Question 3

Read the case study, and then complete the question that follow.

Case study

PolyVeya Pty Ltd is a publically listed Queensland-based plastic forming company that makes components for the auto motive industry. It is well established in Coolangatta and has just finished upgrading to a new warehouse and forming machinery that will allow it to take on extra capacity. It has 250 staff.

The board of PolyVeya Pty Ltd has approached several large boat builders with the intention of expanding into marine plastics, a relatively mature sector. The approaches are well received, with some reservations regarding the company's experience in the salty, high-UV marine environment. PolyVeya is well financed (underwritten) but is carrying some debt and has minimal cash reserves. There is a qulity leadership team in place, but it has little experience with marine plastics.

The risk management team at PolyVeya Pty Ltd conducted a risk assessment and found several areas of risk that could affect its move into the new market. These include:

Technology risk - although they have upgraded their plant, is it suited to marine plastics?

Product risk - will the products from the new player be embraced by the market?

Financial risk - with minimal recerves and some debt from the upgrades, if they are unable to produce a competitive product quickly, they mat face financial difficulties.

Reputation risk - what effect will the move to diversify have on their brand?

Commercial/market risk - given they are moving into a saturated market, how will they perform?

Management risk - does management have sufficient experience to be able to adjust should the marine sector reject their new product?