Risk Criteria ID No. Chosen Business: City

¶ … Risk Criteria

ID NO.

Chosen Business: City restaurant

Before discussing what the core activities the company undertakes to achieve its operational objectives, it is vital to highlight these operational objectives. The following section gives a brief overview of these objectives:

OPERATIONAL OBJECTIVES

The strategic objective of Taste Inn is to become the most liked brand among its customers, a financially and operationally strong company in the eyes of its investors, and a competitive participant in the food and hospitality industry of Australia. The major operational objectives of the company include:

A strong customer base:

The most important operational objective of the company is to strengthen its customer base by attracting more and more customers towards its product offerings. It aims to build a strong public image in the eyes of its customers and the society in which it operates.

Become a financially and operationally strong corporation:

The second most important operational objective of the company is to become a financially and operationally strong company which may never face any difficulty while making investments in the future or see dissatisfied customers due to inefficiency in its operations or customer services.

3. Build strong relationships with the supply chain members

The third important operational objective is to strengthen business relationships with the supply chain members. These members act as the building blocks for a strong and competitive corporation in the industry (Fraser & Simkins 2010). From the supply of raw material to the promotion and distribution of the final products; every supply chain member plays an important role in the success of the company. Therefore, Taste Inn gives strong emphasis on building long-term relationships with the most reliable suppliers from the industry.

4. High sales volume and market share:

A high sales volume and an ever increasing market share is one of the core operational objectives of a business organization. Taste Inn also aims to strengthen its business presence in the food and hospitality of Australia by ensuring a steady growth in its sales and market share. This objective can only be achieved if Taste Inn puts its complete focus on bringing improvements in its product and service offerings and find ways to boost up its sales activities.

Technological advancements are of significant importance for Taste Inn. Reason being, the production units in modern city restaurants are equipped with latest plants and machineries. These advanced plants and machineries make the production processes efficient and cost-effective. If Taste Inn ignores technology and uses traditional methods of baking food and preparing eatables, it will no more remain competitive in its industry. As a result, it will lose its brand image and strong customer base which it has developed over years.

5. Become a competitive participant in the food and hospitality industry:

In addition to focusing on products and service offerings, Taste Inn also aims to become a market leader in the industry by beating the competition and winning the confidence of its stakeholders.

6. Ensure a continuous growth of operations

Another important operational objective of Taste Inn is to ensure a continuous growth in its operation. It considers the business growth as a strong tool for competitiveness and sustainability in the industry.

All of these operational objectives overlap each other because a restaurant can use different strategies to meet one operational objective. For example, quality of the products can be improved by bringing improvements in the current production operations or by purchasing higher quality raw material which is used in the production of the products.

THE CORE ACTIVITIES TO MEET OPERATIONAL OBJECTIVES

1. Total Quality Management:

Total Quality Management (TQM) is an effective technique to improve the overall the business operations efficiency. Taste Inn implements the principles of Total Quality Management in all the aspects of its operations in order to achieve its operational objective of strong customer base, high sales volume, high market share, competitiveness, and sustainability. Total Quality Management (TQM) at Taste Inn entails focusing on product innovation, service quality, financial performance, and overall operational excellence.

2. Efficient Customer Services:

To achieve the operational objective of strong customer base and a high level of acceptability and brand loyalty, Taste Inn focuses on efficiency in its customer services. It consists of ensuring timely delivery of products, pleasant dining experience, quick response to questions and queries, efficient time management, and other related customer services.

3. Inventory Management and selection of Supply Chain Members:

Taste Inn recognizes the importance of product quality and efficient service delivery for the achievement of operational objectives. In order to produce the best quality food products, Taste Inn purchases the highest quality raw material from the most reliable suppliers from the industry. It ensures an efficient inventory management so that there is a balance between the supply and demand of the raw material at its production unit. In order to ensure an efficient delivery of the products, the distributors are selected on the basis of their reputation and track record in the industry (Hajime & Sato 2009).

TQM vs. Inventory Management

As operational objectives always overlap in every industry, Taste Inn will find a significant relationship between the two in meeting its operational objectives. However, both these processes are different from each other in a number of ways. TQM is a composite phenomenon where Taste Inn will look at all the business activities and affairs collectively so as to achieve operational excellence. On the other hand, Inventory management is just concerned with keeping a good balance among supply, capacity, and demand options in the production plants of the restaurant.

