Risk Management Methods

Risk Management Methods

Abstract

In all risk management methods and projects, remedies for causes of costs as well as avoidable time wastage should be created and applied all the time. In the paper, methods of assessing risk management techniques will be presented with the aim of identifying, analyzing, and evaluating possible project risks and effective risk management techniques. The causes of the risks are diverse, ranging from poor designs, creative idea protection, computer technology, and marketing strategies. Additionally, the threats sometimes require radicle techniques due to the continuous reality changes and complexities. However, the underlying risks and methods can be identified using past case studies, validated and measurable approaches that help assess past events and conditions, giving rise to adverse or gainful impact on a particular project. As a result, this research paper takes into account the risk factors, techniques, and environmental dynamics

Keywords: Risk management techniques, assessment and analysis, valuation, risk factors

Introduction

Risk management techniques

Submission of a new product variety

Environmental factors

Risks management plan

Conclusion

Introduction

As a concept, risk management dates back to approximately 2400 years ago. The age-old approach to planning continues to develop rapidly into a scientific field through the 1900s to date. The method involves critical analysis and assessment of ideas to the detail. The application of the concept varies with the organization’s context and requirements. Therefore, risk management is an essential process at all management levels within commercial and non-commercial fields. The industrial areas may include product manufacturing, marketing, distribution, product design, and introduction. The gradual advancements in risk management approaches have faced an array of challenges such as non-optimal decisions arising from inaccurate data collection, macroeconomic dynamics, and insufficient training leading to poor execution of plans. However, the risk management concept helps formulate new ideas, frameworks, functional principles, business models, and appropriate management tools for various projects. As a result, the paper aims to focus on a risk management plan for an existing proposal to introduce a new range of hatchback automobiles for a company specializing in mass production of sports cars. The product expansion plan arises from multiple requests for small budget maintenance cars as well as the recently accelerated environmental conservation requirements. The design is an 85 percent improvement based on a previously discontinued model.

Risk Management Techniques

Risk management techniques refer to the approaches employed to treat possible adverse occurrences that are uncertain but have a significant possibility of occurring during the project execution process. The methods include preventive, adaptive, and risk transfer plans depending on the type of risks facing the investment. According to Fedosova et al. (2015), the resilience in an organization’s structure is determined by its risk management strategies and their capacity to restore basic operations efficiently, and within a short period. Firstly, are the risk preventive measures that will be set to avert possible regular and irregular threats likely to happen. The proposals include a thorough analysis of past incidences, conducting relevant pliability supporting studies, and identification and grouping of resilience (Cagliano et al., 2014). The main emerging risks in the motor vehicle production industry include factory fires, corporate espionage, design and assembly faults leading to technical malfunctions, lack of compliance to carbon dioxide emissions requirements, marketing, and distribution lapses, and the cost-effectiveness of the car in terms fuel consumption, car insurance premiums, and maintenance. Risk preventive strategies require a set of company policies to protect the company from corporate spying and replication of creative information by other companies. Also, setting design verification procedures to prevent eventual faults and court orders from clients for compensation of injuries from road accidents.  Additionally, clear guidelines will be formulated to ensure compliance with the carbon emissions regulations, which will be achieved through the construction of a hybrid propulsion system due to its minimal fuel consumption derived from the combination of the electric fossil fuel engines. The proposed guidelines will also cater to ideal maintenance costs for the car.  Moreover, the marketing and distribution procedures will be set consisting of a comprehensive plan concerning the target market to promote sales, ensure consistent product availability at the dealerships, and facilitate optimum return on investment.

Secondly, adaptive risk management strategies will help the company continue operating despite the risks, even after unexpected adverse macroeconomic factors such as international currency fluctuations and emerging pandemics, which are beyond the company’s control. The control measures adopted involve a budget created to cater for production costs, and prolonged storage needs before breaking even. Additionally, all customer preorders will be required to remit a deposit for commitment. Through comprehensive studies and analysis of past incidences, viable contingency plans will be identified to support the structural integrity of the venture in case the occurrence of unforeseen threats compromises the system’s resilience. A significant number of companies historically have endured economic recessions as well as negative changes in international currency value. As a result, a case by case examination will provide a compatible survival strategy to mitigate possible subsequent losses.

Thirdly, the risk acceptance and transfer strategy treats some uncertainties as eminent but within the company management control. Dealing with the threats requires a selection method to identify threats known as the risk acceptance and tolerability criteria (Ansah, 2019). Both tests are based on the principle of adaptive analysis, which entails decision making supported by dynamically tracked and practical precautionary measures and alternatives. In a study on the aspects of ideal risk acceptance and tolerability criteria in the United Kingdom, Ghosh et al. (2017) state that a risk acceptance criteria created by the industry are aimed at the serving sector as opposed to society interests, and therefore, must be created the national authorities. As a result, the company will formulate structures that encourage adherence to the federal criteria for risk acceptance and tolerability policy. This medium will help manage risks that can be transferred to insurance companies. The recognition and transfer of these risks enable a company to solve damages caused by the company, employees, or members of the society as a result of its commercial activities and improve relations with the local communities.

