Risk Management for SFL and PI Companies Relationship

The report focusses on the relationship between SFL and PI companies. SFL deals with the production of organic skin care products and PI is the major customer of the products. Both PI and SFL have traded for a long time and to strengthen the relationship, the companies have employees Sophie as the relationship manager. The report identifies the risks posed by Sophie and gives recommendations to avoid the problems.

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Name of student
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Date

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Executive summary
The report focusses on the relationship between SFL and PI companies. SFL deals with the
production of organic skin care products and PI is the major customer of the products. Both PI
and SFL have traded for a long time and to strengthen the relationship, the companies have
employees Sophie as the relationship manager. Sophie has the duty of ensuring that PI gets better
terms such as longer credit periods and larger discounts on the products.
However, SFL has complained that various decisions taken by Sophie hurt other customers. For
example, Sophie ordered the production team to make products for PI before meeting other
customer orders. Additionally, Sophie has negotiated larger discounts and longer credit periods
for PI, which could have a negative impact on the profits. Therefore, the report identifies the
risks posed by Sophie and gives recommendations to avoid the problems.

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Table of Contents
Executive summary..........................................................................................................................2
Introduction.....................................................................................................................................3
The potential risks arising from the appointment of a client manager............................................4
A weakness in the implementation of projects.................................................................................5
Loss of personal touch.....................................................................................................................5
The failure of e-commerce systems..................................................................................................5
The lack of a suitable brand............................................................................................................6
The risk of overreliance...................................................................................................................6
The impact of the customer manager risks to SFL..........................................................................6
Recommendations to minimise the risks and threats.......................................................................8
The development of a cross-functional team...................................................................................8
An efficient management information system..................................................................................9
The synchronisation of objectives....................................................................................................9
The signing of performance contracts.............................................................................................9
Conclusion.....................................................................................................................................10
Bibliography..................................................................................................................................11

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Introduction
Santé Future Limited (SFL) manufactures organic skin-care products. The company ensures that
the products meet the high-quality standards required in the market. Santé Future sells the
products to both the wholesale and retail markets. Over the years, the company has grown in size
by selling products to health stores in high-income regions of France. The French consumers
have the perception that the local products do not meet the required quality and do not will to pay
much. However, Santé Future Limited has a clientele that buys the products at a high price due
to the high-quality offered.
Santé Future Limited has Pharmaceutique Inc (PI) as the sole major customer. PI distributes
health food products to international markets and has a reputation for selling high-quality
products. Santé Future Limited started selling to PI in just under twelve months with PI buying
small amounts to assess the levels of demand. However, PI has begun placing larger orders,
which currently accounts for 40% of SFL’s turnover.
SFL has an organisation structure with both operational and non-operational departments. The
organisation has managers and teams running the various functions. SFL has opened up retail
and wholesale shops in various regions of Europe to enable reaching the customers. Currently,
SFL has employed Sophie to manage the relations between PI and SFL. Sophie’s appointment
came up as a recommendation from PI to increase the quantity of purchases and long-term
relationships. Sophie has introduced various amendments to the PI and SFL relations, which
includes such as a management information system to support the growing business. The other
adjustment includes discounts for products and longer credit periods.
The potential risks arising from the appointment of a client manager
The employment of a customer relationship manager could result in various weaknesses and
risks to the organisation. SFL should ensure that the relations with PI have close management

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and controls to prevent the occurring of risks. One of the possible risks includes the
dissatisfaction of customers and the producing company due to possible mismanagement by the
client relationship manager (Boag, 2018). For example, Sophie the client manager could take
actions that hurt SFL while trying to benefit PI Company. The actions such as increasing the
percentages of discounts result in losses for SFL but favour PI. Therefore, the risk of
dissatisfaction occurs due to the approach taken by the client relationship manager (Boag, 2018).
A weakness in the implementation of projects
The other risk posed by the appointment of Sophie to manage the relationship between the two
companies is a weakness in the implementation and management of projects. The project
undertaken by SFL and PI could fail due to inappropriate management by Sophie. The client
manager could lack adequate knowledge and experience in the monitoring the implementation of
a project leading to failure. Therefore, SFL and PI face the risk of losing investments put in
projects such as the development of a new organic skincare product (Juneja, 2018).
Loss of personal touch
On the other hand, SFL Company faces the risk of losing the personal touch with PI Company
(Juneja, 2018). The loss of personal touch arises from the lack of direct communications between
the companies. The need to go through Sophie to deliver any form of communication leads to a
breakdown in passing the information. The breakdown comes in since Sophie could deliver the
information in a distorted manner that leads to misinterpretation.
Furthermore, misinterpretation causes a lack of cooperation in doing various activities (Juneja,
2018). For example, SFL may not understand the exact requirements of issues raised by PI that
leads to further aggravation of the problem. Therefore, SFL Company could lose the PI who
make a large percentage of the profits and sales revenues.

