Tesla Motors Risk Management

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Presentation transcript:

Tesla Motors Risk Management

Outline Background information Risk management system Types or risk : market and sector risks : firm specific risks : financial risks : legal risks Solutions to risks Conclusion

Back ground information Founded in 2003 by Martin Eberhard First car was released in 2006 Current CEO of tesla is Elon mask

General information Share price is currently trading at $225.26 They took a loan in 2009 of $465million and paid it back in 2013, 9 years early They made their first IPO IN 2010 and raised $226million

General information Growth sales have increased by over 100% in the past 9 years The are producing an average of 50000 cars a year with an average of 1000 per week and over 200 power service stations around the world.

Risk Management A risk management plan is a document that a project manager prepares to foresee risks, estimate impacts, and define responses to issues This is a process of identifying , managing and monitoring as to reduce all possible losses. The main risks tesla faces are firm specific risk, financial risk and legal risk.

Identifying Firm Specific Risks Production Risks Product Launch e.g cars, batteries Expenditure Failure of Manufacturing Plant Production Stalls (Bottlenecks ) Warranty and Goodwill Claims Claims associated with guarantees on goods and all other contingent liabilities

Managing Firm Specific Risks Continued… Technological Risks Creating taskforces to work on diversifying technical risks associated with Tesla Motors Personnel Risks Creating Personal Training Workshops for our workers Providing incentives through awards, bonuses and the likes

What is Financial Risk? The probability of loss inherent in financing methods which impair the ability to provide adequate returns'.-BusinessDictionary.com Firms have Financial Risk management contingencies in place to help reduce its exposure to losses. Financial Risk Management is therefore the practise of the firms economic value by using instruments to manage its exposure. These include: 1. Credit Risk 2. Market Risk 3. Foreign Exchange Risk 4. Interest Rate Risk 5. Currency Risk 6. Liquidity Risk

Market and Sector Risks Supplier Related Risks Sales Risks

Supplier Related Risks Dependency and Price Fluctuations of raw materials Failure of suppliers to deliver goods on time

Sales Risks Declining market condition Increased competition and price pressure

Identify legal risk Step one-find sources of legal risks(contracts, regulations , litigation and structural changes. Second step-recognize potential and actual risk. Third step-record risk in risk register.

Analyze legal risk Risk analysis is about understanding the risk in the risk register .To analyze risk begin with an assessment of controls. Risk controls can take several forms depending on the risk, industry and organization.

Managing the risks Tesla faces

Identifying Firm Specific Risks continued… Technology Risks Technological Demands of the modern day Carbon Emissions from vehicles Fuel Consumptions Scandals Safety Requirements Personnel Risks Personnel risk that is separate from those associated with our legal risks

Managing Firm Specific Risks Production Risks Servicing our production equipment regularly Producing only A-Grade products Keeping back up equipment Warranty and Goodwill Claims Improving Customer Relationships to boost loyalty . Providing a platform for customers to voice their opinions Creating an allowance for all these unexpected contingencies

Tesla's Financial Risk Management Plan Main Focus... Financial Risks: 1. Exchange Rate Risk 2. Interest Rate Risk 3. Liquidity Risk 1. Exchange Rate Risk- Hedged with the use of Derivative Instruments like: Options, Currency Futures, and Swaps 2. Interest Rate Risk- Hedged Using Treasury Futures contracts or Interest Rate Swaps 3. Liquidity Risk is risk of not having enough cash assets to run the business.

Six steps to legal management Select framework Legal framework should meet four main objectives Simple but not simplistic Scalable but not overbearing Adaptable but with clear guidance Practical but not regimented

Evaluate legal risks To evaluate a legal risk is to prioritize the response to the risk . At the core of risk evaluation is your organization's risk tolerance . Legal risk that are above the line are intolerable and need risk treatment . The idea behind risk treatment is simple modify the risk to make it tolerable. Once legal risks are inventoried and analyzed in the risk register , it is important to communicate the results to the broader enterprise.

Conclusion Tesla continues to monitor its operations and alters its risk management tools to the changing world Tesla is seemingly a blooming company and shows a good investment platform as it is based on futuristic trends and is playing a key role in the car manufacturing industry. The risk they face seem to be out weighed and manageable as and this is proven by their continues growth in the market.

Questions