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Risk Assesment Of International Business

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Risk Assessment With the Help of PESTEL Analysis

1632 Downloads I Published: 24 Jan ,2019

Introduction

In this report, the concept focuses on the risk assessment of international business so that risk assessment has to be done with the help of PESTEL analysis. C&H Garment is the firm who is about to invest in the RWANDA special economic zone, it offers various incentives like liberal and simplified economic regulations for establishing the business (Ballestas and et.al., 2015). The business risks that are results of various organizational failure, are also discussed in this framework. Rwanda is a small land in South Africa where the special economic zone is  business in Rwanda SEZ.

PESTEL Analysis

The risk assessment in establishing a new business in Rwanda special economic zone can be done on the basis of various factors. The risk % in a business should be minimus so to minimise the chances of risk in the business operations. The risk can be assessed by carrying out the the PESTEL analysis of Rwanda special economic zone (Nduwayezu and et.al., 2014). The factors are shown below:

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Political

The political background of Rwanda is quite unstable; they are focusing on growing their economy from the last so many years. They are motivated to reduce  poverty and people resistance from the place. The political factors impact their economy because still the Rwanda is considered as the low income nation. The political face of  Rwanda is enhanced due to  the foreign exchange through production thus C&H Garment can face huge of risk in the architecture development of their business (Moses and Etuk, 2015).

Economic

Basically, the economy of Rwanda is stable now and in past decades their economy suffered due to civil war and genocide but after introducing the SEZ in Rwanda the economic status has witnessed growth of 8 %, their foreign investment is centralized on the tea, coffee, and tourism. The change in exchange rate can increase the risk of economic growth of C&H garment.

Social

Social background of this Rwanda is based on orthodox mentality. The population of Rwanda is from rural area in which 52% of population is of women. The people are living in a traditional way and also 45% of total population is under poverty line so C&H Garment may have the risk of producing fashionable clothes which may not be the preference of people living in that area.

Technological

The SEZ already have many organizations with latest technology for smooth operations of their working. The C&H have to have more funds for implementing the latest technologies in their workplace. If organization want to invest in the technology and equipment, the risk regarding investors can be seen in the organization which can impact whole structure of the firm organization (Kateera and et.al., 2015). If market changes more advanced technologies come to the market so in such case the training and development program should be provided to  employees so forsuch activities the upcoming expanses can make differences in   the economy of C&H so this can be seen as a risk.

Environmental

The environment of Rwanda can be perfect for the organization because the resources are enough to build a business structure. But the main problem is the population of Rwanda; the consumption of  resources like land, water and other non renewable resources is  high. The non renewable resources are consumed by people of Rwanda so the risk of land degradation, soil erosion and loss of biodiversity can be witnessed by the C&H. The climate of Rwanda changes ant time so the organization can see the risk of maintaining the current system also the anticipation of the future changes should be needed.

Legal

The legislation on international business is strictly followed by the foreign investors in SEZ. The organization have to comply with all trade rules and regulations applied by government of the Rwanda (Rosa and et.al., 2014). The Rwanda special economic zone is carried over  by the trade act 1999 in which the various business laws are included. The legal limitations of operations can be changed by the government so it can be considered as the risk for the organization.

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Risk involved in business operations

Strategic Risk

In an organization, the management made so many strategies to conduct various operations. The risk in strategy does impact on those operations of the organization. The organization usually made the strategies based on the customer preference and the existing technologies(Ballestas and et.al., 2015). If there is any shifting in that preference the line product will be obsolete. Then the market will force the organization to make changes in their existing plans thus it can make negative impact on the system of the organization. So if C&H garments have made the mind to establish their marker in Rwanda SEZ then they may have the strategic risk.

