Occurrence of Risks in Relation to Economic and Legal Implications

Table of Contents

TOC o “1-3” h z u 1. Introduction PAGEREF _Toc86414272 h 22. Occurrence of Risks in Relation to Economic and Legal Implications PAGEREF _Toc86414273 h 22.1 Definition of Risk PAGEREF _Toc86414274 h 22.2 Difference between Risk and Uncertainties PAGEREF _Toc86414275 h 22.3 Origins and Nature of Risks PAGEREF _Toc86414276 h 22.5 Identification of Risks in the Context of Economic and Legal Implications PAGEREF _Toc86414277 h 32.5.1 Compliance Risk PAGEREF _Toc86414278 h 32.5.2 Hazard Risks PAGEREF _Toc86414279 h 42.5.3 Control Risk PAGEREF _Toc86414280 h 42.5.4 Opportunity Risk PAGEREF _Toc86414281 h 53. Risk Management Plan PAGEREF _Toc86414282 h 53.1 Control Measures PAGEREF _Toc86414283 h 63.2 Corrective Measures PAGEREF _Toc86414284 h 73.3 Record Keeping and Review Frequencies PAGEREF _Toc86414285 h 84. Conclusion PAGEREF _Toc86414286 h 8References PAGEREF _Toc86414287 h 9

1. IntroductionChina Communications Construction Company Limited (CCCC) principally engaged in the design and construction of transportation infrastructure, dredging and heavy machinery manufacturing business. The company operates in China a fairly stable economy that uses a mixed controlled and open approach to regulation. This is a report covering a deep insight of the China Communication and Construction Company to uncover the major and minor risks that are associated with the company in its operations within China. The report taps deeper to uncover the economic and legal impacts of the company within its area of operation. The knowledge of the risks as well as the economic and legal impacts of the company helps in formulation of the risk management plan.

2. Occurrence of Risks in Relation to Economic and Legal Implications2.1 Definition of RiskRisk refers to the likelihood that someone or something will suffer harm or loss from a particular event or occurrence (Kuznetsova, 2019). It may also come out as the probability that a certain situation will lead to damage. According to Shad et al. (2019), a risk can is bound by measurable probabilities that are used in speculation or basic calculation and determination the possible likelihood of the event occurring and the amount of harm or loss that can be expected in case it happened.

2.2 Difference between Risk and UncertaintiesThe major and distinctive difference between a risk and uncertainty is within their possible outcomes and the possible occurrence of these outcomes. A risk represents a situation in which both the outcomes to the situation and the possibility of these occurrences are known to the investigator and they can be measured to ensure effective decision making (Kundzewicz et al., 2018), whereas for the uncertainty, both outcomes of the situation and their possibility of occurrence are not known and cannot be obtained by the investigator.

2.3 Origins and Nature of RisksRisk can be associated with several ancient languages. The French and the ancient Greek language are greatly known to represent the concept in the 16th Century, with their local dialect referring to the word as, risqué meaning “hazardous” and ριζα meaning “the root” respectively. However, there are possible links of the word with the Italian and the Spanish languages. The word later took the Englishman reference, according to English people the word is associated with negativity and believed to represents occasions and situation meant to bring and cause harm to people.

The nature of risk is interpreted according to the expected harm from the risks (Adeleke et al., 2018). Pascal well illustrates the nature of risk, he offers a positive expected value, laid the foundation of modern risk management, refer to traffic construction companies in China compared with the research on risk, the risk in the following aspects: the nature of market, legal aspects, material and financial aspects. Hopkin (2017) put these four aspects into four major categories to represent the whole nature of risks. These categories include; compliance risks, control risks, opportunity risks and hazard risks.

2.4 Business and Societal Setting

The China Communication and Construction Company is a multinational publicly traded company with its headquarters situated in Beijing, China. The company has the majority owner as the State to which the company anchors. The company is set in the Engineering and Construction industry offering major design and construction services all over the world. Standing at an approximate revenue of 70 billion dollars (China Communications Construction Company n.d.), the company possesses the capacity to offer construction activities such as Highways and Bridges design and construction, Port Construction, Airports design and construction, Railway construction, Oil mining platforms design and construction among many other developmental and high end infrastructural design and construction (Huang et al., 2020).

