NOTTINGHAM TRENT UNIVERSITY

SCHOOL OF SCIENCE & TECHNOLOGY

“RISK MANAGEMENT OF THE AUTOMOTIVE INDUSTRY IN

THE UNITED KINGDOM AND INDIA”

By

Student Name

(Student Number)

YEAR

Project report submitted in partial fulfilment of the requirements of Nottingham Trent

University for the degree of MSc Engineering Management
DECLARATION
In submitting this work, I confirm that I am aware of, and am abiding by, the University’s
expectations for proof-reading.

Student Signature

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ABSTRACT
With increased globalisation, the automotive industry is one of the fastest growing sector
across the globe. This industry has been directly or indirectly impacting major factors that
contribute to the nation’s economy such as employment, foreign investments, trade,
technology and innovations. A drop in any of these factors will directly make nations lose their
competitive edge in the global market. To avoid such catastrophic impacts, it is important that
the automotive organisations predict and identify the possible risks and implement a solid risk
management process in their organisations.

This research, therefore, addresses the significance of the risk management process in the
automotive industry by referring to two nations i.e. the United Kingdom and India. The
researcher has developed a new risk management framework to identify risks at the initial
stage of the project and be well prepared in advance to tackle them and sustain the growth of
the organisation and the sector.

The new framework has been developed using the mixed method research technique wherein,
qualitative data is collected through literature i.e. books, journals, case studies etc. and
quantitative data is collected through a quantitative survey which was sent to professionals
working in automotive organisations in the two countries. The data collected from the
quantitative survey is analysed statistically and descriptively using data analysis tools. The
validation of the framework is done using literature and sending out the new framework along
with a short validation quantitative survey to the professionals of the automotive industry. The
data from the validation survey has been analysed statistically and descriptively.

Further, discussions are made and recommendations are given keeping in mind the aims and
objectives of the research along with the economic factors such as employment, foreign
investments, exports, technology and innovation that rely on the automotive industry in the
two countries.

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ACKNOWLEDGEMENTS
This research project has been possible due to the valuable contributions, advice and
assistance of many individuals, right from the inception to the accomplishment of the study.

Firstly, I would like to thank my supervisor, Dr. Supervisor's Name for his constant and
valuable guidance, advice, suggestions, time and patience throughout the completion of this
report.

Sincere gratitude to my mother, Mrs. Mothers Name and beloved family members for their
support throughout my academical journey.

Special thanks to Ms. Erasmus Darwin, Mr. Charles Hastings and all my loving friends for
their love and emotional support.

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TABLE OF CONTENTS
DECLARATION ..................................................................................................................... i

ABSTRACT ............................................................................................................................ii

ACKNOWLEDGEMENTS ..................................................................................................... iii

LIST OF FIGURES ............................................................................................................. viii

LIST OF TABLES..................................................................................................................ix

LIST OF ABBREVIATIONS ................................................................................................... x

DIAGRAMATIC OUTLINE OF CHAPTERS ...........................................................................xi

CHAPTER 1: BACKGROUND AND STUDY ORIENTATION ................................................ 1

1.1 Introduction.................................................................................................................. 1

1.2 Background Research and Motivation ......................................................................... 1

1.3 Aim .............................................................................................................................. 2

1.4 Objectives.................................................................................................................... 2

1.5 Research Questions .................................................................................................... 3

1.6 Research Process ....................................................................................................... 3

1.6.1 Sources of Information and Resources Required: ................................................. 3

1.6.2 Tasks: ................................................................................................................... 3

1.6.3 Project Risks: ........................................................................................................ 4

1.6.4 Professional, Social, Ethical and Legal Issues: ..................................................... 6

1.6.5 Time Plan: ............................................................................................................. 8

1.7 Chapter Overview ........................................................................................................ 9

CHAPTER 2: LITERATURE REVIEW ................................................................................. 10

2.1 What is Risk? ............................................................................................................ 10

2.2 What is Risk Management? ....................................................................................... 11

2.3 Benefits of Risk Management .................................................................................... 12

2.4 Evolution of Automotive Industry in the UK ................................................................ 12

2.5 Evolution of Automotive Industry in India ................................................................... 14

2.6 Risks in an Automotive Industry ................................................................................. 16

2.6.1 Financial: ............................................................................................................ 17

