Risk Management: Strategies to Manage Production, Marketing, Financial, and Distribution Risks

This article from Desklib provides a comprehensive guide on risk management strategies for production, marketing, financial, and distribution risks. It covers various approaches to manage risks, such as crop insurance, marketing cooperatives, direct marketing, and whole-farm revenue protection. The article also discusses risks that may occur in the manufacturer, distribution, and restaurant steps, such as natural disasters, transportation costs, food poisoning, and theft. Additionally, it explains the difference between simple and compound interest and the five steps of managing risk. The article cites various sources, including books and journals, to support its content.

Running head: RISK MANAGEMENT
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RISK MANAGEMENT 2
Risk management
Question 1
A pure risk is an event that offer no opportunity for financial gain (A)
Question 2
All the following are direct losses except: an apartment must be rented after a house is destroyed
by fire (C)
Question 3
All the following are direct losses except: a store loses $200,000 in sales because a fire closes it
down for two weeks (B)
Question 4
Which of the following is not an example of catastrophic loss event? Death of Michael Jackson
(B)
Question 5
Which of the following is not a method of protection of risk? Humanitarian aid (D)
Question 6
Which one of the following is not a hazard? Getting shot accidentally while deer hunting (D)

RISK MANAGEMENT 3
Question 2
The risk that can affect the growers include (Lam 2014):
Production risk: risk linked to probability that the harvest or production levels will
be lesser than expected. Chief causes of production risk rise from hostile conditions such as
drought, freeze, or extreme rainfall at harvest or planting. It may also outcome from destruction
due to pest, diseases and insects.
Approaches to manage production risk include:
i. Follow suggested growing practices
ii. Expand business by planting different crop selections and complete new crops.
iii. Increase harvest through more rigorous growing practices or by planting more land.
iv. Consider location choice, use land less vulnerable to disease or pests and rotate crops.
v. Purchase crop insurance cover to stabilize income during times of loss.
Marketing risks: risk linked to the likelihood that the growers will lose the market
for their products or price received will be less than expected. Lower sales and price due to
increase number of competition or manufacturer relocating or closing.
Approaches to manage marketing risk include (Aven 2018):
i. Develop a marketing strategy with genuine sales prediction and target values.
ii. Join a marketing cooperative to boost prices and assurance a market.
iii. Enter into sales or price contracts with buyers.
iv. Upsurge direct marketing efforts to capture a higher price.
v. Market via numerous channels to decrease dependence on a sole market.

RISK MANAGEMENT 4
Financial risks: risks linked to not having adequate cash to meet estimated duties
and losing equity of the farm. It can be caused by greater than before input costs, greater interest
rates and extreme borrowing.
Strategies to manage financial risks
i. Control main farm expenses, consider other suppliers and alternative inputs
ii. Purchase whole-farm Revenue Protection to offer a safety net in poor harvesting years.
iii. Communicate and renegotiate agreements suppliers and loan terms with lenders.
Risk that may occur in manufacturer step in the supply chain include:
Main person dependence risk: The risk of losing experience employees.
Risk management: have a plan entails guaranteeing that the target main personnel are motivated
to continue running the company. To attract and retain basic employees, ensure manners
continuous capability improvement and special management development plans.
Funding risk: risk related to capital requirement which may be impeded or become more
costly.
Risk management: funding risk can be alleviated by certifying that the company has a maturity
structure that makes conditions to take essential other activities to raise capital (Chance 2015).
Competition from low-cost supplier’s risk: this risk can be seen in many manufactures
Risk management: To counter the effects of this competition, manufactures can offer services
and products with a high- tech content, a high level of services and quality products. In addition
manufactures can try to establish close partnership with customers by becoming involved early
in development and planning plan of the restaurant.

RISK MANAGEMENT 5
Risks that may occur in distribution step include:
Natural disaster: risk related with destruction of goods from supplier to the
restaurants. This can be caused by excessive rainfall or excessive sunlight. This can be managed
by searching for suitable transport system to transport the products. Another management is
purchasing an insurance cover (Lam 2014).
Transportation cost risk: risk related to the cost of transportation exceeding the
return of the supplied products it can also be due to accident. To manage this risk one is required
to look for a suitable transportation means. It should be too costly but it should be efficient. In
addition purchasing an insurance cover in case of accident is also important.
Distributor corruption risk: the risk is related with the distributor being corrupt
and selling the products before the initial restaurant receiver. To manage this put a record of all
goods to be supplied and confirm after it has being delivered with the restaurant authorized
personnel or owner.
Risk that may occur in restaurant:
Food poisoning risks: to prevent the risk of food poisoning ensure that staffs
have sufficient training in health safety, food handling and sanitation. A certain all foods are
thrown away when required and also get insurance to cover food testing and public relation in
the occasion of crisis (Bromiley 2015).
Fires risk: to prevent or minimize the risk of fire consider installing an automatic
fire suppression system in the kitchen. Make sure employees are trained to handle an emergency
situation, including evaluation procedures and also clean and degrease fryers regularly and have
them inspected by a professional.

