Every business operates at risk. Production is affected by both internal and external factors that can adversely affect the company's performance. The task of managers is to identify dangerous situations and reduce the likelihood of their occurrence. Production risks are various unforeseen or foreseen unfavorable circumstances. What they are, how analysis and management takes place, will be discussed further.
General definition
Production risks are unforeseen situations that may adversely affect the company's performance. They can occur both during the implementation of the production process itself, and during laboratory development, testing, in the process of selling products. Also, risks may arise during transportation and maintenance.various production facilities.
Production risks are adverse events that result in losses or additional costs to the company. They can be associated with failures, stopping the production process. Similar situations can also arise if the manufacturing technology is not followed, the use of low quality raw materials, or improper work of personnel.
Production risks is a broad concept that should be considered in the context of related areas of the organization's activities. There is a list of the main reasons why such situations arise:
- Decrease in production volumes that do not correspond to the planned indicator, as well as a decrease in the pace of sales of finished products, caused by a deterioration in labor productivity, lost working hours or equipment downtime. Such adverse consequences can also be caused by the lack of a sufficient amount of starting materials, an increase in the percentage of defects in the total number of manufactured goods.
- Price cuts that don't meet targets. Such risks arise due to a decrease in the quality of finished products, a drop in demand. In addition, such risks arise when market conditions change.
- Growth of material costs due to overspending of materials, fuel, raw materials, energy. It may also be affected by increased transport costs, distribution costs, overhead and other additional costs.
- Increasing the payment fundwork that arises from an increase in the number of staff, compared to the planned figure, or the payment of higher wages to some employees.
- Growth of the tax burden, other obligatory deductions of the company.
- Improper organization of supplies, interruptions in electricity, gasoline or other fuels, rising energy prices.
- Depreciation of equipment, its physical or moral obsolescence.
Types of risks
By definition, operational risks are adverse factors that can occur at different levels of an organization's core business. They are classified according to different criteria. If possible, there are production claims:
- Foreseen. They are known from economic practice or economic theory. Such risks are determined in the course of a comprehensive analysis of the company's activities, its external environment. These risks can be prevented with proper management.
- Unforeseen. These are the most dangerous production risks. It is not possible to identify them during the analysis. This does not allow to mitigate or completely prevent their adverse impact on the enterprise.
There is another classification. Risks in this case are divided according to the principle of their area of occurrence:
- External. Caused by reasons not related to the activities of the enterprise. These are the risks of the external market environment in which the enterprise operates. This category includes political, scientific and technical, environmental and socio-economicrisks.
- Domestic. The emergence of risks is due to the activities of the company. They can arise in the sphere of management or circulation, in the process of reproduction or production activities. In the latter case, the risks may be associated with the main, auxiliary or supporting area of the organization's work.
Production risk factors can be classified in a slightly different way. They can be:
- supply;
- strategic;
- related to the violation of plans or deadlines.
Description of risk factors
During the assessment of production risks, all their components are considered. So, one of them may be the risk that arises during the development of a strategy. It arises from the unreasonable determination of the priority areas of the company's activities, which do not take into account the economic and market situation. This risk may arise from incorrect forecasting of the situation in the procurement and supply markets or from an incorrect assessment of the scope of consumption of own-produced products.
Supplying risks imply that a company may not find the right suppliers for a particular line of business, or the cost of their services will be higher than predicted. Another risk may be the refusal of suppliers to conclude a contract or draw up an agreement on unfavorable terms. Suppliers may delay the supply of materials or provide the enterprise with them not in full.
If the planned deadlines are violated, the risks may be associated with non-compliance with the scheduleexpenses planned by the company or when income is not received quickly enough.
Transport risks are allocated in a separate category. They occur at almost every stage of production. Transport risks are divided during the assessment into 4 categories, which differ in the degree of responsibility. They are associated with the movement of products within production, as well as when selling to the consumer.
The most dangerous risks
The most dangerous production risks of an enterprise are unforeseen events or confluence of circumstances that cannot be prevented. They can cause serious damage to the company, up to its complete destruction. The most dangerous production risks of the enterprise are:
- Natural disasters. These can be various natural disasters, such as earthquakes, floods or hurricanes. This category also includes a lightning strike during a thunderstorm. These are unforeseen circumstances that can cause great damage to the company.
- Man-made. They arise due to the emergency state of production facilities, wear and tear of equipment, as well as the actions of intruders. Technogenic risks also arise due to the negligent attitude of workers to their duties or when they make mistakes. Equipment breakdowns during repairs or during construction work are also included in this category.
