Impact of Risk Management on Industrial Productivity

INTRODUCTION

General Introduction

Risks refer to uncertainties, which, if observed, impact both positively as well as negatively when it comes about attaining desired goals, within the production process of an industry. In a broader sense, it would not be wrong to say that risks sometimes appear as a chance and sometimes it becomes a serious threat to overall functioning of industrial productivity. In addition, risk management is the way to overcome and avoid both direct and indirect risks associated with the overall production process of an industry. In other words, poor risk management impacts all stakeholders of an industry, whereas limiting industrial productivity and becomes a barrier in the way of gaining constant success and growth as well. Therefore, this paper will talk about the impact of risk management on industrial productivity, as a whole (Mohammed, 2016).

Various factors impact industrial growth and development in this contemporary world. The scope of different industrial products depends on industrial cycles and processes which consider several determinants of successful industrial operations. These determinants lay the basis for comprehensive industrial planning for overseeing the industrial projects. The industrial growth is highly tied with economic conditions.

However, the developments in industrial sectors also support the overall economic conditions. Accordingly, the industries operating in different sectors within an economy has to undertake various aspects of growth and development before starting major operations (Foerster, 2011). In this regard, one of the most important aspects is risk management which play a pivotal role in the success of an industry. The purpose of this study is to evaluate the impact of risk management on industrial productivity.

In this regard, the manufacturing industry is explored to provide ample data for analyzing different variables involved in this study. Like every other industry, the manufacturing industry has its specific contributors to success and productivity. It is one of the most profitable and expanded industries in the world with millions of employees engaged at different levels to support overall performance and increase in productivity.

Accordingly, the scope of manufacturing industries expanded all over the world demands effective risk management which complies with organizational goals and objectives to increase productivity and efficiency (Acemoglu, 2018). Besides, the risks associated with day to day activities of manufacturing should also be addressed through risk management techniques which are a part of organizational strategy to improve efficiency and performance.

Background to the study

The industrial productivity depends on several factors, including the technological, technical, financial and administrative aspects which fuel the manufacturing processes. There were days when industries were not developed enough to explore new ideas and modern technologies which minimize risk and also provide ample support for industrial hazards. However, after things have entirely changed after the third industrial revolution.

The major industries have adopted modern tools and techniques and technological equipment to minimize risks and effectively tackle industrial hazards including combustible dust, hat, flammable liquids and gasses, machinery and equipment and electrical hazards (Krausmann, 2011). The list of industrial hazards is never-ending and it also includes natural calamities such as floods and environmental changes that ignite flames and cause electricity leakage.

Accordingly, to tackle these hazards, the manufacturing industry demands extreme care in the handling of machinery and equipment, modern technology and technical assistance. However, the minimization of these risks is also associated with industrial production. Several mutual factors and domains of risk management and performance are associated with an increase in efficiency in the manufacturing industry.

However, one of the most important factors considering the contemporary determinants of industrial success and development is technology (Zou, 2019). The third industrial revolution has enhanced industrial capacities through innovation and technology. Now, the major industries in the world are in a better position to minimize risks. However, these developments also come at a price.

With an increase in industrial activities and production, environmental changes are occurring more frequently. The toxic gasses and industrial waste are spoiling the environment. Besides, a huge portion of these hazards comes from manufacturing industries. In this regard, the most common manufacturing industries include electronics, plastic, chemical, printing, pharmaceutical, consumer goods, and transportation, industrial equipment, furniture, fashion, sports, and household goods industries (Mohammed, 2016).

These industries are affecting the natural environment particularly through excessive use of chemicals and manufacturing of plastic products which cannot be recycled (Latif, 2017). The inability of these industries to recycle most of their products is creating a human-made climate change with sea levels rising and excessive pollution and plastic waste ending up in oceans.

Accordingly, this grave situation is also a risk for manufacturing industries as most of the manufacturing units are prone to raise sea levels. The manufacturing industries are mostly set up in the outskirts of major cities to facilitate the transportation of goods. Besides, they are also set up on river banks to reduce the chance of direct contact with chemical hazards.

However, the river banks and open areas outside the major cities are prone to floods and electricity shortages. Thus, these risks decrease the overall production level (Zou, 2019). Therefore, the manufacturing industries apply various risk management techniques to evaluate the nature and type of risks they are dealing with.

Furthermore, they aim to increase productivity through effective risk management. Nevertheless, the manufacturing industries also face investment risks, manpower, technology, land, strategic risks, and technical risks. These risks impact productivity in several different ways. Thus, the effectiveness of risk management techniques can only be determined by evaluating the type of strategy applied and its effects on different risks. Therefore, the risk management tools and techniques are considered as an important part of industrial strategy to increase productivity and efficiency (Mohammed, 2016).

Research Questions

This study focuses on risk management strategies and techniques implemented in the manufacturing industry for increasing productivity. These strategies consider technical, technological, natural and operational factors that are pertinent to industrial processes and cycles to achieve the desired goals and objectives.