4. Effective Marketing and Promotional Activities

Although marketing and promotional activities are not concerned with the operational performance of the company; they play an important role in the accomplishment of its overall operational objectives. Taste Inn expends a significant amount from its marketing budget on advertisements and other promotional campaigns so as to create awareness about its products and services and attract the potential customers towards these offerings. These expenditures can help the company in achieving its operational objectives of high sales volume and improved financial performance in the long run.

5. Internal Control:

Internal control is another practice or core activity which helps the company in achieving its operational objectives (Spedding & Rose 2008). Internal Control refers to the measures and procedures which Taste Inn incorporates within its business setup for the purposes of keeping a check and balance between its earnings and expenditures. That is, the measurement of the effectiveness and efficiency of different departments and taking corrective actions where the performance of these departments varies with the set standards (Ritchie & Zsidisin 2008).

The objectives discussed in the above section can be generalized to any industry, but the risk factors identified in the next section are specifically related to Taste Inn restaurant. For example, the restaurant must ensure a regular supply of raw material like wheat, milk, fruits, eggs, meat, and other ingredients so that there is no shortage of any type of product in the restaurant. Similarly, power failure, late delivery of products, improper treatment of customers, inefficient customer complaints section can pose negative impacts to the company's sales. These specific risks are now discussed below in detail:

OPERATIONAL RISKS FOR THE RESTAURANT

1. Supply of raw material:

One of the major operational risks for a restaurant is the efficient supply of raw material used in the manufacturing of its products. For Taste Inn, the supplies of raw material like wheat, milk, fruits, eggs, meat, and other ingredients must be efficient enough to ensure that there is no shortage of any type of product in the restaurant. However, it is generally observed that every type of industry faces the shortage of raw material due to different reasons which badly hampers the sales growth of its firms during that shortage period. This risk can bring critical consequences for Taste Inn; e.g. dissatisfied and unhappy customers, low sales, fewer revenues, non-availability of raw material or at high price otherwise, etc. (Sadgrove 2005).

2. Inefficient customer services:

Taste Inn always faces a risk of inefficiency in its operations which may be caused due to various reasons; like power failure, late delivery of products, improper treatment of customers, inefficient customer complaints section, etc. This risk can pose big threat to the company in the form of unhappy customers. These unhappy and dissatisfied customers will share their bad experience with the restaurant with other potential customers. On the other hand, if Taste Inn gives superior customer services to all its customers, it will create a positive image in their brand which can become a source of growth and competitiveness of its business in the future.

3. Quality of the products:

Quality of the products is measured either by analysing the quality of raw material which is used in their production of the effectiveness of production operations at different levels. Quality of the products is one of the strongest tools for achieving operational objectives (Young 2010). Therefore, any flaws in the production processes or usage of inferior quality raw material can create big problem for the company's business. If Taste Inn wants to keep its public image strong, it must keep an eye on the quality of its raw material and the steps which are carried out until the final product is produced and is made ready for sale (Talbot & Jakeman 2009).

4. Technological advancement:

In addition to the quality of raw material and the final products, Taste Inn also faces a challenge from technological advancements in its industry. In order to maintain its position in the industry, it has to keep in touch with the latest technological trends which improve the efficiency of the production processes and help in controlling the costs of production. However, the costs of purchasing new machinery and plant also put negative pressures on the company's profit margins (Unnevehr&Hirschhorn 2000). Taste Inn has to keep in view these two risks while assessing its operational risks for the short and the long run.

5. Employee Strikes or Industrial Relations issues:

One of the biggest operational risks which can badly hamper the sales growth and profitability of the company is the issues in industrial relations. Taste Inn has to keep its employees completely satisfied and committed towards their job duties. If any of its employees like chefs, food managers, plant engineers, etc. leave the company for any reason, the performance of other employees is badly affected. It can also cause disruption in day-to-day operations which ultimately hits the annual profits.

6. Unexpected hazards:

Taste Inn may also face unexpected hazards at its production units which may cause heavy financial losses. For example, fire, theft, robbery, natural disasters, technological failure, etc. can demolish the entire to operations at the restaurant. Taste Inn must have effective measures to encounter or mitigate these types of risks in an efficient manner.

