De La Salle University Dasmarias

College of Engineering, Architecture and Technology

Engineering Department Industrial Engineering

IEET527 IE Elective 4 (Risk Management)

Assignment #1 Property Loss Measurement

Submitted by:
Cotoner, John Paul S.
Escusa, Renzell Aira M.
Gangoso, Karilane Joy E.
Lansangan, Reinna Liz M.
Magadan, Ma. Jeremae P.
Pineda, Angello G.
Santos, Roydalyn E.
Umali, Danielle Elaine C.

Submitted to:
Engr. Romeo L. Reyes

February 19, 2016

De La Salle University Dasmarias

College of Engineering, Architecture and Technology
Engineering Department Industrial Engineering

IEET527 IE Elective 4 (Risk Management)

Assignment #2 Short Case Study: TOP-PART ASIA Ltd.

Submitted by:
Cotoner, John Paul S.
Escusa, Renzell Aira M.
Gangoso, Karilane Joy E.
Lansangan, Reinna Liz M.
Magadan, Ma. Jeremae P.
Pineda, Angello G.
Santos, Roydalyn E.
Umali, Danielle Elaine C.

Submitted to:
Engr. Romeo L. Reyes

February 19, 2016

A SHORT CASE STUDY:

TOP-PART ASIA Ltd.

The project under consideration consist in a joint venture (Top-Part-Asia Ltd, T.P.A)
between a European company (Top-Part, T.P.) and local partners in a South-East Asian
country. A preliminary feasibility study summarizes the main financial and technical
aspects of the project.
The new plant is devoted to the production of metal parts to be used in various
industries. They are made out of a resistant alloy requiring, after shaping, a special
chemical treatment (hardening in acid bath). T.P. will make its unique technology
available to T.P.A. through licensing. Broadly the contract would include the setting up of
required equipments, provision of alloy sheet, and training.
The localization has been selected considering both the opportunites arising from a
growing market in the country (and in countries nearby) and the low labor cost. The
sales are expected to amount 500 000 Us$ after one operating year, 1 million Us$ after
two years. The full scale production, 1.5 million Us$, is expected to be reached after
three years only thanks to exports.
The land (10 000 square meters) has already been acquired for 115 000 Us$. The plant,
comprising buildings (180 000 Us$) and equipments (650 Us$) and equipments (650
000 Us$), should be completed within a year. The main part of the amount0 000 Us$),
should be completed within a year. The main part of the amount to be spend for
equipments corresponds to an expensive automatic machine imported from Sweden.
A small building (A) will be devoted to the rinsing process. it is connected to part (B)
housing the other equipments used for the process (zone B1), the storage of metal
sheet (B2) and processed goods ready to be delivered (B3). The second floor houses
the administration offices.
The land is bordered by a rive r out of which water can be pumped for rinsing after
chemical treatment. The polluted water is then purified before it is to be poured back in
the river. All necessary authorizations should be obtained in time thanks to the influence
of local partners. Chemical wastes will be stored in a specific place before they are
taken away by a local specialized company (once a month).
From the financial report we know that the equity raised should amount 600 000 Us$. To
follow the local foreign investment regulation T.P. will contribute up to 49% of this
amount, the rest, 515, corresponds to the contribution of local investors ready to get
involved in this joint venture. 30% comes from an industrial group looking for
diversification, and 21% from an individual belonging to a local family which is well
known among the business community. In addition the new company, TPA, will have to

borrow money from local banks to obtain the complementary funds (according to the
estimates, the working capital corresponds to 40 days of sales).
Concerning human resources, four engineers should be selected from a well known
technological institute in the region and sent to Europe during 3 month for a special
training. Considering the specificity of the process, one specialist from T.P. will join to
take full responsibility of the project. The chief accountant and other employees (25
people) will be found locally.
QUESTIONS:
Prepare a brief report mentioning the main risks related to the project and that comes
under the responsibility of the risk manager. You will rank them in terms of severity and
give suggestion for further investigation.

