RISK MANAGEMENT IN PINISI RELAXATION USING ANALYTICAL

HIERARCHY PROCESS

Wisnumurti Rahardjo

Presentation Roadmap

Background

Business Issue Exploration

Business Solution

Implementation Plan

12

34

Back

grou

nd “32% of startups fail in their first year operation, and 90% of the business failures were due to management inadequacy” W. Reynold 1994

Pinisi Relaxation established in September 2012

risk management handle events that already happened and possibly happen in the future

every decision must be taken appropriately based on its purpose and the capability of the company

Analytical Hierarchy Process could decompose the problem into sub-problems, which are easier to be analized independently

Busi

ness

Issu

e Ex

plor

ation

Establish Context

Identify Risk

Business Risk

Financial Risk

Operational Risk

Human Resource Risk

Market Risk

Monitor and R

eview

Business Issue

Analyse Risk

Evaluate Risk

Treat Risk

Com

mun

icat

e an

d C

onsu

lt

Business Implementation

Business Solution

Theory and Concept

Analytical Hierarchy Process

Busi

ness

Issu

e Ex

plor

ation

Business RiskDemand RiskCapacity RiskReputation RiskSocial Risk

Financial RiskPayment RiskAccounting RiskLiquidity RiskMacroeconomic Risk

Operational RiskRisk of ElectricityRisk of Water DischargedRisk of Broken DeviceRisk of Unavailable Raw MaterialsRisk of Unavailable Supporting ToolsRisk of Room CleanlinessHuman Resource Risk

Risk of Absent EmployeesRisk of Sick EmployeesRisk of Saturated EmployeesRisk of Employees CrimeSalary RiskRisk of Hijacked Employees

Marketing RiskPromotion RiskRisk of Customer Perception

RISK IDENTIFICATION

Busi

ness

Issu

e Ex

plor

ation

No Risk L C Total

1 Demand Risk 5 3 15

2 Capacity Risk 5 2 10

3 Reputation Risk 5 4 20

4 Social Risk 1 5 5

5 Payment risk 4 2 8

6 Accounting risk 5 3 15

7 Liquidity risk 3 5 15

8 Macroeconomic risk 2 3 6

9 Risk of electricity 2 5 10

10 Risk of water discharged 2 4 8

11 Risk of broken instruments 3 4 12

12 Risk of unavailability raw materials 4 5 20

13 Risk of unavailability supporting tools 4 5 20

Likelihood Level Description Explanation

1 Rare Happen yearly or above2 Unlikely Happen every 6 month3 Moderate Happen monthly4 Likely Happen weekly5 Almost certain Happen everyday

ConsequencesScore Description Explanation

1 Insignificant Decrease service level to customers2 Minor Lost sales or cost less than IDR 1.000.000 3 Moderate Lost sales or cost more than IDR 1.000.0004 Major Damage company’s image5 Catastrophic The company stop running

No Risk L C Total

14 Risk of room cleanliness 5 1 5

15 Risk of absent employees 4 2 8

16 Risk of sick employees 4 3 12

17 Risk of saturated employee 5 1 5

18 Risk of employees crime 5 5 25

19 Salary risk 2 4 8

20 Risk of hijacked employees 3 3 9

21 Promotion risk 3 3 9

22 Risk of customer perception 3 2 6

RISK ANALYSIS

Busi

ness

Issu

e Ex

plor

ation RISK ANALYSIS

Score Category1 – 4 Low risk5 – 9 Moderate risk10 – 16 High risk17 – 25 Extreme risk

C

o

n

s

e

q

u

e

n

c

e

s

4 9 7 12, 13 18

10, 19 11 3

8 20, 21 16 1, 6

22 15 2, 14

5, 17

Likelihood

No Risk

1 Demand Risk

2 Capacity Risk

3 Reputation Risk

4 Social Risk

5 Payment risk

6 Accounting risk

7 Liquidity risk

8 Macroeconomic risk

9 Risk of electricity

10 Risk of water discharged

11 Risk of broken instruments

12 Risk of unavailability raw materials

13 Risk of unavailability supporting tools

14 Risk of room cleanliness

15 Risk of absent employees

16 Risk of sick employees

17 Risk of saturated employee

18 Risk of employees crime

19 Salary risk

20 Risk of hijacked employees

21 Promotion risk

22 Risk of customer perception

Busi

ness

Issu

e Ex

plor

ation Analytical Hierarchy Process

Pairwise ComparisonCost Effectiveness Time

Cost 1 3 5Effectiveness 1/3 1 3Time 1/5 1/3 1

Cost Effectiveness Time Normalized EigenvectorCost 0.65 0.69 0.56 0.63

Effectiveness 0.22 0.23 0.33 0.26

Time 0.13 0.08 0.11 0.11

Best alternative

Time (0.11)Effectiveness (0.26)Cost (0.63)

Alternative 2 Alternative 3Alternative 1

Busi

ness

Sol

ution

Risk AlternativesCost

Effectiveness

Time

Weighted Score

Demand RiskCooperate with tour agent 4 5 4 4.26Price promotion in a certain time 5 3 4 4.37Become other company's incentive 3 5 2 3.41

Capacity RiskIncrease room capacity 3 5 5 3.74Develop reservation system 5 3 3 4.26More comfortable waiting room 4 4 4 4.00

