College of Business Administration

Operational Risk Management Case Study: Bon

Boulangerie
Borja, Jill Galarpe, Jim Roy
Calimlim, Niccolo Griego, Jubilee
Covarrubia, Isabelle Mercader, Joan
Elizar, Alaine Palpallatoc, Aila
Elnar, Mary

Risk Management
First Semester, 2019-2020
 TABLE OF CONTENTS

1. BACKGROUND OF THE COMPANY/CASE

2. VIEWPOINT/POINT OF VIEW

3. TIME CONTEXT

4. CASE ANALYSIS PROCESS

4.1.1. STATEMENT OF THE PROBLEM

4.1.2. STATEMENT OF OBJECTIVES

4.1.3. AREAS OF CONSIDERATION (SWOT ANALYSIS)

4.1.4. ASSUMPTIONS

4.1.5. ALTERNATIVE COURSE OF ACTION (ACA)

4.1.6. ANALYSIS

4.1.7. CONCLUSION

4.1.8. PLAN OF ACTION

4.1.9. RISK ASSESSMENT PLAN

  BACKGROUND OF THE COMPANY/CASE

Bon Boulangerie is a bakery business located in Oakville. Which Ray Pane, purchased the
business three (3) years ago which he plans to expand its structures and its territory to maximize
and utilize the target market. It consisted of a single site with baking facilities and a retail store
and café. He also began a new line of business, wholesaling to a local restaurants and high-end
grocery stores within a 20-kilometer radius of the bakery.

 VIEWPOINT

Bon Boulangerie has a plan of expanding the company itself to compete completely with other
company who has the same product by increase of the territorial spot of the bakery. Since, the
bakery now has competed with the well-known pastries businesses. The purpose is that the bakery
should now increase the range than the usual range which it gives more impact and of course be
recognized by the consumer itself.

 TIME CONTEXT

 Ray Pane, purchased the business three (3) years ago.

 Began to change and expand product offering.

 He also began a new line of business, wholesaling to a local restaurants and high-end
grocery stores within a 20-kilometer radius of the bakery.
  STATEMENT OF THE PROBLEM

o What are the main operational targets for the wholesale business line of Ray?

o How does the strategic drive of Ray translate to the operational level of the
business?

o What are the internal and external factors that need to be considered to achieve
operational success?

o What are the risk variables behind the uncertainty around achieving operational
goals of the company?

o How large those risk variables may impact the overall business of Ray?

o What are the significant factors on which Ray should focus his attention to manage
the operational risks associated with the new facility?

o How appropriate the company can obtain that they can put into reality the forecast
outcome for the next 3 years of the business in regards to risk associated with it?

 STATEMENT OF OBJECTIVES

In this case Ray Pane wants to expand the product that the business offers into wholesale to
distribute some local restaurants and luxurious grocery store near the bakery which he owns to
gain more sales. The strategy that Ray Pane thinking was quit good for his income but it will take
him more years to be financial stable and there will be an obligatory to raise the level of product
development, marketing, sales, and distribution. Therefore, Ray Pane purpose is to be a successful
entrepreneur and make his business to be known and to make good deal into market place across
the entire Toronto area.

Bon Boulangerie bakery’s goal is to establish multiple streams of income for his bakery. He
thinks that being too dependent on one market can leave the bakery vulnerable to downturns or a
catastrophic loss. Since pane business is quit expanding into wholesaling, his enterprise should
build a strong reputation among competitors and develop the business product, these sales may
cost more in the long-run by compromising bakery’s reputation. Develop a specialty, and practice
until he become an expert.
 AREAS OF CONSIDERATION (SWOT ANALYSIS)

A. Strengths and Weaknesses

Strengths:
 The owner hired a full time vice-president who will supervise the sales and
marketing of the company
 He also hired a full time distribution manager to be able to focus on the delivery
of the product.
 The company can expand in just short period of time (three years).
 The net income for the first three years of the company is continuing growing
over the years.
 The company knows the flow of their net income over the years.

Weaknesses:
 It took several years to add new wholesale customers and wholesale products so
there will be unutilized spaces in the new facility.
 There are a lot of competitors with the same products.

B. Opportunities and Threats

Opportunities:
 The owner changes and expand the product offerings to be able to increase the
volume of sales and margins.
 The company sells wholesale products to be distributed to different high-end
grocery stores.
 The ability to offer competitive products for the bigger market.

