PIRELLI FINANCE REPORT
THE BUSINESS RISKS ANALYSIS
This section discusses the risks the company may face and ways to mitigate the risks for the company’s success. Risk analysis involves identifying the risks and ways of solving the risks (Gianni, 2020). Business risks may come from the company itself or outside factors that affect the company’s smooth running. The risks have to be avoided at all costs, and if that is not possible, then the company should find a way to manage them. Risk analysis and management help provide a secure and safe environment for visitors, employees, financiers, stakeholders, and clients. It offers protection to the people and assets in the company. There is also a reduction in legal liability and an increase in operational stability. There is a reduction of the threat of possible closure of the company. In the case of business risk analysis being in place, the environment is well protected. There is a reduction in all company expenditure areas if risk analysis is done (Rita, 2018). Time spent on certain things is reduced, income increased, assets increased, increased customer base, and property owned by the company. Business risk analysis reports are also a requirement or necessity by the financial institutions to determine the company’s worth and credibility.
The Business Risks
These are the things that normally contribute to the failure of the company. They prevent the company from achieving its goals and remaining operational (Gianni, 2020). The following are some of the categories Pirelli faces in its quest to the provision of quality services and goods to its customers and gaining sustainability in the field of tire-making: External, strategic, and operational risks and others like corporate social responsibility risks, and business ethics risks and environments risks
External risks
These are the risks that the company has little or no control over them. Currently, several risks may affect the operation and performance of the company. Brexit risks are a concern to the company due to its location in Italy, part of Europe. This will major affect the tariffs and duties paid on the raw materials and final goods and the delays to reach the consumer or the company. The Coronavirus disease has had adverse effects on the company where some of the company sites have been closed, and the goods and services’ movement has been hindered (Armani, 2020). Change in demand is a risk the company faces where there is a chance of people working from their homes due to globalization, an increase in the time or duration taken for someone to get a driving license, and car-sharing services. This will reduce the need for tires. People are currently adopting a healthy lifestyle, which encourages walking and doing exercises.
Risks associated with climate change draw government and international regulations on the operation of the company. The company must adhere to the rules set out to combat climate change (Rita, 2018). The tire sector is also subject to risks concerning extreme weather conditions. There are also risks concerning the pricing and acquisition of raw materials. There is extreme uncertainty in the continued availability of oil chemicals and carbon black associated with oil. As is the case, the price of these essential items plus rubber is subject to fluctuation. It is also important to note the risks posed by the sector’s competitive nature may affect its growth. Although the company enjoys notoriety associated with its name and brand, other players need not be assumed.
Strategic Risks
They are associated with the decisions made by the company in addressing the objectives. They include exchange rate risk, liquidity risk, interest rate risk, price risk concerning financial or business assets, credit risk, and risks associated with human resources.
Operational Risks
This risk involves any event that can interfere with business processes (Rita, 2018). They result from failed or inadequate procedures in conducting business activities. Some of the risks in this category are environmental issues where all company decisions are subject to environmental policies that change from one country to another. There are also risks concerning employees’ safety and health, where so much money is spent on adhering to regulations that ensure employees’ safety at their workplace. There are criminal charges in case the company fails to comply with the rules. There is a liability if there are defective products produced by the company, but it is important to note the absence of such cases in recent years. There are also legal risks involving company suppliers, customers, competitors, and employees (Rita, 2018). Risks concerning personal data collection and processing, which is an activity subject to laws, are expected daily. Risks related to network infrastructure and information systems fall in this category, where there is a possibility of malfunction of systems. Business reporting process risk is also a risk in this category. Other risks include reputational risks and corporate social responsibility risks.
Managing The Risks
Pirelli has been at the forefront in the sector due to its ability to manage and plan for uncertainties. There are various measures the company has taken to tackle the risks, which include:
- Adoption of technology in its processes, thus solving most of the problems. There are simulations carried out to predict most of the outcomes from the decisions that are made. Technology has played a great part in fostering innovation at the company.
- The company is involved in a deep analysis of the data that is available. It collects information about elements that can affect the business’s normal running, such as information about suppliers, international news, rates, and other information that affects it either internally or externally. They can predict and make forecasts about the future.
- Strict adherence to the rules and regulations in Italy and all the countries is operational to prevent closure or unnecessary lawsuits.
- Manufacture of quality products and provision of quality customer services to guarantee returns
- Maintenance of close relationships with suppliers, customers, and employees to be assured of their presence and support in troubling times.
REFERENCES
Armani, L. (2020). INVESTORS. https://corporate.pirelli.com/corporate/en-ww/investors/investors.
Gianni, T. (2020, September 14). Business Risk (Definition): Top 4 Types of Business Risk. https://www.wallstreetmojo.com/business-risk/.
Rita, L. (2018, March 27). Operational Risk Factors You Need to Consider. https://www.theglobaltreasurer.com/2007/09/06/operational-risk-factors-you-need-to-consider/.