Welcome to our group’s submission for the Zurich Enterprise Challenge. For the Challenge we decided to analyze RoboCanada, we hope you enjoy the presentation
Based on our industry research, RoboCanada would be one the largest manufacturers in the industrial automation and robotics industry. They are planning to use Aggregation, outlined in AAA framework, by utilizing their economies of scale, reducing costs, and decreasing service times. So now the question that needs to be answered is; What is the optimal location of the hub to minimize its supply chain and maximize resiliency?
From the map you can see RoboCanada’s two existing hubs, marked in red, and the proposed locations of the new hub, marked in blue. Understanding the complexity of the decision, we used the Zurich Risk Room two different ways to come up not only with the generic risks of each proposed country, but also how specific transport risks could affect the movement of goods between countries.
First we focused on the risk variables most relevant to our decision, based on the company’s goals, the industry, and the company itself. As you can see from the table, this heavily favored business factors.
After filtering these risk variables, we used the risk room to compare and rank the given 7 countries, relative to each other. Then once we had our rank for each country and risk criteria, we calculated the average relative rank. As shown in the graph, Malaysia has a heavy lead, followed by Thailand and China, and where the rest lag quite a bit further behind.
Next we completed the risk analysis looking at the relevant transport risks. We included all countries in the region, which provided us visibility into not only the countries in question and their destination countries, but also the countries in between, providing optimal and suboptimal route results.
After the variables were decided upon, each country was examined using the risk room map function to determine the absolute level of risk of each country for each variable in question. Afterwards, each variable was given a relative weight based on risk impact and a weighted average risk index was calculated. This analysis allowed us to determine routes that should be avoided.
Based on the country risks, transport risks, and also taking into account geographic location, and the distance to Eastern Europe, we concluded that Malaysia, China, and Thailand were our top three choices. Next, using our country PEST results, news, forecasting research, and historical data from the last 7 years, we will discuss the risks of moving into each of these countries, and how these countries relate to Canada and the UK, countries where RoboCanada already has a hub. And in looking at risk mitigation, it is important to not only look at how regional or chosen countries compare to one another, but how these countries compare with the world at large.
The graph shown here shows just that. Canada and the UK consistently stay below the world average for the chosen risks, while our selected three countries have various “spikes,” which are circled in red. The major risks determined by the risk room were; Human Rights, Government Regulations, and Exchange Rate Fluctuation. Next we will break down how these risks can be mitigated and the impact of these mitigation measures.
- Our plan of action to mitigate human rights risks is to adhere to our corporate strategy, rather than providing the bare minimum treatment of workers and general public alike. Although the impact of this will be an increase in agency costs, we believe it will pay off in the long run.
- For Government regulation risks, we can create a mitigation plan in order to decrease our corporate risk. One way to do this is to create a contingency cost in our budgets in order to compensate for any changes in government schemes. The impact of this will be an increase in working capital, tying up funds.
-For exchange rate fluctuation we could negotiate a loose payment arrangement with our internal suppliers. If this, in tandem with front-loading our corporate costs proved to not be enough, Currency risk insurance for operations could provide a viable solution to safeguard against drastic fluctuations.
We decided the other risk factors that need more investigation can be summarized as; Supply Chain Risks, Regional Risks, and Social Risks.
For supply chain risks, Thailand and Malaysia have a long way to travel to all of the destinations, not counting the distance from our suppliers. Combining this with the fact that changing modes of transportation means that these systems are most likely highly coupled. High coupling and high liquidated damages means this venture could be extra risky for any of these countries.
The largest regional risk we believe, is the growing pains that will go along with the many countries’ ability to cope with the recent rapid economic growth, which could add unforeseen events, volatility, and costs to any investment in this region.
Lastly, social risks like religious and ethnic clashing, culture gap, language differences, changing of country identities, and division of wealth will need to be investigated further to ensure that proper governmental controls and world leadership are in place to safeguard any drastic deviations from forecasts in this region.
Based on our extensive research, and provided that RoboCanada acknowledges and properly mitigates the aforementioned risks, our recommendations for the new hub location are Malaysia, China, and Thailand.
- Zurich Risk Room Tool
- Human Rights watch: https://www.hrw.org
- World Bank Group. Doing business: http://www.doingbusiness.org/