PRODUCTION FLOW CHART

PATRIMO
Storage

Shearing

Press Roll Forming

Assembly

Weld Spotting

Rinsing

Storage

Inspection

Packaging

RISKS

ASSETS

Internal Area: 1
2

4
5
6
7

SUPPLIERS

CUSTOMERS

ACCESS

COMPETITION

Physical

Financial

Technological

Human

Excessive
noise
Sharp
objects

High cost of
equipment
Increase
interest rates

System
breakdown

Insufficient
manpower
Incompeten
t employees

Slippery
surfaces

Low sales

Exposed
electrical
sources
Chemicals
spillage
Wrong
parameters
(Machine)
Chemical
Inhalation
Damaged
Raw
Materials

Delivered
Defective
Products

Cyber attacks

Commercial

Bus
Interr

Powe

Ma
Brea
Se
Acc
insid
com

Human error

No investors
Budget
shortfall

High cost of
raw materials

Low demand

Car/Truck
accident

Far location
of suppliers

Better
products
produced
by other
companies

Similar
product in
cheaper
prices

More advance
technology
used by
competitors

Conflict of
interest

Unreliable
suppliers

La
reso

Conflict of
interest

Differences
in
interrupting
the trade
agreement

No o
receiv
cust

Lack of
people who
has
connection
to authority
Companies
hired more
skilled
employees

Damage of
product
during
delivery
Growing
competition
in metal
parts
industry

Trans
n acc

Repu
dama
to ru
and
state

fr
comp
Sudden
changes
monetary
policies
Inflation
Natural
Disaster
Natural
Calamities
ENVIRONMENT
ex. flood,
earthquake

Technology
suddenly
becomes
obsolete

Natural
disasters
that affects
employees

High
advertising
cost

Changes in
taxation

Epidemic
virus affects
employees
ex. H1N1,
Mers-cov,
Ebola, Sars,
etc.

Natural
disaster

Fortuitous
event that
may
happen to
employees

Import and
Export
Regulation
Problems

Na
dis

Una
pas
requir
and p
to op

CRITERIA FOR PROBABILITY RANKING OF A GIVEN RISK

RANK
5
4
3
2
1

RANGE
Certain
Likely
Possible
Unlikely
Rare

PROBABILITY
Occur 0-2 times a year
Occur 3-4 times a year
Occur 5-6 times a year
Occur 7-8 times a year
Occur 8 & above times a year

CRITERIA FOR SEVERITY/IMPACT RANKING OF A GIVEN RISK

RANK
5
4
3
2
1

RANGE
Catastrophic
Severe
Moderate
Minor
Negligible

AMOUNT OF LOSS (PHP)

200,001 and above
150,001-200,000
100,001-150,000
50,001-100,000
50,000 and below

RISK LEVEL CATEGORY

RANGE
8-10
5-7

RANK
High Risk
Medium Risk

COLOR
Red
Yellow

1-4

Low Risk

Green

ACTION REQUIRED
Subject to risk mitigation action
Risk mitigation action should be clearly defined
No mitigation action required (or a very basic
action if you think it is necessary)

RANKING OF RISKS
No
.
1
2
3

Category

Description of Risk

Probability

Impact

Score

Physical
Physical
Physical

Excessive noise
Sharp objects
Slippery surfaces
Exposed electrical
sources
Chemicals spillage
Wrong
parameters(Machine)
Chemical Inhalation
Damaged Raw Materials
Delivered Defective
Products
Car/Truck accident
Companies produced
better products
Natural Calamities
High cost of equipment
Increase interest rates
Low sales
No investors
Budget shortfall
High cost of raw materials
Low demand
Far location of suppliers
Similar product in cheaper
prices
Changes in monetary
policies
Inflation
High advertising cost
Natural Disaster
Changes in taxation
System breakdown
Cyber attacks
Human error
Advance technology used
by competitors
Natural disaster
Technology becomes
obsolete

5
5
4

1
2
2

6
7
6

Risk
level
M
M
M

4
3

3
2

7
5

M
M

2
1
1
3
1
1
3
2
5

5
4
3
3
4
3
3
2
3

7
5
4
6
5
4
6
4
8

M
M
L
M
M
L
M
L
H

5
2
2
1
5
1
5

3
4
5
1
3
1
4

8
6
7
2
8
2
9

H
M
M
L
H
L
H

Physical

Physical

Physical

7
8

Physical
Physical

Physical

10

Physical

11

Physical

12
13
14
15
16
17
18
19
20

Physical
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial

21

Financial

22

Financial

23
24
25
26
27
28
29

Financial
Financial
Financial
Financial
Technological
Technological
Technological

30

Technological

31

Technological

32

Technological

33
34
35
36

Human
Human
Human
Human

37

Human

38

Human

39

Human

40

Human

41

Human

42

Commercial

43

Commercial

44

Commercial

45

Commercial

46

Commercial

47
48
49
50
51
52

53

54
55
56

Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business

Insufficient manpower
Incompetent employees
Conflict of interest
Conflict of interest
Lack of people who has
connection to authority
Other companies hired
more skilled employees
Epidemic virus
Natural disasters that
affects employees
Fortuitous event that may
happen to employees
Unreliable suppliers
Differences in interrupting
the trade agreement
Damage of product during
delivery
Growing competition in
metal parts industry
Import and Export
Regulation Problems

