Ppt Slides Chapter Nine

7/31/2019 Ppt Slides Chapter Nine

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Global Risk / Global OpportunityTen Essential Tools for Tracking

Minds, Markets & Money

Shlomo Maital and D.V.R. Seshadri

RISK OPPORTUNITY 1


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What other types of risks should managers track on their radar

screens, besides financial risks inherent in money markets, which

are of course the primary thrust of our book?

Are there some generic tools that can be deployed to

understand these non-economic risks?

Are each of these non-economic risks independent of each

other, or do they operate in tandem?

What are the consequences of not managing these risks?

Are there opportunities embedded in these risks that can be

leveraged?


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Political Risks

Risks in the political environment that may adversely

impact business operations.

Caused by change of government, violent conflicts,

sanctions, unfamiliar governmental systems etc.

Managing Political Risks:

- helps businesses prepare for possible fall-outs of political

risks

- monitoring political risks helps track political developmentsthat portend boom times

Shock and Stability are two components of political risks.


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Examples of Companies Impacted by

Political Risks

Political unrest ousts Tata Nano from West Bengal

Change in the state government derails Enrons Power Project in India

Indias LCA Project, a victim of sanctions

LN Mittal monitored political risks in target countries and emerged as the

Steel Emperor


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Definition:

Political Risk may be defined as the assessment of the impact that

the political environment, events or decisions in a country or, indeed,

a region, may have on the operation of a business, with the

consequence that investors may lose their money or that the

investment may not reach expectations.

Types of political risk:

* Change of government

* Violent conflicts

* Sanctions

* Political Risks to Trade


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Case Study: Tata Motors - Political Unrest Ousts Tata Nanofrom West Bengal


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* May 2006: Tata Motors announces that a new factory will be built in

Singur, West Bengal (one of Indias poorest states), to build the Nano

car.

* Dec. 2006: large-scale protests by farmers and others, which continue

through 2007.

* Political upheavals, heavy monsoon rains force Tata to postponelaunch of the Nano car to Sept. 2008.

* October 2008: Tata announces relocation of its plant to Gujarat,

a state in Western India known to be friendly to industry. The Gujarat

state government offers attractive incentives.

* March 23, 2009: commercial launch of the Nano car.

* 2010: the new plant in Sanand, Gujarat, opens, with an annual

capacity of 350,000 cars.


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Risks Of Terrorism

Acts of terrorism can impact a firms business continuity,

performance, and the way the business is run.

Best Practice Counter Terrorism Management to mitigaterisks of

terrorism.

Terrorism presents new opportunities for some

companies.


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Terrorism

Case studies:

* Mumbai, India: Nov. 26, 2008

* 9/11 Attack on the United States


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Case Study:

India Premier League IPL moves its second season,

in the spring of 2009, to South Africa, owing to

security concerns. The attack in Lahore, Pakistan,on the Sri Lankan cricket team heightened concern.

South Africas economy gains an estimated $2 b. from

59 matches. Indias Board of Control for Cricket lostheavily.


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Toolbox: Tool #9BPCTM Best Practice Counter Terrorism Management* Secure critical infrastructure by creating formidable barriers

around it

* Buttress infrastructure through systems and processes (e.g.tight entry protocols for personnel).

Case study:

Opportunities seized, as U.S. Homeland Security andDefense budgets provide a large new market


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Environmental Risks

Environmental violations by businesses is a grave issue in thelight of global warming and general rise in societal awareness.

Businesses must go beyond pollution control and ensure

pollution prevention.

Develop environmental strategy that focuses on pollutionprevention, product stewardship and clean technologies.

Benefits of adopting strategies that promote sustainability :

- Meeting market expectation - Leveraging competitiveadvantage - Improving market access - Enhancing brandimage - Increasing cost savings - Increasing shareholder value


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Case study:

KIOCL - Kundremukh Iron Ore Company Ltd

ignore environmental damage at your peril!

1915: iron ore deposits discovered in Kundremukh, Western India

1967: National Mineral Development Corp. does survey

1974: mine infrastructure established

1976: KIOCL becomes Asias largest mining and pelletization complex

1983: Karnataka Govt. declares Kundremukh a National Park,

including KIOCLs mining concession

1995: environment protection organizations file a Supreme Court

petition against KIOCL

Dec. 31 2005 Supreme Court declares KIOCL mining must be stopped

by this date

Environmental Risk


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Case study:

SUZLON ENERGY LTD Harnessing the wind

* Established in 1995, now 5th largest wind turbine manufacturer in the

world, annual revenues $850 m.

* Founder Tulsi Tanti, former textile manufacturer sees decline of the

industry, begins to generate its own electricity with windmills.

* Tanti and his brothers launch Suzlon Energy Ltd.

Green business is good business and it is not just about making money.

It is about being responsible. Clean and green power is the best option.


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Case study:

Risk Management at Infosys

* Risks are listed in six broad categories:

- strategy

- industry- counterparty

- resources

- operations

- regulations and compliance

* Risk Management Practices

- risk assessment

- risk measurement & monitoring

- risk reporting

- integration with strategy and business planning

Best Practice in Non-Economic Risk Management

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