SWINBURNE UNIVERSITY OF TECHNOLOGY

FACULTY OF ENGINEERING, COMPUTING AND SCIENCE

(SARAWAK CAMPUS)

RSK80006 Risk Management

Exercise 3

Eden Voon Wu Qian (100083771)

Submission Deadline: 13th October 2021

Individual Task(s)
Question 1
Supply chain disruption refers to when incoming (or outgoing depending on the
company) materials is stopped unexpectedly. This will definitely negatively impact a
company’s productivity as the required materials (or tools) needed will be insufficient
and if this occurs over a long time, the level of trust from the customers will definitely
drop and this will cost the company dearly. Products that rely on critical components
produced by specialized companies ceased to be manufactured (Willy C. Shih
2020). As an example, assume Company A (Malaysia) requires a controller that
contains microchips from Company B (Korea) and batteries from Company C
(China). Just one disruption from one supply, either Company B or C, is enough to
cause Company A to halt productions and lose revenue. This is one of the effect of
globalization of supply chains where the reliance on international supply chains may
be about negative impact is something disastrous cuts off the chain, even
temporarily. On the opposite spectrum, instead of importing materials for production,
outsourcing trends means handing out jobs to outsiders, people who do not work for
the company. Though this may be good and may be required for specialized tasks, a
disruption causes both parties to lose productivity and trust. Taking the example from
before, if Company A (Malaysia) requires a specialized skill to combine materials to
build something, they might need to ship it to Company B (China). However, if a
disruption such as COVID-19 or something more extreme such as storm affecting
ships, this might lead to what was mentioned before, a drop in productivity.

Question 2
In short, demands are not met. Take a typical construction project as an example,
there would definitely be bricks, cables, cranes, metal foundations and scaffolding
required (there are lots more but for simplicity sake, only some will be used), there
would be many companies, and hence many supply chains, involved. The final client
would be the user of the building. Assuming this project requires 6 months to
complete, any part of disruption may result in delays of the overall project. This may
come in the form of slower than expected brick production, bad weather (eg flooding)
disrupting transportation of metal parts, crane system malfunction or even
miscommunication with suppliers. From the client’s point of view, the project is not
completed on time and trust level will drop. If contracts are signed, they may seek
legal assistance or ask for compensation, all of which affects the company’s income
and reputation.

Question 3
Supply Risk Sources Examples
(Definition)
Environmental Risk Sources The best example possible is the COVID-19
(Occurs from environmental Pandemic. In China, shipments (via ships)
uncertainties including accidents, must be quarantined for a week before
man-made events or natural allowed to dock. This causes delays and
occurring disasters) bottlenecks in supply chains as not only will
the product arrive late, more time must be