Threats:
 In the expansion that the company did, they need to expand or increase the level
of: product development, marketing, sales, and distribution. Which the company
didn’t meet at the first year of their expansion.
 Bigger company that offers the same product.
 There are a lot of bigger companies with the same category of products that also
distribute in high-end groceries stores.
  ASSUMPTIONS

In year 4, Bon Boulangerie will open their new baking facility. When Bon Boulangerie
expands their operation, the production of goods will increase, assuming that it can cater more
wholesalers and fulfill the demand of the market. The expansion in operation will need more
workers in production and in distribution, assuming that it can give employment. Opening a new
baking facility will challenge the company to increase their sales/ profit, assuming that it will
require an increased level of product development, marketing, sales and distribution.

 ALTERNATIVE COURSE OF ACTION

 The Bon Boulangerie will have their new facility but it will be unutilized capacity
because for Bon Boulangerie it will take several years to add new wholesale customers
and wholesale products. So, the action that they need for them to have an income to
their unutilized new facility is to make it available for lease.

 Since, Bon Boulangerie can already compete with bigger / different company with
same product, or bigger company with the same category in high-end groceries stores
in the area, the company can also sell their products beyond the boundary of their area,
or outside of the city to have bigger income.

 Bon Boulangerie company could add some of workers due to its growing status, the
old employees can be superior to them and help the new ones to grow along in their
company.

 ANALYSIS

 Since the Bon Boulangerie are planning to expand its own structure. The possible is
the production could now create more product than the usual. The name itself will also
be more recognized by their target market and can compete to other company. Having
the expansion means they will have more manpower and more equipment that they will
able to assist its own employees. As stated, it will create more employment opportunity
of the unemployed ones. That is the advantage of having expansion of the Bon
Boulangerie.
  The disadvantage one would be the increase the operational cost because again, the
expansion meaning they will add more facilities would increase its costs. The cost for
expansion are pricey. Even in buying new equipments for the production itself. The
resources would also increase because they are now expanding the company itself.
Also, having expansion meaning the number of the employees would increase.

 CONCLUSION

o At the beginning, the bakery has been successful in business as a retail, however,
based on the market research of its retail and cafe clientele it can be further
expanded by introducing a new line of business; wholesale. For the first year in the
business operations regarding wholesaling, it was expected that the profits will
decline as the locals are familiarizing themselves with this idea. By hiring
competent employees and leasing for a separate baking facility is a favorable
strategy; foe they can better focus in making the new line of business successful
while also being managed by employees who knows what to do in regards to
creating a favorable impression on the business.

o The idea of wholesale was brilliant, a lot of restaurants and other retailers have been
availing this good opportunity for ease of work and cost effectiveness; and by its
third year, the profits have tripled, as per Ray's expectation when he first thought
of the idea. Currently, it is still being improved by lessening the shipping cost and
operating expenses.

 PLAN OF ACTION
*To prevent harm in unutilized new facilities they must have a seminar or attend some
seminars to have utilized new facilities this could help in decision making and make a
better plan for the company performance.

*There is no easy way to get right away a good income, so to avoid waste of product they
may produce or release a product depends to the demand of a customers outside their
boundary area

*The addition of workers could lead to risk because people may take advantage of it so as
an action for this the HR must know well the applicant through a discipline and refined
interview made by them.
  RISK ASSESSMENT PLAN

RISK CONTROL LIKELIHOOD JUSTIFICATION CONSEQUENCES JUSTIFICATION RISK RISK

IDENTIFIED AVAILABLE (A) (B) LEVEL TREATMENT
(A*B)
Operational Cost Cutting 4 Company will 2 Company will 8 Transfer
Cost occur operational have
cost in a month approximately a
for its expenses. 50K – 1M loss
for financial for
its operating
expenses
Increase of Hiring of 2 Since company 3 Increase of 6 Accept
Employees employees trying to expand Employees will
limitation its business, now improve of
meaning that they its productivity at
would need to least 50%
hire more workers
Maintenance Buying High 3 Maintaining the 1 Loss will 3 Enhance/
of Equipment Qualities of quality of occurred at least Mitigate
Equipment equipment once a 50k – 500k for
Parts year needed to maintenance
secure the safety
of the employees
Operation Materials to 4 Company would 3 The productivity 12 Avoid
On-Going be used in shoulder any of goods still
while on the construction liabilities and produce but not
process of should be damages for the the usual
expansion optimized employees