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Risk Factors in Business

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9.0 Critical Risk Factors

9.1 Management Risks

Lack of Business Skills and Experience

None of any business is going to be easy. Each business unit is inevitable to face challenges and risks. Being a ‘young’ partnership management team, our management team is lack of field experience and business relationship skill in managing our company. It is because there will have many uncertainty and problems arise along the business operation that five of entrepreneurs ourselves cannot predicted and failure handling. It is a significant weakness for a business management team who operate in the very early period.

Conflict between Partners

Conflict is another inevitable part of business life when there are incompatible issues happened between each other. Partners may have struggle due to different opinions while making the business decision. If unhealthy conflict continues unresolved or not eliminated for long period of time, partners are likely to left the management team or dissolve the partnership relationship. The effect of poor conflict management may give a negative impact on operations and difficulty in achieving the company vision and mission.

9.2 Marketing Risks

Low Brand Recognition

In this strong competition marketing, our company is threatened from the existing competitor. There's no doubt for our company might face some obstacles such as the low brand recognition for our new innovation product. The customer might not familiar with our brand name of the product which might give us less appeal when customer making the relevance product purchasing decision. As compare to the competitor who has higher brand recognition, they have established a well reputation, larger capital, and superior customer’s data, skillful and knowledgeable in retain their customer loyalty than our company. Consumer may perceive risk and unfamiliar about our product. Hence, it is a challenging issue that our company needs to concern in choosing appropriate strategies to penetrate into the market.

Market entry strategy

Our products are considered as brand new product in Malaysia. Failure in selection of an appropriate pricing, marketing, or distribution strategy is a major potential risk. For example, with an inappropriate promotional strategy in ineffective way or wrong target audiences might lead to loss of potential customer and profits. Thus it is important in chosen media and channel to build customer awareness. Another reason is our competitors already have their existing customers and brand loyalty therefore the competitors are less likely to spend on advertising. However, our company is a new established firm and it needs to put more effort and spending in marketing campaign through promotion and advertising. This will lead to increment of expenses in running the business and thus reduce the competitiveness in other operation area.

9.3 Operating risks

Employee lack of Experience, Knowledge and Skills

Our company is lack of experienced workers in handling equipment and tools. As the equipment and tools have different use and function, thus workers may find it difficult to handle new equipment and tools which they are not familiar with. Hence, we may face difficulty in production process and operating management and it may increase our wasted resources. Lacking specific knowledge and skill are critical in all business process phases, and this problem can become the weakness of our company.

Staffing management

Supervisor is responsible in staffing. Sometimes, it is hard for them to control on employee behavior. Employees are likely to proposing complaint to management on different issues. New employees and workers possess less loyalty at the earlier stage of the business operation. The increase of sick leave or absenteeism may cause the shortage of manpower in which they are all hardly to find any replacement in shorter time. Except for the permanent employee, the foreign worker from GPGC might take time to replace even though they are working in daily basis. Employee absenteeism without notice is a major potential problem that company need to concern. Besides that, conflict between employees may arise in company. If the conflict and complaint cannot solve by supervisor, it will make trouble to the business operation. However, it is also difficulty in hired an experience supervisorto manage the foreign worker due to the communication constraint.

9.4 Financial Risk

To launch a new product to market, we need to invest huge amount of capital in dealing with suppliers, hire employees, marketing, purchasing and so on. We need to have sufficient capital in the begging of our day-to-day business operation. However, the unpredictable economic downturn might affect our company financial planning. During inflation and economic downturn, customer purchasing power is reducing. In that moment, they are likely to save money rather than spending. In fact the demand for product may drop critically during this period of time. This scenario may lead our company generate low profit or even worse, facing losses.

9.5 Intellectual Property Infringement

Counterfeit products

Counterfeit products are likely to have a fake company logo and brands to attract customers. When our product has been launched in market, our product design or features can be copied or imitate by our competitor. It is result in intellectual property infringement like patent infringement or trademark infringement occurs when someone uses our intellectual property without our permission. Counterfeit product tends to decrease our product uniqueness and affect our company reputation for being low quality.

