Risks in the Chemical Industry - Coursework Example

Word count: 3075 Risk Assessment Name Grade Course Tutor’s name Risk assessment is an assessment process that deal with fears and uncertainties, and to curb these uncertainties and transform them to increase the entity value (Kolluru, 1996). The aspect of risk and the uncertainty risk is the probability of a gain or even a loss. One side is riskier than the other, if there is the presence of a greater uncertainty or the expected loss is greater. Risk assessment is important for any business so as to allow better planning and to help the company to avoid any losses that might result from the identified risks (Jones, 2009). The process allows all the risks that a business might face to be identified and dealt with accordingly. Therefore, for the chemical company to be profitable and successful it needs to have a risk assessment so as to identify all the risks and how they should be eliminated (Grey, 1995). The risk assessment process will identify risks involved production of Formaldehyde. There are a range of risks that can affect the production of Formaldehyde and all its related activities (Hester, & Harrison, 1998). These risks include expansion into emerging economies and other areas, shortage of raw materials to produce the company products, the complexity of the supply chain, changes in the regulatory bodies, fire and explosions, employees’ safety, there is also high investment in technology involved in chemical industry and environmental liability (Kolluru, 1996). This has highly affected the way chemical companies operate and carry out their activities. Political Risks There are many political risks in the chemical industry and this could affect how the operations are carried out by the chemical companies in many countries. These are the risks that result from the government decisions and policies. The greatest political risk that can affect the chemical companies business is government interference (Kolluru, 1996). Government interference may be in form of government taxation that will affect the company operations in form of profits. This will reduce the company profits which may limit the company operations. The politics may also interfere with the company’s location so as to have the political will of the people living in that area. The politicians make decisions that help them to win elections and to have the support of the majority of the residents (Hester, & Harrison, 1998). Therefore, if the residents threaten the politicians that they can lose their support the politicians may force the chemical company to relocate to another location so as to allow them to win increased votes. The government has the responsibility of making policies that include the operation of various companies in given industries (Kolluru, 1996). The government may pass a policy that will ensure that all companies operate inside the industrial area. This is a very big risk because the company will be forced to relocate to the industrial area. This political risk will mean that the company will have to start operations in a different area which will take time to start production because of the complex planning that is required to set up a chemical company. This will also affect its approachability because the industrial area is very congested that its current location. Economic Risks The economic risks are the risks that directly affect the profits of the company. These are the risks that have long term effects on the survivor of the company. These may include inflation in a certain region of operation that will affect the total profits of the company with same margin. If there is inflation the prices will increase and the consumers will buy less because their demand for certain products will go down (Kolluru, 1996). The interest rates have been so high thus making borrowing and paying debts very expensive. There are countries that limit foreign direct investment and, therefore, this should be a factor to consider and the company should have other strategies of market entry. There has economic meltdown globally that has affected expenditure of the customers downwards thus reducing the company sales. This has made the cost of living to increase which has led to employees demanding higher salaries and wages (Hester, & Harrison, 1998). This might lead the company into losses because the economic meltdown has also increased the cost of production. The company may be affected by increased competition from other countries as a result of regional integration. The reason behind this is that regional agreements allow products from members’ countries to gain access into the local markets. This may reduce company profits which is a very high risk because it will mean the company is losing the size of the market share. The company may also face a limit of it’s of capital to expand its operations (Jones, 2009). Social Risks The company should also consider and research about the social risks such as the benefit the community around gains from the location of this company. There is the risk of majority of the surrounding population losing their employment if the company is to be forced to relocate to another location (Grey, 1995). The company has been giving back to the community through offering them employment and improving the infrastructure around the company. This has been its way of corporate social responsibility and has made to be acceptable in the society. Therefore, there is a great risk of the company is to be forced into relocation because even the surrounding community will stand to lose as a result of such decision (Kolluru, 1996). The company should also consider the cultural trends in a region because they help in creation of the market. For example, they should identify who are the main customers for this product. The social factor may appear as not important to a business but they highly influence a company’s investments. The company should work to conserve the environment (Hester, & Harrison, 1998). This will allow company operation in a smooth way maintaining the environmental set laws. There also increased cost on energy in most countries and, therefore, the company should put this into consideration so as not to affect its financial stability. The social risks affect the company and even all the people around and therefore, they