Question

• Please respond to each of the essay questions in the spaces provided below.
• Each question has a table which provides a list of terms that may or may not be applicable to your answer. For those terms that are relevant please incorporate these terms (and others that you feel are relevant) into your answer/response in a context that demonstrates that you understand the term thoroughly.
• Also, please cross out those terms in the table that you feel do not apply to the essay question.

questions: Senior Management has listened to your concerns regarding concentration risk and learned something that is startling – the fact that while your firm has 120 customers, 40% of the firm’s top line sales revenue is based on sales to 5 customers. They are alarmed and now putting it back on you to determine if this a risk, let alone a major risk. Knowing only this 40% concentration fact, what probing would you do, what questions would you need to have answered to determine if this is a risk at all, let alone a significant risk to the firm.

list of terms:

Tangible Assets

Risk Appetite

Pricing Analysis

Customer Contractual Agreements

Organizational Resilience

Business Interruption Insurance

Risk Assessment

The BCG Model

Market Projections

The 80% Myth

Customer Diversification

Porter’s Five Forces

Answer 1

The following is the answer based on the terms specified:

Tangible Assets- The allocation of the asset for the manufacturing of the product sold to top 5 customer needs to be analyzed. if the allocation is more on top 5 customer, the same needs to be relieved for use on other customers manufacturing.

Risk Appetite- If the risk appetite is more, the company can continue to sell 40 % sales to top 5 customer and vice versa.

Pricing Analysis- pricing needs to be analyzed for the top 5 customer. if the pricing is cheap for them the company can continue manufacturing the same.

Customer Contractual Agreements- customer contractual agreements needs to be seen, how much is the commitment to them.

Organizational Resilience- Not relevant

Business Interruption Insurance- Insurance can be occupied if the company expects business will be affected due to concentered supply.

Risk Assessment- Risk of any contingency needs to be assesed if any customer would face a downfall.

The BCG Model- Not relevant

Market Projections- Projection for demand needs to be assesed whether the same exist with the customer other than top 5.

The 80% Myth- The company needs to study whether there is actually any demand by the other company also of its product.

Customer Diversification- Diversification can be used as a tool to save itself by the company against any economic disruption.

Porter’s Five Forces- Not relevant.