Unit-2, Text - 1 Risk Management

Unit-2 Text-1

Risk Management

India is a major resource center for big corporations around the world. India has a huge labour market. So many business houses rely on this country for their manufacturing operations. However, taking the services of Indian labourers is fraught with many risks at various levels. Particularly there are social issues that have an adverse effect on the status of India as a resource center for big foreign corporations.

One of the social issues involved is the use of child labour and sweatshops. Another adverse issue is safety. If safety of workers is not taken care of, there will be problems in three core business areas, namely, brand reputation, operational efficiency and revenue generation.

The fact that manufacturing operations are risky and unsafe was proved when there was major fire accident in a cracker unit at Sivakasi in September 2012. The fire took the lives of 38 workers and destroyed the factory. The fire quickly spread to a number of adjoining factories and burned the recent stock of fireworks manufactured. The heat was so intense that many local villagers were hurt. The fire and flames lasted five hours. The firefighters struggled hard to put out the fire.

In South Asia, te working conditions in factories are horrible. They are all death traps for workers. The exit points are closed in many factories. Since the workers enter the factories, they can not go out because the exit points are locked. Basements of the factories are used as storerooms for highly inflammable raw materials. Fire escapes are not installed and smoke alarms and sprinkler systems are totally absent. Safety measures are strictly implemented in America and other developed countries. They will be horrified by the conditions in South Asia. In fact, fire services in South Asia are among the least developed in the world. Therefore, they are prone to accidents and disasters. Specially, industrial zones in India encroach into residential slum areas. Disasters are possible in such areas.  In Bangladesh, there were more than six hundred deaths caused by factory fire accidents in five years. In spite of all these disasters and deaths, foreign corporations employ manufacturers of other countries since labour charges are low here. It is very important that the developed countries must extend their risk management efforts to the suppliers and partners in South Asian countries and other regions. If this is not done, the foreign corporations have to incur heavy revenue losses.

Criminal negligence seems to be the cause of factory disasters in India and other countries. As a result, India’s reputation is damaged. India must create a safe work environment in the fabric and textile factories before fire accidents occur.

It is clear that outsourcing and the third party companies extend much benefit to the businesses in developed countries, but financial and social risks must be tackled first. The relationship must be mutually beneficial. The foreign corporations must assess and monitor the risks from time to time and develop good and helpful risk management strategies.