Background: Tessile, S.A., headquartered in Turin, Italy, is a mid-sized textile manufacturer with a strong reputation for high-quality cotton and linen fabrics. Originally a cotton plantation business, the company was transformed under the leadership of CEO Giuseppe Franco into one of Northern Italy’s leading textile exporters. In the past decade, Tessile S.A. has seen increased international demand due to the European luxury apparel boom and rising popularity of sustainable, locally sourced fabrics. With strong operational capabilities and a loyal customer base, Tessile has enjoyed a solid financial positionuntil recently.
The Shift:
Over the last three years, Mr. Franco has pursued an aggressive diversification strategy, acquiring a series of boutique wineries across Southern and Central Italy. These moves, while initially welcomed, have raised concerns among board members and shareholders who view the shift as straying too far from the companys core competencies. Now, Mr. Franco has announced intentions to expand Tessile into the tourism and cheese industries by acquiring heritage farm properties with potential for agritourism and cheese production. The expansion will require:
- A 45 million loan from an international lender
- Reallocation of personnel from textile operations to manage new ventures
- Cross-functional leadership with limited industry expertise in hospitality or food production
Meanwhile, Tessile’s stock value has declined 28%, and debt-to-equity ratios have risen to concerning levels. Shareholder meetings have become contentious, and media outlets have begun questioning the direction of the company.
Risk and Strategic Evaluation: As a hired strategic consultant, you are tasked with presenting a formal report to Tessiles Board of Directors. Your responsibility is to identify and assess the risks associated with the companys current direction, and to advise on how to integrate a robust risk management system to protect the organization moving forward.
Risk Identification and Classification:
- Define the difference between a hazard, threat, and risk.
- Describe the process and tools you would use to identify risks in Tessiles business strategy (e.g., SWOT, PESTLE, stakeholder mapping).
- Identify at least five key risks, classify them (strategic, operational, financial, reputational, legal), and assess their severity and likelihood.
Understanding Risk Management Systems:
- What is the purpose of a risk management system in an organization like Tessile?
- Describe how such a system would be applied in this case.
- What roles do security (e.g., cybersecurity, asset protection) and capacity (e.g., staffing, financial flexibility) play in effective risk management?
Risk Assessment Methodologies:
- Compare qualitative vs. quantitative risk assessment approaches.
- Discuss at least two risk assessment methodologies (e.g., Risk Matrix, FMEA, Monte Carlo simulation) and how they support a systematic approach to evaluating risks.
Risk Response Strategies:
- Describe the four risk response strategies: Avoid, Transfer, Mitigate, and Accept.
- Apply each strategy to one of the risks identified in Tessiles current expansion strategy.
Strategic Recommendations:
- How can Tessile realign its expansion into tourism and cheese production with its textile heritage to reduce reputational and strategic risk?
- What would you recommend the board do to restore stakeholder confidence, manage current debt levels, and maintain long-term growth?
Requirements:
- There is no minimum or maximum required number of pages. Your response will be considered complete, if it addresses each of the components outlined above.
- Use of proper APA formatting and citations – If supporting evidence from outside resources is used those must be properly cited. A minimum of 3 -5 sources (excluding the course textbook) from scholarly articles or business periodicals is required.
- Include your best critical thinking and analysis to arrive at your justification.
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