The of Duraseat Ltd Risk and Value Chain Management - Case Study Example

Institution Affiliated The Study of Duraseat Ltd. Risk and Value Chain Management Student’s Name Subject Professor Introduction The risk is a universal term used in the business arena to represent the uncertainties that the firm might encounter and lead to company failure (Woo, 2013). In modern times, it is important to identify business dynamics that exposes the company to unpredictable risks. Risk management involves managerial activities of identifying, assessing and prioritizing business uncertainties coordinated by human and economic resources (Jin & Zailani, 2010). The essence of risk management in an organization is to monitor and minimize business dynamics that might accelerate or expose the company to unpredictable hazards. In other words, risk management involves all activities coordinated by company’s executives to execute most effective techniques to reduce chances of making business insolvent (Woo, 2013). Risk management constitutes three managerial pillars: risk identification, risk evaluation, and risk mitigation (Cagliano et al., 2015). Risk identification is a process of searching identifying business microenvironments and nature and frequency the macroeconomic factors can expose the company to risks. Risk evaluation allows managers to scale and analyze the risk intensity by comparing different levels of the business operations (Kelly and Male, 2015). Risk mitigations involve activities and Strategies Company will apply to inhibit or reduce risks. The concepts of Value chain illustrates and describes production activities undertaken by the company to escalate company’s competitive advantage using production elements for quality production (Reardon, 2015). The primary purpose of having a value chain within an organization is to provide goods and services that meet customers’ demands (satisfaction). The significance of this paper is to articulate how to manage macroeconomic factors to manage risks and value chain within organizations. The paper uses various theoretical frameworks discussing the impact of macroeconomic factors on risk and value chain management elements. The study below analyzes DuraSeat Ltd. Microeconomic dynamics: legal entities, economic structure, and social connection, environment, political and technological expose the company to various risks. The paper also analyzes various disaster response plan mechanism applicable to Duraseat Company. Additionally, the paper explores various value chain concepts Duraseat should employ to retain competitive advantage. Risk Management Analysis: The case of DuraSeat Ltd Duraseat Ltd is a locally based company that faces various risks. Torrential rains in the region had accelerated risks, and the company is looking forward to mitigate risks dynamics. Legal framework is one of the macroeconomic entities the company is facing. During summer 2016, the company's storage tanks exploded leaking poisonous gasses and fluids to residential areas, rivers, and fishing areas. The impact generated health issues including respiratory disease. Later, the company faced legal actions from the government and interests groups due to the company's impact had on the community. The local authorities had been pushing the management to relocate the company, which is risky to the company's operations. The company might fail to access raw materials found in the area; transferring to the region with limited raw materials and workforce. From n economic perspective, Duraseat had employed over 300 workers from the area, and hence, relocating the firm might cause counter economic effects: the locals will risk losing their jobs, and the company will lose experienced workers. Therefore, the local government and the company should come up with mechanisms to manage the risks. Socially, the residents living around the factory had contracted respiratory diseases. The community health it is at risks. At the same time the company is in danger of losing customers in the market; the negative impact the company had portrayed in the society. Additionally, the company had faced hostile competition from other companies; in the last two years, the company had recorded decline of sales. The company had failed to extend its operations to the targeted market segments due to the stiff competition catalyzed by suppliers from Eastern Europe and Asia. In this aspect, the company is a risk of losing shareholders who had been the pillar of the enterprise. The company also faces environmental risk. In the last few months, this area had been receiving heavy rains causing the rivers around the factory to overflow collapsing some of the company's assets. The collapsed tanks caused chemical leakage, in turn, drained into nearby water sources, residential area, and fishing village. The torrential rains and chemical leakage ad accelerated the environmental risks to the company. Duraseat Ltd is also facing political risks. The company is through the lens of the local and national governments to ensure that the firm had complied with environmental and industrial planning laws. The government is forcing the company to relocate due to poor industrial plan, which had risked the both aquatic and residential lives. Finally, Duraset is facing technological risk. The company has failed to embrace technology when parting production activities. The company fails to demonstrate how the company will use technology to mitigate alarming risks; use of renewable resources and install recycling machines to paralyze the harm effects of the waste products drained by the corporation. Risk Factor Adverse Effect Solution Possibility Legal frameworks Failure to adhere to the environment and modern planning laws. Comply to the legal frameworks and restructure the company’s asset plan Extend its operations to other areas. Economic Risk Lose experienced workforce and shareholders Mitigate alarming environment issues and embrace cost-effective production techniques Embrace technology to reduce risks Social Risk Health issues within the community Participate in social and health community projects. Provide free medical facilities Social acceptance Environment Torrential rains destroying company's infrastructure, leakage of industrial chemicals to the environment Construct water and rain resistance infrastructure. Develop disposal strategy Promotes well-being of the society and the environment Technology Failure to embrace technology in production processes. Embrace innovation in production and waste disposal. Quality production and promotes lean management According to Chemweno et al. (2015) scoring mechanism is a quantity assesses mechanism used to scale the risk intensity discovered. The assessment tool measures the various macroeconomic factors that expose the company towards the risks. The scorecard aims to predict the future of the occurrences, the frequency and the adverse effects it will have on the surroundings (De Marco & Thaheem, 2013). The scorecard used is the probability of occurrence, the frequency of occurrence of the risk and how serious the danger is to the environment. The scorecard constitutes three columns (likelihood of the occurrence, incidence of the uncertainty and the risks impact on the environment. Five numerals are ranging from one to five scaling the level and of uncertainty. The table below illustrates the risk management scorecard-evaluating table. Aspects Probability