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ENT3/5: RISK AND RISK MANAGEMENT IN THE BUSINESS PROJECT

This unit explains about Risk and Risk management in a business project

Challenges faced by the business should include;
(i) The following are the challenges the business is encountering.
 Insufficient capital for expansion operations. This was due to inability of some club members to clear their membership fees as agreed by the club patron.

This was challenge to raise enough capital for the business.
 Limited skills to professionally perform duties e.g some students lacked skills of making chapattis and half cakes.
 Decision making was not easy and this was due to large number of business members, so a lot of consultation was needed before implementation of a decision for a business like purchasing decision, production decision.
 High cost of raw materials and this reduced on the business working capital thus lowering on the profit sharing ratio of business partners for example the price for wheat flour was hiked from 5,000 to 7000 per packet.
 High competition with similar businesses like the school canteen and shops around the school community, this reduced on the market share of the business project thus low profits.
 Challenges of bad debtors as some students and teachers didn’t want to pay their dues, this tied a lot of business capital in debts thus unable to finance production activities of the business
 Limited space for carrying out production work. We were given a small room there production was taking place.
 Challenge of supervising labourers (students) since most them never wanted to work.
 Limited market due to increased changing in customers’ taste and preference most especially senior ones and senior twos
 Limited time to participate in business project activities, this was brought by the school tight programmes, the business operated once in a week
 Sabotage /Resistance from some teachers and the school administration. Most teachers like Ms. Aisha had interest in making the same business due to abnormal profits.
 Challenge of rewarding the members/owners of the business. Since most of them were not actively participating in the production activities but they wanted to get equal share of business profits.
 Loss/theft of business products and property/funds. The financial treasurer took most the business funds for her personal use. This was found out by our teacher Mr. Fred after auditing the project’s books of accounts.
 Uncooperative members. Most business members never wanted to work as directed by the club patron, there was also division among the students and this made conflicts possible during the production process.
 Bad weather such as heavy rains and scorching sun, this stagnated the business activities thus making loses since no activities.
 High operation costs such as high cost of buying raw materials, high costs of paying labourers, high cost of transporting raw materials from the market centers.
 Unreliable utilities for instance unstable power which was on and off. This affected so much the production of some business products such as blending of juice and popcorn production.
 Accidents at work place. For example most students burnt and cut themselves when carrying out the production activities. A case in point was Nalubega

Sophie who burnt herself cooking oil when deep frying chips.
 Challenge of maintaining good quality products /services.
 Use of improper /inappropriate technology or challenge of changing
technology. For example juice was made using hands.

MEASURE TO OVERCOME THE ABOVE CHALLENGES BY / THROUGH
 Advertising e.g. putting posters on the notice board to sensitize the students about the business products, where to find them, their prices and how to handle them.
 Ensuring quality production, this was done through setting quality standards to be observed during production process, working from clean environment, sourcing from quality supplier and motivating workers to increase on their morale.
 Price reduction to attract more customers and out compete business rivals like school canteen like the price of chapatti cost shs 400.
 Selling mainly on cash basis to reduce cases of bad debtors and credit to only credit trustworthy customers like teachers, prefects and school administrators.
 Sourcing raw materials from cheap suppliers to increase on the profitability of the business project.
 Improving on the entrepreneurship skills such as marketing skills, managerial skills, negotiation skills (for best prices), financial management skills among others.
 Monitoring the activities of competitors (school canteen) to learn from them so as to improve on the production activities.
 Having friendly dialogue with the school management to accept practical entrepreneurship in the school on a daily basis or twice a week.
 Selling shares to increase on the business funds for example the business sold 100 shares for shillings 200 each to interested members like prefects and
teaching staff.
 By looking for new markets outside the school to expand on the market size and counteract stiff competition with school canteen.
 Capitalization of the business through borrowing from the school administration shs 100,000, fundraising to increase on the business capital.
 Improving decision making through training consultations, following set guidelines most especially by the club patron.
 Conducting training and retraining of members to improve on their skills.
 Rewarding members according to the set guidelines basing on participation, share capital contribution etc
 Safeguarding business property by keeping it in secure rooms and maintaining proper records/ improved or tightened security.
 Disciplining the uncooperative members by firing them, enforcing work schedule, sensitizing them etc
 Provision of guidance and counseling about importance of practical entrepreneurship education/sensitization about the benefits of practical entrepreneurship education.
 Cost minimization by members doing the work themselves buying inputs from cheaper sources, using free school facilities etc
 Using alternative sources of utilities e.g firewood for electricity /charcoal, fetching water from the stream / well
 Use of protective gears / equipment like gloves, gumboots etc /frequent cleaning of the work station.
 Improving quality through use of skilled use of good quality raw materials etc
 Improving technology through technological transfer technological development etc like using of blending machine, popcorn machine,

WAYS OF MAINTAINING SECURITY IN THE BUSINESS
 Checking thoroughly all vehicles, motor cycles and persons entering or leaving the school at the entrance.
 Installing security lights and switching on them at night to improve on the lighting system of the school and the business club premises.
 Having in place a well maintained fence and monitoring it at all times by the club and school security personnel.
 Installing security monitoring equipment like CCTV cameras, alarm systems
 Employing well-armed and well trained security workers and giving them clear instructions relating to security.
 Placing warning notices relating to security at different points within business and outside the premises.
 Restricting permission to enter the business to business customers, workers and other permitted business parties such as the club patron.
 Installing fire extinguishers at the business work place.
 Ensuring that all club workers wear ENT club business uniforms that have name and number tags on them at all times during working time.
 Ensuring close supervision of all club workers while carrying out their duties to minimise theft.
 Safely locking all business movable assets like cash, work equipments etc.

WAYS OF ENSURING SAFETY /MINIMISING LOSS OF BUSINESS
FUNDS/CASH
 Ensuring proper documentation of all cash received and paid out.
 Securing and depositing the business’s cash to the school bursar immediately after receiving it. This was done by the club treasurer.
 Keeping the remaining cash at the business premises safely locked up in the money safes and also locking the doors to the cash safe rooms.
 Ensuring that only authorised personnel like the club treasurer received cash receipts and recorded all cash received in the cash receipts and other relevant books.
 Ensuring that all cash expenditures are requested for through the club president and club treasurer and then approved by an authorized like the patron.
 Prohibiting any cash drawings from the business but if allowed then restricting the amount and charging interest on the amount withdrawn. For example we charged 20% on any drawings made by members.
 Ensuring timely collection of debts within one month or as soon as they are incurred so as to avoid losing money due to bad debts like unfaithful students such as Kato and Kamoga.
 Buying business items from a nearby reliable and cheap supplier like from Gangu trading centre in order to minimize high expenditure due to high transport costs.
 Employing certified auditors to check the accounts records for error and fraud and this was done by our patron who is a public certified accountant.

 

 
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