INTERNAL EXTERNA

Demand
Risks

Supply
Risks
Top
&Rising

Production
Risks

Collection
Risks

Demand Risk Risk event

Top & Rising will only
have one customer
during the first 5 years of
operations, whereas its
payback period is
6.29years

Forecast risks where

forecasted demand is
not equal to actual
demand

Outcome
Become over
dependent on this
guaranteed demand and
spend no effort on
understanding the
market trends and
risks as well as consumer
preferences.
Unnecessary cost for the
firm in terms of disposing
or storing their surplus.
Critical as JV handles
perishable items with short
shelf life. On the other
hand, low forecast but high
actual demand can mean
opportunity cost in
terms of lost sales.

Mitigation
Diversify their customer
base even while in the
protection period to fully
utilize their capacity.

Work with retailers and

other players of the supply
chain to increase
visibility of demand
information
Adopt Just-In-Time
Manufacturing
methodology

Risk event
Changes in consumer
preferences

Outcome
Increasing concerns
towards health issue has
pivoted consume trends
towards healthier eating;
and may cause
Top&Rising products to
lose out in the
competitive food industry

Mitigation
Conduct market
surveys at a regular
interval to understand
consumer preferences.
Should also engage in
product diversification
that will allow them to
enjoy economies of scale.

Supply Risk Risk event

Political Risks in
supplier countries might
result in the possibility of
strikes, shutting down
production & distribution
of raw materials to our JV

Delays in deliveries of
raw materials

Outcome
Cause delays or even
halts to our production
process

Cause delays or even

halts to our production
process

Mitigation
Currently they only get
their raw materials
supplies from two
countries. Can have
their supplies from
multiple countries with
relatively more stable
political scene at a similar
cost through negotiations.

Assess credibility of
suppliers.

JV needs to have
alternative temporary
shipping routes to switch
to in the event of natural
disasters.

Risk event
Risk of price of raw
materials increasing
after the initial agreed
price.

Exchange Rate Risk

Hedge Risk

Outcome

Mitigation

Hurt the JV profit

margin
Cut expenses elsewhere
and compromise on the
quality of the goods
produced

Negotiate for longerterm contracts

Actively source for
alternative suppliers

Raw material prices will

be higher than as per
agreed, if exchange rates
were to move against
JVs benefit.

Include clauses in
contracts to fix the
exchange rate at the rate
at which they sign their
contract

When market price of

raw materials actually
fall lower than agreed
price.

Include some flexibility

in the contract/clauses.

Production Risks
Risk event
Capacity Risks

Risk of employee not

adequately trained as it
is a very complicated
production process. Might
also have dis-synergies
within JV due to different
cultures

Outcome
Hurts financial
performance be it
under-utilization or lack of
capacity to produce to
meet demand and may
cause bottlenecks at
different section of the
production chain

Cause delays or even

halts to our production
process.
Can also result in sub
quality goods being
produced

Mitigation
Make production process
more flexible
Shift bulk of production
cost from fixed cost to
variable cost

Have a mix of old and

new employees at both
production plants before
the new local employees
are very experienced with
the production process and
have team-building
activities.

Risk event
Risk of insufficient
profits to maintain and
upgrade machineries

Outcome
Delays in production
process or result in sub
quality goods being
produced

Mitigation
Set aside a pool of
funds for upgrade of
machineries in case
theres a particular year
whereby profits
generated are
insufficient.

Collection Risks
Mitigation
Filter credibility of

104.3
days

60 days

60 days

104.3
days

customers. Give
discount to customers to
encourage payments.
Decrease inventory
period, increase A/P
period, decrease A/R
period.