Risk and Value Chain Management for Duraseat Ltd - Case Study Example

RISK AND VALUE CHAIN MANAGEMENT FOR DURASEAT LTD Name Professor (Tutor) University Course City and State Date Risk and Value Chain Management for Duraseat Ltd A risk is a probability for either a liability, injury, or loss caused by negative effects that can be due to internal or external factors. Risks can be managed, but the process of managing risks should be carefully and effectively planned. Risk management is the process of risk identification, assessment, and mitigation to reduce a risk to a level that is acceptable (Beaver & Parker, 1995). Approaches used in managing risks can determine the techniques, process, and tools to be used. A plan is important so as for describing the structure of the risk management process (Cagliano et al., 2015). A simple risk management process involves identifying the risk, identifying the causes of the risk, identification of control methods, the establishment of the likelihood and consequences, pick out risk rating descriptors, put in additional control methods, decision-making, and monitoring and review (Das, 2006). A value chain can be described as activities organizations in specified markets go through to ensure the production of valuable goods and services for the markets (Schmitz, 2005). The value chain is based on business management, and its main objective is the integration of communication and improving the levels of cooperation between members of the production process so that customer satisfaction and on time delivery are achieved. In the process of value chain management, the customer is viewed as the primary source of value (Sekhar, 2007). The value of the customer is created through product demand, and focus, therefore, becomes creating value in the eyes of the consumer. The process of value chain management is effective when divided into two. The first being the primary activities including production and logistics. The second are support activities that include marketing, information and technology, and human resource management (Project Management Institute, 2008). To create an effective and profitable value chain, it is critical for firms to establish a connection between customer value and what the firm produces. The main focus of value chain management is in research and development, marketing, innovation, economic factors, analysis of social trends, and testing of products. This paper is a study case of Duraseat Ltd and analysis of the risks the company faces, the management of these risks, disasters regarding environment and technology and disaster management plan, and the value chain management of the company. Duraseat Ltd Risk Management Analysis The case of Duraseat Ltd a locally based company that manufactures plastic chairs and tables to be sold to schools in Europe and Asia is about the risks the company faces. Environmental conditions in the area including heavy rains have increased the risks the company faces. The company, therefore, has the objective of managing these risks through a properly planned risk management process. The company faces economic risks as the level of competition from suppliers in Eastern Europe, and Asia has risen. Rising levels of competition often lead to a reduction in customer numbers that in turn leads to fewer profits. In fact, the company has not achieved its annual targets in a period of two years. Besides, the company faces the risk of losing well-trained employees in case it relocates. The social risk the company faces is from the locals who contracted respiratory defects because of the toxic substances that were released to the air because of the 2016 explosion. With the risk of the same explosion not occurring in the future, the company risks the health of community members who even want the company to relocate. Legally the company faces risks because of its partaking in environmental degradation. The company faced legal actions from interest groups and local authorities because of its contribution to environmental pollution. These groups want the company to relocate, and the only advantage the company has is the plant's site has some immunity, and this has protected the plant from the legal risk it faces. Environmental risks are also faced by the company due to the location of the plant. The area experiences heavy rains, and this causes river Change to overflow flooding the plant site. The flooding causes the tanks to leak releasing dangerous chemicals into residential areas and the fishing village. Both the heavy rains and water pollution are environmental risks the company faces. The political risks the company faces is from both the local and national governments. Environmental and planning laws are important for all firms, and Duraseat Ltd is not an exception. The government has to ensure that these laws are fulfilled by all firms to satisfy the wish of the people that elected them. The increase in competition Duraseat Ltd faces from suppliers in Eastern Europe, and Asia is the competitive risk it faces. Increased competition will force the company to restructure its methods so as to maintain its competitive market. The competition will reduce the company profits as evidenced by its failure to meet its financial targets. The final risk the company faces is the technological risk. The company is not advanced in the installation of technology in its plant. The environmental problems and leakages from the company's tank show that Duraseat Ltd is not well endowed technologically. The risk register and assessment schedule is shown below. Risk ID Risk category type Risk description and potential effect. Probability of occurrence Severity of impact Solution 1 Environmental risk Heavy rains and environmental pollution. High High Construction of a dam to ensure that River Crange does not flood. 2 Social risk Community pressures due to health problems the company causes. Medium to high High Provide more employment opportunities to reduce resistance levels from the locals. 3 Legal risk Legal laws including environmental and planning laws. Medium to high High Follow all the laws that have been put in place by both local and national government 4 Political risk Caused by local authorities that want the company to relocate. Medium to low Low Ensure that all needs from the authorities are satisfied. 