Risk identification and analysis
The ultimate goal of risk identification and analysis is to prepare for risk mitigation. Mitigation involves reducing the probability that a risk event will occur or modify the impact of a risk event if it does happen. The organization will minimize the risk in the first place by reducing the danger itself. It can use techniques to identify potential risks and eliminate those risks in advance. Also, approaches that have potential threats should be discarded first to reduce additional risks and significant losses. The organization can mitigate losses by reducing the magnitude of the damage or the chance of the failure happening. To reduce the degree of potential risks, risk may be shared with another party. This is possible when insurance allows the firm to transfer a part of the risk or the entire risk to a third party. Retention of risk is another technique by which the company will lessen its chances. This merely means accepting the loss that occurs because of the risk. I will first identify the threats, and then clarify the potential solutions for mitigating.
SUPPLY-RELATED RISKS
At the strategic stage, supply-related threats can be combined with unforeseeable levels of instability that can be very detrimental. These risks may be linked to operational-level defects or delays. The risks involved here are: the home country political danger that is geopolitical because it is impossible to shift the home country or decrease participation. There’s always a risk that will shut down production, undermining the worldwide distribution. One way to address this is to have plants and manufacturers in several countries. An aggressive Backup Suppliers plan from other countries/regions can also be a smart idea. Another risk is the possibility of mergers and acquisitions where a competitor is permitted to buy a manufacturer and eventually lock out suppliers or boost competitive costs. To minimize this, Samsung has long-term partnerships with its vendors. The relationship is almost as if the vendors were part of Samsung. Core manufacturers are provided with financial and technical support, and also expertise in human resources. Capacity risk is also another threat. Power will quickly be too low in the customers Samsung industry where all situations are expensive due to misrepresented investment in one case and lack of revenue in the other. Developing or expanding the production takes time and commitment. Therefore capacity building or adding is a realistic choice.
Intellectual property risk is another fast-growing danger, as supply chains are less vertically focused and more multinational, as businesses outsource to the same suppliers as competitors use. Since long-term profitability is based on maintaining a competitive edge in this sector, intellectual property loss has strategic consequences. Samsung companies can reduce this risk by having any production in-house or, at least, under the control of the company, or holding it in. Another way leaders can minimize risk is by reducing the transfer of new intellectual property to countries with inadequate regulatory restrictions that often shield it from one producer and usually two other. Inventory risk is also another risk. Excess production in the Samsung industry impacts financial results. Inventory risk depends on the product ‘s worth, obsolescence rate, demand and supply fluctuations, and product diversity, and it’s significant for the consumer electronics industry. Managers should pool inventories, build similar components around products, and work with product diversity to reduce inventory threat, delay the last stage of development before orders materialize. Samsung restricts the manufacture of critical parts to a range of locations supplying production plants around the world. This risk is also minimized by co-locating distributors.
DEMAND-RELATED RISKS
Risks here include: technology and potential loss of competitive edge that is a constant risk faced by the Samsung industry. With its clamshell mobile phone style, Samsung may have outdone Nokia, but some other business could also blind it in effect. To minimize the risk of losing its competitive edge, Samsung Electronics spends more on innovation than any of its rivals as a percentage of annual sales (about 8 percent of unconsolidated revenues). Another is Customer Preference Shifts. This can be mitigated through a diversification of both the product range and the markets. This means continuous research and development not only of products but of markets as well. Risk for receivables is in this category, too. The possibility of failing to collect on receivables can affect any company’s profitability. Samsung sells to retailers using hard currency in many parts of the world to mitigate both the cost of receivables and the risk of exchange rates. More than that, it uses “delivery information” technology to reduce the risk of receivables by eliminating delays and reducing the time between delivery and invoice.