Manage Risks: external/internal
"However beautiful the strategy, you should occasionally look at the results"...WC
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Today, business faces several risk from both internal and external factors. Several examples can be found in various business, here are some taken from the press
- Dispite the economics downturn and fuel cost rising up over 100%, Quantas still manages to see a profit rise of 44% (press) while everyone is the business is seeing loses, how did they do that?
- CP All Plc, the operator of 7-Eleven convenience stores in Thailand, aims to build revenue this year by 15% or 12.2 billion baht and net profit by 20% or 500 million baht (press), what strategy was used there?
- PTT Exploration & Production Plc, Thailand’s natural gas exploration flagship, posted an increase of 82% in second-quarter profit from a year earlier (press), how was risk mitigated here?
To be more specific what are the risk? Let’s look at some external macro economic risk. A report made by BOT reported that ”overall sales of the business, private consumption and investment was reported to decline due to continuous increase in the cost of raw materials, hence consumers became more cautious in their spending and selectively purchased focusing on quality products. In addition, unstable political situation by protests against the government decreases businesses confidence.”
Internal Risk Management involves operational and system contingency planning to respond to and mitigate damaging events; continuity of operations for the identification of vital records, systems, and processes; and preparation required to ensure that these systems and processes will be available in the event of a catastrophe. We can see those on a day to day operation, weather the raw material will be delivered on time, the logistics deliver the products to the store successfully.
However, having said all this, risk management is not a new subject. It’s just that it hasn’t been processed and managed well enough to be understood and used within the organization similar with strategy management.
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