7. Health and Safety issues:

Health and safety issues are among the biggest risks in the food and hospitality industry. The food which is produced for the customers may get poisonous or harmful for the customers due to different reasons. Such as some people may be allergic to wheat, nuts or eggs.Taste Inn also has to adhere to the Health and Safety Laws and Regulations in order to run its business operations in a legal and authorized way.

8. Customer preferences:

Customer preferences and life styles are the part of social and demographical forces which impact every type of business in one way or another. For Taste Inn, customer preferences may turn positive or negative any time. Therefore, it faces a big risk of a negative behavior from its potential customers which may make them switch to other competitor brands. In order to survive in this situation, Taste Inn has to produce its products which are exactly according to the requirements and needs of its potential customers.

9. Competitive forces:

The companies operating in the food and hospitality industry face a strong competition from the local and international competitors. Taste Inn is not a large scale restaurant in the market, but it faces a stiff competition from the top quality brands of the world. These top competitors are accompanied by the new small scale businesses in the industry. All these competitors pose big threats to the company in its sales growth, profit margins, competitiveness, market share, and different other performance parameters.

10. Industry patterns:

Industry patterns refer to the behaviour of different industry participants towards the efficient functioning of the industry. The major industry participants include regulatory bodies, supply chain members, manufacturers, and customers. For example, the regulations imposed by the regulatory authorities are mandatory to be followed by all the other industry participants. Similarly, the supply and demand patterns are largely influenced by the suppliers in the industry. Taste Inn has to align its business operations with this changing industry behaviour in order to sustain in the long run.

THE TWO PRIORITY RISKS

The ten operational risks identified or assessed in the previous section are quite general risks which are found in almost every industry. However, there are certain complexities and issues which make them industry specific; thus need to be managed in a quite different way. The first and the foremost important risk is the quality of the products which, if low, can make the customers switch to superior quality products. This risk can be mitigated if the company purchases the highest quality raw material from its suppliers. The second important risk is the competitive forces. This risk cannot be mitigated even if the company reaches the top most position in its industry. The only way to manage this risk is the use of competitive strategies in all the aspects of the business; including production, marketing, distribution, etc. (Wheeler 2011).

In order to reach these two highest priority risks, all the essential steps have been followed. First of all, the operational objectives have been identified followed by 10 operational risks which the restaurant may have to face in its industry. Afterwards, every risk has been analyzed in order to prioritize it according to its possible consequences for the restaurant's business. In the fourth step, the two highest priority risks have been identified which have the highest level of risk and greater likelihood and consequences rating as compared to other risks.

RECOMMENDATIONS

The quality of the products is given the highest priority in the risk assessment and treatment charts because it is directly related to the sales, customer preferences, competition, financial performance, and all other factors which make a company competitive in its industry. The second highest ranked risk category is the competitive forces. These forces directly impact the customer base and sales growth of the company. If Taste Inn wants to grow in its industry, it will have to focus on the quality of its products as well as formulate strategies to beat the competition in an effective and efficient manner (Wallace & Webber 2004). The possible treatment options for improving the quality of the products and mitigating the relevant risks include; purchasing highest quality raw material, ensuring production efficiency, and proper inventory management. The possible treatment options for meeting the competitive pressures are differentiation strategies, marketing mix effectiveness, and continuous growth of operations. The preferred option in the former risk is purchasing highest quality raw material while differentiation strategies in the later. The results of cost benefit analysis reveal that Taste Inn should accept these options and apply them for at least six months period. The more important risk, product quality should be considered for the whole year. The risk monitoring methods for this risk includes internal control, audit, and supply chain evaluation while the other risk can be mitigated through regular marketing analysis and marketing audit.

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PART 2

Table 10.1 Risk Register

Sr. No.

Risk

What can happen? (Event)

How Can it happen?

What can happen (Consequences)

Identify Existing Controls

Effectiveness and implementation of existing controls

Analysis

Risk Priority

Treat Risk (Y/N)

Further Action

Likelihood

Consequences

Level of risk

1

Supply of raw material

Shortage of products

Non-availability in the market, less crops, etc.

Low production, unhappy and dissatisfied customers

Inventory management

Balance between current supply and demand options.