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The failure of e-commerce systems
The other risk posed by the use of a customer relationship manager is the failure of the
information and E-commerce systems (Perks, 2017). The use of a customer relationship manager
relies heavily on information technology to enable adequate communications. A weakness in the
information system results in poor flow of information from the client to the customer. The same
could happen to SFL and PI whereby the information systems fail to perform as intended by the
company. The underperformance could pose a challenge to Sophie while trying to pass
information between the two companies. Therefore, the partners lack proper details of the
requirements.
The lack of a suitable brand
Moreover, SFL faces the risk of lacking a suitable commercial brand that PI can identify with.
The failure to establish a suitable brand arises from the failure of the companies deal directly
(Olsen, 2018). PI deals with Sophie instead of interacting directly with SFL thus the failure to
identify with the specific SFL brand. PI assumes that the behaviour portrayed by Sophie
represents the image of SFL. Therefore, when Sophie portrays a bad image, PI adopts a negative
image for SFL. Consequently, SFL could lose a major customer due to Sophie’s misconduct.
The risk of overreliance
Furthermore, SFL faces the risk of overreliance on PI to increase sales and revenue for organic
skin care products. SFL has already started frustrating other buyers by not delivering products to
in a bid to satisfy PI. Sophie, the client manager, requires the production department to make
orders for PI first while other orders stay on hold (Rebecca, 2018). The action has frustrated
other small buyers and could result in a fallout. Additionally, the company plans to invest in a
management information system to communicate with PI and has increased the credit period for
the major customer. The actions could lead to losses of the other customers due to the feeling of

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discrimination by not receiving equal treatment. Likewise, SFL could suffer serious reductions in
sales units and revenues in the case that PI withdraws as the major buyer of the products.
The impact of the customer manager risks to SFL
The risks could result in the loss of major customers who buy most of the company products
(Boag, 2018). For example, the poor communications between the companies could result in PI
looking for other suppliers of organic skin care. SFL would, therefore, lose a major customer
who buys most of the products, which represents a significant loss of revenue. Therefore, SFL
Company will have a reduced financial power due to the reduced revenues.
On the other hand, SFL could face the problem of not meeting PI requirements in time due to the
need to pass information through Sophie. The making of decisions between SFL and PI proves
difficult due to the need to involve the client manager (Suzanne de Treville, 2018). Therefore,
companies face a challenge when making important decisions within a short time. The delays in
making decisions and passing information results in a failure to exploit beneficial opportunities
in the market. For example, PI could require more units to satisfy new demand but the delay in
delivery of information could cause SFL not to increase the number of units demanded.
Therefore, the company misses the opportunity to make additional revenues (Suzanne de
Treville, 2018).
On the other hand, the risks could result in a negative image for the companies (Perks, 2017).
SFL and PI interact through the client manager who represents the culture and image of the two
companies. Therefore, the companies form judgments based on the conduct portrayed by the
client manager. In the case that Sophie conducts unprofessionally, then the image of the
represented company suffers a dent. The development of a negative image could result in the
cancellation of contracts between the two companies.

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Moreover, the companies lose personal contact due to the distance created by the client manager
(Suzanne de Treville, 2018). The personal touch serves an important role in the buyer and
customer relationship such as developing trust and mutual understanding. The companies with a
personal touch strive to achieve objectives together and consider the effects of various actions on
each other. The personal touch increases the revenues and continuity of the companies by
reducing competition among the seller and buyer. In the case of SFL and PI, the client manager
could eliminate the personal touch and cause the companies not to have a mutual understanding
(Boag, 2018). The effects have started showing where PI makes urgent orders and requires SFL
to deliver before meeting the orders placed by other customers. The actions have affected the
other customers since most of the buyers have suffered shortages in inventory over time.
Therefore, SFL could end up losing other customers due to the lack of products in the market and
frustration.
The risk of over-reliance on PI could impact the company in various ways such as the reduction
of sale units, revenues, and loss of resources invested in strengthening the relationship (Juneja,
2018). The impact could occur in the case of PI withdrawing from the relationship due to events
such as bankruptcy that could cause winding up of the company. Therefore, SFL could end up
making losses in the future due to fewer customers for organic skin care. The company could
incur excessive market costs trying to convince other major customers to buy the products. SFL
could also suffer the problem of leaving the market due to the losses incurred when the major
suppliers leave the market. Therefore, SFL should consider searching other customers to ensure a
wide market share that will maintain high sales units and revenues (Rebecca, 2018).