3
3
2
2

3
3
2
2

6
6
4
4

M
M
L
L

Power failure

Machine Breakdown

Severe Accidents inside

the company

Lack of resources

No orders receive from

customers

Transportation accidents

Reputation damage due to

rumors and false
statements from
competitors

War

Natural disaster

Unable to pass the

Interruption
57

Liability

58

Liability

59

Liability

60
61

Liability
Liability

requirements and permits

to operate
Bank loans
Raw materials ordered not
paid on time
Delivered defective
products
Car/truck loan
Improper waste disposal

1
3

4
4

5
7

M
M

PHYSICAL RISKS
Internal

Excessive Noise

Excessive noise may be experienced by the workers due to the machines that will
be used in the company. Since the product of the company is metal parts, cutting
machine will be used that produces higher decibels of sounds that may harm the
workers designated in the cutting machine.
Solution: (Prevent)
With this problem, the group recommends to provide a Personal Protective
Equipment (PPE) for the workers. Most particularly, the worker in the cutting machine
will use ear muffs or ear plugs to lessen the excessive noise.

Sharp Objects

The working environment itself of the company may cause risks such as cuts and
lacerations to the workers due to the sharps objects in the company. Machines, tools,
and equipment that the company will are sharp and proper handling is needed in using
these. Also, excess metal sheets are sharp after being cut.
Solution: (Prevent)

Proper PPE for the workers will be provided to prevent the occurrence of cuts,
lacerations and other related incidents. Cap, gloves, eye goggles, body suit is
recommended to be used. With this step, the workers body will be protected from harm
objects.

Slippery Surfaces

Wet floors and oily work areas are examples of slippery surfaces. Wet floors may
occur in the rinsing section. While oily and greasy surfaces may happen in the work
areas where oils and grease are needed in the machines for lubrications. With these
slippery surfaces, accidents may occur if appropriate actions will not be taken
immediately.
Solution: (Prevent)
Safety signs are recommended to be used to inform the workers if in case
slippery surfaces will be present. By doing this step, the workers will be aware of the
risks that may happen with the said problem.

Exposed Electrical Sources

Exposed electrical wires and sources are dangerous for both the company and the
workers. This may cause short circuits that may lead to fire. Also, workers may
accidentally get in contact with these sources that may electrocute the worker.
Solution: (Prevent)
Covering of the exposed electrical sources will be the proposed solution to the
said problem. Hiding it under the floor and managing the cables will help organize the
electrical sources. By doing so, the working environment will be safer.

Chemicals Spillage

Certain chemicals will be used in the production of the metal parts. Acids will be
used in some processes of the production. Chemical spillage may occur if improper
handling of chemicals is done. Chemical hazard is the risk in this problem. Burns and
inhalation of chemicals may occur thus, physical risk is present to the workers in the
processes.
Solution: (Prevent)
Proper storage and handling of chemicals is recommended to be done by the
company to prevent the occurrence of chemical spillage. The chemicals must be stored
in a cool dry place where in contamination will be impossible.

Wrong Set-Up Of Machines

Parameters for the machines that will be used must be standardized and followed
thoroughly. If in case that the machines are set-up improperly, malfunction may occur.
Also, the machine may be damaged. Malfunctioning of the machine may cause defects
to the products. The worst thing that could happen is that the machine may explode if
wrong parameter is done.
Solution: (Prevent)

With this problem, proper set-up of parameters for the machine must be done by
a trained technician and guided by a Mechanical Engineer. Through this step, machine
malfunction, machine damage, and rejects will be prevented.

Chemical Inhalation

Inhalation of chemicals is dangerous for the workers health. In some cases,

chemical inhalation may cause nausea and vomiting. In this situation, it is also a risk for
the production since the worker will be idle thus the production may stop or slow down.
The workers efficiency for that day may also be lessen due to the chemical inhalation.
Solution: (Prevent)
Wearing of PPE most specifically face mask is recommended as a solution for
this problem. The worker will now be protected from chemical inhalation thus keeping
the worker from risks.
External

(Suppliers) Damaged Raw Materials

Suppliers may sometimes deliver raw materials that are defective upon delivery.
With this, lesser quantity of quality goods may be processed and produced. It is a risk
for the company since the demands of the customer will not be met.
Solution: (Prevent)

The proposed solution for the problem is to have allowances for the quantity of
delivery. For example, 1000 sheets of metals will be ordered. An allowance of 100 will
be added to the order to have an excess in case of defective products will be delivered.

