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Potential Risk and Risk Management Strategies Case Study

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Updated: Nov 23rd, 2019

German Market Risk Assessment

Risk management elements are risk assessment and risk mitigation. Risk assessment allows the business management team to evaluate the likely risks as well as the sources of those risks before venturing into a new market. Thus, this reflective treatise attempts to explicitly review the risks that Mogan Industrial Company will face in the German market and possible mitigations for the identified risks.

German Market Risks

Risks are uncertain happenings which have impact on projects being undertaken. As a result, risk analysis is deployed to assess the degree of risk uncertainty as well as its impact on a project. One of the major approaches applied in project risk analysis is structural risk analysis, which is used to determine some of the problems related to technical implementation. Operational risk is regarded as the main risk in this line of the company’s business.

Structural risks

Introduction of the company in the German market may face challenge of market penetration since the construction industry of Germany is known to operate in a very competitive market. The major competitors that the company will have to deal with include government agencies and well established businesses. Besides, the laws and regulations of running business in Germany are very strict and may be unfavorable to the company.

Operational and Economic Risks

Operational risks involve risks associated with processes, people, and technological elements. The essential political requirements of MICUS towards the entry planning and development phases are those that impact directly on the stability of the German culture.

Notwithstanding, this diversification of the economy has led to the definition of the inter dependence of sectoral components of the economy that translate to the realization of a restricted business operation. As a matter of fact, the cost of running business in Germany is higher than that in America due to taxes (German Construction Industry 2012). This summarized in the table below.

Risk Impact Probability
Economic and Financial Risk High

Operation of business in Germany is very expensive due to the high taxes.

Low

Since the company is reliable, there is an assumption that the company will benefit from economies of scale to reduce the cost of doing business in Germany.

Operational and Technological Risk High

The overruns on cost are likely to create a ripple effect in other company implementation categories such as hiring suitable personnel, marketing, and competition.

Medium

Since the company is tightly controlled, the probability will not be high since the company has a strong establishment in America besides planning to adopt the acquisition strategy to enter the German market.

From the above classification table, probability/impact matrix was developed as indicated in the table below.

Probability

Low Medium High
High Political Risk. Economic and Financial Risk Delay Risk, Safety Risk, Operational Risk Social Risk
Medium
Low Environmental Risk, Legal Risk

Impact
(Source: Self generated)

Explanation of the Project Probability/Impact Matrix

BLUE The risks here are classified as ‘occurred’ and the ideal approach would be avoidance of the risks such as cultural conflict in business.
GREEN The ideal approach would be either risk transfer or mitigation with those in the LP-HI addressed through contingency budgeting. The MP-MI category should be addressed through a critical contingency plan.
ORANGE The risks in these categories should be addressed through simple risk acceptance and dealt with through risk managements approaches as they arise.

Risk Management Strategies

Foresight is very crucial since it gives a company rough perspective and overview of the future concerning the expected and unexpected changes and challenges (Sai-Global 2012).

Therefore, MICUS should carefully examine and evaluate their past and endeavor to adopt relevant skills that will be relevant for future challenges and responsibilities in Germany. In the quest for internalization, MICUS Company should opt for local labor as a strategy and include members of the German company in the management team through training of young and talented managers.

Besides, the company should embrace the need for creation of an integrated structure to absorb company goals and those that favor business in Germany. In turn, this will give the company various meanings with relation to it prospective or viewpoints as German citizens have unique culture (Hull 2011). Besides, this foresight gave the company ability to look forward into the future in an effort to predict and anticipate various developments before they actually take place since some members of the decision making organ will be Germans.

The company should embrace the unique culture of the Germans who are their consumers. In doing this, the company should incorporate distribution agency control by the Germans and customized the products to suit consumers. In effect, the prevailing trends determine an organization’s functions and the context within which it operates (Timans 2006).

Therefore this strategy is very crucial, especially in forecast of future direction as the German, market will be used to customization and introduction of special aspects in the engineering industry. Apparently, the company is in a good position to venture in the German market as indicated in the risk analysis.

References

German Construction Industry. (2012). Construction in Germany: Structural Data on Production and Employment Facts and Figures for 2011. Web.

Hull, J. (2011). Fundamentals of Futures and Options Markets. New Jersey: Pearson.

Sai-Global. (2012). . Web.

Timans, K. (2006). Risk Assessment. New York: John Wiley and Sons.

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