Compliance Risk

The government of that particular area in which the business unit have made their base should have bureaucratic rule and regulations and some legislation. The compliance risks are identified by the practices of investment. The regulations are made for the protection of employee those are generated by the Occupational safety and Health Administrations(Nduwayezu and et.al., 2014).There are some environmental concerns that are answerable by the Environmental Protection Agency and some localities. So Rwanda SEZ is also bounded with such regulation and legislation so the risk which are associated with the compliance, would be in system of C&H.

Financial Risk

The management of the money matters in the growth of an organization. The business should know how to hold the money for the right investment. The credit given to the customers should be not for long time. If the foreign exchange rate will be reduced then it can make impact on the sales of organization. The export business will be paralyzed if organization do international business. The financial risks can be seen as the interest rates into account. The C&H have to handle their accounts properly otherwise there can be also some financial risk(Moses and Etuk, 2015).

Operational Risk

If the internal system will fail to operate the various operations then it will back in the form of operational risk. If there is any unexpected failure comes in the system of the organization. If the employee are not working with the complete involvement then it will be taken as the failure of human resource department. They do not given valuable training to develop their skills. The operational risk will not give anything in return as this failure will be highly risky for the organization(Kateera and et.al., 2015). Rwanda Special economic zone have so many organization, and if any organization will have failure on their operational activities then it can be more dangerous. Thus, C&H can also have this kind of risk in the Rwanda special economic zone.

Reputational Risk

The organization have to maintain their image in the market by providing good and effective products and services to the customer. The marketing strategies will make impact on the reputation of the organization if there is any negativity in the way of marketing. C&H have to evaluate the taste of people the trend in the market. In case the C&H have not succeed in doing the proper market then it will decrease their market reputation. An organization have to put so many efforts to make a better brand image. People of Rwanda are so traditional so if they don’t like the products of C&H then will became a reputational risk. The modern generation have social media so a negative response can reduce the sales of the products and ultimately it will affect the profitability. If the SEO department of C&H fails in managing its operations then it can also produce reputational risk(Rosa and et.al., 2014).

There are some more risk involved in this business operations. This kind of risk cannot be identified so easily. The natural disasters and the environmental risks are included. The prediction of these failure is quite difficult to conduct because it came suddenly in the system of organization. If C&H have so many skilled employee that can make their business more profitable, sometime the management of those employees been so difficult for the organization that called as the employee risk management. The Occupational Safety and Health Administration have not covered each health and safety risk, those exceptions are covered in this category. The import and export operations will be grounded in the risk the guest country will have instability in their political and economic factors.

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Conclusion

In this context, the risk analysis has been done with the help of PESTEL analysis. It is concluded that risk must be analysed before establishing the business in special economic zone. The Rwanda special economic zone has so much exposure for the organization. The business risk can be reduced by adopting proper evaluation techniques and making reliable strategies. Each organization should carry out the risk assessment before locating their business.

References

  • Ballestas, J.D. and et.al., 2015. Accuracy of a Statistical Risk Assessment Model in Predicting Shoulder Dystocia and Brachial Plexus Injury in a High-Risk Population at Einstein Medical Center, Philadelphia [133]. Obstetrics & Gynecology. 125. pp.47S-48S.
  • Nduwayezu, E. and et.al., 2014, May. Some aspects of risks and natural hazards in the rainfall variability space of Rwanda. In EGU general assembly conference abstracts (Vol. 16, p. 14468).
  • Moses, E.A. and Etuk, B.A., 2015. Human Health Risk Assessment of Trace metals in Water from Qua Iboe River Estuary, Ibeno, Nigeria. Journal of Environmental and Occupational Science. 4(3). pp.150-157.
  • Kateera, F. and et.al., 2015. Hepatitis B and C seroprevalence among health care workers in a tertiary hospital in Rwanda. Transactions of The Royal Society of Tropical Medicine and Hygiene, 109(3). pp. 203-208.
  • Rosa, G. and et.al., 2014. Assessing the impact of water filters and improved cook stoves on drinking water quality and household air pollution: A randomised controlled trial in Rwanda. PLoS One. 9(3).  p.e91011.
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