RISK MANAGEMENT 6
Slip, trips and falls risks: to prevent these type of accidents restaurant should
keep floors dry and clean. Clean any spills instantly. When cleaning use non-skid wax. Make
sure light is sufficient particularly around stairs or entry ways.
Customer risk
Cut risk: this may occur due to mishandling of utensils. To prevent the staffs should be properly
trained for equipment handling, safety procedure and customer services.
Food poisoning: this can be caused by improperly washed fruits, vegetables and uncooked food.
To prevent this make sure the staffs have good hygiene and stress on employee’s preparation
practices, storage and handling (Bromiley 2015).
Theft: to prevent this consider adding video surveillance around the entry way, cash registration
and parking areas. Purchase an insurance policy with crime coverage just in case, so that you
have help with financial influences after something does occur.
Question3
I will advise the client to choose project Y because even though its initial investment requires a
lot of capital the returns increase at a higher rate. The return on the investment is also 12% as
compared to project X which has a return on investment which is10%. The returns on year one is
$4000 and continue to increase by $2000 yearly as compared to project X which has $ 5000
returns in year one but the returns increase yearly by $1000. Investment in project Y will be
expected to yield more profit than project X.

RISK MANAGEMENT 7
Question 4
Simple interest is the sum of interest received on the original amount of money invested. Simple
interest is paid as it is made and does not turn into part of account interest bearing balance. While
compound interest is interest paid on interest (Keynes 2016). When it comes to investing,
compound interest is better since it permits funds to grow at a quicker rate than they would in
simple interest rate account. Compound interest is applicable when calculating annual percentage
yield.
The five steps of managing risk include (Elder 2018)
Step 1: Identify the Risk- identify and define the risk that might affect a project or its
consequences. Prepare project risk register.
Step 2: Analyze the risk- define the possibility and result of every risk. Develop a sympathetic of
the nature of the risk and result of each risk.
Step 3: Evaluate the risk- Assess or rank the risk by determining the risk greatness, which is the
mixture of possibility and result. Make the assessment whether the risk is acceptable or whether
it is serious enough to warrant treatment.
Step 4: Treat the risk- Evaluate the uppermost risks and set out strategy to treat or amend these
risks to attain acceptable risk levels. How to lessen the likelihood of negative risks as well as
enhancing the opportunities.
Step 5: Monitor and review the risk- This is where you take the Project Risk Register and use it
to review, monitor and track risks.

RISK MANAGEMENT 8
Market risk is the risk that the value of an investor will decline due to the alterations in
market dynamics. These aspects will have an influence on the general performance on the
financial markets and can only be eliminated by diversification into assets that are not connected
with the market. This risks include currency risk inflation risk and commodity risk, while
liquidity risk is the risk that a bank company may be unable to meet short term financial demand.
It typically arise due to the incapability to convert a security assets to cash devoid of loss of
capital in the process (Aven 2018). For example Bank Deposit, if all clients were to withdraw
their deposit all at once. If economic circumstances source a big number of extractions, banks
may need huge amount of cash in short period of time.

RISK MANAGEMENT 9
Reference
Aven, T., & Zio, E. (2018). Knowledge in Risk Assessment and Management. John Wiley
&sons.
Bromiley, Philip, Michael McShane, M., Nair, A., & Rustambekov, E. (2015). Enterprise risk
management: review, critique, and research directions. Long range Planning, 48(4), 265-276.
Chance, D.M., & Brooks, R. (2015). Introduction to derivatives and risk management. Cengage
Learning.
Elder, D., & Teasdale, A. (2018). ICH Q9 Quality Risk Management. ICH Quality Guidelines:
An implementation Guide, 579-610.
Keynes, J. M. (2016). General theory of employment, interest and money. Atlantic publishers &
Dist.
Lam, J. (2014). Enterprise risk management: from incentives to controls. John Wiley &sons.