5 Technological risk Involves technology, product design, and technical processes. The company uses inadequate advanced technology. Medium to low Medium to high Acquisition of advanced technology and ensure innovation is one of the major goals of the company. 6 Competitive risk Entails aggressive competitors, unfamiliar terrain, and unknown markets. The company faces competition from suppliers in Europe and Asia. Medium to low Medium to high Come up with aggressive measures that ensure customer satisfaction thereby maintaining its competitive advantage. 7 Economic risk Financial loss, instability and ineffective management are the aspects encompassing economic risk in case of relocation or failure to deal with competition. High Extremely high Formulate management and other business strategies that will allow the company to increase its profits. The risks the company faces can also be analyzed quantitatively through several aspects used in quantitative analysis of risks. These aspects include the probability of occurrence, frequency by which they occur, and impact or severity of the risk (De Marco & Thaheem, 2013). All these aspects are rated from one to five. One being low and five being high then a total is done (Fragnieere & Sullivan, 2007). Risk ID Risk category type Probability Frequency Severity Total 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 Environmental risk 2 Social risk 3 Legal risk 4 Political risk 5 Technological risk 6 Competitive risk 7 Economic risk Disaster recovery plan Disaster recovery plan is a process that is documented and entails a set of practices systematically arranged to recover and protect a firm (Bates, 1991). Disaster recovery plans are essential for companies and below are some examples of Duraseat Ltd for environmental hazards and technological hazards. Environmental hazards These are the type of hazards that cause environmental degradation (Gustin, 2010). For Duraseat Ltd some of the environmental hazards include: The release of toxic substances to the environment as a result of explosions in the plant. The plant experienced such an explosion in 2016. These toxic substances are dangerous to the health of residents living around the area. To deal with such an issue, proper measures should be put in the company including proper maintenance of equipment to prevent such explosions in the future. The other environmental hazard from the company is the leaks from the company tanks during heavy rains. These leakages are of dangerous chemicals used in the making of plastic chairs and tables. When these chemicals find a way into the river, it becomes dangerous for human consumption and aquatic life. The company together with the local authorities should ensure that a dam is built to prevent flooding of River Crange during the heavy rain seasons. Technological hazards The company has underutilized technology as evidenced by leaking tanks and exploding equipment and this is a hazard (Smith, 2011). The company should, therefore, acquire new technologies of storage of chemicals and ensure they are maintained. The flooding of the company’s plant also shows the company has failed to use modern technologies to mitigate this issue. One of the major goals of the company should be ensuring that proper and advanced drainage systems are installed and other systems for example of heating the ground to ensure the rate of evaporation is high therefore reducing flooding. Value chain analysis Value chain analysis is a strategy or tool of analyzing all activities that take place in the firm (Taylor, 2011). The main objective of the process of a firm is to find out the most valuable activity at the firm and the ones that can give a company a competitive advantage when improved. The process incorporates four major areas including the inbound logistics, the process or operations, the outbound logistics, and marketing and sales (Wallace & Webber, 2011). For the case of Duraseat company, the inbound logistics is all about the whole process of distributing raw materials up to the receiving and warehousing stage. The company receives its raw materials from its suppliers then stores them. The operations phase entails the whole manufacturing process of the raw materials into plastic chairs and tables that are to be sold. The operation phase is both service and product based. The products are then sold to the customers in the third phase of the process which is the outbound logistics. This phase of the value chain analysis only covers the distribution of the finished products to the customers which in the case of Duraseat Ltd are the schools in the United Kingdom and Europe. The final phase which is the marketing and sales entails the processes the company uses to reach to its customers for example advertisements. All these aspects of the value chain analysis are important to the company as it will enable the process of evaluation to determine the most valuable phase to be performed smoothly. The company through its staff will also determine those processes that require improvement. A good process of value chain analysis will ultimately lead to a firm developing and in the process maintaining its competitive advantage in the market (Wendimu, 2011).  Conclusion In conclusion, both risk evaluation and value chain analysis are important aspects of every firm or company that aims at meeting all its set objectives (Chopra & Sodhi, 2004). Risk management creates a special way that a company can be able to mitigate effects of risks that it already faces and those that it might face in the future. Some most common risks that firms have to plan against are the economic risks, environmental risks, social risk, political risks, competitive risks, individual risks, and technological risks. These aspects are some of the key foundations for an organization to succeed and therefore mitigating risks against them would ensure it remains competitive (Fleisher & Bensoussan, 2015). Also, another important aspect of every company is the disaster recovery plan which determines how a company will react in the phase of disaster (Toigo, 2000). Organizations need to have effective and efficient disaster management plans that will ensure that they deal with unplanned disasters, for example, the explosion of 2016 in the study case, Duraseat Ltd. 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