Currently, there is no shortage of raw material

No consequences medium

Normal

Y

Build strong supply chain relations and regularly do market analysis[footnoteRef:1] [1: Fraser, J., & Simkins, B.J. 2010, Enterprise risk management: today's leading research and best practices for tomorrow's executives, The Robert W. Kolb series in finance. Hoboken, N.J.: J. Wiley & Sons.]

2

Inefficient customer services

Dissatisfied customers

Inefficiency in dealing with the customers

Potential customers will be lost, low sales, low profitability

Total Quality Management,

Customer Relationship Management

No inefficiency found

No bad consequences found

High

High

Y

Keep customer services on top priority[footnoteRef:2] [2: Spedding, L.S., & Rose, A. 2008, Business risk management handbook: a sustainable approach, 1st Edition, Oxford: CIMA]

3

Quality of the products

Low quality products

Inefficient production processes, low quality raw material

Low quality products, unhappy customers, negative impact on brand image

Purchase of highest quality raw material

Efficient production processes

Quality of the products is high

No negative consequences can happen

High

High

Y

Keep good relations with high quality raw material suppliers

4

Technological advancements

Introduction of new technology

Technological advancement in the industry

Old technology can become obsolete, become inefficient

Up-to-date plant and machinery

Research and Development is done uncertain

Can impact the business in the short run, manageable in the long run

Medium

Normal

Y

Conduct regular market analysis, invest in technology[footnoteRef:3] [3: Unnevehr, L., & Hirschhorn, N. 2000, Food safety issues in the developing world, World Bank technical paper, no. 469. Washington, DC: World Bank.]

5

Industrial relations

Employee dissatisfaction

No concern of the Management for employee

Low employee morale, low motivation, high turnover

Attractive benefits and superior work environment

Needs improvements

Can happen any time

Low productivity medium

Y

Use employee motivation techniques, training and development, etc.

6

Unexpected hazards

Fire, natural disaster, theft, fraud, etc.

Unexpected (various reasons)

Heavy financial and operational loss

Safety controls

Need improvement

Unexpected risk loss high medium

Y

Use more effective safety controls and measurements[footnoteRef:4] [4: Wallace, M., & Webber, L. 2004, The disaster recovery handbook: a step-by-step plan to ensure business continuity and protect vital operations, facilities, and assets, N.Y: American Management Association]

7

Health and safety issues

Food poisoning, harmful food

Unhealthy food control, ineffective management

Serious health issues in customers

Food control

Need improvement

Low probability

Serious legal issues medium low

Y

Purchase fresh raw material from reliable suppliers

8

Customer preferences changing customer behavior

Products fail to satisfy the customers

Lose of potential customers once and for all

Competitive marketing mix strategies

Need improvement in product strategies and promotional strategies

High probability

Low sales, low profits high medium

Y

Keep on introducing innovative products with new tastes and ingredients

9

Competitive forces

High level of competition

Competitive strategies of top market leaders, entry of new competitors

Lose of customers, low sales

Competitive strategies effective

High probability

Low sales, lesser number of customers high

Y

Use differentiation strategy[footnoteRef:5] [5: Wheeler, E. 2011, Security risk management: building an information security risk management program from the ground up, Amsterdam Waltham, MA: Syngress]

10

Industry patterns

Changes in regulations

Changing industry needs

Sudden changes in operational procedures

Market analysis

Need improvement

Medium probability

Legal issues medium

Y

Keep an eye on changing industry conditions and regulations in the worldwide markets[footnoteRef:6] [6: Hajime, S., & Sato, H. 2009, Management of Health Risks from Environment and Food, 1st Edition. Netherlands: Springer]

Table 10.2 Risk Register

Sr. No.

Risk

What can happen? (Event)

How Can it happen?

The consequences of event happening

Adequacy of existing controls

Consequence Rating

Likelihood Rating

Risk Priority

Level of Risk

Consequences

Likelihood

1

Supply of raw material

Shortage of products

Non-availability in the market, less crops, etc.

No consequences

Currently, there is no shortage of raw material

Balance between current supply and demand options.

8

8

Normal

Normal

2

Inefficient customer services

Dissatisfied customers

Inefficiency in dealing with the customers

No bad consequences found

No inefficiency found

Customer Relationship Management

9

9

High

High

3

Quality of the products

Low quality products

Inefficient production processes, low quality raw material

No negative consequences can happen

Quality of the products is high

Efficient production processes

8

7

High

High

4

Technological advancements

Introduction of new technology