BN4206 Risk Management Report: Prostay Ltd. Expansion Project

This report presents a comprehensive risk management analysis for Prostay Ltd., focusing on a proposed factory extension and expansion. It begins with a needs verification, identifying key requirements such as minimizing asset losses from natural disasters, mitigating work health and safety risks, addressing community and market risks, and minimizing legal risks. The report then details a quantitative risk assessment using a risk register, categorizing risks like market volatility, WHS concerns, cyber threats, natural disasters, legislative changes, economic instability, and technological obsolescence. Finally, the report outlines a disaster recovery plan addressing environmental hazards (flooding and storms) and technological hazards (machine breakdowns and cyber risks), offering specific contingency plans and disaster response strategies to minimize potential impacts on Prostay Ltd.'s operations.

Running head: RISK MANAGEMENT
Risk Management
Name of the Student:
Name of the University:
Author Note:

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RISK MANAGEMENT
Part 1. Prepare a Need Verification for the proposed extension and expansion at your
current site.
Answer:
An analysis of the needs of company mentioned in the case study namely,’ Prostay
Ltd.’ uncovers that it should extend its manufacturing facilities as per the proposal of the
investors. The analysis brings in the light several needs of the company which have to be
considered pertaining to its future expansion needs. The following are the needs of the company
to expand its manufacturing site:
Need 1. Prevent (minimise) losses of assets owing to natural calamities:
The first need of the company is to ensure that its future factory is safe from floods. The
case study mentions that factory site of the company suffered a huge damage owing to the
flooding of the river. The flooding resulted in explosion in factory and release of gases. This
means that the company suffered loss of the tank or the storage which was damaged in the
explosion. This means that the company suffered loss of fixed assets (Sadgrove 2016). It is
clear from the analysis that the explosion also resulted in the losses of the gas which could be
used for manufacturing purposes. This means that the company lost current assets due to the
explosion. The company is required to acquire a new factory to ensure that it does not suffer
losses in the future. Thus, it can be verified that the first need of the company is to minimise the
losses of assets due to natural calamities to the extent possible (Olson and Wu 2015).
Need 2. Prevent or minimise work health and safety risks:
The second risk which Prostay Ltd needs to mitigate or at least minimise would be
safety risks to the workers. The case study mentions clearly that the factory suffered losses due

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to explosion of toxic gases owing to the flood. The case study does not mention involvement of
any employee in the explosion. It also remains silent about injury or death of any employee due
to the explosion. However, it cannot be denied that future explosions may involve injury and/or
death of employees. Thus, it can be verified on this ground that the company should expand its
manufacturing to a new site in order to prevent or at least minimise loss of manpower
(Kouabenan, Ngueutsa and Mbaye 2015).
Need 3. Community risks or social risks:
Prostay Ltd should take into account the third need to expand its manufacturing facility
to a new location which is minimising community risks. The case study clearly points out that
the explosion in the factory not only damaged the assets of the company but also effected the
health of the local communities. This means that the company should expand its factory to a site
which would be located far away from local communities. This would to a great extent that
incidents like fire and explosions do not impact local communities largely. Thus, the company
should shift its factory to a new location (Blodgett 2015).
Need 4. Minimising of market risks:
Prostay Ltd should shift its factory location to a new site to minimise the market risks it
would suffer due to the explosion. The case study mentions that the factory site suffered
explosion which is a huge loss due to flood. The case study however does not mention any loss
of human beings. Thus, it can be established on this ground that no labour was working in the
factory owing to the flooding. This absence of employee and stalling of work actually resulted in
no loss of human resources. The matter can also be interpreted as, the stalling of factory
operations due to the flood succeeded in mitigation WHS risks but not market risks The
company was not able to produce goods which means its revenue generation was hampered. This

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means it suffered revenue risks. The case study mentions that the company has received an
immense order from the European Union. This means that Prostay Ltd required to maximise
production of finished goods in order to cater to the increasing demand in the EU market. It can
also be pointed out that stalling of productivity in the present factory site owing to flood has
already caused loss of productivity and consequent revenue losses. This means that
establishment of the manufacturing plant at a new location would ensure that the company is
able to produce finished goods smoothly. This would enable the company to meet the increased
demands in the EU. It can also be pointed out that on the other hand if the company fails to meet
the increasing demands in the EU, it would lose its customers to its competitors. It can be
pointed out that shifting the factory in the new location would enable Prostay Ltd to minimise
revenue risks.
Need 5. Minimising of legal risks:
The fifth need of Prostay Ltd to expand its manufacturing facilities to a new location
which transpires from the case study is minimising legal risks. The case study already mentions
that the company received litigations from the local communities owing to the damage the latter
suffered due to the spread of poisonous gases post explosion. This means that expansion of
factory site would enable Prostay Ltd to minimise the damage which would be caused in events
of accidents in the future. It can also be interpreted that by expanding its manufacturing site to a
new location, the company would be able to minimise litigations from the local communities and
related legal risks.

