Detailed Risk Analysis and Recommendations: Vodafone in Morocco

This report analyzes the risk management aspects of Vodafone's planned expansion into the Moroccan market. It begins with an introduction to the need for effective risk management in business, highlighting the various types of risks and the importance of strategic planning. The report details Vodafone's current business operations, financial performance, and geographical presence, specifically focusing on the company's interest in expanding into Morocco. It examines the economic, political, and financial conditions of Morocco, including factors such as government structure, corruption, tax rates, GDP, and economic growth. The report then applies scenario analysis techniques to assess the potential risks and rewards of Vodafone's market entry, considering factors such as competition, technology, literacy rates, and topography. Finally, the report provides recommendations, suggesting that the risks associated with entering the Moroccan market outweigh the potential rewards due to high corruption levels and other unfavorable factors. The analysis suggests that Vodafone should consider alternative markets.

RISK MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
A) Geographical areas selection. ...........................................................................................1
B) Details about economic, financial and political information and Scenario analysis
technique ................................................................................................................................2
C) The risk and reward of entering the selected new market based......................................6
D) Recommendations and Justification..................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

Illustration Index
Illustration 1: Logo of Vodafone ....................................................................................................2
Illustration 2: Stages of Scenario Analysis......................................................................................5

INTRODUCTION
For running an organization successfully there is a need of well-managed business and
effective risk management. If they are unable to manage these two things then there business will
surely get benefited. There are many types of risk in business which a management and their
organisational members need to consider (Embrechts and Hofert, 2014). Environmental,
financial, insurance, stakeholders, technology and many more where risk management is
necessary. Further, they are separate components and all are required to be manage
independently. It is a way by which planning, directing and controlling are done in firms so that
activities and resources can be effectively utilized. Along with this, it should be cost effective as
well as must increase the shareholder's value. It is also required for the protection and growth of
organisation assets value. Business and country-risk both are comparable to each other, as they
both define future capacity of generating revenue from the available resources.
Following report contains the details about the UK multinational telecommunication
industry, Vodafone. They are planning to expand their business in North African market. Before
making the investment, they want to analyse all potential risk, so as to make and implement
strategies to reduce the same. For this purpose, risk management has been done by considering
the economic, political and social information. Besides this, risk and rewards of the new market
is identified and at last recommendations, and justification are provided for appropriate entry for
the organisation.
A) Geographical areas selection.
Vodafone is an International telecommunication company which was founded in UK in
the year 1984. There are many services provided by the company in that sectors such as data
solution, services and roaming, mobile internet, voice and message services and business
services. Moreover, it provides branded products, business and personal solutions. In the year
2017, the firm has collected more than £47.631 billion of revenue and profit of more than £6.25
billion. There are more than 533M customers of the company internationally and more than 20M
in UK. The firm has planned to expand to new areas in North Africa and they have chosen
Morocco for the business-expansion. In terms of geographical areas, it is connected to
Mediterranean Sea to Atlantic Oceans. To its south is desert and has many mountains. They have
total areas of 446,550 km². They have two different types of climate in north-west and south-
east. Major population lives in north-west and has temperate and akin climate (Akkizidis and
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Stagars, 2015). It has mild winters and hot summers. This area has more mountains and plateau
region. Most of the land is used for pastures and has major hazard from the earthquakes and
geologically unstable. According to the environmental condition it has various Eco-regions and
major issues are faced on climate change and land degradation. There are more than 33.4 M
people living in that areas and the country is having high density in terms of population. They
have very rich culture and very adequate temperature. Morocco has very less number of
telecommunication companies. There are 4 major companies which are Maroc-Telecom, Inwi,
Medi-Telecom and Office-National-des-Postes-et Telecom. Maroc telecommunication is having
major market shares and more customers. It has revenue collection of £1618B.
B) Details about economic, financial and political information and Scenario analysis technique
Country risk is based on the environmental impact on the country in their cash-flow of
the firm. There are majorly four factors which can be risk prone, they are economic, financial,
political condition and some subjective areas.
Political Aspects: The country is having constitutional monarchy as well as elected members of
parliament. Here major power is divided among the prime minister and King Mohammed VI.
Corruption is major problem there and those who opposes the government laws are punished by
2
Illustration 1: Logo of Vodafone
Sources: Vodafone, 2017