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 2.6.2 Design and Technical: ......................................................................................... 17

2.6.3 Operational: ........................................................................................................ 18

2.6.4 Supply Chain:...................................................................................................... 18

2.6.5 Health and Safety:............................................................................................... 19

2.6.6 Environmental: .................................................................................................... 19

2.6.7 Legal, Regulatory and Political: ........................................................................... 20

2.7 The Risk Management Process ................................................................................. 20

2.7.1 Risk Identification: ............................................................................................... 21

2.7.2 Risk Analysis: ...................................................................................................... 24

2.7.3. Risk Evaluation: ................................................................................................. 27

2.7.4. Risk Response ................................................................................................... 29

2.7.5 Risk Monitoring: .................................................................................................. 30

2.8 Case Study ................................................................................................................ 31

2.8.1 Dyson in UK: ....................................................................................................... 31

2.8.2 Tata Nano in India: .............................................................................................. 32

2.9 Chapter Summary ..................................................................................................... 34

CHAPTER 3: RESEARCH METHODOLOGY ..................................................................... 35

3.1 Introduction................................................................................................................ 35

3.2 Research Design ....................................................................................................... 35

3.2.1 Mixed Method Research: .................................................................................... 35

3.3 Data Collection Methods............................................................................................ 36

3.3.1 Primary Sources:................................................................................................. 36

3.3.2 Secondary Sources: ............................................................................................ 37

3.4 Data Analysis- SPSS ................................................................................................. 38

3.5 Validation Procedures................................................................................................ 38

3.6 Ethics Consideration .................................................................................................. 38

3.7 Assumptions of the Research .................................................................................... 38

3.8 Chapter Summary ..................................................................................................... 39

CHAPTER 4: SURVEY RESULTS ANALYSIS AND DEVELOPED FRAMEWORK............. 40

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 4.1 Introduction:............................................................................................................... 40

4.2 Demographic Characteristics ..................................................................................... 40

4.2.1 Distribution by Age Group: .................................................................................. 40

4.2.2 Distribution of Automotive Experts by Profession: ............................................... 40

4.2.3 Distribution by Region: ........................................................................................ 41

4.2.4 Distribution by Professional Experience in the Automotive Organisation: ............ 41

4.3 Distribution by Risk Management Processes ............................................................. 42

4.3.1 Distribution by Risk Management Practices: ....................................................... 42

4.3.2 Distribution by Top Risks: .................................................................................... 42

4.3.3 Distribution by Review of New Activities: ............................................................. 44

4.3.4 Distribution by Risk Identification Method: ........................................................... 45

4.3.5 Distribution by Risk Analysis Method:.................................................................. 47

4.3.6 Distribution by Risk Evaluation Method: .............................................................. 48

4.3.7 Distribution by Risk Response Method: ............................................................... 50

4.3.8 Distribution by Pandemic Readiness: .................................................................. 50

4.4 Developed Framework for the Risk Management Process: ....................................... 51

4.5 Chapter Summary ..................................................................................................... 54

Chapter 5: FRAMEWORK VALIDATION, DISCUSSIONS and CONCLUSION ................... 55

5.1 Introduction................................................................................................................ 55

5.2 Validation of the Developed Framework .................................................................... 55

5.2.1 Effectiveness of Proposed Risk Identification Method: ........................................ 55

5.2.2 Effectiveness of Proposed Risk Analysis Method: ............................................... 56

5.2.3 Effectiveness of Proposed Risk Evaluation Method:............................................ 56

5.2.4 Effectiveness of Proposed Risk Response Method: ............................................ 57

5.2.5 Effectiveness of Proposed Risk Management Framework:.................................. 57

5.2.6 Acceptance of the Proposed Framework: ............................................................ 57

5.2 Importance of Risk management in the Automotive Industry in UK and India ............ 58

5.2.1 Economy: ............................................................................................................ 58

5.2.2 Trade: ................................................................................................................. 59

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 5.2.3 Employment: ....................................................................................................... 59

5.2.4 Technology and Innovation: ................................................................................ 60

5.3 Conclusion................................................................................................................. 61