- Mixed. They imply a violation of the natural balance, which occurs due to industrial activity.
Example
Existing risks at hazardous production facilities can lead not only to losses, but also to bankruptcy of the organization. Therefore, managers should be able to identify them at the planning stage. After that, an action plan is developed to reduce the identified risks. It is worth considering them with an example.
Thus, businesses have the risk of returning or rejecting goods. The reason for this phenomenon may be insufficient product quality. For this reason, the product cannot be used. As a result, consumers switch to a different type of product, purchase goods from competitors.
This risk is strongly influenced by the current market situation. If the economic situation is unstable, there is an oversupply of goods. At the same time, the number of consumers willing to buy these products is declining. Therefore, an enterprise, in the course of planning its activities, is obliged to take into account external economic conditions, organize the release of products in accordance with the current situation.
The second important factor that affects this risk is the individual responsibility of the head and all managers for reducing the quality of finished products. If the system of motivation is properly organized, the quality of products will not decrease. It will be necessary to introduce both rewards for quality work and fines for negligence in one's duties.
Governance principles
An important role in preventing adverse external and internal impacts has the management of production risks. It shouldbe systematic and complex. Otherwise, it will not be possible to achieve the effectiveness of the organization. To obtain comprehensive information about the current situation and make a forecast for the future, a risk analysis of production facilities is carried out.
During this process, information about the properties of the object, its structures is collected. This suggests what risks they will be exposed to in the future. During the analysis, all possible risks are identified. It also calculates the damage they can cause. The result might be:
- negative (the company is making a loss);
- positive (you can make a profit);
- zero (unchanged).
To be able to manage risks while making a profit and preventing additional losses, you will need to collect reliable information about the object under study. This will make it possible to make a reliable forecast about the occurrence of potentially dangerous situations in the future.
Sources of information
To perform an industrial risk analysis, it is important to collect complete, reliable information about the object of study. It is usually the enterprise. Information can be obtained from internal or external sources. In the first case, the necessary data is provided by all structural divisions of the object of study. Such information is structured and summarized. This allows you to look at the current production situation from the outside.
External sources of information can be very different. They allow you to assess the market situation, the characteristics of competitors, as well as your own position in a particular industry.
Channels for obtaining the necessary information
Internal sources of information can be:
- Information about the features of the production process, methods and technologies for manufacturing products, etc.
- Accounting data.
- Financial and economic reporting.
- Data obtained during inspections, revisions, audits.
- Market research.
- Experience of managers.
- Risk factors that have occurred in past periods.
External sources of information include:
- Official statistics.
- Analytical forecasts.
- Economic, demographic, political factors.
- Data on the work of competitors.
- Information about real and potential partners.
- Official demand research.
- Supplier information.
Risk Mitigation Methods
In the course of assessing production risks, the likelihood of adverse situations, as well as possible damage, the enterprise develops a set of measures to prevent damage. This reduces the likelihood of such situations occurring. There are different methods and approaches to reduce the risk in the enterprise:
- Prevent adverse developments entirely if possible.
- Create conditions in which, if a dangerous situation occurs, it will cause less damage if it cannot be completely prevented.
- Introduction of an engineering control system that responds to certain factors and manifestations.
- Using personal protective equipment for personnel.
- Introduction of administrative control system.
- Installation of appropriate signs, sound alarms.
First of all, managers should take care of reducing the threat. Only after that is the equipment with personal protective equipment. Possible threats must be prevented comprehensively. In other words, it is necessary to take care of workwear in those production conditions in which it is impossible to completely remove the influence of dangerous, unfavorable factors on the life and he alth of workers.
Potential danger
When analyzing risk and hazardous production factors, one should consider which of them are potentially such. The likelihood of an adverse event in this case is high. Potential hazards include:
- The absence of a fence or its unsatisfactory condition. But it is they who prevent accidental contact of an employee with such harmful production factors as temperature, voltage, and so on.
- Incorrect or non-existent safety systems.
- Defense mechanisms work too slowly.
- Incorrectly colored or uncomfortablelocated emergency buttons.
- Insufficient or too bright lighting.
- Inadequate sanitary and hygienic room temperature conditions.
- Increased concentration of dust, chemicals in the air, exceeding the norm.
- Potentially dangerous equipment is located in close proximity to workers, which does not exclude their contact.
- Personal protective equipment does not meet working conditions.
Each enterprise may have its own specific potential hazards. It is extremely important to identify and eliminate them in time.