Introduction of a new product variety

The computer age has fostered high-level dynamic changes in motor car engineering, which in return continues to prompt design advancements for customer satisfaction and achieve sales objectives effectively. Additionally, technological advancements have raised customer expectations by increasing access to information globally; hence, they are aware of the possibilities of the motor vehicle industry in relation to current technology. Also, the task of developing a new car requires a keen analysis of all possible threats that may arise from the technical aspects, either from the engine, braking systems, or software integration (Ghosh et al., 2017).  As a result, the car concept will be divided into three main sections that will focus on the drive train, the software technology integration, and the interior and exterior design. The drive train consists of the petro engine, the electric motor, and transmission systems. The gas combustion engine concept will be in two versions beginning with a 1-liter engine generating 110 horsepower and 95 pounds of torque. The idea aims at exceeding the capacity of regular hybrid cars in existence. As the inferior version, the vehicle is expected to attract customers interested in small cars with low maintenance costs. The second version will have a 1.5-liter petro combustion engine combined with 78Kw electric motor engineered to produce 186 Horsepower and 103-pound feet of torque. The market segment targeted will include people with an affinity for high-performance cars with a low maintenance budget. Furthermore, the transmission systems and the engines will be integrated using a continuously variable transmission (CVT) system for optimum power delivery to the wheels. The CVT system allows the driver to drive without shifting the gears manually (Malhotra, 2015). A CVT system is superior to a standard automatic mode as it offers quicker acceleration and draws maximum power from the combustion engine and the electric motor, thus increasing fuel efficiency and ensuring minimum carbon dioxide emissions. Other essential components include the suspension systems with compressed air in the shock absorbers and a stabilizer bar for the front wheels. In contrast, the rear wheels will have similar air-filled shock absorbers with trail arms offering comfort reliability and optimum engine performance.

The effectiveness of the mechanical engineering aspects of the car requires reliable software that is easy for the consumer to understand and use as well as sufficiently strong to eliminate vulnerability to cybercrime. According to research on the challenges of hybrid cars, Ghosh et al. (2017) suggest that in the recent history, hybrid car manufacturers faced overheating problems on the inverters and car theft relating to modified software systems. Additionally, the transmission control software was adversely affected, forcing cars to lose power and stop suddenly in the middle of the road. The project’s proposed risk management plan will require thorough testing and retesting of the prototypes while deploying stringent software development standards. The standards will be achieved and maintained by hiring professionals with an excellent track record and relevant past successes in software development. The cost is expected to be significantly high as a result of the remuneration packages for the software and mechanical engineers and the acquisition of components for the build. The software maintenance process will be tranquil alongside error improvements, cost-effective, reliable, while also offering machine independence and compatibility with other computer devices. This is a crucial aspect of modern-day driving, which includes devices such as smartphones, laptops, blue tooth connectivity navigation devices, and drive aid cameras.

The next design aspect involves the development of visually attractive bodywork that is both functional and cost-effective. As an essential factor in marketing, the product package appearance can boost sales by my significant margins and reduce the marketing costs for the product. Nakamura & Kijima (2014) explain that good car design can also help overshadow other shortcomings hence decreasing the risk of recalls arising from dysfunctional car parts, which is often costly and time-consuming. To prevent the risk of dysfunctional components, the risk management team proposes a 95 percent minimum pass for tests on safety, comfort, performance, and reliability of the prototype. These factors will be crucial in setting the designs for body panels, front and rear light shapes, the doors, cabin space, the seats, and drive controls. The prototype design will provide structural, lightweight body panels with aerodynamics that provide sufficient downforce at high speeds. Also, the thin body panels must be durable to protect the car occupants from fatal injuries during road accidents. The front and rear lights will be well aligned almost seamlessly with the body panels with an attractive modern appearance for practical aerodynamics. It will also reduce the air pressure generated from the back of the car. The interior will receive foam insulators on the floor pan, sides, and transparent noise for the windows and the windshields. Lastly, the seats, drive controls, and load space will be designed to achieve ultimate comfort through backbone support, electric seat massage, adjustable access to drive controls, and sufficient space for family luggage.

Environmental factors affecting risk management

The environment risk management factors refer to the assessment of external threats, identifying and developing techniques for managing the threats concerning business interests, human health, and environmental protection. Paltrinieri et al. (2014) argue that business risk factors are categorized into three, and they include ecological, economic, and social responsibility. Moreover, van Biljon & Haasbroek (2017) explain that the environmental factors affecting the modern business world have increased as a result of human population growth, advancement in risk assessment techniques that help identify more equally critical elements, as well as improved understanding of the environmental sustainability needs. As a result, the company’s environmental risk management team selected the triple bottom line theory. According to Hishan (2020), the approach was created in 1997 and focuses on three main aspects of environmental factors related to business risks, namely earth, people, and profits. The robust financial performance of any business activities depends on the wellbeing of the surrounding community, and the protection of the environment. Therefore, the local authorities have to enforce environmental protection policies alongside corporate social responsibility requirements (Rezazadeh Kermani & Momeni, 2016). Firstly, the ecological factors contribute significantly to all business activities due to their independence. Thus, a proactive risk management method is needed to ensure that threats likely to emerge in the future are highly specified and contained under foreseen and acceptable parameters. The project team devised a risk assessment method for analyzing the adverse effects caused directly or indirectly to the ecosystems as a result of the extraction of raw materials, industrial waste management, and carbon emissions from the vehicle’s combustion engines. Therefore, the selected techniques aim to adhere to existing environmental regulatory requirements set by the local authorities.

