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nternal and External Business Risk’s Facing Kimball Electronics
“There are two important factors which jointly determine the failure rate of businesses in the economy. The first is internal – the effectiveness of management and the second is external – the general economic environment” (Everett, 1998). These two factors are essential because the business survival rate in the U.S. is meager. If a business owner does not continually analyze their risks, they should not be shocked when their business hits unexpected roadblocks and challenges. In my office, we are continually analyzing the future and preparing contingency plans for unexpected factors. An effective business owner should be playing offense by innovating new products and playing defense to protect and preserve the products and revenue they have already made. Analysts consider the critical external factors that affect value, such as interest rates, inflation, technological changes, dependence on natural resources, and legislation” (Hitchner, 2017).
Kimball electronics has many external risk factors such as economic uncertainty, customer bankruptcy, competitive environment, lack of suppliers. With economic uncertainty, KE must continually monitor the economic climate to accept commitments when things are up and reduce workload obligation when it is down. Customer bankruptcy ties into the economy because unknown factors such as the pandemic could cause their customers to go bankrupt and leave KE with reimbursement for their job. The competitive environment of this space means that KE has to invest a lot of time and money into R&D in hopes that it pays off in the long run when they outdo their competitors in innovation. Also, when it comes to things like the pandemic, this reduces suppliers’ ability to ship products and materials to KE. This may even cost them more because of the reduction in boats coming from China, and planes being able to fly.
“When we look out into the future there is a myriad of possibilities: there can be no comprehension of this in its totality. So our ﬁrst step is to simplify in a way that enables us to make choices amidst all the uncertainty.” (Anderson, 2014). Some of the internal risk factors are asset impairment, cybersecurity, intellectual property, and insurance inefficiencies. Kimball electronics maintains a lot of production equipment that requires routine maintenance. If a piece of equipment or technology system goes down, this can cost them time and money until the asset is repaired. They also have to ensure they are staying current with cybersecurity and intellectual property because they produce items for some large companies. These companies want to feel worry-free when it comes to their proprietary ideas being stolen. Lastly, they have to worry about other companies suing them for making similar intellectual property and having a solid legal team that can review everything.
Just like any company, Kimball electronics faces a lot of internal and external risks. The key is being able to track them and plan for when things go wrong accurately. Kimball electronics even has an entire section dedicated to compliance. Companies from small to large all do this and even have to report such items to their shareholders.
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