Risky Business: 5 Major Risks and How to Mitigate Them
In 2018 there are many factors that influence manufacturing business success. These risks can be grouped into 5 generic categories.
This article will look at each of these risks and offer some guidance on how you might go about mitigating those risks.
1. What are people related risks?
Talent acquisition and retention are major concerns. Globalisation drives cost efficiency, making it more difficult to offer competitive remuneration packages to skilled, experienced workers. Companies invest significant resources on rehiring and training replacement workers. On average, a manufacturing firm takes 94 days to replace a skilled technical worker, and 70 days to replace a skilled production worker.
60% of skilled positions remain unfilled due to a lack of skilled people. Schools not covering applicable skills, changing immigration and employment laws, and an ever increasing focus on workplace safety compounds the problem.
How do you mitigate this?
Develop skills internally through mentoring and training, to ensure continuation in skilled positions. Develop an internship program or create a cross-training program to transfer skills to the next generation. Collaborate with schools and universities in your region to promote manufacturing oriented skills to generate a stable talent pool. Retain your best people by having attractive employment terms and conditions. These are all great suggestions when it comes to mitigating the risks that are reliant on the people in your business.
2. What are cybersecurity risks?
Securing electronic business information is an increasingly complex problem. In 2017 the manufacturing industry accounted for one third of global cyber-attack victims. The aim of cyber-attacks has shifted from gaining a financial benefit to obtaining valuable intellectual property.
The significant advantages technology brings to manufacturing is accompanied by significant risks in the form of hackers and disgruntled employees. Irrespective of how many safeguards are put in place, hackers continue to develop more complex methods of obtaining access to sensitive information. The manufacturing industry generally does not have the same IT resources or level of security as the financial or government sectors.
How can these risks be mitigated?
The basic steps are:
Educate employees about phishing scams and the importance of strong passwords
Restrict access to functional areas
Continuously maintain these access rights
Enlist a cybersecurity professional to assess IT infrastructure weaknesses
Invest in security upgrades
3. What risks do regulatory compliance pose?
Compliance covers a broad spectrum and includes everything from product safety, to fair business practice, to IT. Constantly changing local regulations, and different regulations globally present competitive challenges, and create a non-compliance risk.
How can these risks be mitigated?
Enlist the services of specialist advisors. Their purpose is to keep up to date with the latest regulation changes and ensure that current business systems are adapted accordingly.
Standard operating procedures (SOPs) and policies, designed with regulatory compliance at the core, will ensure that the business operates within regulatory parameters. Regular audits will ensure that the procedures and policies remain effective and are adhered to. Compliance is every employee’s responsibility, from the lowest grade employee to the CEO.
4. How does the supply chain pose a risk?
The manufacturing industry has benefited from globalisation, outsourcing and lean manufacturing to name a few. This resulted in more complex supply chains with fewer suppliers, in potentially more unstable parts of the world.
Extreme weather, tariff restrictions or regional political unrest may lead to delayed deliveries, higher prices or a loss of business income and reputation. Research shows that no single risk is greater than another, but rather a broad spectrum of risks potentially impact the business.
How are these mitigated?
Mitigating supply chain risk therefore requires a broad brush approach, which requires a clear understanding of the biggest risks. It is imperative to identify the materials and equipment without which operations will stop. Or the key supplier who’s failure to supply may stop operations.
An effective supply chain risk management program is essential and can include:
Implementing advanced technologies to provide end-to-end visibility
Close collaboration with suppliers
Engaging multiple suppliers
Understanding supply chain risks
Monitor and proactively managing risks
5. What are some environmental risks?
Environmental risks are prevalent throughout the value chain including direct operational risks, and indirect risks associated with upstream and downstream activities. These risks potentially disrupt production, affect a company’s public reputation and have an overall negative impact on the business’ performance.
Environmental risks include but are not limited to:
Environmental regulation and legislation non-compliance
Natural resource consumption
Air, water and soil pollution
Human rights and WHS
Hazardous waste management
Ethical sourcing practices
How can these be mitigated?
Being prepared is key to mitigating environmental disasters. A well-developed business continuity plan maximises the chances of effectively managing an event and minimising losses. Up to 40% of all businesses without a business continuity plan fail to recover after an event. The following steps are recommended to develop a plan:
Identify events most likely to occur based on historical internal and external factors
Identify value chain elements critical for business survival
Implement controls to manage and mitigate potential events and their impact on the business, employees, environment and the public
Audit the program, adapting it as your company evolves.
Being prepared for a range of different business scenarios is important for the survival of any business. It’s extremely important that you take time to assess the risks in your business, and then to develop a plan to help manage potential risks or critical failures.
At Challenge Engineering, in Sydney Australia, we machine custom metal and plastic components, and pride ourselves on great customer service. We can manufacture and deliver anywhere in Australia. Please contact us and find out how we can assist your business.Sign up to Challenge Engineering’s blog, send through a Request A Quote form, email us or phone (02) 9632 0010.