(Customers) Delivered Defective Products

It is a big disappointment for the customer if the delivers finished product is defective
or damaged. Customer satisfaction will not be met. It is a high risk for the company to
deliver products that is in low quality. The customer will be dismayed; in effect they will
no longer buy the product of the company again.
Solution: (Prevent)
Strict implementation of quality control for the produced products must be
implemented. Corresponding actions must be implemented to ensure the high quality of
the products to be produced. With this, the products to be delivered to the customer will
be in good quality thus customer satisfaction will be achieved.

(Access) Car truck Accident

Accidents are hard to prevent and road accidents is in the top of the list. Trucks of
the company may be involved in road accidents thus causes risk for the assets of the
company. Damage to the property of the company is one of the effects. Also, loss of
access for transporting the products is a risk.

Solution: (Transfer)
Car insurance is the proposed solution for the problem. By having a car
insurance, the trucks of the company will be insured in case road accidents will happen.
The damage to the vehicle will then be carried by the insurance company.

(Competition) Better Products Produced By Competitors

The products produced by the established and known companies will be better for
the customers at first. The product of the company is not yet established and known to
the market. Another factor is that the physical appearance may not be good since the
company is new in the industry.
Solution: (Prevent)
Product improvement and product innovation is the main solution for this
problem. Continuous improvement of the design of the product as well as the processes
it undergoes will help improve the product itself and also through Research and
Development. With this, the company may compete with the leading company in the
industry.

(Environment) Natural Calamities

Natural calamities such as floods, volcano eruption, landslides, storms and

earthquakes may cause risks to the company and its workers. These calamities may
cause severe damage to the lives of the workers and properties of the company.

Solution: (Combination)
Proper trainings and preparation for the calamities is the solution for the problem.
By doing so, every worker will be trained and guided with the proper knowledge needed
if ever the calamities occur. Insurance for the company properties is also a solution.

FINANCIAL RISKS
Internal

High Cost of Equipment

The high cost of tools, equipment and machine is a financial risk for the company
because higher capital is needed to operate the company. Numbers of machines are
needed to produce the products thus larger amount of money will be used to start the
business.
Solution: (Avoid)
Choosing the cheapest yet reliable equipment will be the recommended solution.
The company can also bargain with the supplier of the equipment to get it in a cheaper
price.

Increase Interest Rates

Higher interest rates mean banks are willing to pay more interest on their deposit
accounts, but this also means that the cost of borrowing will likely be greater. When the

economy

is

slowing.

This

generally

means

companies

are

less

profitable,

unemployment is rising and consumers are reining in their spending.

Solution: (Prevent)
The group suggests that the company may prevent from borrowing money from
the bank if possible. With this, the company will not be liable to any bank interests.

Low Sales

Since the company will be new in the metal parts industry, it is expected that the
company will not be able to achieve high sales immediately. It is expected to have low
sales at the introduction phase of the product since large companies are known in the
metal parts industry.
Solution: (Prevent)
Advertisements and strong marketing campaign must be done to solve the said
problem. As a result, the consumers will be familiar to your product and can compete
with the companies known in the industry.

No Investors

The company is just new and is about to start. It is possible that difficulty in finding a
potential investor may occur. One factor that can be considered is that the company is
not yet established and assurance in profit is not clear. It is a risk because the financial
aspect of the company will be by collecting financial supports from investors.

Solution: (Prevent)
The possible solution for the problem is to find and convince potential sponsors.
Persistent conversation with the possible sponsors is needed to have sponsors needed
to start the company.

Budget Shortfall

Deficit in budget is a high financial risk for the company. It is a big problem since the
funds are needed to start and operate the business. Lack of funds will mean that certain
needs of the company will not be acquired thus the company cannot be operational.
Solution: (Prevent)
It is recommended by the group that the company may get a loan from the bank
in order to have the funds needed to start the business. Securing of loans will mean that
the company will borrow money from the bank and will be paid after a certain time.
External

(Suppliers) High Cost of Raw Materials

The high cost of raw materials needed in the production of the product is a financial
risk for the company. This means that the company needs bigger funds to produce the
product and start the company.

Solution: (Avoid)
Conduct bidding for low cost raw materials. Gather different suppliers and pick
the lowest cost with good quality raw materials. Through this, the company can get
lower cost raw materials.

(Customers) Low Demand

In the start of the company, it is expected that the company will have low demand for
the products. It maybe because the company is still new in the industry and the product
is not yet established.
Solution: (Prevent)
Advertisements and strong marketing campaign must be done to solve the said
problem. As a result, the consumers will be familiar to your product and can compete
with the companies known in the industry.