Organizational Risk Sources
(Occurs within suppliers including
labour issues and uncertainties
such as equipment or IT-based
failures)
Network-related Risk Sources
(Occurs from interaction between
organizations and suppliers)
1) Lack of Ownership
(Occurs when the tasks are
too spread out until it is
unclear what belongs to
who)
2) Chaos
(Occurs from human errors
such as miscommunications
and distrusts leading to
conflicts)
3) Inertia
(Occurs in the form of
laziness where foresight is
hazed due to
incompetence)
Question 4
Risk Mitigation
Evaluate/identify current risks
Prioritize by Probability and Impact
Ensure supplier quality
Diversify suppliers
given to sort out the logistics if more than one
shipment is involved (Yap, Boston &
MacDonald 2021).
In Australia, workers are going on strike due
to mandatory vaccination. Ignoring the
reason for protest, most protesters are
construction workers and this will lead to
breakdown in authority management and
delays in all projects (TheNewYorkTimes
2021).
1) To fight against COVID-19, the supply
chain was disrupted due to mandatory
lockdowns to curb the spread of the
virus. Because of this, the growth of
U.S. medical device market was
affected negatively (Bhisey 2021).
2) Fostering a good relationship between
company and suppliers will ensure a
smooth flow of supplies to avoid
supply chain disruptions (Castenson
2021).
3) Builders who are afraid of shortage
would buy and stock up lumbers which
may result in price hikes.
Elaboration
Brainstorm and list out potential supply
chain disruption risks may help the
company avoid such scenarios.
To save on resources, prioritizing risks
based on severity and probability is
important to properly allocate resources
and avoid any wastage.
Maintaining the company’s reputation is
not solely the company’s role, but the
supplier’s role as well. Competent
suppliers will do their best to maintain
image while supplying instead of
resorting to devious means (eg taking
“shortcuts”, bribery etc.).
Being reliance on one reliable source is
good. However, if that one network is
disrupted, it would immediately halt the
entire operations. Having backups or
expanding networks will help greatly.
Be Aware of Suppliers’ Risks
Include Partners in Risk Planning
Purchase cargo insurance
Be Transparent with Partners
Consider trade credit insurance
Review risks periodically
Question 5
Models of Risk Culture
Cultural Theory of Risk
Double S Model
As well as the company’s risk, part of
risk management is to understand and
be aware of other people’s risk,
especially the supplier’s. For example, if
the supplier is international, it is
important to understand the country
legislation regarding these importation.
Involving suppliers or any parties
involved in the process (data
managements, transportation etc.) in
risk management planning will help in
predicting and controlling risks in the
long run.
Insurance can act as a backup plan to
protect shipments as well as warehouse
goods from damages.
Just like the previous points of having
partners, sharing information with them
will help everyone involved profit in the
long run.
This will help counter any slow-paying
or no payment customers to help
protect the company.
Risk management is all about
understand, reviewing and handling
risks. Hence, constant monitoring and
studying of risks is a major criteria.
Elaboration
This basically formulates 4 possible cultures in a
workplace
1) Heirarchists – Prefers to assess the
rewards-risks relationship
2) Individualists – Consider risks to limit their
ability to earn profits
3) Egalitarians – Would rather avoid risks
than pursue risk control (Prevention is
better than cure)
4) Fatalists – Prefers to act on a situation-to-
situation basis and retain their flexibility
Understanding these four cultures will help
understand their disagreements perspectives and
help manage various workers’ attitudes.
Similar to Cultural Theory of Risk, the Double S
Model instead highlights the cultures as a whole
collective. The first S refers to sociability (people
oriented) and the second S refers to solidarity
(task oriented). Breaking this down, there will be
1) Networked – High people focus, low task
 focus
2) Communal – High people focus, high task
focus
3) Mercenary – Low people focus, high task
focus
4) Fragmented – Low people focus, low task
focus
This model groups eight different aspects of risk
culture into four themes. This allows for easier
analysis and prioritization when necessary.

IRM Risk Culture Aspects

Model

This model groups the different work-values into

“profiles” to determine how relationships are built
as well as how tasks are accomplished. This
Organizational Culture
would also describe the different styles of
Profiling
management. The attitudes, or risk culture, would
change based on the company’s direction, be it
aiming for stability or profitability (or both).
Question 6
Cultural Theory of Risks refers to studying how risk are recognized by one’s values
and societal view. In short, risks can be viewed differently based on everyone’s
experience and walks of life. Following that definition, the very different views may
be grouped into four major categories, each with a broad definition on their view of
risks.
Fatalist
This group of people are usually unmanageable as they have weaker social ties
while still experienced. This means they are more likely to endure hardship without
plans to control the cause and effect.
Hierarchist
This group of people are the “managers” as they are highly organized with clear well-
defined rules. Think of them as militaries, they have strong sense of authority and
responsibility. They would like to see rules/regulations enforced and monitored.
Individualist
As the name suggests, they prefer to be alone to enjoy freedom and make their own
responsibility. They tend to align their perspective with nature that is robust and
would be able to withstand hardships from society in general.
Egalitarian
They prefer to resist control and make their own pathway. Being in high group
means they would still be willing to work and bond closely with their peers though
with less incentive to follow the rules. They would prefer everyone to be treated
equally. This is different from Individualist where they would rather work on their own
(low group).

Question 7
In the Double S Model, the basic principle refers to understanding where the
peoples’ lie. It may be under executing task, interacting with people or both.
Interacting with people is referred to as “Sociability”. People high in this group will
socialize well and would be willing to do things for other people because they want
to. They may be more open to giving, and receiving, suggestions as well as guiding
others when working. In risk management, they may fall under the whistleblower
towards any potential threat/risks.
As for task execution, “Solidarity” refers to being goal oriented and people here are
interested in getting the best end result. If someone has high solidarity, they may
share common tasks and would enjoy mutual benefits. In risk management, they are
the one who would be willing to go to the far ends to ensure the threat/risk is
controlled/prevented.
The four group of people all has different names:
1) Networked – High people focus, low task focus
2) Communal – High people focus, high task focus
3) Mercenary – Low people focus, high task focus
4) Fragmented – Low people focus, low task focus