5.4 Recommendations and Future Scope........................................................................ 62

5.5 Chapter Summary ..................................................................................................... 62

References ......................................................................................................................... 63

APPENDIX A ...................................................................................................................... 72

APPENDIX B ...................................................................................................................... 77

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LIST OF FIGURES
Figure 1.1: Tasks in the research (Author, 2020) .................................................................. 4
Figure 1.2: Risk Matrix (Funchall, 2011) ................................................................................ 6
Figure 1.3: Research Risk Status (Funchall, 2011) ............................................................... 6
Figure 1.4: Gantt Chart of the research (Author, 2020) ......................................................... 8
Figure 2.1: The risk management process (Head & Horn, 1985) ......................................... 21
Figure 2.2: Steps in the Delphi Method (RAND Corporation, 1969) ..................................... 24
Figure 2.3: Monte Carlo Simulation Charts (Novkov, 2019) ................................................. 26
Figure 2.4: HAZOP template (IEC, 2016) ............................................................................ 28
Figure 2.5: FMEA template (Martin, 2018) .......................................................................... 29
Figure 4.1: Clustered bar representation of the top risks (Author, 2020).............................. 43
Figure 4.2: Graphical representation of the review of new activities (Author, 2020) ............. 45
Figure 4.3: Graphical representation of the risk identification method (Author, 2020) .......... 46
Figure 4.4: Histogram for effectiveness of risk identification method (Author, 2020) ............ 46
Figure 4.5: Histogram for effectiveness of risk analysis method (Author, 2020)................... 48
Figure 4.6: Histogram for effectiveness of risk evaluation method (Author, 2020) ............... 49
Figure 4.7: Graphical representation of pandemic readiness (Author, 2020) ....................... 51
Figure 4.8: Developed Framework (Author, 2020) ............................................................... 52

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LIST OF TABLES
Table 1.1: Risks encountered in the project (Funchall, 2011) ................................................ 5
Table 1.2: Risk Mitigation Plan (Funchall, 2011) ................................................................... 5
Table 2.1: Establishment of Automotive companies in the Indian market (Ramachandran,
2011) .................................................................................................................................. 16
Table 2.2: Contents in the risk register (Chapman, 2011) ................................................... 23
Table 4.1: Distribution by age group (Author, 2020) ............................................................ 40
Table 4.2: Distribution by profession (Author, 2020) ............................................................ 41
Table 4.3: Distribution by region (Author, 2020) .................................................................. 41
Table 4.4: Distribution by professional experience (Author, 2020) ....................................... 42
Table 4.5: Distribution by risk management practices (Author, 2020) .................................. 42
Table 4.6: Distribution by top risks (Author, 2020) ............................................................... 43
Table 4.7: Severity of the top risks (Author, 2020) ............................................................... 44
Table 4.8: Distribution by review of new activities (Author, 2020) ........................................ 44
Table 4.9: Distribution by risk identification method (Author, 2020) ..................................... 45
Table 4.10: Effectiveness of risk identification method (Author, 2020)................................. 46
Table 4.11: Distribution by risk analysis method (Author, 2020) .......................................... 47
Table 4.12: Effectiveness of the risk analysis method (Author, 2020).................................. 47
Table 4.13: Distribution by risk evaluation method (Author, 2020) ....................................... 49
Table 4.14: Effectiveness of the risk evaluation method (Author, 2020) .............................. 49
Table 4.15: Distribution by risk response method (Author, 2020) ........................................ 50
Table 4.16: Effectiveness of the risk response method (Author, 2020) ................................ 50
Table 4.17: Distribution by pandemic readiness (Author, 2020) .......................................... 51
Table 5.1: Effectiveness of the proposed risk identification method (Author, 2020) ............. 56
Table 5.2: Effectiveness of the proposed risk analysis method (Author, 2020) .................... 56
Table 5.3: Effectiveness of the proposed risk evaluation method (Author, 2020)................. 56
Table 5.4: Effectiveness of the proposed risk response method (Author, 2020) .................. 57
Table 5.5: Effectiveness of the proposed risk management framework (Author, 2020) ....... 57
Table 5.6: Acceptance of proposed framework (Author, 2020) ............................................ 58