(Access) Far Location Of Suppliers

The farther the location of the suppliers means that the larger the cost of the
transportation of products. It is a financial risk for access because the raw materials will
be higher in cost due to the transportation cost that the supplier may add.
Solution: (Prevent)

Find suppliers that are nearer to the company. With this, it would be more
accessible and convenient in delivering the products. The raw materials will also be
cheaper because the transportation cost will be minimal.

(Competition) Similar Product In Cheaper Price

Different companies may offer the same product in cheaper price. It is possible
because of certain factors. One possible reason is that the competitor may be
established in the industry. Strong competition will be experienced by the company
since they will be new in the industry and it is a challenge to introduce their company
and product.
Solution: (Prevent)
Advertisements and strong marketing campaign must be done to solve the said
problem. As a result, the consumers will be familiar to your product and can compete
with the companies known in the industry.

(Environment) Sudden Changes in Monetary Policies

It is a risk pertaining to the environment because it may affect the price of the

product and supplies which may cause loss of money and customers.
Solution: (Knowledge & Research)
Plan an advance and accordingly to the forecast based on the statistical graphs
that the group of companies will address. This will ensure that the impact of the inflation

will lessen therefore the company can compensate to the loss that the specific scenario
will give.

(Environment) Inflation

It is a risk pertaining to the environment because of its global effect pertaining to an

increase of price of its raw materials cause an increase of price of the product itself
broadly address to the specific customers.

Solution: (Knowledge & Research)

Plan an advance and accordingly to the forecast based on the statistical graphs
that the group of companies will address. This will ensure that the impact of the inflation
will lessen therefore the company can compensate to the loss that the specific scenario
will give.

(Environment) Natural Disaster

It is a risk pertaining to the environment because it can affect the financial status of
the product pertaining to if the company occurs damages in the event wherein a natural
disaster occurs.
Solution: (Combination)
Retrofit existing structures. It is to promote the strengthening of existing structure
to lessen natural disaster risks. Cost-effective techniques for retrofitting existing

structures will be developed and incentives will be established and will encourage all
shareholders to apply these techniques.

(Environment) Sudden Changes in tax

Changes in tax will affect the cost of the company. Thus, increase in the price of

the product may occur that will lead to customers find similar or substitute products in
cheaper price.

Solution: (Knowledge & Research)

Plan an advance and accordingly to the forecast based on the statistical graphs
that the group of companies will address. This will ensure that the impact of thechanges
in tax will lessen therefore the company can compensate to the loss that the specific
scenario will give.

Environment (High Advertising Cost)

Advertising costs is included in estimating the market price of the product. Thus,

increase in the price of the product may occur if the advertising cost is high that will lead
to customers find similar or substitute products in cheaper price.
Solution: (Avoid)
Find other effective advertising strategy at low cost

TECHNOLOGICAL RISKS
Internal

System Breakdown

System breakdown can cause loss or corruption of customer transaction which will
leads to misinformation of specific companys needs, power loss which may lead to
delays in production which may affects the whole companys profit.
Solution: (Prevent)
(CORRUPTION OF CUSTOMER TRANSACTION) Secure computers, servers
and wireless networks. Use anti-virus and anti-spyware protection and firewalls.
Regularly update software to the latest versions. Use data backups that include off-site
or remote storage. (POWER LOSS) Provide emergency generators to compensate the
loss in terms of time that the power outage will consume.

Cyber attacks

Cyber-attacks which can access companys personal data especially when it comes
to business transactions and future plans for the company. This will lead to the
customers loss in terms of money and it can cause the widen dissemination of
information.
Solution: (Prevent)

Secure computers, servers and wireless networks. Use anti-virus and antispyware protection and firewalls. Regularly update software to the latest versions. Use
data backups that include off-site or remote storage.

Human Error
Human Error can lead to misinformation regarding to the whole system which

can affects the company as whole for the reason of, this information affects every single
detail in the company wherein the information is the main system towards the action
that the company will act.

Solution: (Prevent)
Proper trainings for the employees especially for those who are subjected to the
internal system inventories and other private documents. Sanctions will provide
specifically for the reason of these information can affect the company as whole.
External

(Competition) More advance technology used by the competitors.

In terms of machinery and system the company who has more advance technology
used in the specific company can attract customers because it has a high standard
when it comes to the product and it is more efficient. It can be a threat to a company

who were new to the business especially if their competitor has more advance
technology.
Solution: (Prevent)
The Company must apply specific technologies that will lead to the companys
success. It may not be more advance than the competitors but it can be more efficiently
in terms of its used because of every technology has a high cost which can lead to
companys loss when not properly managed.