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Part 2. Assuming the board of directors of your company have approved the proposed
extension and expansion project, identify the possible risks which can affect the project and
prepare a quantitative assessment of the risks using an appropriate risk register:
Risks at Prostay Ltd
Ris
k
no
Documen
t control
informati
on
Risk
identifie
r
Risk
Category
Risk
Descripti
on
Impact of
the risks
Risk
respons
e
categor
y
Owner
of risk
Precautiona
ry
recommenda
tions
Owner of
Risk
response
action
1
Profit and
Loss
statement,
balance
sheets
Falling
profits in
spite of
strong
marketin
g
strategies
Market
risks
1. Market
risks can
originate
due to
introducti
on of new
products
by
existing
competito
rs and/or
entry of
new firms
with
similar
products.
2. Loss of
producivi
ty due to
explosion
1. Fall in
revenue and
losing of
consumers.
(short term
impact)
2. Losing
investors,
and supply
chains due
to falling
capacity to
give
positive
ROI.
(medium
term)
3. Goodwill
risk and
losing of
global
market
position
(long term
loss)
4. Reduced
productivity
due to
increasing
accidents
and loss of
resources
Strategic
decision
s,
marketin
g
strategie
s
Finance
departme
nt,
Marketin
g
departme
nt, Risk
manager,
Engineer
1. Formation
of a strong
risk
management
strategy.
2.Use of
moern risk
management
systems
3.Strengtheni
ng marketing
of products,
introducing
new and
innovative
products with
less
competitors
Marketing
departme
nt
2 Risk
register
Employe
es,
customer
s or any
other
stakehold
er
Vary
WHS
risks to
employee
s due to
collision
with
objects
etc
Loss of
productivity
, actions
from Safe
Work
High to
very
high
Manage
ment
Safety
training of
employees
Managem
ent and
the
concerned
departme
ntal heads
3
Unjustifie
d loss of
capital,
Unjsutifie
Employe
es,
customer
s or any
Cyber
theft risks
1.Cyber
attack
would
cause loss
1. Loss of
sensetive
business
data.
High
Apex
manage
ment and
all the
1. Tightening
of security.
2. Allocating
new email ids
Apex
managem
ent and all
the

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d loss of
data,
Unexplain
able alter
of
informatio
n
other
stakehold
er
of ICT
data and
designs
which
would
attract
huge
security
risks
towrads
the
company.
2. Cyber
attacks
lead to
loss of
customer
and
financial
data of
extreme
business
significan
ce. Loss
of
customer
data and
financial
resources
online
lead to
R1
2. Loss of
financial
resources.
3.
Unauthorise
d access to
the
business
strategy
information
of the
company.
4. R1
departme
ntal
heads
and
passwords to
each
employees.
3. Mandating
subordinates
to obtain
approval of
superiors to
accede to
specific
information.
4. Making it
compulsory
for all
employees to
exchange
official
information
exclusively
on the
formally laid
path of
information
sharing.
5. Employees
holding
assistant
managers and
beyond
should lock
their systems
using a four
layer
password
security.
departme
ntal heads
4
Cannot be
document
ed
Employe
es,
customer
s or any
other
stakehold
er
Natural
disasters
Natural
disasters
like
floods
result in
explosion
s as
mentione
d in the
case
study
Depends on
the
seriousness
and
intensity of
the
calamities
Immedia
te
Governm
ent,
security
personne
l etc
Evacuation
Governm
ent,
security
personnel
etc
5 Governme
nt and
legal
websites
Apex
managem
ent
Change in
legislation
s
pertaining
to retail
sector
Change
in laws
require
companei
s to
comply
with the
new laws.
1. Damage
to existing
housing
stock
2.
Unproducti
ve
maintenanc
e costs
3.Requires
W adapt the
relevant
areas of
operations
as per the
Immedia
te
Apex
manage
ment and
all the
departme
ntal
heads
Compliance,
OHS
strategies
Governm
ents