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Recommendations to minimise the risks and threats
The development of a cross-functional team
SFL should device various methods to reduce the risks and threats posed by the election of a
customer manager (Perks, 2017). One of the recommendations includes forming a cross-
functional team made up of experts from SFL and PI. The cross-functional team will manage the
relationship between the two countries and prevent Sophie from operating in favour of PI at the
expense of SFL. The cross functional team will discuss various issues such as the decision
making on the fulfilment of the orders, the credit terms and the management information system.
The cross-functional team will also ensure efficient communications between the two companies
and avoid delays in decision making. The cross-functional team will improve the personal
contact between the companies due to the constant communications and brainstorming to come
up with solutions for problems (Suzanne de Treville, 2018). Therefore, the companies will
continue the relationship for a long time due to the mutual understanding and trust developed
through the cross-functional team.
An efficient management information system
Furthermore, SFL should develop an efficient management information system to pass adequate
information between the companies (Juneja, 2018). The information system should inform both
SFL and PI about the available levels of inventory and the demand in the market. Therefore, PI
will make orders that match the amount of inventory available at SFL to prevent the
overstretching of resources and failing to meet other customer demands. On the other hand, SFL
will have adequate information about the market demand and produce units enough to satisfy the
orders placed by PI. Therefore, SFL will always meet the demand placed by PI due to having
adequate information.

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The synchronisation of objectives
SFL could also eliminate the risk by synchronising the objectives with PI (Olsen, 2018). The
synchronised objectives should include such as the growth of market share and continuous
customer satisfaction. SFL and PI could work together to achieve the objectives and avoid
making decisions that could cause failure. For example, PI requires SFL Company to satisfy
orders before meeting other customer demands. However, with the synchronisation of the
objectives, PI could allow SFL to deliver products depending on the available capacity (Juneja,
2018). Therefore, SFL will have the ability to deliver to other customers without frustrating other
small buyers of the products. Additionally, with the synchronisation of the goals, SFL will have
the chance to negotiate with PI on the terms of credit and discount on products. The companies
will have the chance to negotiate and come up with price and credit terms that do not result in
losses.
The signing of performance contracts
On the other hand, the companies should sign performance contracts that has details about the
terms of the relationship (Rebecca, 2018). The companies should ensure that the contract have all
the requirements of the relationship to reduce unfair practices. The contract should detail issues
such as the duties and responsibilities of the client relationship manager. Additionally, the
contract should set the means of communication and the means of handling sensitive issues such
as meeting urgent demand at the expense of other customers. The contract should also give
details on the terms of credit and prices of the product and the procedures to revise the terms.
Therefore, the contract will allow the companies to have a long term relationship with means of
settling disagreements and negotiating better terms (Olsen, 2018).

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Conclusion
SFL should consider giving PI better terms of business due to the high amount of revenue and
sales units generated by the relationship. The various methods to use when creating a better
relationship includes such as giving PI better terms of credit and discount for the products. The
reduced prices and better credit terms will prevent PI from seeking other suppliers of organic
skin care. However, SFL should consider developing terms that do not result in losses and
overstretching of the available resources. SFL should engage PI in a collective bargain
agreement to come up with terms that do not lead to straining and conflict with other buyers.
Furthermore, Sophie should consider acting in a manner that benefits both PI and SFL. Sophie
should avoid making decisions that cause SFL not to deliver products to other customers. For
example, Sophie should avoid making orders to the operations department to meet PI demands
before satisfying other customers. Sophie should understand that such decisions result in
frustration to the customers and a shortage of the products in the market. The client manager
should also avoid making decisions such as giving large discounts and long credit periods to PI
due to the possibility of losses and reduction in the working capital. Furthermore, the companies
should avoid making oppressive decisions to enable the mutual achievement of objectives such
as increasing the market share, increasing the quality of products and generating revenues.

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Bibliography
Boag, P., 2018. Customer Journey Mapping: Everything You Need to Know. [Online]
Available at: https:www.sailthru.com
[Accessed 14 May 2018].
Juneja, 2018. Management Study Guide. [Online]
Available at: https://www.managementstudyguide.com
Olsen, E., 2018. Strategic Implementation. [Online]
Available at: https://www.onstrategyhq.com
Perks, R., 2017. Quality Control Systems and Customer Satisfaction. [Online]
Available at: acdemic.mintel.com
[Accessed 21 April 2018].
Rebecca, 2018. Extending CSR in SME's Upstream Supply Chains: A Dynamic Capabilities
Perspective. Taylor and Francis Journal, 24(10).
Suzanne de Treville, 2018. Journal of Operations Management. Elsevier, 61(1).

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