(Environment) Natural Disaster

In terms of natural disaster which can cause to property damage especially the
technologies in the company can cause loss due to the loss of information and machine
loss that can affect the whole production. In terms of the information, the loss of
information of the company can lead to misinformation and delays to the customers.
Solution: (Combination)
Retrofit existing structures. It is to promote the strengthening of existing structure
to lessen natural disaster risks. Cost-effective techniques for retrofitting existing
structures will be developed and incentives will be established and will encourage all
shareholders to apply these techniques.

(Environment) Technology sudden becomes obsolete

In terms of technological aspect of environment; it can affect the companys output

and its capacity because an obsolete technology can cause a company to spend much

on a single machine because the maintenance. Maintaining an obsolete technology can

affect the companys performance as well as companys monthly savings.
Solution: (Knowledge & Research)
Have a Obsolescence plan. In terms of being able to budget, prioritize actions,
set goals, etc. Planning starts with identification and research. With the help of a third
party, the company must define the goals and scope of the obsolescence plan, and
develop a strategy for safely collecting information from all legacy technology. Inventory
gaps should be identified. Then, product lifecycle status information is collected by
reviewing manufacturer websites and notifications, publications, and distributor and
reseller information.

HUMAN RISKS
Internal

Insufficient manpower

The management experience lack of worker and employee hired in the company
thus to experience delay in the production process or any process inside the company.
Solution: (Avoid)

Hire additional employees

Incompetent employees

The company may hire incompetent employees if improper screening during

application was happened.
Solution: (Prevent)
The recruitment officer should filter all applicants in all positions and choose the
best among the best of the applicants.
External

(Supplier) Conflict of Interest

Conflict of interest between suppliers may occur because of opposite ideas and
beliefs. This may cause disagreements and delay the transport of raw materials.

Solution: (Prevent)
Mutual agreement of both parties.

(Customer) Conflict of Interest

Conflict of interest between customers may occur because of opposite ideas and
beliefs. This may cause disagreements and delay the transport of finished products.
Solution: (Prevent)

Mutual agreement of both parties.

(Access) Lack of people who has connection to the authority

Connections to authority are somehow important to accomplish transactions faster.

However lack of connection will cause delay to the transactions.
Solution: (Prevent)
Gain connections or join fraternity

(Competition) Other companies hired more skilled employees

Competition with other companies are rising in metal part industry. One factor is that
other company hire more skilled employees that your company. Thus gaining them edge
in worker efficiency aspect.
Solution: (Prevent)
Hire more competent employees and offer the most skilled one with higher rate
and compensation compared to the rate offer of the other company.

(Environment) Epidemic virus affects employees

Illness is one of the factors that affects the productivity of an employee.

Solution: (Transfer)
Secure employees health insurance for safety purposes.

(Environment) Natural disasters that affects employees

There are instances that natural disaster ruins people's belongings and assets. A
possibility that an employee of the company can experience such things which may
cause for the employee to be demotivated and decrease his/her productivity at work.
Solution: (Transfer)
Secure employees insurance for safety purposes

(Environment) Fortuitous events that affects the employees

A possibility that an employee of the company can experience fortitious events may
cause for employee to be demotivated and decrease his/her productivity at work.
Solution: (Transfer)
Secure employees insurance for safety purposes

COMMERCIAL RISKS
External

(Suppliers) Unreliable suppliers

Suppliers is important in a manufacturing company and it is vital that the suppliers

are reliable. However, there is a risk that the supplier that the company may get is

unreliable. This may cause the delays in the production especially if they deliver raw
materials late or they have many damage raw materials delivered.
Solution: (Prevent)
The company should revise the contract between them and the suppliers. They
should be strict and ensure the suppliers' reliability. Otherwise, change suppliers.

(Customer) Differences in trade agreement

There are instances that the customer and the company differ in opinions. This

may cause to interrupt and prolong the trade agreement.

Solution: (Prevent)
Both parties should meet halfway. Formulate an agreement that would satisfy
both parties.

(Access) Damage of product during delivery

Delivery of products is done through transportation which may incur damage on

some products.
Solution: (Prevent)
Secure products and have proper material handling in delivering products

(Competition) Growing competition in metal parts industry

A lot of industry nowadays is focused on manufacturing metal parts which leads

the customers to have many options in what company to choose.

Solution: (Prevent)
Conduct promotion and advertisements to make your company and product
known.

