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BFA522 Risk Management

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BFA522 Risk Management

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Course Code: BFA522
University: University Of Tasmania

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Country: Australia

Question:

Scenario A: You MUST first get approval from your trainer to use a scenario of your own choice. It could be the company or business you are currently working for or a business that you are in the process of establishing.Scenario B: You have convinced ten (10) investors, friends and family, to invest $5,000 each into a business that you want to start-up. But before they hand over the money they want to see that you have a Risk Management Action Plan in place that is sound and that shows that you are taking this venture seriously. They want to be convinced that you will succeed and that you have planned this business venture properly and taken everything into consideration. You are opening up a small restaurant located at unit 3, 118 Mawson Pl, Mawson in Canberra. The name of the Malaysian Restaurant will be:Spices of MelaccaIt will cost $440 to open a company if you do it yourself (and that will copyright the name Australia wide). Applications can be found on ASIC website. You need to hire staff and develop a menu. The rent is $800 per week with a bond of three months and you must pay one month rent in advance. The lease-contract is for a two years minimum stay with option for extension to be negotiated. You need an ABN, food licence and you have decided to get a liquor licence instead of having a BYO. The location has a functioning kitchen because it used to be a restaurant before, but the rest is all empty, so you need to buy all chairs, tables and dishes. You will be employ employees before the restaurant opens up for business, but you will not engage in any specific training for the new staff, as it will all be on-the-job training. For advertising you have decided to spend it on pamphlets in the immediate suburbs and on google advertising. You will not initially buy expensive POS software but will operate through old-fashioned cash register. You will take out insurances for burglary, fire and flood. There are council restrictions for outside seating which at the moment allow up to six tables to be used for the business outside of the premises. Deliveries will be done through an external source which will be Uber eats or Menu Log. You will renovate the interior and exterior of the shop in a traditional setup.

Answer:

Introduction
The risk management process plays important role in resolving the potential issues associated with the business (Tjoa, et al, 2008). In this regard, the risk management of new restaurant; Spices of Melacca has been evaluated with the application of risk management process and environmental analysis. 
Stakeholder Analysis
The analysis has been done as follow for Spices of Melacca-
Table 1: Stakeholders’ analysis

Stakeholders

Issues/Risks

Customers

Changing demand related to products and services and availability of substitute because of price variation.

Investors

Interferences in the decision making and dissatisfaction at the time of low rate of return.

Employees

Unskilled employees might create additional cost of training and development.

Suppliers

Ineffective supply chain along with the poor quality of input. Furthermore, payment related issues with suppliers might also affect the performance of the business.

Competitors

Due to high competition in the marketplace, Spices of Melacca might get low rate of return.

Government

May create issue through unfavorable regulations and rules.

Risk Analysis
Pestle analysis
The description of several elements has bene provided as follows-

Political factors-Australia is considered as the world’s most political stable country which supports beginners to commence business in the country from (HABC, 2018). Owing to this, Spices of Melacca have superior opportunity to begin trade in Australia with supportive and stable political factors.
Economic factors-The economic condition of Australia is good due to it have highest growth rate among the developed countries (ePortal, 2018). Further, the GPD rate of Australia encourages new investor to begin their business. Thus, Spice of Melacca has minimum risk from the economic condition and also have fine prospect to establish their business in Australia. 
Social factors- Many tourists prefer to spend their time in the restaurant in Australia (Restaurant & Catering magazine, 2017). Owing to this, their taste is according to their region so the selection of menu dishes will be accordingly.
Technological factors-In the present era the technology is crucial for establishing of any business (Rodgers, 2007). In this context, the restaurant business needs to bed more advanced in term of technology in several (Saad Andaleeb and Conway, 2006).
Environmental factors-Climate change influenced the restaurant business because it has impact on the availability of raw material of food product through the changing rainfall pattern this impact on Australia as other continent (Collet, 2014). Owing to this, the Spice of Melacca has risk from the climate of Australia.
Legal factors-Australian government is aware about the food safety of their public and accordingly imposed the food safety Act 1991 which focuses on the food quality serve by the commercial purpose (Australian Institute of Food Safety, 2018). Owing to this, the legal environment of the Australian market related to food may affect the performance of the new business.

Participation and Goals
Objectives and critical success factors
The success of the business will be measured on the basis of objectives which are listed as follows-

To avail the products and services at favorable price to deal with competition
To maintain the effective as well as integrated supply chain for reducing the cost by 10% in the time span of 6 months.
To create the brand image in the Australian market by offering variety of products and services
To increase the sales turnover by 15% till the next financial year

Stakeholders involvement for risk management
On the basis of stakeholder analysis and the objectives of action plan, different methods will be used to involve the stakeholder in the risk management process. For involving the customer in risk management, survey will be conducted that helps for understanding the customer’s current requirements in Australian market. Further, to increase the product quality, connection will be established with the major supplier in restaurant industry of particular area. Moreover, the involvement of investors will be increased through enhancing their participation in decision-making process for financial support.
Risk Matrix
Risk matrix helps an organization to understand the risk and their relation with the objectives (Lim and et. al., 2012; Ankley and et. al., 2010). In this context, the management of the Spices of Melacca has been carried out as follows. In this regard, the score is changes on the level of 1 to 5 wherein 1 present very low risk and the last 5 present very high intensity of risk
Risk identification
Table 2: Risk identification

