Strategic Plan, Part 3: Strategic Evaluation

Kilgore is regarded as a private company owned by Steve. It is a small company that deals with the manufacture of power window assemblies. Steve was mainly assisted by other members of the team, such as Cathy, Rory, and Casey. The main focus of the small company was on the management of cash flows. Even though the company had recorded a good profit for the last five years, many are the times it would face a financial crisis during critical times of the year. In the beginning, the company was grappling with many bank loans as well as personal loans so that it would stay in the business. The company engaged in a new contract. The auto supply contact with the US held up the risk of increasing their concerns about the management of cash flows. The troubling aspect of the new contact was the financial part, and this called for the need to manage the financial risk faced by the company. Various concerns were arising from the contract. One is the potentiality of inflation between the US and Canada and the potentiality of profits.

Cathy William seems to be quite disturbed and she has been growing tired as well as frustrated. She and her team of four members working in the treasury are in a struggle of how they would hedge the currency risk that the company is facing. With the new contact that they had acquired through a very exhausting exercise, they had to deal with a Japanese manufacturer who was so thorough in the due diligence of supplier agreements. In addition to that, the company still faces a very stiff competition due to the present economic environment. The reason as to why the 5 years contacts which could even be extended to 8 years meant a lot to the company would be a determination of whether they stay in the business if they fail.

The Japanese manufacture demand was so high. This is in regards to the technical and operational demands. The main issue here was the price because many small Canadian manufacturers such as Kilgore would rely on the contacts that are based on price. The company is also prone to the risk of exchange rate vitality and this has made the company experienced several losses in the 1890s this is the main reason the company decides to stick with the Canadian supplier.

To deal with the risk that the company is facing, I would come up with a comprehensive risk strategy. I would first incorporate Cathy and the other members to form a risk management team. The main reason to incorporate them is that they have been discussing the issues affecting the company and how they can deal with the problem (FRASER, 2014). One of the strategies that can be applied and could be of help to the company is the hedging strategy. This would be mostly favored by the use of currency swaps. This currency Swap would allow the company to fix the rate of exchange, but this would affect the elimination of bigger profits for the company.

Because the application of the currency swaps has some downfalls, even if it is good, the best strategy of all is the use of forwards contact that is short term. This would be rolled daily since they are short term. However, this would lead to more flexibility and would lead to Kilgore being locked for a period exceeding one year. But if the short term contracts are utilized well, then it would be less than one year. Even though this strategy has got its pitfalls, the advantages are many. To reduce the risk, the company can also opt to make use of currency options (Kumar, 2018). They are known to provide more flexibility and would help Kilgore to have the windfall gains from the advantageous movement of the Canadian dollar. Despite some of the concerns, the advantage is more in comparison to the cons.

The firm can also make use of the 5 step approach. The first is the definition of the business strategy and the objectives. With SWOT analysis, the company can come up with a balanced scorecard. This step alone can fail in the identification of the risk. It is, therefore, crucial to come up with some additional steps that would integrate the risk in the stage of planning. The next step would involve the establishment of key performance indicators, which is important in measuring results. The best KPI will offer a hint of the level Kilgore will pull so that it can improve on them. This will trigger the company to focus on sales per person. The company will then identify then the risk that will drive the variability of performance. They are referred to as the unknowns, for instance, the demand by customers. The next step would involve the establishment of the key risk indicators and later provide an integrated reporting as well as monitoring.

There are other strategies that the company should focus on to deal with the risk related to the financial management of the company. Regardless of how small or big a company is, there is a danger of having damage to the financial balance if there is no plan. The first step is to engage in the identification of the risk which is preceded by measurement of the financial risk. This is quantifying every kind of liability that the company has. The company also seems to have a problem with how it manages its risks. Since matters finances are very critical, it is important to make sure that the company has an insurance policy in place. No one would want to think about the occurrence of the worst scenario and due to this, it is crucial to have an insurance policy. The company should also set up an emergency fund. This would be of help during times of uncertainty like the one Kilgore is going through.

The company should also direct its focus on the management of the cash flow. They ought to make sure that credit to all their customers should be well scrutinized. This is a good way of enhancing their inventory and adopting the option of leasing rather than opting for the purchase way (Sweeting, 2017). The company should also make sure that the accountability levels are very high. It would also be advisable that the financial risk is blended with the management of ERM. The two should be combined since the company is just small. Technology and financial management go hand in hand.

References

FRASER, J. R., SIMKINS, B. J., & NARVAEZ, K. (2014). Enterprise Risk Management Case Studies. Implementing Enterprise Risk Management: Case Studies and Best Practices, 1.

Kumar, A. (2018). A Study on Risk Hedging Strategy: Efficacy Of Option Greeks. Abhinav National Monthly Refereed Journal of Research in Commerce & Management, 7(4), 77-85.

Sweeting, P. (2017). Financial enterprise risk management. Cambridge University Press.

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