QUESTION ONE [40]
Struggling Cosmetic Manufacturing Firm in Johannesburg
In the vibrant city of Johannesburg, South Africa, a once-thriving cosmetic manufacturing
firm finds itself at a crossroads. This company, known for producing a range of high-quality
cosmetics tailored specifically for women, has a rich history of serving both local and
international clients. However, it now faces a series of substantial challenges that threaten
its stability and reputation.
The company, whose name has been synonymous with quality cosmetics for several
decades, has been actively involved in international trade. Its clientele extends far beyond
South African borders, with foreign clients in various countries around the world. Locally, the
firm has managed to establish a strong presence by distributing its products through eleven
stores across South Africa. This combination of international and local trade has been a
hallmark of the company's success for many years.
At its peak, the company employed a dedicated workforce of 214 employees. However,
recent events have significantly impacted its operations. The firm operated without
documented policies and procedures, which has led to organizational inefficiencies and
operational challenges. Furthermore, the Chief Financial Officer (CFO) has been suspended
due to ongoing financial irregularities, casting a shadow over the company's financial
integrity. Additionally, the auditors, concerned about the financial discrepancies, have
resigned, further straining the company's accountability and transparency.
In recent months, product defects have come to light, causing a decline in customer
satisfaction and trust. This has led to a decrease in sales and has damaged the company's
once-pristine reputation. Moreover, the company lacks an in-house legal team, leaving it
exposed to potential legal disputes and liabilities arising from product defects and other
issues.
Adding to the company's woes, it has been significantly impacted by South Africa's recurring
issues with load shedding, which have disrupted production and resulted in revenue losses.
In a cruel twist of fate, a severe hailstorm recently damaged the company's manufacturing
facilities, further compounding its woes, and threatening its ability to meet market demands.
In the face of these multifaceted challenges, the cosmetic manufacturing firm in
Johannesburg is in dire need of a strategic turnaround plan. The company's once-proud
legacy and its commitment to delivering quality cosmetics to women locally and globally
hang in the balance. As it navigates these turbulent waters, the firm must act swiftly and
decisively to regain its footing, restore its reputation, and chart a course towards a brighter
and more sustainable future.
1.1 With reference to the case study above, explain the operational risks that the risk
manager should consider and include in the risk management plan that should be
presented to the board of directors to assist the company to rebuild trust and to reestablish operational stability. (20)
1.2 Explain how risk financing as the final step in the process of risk management affects
the activities prioritized by the divisional risk champions (20)
This is a research-based assignment. You are required to adequately cite the research and
to provide answers in your own words and your own interpretation of the sources consulted.
Answer for Question 1 requires a word count: 2500 words