Question 8
IRM Risk Culture Aspects Model is quite similar to the Double S Model in that it
deals with human attitude. But instead, it looks into more detail and categorizes them
into eight aspects, which is again categorized into four major categories. This model
states that risks cannot be directly measured as it is more abstract.
Category Aspect
Risk leadership: clarity of direction
- Clear expectation on how to execute risk management
Tone at the top
Responding to bad news: welcoming disclosure
- Seeking out information about risk events
Governance Risk governance: taking accountability
- Be responsible and take up accountability during risk
management
Risk transparency: risk information flowing
 - Communication of risks among all employees
Risk resources: empowered risk function
- Constantly improving risk management skills
Competency
Risk competence: embedded risk skills
- Make risk culture a second nature skill
Risk decisions: informed risk decisions
- When facing uncertainties, seek out information to
make the best possible decision
Decision making
Rewarding appropriate risk taking
- Actively seek out risk to understand and manage such
risks

Group Task(s)
Question 1

The impact of supply chain disruption not only affects the companies productivity and
profits, it also affects all those involve in the “chain”, from distributor to consumers.
According to Meyer (2021), the impact of supply chain disruption may be minimized
by being well-prepared. That say, seven factors may be considered when
strategizing to mitigate supply chain disruptions.
Create a supply chain emergency plan
Instead of having just one initial plan, such as to import goods or prepare
infrastructure, it is best to always have an emergency plan. So instead of choosing a
one way route, it is best to imagine a web of options that does not necessarily must
be used but may be set aside in the event of unexpected disruptions.
In regards to the question, it is best to have backup plans in the form of reallocation
of resources. As steel supply is definitely low due to the earthquake, backup plans
such as working on different parts of the project will help keep the project moving
and avoid delay. When steel supply is restored, then the task may be continued.
Build up inventory
Inventory refers to having stockpile ready in the event of supply chain disruptions.
One good practical example was during my (Eden) internship in Sejingkat Power
Corporation, they have constant supply of coal, for their coal-fired power plant, from
Mukah but in the event of rain or other bad weathers, this supply may be disrupted.
Instead, the company, Sarawak Energy Berhad, stationed two boats full of coal
nearby (there was no space on land) which are ready to be used as backups.
Falling back to the question, the simplest mitigation is to stock up on multiple crucial
supplies beforehand, especially if that material/tool is imported from elsewhere. As
iron steel is imported from overseas, beginning stockpiling iron steels ahead of
schedule is safe and prevent further delays as the project may continue though to a
limited extent until it runs out.
Conduct a supply chain vulnerability audit
“Knowing is half the battle”. Understanding the possible threats towards one’s supply
chain will allow for better preparation. This may come in the form of environmental,
societal and political analysis and if needs be, may come from an external party to
help with a more unbiased assessment.
As a contractor in the question, assuming enough qualifications, the best approach
would be to run down existing risk management in place and find weak points that
may allow supply chain disruption to penetrate and impact the project negatively.
Weak points may come in the form of insufficient stockpiles prepared, relying solely
one a few suppliers and overusing of materials.
Identify backup suppliers
Like having backup plans, having backup suppliers may be helpful during
disruptions. Doing research and building healthy relationships with other suppliers
will ease the process as well as streamline the process. Another added benefit is the
ability to make different choices based on the needs of various projects.
As the project in the question is in Serian, Sarawak, identifying suppliers from
across the state is important to reduce costs as well as have easier access to them.
That way, options would be available to decide whether to import from overseas or
local manufacturers.
Diversify supply base
Just as identifying various suppliers is important, diversification towards other
venues is important. Assuming one part ships from one location, there is no harm in
finding another supplier of the same part, albeit different quality and costs, to reduce
in other shipping costs.
As iron steel is in shortage as shown in the question, it is possible to find other steel
manufacturer in Kuching or the entire Sarawak to use as backup, though this should
be done before the disruption.
Partner with a logistics expert
Getting a good logistics relationship is just as important as getting good suppliers.
When disruptions do occur, a good relationship with a logistics company ensures
that the process is up and running as soon as possible as their priority may be
shifted towards you. The added bonus would even be a reduction in logistic fees with
or without disruptions.
As a contractor, forming good relationship with a logistic company regardless of
projects is the first step to reducing the impact of supply chain disruptions. Who
knows? Maybe the logistic company may even offer discounts for this partnership. In
the case of the question, a good relationship with a logistic company may result in
them prioritizing us first once the earthquake has settled.
Adopt risk evaluation tools
With the rise in technology, Internet Of Things and Artificial Intelligence (AI), finding
the right risk evaluation tools for simulation of scenarios will definitely help predict
outcomes for one’s decisions. This may help avoid chain supply disruption entirely or
mitigate most of the negative impacts by aiding managers in making more impactful
decisions. One simple example would be weather forecast. Though it is not exactly a
risk evaluation tool, it may act as one as it help predict when supply chain disruption
may occur due to bad weather and allows for the appropriate response.
Following the question, using risk evaluation tools such as risk matrix or decision
tree may help in mitigating the earthquake supply chain disruption. By allow
managers to divert resource, as mentioned before, based on a laid out map of the
plan, the project may continue instead of facing delays due to shortages. This also
allows manager to properly choose the right path forward and so on until the supply
chain is restored.