Risk

Purpose1
Customer satisfaction

Purpose 2
Isolation

Purpose 3
commence in Australian market

Purpose 4
Profitability

Score

Pressure of stakeholder

5

3

3

2

13

Political pressure

2

3

4

3

12

Employee development

4

3

4

4

15

Technological risk

4

3

4

5

16

Low quality related issue

5

4

4

4

17

On the basis of risk prioritization low quality, technology and employee development require keen focus of the business as these are high risk areas (refer appendix). However, likelihood and consequences of risk is determined in the following manner-
Likelihood and Consequence
The score of each score, refer the table in appendix.
Table 3: Risk likelihood

Risks 

Risk 1

Risk 2

Risk 3

Risk 4

Risk 5

Low quality related issue
 

Technological risk
 

Employee development

Pressure of stakeholder
 

Political pressure
 

Likelihood

2

2

3

4

2

Consequence

5

5

3

4

3

Risk 1

0

1

3

5

Risk 2

 1

0

4

4

0

Risk 3

4

4

 0

3

0

Risk 4

4

3

4

0

4

Risk 5

0

3

1

0

Risk interface score

9

11

12

15

Risk interface Weighted score

45

55

36

60

12

As per the evaluation of the risk analysis, low quality, pressure of stakeholders and technological changes should be addressed effectively so as to determine the successful operation of the business.
Risk management options

Total quality management
Employee training
Free flow of communication between stakeholders
Applying new and cost-effective technology

Evaluation of Risk Management Process
To ensuring the good product quality total quality management model will be applied along the employee training program on the regular basis which will enhance the employee capabilities in organizing. Further, it will increase product quality together with employee development. Apart from this, the healthy communication will establish between the stakeholders of company. After some period of commencing the business, the technological advancement will be done for the improvement of the service and product quality. Further, it will enhance the quality of those operation which leads customer satisfaction and improve productivity.
Conclusion
According to present report it can be concluded that the external environment influenced the business by creating threats which affects company’s profitability and productivity. In this context, the risk management is most crucial for beginners to manage the efficiency of their business with effective management of particular risk and minimize the effect of risk on the business.
Refrences
Ankley, G.T., Bennett, R.S., Erickson, R.J., Hoff, D.J., Hornung, M.W., Johnson, R.D., Mount, D.R., Nichols, J.W., Russom, C.L., Schmieder, P.K. and Serrrano, J.A. (2010) Adverse outcome pathways: a conceptual framework to support ecotoxicology research and risk assessment, Environmental Toxicology and Chemistry, 29(3), pp.730-741.
Australian Institute of Food Safety, 2018. Food Safety Laws. [Online]. Available at:< https://www.foodsafety.com.au/resources/videos/food-safety-laws>. [Accessed on 1September 2018].
Collet, J., 2014. Climate Change and Australian Food Security. [Online]. Available at:< https://www.futuredirections.org.au/publication/climate-change-and-australian-food-security/>. [Accessed on 1September 2018].
ePortal, 2018.AUSTRALIA: ECONOMIC AND POLITICAL OUTLINE. [Online]. Available at< https://en.portal.santandertrade.com/analyse-markets/australia/economic-political-outline>. [Accessed on 1September 2018]
HABC, 2018.Geopolitical assurances of stability for business and investment. [Online] Available at:< https://www.habc.gr/australia_geopolitical.asp>. [Accessed on 1September 2018]
Lim, S.S., Vos, T., Flaxman, A.D., Danaei, G., Shibuya, K., Adair-Rohani, H., AlMazroa, M.A., Amann, M., Anderson, H.R., Andrews, K.G. and Aryee, M. (2012) A comparative risk assessment of burden of disease and injury attributable to 67 risk factors and risk factor clusters in 21 regions, 1990–2010: a systematic analysis for the Global Burden of Disease Study 2010, The lancet, 380(9859), pp.2224-2260.
Restaurant & Catering magazine, 2017.Foreign tourists spend big in Australian cafés and restaurants. [Online]. Available at:< https://rca.asn.au/magazine/foreign-tourists-spend-big-australian-cafes-restaurants/> [Accessed on 1September 2018].
Rodgers, S., 2007. Innovation in food service technology and its strategic role. International Journal of Hospitality Management, 26(4), pp.899-912.
Saad Andaleeb, S. and Conway, C., 2006. Customer satisfaction in the restaurant industry: an examination of the transaction-specific model. Journal of services marketing, 20(1), pp.3-11.
Tjoa, S., Jakoubi, S. and Quirchmayr, G., 2008, March. Enhancing business impact analysis and risk assessment applying a risk-aware business process modeling and simulation methodology. In Availability, Reliability and Security, 2008. ARES 08. Third International Conference on(pp. 179-186). IEEE.

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