the Courts. Government integrity is very low. There are certain changes which can be
overviewed in registration of the new firms there. However, there is problem regarding the
labour market rigidity. Government has provided subsidies in many areas. Major freedom is
provided through the trade in Morocco's. There is very low applied tariff rate. Foreign and
domestic firms are considered equally. Huge competition can be seen in the financial sector.
Further, there is increase in the modernization and transparency in the business organizations
(Kresak, Corvington and Williamson, 2016).
Financial Aspects: The cited country has corporate-tax of 30% income-tax rate of 38%. Other
than this, there is VAT (value added tax). For the individual, the overall-tax burden is 22%.
Government spending is 69.4% as well as public debt is similar to 63.7 % of the Gross Domestic
Income. There are very high laws which must be followed by every industry expanding there.
They have very low rates of land registration and titling. The country currency has Moroccan
Dirham where £1GBP is equals MAD .د م12.44 . Major population is 33.5M, GDP growth is
4.5% and rate is $273.5 billion. They have 4.0% growth rate and per capita income of $8,164 per
capita. They have high unemployment rate of 9.6% and inflation rate 1.6% (2017 Index of
Economic Freedom, 2017).
Economic Aspects: There are very least condition of wars and they have very low currency rate
in terms of dollar. Major decisions are taken by the Government but the King's decisions is also
considered. They promote the foreign exchange and trade business. Major policies developed
there promote the business-activities. However, due to inflexible labour laws there is moderately
high unemployment rate. The rules and regulation are majorly based on the Government laws
which makes the overall progress and makes private sector stronger. They have very medium
progress rate. For the private sectors, economic reforms help to expand their business.
Analysis based on scenario analysis: It is business-activity track which is used to manage the
potential risk and track the record. Construction and decisions-making are the main part of it. At
the beginning, decisions or issues are mentioned (McHenry, 2013). Secondly, driving forces are
identified which is followed by scenario plot. At the forth position comes, flesh out scenarios
which includes the outcomes based on decision-making process. Then implication are studied
and monitoring the external environment is done. At last, relationship between the organisation
and customers are studied and finally the outcomes are implemented in daily procedures.
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According to the above data, government actions will least affect the company if they
follow the laws there. Confiscation and Expropriation are not seen in the country. There is great
stability in the country's political system. Further, they have ally with US so there is no risk of
investor's. Moreover, there will be no impact on any operational activities. There is very slow
flow of money. The consumers living there are having very polite behaviour and they are loyal
to their companies. Along with this, there are some factors which create impact on company
from the Host government (Dunis and et.al., 2016). The country is having high trade business-
activities which means there is high import and export. This means that there will be no fund
transfer blockage. UK is having more currency value so the exchange of money can be easily
maintained. As stated above there are no war like situations from the external and internal
factors. Most of people living there are engaged in the local activities. Furthermore, there are
very less technological advancement in the country which is greatly required for the
development. There is stability in the business as they have high GDP and per capita income.
However, there is high risk for the Vodafone as the corruption level is too high which will
increase the cost of conducting business and will also impact the revenue collection.
The country is having flexible economic and financial condition, there are various
business opportunities available for foreign companies. There is no additional restrictions from
the host government (Patil and Wongsurawat, 2015). Further, fund transfer and currency
exchange are efficacious. There is very low inflation rate and has high exchange rate. As there is
low recession so demand will be always high. Government is promoting the foreign trade and
business. Other than this, the economic growth indicators are also promoting for higher business.
However, there is very low literacy rate and health rate found which can affect the business.
There are least policies which affect the business and its development in the country by the
government.
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From the above all the details Scenario process can be developed which is mentioned
below:
Step 1: Vodafone is expanding its new business into new areas which is Morocco in North
Africa. Economical and financial details are favourable for the company but there will be high
impact on the firm from the political aspect. There is high level of corruption in the country and
decision-making can be based on Government and King. Other than this, there is very low
literacy and education rate which can affect the operational activities.
Step 2: There is high predictability in terms of the economic and financial areas but great
importance must be given to the governance as corruption will affect the business-operation at
every point (Asbury and Jacobs, 2014). There is also high unemployment rate and no labour
regulations which can affect the business.
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Illustration 2: Stages of Scenario Analysis
Sources: Sallah, 2013

