Risk Analysis for Beta project
Autores: Camila Alegría, Jaime Alegría, Fátima Tafur
Beta Talento is a training company that provides technical and soft skills to young people between 18 and 25 years of age who are in a situation of socioeconomic vulnerability in Peru for subsequent job placement in the hospitality industry. Its objectives are to reduce training and insertion time to less than 1 year, compared to the traditional format that takes a minimum period of 3 years. To meet the demand for personnel required by companies in order to improve customer service and hospitality standards in the country through a curriculum co-created with them.
According to the U.S. Bureau of Labor Statistics (BLS), approximately 20% of new businesses fail during the first two years of being open. The new risks of an increasingly changing market and the lack of mitigation of these risks have an impact on this probability of failure. Therefore, it is important for organizations to perform risk analysis and identify the potential problems they may face, in order to develop mitigation strategies and reduce the risk of failure. In this document, we will proceed to identify the most common risks and possible actions to mitigate them for BETA.
II. Risk Analysis
Some of the potentials risk are:
1. Market and Product Risk
Market risk refers to risks that may be encountered by: (i) consumers, (ii) market saturation, (iii) competition and (iv) economic fluctuations. In addition, the market can be strongly influenced by the economic situation of the country.
In Peru, the youth population between 15 and 29 years of age currently reaches 7.8 million people, 23% of the Peruvian population. In addition, it is important to emphasize that 7 out of 10 young people do NOT have access to Higher Education, and 54% of the EAP is underemployed or looking for a job.
In addition, BETA will be developing within the hospitality sector, being that this is the 3rd sector that generates the most employment in Peru. Moreover, we have mapped that within our competence are the CETPRO, CENFOTUR, Institutes and Universities.
To reduce risks with our consumers, we have already conducted interviews, surveys to better understand your interests. We are also working with education experts to help us translate the interests of young people into methodologies that are easy for them. Our study plans will be worked together with companies, since we will know their needs and priorities in depth. For this reason, it is necessary to have good and, above all, lasting alliances.
Likewise, we want to attack the low employment rate, which is why we offer shorter-term options than the competition, which makes us an attractive option in the market, which seeks to generate employability.
Finally, we know that we are performing in an important sector for the country. However, we also know that we have developed a business model that can be replicated in different industries, so in the future we will be able to work to promote these other areas.
Considering all the variables and mitigation plan, we consider that the Market risk for BETA is 2.5 out of 5.
2. Financial Risk
Financial risk encompasses a spectrum of difficulties tied to funding, the availability of capital, generating revenue, and maintaining financial stability. These challenges can result in constraints on cash flow, restricted resources for expansion and day-to-day activities, as well as obstacles in attracting investments or securing loans.
In Beta’s case, during the making of the analysis of their fixed and variable costs for the realization of their training program, there apparently are no risks about the revenue generation and the financial stability once the business is running. However, the principal and most important outcome that could imply a financial risk is that they need an initial capital for starting their operations. Currently, they are receiving financial support in the form of consultancy for the development of the business plan for our project.
BETA’s team is participating in various programs/contests such as Nestle’s Impulso Joven and this SBC contest in order to obtain this initial capital. In addition, they are growing their networking with companies and embassies who could be possible donors.
Considering all the variables and mitigation plan, we consider that the Financial Risk for BETA is 2.5 out of 5
3. Regulatory and Compliance Risk
Regulatory and compliance risk refers to the legal and regulatory framework that every company and association must consider, and which is tailored depending on the country and industry in which one is operating. In the event of non-compliance, this may result in various penalties for the company.
BETA participates within the Education sector, and seeks to promote a curriculum based on qualifications necessary to enhance the profile of young people. It is interesting to note that several countries have a framework that regularizes these qualifications; however, Peru only implemented this unique and consensual instrument that organizes formally recognized qualifications in 2022, and which should be implemented in the next 5 years. (MINEDU, Decreto Supremo Nº 012-2021-Minedu, Lima – Peru)
In addition, currently the Ministry of Education only has a legal framework that certifies universities and institutes. In our case, we will provide short courses, but there is no specific regulation..
First of all, in order to work in accordance with the law, BETA is being constituted as a non-profit social association, with this formalization many doors open for us to have contracts and receive donations from supporters.
Since BETA will offer courses, we will not have a legal norm that regulates them; however, we know of successful cases of academies that offer certification under the same modality as ours, and in this case it is necessary to have allies that support your project! Therefore, we have mapped our strategic allies to support the quality of our program.
Considering all the variables and mitigation plan, we consider that the Regulatory and Compliance risk for BETA is 2.5 out of 5.
