Risk Management - What to look for?

I am particularly interested in risk assessment subject.

Almost everyone in the supply chain operation or any other industry will understand what is risk management is all about. Under the latest ISO 9000 revision, risk assessment is one of the key issue to be tackled.


There are common analytical tools that we can use to mitigate and manage risk management. Let go into briefly each of the concept.

Proctor 5 forces model

This  model look at the potential threat and opportunity through analysis of  (a) Buyer Position (b) Competitor power (c) Potential Competitors (entrant to the industry) (d) Suppliers Position (bargaining power of suppliers) (e) the total industry status

It a general outlook of the whole business structure which may not able to pinpoint an accurate picture but will help organization to prepare to macro strategies to counter any potential threat beside using it to configure organization advantage over area they have good positioning.


SWOT analysis

This is another analysis which look into the strength, weakness, opportunity and threat.

PEST

PEST is a short acronym for Political, Economic, Social & Culture and Technological analysis.

Similar to the other two models. It view the outlook of the external forces which may beyond the power of organization.

It has to do with external forces which may influence how business are run based on political, economic and environmental issue, social outlook and technological advancement.

DMAIC model

This model is actually from lean management concept and it stand for Define, Measurement, Analysis, Improve and Control action.

PESTLE analysis

An extension to PEST in that it also include Environment and Legal issue. It analyses the whole external threat to a business organization.

It can be use as defining the problem or potential threat coming up, measurement of the potential threat (what impact this will create to businesses), analyses the overall situation, follow by seeking solution to avoid the potential issue and then implement and control the issue from escalating.

The models above act as the common tool we should able to utilize in risk management. Then, the next question is what to look for?

This sometimes akin to finding needle in the haystack syndrome. To be able to do so, the leadership in the industry must able to recognize the threat long before it becoming a real problem. The evaluation skill and the ability to have the foresight is long recognize to be the basis of risk management success.

Some of the regular question one have to ask oneself over and over again may seem very straight. Example are as following:-

•  Is the supply of materials from a particular supplier or from a certain geographical zone will be an issue over a period of less then 5 years?
•  Will the commodity your organization rely upon for production will have changes in term of key players moving in or out from the industry?
•  Who will be the major players?
•  Will the technologies your industry in will undergo changes in less then 3 years?
•  Is China slow down will generate a bigger threat to the industry in term of price war for larger market share?
•  Will the retirement of a key management member impact your company functionality?
•  Are you over reliance of a single supplier or customer?
•  Have your organization ever analyses the impact of a supplier supply base been burned down or impacted by long term strike? What will you do?
•  Is there any potential of a key supplier becoming your competitor?
•  Are your company prepare for relocation in the event of a political crisis in certain geographical area? How will you manage the customer issue of unmet deliveries?
•  Are you prepare internally to counter the threat of a key sales person switching to competitor and bring your customer along with him or her to the competitor zone?

The detriment factor will be  (a) which risk you will survive if it impact you now (b) which risk you will most likely be impacted but able to survive (c) which risk you will be destroyed if it attack you now

To do so, understanding your strength in the industry and ranking your risk severity level will be needed.