Operative Risk Analysis of Industrial Small and medium Enterprises

Operational Risk Analysis of Industrial Small and Mediun

Enterprises - SMEs

Jorge A. Restrepo, M.Sc. Ph. D (c). Jairo Ángel Díaz. M.Sc. (c).

Beatriz Mora M.Sc. (c).

Opinion Survey Joint Industrial - OSJI – Antioquia Ind. make up 20% total C.I.M. and 32% of nontraditional exports. Antioquia represent 22% total employment ->population -> 13% country's. Imports displayed a large growth-> 11.9% U.S.$4,8M. Most relevant data comes in nontraditional export increased->U.S.$4,5M. up 31.1%.

Different authors M. Castillo (2008), Jorion (2000), JP Morgan. (2011), Medina (2006), Sturm P. (2013) presents the following classification:

Ris

k M

anag

emen

t Operative Risk

Financial Risk

Reputational Risk

Risk High Severity

Phases of the analytical hierarchy process according to Saaty (1980, 1994) illustrated with the Brunswikian lens model adapted from Scholz and Tietje (2002).

A B

More

Important Intensify

1

Profitability - Pro

Eff A 4

2 Deb A 4

3 Via B 2

4 Liq A 4

5

7

1

Efficiency - Eff

Deb A 5

2 Via B 4

3 Liq A 5

4

5

6

1

Indebtedness -

Deb

Via B 9

2 Liq A 2

3

4

5

1

Viability - Via

Liq A 7

2

3

4

Paired comparisons using AHP Technique

1 = Indifferent 3 = moderately

Preferred

5 = Strong

degree of

preference

7 = Very strong

preference

9 = Extremely

preferred

AHP Pro Eff Ded Via Liq

Pro 1 4 4 ½ 4

Eff 1/4 1 5 ¼ 5

Deb 1/4 1/5 1 1/9 2

Via 2 4 9 1 7

Liq 1/4 1/5 ½ 1/7 1 Normalized Principal Eigenvector

SUM(col) 3,75 9,4 19,5 2,0039 19 1ra 5a

Pro 0,26667 0,4255 0,2051 0,2495 0,21053 27% 27%

Eff 0,06667 0,1063 0,2564 0,1247 0,26316 16% 12%

Deb 0,06667 0,0212 0,0512 0,0554 0,10526 6% 6%

Via 0,53333 0,4255 0,4615 0,4990 0,36842 46% 49%

Liq 0,06667 0,0212 0,0256 0,0712 0,05263 5% 6%

Lambda 1,0157 1,1525 1,1126 0,9805 1,1434 5,405 Principal Eigenvalue

N 5 CI 0,101

CR 9,0% Consistency

N 1 2 3 4 5 6 7 8 9

RI 0,00 0,00 0,58 0,90 1,12 1,24 1,32 1,41 1,45

Check

5,405

l*I

5,405

5,405

5,405

5,405

A-l*I

-4,4 4,0 4,0 0,5 4,0

0,3 -4,4 5,0 0,3 5,0

0,3 0,2 -4,4 0,1 2,0

2,0 4,0 9,0 -4,4 7,0

0,3 0,2 0,5 0,1 -4,4

(A-l*I)x 0,01 0,01 0,01 0,01 0,01

0,24 0,24 0,24 0,24 0,24

0,02 0,02 0,02 0,02 0,02

-0,19 -0,19 -0,19 -0,19 -0,19

-0,07 -0,07 -0,07 -0,07 -0,07

Indices

PROFITABILITY

Gross Margin (%)

Operating margin (%)

Net margin (%)

Return / Equity (ROI) (%)

EFFICIENCY

Asset Turnover (times)

Portfolio turnover (days)

Rotation suppliers (days)

Inventory turnover (days)

Operating cycle (days)

DEBT

Debt to equity ratio (%)

Financial obligations / liabilities (%)

Total Liabilities / Sales (%)

Current Liabilities / Total Liabilities (%)

VIABILITY

Ebitda (MLL)

EBITDA / Sales (%)

Sales / Financial duties (sometimes)

LIQUIDITY

Current ratio (times)

Acid test (times)

Working capital (MLL)

𝑹𝒐 = 𝑾𝒋𝒏𝒊=𝟏 𝑿𝒊𝒎

𝒋=𝟏 Equation

1. Where: J = 1-5 represents the major indices: profitability, leverage, efficiency, viability and liquidity I = 1 to 19, represents the two level indices summarized in Table