Accordingly, this study analyzes the current risk management strategies in the manufacturing industry and its impact on industrial productivity. However, it is pertinent to mention that risk management strategies can impact industrial productivity both positively and negatively. Thus, the research questions of this study include:

  1. How risk management impacts industrial productivity?
  2. What are the major risk management strategies implemented in manufacturing industries to minimize risks?
  3. What tools and techniques are used by the risk managers to avoid potential risks in manufacturing processes?
  4. Is the operational capacity of the manufacturing unit impacted by risk management techniques?
  5. How a major player in the manufacturing industry provide safety to their employees through risk management?

Research Objectives

This research evaluates the impact of risk management on industrial productivity. It also evaluates the impact of risk management techniques on the overall performance and efficiency of manufacturing units. In this regard, it considers several factors including time management, safety and operational capacity. Besides, this study also explores different variables that are connected to the success of risk management strategies.

In this regard, one of the most important aspects of risk management is cost. Thus, the relationship between cost and the major variables of this study is also an important aspect that will be explored in this research (Herrmann, 2014). A major purpose of this research is to provide findings for future research based on constructive arguments, data and previous studies.

The industrial development and use of modern tools and techniques to increase productivity are common attributes to a contemporary industrial environment. However, it is a known fact that risk management strategies are barely considered in industrial sectors owing to their huge cost and the time they take to minimize risks.

Therefore, several industrial units belonging to different sectors do not particularly mention or promote risk management because they consider it a waste of money and time. However, these shortcomings have led to serious ramifications due to the poor safety and security of employees (Herrmann, 2014). Accordingly, the purpose of this study is to provide an unbiased view of industrial productivity concerning risk management.

The current globalization and complex business environment leads many business to think beyond just profitability only. There are different types of companies and these companies have to look after various issues and problems. The problems are the part of firms and it depends on what type of firm it is. The matter is that there are many different types of firms such as manufacturing, trading, exporting, imprinting, service or bank. All these firms have different needs, requirements and way of doing business. There are many ways and procedures to solve the risk and the main tools is the system analysis and systematic analysis. The procedures and ways to solve this vary from one firm to another (Mohammed, 2016).

Traditionally risk management used to be considered as a means to alleviate perhaps eliminate negative outcomes of exposures.  The risk management is all about looking for these firms’ centric issues and problems and how they can solve it. It is also be about the issues and concerns that the firs is facing and these issues can be linked to internal and external sources.

The risk management can be useful when it improves productivity in terms of safety, time, money, and operations. The impact here is that the internal employs, and management impose certain issues and threats too. Moreover, the external forces also threaten the company and industry. Therefore the firm has to look at all these risks and they have to manage this risk properly and thoroughly (Hoyt, R.E., Moore D.L and Liebenberg A. P. 2008).

Risk management is a difficult and challenging tasks and it requires great skills and techniques to successfully do it. The risk management is about assessing the risk which is associated with any takes or source, and what can be done to reduce the impact and effect of that issue. This is needed as it impacts the performance and productivity. The productivity of the firm is linked to the risk management and it impacts the performance directly.

If the risk and crisis is not managed then the productivity will decline and the firm will face consequences. The time will be wasted and costs will be incurred by the firm too. Hence the risk is to be reduced so the employees can produce more, and they can perform at optimal levels and perform well too. Moreover, it is about the mitigation of that risk (Jafari, A. Chadegani and Biglari 2011).

However, the result of this and other empirical studies shows the ability of risk management to go beyond this and respond to market factors which are out of management control in order to control volatilities in earning which ultimately improve corporate performance. The empirical study investigates the relationship between total risk management and company’s performance (Mohammed, 2016).

There are a number risks that can take place in the firm and most of them are possible and simple to reduce, handle and mitigate as well. The risks include the nature risks, terrorist attack and so on and so forth. The crisis like situation is common for the companies and they can look into this because risk management and crisis handling is essential for the growth and enhancement for the firm. With risk management the firm cannot grow and prosper.

In addition to this the capital and assets will be efficiently utilized only when the risk is less and everything has been managed efficiently. This is required so the firm can get better and better with time. There is a positive relationship between total risk management and company’s performance in companies which have invested higher level of intellectual capital (J. Eco. And Int. Fin. Vol.3 (15). J.Pezier 2002).

The handling of risk management is an art and skill but it is a part of management and leadership. The risk management which is a sub category of leadership is quiet essential and the good leaders and managers can pull it off. There are many ways and procedures to solve the risk and the main tools is the system analysis and systematic analysis.

The procedures and ways to solve this vary from one firm to another and there is not fixed way for solving the risk or to manage it. Different companies adopt different ways of doing it. The domino effect of world incidences lead the future to be more dynamics and unpredictable than it was before.

The risk management can be useful when it improves productivity in terms of safety, time, money, and operations. The firm can benefit from this in a number of ways. If the firm solves the risk and mitigates it then it can overcome the problem and crisis which may occur in future. Moreover, it can save costs and money which might occur if the problem gets severe (Lam, J. 2001).

The productivity of the firm is linked to the risk management and it impacts the performance directly. If the risk and crisis is not managed then the productivity will decline and the firm will face consequences. The time will be wasted and costs will be incurred by the firm too. Hence the risk is to be reduced so the employees can produce more, and they can perform at optimal levels and perform well too. In addition to this the capital and assets will be efficiently utilized only when the risk is less and everything has been managed efficiently (Mohammed, 2016).

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