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laws
6 Financial
statements
Apex
managem
ent,
finance
departme
nt, CFO
Economic
risks
1.
Increase
in cost of
materials,
cost of
labour
etc.
2.
Scarcity
of funds
due ti
withdraw
al of
financial
support
either by
governme
nt or
companie
s funding
the
project.
Requires
construction
to adapt the
relevant
areas of
operations
as per the
laws
Immedia
te or
within
the date
of
enforce
ment
specified
specified
Apex
manage
ment and
all the
departme
ntal
heads
Formation of
strategies
Apex
managem
ent and
finance
departme
nt
7 Risk
register
Apex
managem
ent,
security
officer
and any
other
employee
Fire,
exlosions
Loss of
materials
, loss of
equipme
nt,
injury of
employee
s, loss of
producti
vity,
casualty
in case of
large
scale
explosion
s in the
case
study
Prostay
Ltd loses
productivity
,
employees,
resources
Immedia
te or
within
the date
of
enforce
ment
specified
specified
Apex
manage
ment and
all the
departme
ntal
heads
Risk
management
strategies
Apex
managem
ent and
finance
departme
nt
8 Financial
statements
Apex
managem
ent and
top
managers
including
CFO
Goodwill
risks
The
company
may
loose
trust of
stakehold
ers
Prostay
Ltd loses
productivity
,
employees,
suppliers,
patents and
assets
Immedia
te
Apex
manage
ment and
all the
departme
ntal
heads
Risk
management
strategies
Apex
managem
ent and
finance
departme
nt
9 Financial
statements
Apex
managem
ent and
top
managers
including
CFO
Capital
risks
Weakeni
ng of
capital
base due
to lower
generatio
n of
capital
Prostay
Ltd lose
productivity
,
employees,
suppliers,
patents and
assets
Immedia
te
Apex
manage
ment and
all the
departme
ntal
heads
Strengthenin
g marketing
of products,
introducing
new and
innovative
products with
less
competitors
to boost
revenue
generation
and
Apex
managem
ent and
finance
departme
nt

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strengthen
goodwill
10 Financial
statements
Apex
managem
ent and
top
managers
including
CFO,
R&D
head
Technolo
gical risks
1.
Modern
technolog
y leaves
perevious
technolog
y
versions
redundant
.
Requires
Prostay
Ltd to
carry on
continuous
research on
product
technology,
operation,
ecommerce
technology
etc
Immedia
te
Apex
manage
ment and
all the
departme
ntal
heads
Requires
Prostay Ltd
to carry on
continuous
research on
product
technology,
operation,
ecommerce
technology
etc
Technolo
gcial
officer
11 Litigation
s
Apex
managem
ent
Legal
risks
Prostay
Ltd
receives
litigations
from
local
communi
ties
owing to
damage
caused to
them due
to
escalation
s
Increased
legal risks
and
associated
costs
Immedia
te
Apex
manage
ment and
all the
departme
ntal
heads
Requires
Prostay Ltd
to ensure
that the
manufacturi
ng activities
and
accidents
like
explosions
do not
hamper the
communities
Apex
managem
ent
Part 3. Prepare a disaster recovery plan against some possible hazards to your company’s
operations. The plan must include 2 environmental hazards and 2 technological hazards.
The format of your report should include a profile of the hazards as well as the contingency
plan and the disaster response for each hazard.
The following disaster recovery plan would enable Prostay Ltd to minimize the risks it
would face due to these risks:
SL No Environment hazards management plan: Flooding and storm
1 Recognise the risks by following meteorological information availble on
televison, radio and digital platform
2 Shift capital like machine and raw materials to safer place upon any such
prediction
3 Provide safety kits to employees
4 Evacuate the location concerned as and when directed by the local authorities
5 For further actions go as per the government instructions

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SL No Technological risks management plan: Machine breakdown and cyber risks
1 Identify risks mentioned
2 Hold meeting with the departments and form strategies
3 Training of employees
4 Implementation of the risk management strategies
5 Monitoring and further action

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References:
Blodgett, C., 2015. No school alone: How community risks and assets contribute to school and
youth success. Washington State Office of Financial Management.
Kouabenan, D.R., Ngueutsa, R. and Mbaye, S., 2015. Safety climate, perceived risk, and
involvement in safety management. Safety Science, 77, pp.72-79.
Olson, D.L. and Wu, D.D., 2015. Enterprise risk management (Vol. 3). World Scientific
Publishing Company.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.