The multinational basis of the China Communication and Construction Company makes the company interact and impact a number of societies with different diversified composition of people. The basic society associated with the company is Chinese with a majority of the population consisting of the Chinese ethnicity however this changes when the company is contracted to work in other nations. With different nations the company interacts with different population of people with different languages and different practices. China Communication and Construction Company is exposed to as many cultural backgrounds and societal belief as the number of nation the world due to its worldwide operation nature.

2.5 Identification of Risks in the Context of Economic and Legal ImplicationsAccording to Polinkevych et al. (2021), and the Pascal’s argument in the Pascal’s Wager, the two analysts brought out four major aspects within which the nature of risk could be analyzed. This happens to be the major aspects within which the risk concept can be linked with the economic and the legal perspective. The China Communications and Construction Company also lies along these analytical suggestions of risk impact to the company and the link of the risk aspects to the economic and the legal parameters.

2.5.1 Compliance RiskThere is a requirement for the company to comply with the Labor Contract Law and The Law of Corporate Income Tax. The Labor contract Law ensures the process used in acquisition of labor by the company, is considerate to both parties. This means that the laborers rights are not overlooked which. More so, the working conditions for the laborers should also be in line with the health requirements of the laborers. The Law of Corporate Income Tax on the other hand ties the company to submit the right amount of tax as per their operations in a certain fiscal year.

Failure to comply to the laws the company will be fined up to 50,000 yuan. However a repeated non-compliance action by the company might result to the closure of the company by law. World Bank and other international organizations may also terminate ongoing projects when the company involved is proven to have violated these laws. As a result, those who violate these laws may face not only huge fines but also be blacklisted and restricted from overseas operations. This spells out the huge impact of this risk to the company. However, from the historical data, the probability of the same happening is very low. According to the World Bank’s statistics on sanctions cases from 2007 to 2017, fraud was the most common at 81%, followed by corruption at 20%, conspiracy at 10%, obstruction of investigation at 5%, and coercion at 1% (Nan Jinlin&Yuan Wenqi,2020).

2.5.2 Hazard RisksAs a large infrastructure company, CCCC faces risks of earthquake, flood and other hazards.

On July 20, 2021, Zhengzhou, China, suffered a rare heavy rain. The construction enterprise Jianye Group suffered heavy losses in a large number of projects under construction, resulting in direct economic losses of 550 million yuan (Xu Qian, 2021). This risk category is related to the loss of physical property (Aziz, 2020). It is said that the risk of flooding in China will increase within a decade, The final increase range was determined to be from 4.04% to 12.34%, indicating that the higher chance of flooding in China means that the company will slightly predict the occurrence of floods often not only because of the percentage increase in the probability of occurrence but also because of the expected increase in flood cases over several decades (Schulte & Hallstedt, 2018). The expected impact is high because the hazard risk affects structural damage to working equipment and projects, resulting in financial losses.

2.5.3 Control RiskConstruction of infrastructure projects requires a lot of manpower and mechanical equipment. Negligence or improper operation will bring serious consequences. The control risk of CCCC is safety accidents.

In 2017, tower cranes collapsed at the construction site of guangzhou Headquarters Base B Project, causing 7 deaths, 2 serious injuries and a direct economic loss of 8.47 million yuan. The company was ordered to suspend operations for 90 days and not undertake new projects during the period. (Li Ying,2020). Control risk is generally related to management, which brings serious economic losses and negative image to enterprises meaning a huge impact to the company in general. The likelihood of accidents in project sites is medium high. The experience-level of the laborers highly count when determining the likelihood of accidents happening in the projects sites. This risk requires organizations and companies, like internal governments, to adjust to changes in the external environment. The overall impact of the accidents under control risks is expected to be high.

2.5.4 Opportunity RiskOpportunity risk is the failure rate attached to an organization in case it takes upon a new venture. This may be in terms of branching to other areas or diversification of the business to introduce a new product of or service (Sum & Abdul, 2020). Unsuccessful introduction of a new service to the market by the (CCCC LTD) may result to huge losses. Putting in consideration the sophisticated machinery applied, the losses may go up to hundreds of million dollars. However considering the resources of CCCC LTD, the probability of this happening is low. Nevertheless from the huge losses the risk occurrence may accrue, then the impact of the same could be very hefty The size of the organization offers more resources to conduct research and investigation for relevant market data so that any decision or step there henceforth is statistical to avoid guesses and avoidable risk ventures (Panjehfouladgaran & Lim, 2020).

