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ABSTRACT
This study investigates the Management of Risks in the Manufacturing Sector using Non-Insurance Methods, using the Coca-Cola Companies in both Port Harcourt and Eleme, all in Rivers State as its case Study. It points out the possible risks associated with a manufacturing company and the available non-insurance methods and spells out the benefits so derived from its usage. In the course of the research work, a descriptive survey was adopted and was collected though a structured questionnaire, personal interview and telephone. The data collected was analyzed using simple percentage, frequency table and graphs (bar charts) and the study revealed that risks in the manufacturing sector can be managed using non-insurance methods and made recommendations that, every manufacturing company alongside insurance as a risk management tool should also recognize and adopt some other non insurance methods too and that every manufacturing company should take risk management (decisions) as a central part of its business strategic management.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Every manufacturing company is sure to have its range of objectives, some of which are more crucial than others. These said objectives are sometimes informal but most often are defined in a formal and documented strategy plan.
Risk could be described as having potentials to threaten the operations, assets and other responsibilities of a company. There is therefore the need for a company to understand critically the risks to which it is exposed to which means understanding quite critically the potential / extent of damage that can be caused. (Risk Management course study 250, CIIN, 2001).
The types of risk that can be faced by a manufacturing company, say, Coca – Cola Company include,
Strategic risks for example, a competitor coming on to the market
Compliance risks e.g. the introduction of new health and safety legislation.
Financial risks e.g. increased interest charges on a business loan
Operational risk e.g., the breakdown of or theft of key equipment
Environmental risks; including natural disasters.
Risk management therefore should be a central part of any business strategic management, as it is the practice of using process, methods and tools for managing these risks. It focuses on identifying what could go wrong, evaluating which risks should be dealt with and implementing strategies to deal with those risks.
So to manage risks in the manufacturing sector, there is the need to first evaluate the risk so as to determine the significance of the risk to the business and the decide to accept the specific risk to take action to prevent or minimize it. For further evaluation of risk, a risk map can be plotted on the significance and likelihood of the risk occurring. Prioritizing risks, allows you to direct time and money toward the most important risk.
The use of preventative measures for business continuity which involves putting process, methods and tools in place to deal with the consequences of events you have identified as significant threats for the business and so the identified risks can be dealt with in four ways:-
Accept it
Transfer it
Reduce it
Eliminate it
The risk may be accepted if the cost of elimination is completely too high.
It could be transferred which is typically done with insurance.
It could be reduced by introducing new safety measures or eliminated completely by changing the way of production of products.
All of these can be formalized in a risk management policy, setting out your business approach to and appetite for risk and its approach to risk management (Secretan, P.A.D,1987).
1.2 STATEMENT OF PROBLEMS
The possible problem associated with the manufacturing sector (Coca-Cola Company) in its processes, include;
- Introduction of new laws and regulations, as regards health and safety.
- Changes among customers or in demands
- Microbial contamination
- Abnormal appearances
- Failure on the side of the suppliers
- Breakdown of machine
- Human error
1.3 OBJECTIVE OF THE STUDY
The aim of this project is to investigate into the management of risks in the manufacturing sector using other available risk management methods aside the traditional risk transfer vehicle called insurance.
The research seeks to let known how the manufacturing sector manages its risks using non-insurance methods.
Also, this research paper is done to fulfill the requirement for an award of Higher National Diploma (HND) in insurance and risk Management from the department of insurance and risk management in accordance with the directives of the National Board for Technical Education (NBTE).
1.4 RESEARCH QUESTIONS
In the course of this study, the following research questions were drawn:
- What sort of risk(s) takes place/occurs at the manufacturing sector?
- Can risks in the manufacturing sector actually be managed using non-insurance methods?
iii. What non-insurance methods are available for the management of risks in the manufacturing sector?
- What are the demerits of using non-insurance methods as risk management tools in the manufacturing sector?
- Of what benefit is the use of non-insurance methods as risk management tools?
1.5 SIGNIFICANCE OF THE STUDY
The study is meant to point out the concept of risk, its management and how it is managed in the manufacturing sector using non-insurance methods. It also points out the traditional method of transferring risk in the course of managing it.
All of these make the study of utmost importance.
1.6 SCOPE OF THE STUDY
The study seeks to discuss the management of risk in the manufacturing sector using non-insurance method; which is very large and so is delimited to the management of risk in the coca-cola Company which is a line of production/producer in the manufacturing sector due to constraint of finance and time.
1.7 DEFINITION OF TERMS
Insurance: This is agreement by which an insured transfers his risks (uncertain tendency of loss) to the insurer at an adequate fee called premium, on the promise that the insured shall be indemnified or compensated upon the occurrence of the insured event.
Management: This is what managers do which include, planning, organizing, directing and controlling the resources of an organization in an effective and efficient manner and within a given time to get appropriate result.
Manufacturing Sector: This is a part of an area of activity especially of a country’s economy that is into the business of producing goods in large quantities in factories, and so on.
Objective: This is something that you are trying to achieve.
Risk: This is the doubt concerning the out come in a given situation, the chance of loss occurring or say, the probability of a loss occurring.
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