should be eliminated as soon as they are detected while running a company (Jones, 2009). Technological Risks There is growth of technology in every industry in the world; therefore, the chemical company should consider the technological risks in the regions of investment. In the chemical industry there is a lot of technology use and the companies keep on innovating new technologies so as to have a large market share because of increased competition (Kolluru, 1996). Therefore, the company should highly invest in research and development so as to keep pace with the main players industry (Jones, 2009). This technological awareness in the countries will ensure that the company does not lag behind in acquiring the market share. This should go into introducing new products related to chemicals (Hester, & Harrison, 1998). The company should develop and utilize the current technology so as to ensure its reaches as many customers as possible around the world. The company has not fully utilized the social media such as the Facebook and Tweeter to increase its clientele base. The company should invest in high level technology so as to ensure that there is no leaking risk in the plant. This will ensure that there is a leaking risk detection technology (Kolluru, 1996). The technological risks are very serious in a chemical business because they need to ensure that there is a proper and safe way of production and transportation of the chemical from the plant to its destined customers. Therefore, there should be no lagging behind in the technology of the company because it will ensure their competitors out compete them in winning the market share. Therefore, the technological risks should be eliminated as much as possible (Jones, 2009). Legal Risks The company faces the risk of legislative which can be taken against the company by the residents who want the company out of the area. The company should follow all the legal requirements so as to ensure that there are no problems during the company operations (Hester, & Harrison, 1998). The company should take into consideration the legal requirement in the regions and countries of investment. The company should ensure that the risks such as cartels that will be involved in fixing prices. The company should not take any risk of employees and consumer safety. This should be avoided by taking all the required safety precautions recommended by the government (Grey, 1995). This is against the international competition law (Kolluru, 1996). The company should also consider factors such as consumer laws in a certain country so as to ensure that they provide what is needed in the market. There is also need to consider labour laws because there are laws that require payment of very high salaries and they will affect the company’s financial stability. The company faces a risk of not meeting the required safety precautions that would occur in case of a leakage that will threaten the lives of the employees as well as the lives of surrounding community (Hester, & Harrison, 1998). The company should work to avoid all the legislative risks by ensuring it meets all the necessary requirements that will make them conflict with the law (Jones, 2009). This will ensure that the company will have a smooth operation. These are the laid down rules and policies that companies should follow. The legal frameworks include consumer protection, environmental legislations, health and safety and employment law. Environmental Risks The environmental risks are the factors that involve the natural resources and the surrounding of the company. The environmental risks have a higher chance of leading to a closer of a company. Efforts to reduce environmental degradation through use of paper and releasing of gases into the environment should be the company’s most important goals (Hester, & Harrison, 1998). Energy use should be reduced so as to safe Mother Nature. The company should ensure that there are no risks of leakage because this will be affecting the environment because this will be going against the laws which have been put in place by the regulatory authorities. The company should have a way of disposing its waste material in the best way possible that will ensure that the environment is not contaminated in any way. The company will ensure that no waste products are released into the river that is near the company’s location (Kolluru, 1996). Therefore, there is need to eliminate any risk that will lead to leaking to waste products to the tributary of river Ure. This will ensure that the lives of those around the company’s plant do not face any risks of having contaminated environment or even contaminated water. The environmental risks should be eliminated and the company should have a plan to detect their occurrence so as to avoid interruption of company operations. Competitive Risk The company attracts a lot of competition from other bigger local and international companies. This is a great risk that the company should ensure it handles its competition in the best way possible. This is a risk that a business cannot eliminate but it can be well maintained. The company should ensure that it has all the resources that will make the company remain at the same level with all its competitors (Kolluru, 1996). The company strategy will ensure that the company invests in research and development to ensure that they keep on improving the technology that is necessary in the airlines industry. This will ensure the company expands into the international market especially the international business class (Hester, & Harrison, 1998). The company should take a strategy that will ensure that they take a technology that will stay in the market for a long time because this will help the company reduce its operating cost and this will help increase the company profits. Technology is very expensive and, therefore, it takes a large share of company profits which can be taken to improve the services of the company (Hester, & Harrison, 1998). The company should invest on the modern technology so as to ensure that its products remain favorable in the market. This will allow the company to maintain or even increase its market share through production. The company should maintain healthy competition because this will ensure that the company does not get into the wrong side of the law because of unhealthy