3.0 Risk Management Plan3.1 Control MeasuresThe principle framework of a risk control initiative include: identification of the possibility of risk in the organization; identification of the most likely employees or groups of employees to be impacted; educating employees on the probability of risks; train employees on what to do in the event of emergencies, reporting the incidence, and making decisions; perform periodic evaluations of the workplace including the knowledge of employees on risk and risk control expectations and measures; and to reprimand employees and procedures that are not aligned to the risk control measures.

Specifically, China Communication and Construction Company is required to ensure the legal department of the company ensures that the operations within and around the company are in the total compliance with the labor contract law in China and other countries involved with the CCCC LTD. For this, the legal department should advice the HR department on the requirements by law. The legal department should also advice the finance department in matters of taxation to ensure the company fully complies with the law of enterprise income tax.

Project managers within the company should ensure that the safety measures are put in place for every project to avoid injuries and subsequent disasters from mistakes in safety measures ignorance. Projects in foreign countries should be thoroughly planned to accommodate any disaster expectation in the foreign land for example the case of floods in states like Miami in USA and earthquakes in Haiti. This fore investigation ensures earlier preparations for the expected disasters which would help avoid injuries and at most save lives.

There should be intense data collection and data analysis in the event of major market steps by the company. This includes introduction of a new trading product or service so enhance success stakes in the operation.

3.2 Corrective MeasuresThe management should always ensure harmonious working of the different departments to ensure effective information passage in the moments of updates and sensitive changes (Vekasi, 2019). The legal department should ensure they are always updated on the latest updates on the relevant laws and pass the information effectively to the relevant departments and personnel. This includes foreign laws, in countries that are in constant operations with the company and those starting their operation with company. Innovation within the design team should always be high to ensure the company maintains its market share for quality in the services offered (Han et al., 2018). Structural changes should also be undertaken within the working environment to accommodate relevant drills and ensure the health acts is strictly followed. Structural changes are also necessary when trying to curb any disaster such as fire outbreaks in working environment. Previous mistakes within the company should be noted and studied to help avoid the same mistake in future or any related mistake henceforth. The management should also consider foreign assessment or auditing from known companies to ensure the company is in the same position and direction as the internal auditing states.

The marketing department and the data handling department together with the management should be in constant check of the statistics within the company operations and compare the current statistics with the previous ones to know and understand the position of the company against that of the prevailing economic climate. These should also use the data obtained for future planning to cope with the constantly changing market. This strategy ensures that the steps of the company are informed for the case of huge steps like the introduction of a new service by the company to the market. The management team and the data handling department should take proper steps in the investigation and projection of any major step in the company’s operations such as expansion or diversification to prevent unnecessary blunders

3.3 Record Keeping and Review FrequenciesFor efficiency, the company must ensure proper record keeping which means the system and mode of keeping records should be such that the retrieval and access of the stored information is not interrupted and should not lose information (Chang et al., 2018). For China Communication and Construction Company, all incidents on law infringement within the company operation should be recorded by the legal department and the management in proper details and the number of occurrences (frequency of occurrence) to be used in decision making and for addressing the entire company personnel together with the public during the annual meetings.

The HR department together with the finance department and the managing department should have records of hazardous occurrences in the company’s lifetime should also be recorded accordingly and under the right variations. These records should indicate the occasions of flooding, fire, earthquakes among others. They should also indicate their locations and duration alongside the damage caused for future references and decision making.

Marketing department together with the managing department should store records of Market variations and changes, with their relevant variations and the effect they had to the company operations and the entire market at large. This information offers great reference in the future for projections and caution.

The managing department should ensure they record any major step within the company in terms of diversification and growth with their relevant variations and the outcomes for better understanding in the future when the information is used for reference.

4. ConclusionThe China Communication and Construction Company being a very large organization, should invest effectively on the risk study and mitigation. The organization with its size and value may be highly prone to assume proper running and production efficiency since it is difficult to identify any problem embedded in the large sections and department. Therefore to curb disaster the company should ensure proper check and study of various sectors in the internal and external environment both macro and micro to uncover risks and mitigate them for survival and thriving.

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