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Risk Management Applications Essay


Introduction

Any business or company may develop or plunge depending on certain circumstances. Despite the fact that the primary objective of any business is to prosper, companies or business organizations must be aware of the risk factors associated with their prosperity.

Normally, there is extensive public attention to companies that are rapidly growing, thus risk management is a fundamental aspect in such companies to minimize chances of failure. Globally, green technology companies have continually been in the public limelight for their rapid progress, making substantial impacts both socially and economically (Rugy, 2012).

In special attention to the United States of America, the state has witnessed the emergence of changes in the transportation sector and energy sector. Electric Vehicle (EV) technology, electric auto producers, and coal-fired utility companies have emerged.

However, such companies have risk-associated factors like environmental squalor among other factors. Therefore, this essay seeks to examine social benefits, highest risks of failure, and recommends possible strategies to prevent that failure in Beacon Power Company.

Company description

Beacon Power Corporation is an American company globally renowned for flywheel-based energy storage technology. The company began operating in the year 1997, as a branch of Sat. Con’s Energy Systems Division in Chicago. The company aimed at investing in the energy sector by establishing advanced flywheel-based energy storage system.

In the year 1998, the company became a separate entity and got publication in 2000 (U.S. Department of Energy, 2011). Beacon Power Corporation Company started operating in North America where the first and second flywheel technology systems gained public awareness.

In 2004, the company became interested in developing an energy recycle system that absorbs electricity from the grid when demand is low and releases it when the demand is high. Tremendous efforts in the project became successful and the company demonstrated the system from 2005-2007. Thereafter, in 2012 the Rockland Capital took over the company and renamed it as Beacon Power, LLC.

Beacon Power Company deals with commercial production of electricity using “composite flywheel technology for grid-scale frequency regulation” (U.S. Department of Energy, 2011). The primary business objective of the company is to provide frequency regulation service, through owing, building, or even operating flywheel-based frequency regulation companies on a commercial basis.

The company mainly uses environmentally sound flywheel technology to produce energy that has turned imperative in providing Americans with clean energy solutions (U.S. Department of Energy, 2011). The company has developed exponentially since 1999 and currently is among the leading US energy companies in green technology in providing economically, socially, and environmentally friendly services.

Currently, plans are underway to expand in the business market by inviting co-investors to manage some of the company’s regulation plants. However, recently the company has been in the public realm as being marred with several challenges that serve as risk factors to its failure. The company suffers bankruptcy and in most cases responsible for some social economic and minor environmental effects.

Social benefits of Beacon Power Company

Beacon Power Company has continually proved significant in providing some social benefits to the Americans and some parts of the world as well. The company plays a pivotal role in the socio-economical life of Americans. Due to its rapid growth and development, the company initiates several construction projects of which majority of them last for almost a year or several months.

Therefore, through construction, the company provides a number of direct jobs to the population. Constructors, builders, and engineers acquire employment in the construction site.

On the other hand, the company has some indirect positive economic impacts within the construction area since vendors and other equipment suppliers become beneficiaries from capital orders for construction equipment and support systems (U.S. Department of Energy, 2011).

On completing the construction, several job vacancies emerge ranging from managerial to subordinate jobs. Construction of the company further leads to urbanization of the region, thus calling for other business investors that in turn create job vacancies.

Being an energy provider, Beacon Power Company has extensively invested in production of efficient, reliable, and resilient electric smart grid that ensures a constant supply of power in areas where it is incorporated. The company produces over 20-megawatt as measured in the utility-scale providing energy to on an estimated population of about 5.3 million residing in Chicago County.

According to the U.S. Department of Energy (2011), the smart grid demonstrates regionally unique projects that are technologically fit and capable of providing services at low cost. The projects contain smart grid business models ranging from different scales, which can be readily adapted and replicated around Chicago County.

Beacon Power Company possesses smart grid technologies that have advanced digital technologies that are extremely imperative in planning and operating the electrical power system, which ensures maximum effectiveness of the plan resulting in minimal delays in power supply.

Another social significance of the company is occupational health and safety. Beacon Power Company’s construction and maintenance undertakings are always in accordance to regulations set by the occupational safety and health administration. It ensures that it follows recommended guidelines in the process of handling, maintaining, repairing, and even installing its onsite equipments.

On top of that, the company involves itself in providing formal training to local police and firefighters in handling emergency issues by helping them in understanding the features of the system (U.S. Department of Energy, 2011).

The company has designed system operations that automatically shut down the flywheel in case of any arising malfunction. The company has as well designed a monitoring system with an automatic sensor-based fire alarm that instantly indicates accidental loses that mitigate chances of insecurity in terms of fire breakout.

Despite the fact that there exist some unavoidable short term negative environmental impacts like air emissions and dust from the construction sites during construction activities of the company, the company ensures that it is environmentally sensitive.

Unlike other energy providing companies that produce electricity using fossil fuel and biomass that emit dangerous gases like carbon monoxide, nitrogen oxide gas, and lead, Beacon Power Company uses procedures that are environmentally friendly to produce electricity.

According to the U.S. Department of Energy (2011), in areas where use of specific material is essential, the company uses available biodegradable antifreeze materials like percent propylene glycol. The company has gone an extra mile by coming up with solutions to negative environmental impacts that result from construction activities of the company.

