The US acquisition is the significant step for Shimtech Industries because the company focuses on proving the international leading positions. To acquire Performance Plastics, Inc. (PPI) in the United States means to shift Shimtech’s manufacturing and engineering procedures and strategies to the new high level.
The process of acquisition is associated with a range of risks which include financial, technological, organisational, environmental, strategic, and human resources risks. At this stage of discussing the risk management process, it is necessary to present the updated risk framework, risk management procedures, responses to potential risks, and a risk action plan.
Updated Risk Framework
Financial risks such as (1) the decrease of business transactions and (2) the decrease in investment can be addressed with the focus on mitigation. Technological risks associated with the manufacturing process include the problems with (1) equipment, (2) use of innovative technologies, (3) breakdown of the manufacturing process, and (4) the adaptation of the technological process (Barkley, 2004, p. 76).
To execute the risk management plan related to technological risks, it is necessary to focus on risk avoidance techniques. Organisational risks such as (1) the adaptation to the corporate culture and (2) re-organisation of corporate hierarchy are addressed with the focus on prevention. Environmental risks such as risks of storms in California where PPI is based are planned to be addressed with the help of sharing.
Strategic risks are associated with reforming the company’s business plan according to the new goals (Kendrick, 2009, p. 112). In addition, the process of acquisition results in focusing on the human resources management and risks associated with approaches to promoting the principles of corporate culture. These risks are planned to be addressed with risk mitigation strategies.
Project Risk Management Procedures and Forms of Risk Management
Risk management forms are (1) risk prevention or risk avoidance; (2) risk or impact mitigation; (3) risk sharing; and (4) risk retention (Cooper, Grey, Raymond, & Walker, 2005, p. 67-79).
Project risk management procedures are (1) the identification of the risk; (2) its evaluation according to the consequence type (insignificant, minor, moderate, major, catastrophic); (3) identification and selection of the options to overcome the risk and reduce consequences (options depend on the form of risk management); (4) development of the risk action plan; and (5) implementation of risk action plan.
Minor financial, strategic, and human resources risks are planned to be mitigated. Minor technological risks are avoided. Organisational risks are prevented. Major and catastrophic technological, operational, and environmental risks which cannot be prevented and which are characteristic for the aerospace industry should be addressed with the focus on risk sharing and retention.
Responses to Potential Risks
Financial risks: the response to (1) the unexpected decrease in business transactions and (2) decrease in the profitability is the process of strengthening the prevention strategy, improving auditing and inspecting; (3) the decrease in investment is responded to with focuses on reporting, auditing, and strategies to attract investors.
Technological risks: (4) equipment and (5) system damages are responded to with changes of broken parts and system; (6) the fail of the innovative technologies system is responded to with using the alternative technologies and improving the technological platform; (7) the response to the breakdown of the manufacturing process and (8) the risk of fire is the focus on protection and safety systems controls; (9) fails in adaptation of the technological process are addressed with improving the technological platform.
Organisational risks: (10) ineffective adaptation to the corporate culture is addressed with using team-building exercises; (11) challenges in re-organisation of corporate hierarchy are responded with the focus on team-building strategies and procedural changes.
Strategic risks: (12) weaknesses in a business plan are addressed with reviewing the strategy’s goals; (13) the fail of strategy is responded with analysing causes and consequences and with reforming the approach (Royer, 2001, p. 114).
Environmental risks: (14) the risk of storms, (15) hurricanes, and (16) flood are responded with improving the safety and emergency system and developing the evacuation plan.
Risk Action Plan
The Risk Action Plan includes such components as (1) statement of the risk level; (2) risk description; (3) current controls and plans; (4) additional recommended actions; (5) responsibility; (6) resources; (7) timing; (8) reporting; (9) references (Cooper et al., 2005, p. 67-91; Loch, DeMeyer, & Pich, 2006, p. 89). It is important to develop the Risk Action Plan for such a technological risk as the breakdown of the manufacturing process.
Conclusion
Responses to the potential risks associated with the situation of acquisition related to Shimtech and PPI are developed according to the strategies used for different risk management forms. The main challenge associated with the risk management planning is the development of the risk action plan which should be organised according to the level of the risk and its character to propose effective actions to overcome the determined risks. Development of the risk action plan can be discussed as the most important stage of risk management.
References
Barkley, B. (2004). Project risk management. USA: McGraw Hill Professional.
Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines: Managing risk in large projects and complex procurements. West Sussex, England: John Wiley & Sons.
Kendrick, T. (2009). Identifying and managing project risk. USA: AMACOM.
Loch, C. H., DeMeyer, A., & Pich, M. T. (2006). Managing the unknown: A new approach to managing high uncertainty and risk in projects. Hoboken, NJ: John Wiley & Sons.
Royer, P. (2001). Project risk management: A proactive approach. USA: Management Concepts Inc.