competition. The company should ensure that it expands its market share (Grey, 1995). Integrated Risk Management Anticipate At this stage of risk management the company needs to research and scan all the possible avenues that would affect their operations and halt the production of company products (Hester, & Harrison, 1998). This will help the company to be aware of any changes that will occur in future and affect the company activities. This will allow better planning from the company so as to ensure that the company does not stop production when such risks occur (Kolluru, 1996). In anticipation stage the company researches about all the risks that can affect the industry in general all and those which can specifically affect the company (Grey, 1995). This makes the company test the risks and have solutions that would be used when such occurrence occurs. This means that the risks can be eliminated even before they occur and this stabilizes the company operations and thus maintaining its market share (Jones, 2009). Assessment The assessment stage involves identifying all hazards and threats that can occur during the company operations. There are a range of hazards and threats that may occur as the company carries out its functions (Hester, & Harrison, 1998). The company and its management weigh the likelihood of the hazards and threats occurring in future. This helps company to appreciate how these risks can be spread. The company by doing this identifies all the consequences that can with hazards and threats that may affect the company in future. This allows the company to prioritize the hazards so as to which can adversely affect the company so as to allow better planning. The company will ensure there continued monitoring for these risks (Jones, 2009). Prevent This strategy allows the company to prevent the occurrence of the risks by ensuring all the avenues that will allow the hazards and threats to occur are eliminated (Hester, & Harrison, 1998). This is the best option than dealing with the consequences that would result from the occurrence of the risks. Therefore, the company should have both active and passive measures put in place to ensure that the hazards and threats are eliminated before they occur (Kolluru, 1996). This will allow the company to reduce on its cost of operation. The prevention measures should be put in place to ensure that there are no avenues left to allow the occurrence of the risks that would cripple the company activities in any way. This is a cost benefit to the company because it will avoid expenses that will used to cater for the losses that would result from occurrence of risks (Jones, 2009). Prepare Stage This stage requires the company to ensure it has emergency plans that would be used to handle the occurrence of any risks that will affect the activities of the company (Jones, 2009). The emergency plans will ensure that the company continues with its activities even when there is interruption such as risks and hazards. Therefore, the company should ensure that they train their employees to handle any occurrence that might threaten the company’s operations. This means that the employees will undergo training that will equip them with the necessary knowledge to handle the complex situations (Hester, & Harrison, 1998). They should also exercise the skills they get from the training so as to know that they can apply the knowledge in case of a risk occurring. This means that the company has a business continuity plan because even if a risk occurs it will be handled without affecting the company’s activities in any way. The company should have a great plan that will ensure that the company activities continue without stopping even if there is a hazard or a threat to the business. Respond The respond stage requires that the company has a plan to deal with immediate effects that result from occurrence of the risks. The plans should ensure that the impact of the risk is reduced or neutralized so as not to affect the general operations of the company (Hester, & Harrison, 1998). Recovery stage This stage can take time which can range from to even years and the company requires to have the required resources to ensure it recovers and gets back to its original position. The recovery process requires those in management position to keep on reviewing the process and have debrief on what should be improved so as to allow full recovery. This can be done through risk assessment process to weigh how the risks have been handled since their occurrence. The company can also take site clearance in case there was a high risk occurrence that could have led to breakages (Kolluru, 1996). The company can also take decontamination to ensure that everything that was contaminated is taken care of so as to ensure the recovery required is achieved. The company should also ensure that it takes reconstruction so as to have normal company operations back in place. In case of any litigation the company should take the required responsibility and even compensate the required parties. The company can also start criminal proceedings on the parties involved with the risk. This is the most important part of risk management because it ensures that the company is taking the right path into realizing its previous position (Hester, & Harrison, 1998). In conclusion, risk assessment is a continuous process that should be taken by every company so as to ensure there is better planning. Planning will ensure the risks are eliminated before they occur so as to safe company resources. The company should take all the steps of risk management so as to ensure it gets back to its previous position without incurring a lot of losses. This process will ensure that all the risks have been identified and planned for in case they occur in future. This process relates the risks to the reality of occurring and ensuring that there is proper plans in case the risks occur. References Kolluru, R. 1996. Risk assessment and risk management handbook. McGraw- Hill publishers: New Jersey. Hester, R., E. & Harrison, R. 1998. Risk assessment and risk management. Royal society of chemistry: London. Grey, S. 1995. Practical risk assessment for project management. Wiley: New York. Jones, W. 2009. Project risk assessment: Fuzzy logic approach to project risk assessment. Lightening source incorporated: London. Read More