Risks and benefits of using chinese contract manufacturing

It is essential that the concepts of valuations shareholder value analysis be linked into a due diligence process. This is in order to reduce the number of failed mergers and acquisitions. Other areas include intellectual property, real and personal property, insurance and liability coverage, debt instrument review, employee benefits including the Affordable Care Act and labor matters, immigration, and international transactions. Due Diligence has emerged as a separate profession for accounting and auditing experts.

Risks and benefits of using chinese contract manufacturing

Throw in potential disruptions to supply chains that have been stretched across thousand of miles and country borders by globalization, and the opportunity for something to go wrong is, to say the least, worrisome. Financial executives, who have not done so already, should begin to develop a holistic risk management program or one that allows them to mitigate and manage risk on a broad front.

Organizations who are tempted to short change their risk management efforts will find potential consequences can be severe, from a loss of competitiveness to, in the extreme, having to cease operations altogether. Usually the probability of that event and some assessment of its expected harm must be combined into a believable scenario an outcome which combines the set of risk, regret and reward probabilities into an expected value for that outcome.

In scenario analysis "risk" is distinct from "threat. In information security a "risk" is defined as a function of three variables: If any of these variables approaches zero, the overall risk approaches zero. For example, human beings are completely vulnerable to the threat of mind control by aliens, which would have a fairly serious impact.

But as we haven't yet met aliens, we can assume that they don't pose much of a threat, and the overall risk is almost zero. Is the risk negligable, this is often called a residual risk.

It entered finance in the s when financial derivatives proliferated. It did not reach most professions in general until the s when personal computers proliferated. Governments are apparently only now learning to use sophisticated risk methods, most obviously to set standards for environmental regulation, e.

Risk management Risk management involves identifying, analyzing, and taking steps to reduce or eliminate the exposures to loss faced by an organization or individual. The practice of risk management utilizes many tools and techniques, including insurance, to manage a wide variety of risks.

Every business encounters risks, some of which are predictable and under management's control, and others which are unpredictable and uncontrollable. Risk management is particularly vital for small businesses, since some common types of losses—such as theft, fire, flood, legal liability, injury, or disability—can destroy in a few minutes what may have taken an entrepreneur years to build.

Such losses and liabilities can affect day to day operations, reduce profits, and cause financial hardship severe enough to cripple or bankrupt a small business. But while many large companies employ a full time risk manager to identify risks and take the necessary steps to protect the firm against them, small companies rarely have that luxury.

Instead, the responsibility for risk management is likely to fall on the small business owner. The term risk management is a relatively recent within the last 20 years evolution of the term "insurance management.

Risk management is now a widely accepted description of a discipline within most large organizations. Basic risks such as fire, windstorm, employee injuries, and automobile accidents, as well as more sophisticated exposures such as product liability, environmental impairment, and employment practices, are the province of the risk management department in a typical corporation.

Risks and benefits of using chinese contract manufacturing

Although risk management has usually pertained to property and casualty exposures to loss, it has recently been expanded to include financial risk management—such as interest rates, foreign exchange rates, and derivatives—as well as the unique threats to businesses engaged in E commerce.

As the role of risk management has increased, some large companies have begun implementing large scale, organization wide programs known as enterprise risk management. As ofthe role of risk management had begun to expand even further to protect entire companies during periods of change and growth.

As businesses grow, they experience rapid changes in nearly every aspect of their operations, including production, marketing, distribution, and human resources. Such rapid change also exposes the business to increased risk.

In response, risk management professionals created the concept of enterprise risk management, which was intended to implement risk awareness and prevention programs on a company wide basis.

The main focus of enterprise risk management is to establish a culture of risk management throughout a company to handle the risks associated with growth and a rapidly changing business environment.

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Writing in Best's Review, Tim Tongson recommended that business owners take the following steps in implementing an enterprise wide risk management program: Finally, it is important that the small business owner and top managers show their support for employee efforts at managing risk.

To bring together the various disciplines and implement integrated risk management, ensuring the buy in of top level executives is vital. Luis Ramiro Hernandez wrote in Risk Management. A professional code of ethics is usually focused on risk assessment and mitigation by the professional on behalf of client, public, society or life in general.

Risk sensitive industries Some industries manage risk in a highly quantified and numerate way. These include the nuclear power and aircraft industries, where the possible failure of a complex series of engineered systems could result in highly undesirable outcomes.

The total risk is then the sum of the individual class risks In the nuclear industry, 'consequence' is often measured in terms of off site radiological release, and this is often banded into five or six decade wide bands.

Where these risks are low they are normally considered to be 'Broadly Acceptable'. Risks beyond this level are of course 'Intolerable'.CEOs and top management teams of large corporations, particularly in North America, Europe, and Japan, acknowledge that globalization is the most critical challenge they face today.

Many firms with manufacturing facilities have a huge amount of inventory. Retail and whole sale businesses also have enormous amounts of inventory. Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care..

It can be a legal obligation, but the term will more commonly apply to voluntary investigations.

Manufacturing in China: The Business Risks | China Law Blog

A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition. When deciding about contract manufacture, the company should weigh the benefits and associated risks.

For small companies, contract manufacturing may not be a good business strategy. For large companies that are trying to extend into new markets, contract manufacturing may be a good choice. China accounts for one-fifth of the global manufacturing, making it the largest manufacturing nation in the world.

Shanghai will remain the manufacturing center of quality electronic devices because they have the skilled labor, as well as the excellent engineers required to produce high-quality products, while many other regions specialize in.

Risks and benefits of using chinese contract manufacturing

Many safety professionals have an ad-hoc approach to compliance administration, involving a mix of paper-based systems, clipboards, databases, and mammoth spreadsheets which can put the visibility, accuracy, and reliability of safety data at risk.

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