Step 3: Literacy rate, labour regulation and corruption are the main factors which are affecting
the business. If strategies can be made based on the above factors then the business expansion
will be profitable. GDP, Trade business, exchange rate and all other financial and economic
factors are supporting the firm's development.
Step 4: The firm must not be established there as there are certain other disadvantages which will
be suffered by the company. This can be seen as there is very low literacy rate so employees will
be required from other areas, it has hilly areas so establishment of towers and their maintenance
will be expensive. Corruption is also high and every stage this will affect the growth of company.
Though, there is high GDP and per capita income but all other factors are mostly required.
Adopting corruption will affect the policy and business-values of firm.
Step 5: Through the above decision-making and strategic planning it can suggested that
expanding business there will be huge loss to company in terms of value and investment.
Step 6: Relationship with the Government and King can help but they may require the shares in
the firm. There are very least indicators which help the organization to establish there (Rogel-
Salazar and Tella, 2015).
Step 7: Implementing the organisation in Morocco will be loss to the organisation.
Step 8: If they planned to implement their, they will have high expense which will affect the
business. Moreover, they have to face high competition from the established companies existing
their.
C) The risk and reward of entering the selected new market based
According to Epstein and Buhovac (2014), there are very level of risk in the investment
for the company. Moreover, there will be high competition faced by the firm from existing
companies. Along with this, organisation will be affected in terms of technology, literacy rate
and topography. They will be high corruption at every level of organisation. There are very least
rewards which company will gain. Due to competition also they have to reduce the prices which
will impact the company (Embrechts and Hofert, 2014). There are very less areas where business
profit and expansion can be overviewed. If the firm is ready to spend more money then they must
make the investment.
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D) Recommendations and Justification
From the above risk management it can be recommended that there are very high risk
factors in expanding the business in the cited country. The firm must locate some other areas for
the expansion. The reason due to which business must not be expanded their are mentioned
below:
1. High level of corruption which will affect business in reform.
2. Very low literacy rate for which employees from other countries are required for
working, it will be costly for the firm.
3. Topography is uneven and there are low technologies used (Chang, 2013).
4. There is very considerable rate of unemployment and no labour structure.
Due to these reason business-expansion in that area must be prevented. There are other
areas like Egypt where business expansion can be planned as these factors are very less there.
CONCLUSION
The above report is about risk management for Vodafone group. Using the Scenario
analysis technique they have decided to identify new areas of doing the business. The cited
report has different factors which are required during the time of business expansion. It consist of
risk and rewards for the expansion and at last recommendation and justification for the same are
provided. Through the above risk management, Vodafone can save lot of investment and time.
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REFERENCES
Books and Journals
Akkizidis, I. and Stagars, M., 2015. Marketplace lending, Financial Analysis, and the Future of
credit: Integration, Profitability, and risk management. John Wiley & Sons.
Asbury, S. and Jacobs, E., 2014. Dynamic risk assessment: The practical guide to making risk-
based decisions with the 3-level risk management model. Routledge.
Chang, V., 2013. Business integration as a service: computational risk analysis for small and
medium enterprises adopting SAP. International Journal of Next-Generation Computing.
4(3).
Dunis, C. L. and et.al., 2016. Artificial Intelligence in Financial Markets: Cutting Edge
Applications for Risk Management, Portfolio Optimization and Economics. Springer.
Embrechts, P. and Hofert, M., 2014. Statistics and quantitative risk management for banking and
insurance. Annual Review of Statistics and Its Application. 1. pp.493-514.
Epstein, M. J. and Buhovac, A. R., 2014. Making sustainability work: Best practices in
managing and measuring corporate social, environmental, and economic impacts.
Berrett-Koehler Publishers.
Kresak, M., Corvington, L. and Williamson, P., 2016. Vodafone answers Call to Transformation.
Business Transformation Essentials: Case Studies and Articles. p.127.
McHenry, M. P., 2013. Technical and governance considerations for advanced metering
infrastructure/smart meters: Technology, security, uncertainty, costs, benefits, and risks.
Energy Policy. 59. pp.834-842.
Patil, S. and Wongsurawat, W., 2015. Information technology (IT) outsourcing by business
process outsourcing/information technology enabled services (BPO/ITES) firms in India:
A strategic gamble. Journal of Enterprise Information Management. 28(1). pp.60-76.
Rogel-Salazar, J. and Tella, R., 2015. Portfolio construction based on implied correlation
information and value at risk. EconoQuantum. 12(1).
Online
Vodafone, 2017. [Online]. Available through:
<https://www.vodafone.ua/en/personal/roaming/contract-roaming/roaming-home>.
[Accessed on 31st July 2017].
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Sallah, S., 2013. [Online]. Estimating Risk: the importance of Scenario Analysis. Available
through:<http://www.lumina.com/blog/estimating-risk-the-importance-of-scenario-
analysis>. [Accessed on 31st July 2017].
2017 Index of Economic Freedom, 2017. [Online]. Available through:
<http://www.heritage.org/index/country/morocco>. [Accessed on 31st July 2017].
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