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LIST OF ABBREVIATIONS
Active Threat and Opportunity Management (ATOM)
Bharat Stage Four (BSIV)
Bharat Stage Six (BSVI)
British Motor Corporation (BMC)
Construction Industry Research and Information Association (CIRIA)
Core Group on Automotive Research and Development (CAR)
Department of Trade and Industry (DTI)
European Union (EU)
Expected Monetary Value (EMV)
Failure Mode and Effect Analysis (FMEA)
Foreign Direct Investment (FDI)
Great Britain Pound (GBP)
Gross Domestic Product (GDP)
Hazard and Operability Studies (HAZOP)
Information Technology (IT)
Internal Combustion Engine (ICE)
International Monetary Fund (IMF)
International Organisation for Standardisation (ISO)
New Car Assessment Program (NCAP)
Organisation of Motor Vehicles Manufacturers (OICA)
Original Equipment Manufacturers (OEM)
Project Management Body of Knowledge (PMBOK)
Project Management Institute (PMI)
Research and Development (R&D)
Society of Motor Manufacturers and Traders (SMMT)
Specific, Measurable, Attainable, Realistic and Time Bound (SMART)
Statistical Package for the Social Sciences (SPSS)
United Kingdom (UK)
United Nations (UN)
United State Dollar (USD)
United States of America (USA)

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DIAGRAMATIC OUTLINE OF CHAPTERS

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CHAPTER 1: BACKGROUND AND STUDY ORIENTATION
1.1 Introduction
The main purpose of this research is to investigate the various risks and risk management
processes in the automotive industry by referring to the procedures in the two countries i.e., a
developed country such as the United Kingdom (UK) and a developing country like India. To
achieve the aims of the research, surveys are conducted, wherein inputs are taken from
professionals working in the automotive industry in the UK and India. The results of the survey
have been analysed descriptively and statistically. The analysis of the data is followed by the
discussions of the results. Based on the literature review, learnings from the case studies,
results of the survey and findings from the discussion, a new risk management framework for
the automotive industry has been proposed by the author.

1.2 Background Research and Motivation

According to Nagarajan et al. (2015) risk management is one of the most crucial part of the
automotive industry as it is directly linked to the success of the industry. Risk management
plays an important role at all levels in an automotive firm starting from the in-house designing,
manufacturing, operations, inventory etc. Any disturbance in either of the process may
increase the cost of the production or result in production stoppage leading to major losses.
The swinging figures of global commerce have increased the amount of risks involved in the
automotive industry. Globalisation has made this industry more cost effective and dynamic.

According to Pons (2010) in keeping with the global trends, there are high risks in the
automotive industry that emerge at the national level too. Both, the international and national
levels are not equally distributed. Developing or under-developed countries which do not have
an enormous automotive production base are particularly more sensitive to the risks.
Therefore, the government actively manages the risks in these countries. There is a difference
in the risks and risk management processes in the industrially developed and developing or
under-developed nations. The developed nations making use of their resources, tactically plan
to forestall the threats by focusing on the opportunities ahead. To sustain the growth of the
economy, increase Foreign Direct Investments (FDI) and increase exports of the nation,
strategic risk management in the automotive industry becomes very crucial.

According to Patterson et al. (1999) the risk management department in the automotive
manufacturing organisations are very pivotal as they directly affect the organisation’s success
and profitability. This department helps the organisation to reach their goals and objectives of
gaining an upper hand over their competitors in the global market. The risk management
department deals with various constraints like economic and political changes, demand,
quality, suppliers, legislation etc. These constraints are linked to the strategic priorities of the

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risk management department. Well execution of these activities brings success to the
organisation and help them achieve their aims along with the growth of the automotive industry
in the country.

The complexity in any on the above constraints may terribly affect the performance of the
organisation. Drawing relations between the business world and literature findings is
mandatory to bridge the gap in the project risk management techniques in the automotive
manufacturing organisations. Therefore, a strong urge to understand and examine the risks
and the risk management processes is the motivation and reason for this research. A further
motivation for the research is to develop a solid methodology for the risk management in the
strategic planning of the automotive industry. To investigate the real-world risk management
processes in the automotive industry, surveys have been conducted. The examination was
based on substantial literature review and by collecting quantitative data from the survey and
the research has been supported by statistical data analysis.