Reputation RiskAsk customer’s body condition 5 4 5 4.74Therapist training periodically 4 4 4 4.00Tell the impact of treatment to the customers 5 3 5 4.48

Social RiskChanging the name of the company when something goes wrong 3 5 3 3.52Cooperate with the media 4 3 5 3.85Relationships with nearby residents 5 4 3 4.52

Payment riskProvide additional payment methods 5 4 4 4.63Upfront payment 5 3 5 4.48Double check the price list 5 3 5 4.48

Accounting riskManual and computer bookkeeping 5 4 4 4.63Daily data online checking 5 4 5 4.74The use of accounting software 3 5 5 3.74

Risk AlternativesCost

Effectiveness

Time

Weighted Score

Liquidity riskWeekly payment plan 5 4 5 4.74Reserved cash 5 4 5 4.74Contract with supplier 4 5 4 4.26

Macroeconomic riskPeriodically increase the price 5 3 4 4.37Eliminate unimportant cost 5 4 5 4.74Contract with supplier 5 5 4 4.89

Risk of electricityBuy electricity resource 3 5 5 3.74Use devices that do not use electricity 4 2 5 3.59Discount when the electricity off 4 3 5 4.48

Risk of water dischargedBuy bigger water reserve 3 5 4 3.63Use drinking water 4 4 5 4.11Periodically checking water 5 2 4 4.11

Risk of broken devicesReserve more devices 3 5 5 3.74Skip the treatment process 5 2 5 4.22Warranty contract with supplier 4 3 3 3.63

Risk of unavailability raw materials

Add safety stock 4 5 5 4.37Use substitute raw materials 3 4 5 3.48Raw materials checking periodically 5 3 4 4.37

Busi

ness

Sol

ution

Risk AlternativesCost

Effectiveness

Time

Weighted Score

Risk of unavailability supporting tools

Add safety stock 4 5 4 4.26Use supporting tools already used 5 4 5 4.74Supporting tools checking periodically 5 3 4 4.37

Risk of room finenessScheduling and checking of employees room duty 5 4 4 4.63Periodically checking the condition of the room 5 4 4 4.63Setting standards of cleanliness 5 4 4 4.63

Risk of employee’s absentFines on employee absenteeism 5 4 4 4.63Exchange off schedule 5 5 4 4.89Recruite part-time employees 3 4 3 3.26

Risk of sick employeesProvision of healthcare money per month 3 5 5 3.74Periodic health checks 3 4 5 3.48Provide common medicines for employees 4 3 5 3.85

Risk of saturated employeeProvide entertainment facilities for employees 4 4 5 4.11Conduct an annual holiday for all employees 3 5 3 3.52Giving training to employees 4 5 4 4.26

Busi

ness

Sol

ution

Risk AlternativesCost

Effectiveness

Time

Weighted Score

Risk of employees crime

Put the customer's valuable things on locker 3 5 5 3.74Put the employee charge into the court despite of company 4 3 3 3.63Valuable belonging is not company’s responsibility 5 4 4 4.63

Salary riskIncrease the percentage variable salary 4 5 5 4.37Conduct overtime 4 5 5 4.37Adding monthly bonus salary 5 5 4 4.89

Risk of hijacked employees

Contract with the employees 5 3 4 4.37Standardize massage technique 4 3 4 3.74Get in touch with employees 5 5 3 4.78

Promotion riskSignpost names and pictures in the street 3 4 5 3.48Radio advertisement 3 4 3 3.26Cooperate with other business field 5 4 3 4.52

Risk of customer perception

Do the black list of the customer 5 3 5 4.48Add the same gender service concept in each media 5 4 5 4.74Finish treatment earlier 5 3 5 4.48

Busi

ness

Sol

ution

Impl

emen

tatio

n Pl

an

Ask customers’ body condition and complain before treatment

Check the condition of the rooms before treatment

Tell the customers to take responsibility of their belongings

Use drinking water if there is no water available

Skip treatment process that couldn’t be proceed with drinking water when the water is not available

Use supporting tools that already used when the supporting tools are unavailable

Therapist for customers

Impl

emen

tatio

n Pl

an

Ask the payment before treatment

Double check the price

Ask the customers to use EDC if there is no charge available

Tell the recent promotion available

Tell the therapist’s name that handle the customer

Tell the customers that they can do reservation for the next treatment

Receptionist for customers

Tell the customers to take responsibility of their belongings

Impl

emen

tatio

n Pl

an

Take responsibility of environment cleanliness

Check the raw material inventory

Check water condition

Do room duty as scheduled and meet the standard of cleanliness

Exchange off schedule when there is an important activity outside the therapist’s off schedule

Buy medicines if the condition of body is not fine

Employees for non-customers

Impl

emen

tatio

n Pl

an

Daily creation of data record

Payment forecast per week

Check contract with supplier

Monthly financial report

Accounting / Branch Manager for non-customers

Impl

emen

tatio

n Pl

an

Cooperation with other business field by exchange promotions

Cooperation with tour agents or tour leaders

Promotion based on the lowest average customer arrival time

Prepare discounts when electricity is off

Owners or Branch Manager

Add same gender service in flyer and brochures

Give discounts for nearby residents

Control the bonus for employees

Control the cleanliness

Scheduling holiday for owners and employees

Giving yearly training for employees

Adding EDC machine

THANK YOU

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