(Environment) Import and export regulation problems

Government tends to change the import-export regulations which may affect the
import-export transactions of the company.
Solution: (Knowledge & Research)
Consult to import-export experts and ask for advices to what is best to be done.
BUSINESS INTERRUPTIONS
Internal

Power Interruption

Power outages bring production lines to an abrupt halt. This may translate into loss
of material, breakdown of machinery, and loss of productive time. This may also cause
supply chains to shut down altogether. Power is really important in Manufacturing
Industry because it is the heart of the production.
Solution: (Prevent)
The company should provide secondary sources of electricity like generators.

Machine Breakdown

Machine Breakdown interrupts the smoothness of running the business specially in

the production process. If at first the machine already not working it will affect the whole
production schedule.
Solution: (Prevent)
The company should undergo several tests in operating the machine before use.
The company should also secure the warranty of the machines to its suppliers.

Severe accidents inside the company

Severe accidents that may happen in the company may interrupt the whole business
or production processes. Severe accidents that leads to employees injuries or even
death.
Solution: (Combination)
Strengthen the rules in every aspect of safety purposes. Provide insurance to all
employees.

External

(Supplier) Lack of resources

The production process will interrupt if there was a shortage of resources available
in producing a certain product. It includes all resources, direct or indirect.
Solution: (Prevent)

The company should strengthen the importance of the contract between its
suppliers regarding the time of delivery of all resources and raw materials needed in the
production.

(Customer) No order receive from customers

The business also interrupts if there is no order from customers. There will be a lot
of lost if the production will stop due to lack of demand of its product.
Solution: (Prevent)
The company should at least advertise or promote the opening of the business to
prospect customers.

(Access) Transportation accident

If transportation accident occurs, several things may happen like there will be delay
in delivering the products and also lead to defects to products inside the delivery
vehicle.

Solution: (Combination)
Insurance on the products inside the vehicle and always check the condition of
the vehicle. The company should also hire legit professional drivers

(Competition) Reputation damage due to rumors and false statements from

competitors

The business may also interrupt due to rumors or false statement made by your
competitors. They may accuse you to different violation in order to stop the run of your
business.
Solution: (Avoid)
Hire a company lawyer that will ensure or the legal documents and papes to run
the business. Be also ready with all your supporting data to the possible false statement
the others may throw unto the company

(Environment) War

War, martial law or any conflict in the society may interrupt the business.
Solution: (Retain)
Secure an agreement within the government and for the mean time adapt to
change and pray for world peace.

(Environment) Natural Disaster

Natural calamities such as floods, volcano eruption, landslides, storms and

earthquakes may cause risks to the company and its workers. These calamities may
cause severe damage to the lives of the workers and properties of the company.
Solution: (Combination)

Retrofit existing structures. It is to promote the strengthening of existing structure to

lessen natural disaster risks. Cost-effective techniques for retrofitting existing structures
will be developed and incentives will be established and will encourage all shareholders
to apply these techniques.

(Environment) Unable to pass the requirements and permits to operate

The company does not pass all the permits needed in operating the business.
Several permits are needed in establishing manufacturing company especially if it is a
hazard friendly process in producing the company's product.
Solution: (Prevent)
The company should hire an environmental engineer or any personnel that is
responsible to all documents related in applying permits to operate the company.
LIABILITY
Internal

Bank loans

Loaning in a bank is part in starting a business or a company. However, there are

some banks that have high interest rates and may lead the company to be burdened in
paying the money loaned.
Solution: (Avoid)
Find the most reliable and lower interest rate bank to loan in.

External

(Suppliers) Raw materials ordered not paid on time

There may be an instance that the company may fail to pay the supplier the raw
materials ordered on time.
Solution: (Prevent)
Order only the necessary amount of materials and budget the ordering carefully.

(Customers) Delivered Defective Products

It is a big disappointment for the customer if the delivers finished product is defective
or damaged. Customer satisfaction will not be met. It is a high risk for the company to
deliver products that is in low quality. The customer will be dismayed, in effect they will
no longer buy the product of the company again.
Solution: (Prevent)
Strict implementation of quality control for the produced products must be
implemented. Corresponding actions must be implemented to ensure the high quality of
the products to be produced. With this, the products to be delivered to the customer will
be in good quality thus customer satisfaction will be achieved.

(Access) Car/truck loan

Having a car/truck is vital in a company especially in delivering finished products.

