Risk management is the logical process of applying limited resources into opportunities to minimize the impact and occurrence of unfortunate events. It is an influential part of business especially in cases where large investments have been made, and simple occurrences could result in major losses of the investment. Taking Brazil as my case study, I will show the importance of the 10 critical steps for risk managers in loss prevention, as well as how to begin an export import relationship with Brazil. It is important to note that Brazil is the world’s 7th largest economy and its biggest earners are in agriculture and industry.
For a risk manager, the first crucial step is the assessment of political risk. Business interruption due to political factors is a common occurrence especially in developing countries. (Cook, Alston & Raia, 2012). Political causes that can ruin business opportunities include war, government upheaval, a strike, seizure of suppliers’ factory or sudden change of law. Loss does not always occur when the physical product is damaged. The prevention of improving revenue can be viewed as a loss especially if production had been significantly increased with the view that a now unreachable location would be the new market.
The risk manager must consider the process in assessing the risk of the company. In calculating the process risk, the manager must look at the potential impact of the company both positive and negative. If the company will cause lifestyle change of the people or not and whether there are any subsidies offered by the government to the firm or to firms that produce a substitute product for the firm’s product (Jeynes, 2003). The Amazon forest in Brazil is considered one of the largest ecosystems in the world. Human activity has, however, caused the government to draft laws that will conserve the forest due to its rapid decline in size over the past years (Lele, Husain, Perkins, Viana, Verissimo & Vosti, 2000). To do business in Brazil, the business is better located far from the Amazon to avoid fines and government investigations.
The next step that a risk manager must consider is the people. Consideration of workers is necessary as they will determine both quantity of goods produced and the quality. When assessing the risk factor of people the considerations are; the culture of the community, the possibility of unions, and current level of skill of the workers versus current and future needs of the company (Jeynes, 2003). Although Brazil is rapidly developing, it does not yet have literacy levels as high as those in America, Canada or most European nations. (OECD, 2011) This means that a foreign investor requiring highly skilled labour in Brazil will have to consider training employees if he/she is to remain competitive in certain fields such as technology and industry. If the investor instead chooses to hire expatriates, their safety must be put into consideration as with increasing terrorist activities foreigners are often targeted (Cook, 2012).
The product or service is the next step in risk management for the manager. The firm’s current position in the market must be taken into consideration when calculating risk. The manager must also look at current trends as well as new fads and determine whether these are short term novelties or will pick up to be long term trends. In assessing the risks for the product, the risk manager must consider environmental factors and whether the product will cause environmental degradation (Jeynes, 2003).
Brazil has recently discovered offshore oil near its shores and currently there is a debate on whether or not these new discoveries will harm the Amazon or not. In 2011, , Chevron oil had an oil spill from one of its ocean rigs and was fined 17 million dollars due to the environmental damage it caused. The impact of the accident would be felt in the market for over a year as 3 auctions for oil and gas in 2012 would not take place. Poor risk assessment caused Chevron to pay a penalty and lowered Brazil’s exports for 2012 (Blount, 2013). To begin exporting oil from Brazil, I would ensure the government that all the oil is safely contained, and no spills can occur as well as ensure that our firm is using the best machinery available to avoid paying a penalty.
The Finances and premises must be taken into consideration and is the next step for the risk manager. The suitability of the premises to the work done must be considered as well as its size versus the size required. The cost of the premises and rent rates need to be factored especially if it is a small business that cannot afford high rates (Jeynes, 2003). Many small businesses might also find it a challenge raising the initial capital for their exports and the risk manager must ensure that they avoid over-ambitious export targets (Cook, 2012). To prevent losses in Brazil, more so in import and export, one can insure the goods and let the bank become the mitigate loss in the business.
Security is the next step for the risk manager. When determining security the manager must consider the safety of the workers, the manufactured goods, intellectual property, as well as data and security (Jeynes, 2003). Although insurance against theft is the first, step the manager must also ensure that there are steps taken to ensure that nothing is stolen. No amount of insurance will cover the loss of a trade secret or theft of data from their offices. Theft of goods on a large scale will also make the business incur a loss and eventually its closure.
Finally, the risk manager must look at the safety and purchasing of goods. The company must ensure that safety measures are in place to prevent losses due to accidents and fire. Safety measures such as emergency exits, fire extinguishers and alarms protection against noise and air pollution as well as quality of goods bought and sold. There has been a history of fires in night clubs in Latin America due to improper use of dangerous equipment such as flares. These fires have resulted in high fatalities due to lack of fire-fighting materials and over-crowding (Baida, 2013). If one is to venture into this field in Brazil' they must ensure that their patrons as well as employees, are safe by placing enough fire exits and ensuring proper crowd control.
There are ten steps to risk management these are: policy/politics, planning, product, people, procedures performance, premise, purchasing and protection. All these must be considered to avoid either a loss or loss of extra earnings. The Brazilian market has a lot of opportunities for both imports and exports, however, environmental degradation is an issue of concern for the government, and there are stringent measures in place to punish polluters. To do business, the risk manager will have to pay extra attention to environmental pollution to ensure that they do not degrade the environment.
References
Baida, A. (2013). Brazil, Mexico and other deadly nightclub fires In Latin America. Retrieved April 25, 2013, from http://www.huffingtonpost.com/2013/01/28/nightclub-fires-latin-america_n_2564738.html
Blount, J. (2013). Chevron, transocean say Brazil drops criminal oil spill charges. Retrieved April 25, 2013, from http://www.reuters.com/article/2013/02/21/us-chevron-brazil-charges-idUSBRE91J17Z20130221
Cook, A.T. Alston, R. Raia, K. (2012). Mastering import & export management second edition. NewYork: AMACOM.
Lele, U., Husain, S. A., Perkins, K., & Viana, V., Verissimo, A., & Vosti, S. (2000). Brazil: Forests in the balance - challenges of conservation with development. Washington, DC: World Bank Publications.
Jeynes, J. (2003). Principles of risk management: The 10 Ps. England: Opal Services.
OECD. (2011). Education at a glance: OECD indicators. Retrieved April 25, 2013 from http://www.oecd.org/brazil/48657313.pdf