The company uses best management practices including soil stabilization and watering of exposed soil during the construction process. The presence of flywheel-based frequency regulation reduces significantly the amount of fossil fuel power plant, thus reducing dependence on fossil fuel.

Highest risks of failure

Beacon Power Corporation Company has been in the public limelight for its endeavors as well as some of its failures. The company in most cases ranks among three leading companies in the United States of America questioned for bankruptcy. Beacon has continually depended on the department of energy for loan guarantee programs to keep it moving since it is marred with financial woes.

In fact, the company has in numerous occasions, failed to repay loans guaranteed to them by the government, thus falling short of its goals. According to Rugy (2012) in October 2009, “Beacon Power Corp., an energy-storage company that received $43 million in backing from the 1705 loan program, filed for bankruptcy” (p. 1).

Several factors have led to failure of Beacon Company including investing in projects in the open market without government guarantee, as well as investing in projects that were legible to loans, but instead enjoyed loans that were provided by the Department of Energy.

Beacon has also failed to prove its commitment in maintaining its public image in terms of its socio-economic impacts. The fall of this company has adversely affected the majority of taxpayers. Serving under a leading company does not guarantee Beacon as risk- free entity.

Several projects including Beacon-initiated projects serve under large companies that leave taxpayers in problems whenever there is a failure in the projects as the parent company simply restructures and continues providing other projects. By failing to repay its loans, Beacon set the cost of the investment to taxpayers (Rugy, 2012).

As the government extends loan guarantees to high-risk companies, taxpayers in turn carry the burden of any failure. Due to lost trust from the community, Beacon is still on the verge of collapse since citizens no longer have the faith they had in the company before. This aspect will influence its future goals and objectives, leaving the company barely capable of reaching its intended horizon.

Mismanagement of funds has led to failure of Beacon Power Corporation Company. Despite several loan guarantees by the federal government, Beacon has failed to manage its funds effectively by investing in numerous risky projects.

According to California Energy Commission (2011), “some of the loans went to provide capital for high-risk projects, projects likely unable to get financing from the broader market without a government guarantee” (p.143). The company has survived collapsing for three years with the management barely understanding the risks associated with misallocation of capital and labor.

This malpractice in management leads to negative impacts since risky projects pass on the losses associated with the company’s failure to the taxpayers. It is absurd that the government continues to support companies like Beacon financially at the expense of the taxpayer’s money. Hence, there is a need for the government to rethink on its loan terms to Beacon Power Corporation Company.

The strategies to prevent such failure

Great attention is wanted to address financial issues associated to the fall of Beacon Power Company. Firstly, the company should emphasize on proper use of resources that have cost the company a substantial amount of money to develop rather than excessively depend on loans granted by the federal government.

Beacon Power has successfully developed a flywheel network; thus, the company should use it to generate revenue rather than depending on loans. Secondly, the company has a significant advantage over other power generating companies.

Since it produces power using environmental friendly procedures, Beacon should take this advantage and extend to international borders to help generate more income that will in turn guarantee them of financial stability.

Thirdly, the government should provide financial support to Beacon under strict terms that would act as a source of motivation to enable the company in achieving a broader financial prospect that will assist in its operations.

In addition, considerable precautions should be put in place in a bid to overcome mismanagement of funds entrusted into the company. Beacon Power should engage in productive and less risky projects that would assure that the company continues to serve the nation without financial woes. Several changes in management that might prove effective are imperative to restore the company to its initial position.

The company should emphasize on expanding beyond boarders by engaging in international energy market to avoid concentrating in the United States. This move will assist in determining if the performance intended projects could differ from one country to another depending on social, economic, and/or environmental issues of the company.

The government should bar the company from engaging in malpractice by assisting the company in justifying the effectiveness of projects through comprehensive research covering and other means that might prove significant.

Conclusion

Green technology companies have proven significant in recent years by providing clean energy solutions, thus receiving wide public attention. However, in most cases, such companies’ operations come to standstill with the majority not knowing the reasons behind the stagnation and thus such companies “fall short of their stated goals of developing clean energy and creating jobs” (Rugy, 2012, p.11).

Beacon Power Corporation Company is among such companies. Despite the fact that Beacon has been significant in providing some social benefits like creating jobs, enhancing urbanization of regions under its operations, and producing electricity in an environmentally friendly manner, it has somehow failed.

The company has in the recent past failed to protect its public image by going bankrupt after engaging in risky projects. Beacon has in numerous cases failed to repay loans guaranteed by the federal government and thus passing on the burden to taxpayers.

Therefore, in a bid to address these challenges, Beacon Power Corporation should remain cautious on project management and expand to international markets to avoid depending on loans.

References

California Energy Commission. (2011). 2020 strategic analysis of energy storage in California. Report on Public Interest Energy Research. Web.

Rugy, V. (2012). A guarantee for failure: Government lending under sec. 1705. Web.

U.S. Department of Energy. (2011). Final environmental assessment of the Beacon Power Corporation flywheel frequency regulation plant. Web.

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IvyPanda. 2019. "Risk Management Applications." October 2, 2019. https://ivypanda.com/essays/risk-management-applications/.

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IvyPanda. (2019) 'Risk Management Applications'. 2 October.

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