Corporate social responsibility traced back to the early 1900s, which marked the initial years of industrialization. A company’s social responsibility seeks to ensure that generation of revenue while being ethical and obeying constitutional requirements, including civil liability, and managerial decision making (Hishan, 2020). Similarly, risk management managers should conduct environmental conservation awareness training for all employees to ensure a comprehensive understanding of corporate social responsibility concepts. Additionally, the company should engage in funding, and participating in community cleaning efforts, help improve public education facilities, provide other types of donations such as equipment for medical research art and Agricultural research projects. Moreover, Engaging in these activities improves the social connection between members of the society and the company. Further, social responsibility should help minimize community tensions through hiring local skilled human resources since this is a gesture of genuine goodwill, which promotes the longevity of good relations with the community. Overall, corporate social responsibility is a crucial aspect of environmental risk factors. Hence, any strategic risk management plan should be characterized by elaborate corporate social responsibility involvement, which may also become a contingency plan in the long run.

The environmental, economic factors affecting risk management include market prices, interest rates, and international currency. These elements are often beyond the risk management team’s control and may prevent new ventures from establishing if not factored in during planning (Hishan, 2020). For example, market pricing is an essential factor when setting the market value of a product. Due to its unique dependence on factors such as competition, the pricing of a product should consider the price levels for products possessing similar qualities. Consequently, risk management assessment for inaccurate pricing and the adverse effects is essential and should mitigate any losses arising from sudden adverse changes in market dynamics. Additionally, the fluctuations in global currency are a significant factor that determines the cost of raw materials if imported or the final product is exported, as well as bank interest rates. Therefore, critical analysis and assessment of the economic risk factors should be conducted, which should facilitate the creation of ideal market entry tactics.

Risks management plans

Risk management plans are response procedures prepared to prevent, mitigate, accept, share, enhance, or control a positive or negative risk. Van Biljon & Haasbroek, (2017) explains that all project risk management plans aim to provide standard operating procedures with ideal ways of treating various risks. As a result, the project’s suitable response plans are as follows.

1. A risk avoidance plan helps remove possible causes of a threat by relaxing or isolating the project element likely to cause a peril. Therefore, risks factory fires will be identified, and their causing agents treated accordingly to prevent them from occurring.
2. The risk transfer plan involves selecting an entity to bear and manage any risk if it occurs. The threats that cannot be eliminated will be transferred to negligent employees, suppliers, and customers based on the cause and the context of occurrence to minimize company liabilities.
3. Mitigation plans help to minimize the threat effect or possibility of occurrence to a manageable limit. As a result, risks such as machine break down, robotic software failure will be reduced by procuring high-quality machines, develop routine service schedules, and hire professional operators.
4. A risk-sharing plan allows a threat to be allotted to another party with the necessary capabilities to maximize potential benefits arising from its occurrence. The set plans for such risks will be transferred to project benefactors to facilitate in increasing probability as threats would also be treated to minimize liability.
5. The risk enhancement plan aims to change the magnitude of a gainful risk by increasing the probability of its happening and the impact hence improving positive outcomes. The risk identified in such respect is a possible stock out, which will be maximized by increasing the production lines and enhancing the combined effort by engineers and investors.
6. The ultimate risk management plan is the acceptance strategy for the risks that prove impossible to optimize on or eradicate. The risk acceptance plan is adopted when the other approaches are not applicable. The threat identified concerning the program is court orders to recall all defective cars or compensate a section of customers for damages caused by the company’s doing. Consequently, 15 percent of the total investment is set aside as the fallback plan.

Conclusion

The viability of risk management techniques depends on a variety of factors since its development and advancement years ago. The risk techniques should provide reliable and efficient risk assessment and analysis procedures to ensure project resilience. As a result, the proposed hybrid car model to be introduced will enter the market with the user and technical features that exceed customer expectations and perform as per the projected goals and objectives while maintaining manageable costs. Additionally, environmental risk factors such as the national and global economic dynamics will be considered to avert or accept eminent risks. It is essential to carry out studies and collect data for informed decision making. Most importantly, comprehensive threat management and response plans must be identified to avoid, reduce, reduce, accept, or transfer liabilities of threats, thereby facilitating risk control. The process of risk and project management plan is a fundamental factor in the continued success of a business venture and requires human resources, time, and financial resources.

References

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