But in starting a business, there is a high possibility that one does not have delivery car

yet. Therefore, truck loans are an option for business starters. However, there is a risk
that in the middle of delivery operation, the loaned truck may be involved in an accident.
Solution: (Combination)
Secure insurance for safety purposes and make sure that the driver is responsible
enough for the job hes in.

(Environment) Improper disposal of waste

Improper waste disposal can end up in the river at the back of the company and can
change the chemical composition of the water. Technically, this is called water pollution.
This will affect all ecosystems existing in the water. It can also cause harm to animals
that live there and the company cant use the river for their rinsing process since it will
be polluted.
Solution: (Prevent)
The company should follow the standard procedure of proper waste disposal to
prevent its harmful effects in the environment

RISK SUMMARY & MITIGATION STRATEGY

No
.
1
2
3
4
5
6

Category

Description of Risk

Physical
Physical
Physical
Physical
Physical
Physical

Excessive noise
Sharp objects
Slippery surfaces
Exposed electrical sources
Chemicals spillage
Wrong parameters(Machine)

Risk
level
M
M
M
M
M
H

Risk
Mitigation/Handling
Prevent
Prevent
Prevent
Prevent
Prevent
Prevent

7
8
9
10

Physical
Physical
Physical
Physical

11

Physical

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29

Physical
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Technological
Technological
Technological

30

Technological

31
32
33
34
35
36

Technological
Technological
Human
Human
Human
Human

37

Human

38

Human

39

Human

40

Human

41

Human

42

Commercial

43

Commercial

Chemical Inhalation
Damaged Raw Materials
Delivered Defective Products
Car/Truck accident
Companies produced better
products
Natural Calamities
High cost of equipment
Increase interest rates
Low sales
No investors
Budget shortfall
High cost of raw materials
Low demand
Far location of suppliers
Similar product in cheaper prices
Changes in monetary policies
Inflation
High advertising cost
Natural Disaster
Changes in taxation
System breakdown
Cyber attacks
Human error
Advance technology used by
competitors
Natural disaster
Technology becomes obsolete
Insufficient manpower
Incompetent employees
Conflict of interest
Conflict of interest
Lack of people who has
connection to authority
Other companies hired more
skilled employees
Epidemic virus
Natural disasters that affects
employees
Fortuitous event that may happen
to employees
Unreliable suppliers
Differences in interrupting the
trade agreement

M
M
L
L

Prevent
Prevent
Prevent
Transfer

Prevent

M
M
L
M
M
L
M
L
H
M
H
H
M
M
L
H
L
H

Combination
Avoid
Prevent
Prevent
Prevent
Prevent
Avoid
Prevent
Prevent
Prevent
Knowledge & Research
Knowledge & Research
Avoid
Combination
Knowledge & Research
Prevent
Prevent
Prevent

Prevent

M
M
M
M
L
L

Combination
Knowledge & Research
Avoid
Prevent
Prevent
Prevent

Prevent

Prevent

Transfer

Transfer

Transfer

Prevent

Prevent

44

Commercial

45

Commercial

46

Commercial

47
48
49
50
51
52
53

Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption
Business
Interruption

57

Business
Interruption
Business
Interruption
Business
Interruption
Liability

58

Liability

59
60
61

Liability
Liability
Liability

54
55
56

Damage of product during

delivery
Growing competition in metal
parts industry
Import and Export Regulation
Problems

Prevent

Prevent

Knowledge & Research

Power failure

Prevent

Machine Breakdown

Prevent

Severe Accidents inside the

company

Combination

Lack of resources

Prevent

No orders receive from customers

Prevent

Transportation accidents

Combination

Reputation damage due to rumors

and false statements from
competitors

Avoid

War

Retain

Natural disaster

Combination

Prevent

Avoid

Prevent

M
M
M

Prevent
Combination
Prevent

Unable to pass the requirements

and permits to operate
Bank loans
Raw materials ordered not paid
on time
Delivered defective products
Car/truck loan
Improper waste disposal

SUMMARY

Overall Risk level

40
35
30
25
20
15
10
5
0
High Risk

Medium Risk

Low Risk

The above graph shows that the company has more medium risks compare to
high risk and low risk.

Categories of risk

16
14
12
10
8
6
4
2
0

The above graph shows that financial risks ranks the highest among other risks that
the company will experienced.
Categories of risk & Risk level
10
9
8
7
6
5
4
3
2
1
0

High Risk
Medium Risk
Low Risk

The above graph shows risk levels in each category of risks. It shows that
medium risk consistently ranks the highest in each category.

Overall Risk Mitigation/Handling

40
35
30
25
20
15
10
5
0

The above graph illustrates that prevention is the common mitigation action of
the risks mentioned above.