Another motivation of the research is to boost the automotive manufacturing sector in the
developing and under-developed nations so as to bring in foreign investors, escalate the
exports and increase employment in these nations. Therefore, the author has a powerful urge
to the study the risk management activities in the automotive industry to contribute to the
literature.

1.3 Aim
The main aim of this research is to identify and analyse the various risks and risk management
processes in the automotive industry and to suggest a concrete risk management framework
in the strategic planning of the organisations to effectively support economic growth.

1.4 Objectives
• To identify the various risks involved in the automotive industry.
• To study different risk analysis methods, comparing a developed nation such as the
United Kingdom and a developing nation like India.
• To categorize the risks by prioritising them and identify the opportunities or threats
which might affect the growth of the organisation.
• To review risk response and monitoring of the risks in the automotive sector.
• To develop a solid methodology for the implementation of risk management in the
tactical planning of the automotive industry.

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1.5 Research Questions
The automotive industry faces various risks, negligence of any of these may lead to project
failures. In order to avoid project failure, it is mandatory to plan out the risk management
process well. The following research questions will be useful to do so.

• How to identify the sources of risks in the automotive industry?

• What methods are available to analyse and evaluate the risks in the automotive
industry?
• Why is it necessary to control and monitor the risks?
• How to integrate risk management in the strategic planning of the automotive industry
in the UK and India to sustain economic development?

1.6 Research Process

1.6.1 Sources of Information and Resources Required:
Before starting with the surveys, it is important to understand the principles and background
of risk management in the automotive industry. It is not possible to ask appropriate questions
in the survey without understanding the concept. Hence, journals, books, case studies and
other reliable academic resources have been used.

For the argument and inference section of the project, data analysis will be done. Also, for the
essential data collection, quantitative surveys will be conducted. The quantitative
questionnaire will be evaluated with methods like linear numeric scale, Likert scale etc. The
responses shall act as valuable resources for the research.

The information collected through the survey will be assessed with a statistic software i.e.
SPSS. This tool will be the primary source to examine the data of the conducted quantitative
survey. In order to operate the SPSS software, self-learning has been done to get well-
acquainted with the functions through online available tutorials and instruction manuals.

1.6.2 Tasks:
To achieve the aim and objectives of the research, a number of tasks have been performed.
A realistic time frame has been developed so that the tasks are performed according to
professional standards and the research was completed on time. The SMART approach i.e.
Specific, Measurable, Attainable, Realistic and Time bound have been adopted for the
research.

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 Figure 1.1: Tasks in the research (Author, 2020)
1.6.3 Project Risks:
The possible risks that can be encountered during the research have been illustrated in Table
1.1. The colour coding method is used to differentiate the different risk levels.

According to Funchall (2011) Figure 1.2 illustrates a risk matrix wherein the X axis shows the
impact degree of the risk and the Y axis represents the risk probability. The intersection of
these axes indicates the risk category. Table 1.1 and 1.2 illustrate the risks, its status,
categories and their mitigation plan in detail. Overall, eleven risks have been identified for this
research. Figure 1.3 shows these risks according to their categories in the form of a pie chart.

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Table 1.1: Risks encountered in the project (Funchall, 2011)

Table 1.2: Risk Mitigation Plan (Funchall, 2011)

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 Figure 1.2: Risk Matrix (Funchall, 2011)

Figure 1.3: Research Risk Status (Funchall, 2011)

1.6.4 Professional, Social, Ethical and Legal Issues:
In any research, ethical, social, professional and legal issues must be considered by the
researcher in order to add value to the science of the existing research so as to benefit further
to fellow researchers that access the paper. Hence, it is the moral responsibility of the
researcher to include the protection of data in their scope by retaining the decorum, integrity,
discretion and confidentiality of the survey takers and the participating organisations in the
research.