9.6 Other Risks as Appropriate

Fire safety in the workplace

Many unexpected circumstances may happen in the workplace which might cause fires or explosions. Situation that may cause in fire such as electricity short circuit, electrical equipment, wood, paper, plastic, lighting and accidents which can cost our company to have a huge lost.

Burglary and Theft

Running a business is risk as you cannot predict what will happen and you cannot entirely control people behavior. For example, crime such as burglary and theft can be committed by either internal staff or external people. Even if happened internally also hardly to be traced.

9.7 Contingency Plan

9.7.1 Management Risk

In order to solve the problem of inexperience, our management needs to boost our skills base. We are encouraging our team management to attend management training courses, seminar, risk management courses, negotiation training courses and leadership program to upgrade our management ability. Those training courses are designed to improve our leadership and management skills including time management, conflict management, developing mindset, problem solving, presentation strategies, communication and strategic planning. Thus, all those skills and courses are needed in develop our ability to meet our business objectives.

Besides that, we have to make sure that our management operates without conflict and more fairness. Management should follow company rules, policies and standard operating procedures as guidance. So that everything operates under a clear and orderly condition.

9.7.2 Marketing Risk

We can increase our brand recognition by conducting marketing analysis. The market analysis present useful information about the industry and market which our business wants to enter. We can get the useful information including our customer purchasing trends, spending power and competitor information. Based on the analysis, we can reduce business failure as we able to understand about our customers’ needs and select appropriate market entry strategies to penetrate into the target market.

The most importantis narrow down our target market into a manageable size. Next, we are trying to target specific people with advertisement and promotion in generating brand awareness to our product. For example, there are many new social websites and they will offer a free service, and online adverting available. In this way, we can directly reach our potential customer by advertising, giving discount, voucher and coupon through print media, newspaper and trade show. When our product is appear more and more times to the potential customer, it will increase our product brand recognition and profits.

9.7.3 Operating risks

Employee training and development program will be providing every three month. Employee will attend the program selectively to improve their ability and performance. Besides, hire an experience supervisor will help in control our staff effectively as they know how to build relationship and dealing with employee’s complaint. They are representing company in management of employee concern, problem and complaints. To meet employee needs, management and supervisor shall constantly meet with worker to show their concern. We will increase permanent employee salaries 10% for 1st year and 20% for 2nd year accordingly to enhance their motivation and loyalty. Other additional incentive such as health insurance, vacations and OT claim will given to appreciate their effort.

9.7.4 Financial risk

To reduce financial risk, our company accounting and finance department are also playing important role. They are responsible for the day to day accounting transaction of the business. Furthermore, they have to calculate all the employees’ salaries, company earning, cash payment, income tax and so on. They are helping our company in checking and monitor company expenses is exceed the budget so that it is always have sufficient cash flow in daily operation. Therefore, an excellent accounting and finance department is needed to provide information to assist our management in making accurate budget planning.

9.7.5 Intellectual property protection

Our company will register for the trademark and patent to protect our product imitate by other people. Register for trademark and patent prevent other designing or merchandising similar product under a clearly different mark. Hence, we can protect our company reputation and profitability. If any intellectual property infringement detected we can take legal action to court against the party. It is the ownership right that we can use to protect our product from imitate.

9.7.6 Other contingency plan

We need to prevent our company from fire and keep people safe. Fire detection and warning systems will be install in our factory area especially assembly line to alert people when there’s fire. Once the alarms active from smoke and heat it is alert that somewhere is on fire. Next, firefighting equipment must be installed, tested and train our staff to use them so that they know how to use them in critical moment. Fire drills training will be given at least one times per year to train them about the fire risk management. To minimize burglary and theft occur in company installing Closed-Circuit Television (CCTV) must be implementing.


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