Profitability 22,3%

Efficiency 12,7%

Indebtedness 6,0%

Viability 52,7%

Liquidity 6,4%

-10%

-5%

0%

5%

10%

1 2 3 4 5 6 7 8

Gross Margin (%)

Gross Margin (%)Forecast (exponential smoothing)

-10%

-5%

0%

5%

10%

1 2 3 4 5 6 7 8 9

Gross Margin (%)

Gross Margin (%)Forecast (double exponential smoothing)

-40,00%

-20,00%

0,00%

20,00%

40,00%

1 2 3 4 5 6 7 8 9


Operating margin (%)Forecast (exponential smoothing)

-40,00%

-20,00%

0,00%

20,00%

40,00%

1 2 3 4 5 6 7 8 9


-40,00%

-20,00%

0,00%

20,00%

40,00%

60,00%

1 2 3 4 5 6 7 8 9

Net margin (%)

Net margin (%) Forecast (exponential smoothing)

-50,00%

0,00%

50,00%

1 2 3 4 5 6 7 8 9

Net margin (%)

Net margin (%) Forecast (double exponential smoothing)

-50,00%

0,00%

50,00%

100,00%

1 2 3 4 5 6 7 8 9


Return / Equity (ROI) (%) Forecast (exponential smoothing)

-40,00%

-20,00%

0,00%

20,00%

40,00%

60,00%

1 2 3 4 5 6 7 8 9


Return / Equity (ROI) (%) Forecast (double exponential smoothing)

Periods 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Indices Percentage Growth Period 2000-2009

PROFITABILITY

Gross Margin (%) -1,62% -0,03% -7,42% 5,75% 2,75% -2,70% 1,42% -7,96% -4,84%

Gross Margin (%)Forecast (exponential

smoothing) -1,62% -1,38% -2,31% -1,07% -0,48% -0,82% -0,47% -1,63%

e^2 0,03% 0,37% 0,65% 0,15% 0,05% 0,05% 0,56% 0,10%

Gross Margin (%)Forecast (double exponential

smoothing) -1,62% -1,97% -0,45% -7,52% 4,13% 3,64% -1,92% 1,01% -7,74%

Lt (Estimating orderly) -1,62% -1,97% -0,45% -7,52% 4,13% 3,64% -1,92% 1,01% -7,74%

Estimating the slope 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00% 0,00%

e^2 0,00% 0,04% 0,49% 1,76% 0,02% 0,40% 0,11% 0,80% 0,08%

Operating margin (%) -12,15% 23,07% -25,88% 21,10% 8,47% 5,33% 1,08% 7,49% -22,56%

Operating margin (%)Forecast (exponential

smoothing) -12,15% -12,15% -12,15% -12,15% -12,15% -12,15% -12,15% -12,15%

e^2 12,41% 1,89% 11,05% 4,25% 3,05% 1,75% 3,86% 1,08%

Operating margin (%)Forecast (double

exponential smoothing) -12,15% -12,15% 23,07% -25,88% 21,10% 8,47% 5,33% 1,08% 7,49%

Lt (Estimating orderly) -12,15% -12,15% 23,07% -25,88% 21,10% 8,47% 5,33% 1,08% 7,49%


e^2 0,00% 12,41% 23,96% 22,07% 1,59% 0,10% 0,18% 0,41% 9,03%

Net margin (%) 46,29% 8,14% -22,26% 31,12% 9,68% 18,94% 1,54% 0,69% -23,43%

Net margin (%) Forecast (exponential smoothing) 46,29% 33,61% 15,04% 20,38% 16,83% 17,53% 12,22% 8,39%

e^2 14,55% 31,22% 2,59% 1,14% 0,04% 2,56% 1,33% 10,12%

Net margin (%) Forecast (double exponential

smoothing) 46,29% 46,29% 8,14% -22,26% 31,12% 9,68% 18,94% 1,54% 0,69%

Lt (Estimating orderly) 46,29% 46,29% 8,14% -22,26% 31,12% 9,68% 18,94% 1,54% 0,69%


e^2 0,00% 14,55% 9,24% 28,50% 4,59% 0,86% 3,03% 0,01% 5,82%

Return / Equity (ROI) (%) 49,35% 1,93% -22,16% 31,42% 9,37% 21,80% 1,90% 7,11% -31,51%

Return / Equity (ROI) (%) Forecast (exponential

smoothing) 49,35% 34,50% 16,76% 21,35% 17,60% 18,91% 13,59% 11,56%

e^2 22,48% 32,11% 2,15% 1,44% 0,18% 2,89% 0,42% 18,55%

Return / Equity (ROI) (%) Forecast (double

exponential smoothing) 49,35% 49,35% 1,93% -22,16% 31,42% 9,37% 21,80% 1,90% 7,11%

