Case Study 12: Risk Management at GlobalTech Electronics

Background

GlobalTech Electronics is a leading multinational company specializing in the production of high-quality electronic components for consumer and industrial markets. Established in 1995, the company has built a reputation for innovation and reliability. With manufacturing facilities in five countries and a supply chain spanning 30 nations, GlobalTech serves clients like automotive giants, smartphone manufacturers, and defense contractors.

The Challenge

In 2022, GlobalTech faced multiple risks that could potentially impact its financial stability and brand reputation. The three primary risks included:

1. Supply Chain Disruptions
   Due to geopolitical tensions, one of their major suppliers of semiconductor materials, based in East Asia, faced trade restrictions. This led to delays in raw material delivery, risking production halts.
2. Cybersecurity Threats
   As a technology-driven organization, GlobalTech experienced a ransomware attack that compromised its data systems and posed the risk of leaking sensitive client information.
3. Regulatory Changes
   New environmental regulations in Europe required immediate modifications in manufacturing processes, threatening compliance penalties and increased production costs.

Risk Management Approach

GlobalTech’s leadership, spearheaded by its Risk Management Office, adopted a structured approach to mitigate these risks:

1. Supply Chain Risk Mitigation
   • Diversification: Partnered with additional suppliers in North America and India to reduce dependency on East Asian sources.
   • Inventory Strategy: Increased safety stock levels to buffer against future delays.
   • Real-Time Monitoring: Implemented AI-based supply chain monitoring tools to identify bottlenecks and predict disruptions.
2. Cybersecurity Risk Mitigation
   • Incident Response Team: Engaged a specialized cybersecurity firm to address the ransomware attack and enhance firewall and encryption protocols.
   • Employee Training: Conducted company-wide training on phishing detection and cybersecurity hygiene.
   • Insurance: Invested in comprehensive cybersecurity insurance to cover potential financial losses.
3. Regulatory Compliance
   • Process Reengineering: Upgraded machinery and shifted to eco-friendly raw materials to comply with European environmental standards.
   • Stakeholder Engagement: Engaged with local authorities to understand compliance nuances and secure extensions for implementation.
   • Sustainability Certification: Achieved certifications to strengthen the brand’s position as an environmentally responsible manufacturer.

Outcomes

• Supply Chain Stability: Despite initial delays, production normalized within four months. The diversified supplier base also provided cost benefits in the long run.
• Cybersecurity Fortification: No further cyber incidents were reported, and customer confidence was restored.
• Regulatory Compliance: The company avoided penalties, and the new eco-friendly production process became a competitive advantage, attracting sustainability-conscious clients.

Discussion Questions

1. Identify the types of risks GlobalTech faced and classify them into operational, strategic, or financial risks.
2. Evaluate the effectiveness of GlobalTech’s risk management strategies. What additional measures could the company have taken?
3. Discuss how proactive risk management can transform challenges into opportunities for a company.
4. If you were the Risk Manager, how would you prioritize these risks? Explain your rationale.
5. What role does communication with stakeholders play in managing commercial risks effectively?

Conclusion

The case study of GlobalTech Electronics demonstrates the critical role of a robust risk management strategy in maintaining operational continuity and fostering resilience. It underscores the importance of adaptability, proactive planning, and stakeholder collaboration in navigating complex commercial risks.

This case is designed to provide MBA students with a real-world scenario to analyze and understand the intricacies of commercial risk management.

If you want case studies related with your topics, please WhatsApp the topics to us, we will create and send to you….. (Our WhatsApp No: 9746264915)