Frequency Severity Total 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Legal frameworks Economic Risk Social Risk Environment Technology Political Risk Total The factor with the highest total illuminates how the factor is a risk to the company. Disaster Recovery Plan Disaster recovery plan is systematic strategies that the corporation uses to prepare the business to curb future uncertainties; disruptive natural or human-made events that might harm the business (McEntire & Smith, 2011). Business disaster plays a vital role in every organization for it anticipates the well-being of the company and its production stability. The disaster recovery plan constitutes valuable information that helps managers to identify appropriate tools to mitigate random, disruptive events. The essence of disaster recovery plan is to help the organization face hazards without stagnating or paralyzing the production processes. This paper explores disaster recovery plan basing on environmental and technological risks. Environmental hazards Environmental hazards are natural or human-made disasters that might harm or affect the business operations (Miles, 2015). It is important for a company to identify environmental risks in advance, assess the situations and probability of the incubation of the environmental hazards. Duraseat Ltd deals with sulfur and leads chemicals, which are dangerous elements to the environment. Regardless of generating high sales and high profits, the company operates in an environment with aquatic and human life. In this aspect, draining battery contents (sulfur and lead) into water systems in the area might bring environmental repercussions in the future. The river and fishing villages the primary source of income, and food in that matter, and harming the environment might bring uncontrollable disaster. For a company to avoid the environmental hazards, the company should come up with disaster recovery strategies. For example, the company should plan to contain the waste products in enclosed septic tanks instead of draining the waste into natural water sources. Also, the company can take an initiative of treating water using neutralizing chemicals and warn the public from using untreated water. Additionally, the company has been colliding with the government and the community due to toxic fumes burning in the factory. The company also pollutes the air with toxic fumes released to the environment by the corporation have been risking the health of the residents' health and the aquatic life. For a firm to cover up the air pollution, the company should come up with safety mechanisms; to neutralize toxic elements in the fuming gas. The torrential rains also affect the company’s operations. As mentioned above, the company incurred losses after the breakdown of the riverbanks eroding some of the company's assets. Also, during the heavy rains, the company's chemicals leaked to the drainage systems causing health hazards to the community. Therefore, the company should initiate the building of water dams by collaborating with the government and the residence. The community can use water during summer for irrigation and domestic use; the barrier will minimize the flooding intensity. For managers to cover future asset losses, the company should have an insurance cover to protect the business's assets, and people living around the area. Also, to cater for community health, Duraseat Ltd should build sanitary facilities (emergency response management) to cater residents health in case of the emergency Technological Hazards Technology is one of business variables, which is essential to modern companies. For a company to succeed in the current globalized and hostile markets, it must embrace technology (Klouvas, 2013). Technology can also be hazardous through information systems. Information technologies allow the company to integrate and store important data such as inventory and consumers' feedbacks (Popescu & Dascalu, 2011). The company should come up with plans for protecting or retrieving valuable information in case of the failure of the systems. Additionally, technology helps the businesses in the production process by controlling wastes and enhancing quality production. In this case, utilization of technology is limited at utilization Duraseat Ltd. The company should start investing heavily in technology infrastructure to curb pollution, improve quality production and promote lean management. The company also should embrace technology and install automated leak sensors in storage tanks to manage leakage. Value Chain Analysis Value chain concept is an essential business element that helps the organizational executives to analyze the company's internal production activities with an aim of building company's competitive advantage and customers’ value (Patnaik & Sahoo, 2009). Additionally, value chain helps the managers to identify and analyze activities within an organization that will create and enhance customers' value in the market (Kelly et al., 2014). Michael Porter's value chain approach constitutes several core elements that support organization to build strategic value. Inbound and outbound logistics, production operations, services, human resource management, infrastructure, and procurement are core pillars portrayed by porter's model (Patnaik & Sahoo, 2009). Inbound and outbound logistics involves receiving raw materials from the suppliers and disseminating (distribution) of finished goods to marketplaces (storage facilities) respectively (Jorion, 2007). It is evidence that Duraseat Ltd receives production raw materials from suppliers and at the same time the company had storage tanks to distribute the finished products to their clients respectively. Production operations involve Duraseat activities of converting raw materials into end products. Services require the support the company offers to customers after and before purchasing the products; customers service networks. Infrastructures involve the company’s assets such as technology infrastructure that supports Duraseat's production processes. The primary purpose of human resource management is to monitor and manage the organizational workforce as well as recruiting, training, hiring and developing employees within an organization. Finally, procurement involves giving tenders to suppliers as a way of getting quality raw materials (at low costs) for quality production (Wahl & Bull, 2014). The raw materials received from the suppliers must be of high quality to enable the company to manufacture products that meet consumers' needs. Conclusion It is evidence that risk and value chain management are core pillars that every organization requires surviving in the hostile market. It is important for a company to identify asses and analyze the risk the company might face in the future. Legal frameworks, environment, technology, social, political and economic factors determine the vulnerability of the enterprise. For instance, Duraseat faces risks scenarios; pulling both air and water risking both human and aquatic life in the area. Disaster recovery plans are tools the company can use to mitigate the risks. Finally, value chain management involves activities that help the organization gain and retain competitive advantage. References Cagliano, A. C., Grimaldi, S., & Rafele, C. (2015). Choosing project risk management techniques. A theoretical framework. 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