Lt (Estimating orderly) 49,35% 49,35% 1,93% -22,16% 31,42% 9,37% 21,80% 1,90% 7,11%


e^2 0,00% 22,48% 5,81% 28,72% 4,86% 1,54% 3,96% 0,27% 14,92%

Major Indices Level 1 Secondary Indices Level 2

Name Industry

Risk

Company

Risk

Company vs

Industry

Weight

AHP Name Ratio

Historic Value Risk

without Weighted

Historic Value Risk

Weighted Value Risk

Weight AHP Industry Company Industry Company Company vs

Industry

Profitability

97,4% 95,5%

22,3%

Gross Margin (%) 8,7% 222,6% 215,0% 19,3% 18,7% -3,5%

-1,9% Operating margin (%) 9,5% 170,8% 165,0% 16,1% 15,6% -3,4%

Major Net margin (%) 9,4% 222,4% 225,0% 21,0% 21,2% 1,2%

Industry Return / Equity (ROI) (%) 19,9% 205,6% 201,0% 40,9% 40,0% -2,3%

Return of Assets 52,5% 194,1% 190,0% 101,9% 99,8% -2,1%

Efficiency

178,0% 168,2%

-5,7%

12,7%

Asset Turnover (times) 30,7% 0,0% 1,0% 0,0% 0,3% 460,5%

Portfolio turnover (days) 13,2% 172,6% 155,0% 22,8% 20,5% -10,7%

Minor Rotation suppliers (days) 15,3% 367,7% 350,0% 56,4% 53,7% -4,9%

Industry Inventory turnover (days) 9,1% 262,8% 250,0% 24,0% 22,8% -5,0%

Operating cycle (days) 31,6% 236,5% 224,0% 74,8% 70,8% -5,4%

Indebtedness

189,1% 191,1%

1,0%

6,0%

Debt to equity ratio (%) 64,5% 183,9% 186,0% 118,6% 119,9% 1,2%

Major Financial obligations /

liabilities (%) 8,2% 253,3% 245,0% 20,9% 20,2% -3,3%

Industry

Total Liabilities / Sales (%) 13,2% 177,3% 187,0% 23,3% 24,6% 5,3%

Current Liabilities / Total

Liabilities (%) 14,1% 186,8% 187,0% 26,4% 26,4% 0,1%

Viability

147,8% 143,5%

-3,0%

52,7%

Ebitda (MLL) 78,2% 137,4% 145,0% 107,4% 113,4% 5,4%

Minor EBITDA / Sales (%) 12,6% 140,8% 138,0% 17,8% 17,4% -2,0%

Industry Sales / Financial

obligations (times) 9,2% 246,3% 138,0% 22,7% 12,7% -57,9%

Liquidity

181,5% 174,5%

-3,9%

6,4%

Current ratio (times) 12,7% 168,0% 152,0% 21,3% 19,3% -10,0%

Minor Acid test (times) 70,5% 208,3% 204,0% 146,8% 143,8% -2,1%

Industry Working capital (MLL) 16,8% 79,6% 68,0% 13,4% 11,4% -15,8%

Operative Risk 145,0% 140,8% -3,0% 100,0% Kind of Risk= minor Industry

Name Industry

Risk

Company

Risk

Company vs

Industry

Weighted

AHP

Profitability 97,4% 95,5% -1,94% 22,3%

Efficiency 178,0% 168,2% -5,70% 12,7%

Indebtedness 189,1% 191,1% 1,05% 6,0%

Viability 147,8% 143,5% -2,99% 52,7%

Liquidity 181,5% 174,5% -3,93% 6,4%

0,0%

50,0%

100,0%

150,0%

200,0%

250,0%

300,0%

350,0%

400,0%Gross Margin (%)


Net margin (%)


Return of Assets

Asset Turnover (times)

Portfolio turnover (days)

Rotation suppliers (days)

Inventory turnover (days)

Operating cycle (days)

Debt to equity ratio (%)

Financial obligations /liabilities (%)

Total Liabilities / Sales (%)

Current Liabilities / TotalLiabilities (%)

Ebitda (MLL)

EBITDA / Sales (%)

Sales / Financial obligations(times)

Current ratio (times)

Acid test (times)

Working capital (MLL)

Industry Company

Thanks

Operative Risk Analysis of Industrial Small and medium Enterprises

Business

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