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Introduction : Macro Perspective of Risk Management in China's Textile and Automotive Industries
The Macro Perspective of risk management is the overall analysis that requires the detection of the huge economical and political factors of the economy. The main purpose of the assignment is the analysis of the several kinds of risks that are detected in business operations in China. There is also the analysis on the basis of the two industries that are selected for the identification of the common risks.a)Analysis of the different risks for the expansion of the business operations in China
The foreign business venturing in the land of China to start a business or expenses within the boundaries of China generally come across certain risks. The Chinese market has some reporting of fraudulent activities, lack of meaning integrity and misappropriation and pre sensation of assets. China's consumer economy is suspected to have increased and it is mostly export-oriented which creates opportunities for the country to expand abroad (Acharya et al. 2021). On the other hand, it makes the foreign companies who are supposed to export to China in a difficult position. The market access has a local distribution network and the purchasing habits of the consumers of china and the regulatory requirement regarding the market access are difficult for international firms. The Bureaucracy in china is another risk that overseas firms encounter often as the laws and regulations in chains are strict for foreign companies. Out of 338 respondents 315 of the firms have conveyed their concern about expanding in the country (Lu et al. 2020). The rights of protecting intellectual property in the area have been defaulting and notorious from the beginning. Foreign companies climb on the rights especially struggles from the standards of IP protection available in the country. Competition with the services and products made by Chinese companies is something that lands the overseas forms in the most difficult situation.
Common risks detected in the two industries of China
The two most popular and biggest industries in China are the textiles and automotive industries which have few risks in the market. The risks that are evaluated for the two industries are domestic risk, financial risk, operational risk and technological risk.
Domestic Risks
The risks that are identified with the textile industry for the domestic industry are due to the outbreak of the pandemic. This is one of the biggest domestic risks that has been identified in the textile industry. This is mainly due to the implementation of the lockdown rules and the disruptions in the supply chain throughout the country (apparelresources.com, 2022). There also have been several bans on cotton imports that can be seen in the Chinese textile industry. On the other hand, the automobile industry has also faced several types of issues that are due to the outbreak of the pandemic. The shutting down of industries and factories is one of the concerns that have been detected. There is also the issue related to the dealers facing compliance risks that have initiated one of the largest “anti-monopoly investigations” in the automotive industry (deloitte.com, 2022). The regulation is for a fair chance in the competition of the players that are in the same industry.
Technological Risk
The risk that is the most influential is the technical risk that can be seen in both industries. The advancement of technology has made the demands of consumers higher than it was which has made the competition even more severe. There is a scientific aspect that can be seen to impact the quality of the clothing. The textile industry is responsible for the manufacturing of clothing material that is fire-repellent, water-resistant and also uses less energy (basf.com, 2022). The concern for the ecological factor is also considered for the technological risks in the industry. This same can be seen in the automobile industry as energy consumption is one of the major concerns for the car industry. The carbon emission point is one of the elements that are used for the analysis of the technological risks as China has been lagging in terms of the international standard. The current determination for technological advancement is the main criterion for the industry.
Two risks of the company in China and one risk of the common industry
The two most common risks that can be seen for the two industries are the domestic risk and the technological risk. This is due to the fact that both industries require the consumer and the domestic implementation of the rules (Lai et al. 2020). The supply chain is the most definite risk that can be seen for the textile industry. On the other hand, the automotive parts and the dealers are the main risks that have been detected.
Management of the risks and the strategies of the industry
The adoption of risk mitigation strategies can create a specialization in the risk management activities of a firm or an individual. The implementation of four basic strategies to manage or mitigate the domestic risk created in the daily life of an individual or a firm. The inclusion of reduction, transference, avoidance and acceptance creates professionalism in the management of domestic risk. As per the opinion of Sharma et al. (2020), the inclusion of complexity has raised the risk factors involved in a firm. In a recent survey it has been analyzed that 59% of the risk has increased by the existence of complex methods and strategies of management in a firm. Moreover, technological risk can be managed by the adoption of proper and effective training and development strategies among employees to update their technical knowledge and skills (Obasa, 2022). Employees with effective technological knowledge can technological problems by themselves and this can reduce excessive consumption or wastage of time due to technological risk.
Evaluation of the effective financial risk management of a business entity for the benefit
The benefits of financial risk management are the efficient use of resources and the consistent flow of operations. There can also be an increased amount of security that can be concentrated on risk management (Sosnovska and Zhytar, 2018). This can also help with the increase in the number of customer satisfaction which can also lead to increased revenue from operational activities.
Conclusion
The assignment can be concluded that several risks are identified with the two industries in China. Furthermore, there is an analysis of the risks in the two companies selected and also the risks in the industry addressed to the company. Lastly, the analysis and the computation of the management of the risks and the strategies that can be used for the evaluation. Their effective analysis of financial risk management can be used for the benefit.
References
Acharya, V.V., Qian, J., Su, Y. and Yang, Z., 2021. In the shadow of banks: Wealth management products and issuing banks’ risk in China. NYU Stern School of Business.
apparelresources.com, (2022). Domestic Risk in the Chinese Textile Industry. Available at: https://apparelresources.com/business-news/trade/big-blow-chinese-textile-industry-domestic-international-demand-weakens/ [Accessed on 26th October, 2022]
basf.com, (2022). Domestic Risk in the Chinese Automobile Industry. Available at: https://www.basf.com/cn/en/media/BASF-Information/Resources-environment-climate/Challenges-and-opportunities-for-China-automotive-market.html[Accessed on 26th October, 2022]
deloitte.com, (2022). Domestic Risk in the Chinese Automobile Industry. Available at: https://www2.deloitte.com/cn/en/pages/consumer-industrial-products/articles/2016-deloitte-china-auto-dealership-performance-study.html[Accessed on 26th October, 2022]
Lai, S., Bogoch, I.I., Watts, A., Khan, K., Li, Z. and Tatem, A., 2020. Preliminary risk analysis of 2019 novel coronavirus spread within and beyond China.
Lu, Y., Wu, J., Peng, J. and Lu, L., 2020. The perceived impact of the Covid-19 epidemic: evidence from a sample of 4807 SMEs in Sichuan Province, China. Environmental Hazards, 19(4), pp.323-340.
Obasa, O., 2022. Pension Management, Risks and Investment Strategies: A Study of Defined Contributory Pension Scheme in Nigeria. Journal of Management and Social Sciences, 11(1).
Sharma, R., Shishodia, A., Kamble, S., Gunasekaran, A. and Belhadi, A., 2020. Agriculture supply chain risks and COVID-19: mitigation strategies and implications for the practitioners. International Journal of Logistics Research and Applications, pp.1-27.
Sosnovska, O. and Zhytar, M., 2018. Financial architecture as the base of the financial safety of the enterprise. Baltic journal of economic studies, 4(4), pp.334-340.
