Question

All projects incorporate a certain amount of risk. The real challenge is managing that risk in an appropriate manner. Discuss some of the risks that you anticipate in your project and how you would address them.

Answer 1

I work for a garment manufacturing company. My project is of replacing all old machinery and euipment in a phased manner over next 2 years. The new machinery would enable the company to be more productive, cost effective and thus profitable and more competitive. The initiative was taken by the company, which is basically an export oriented unit, as a result of announcement of new favourable economic policies of the government and the countries of the European Union and the US, recovering from the economic downturn, and demand of export garments picking up. The exercise would involve the expenditure of over 1 Million dollars, though the company owners have their finger crossed. The region is a disturbed one, with chronic scarcity of labour. It also falls in a fragile ecological area, and thus prone to natural calamities like landslides, floods and uneven rainfall. Other threat is from cheap garments from China, which has ben posing tough competition for past two years.The project has many risks, as listed below with mitigation strategies.

(a) The economic policies of government might change for worse, and it might not be much profitable to produce knit garments. The low margins would not be able to pay for the expansion costs.

(b) Economic slump in any of the target countries of export, might again reduce the profits and order sies, thus, affecting the return on nvestment.

(c) Sudden natural calamity might damage the infrastructure and company's ability to honour its commitments towards the customers, affecting its reputation adversely.

(d) Labour scarcity might haunt the company management, and might affect the production despite everything being in order.

(e) The company might not be able to cope up with cheap foreign goods, which might affect its exports.

The issues (a) can be addressed through being a part of strong lobbying wih the government forces, by uniting all players in the market to influence the policy making to soem extent. The factor (b) is beyond the bounds of the company, however, it can compete on high quality and low prices. The untoward incidents can be addressed by buying insurance, while factor (d) can be resolved by improving the wages and work conditions to attract and retain the labour, and keeping their moral and motivation high. The company can keep a buffer of workforce to handle sudden attrition. The competiton can be addressed by keeping the costs of manufacturing low, and quality high, by the use of innovation and new technologies.