4. Social Impact Risk
The risk of social impact emerges when obstacles obstruct the realization of desired societal results. These challenges could encompass factors like reduced community involvement, unanticipated societal obstacles, or insufficiently robust monitoring and assessment procedures. Such risks have the potential to erode the essence of the organization’s mission, weaken the confidence of stakeholders, and impede its lasting viability. Furthermore, they might lead to harm to the organization’s reputation and curtailed backing from beneficiaries and other invested parties.
BETA’s purpose is to prepare young people quickly and support them in their labor insertion being that small educational seed that makes them consider that with education they will be able to have better opportunities. Nevertheless, there could be a risk that young people who are already working and earning money would not want to go back to higher education and continue improving their education.
BETA’s graduates will be part of an alumni network where they will receive talks and mentoring. In addition, BETA will implement an alliance network with different universities, institutions and academies so that they can have some discount in the price of their programs to continue their education.
Considering all the variables and mitigation plan, we consider that the Social Impact risk for BETA is 2.5 out of 5.
5. Operational and Scalability Risk
Operational and scalability risk refers to the various challenges an association may face in scaling up its operations, such as managing growth, optimizing processes and building organizational capacity. Inadequate operational systems can lead to inefficiencies, service delivery problems and constraints on organizational growth.
BETA’s operations require teamwork with the companies to co-create the curriculum. This curriculum will be implemented through face-to-face and virtual classes through a special platform for BETA. In addition, the scalability of the project involves the acceptance of the target audience, which in our case is young people.
To counteract some of the problems of the platform, we will try to make the videos available for downloading and viewing without the internet. In addition, the platform should be easy to use and access, both for us as a team to manage it, as well as for its users.
Our curricula will be worked together with the companies, being that we will know in depth their needs and priorities. Therefore, it is necessary to have good alliances and above all long-lasting ones. We will work on a general mapping of companies in the sector in order to generate alliances with the main ones that are aligned with our values. But we will only have back up companies.
Considering all the variables and mitigation plan, we consider that Operational and Scalability Risk for BETA is 2.5 out of 5.
6. Environmental Risk
Environmental risk encompasses a range of difficulties connected to ecological sustainability, occurrences of natural disasters, the effects of climate change, and the scarcity of resources. These challenges have the potential to influence the functioning and endurance of social businesses. They might result in interruptions within supply chains, heightened expenditures, harm to reputation, and the jeopardizing of both social and environmental goals.
In Peru, the El Niño phenomenon generates heavy rains and floods, mainly in the northern coast of the country, which impacts kids and young people who can’t go to their schools or educational institutions (UNICEF, 2023). BETA is a hybrid program and most of the education will be placed in online platforms (synchronous and asynchronous). Then, even with occurrences of natural disasters, the structure of the program and the total service won’t be so adversely affected.
We are planning to invest in digital learning tools and platforms that can facilitate remote learning during natural-disasters-related closures. This way, students can continue their studies even when they cannot physically attend the institutions.
Considering all the variables and mitigation plan, we consider that the Environmental Risk for BETA is 1.5 out of 5.
7. Governance and Leadership Risk
Governance and leadership risk refers to challenges such as: ineffective leadership, inadequate governance structures, inadequate ethical practices, which can affect the credibility and long-term viability of social enterprises.
Currently, we are composed of volunteers for the management and marketing positions. Since the team has been working together for years, it does not create any problems in the climate or in the fulfillment of tasks. In addition, we receive advice on pedagogical methodologies.
BETA’s team will seek to further improve the work of the team by having full-time staff. As well as including a specialist in pedagogical methodologies in the team. In addition, we will have a clear mapping of what BETA’s values are and they will be shared with the entire team. We will also have periodic activities that help to maintain a good work environment, as well as activities that reinforce the characteristics of maintaining good practices.
Considering all the variables and mitigation plan, we consider that the Governance and Leadership Risk for BETA is 2 out of 5.
In the ever-evolving realm of social business, numerous risks can emerge as obstacles, potentially disrupting advancement and thwarting the attainment of lasting influence and economic stability. It becomes crucial for social entrepreneurs to possess a comprehensive grasp of these risks, comprehend their possible repercussions, and employ effective approaches to minimize their impact. In the case of Beta, the average risk for BETA is 2.3 out of 5, which is a normal, not so high risk.The most important are the Market and Product Risk, Financial Risk, Regulatory and Compliance Risk, and Social Impact Risk. BETA’s team needs to quickly start implementing the mitigating actions identified to address these risks.