ACCT5919 Business Risk Management
HEBLON PLC CASE STUDY
Semester 2, 2013
Wenjia Wu 3489021
Wing Kin Lam 5011203
Xuan Zhang 5024642
Xin Su 3468927
This report will examine the key risk management issues in Heblon PLC (Heblon), with emphasis on the risk identification process. Established in 1950s in the UK, Heblon provides high quality wooden furniture in traditional manufacturing industry. After several decades of development, it currently has 250 employees, and relies on individual craftsmanship and labour intensive production processes. Heblon achieved sales revenues of £10 million in the previous year and occupied ...view middle of the document...
Due to limits in time, money and human capital, managers have to focus on key risks to improving business performance.
Based on the facts provided in Heblon, various types of risks, including strategic, operating, financial and legal risks are identified as followed.
Risks | Types of risks |
| Strategic | Operating | Financial | Legal |
Competitive pattern | √ | | | |
Expertise of management | √ | √ | | |
New technology | | √ | | |
Human resources | | √ | | |
Wood supply (raw material) | | | | √ |
Financing structure | | | √ | |
Increasing cost | | | √ | |
Unsatisfactory customers | | √ | √ | |
Bargaining power of retailer | | | √ | |
In risk identification, it is necessary to analyse the situations and sources of the risks. Five most significant risks, namely, environmental issue, change in consumer behaviour, technology development, higher competition in industry and concentration of distribution, are identified from Heblon’s business environment.
The protest of deforestation due to global warming has caused the reduction of hardwood supply in furniture manufacturing. Therefore, the lead time for the delivery and the price of materials would increase. As the pressure is expected to grow continuously, the risk is likely to occur in the future.
Change in consumer behaviour
Since consumers are becoming more fashion and design conscious nowadays, the demand for the traditional or reproduction style furniture may be reduced. Although there is no real impact on company currently, this will change price and cost structure of the business in the future.
The development in manufacturing process and management and control system would improve Heblon’s productivity and efficiency in business process. However, this would increase the financial pressure to the company because of lack of financial resources to support those developments.
Higher competition in industry
The entries of overseas competitors are intensifying the competition in furniture industry. This has induced more competitors from lower price section to differentiate their products by emphasizing quality, design and delivery. Therefore, the competitive advantage of Heblon will become less significant and the future sales will decrease.
Concentration of distribution channel
As the market share of distributors as manufacturers has been growing in the last decade and the bargaining power has been shifted from manufacturers to retailers. This imposes negative effects on profit margin and terms of supply to the small manufacturers like Heblon.
The performance and studies of Heblon suggest that the company have not properly applied method in risk identification, and consequently the pace of development was slowed down.
Risk identification may be conducted in formal and informal approaches, with the former primarily made up of past losses and safety system techniques. The...