Question 2
I will be providing the cause of delay to the project delivery by providing the following
points.

1. Delay due to Environmental risk sources: So, one the first reasons for
the cause of delay will be high seasonal rain leading to floods and
high tides China. Due to this extreme weather the material docking
and loading process on the ships has come to a halt as the ships
cannot be sailed in these conditions as it is unsafe. As China is our
leading manufacturer and importer of construction materials, we will
not be able to procure them on time which will create a delay in our
project delivery as there are materials especially steel which are very
specific to our project.

2. Delay due to organizational risk sources: Another reason for delay is

caused due to organizational risk sources. Due to labor strike in our
country the production and manufacturing of materials and works has
been slowed down and nearly come to a halt. This one factor has
been creating a lot of issue to our project as due to insufficient
manufacturing there has been a delay in procuring construction
materials which might halt work on site. Not only that but the strike
has also motivated our workers into halting leading to further delay as
some parts of the project cannot be started until the predecessor
 tasks are complete. Another reason for delay is caused due to
equipment failure on site. Some of the site equipment require
periodical servicing, both this and the labor strike are creating an
issue with continuity of works are it is becoming extremely difficult to
get the serviced as there are not service person available to carry out
the repairs.

3. Delay due to network related risk sources: And the final cause of
delay to project delivery is network related risk. Due to lack of
ownership or poor inventory control some of the already scarce
materials have become obsolete and have reached a condition where
they cannot be used, using these material will lead to reduction of
quality of the project and as we know it is difficult to procure materials
due to the labor strike and floods in China. Another issue arising in
this case is confusion in the specification of some materials. The
cement manufacturers have manufactured wrong grade of cement.
This issue was created due to poor communication between the
owner and the supplier. The labor strike taking place has also created
an increase in the cost of construction material which is taking a toll
on the construction budget. To reduce these over costs a new
procurement strategy has to be created to even out the budget.

These are some of the reasons and points leading to delay in the project delivery.

From the following points we can see how various factors affect the supply chain in
projects and how most of the issues are create a chain reaction which reduces the
efficiency of supply chain

Team Declaration
Name Signature Sections Contributed
Eden Voon Wu Qian Group Task 1 & 2

Riyyan Khan RIYYAN KHAN Group Task 1 & 2

References
Bhisey, R 2021, ‘U.S. Medical Device Outsourcing Market | Increasing Demand for
Medical Devices is estimated to bring Lucrative Opportunities | BioSpace’,
viewed 12 October, 2021, <https://www.biospace.com/article/u-s-medical-
device-outsourcing-market-increasing-demand-for-medical-devices-is-
estimated-to-bring-lucrative-opportunities/>.
Castenson, J 2021, ‘Time And Time Again, Solving Supply Chain Issues Circles
Back To One Thing’, viewed 12 October, 2021,
<https://www.forbes.com/sites/jennifercastenson/2021/09/27/time-and-time-
again-solving-supply-chain-issues-circles-back-to-one-thing/?
sh=683b6a5d5208>.
Meyer, S 2021, ‘7 Steps for Minimizing Supply Chain Disruptions + Prevention Tips’,
viewed 12 October, 2021, <https://www.bigcommerce.com/blog/supply-chain-
disruptions/#7-tactics-for-preparing-for-supply-chain-disruptions>.
TheNewYorkTimes 2021, ‘Construction Workers in Melbourne, Australia, Protest
Vaccine Mandate - The New York Times’, viewed 12 October, 2021,
<https://www.nytimes.com/2021/09/21/world/australia/australia-melbourne-
vaccine-mandate-protest.html>.
Willy C. Shih 2020, ‘Global Supply Chains in a Post-Pandemic World’, viewed 12
October, 2021, <https://hbr.org/2020/09/global-supply-chains-in-a-post-
pandemic-world>.
Yap, C-W, Boston, W & MacDonald, A 2021, ‘Global Supply-Chain Problems
Escalate, Threatening Economic Recovery - WSJ’, viewed 12 October, 2021,
<https://www.wsj.com/articles/supply-chain-issues-car-chip-shortage-covid-
manufacturing-global-economy-11633713877>.