk Factors Associated with the Business There are many risk factors that are associated with the business of construction. Some of those risks include shortage of capital, inefficient labor, improper designs of houses, and use of low quality material in construction. These risk factors lead to the occurrence of some huge risks related to construction. It is the responsibility of the administration and supervisory staff to make sure whether all issues related to construction are going in the right way or not. If any fault is found somewhere, the management staff should take appropriate steps to correct the fault at the earliest. Mr. Mark James, the chief operations manager of the Bluestar Company, believes that the risk factors like shortage of capital and inefficient labor result in creating critical problems for a company. Not only capital and labor related risk factors are hazardous for a company but also some other factors such as low quality construction and inefficient administration also prove to be harmful for any construction company. Therefore, special care and attention should be given to all aspects of a business in order to reduce the possibility of occurrence of risks. 3. Effects of Risk Factors The effects of the above-mentioned risk factors are very harmful for the success of the business of construction. If there will be shortage of required resources for the construction of houses, the houses will not be constructed within time, which will result in making the customers, dissatisfied with the company. Customer dissatisfaction with the company results in decreasing the level of profitability for the company. A company must maintain a good amount of capital in order to run all business activities successfully. Inefficient labor is also one of biggest problems associated with the construction companies. Some companies do not have a skilled and proficient labor for the construction of houses and it adversely affects the finishing touch that is given to the houses. Low quality construction and unattractive finishing also result in customer dissatisfaction with the products and services of a company. Another risk factor is unapproved designs of the houses. The risk here is that a customer can reject the design or some part of a design if the management of the company does not get the designs approved by the customers before construction. It is the responsibility of the management of every construction company to get the designs approved by the customers before going on to transform the designs into houses. 4. Reduction of Identified Risks The chances of risks’ occurrence can be minimized if the administration of a company gives importance to all issues related to the company. Shortage of capital risk can be reduced by arranging required capital before starting the development of houses. Inefficient Labor risk can be reduced by hiring the labor staff based on experience, skills, and level of expertise. Such people should be fired away from the company who are not productive or efficient. Improper or unapproved design risk can be reduced by getting the designs approved by the customers before going on to transform the designs into houses. The last identified risk, which is low quality construction risk, can be reduced by selecting an honest and trustworthy supplier for the company who should provide high quality raw material to the company for the construction of houses. 6/10/10 Selected Company Blueflash Construction Company 1. The Activity Cycle 2. Main Objectives of the Company All construction companies have some key goals and objectives, which make them different from other competing companies. The main objectives of the Blueflash Construction Company include: Providing premier lifestyle to the people Providing low cost housing to the people Providing well-designed and modern houses to the local people, and Providing assistance to the people in designing their houses 3. Policies, Procedures, and Key Areas There are some key policies and procedures, which the Bluestar Company has adopted in order to carry out all business activities in a professional manner. Those policies are related to all departments of the company including finance, human resource, marketing, and customer representation departments. The policies are developed with the mutual understanding and assistance of the managers of all departments, and this is the reason why the company has gained good reputation in a very short span of time. Company’s policy regarding finance department is very clear. The policy is that the company must maintain a specific amount of money to run different business processes, and if the amount of capital falls below the set amount, the company will not start any new project. The policy regarding human resource department is that the company will recruit only those individuals who will have an excellent educational and professional record. The policy regarding marketing department is that the company will advertise all of its new projects and houses using the most effective ways of advertising so that every person living in the country should have awareness about the company’s projects. It is due to the well-planned policies and procedures that the company is recognized as one of the top construction companies of the country. 4. Activity Manager’s Role The role of the activity manager of the company is very imperative. The activity manager supervises all business activities and makes important decisions regarding different business processes. The activity manager looks after each and every issue related to the business operations and fixes the flaws that appear in the business operational strategies. 