IBUS6003 Managing International Risk Semester 2 2024

Final Summative Assessment

This final summative assessment contains two cases and a set of case questions for each case. Each set is worth 15 marks. Use max. 600 words per case.

Write clearly with sentences and paragraphs. You are allowed to use bullet points, figures, and tables, but they have to be explained. Use 1.5 spacing between lines. Label the answers clearly and correctly (e.g., Case 1 a)). There is no need to copy entire questions. Address the questions directly and avoid discussing unrelated matters. Name your file using your SID. Include only your SID and no other identifier in the document to facilitate anonymous marking.

Case 1.Read ‘The risk management of Austoys’ case below and answer the

following questions.

a)  Identify the weaknesses of Austoys’ foreign exchange risk management   policy. How would you organize the foreign risk management of Austoys  instead? Justify your recommended foreign risk management strategy. (5 marks)

b)  Evaluate the technological risks associated with Austoys’ upcoming line of smart toys, considering potential impacts on both the company and its customers. Provide an illustrative example of each risk; one for Austoys and one for its customers. Furthermore, propose mitigation strategies for    these risks, specifying whether they are protective or preventive. (5 marks)

c)  Explain what the trade-off between supply-chain efficiency and risk is.  What is Austoys position in the supply-chain management risk-reward  matrix? Austoys focus on mitigating inventory and capacity risk. Which supply-chain risks does this focus exacerbate and why? (5 marks)

The risk management of Austoys

Austoys is an Australian toy manufacturer based in New South Wales with headquarters and manufacturing facilities in Western Sydney. This thriving company predominantly operates in Australian dollars (AUD) but procures supplies from U.S., German, and Danish suppliers, necessitating transactions in U.S. dollars (USD), Euros (EUR), and the Danish Krona (DKK). Austoys' principal markets span Australia, Western Europe, and the United States. In the upcoming year of 2023, the company anticipates monthly expenses of 20,000 USD, 10,000 EUR, and 70,000 DKK, alongside projected monthly sales of 40,000 USD and 30,000 EUR.

Austoys adheres to a comprehensive risk management policy, stipulating that exposure to currency fluctuations should be fully hedged through forward exchange rate agreements at the point of recognition. Operating with a lean organizational structure, Austoys assigns substantial responsibilities for risk management and operations to each organizational unit. For example, the sourcing and international sales units independently hedge their foreign exchange exposure, as they possess an in-depth understanding of their specific exposure dynamics.

In the latter part of 2023, Austoys is gearing up for the exciting launch of a cutting- edge line of smart toys, ingeniously designed to harness the power of voice recognition technology for engaging interactions with children. These innovative toys are seamlessly integrated with Austoys' proprietary artificial intelligence, poised to revolutionize the way they interact with kids in a manner that feels both natural and perfectly tailored to their age. Austoys has made significant investments to develop   this new line of toys and believes that it will be a central part of its future growth.

In the face of competition from toy manufacturers operating in low-cost countries, Austoys has embarked on an operational excellence program to enhance supply chain efficiency. This initiative entails the adoption of just-in-time and lean practices in collaboration with suppliers and buyers. The outcomes have included supplier consolidation, at times relying on single suppliers to drive cost reductions, while concurrently mitigating the risk of surplus inventories and excess capacity.

End of Case 1

Case 2.Below you can find the business model canvas of AdvChips, a US

multinational company and a large semiconductor chip manufacturer. Use this business model canvas to answer the following questions.

a)  Identify three critical vulnerabilities of AdvChips. Explain why these vulnerabilities are critical for AdvChips. (5 marks)

b)  Identify potential political and disruption risk events that pose a risk to the   three identified vulnerabilities (two risk events per vulnerability, altogether   six risk events). Explain why the events pose a risk to AdvChips. (5 marks)

c)  Rate the risks you identify using the risk matrix. Justify your rating. (5 marks)

The business model of AdvChips Key Partners:

•  Technology Partnerships: Collaborations with hardware and software companies to integrate AdvChips processors into various devices.

•  Supplier Relationships: Partnerships with a few capable semiconductor and component suppliers that have the ability to produce such technology.

•  OEM (Original Equipment Manufacturer) Partnerships: Collaborations with computer and device manufacturers.

Key Activities:

•  Microprocessor Development: Research and development of advanced microprocessors and chipsets.

•  Manufacturing: Semiconductor fabrication and production.

•  Marketing and Sales: Promoting AdvChips's products to both consumers and businesses.

•  Innovation: Continuous development of new technologies and solutions.

•  Licensing: Licensing AdvChips technology to other companies.

Key Resources

•  AdvChips Intellectual Property: Patents, technologies, and proprietary chip designs.

•  Manufacturing Facilities: Semiconductor fabrication plants (fabs).

•  R&D Centers: Research and development teams focused on innovation such as smaller and more energy-efficient chips.

•  Talent: Skilled workforce including engineers, designers, and marketers.

•  Brand: AdvChips is a recognized and trusted brand name.

Value Propositions:

•  Performance: Offering high-performance microprocessors for computing devices.

•  Reliability: Providing reliable and proven technology.

•  Innovation: Staying at the forefront of technological advancements.

•  Compatibility: Ensuring compatibility with various hardware and software.

•  Security: Addressing cybersecurity concerns through hardware-level security features.

Customer Segments:

•  Consumer Market: Individuals and home users seeking personal computing devices.

•  Enterprise Market: Businesses and organizations in need of data center solutions.

•  OEMs: Companies manufacturing laptops, desktops, servers, and other hardware.

•  Cloud Service Providers: Organizations offering cloud computing services.

Customer Relationships:

•  Technical Support: Providing customer assistance and technical support.

•   Marketing and Education: Informing customers about AdvChips's products and technologies.

•   Innovation Collaboration: Engaging with partners and customers to co- create solutions.

Channels:

•  Distribution Partners: Distributors and retailers selling devices with AdvChips processors.

•  AdvChips's Website: Online platform. for product information and sales.

•  Direct Sales Teams: Sales teams for enterprise and data center solutions.

Revenue Streams:

 •  Microprocessor Sales: Revenue from selling microprocessors and chipsets.

•  Licensing Fees: Income from licensing technology to other companies.

•  Data Center Solutions: Revenue from enterprise and cloud solutions.

Cost Structure:

•  R&D Costs: Expenses related to research and development efforts.

•  Manufacturing Costs: Costs associated with semiconductor fabrication.

•  Marketing and Advertising: Expenses for promoting AdvChips products.

•  Supply Chain Costs: Costs related to component procurement and logistics.

•  Employee Compensation: Salaries and benefits for employees.

•  Licensing Agreements: Costs associated with licensing technology from other companies.