Thompson Steel (TS) is a major producer of iron and steel powders, with sales in more than 25 countries throughout the world. Its product lines serve all major fields of application: manufacturing parts for the automotive, appliance, electric tool, and lawn and garden industries; welding and alloying; reprography; and the food industry. TS was formed in 1968 to manufacture iron powder from the high-purity iron produced by another division of the group. It is owned by International Iron Inc., one of the largest minerals and metals companies in the world, which has its bead office in the United States. The mission of TS is to meet and exceed customers’ specifications through a total quality system. The company constantly puts new products on the market to meet the evolving requirements of the industry. The company has had several problems in the past in meeting the environmental requirements for its industrial waste. The environment department and ecological groups have also complained that the company has polluted the river and caused environmental damage during the last decade. Management’s relationship with its employees and their union have always been tense. The company is thinking about closing its plant and outsourcing its production to vendors located in South America. This option would involve transferring some technological knowledge to vendors and increasing transportation costs, but would enable the company to reduce toxic waste in Canada.

Required 

The president of the company is aware that there are some risks associated with the decision to outsource the production to South America. To help him make a decision, he has asked you, the director of the management audit department, to prepare some discussion notes to assist in the decision and subsequent control should the decision be made. Those notes should:

a) A Risk Assessment Matrix (score 9: High; 5: Medium; 1: Low) to identify and prioritize the risks that TS will be exposed to if it decides to outsource its production to South America.

b) Provide an example of 4 Responses an organization can take toward a risk. List the Responses; for each of the risks you identified in part A (above) briefly describe a Response & Example that could be applied to it.

c) State the scope and the objectives for a management audit of TS’s manufacturing activities in South America, if it decides to outsource its production.

d) State the criteria to use for evaluating TS’s efforts to address each risk, if it decides to outsource its production.