5. Risk Factors and Ways of Managing Risks There are various risk factors associated with Blueflash Construction Company. However, the management of the company has implemented some effective strategies, which have proved to be very helpful in managing those risk factors. Some of most critical risks associated with the company include design assumption risk, fire risk, and uncertainty of the environment. Design assumption risk occurs when a customer asks for a change in the design of the house after development by saying that the structural design was not shown to him before the start of construction. The company manages this type of risk effectively at the design phase of the activity cycle by arranging a meeting between the client and the architect in order to remove any kind of flaw present in the design. Fire and health safety is one of the most important concerns for the managers of the company. Some of the most frightening risks associated with fire include short explosion risk and short circuit risk. Bluestar Construction Company pays special attention towards the safety of employees and takes proper measures to eliminate the chances of fire. Uncertainty of the environment is another type of risk associated with the Bluestar Company. The risks associated with environment uncertainty include unforeseen rain, earthquakes, and unpredicted changes in the climate. “To succeed in todays world, the first step taken by contractors is to incorporate environmental risk management into every facet of their business operations” (Slivka 2010). Bluestar Construction Company has implemented proper mechanisms to tackle with these kinds of environmental risks. Those mechanisms include implementation of climate prediction system and constructing earthquake proof foundations of the buildings. 13/10/10 Selected Company Erickson Manufacturing Company 1. Risk Factors Erickson Company deals with the manufacturing of different kinds of products for its customers. The product range includes cameras, televisions, mobile phones, and some other kinds of electronics. Erickson Company is a customer-oriented company, which focuses on the needs and demands of the customers while manufacturing any kind of product. Erickson Manufacturing Company undergoes different kinds of projects every year. Let us discuss some risks associated with one of its projects in order to get a better understanding of the risk management mechanisms of the company. The risks, related to the project of new camera manufacturing, include manufacturing fault risk, customer dissatisfaction risk, and marketing failure risk. The manufacturing fault risk occurs when the engineers forget to give required attention to some parts of the product development process, and at the end of the manufacturing process, some faults occur. Such kinds of faults are known as product manufacturing faults. An example of such kind of risk is a software fault present in a newly developed camera. Another kind of risk associated with the project of camera manufacturing is customer dissatisfaction risk. Sometimes customers do not get satisfied with the working of a product which results in decreasing the demand for the product in the market. In such cases, the project is rated as a failure because the project does not result in making expected profits for the company. Third kind of risk associated with the project is marketing failure risk. Marketing risk occurs when a company hands over the task of advertising to a low profile marketing firm, which is not able to do proper marketing of the project. In such cases, the project cannot attract a large number of people. These were some of the risks associated with one of the projects of Erickson Manufacturing Company. 2. Risk Assessment Process The risk assessment process of the company for the project of new camera development is very accurate. The risk management staff of the company analyses each and every aspect of the project, and based on the analysis, the staff performs the task of risk assessment. The risk assessment tasks include knowing what causes harm to the project, which employees get harmed from the risks, and what actions need to be taken to eliminate the risks. 3. Risk Identification Process Risk identification ascertains which risks possess the ability to affect any specific project of a company. The tools and processes included in the risk identification process of Erickson Manufacturing Company are documentation reviews, information gathering techniques such as Delphi technique and brainstorming, checklist analysis, assumptions analysis, analysis of flowcharts, analysis of cause and effect diagrams, and registering the results of the qualitative and quantitative risk analysis. 4. Likelihood of Risks and their Treatments Manufacturing Fault Risk Likelihood of manufacturing fault risk is low and the ranking score measures up to 25%. The treatment mechanism for this risk includes thorough inspection of all manufacturing processes during the process of product development. Customer Dissatisfaction Risk Likelihood of customer dissatisfaction risk is also low and the ranking score measures up to 30%. The treatment mechanism for this risk includes incorporating the needs and demands of the public in the planning and design phases of the product development process. Marketing Failure Risk Likelihood of marketing failure risk is very low and the ranking score measures up to 10%. The treatment mechanism for this risk includes hiring a high profile marketing firm for advertising of the project. 13/10/10 1. What is planning? Planning is a creative process that is used to optimize the efforts needed to achieve any specific goal or objective. A company needs to do proper planning for carrying out all sorts of business activities effectively. Planning is also one of the key phases included in the product manufacturing process of a company. It is evident from various researches that proper planning leads a company’s way towards success whereas improperly planned activities result in failure for the company. Therefore, a company must do proper planning in order to gain competitive edge in the market. 2. How Old I Plan? I consider planning as one of the most important activities of any person’s life. Planning makes the life perfect. Therefore, I properly plan all of my activities before going on to do anything in my life and I think this is the main reason behind my success in educational and personal life. 3. Planning Process The planning process for the new camera development project includes various steps, which are of extreme importance for the successful manufacturing and advertising of the newly developed product. These steps include documenting scope of the project, documenting the stakeholder requirements, forming the team of professionals to carry out manufacturing activities, identifying inputs and deliverables of the project, arranging required resources for the product manufacturing, and preparing the budget for completion of the project. All of these steps play a vital role in making the planning process effective and successful. References Slivka, J 2010, Development of Environmental Risk Profiles for Construction Firms, viewed 02 December 2010, . Read More