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Professional Issues:

As the survey conducted involves working professionals from different organisations of the
automotive industry, the collected data and information must be kept confidential and secured
without any revelations about the involved companies. There should be consensual
agreement with the participating individuals of the survey and must be safely held till the end
of the research. Any issues related to conflict of interest should be carefully attended. There
must not be information or data breach with other companies. The collated factual information
should be securely held private without sharing it to any other individual or company in any
case.

Social Issues:

Any kind of deceptive and misleading deeds, while connecting with the professionals and
organisations, should not be entertained in the research. The involved professionals and
researchers have accountability for the society as they share the same ecosystem, so they
affect each other directly working in the automotive manufacturing industry.

Ethical Issues:

The individual conducting the research should be sincere, critical and authentic while
analysing and publishing the results. Also, the facts and information should be carefully
represented without any manipulations by the researcher for their own benefit. Similarly, the
obtained figures and files should not be controlled in order to reach to any particular result.

In order to be considerate and respectful towards other’s work, the research should and must
avoid plagiarism or copying from other resources. The data and information used should be
cited accurately for both data collection and literature review, after acquiring the necessary
permissions and clearances.

Legal Issues:

Any illicit or criminal activities should be avoided by the researcher. Data protection is a law in
the UK as well as India and thereby, consent of the involved participant professionals must be
obtained before starting the survey and obtaining results. The participants should be aware
about their rights to refuse to answer any question or participate in the research study. Further,
the obtained data of the contributors must not be disclosed. The confidentially and discretion
of participants and companies ought to be ensured by limiting access to identification.

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1.6.5 Time Plan:

Figure 1.4: Gantt Chart of the research (Author, 2020)

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1.7 Chapter Overview
Chapter 1: Background and Study Orientation
This chapter in the research consists of the introduction, background research and motivation,
aims, objectives and research questions. It also contains the research process such as the
sources of information required, risks of the project, various tasks involved, professional issues
and the time plan on how the research will be conducted.

Chapter 2: Literature Review

This chapter consists of a thorough literature review starting with the definitions of risks,
definitions of the risk management process and its benefits. It presents a deep history of the
evolution of the automotive industry in the UK and India. It gives information of the several
risks in the automotive industry. It consists of case studies on automotive project failures.
Further, the entire risk management process and various methods in the process are the
explained in detail.

Chapter 3: Research Methodology

This chapter includes an introduction, the research design that is selection of the mixed
method technique for this research and the data collection and analysis methods. It also
includes the ethics considerations, validation processes and the assumptions made
throughout the research.

Chapter 4: Survey Results Analysis and Developed Framework

This chapter consists of the analysis of the survey results. The sections under this include an
introduction, survey results analysis based on demographic characteristics and the distribution
by risk management practices. It also explains in detail the new risk management framework
developed by the author.

Chapter 5: Framework Validation, Discussions and Conclusion

This chapter consists of the validation of the new developed framework. Discussions are also
made on the importance of the risk management process in the automotive industry in the UK
and India. Further, it contains the recommendations and conclusion for the research.

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CHAPTER 2: LITERATURE REVIEW
2.1 What is Risk?
According to Cretu et al. (2011) the term ‘risk’ certainly requires some debate. The word is
mostly implied to have a negative impact on the listener. For instance, if someone says, “It is
a very risky assumption”, it is usually presumed that the situation has a higher possibility to go
wrong and further something bad is about to occur with the risky assumption. The fact
discussed here is that risks represent an uncertain outcome. Risk comprises both opportunity
and threat as they both have an uncertainty associated. The crucial aspect of effective risk
management is to neither be pessimistic nor optimistic.

According to Hillson (2002a) towards a common definition, there are two options hinting to the
definition of “risk”, one with positive effect called as opportunity whereas the other with
negative effects termed as threat.

The Oxford English Dictionary has defined risk as “hazard, a series of bad sequences, loss or
disclosed to mischance”. Usually, the downside of a risk is mentioned in any situation and is
rarely seen as a potential for a gain. The authors of the Project Management Institute (2004)
have a similar opinion to various practitioners and researchers that risk is an uncertain event
with a positive or negative effect on the objectives of the project as mentioned in the PMBOK
guide. To most people, risk is identified to have a negative effect including some national
standard-setting bodies like the International Organisation for Standardization (ISO) which
also relates to the negative description of risk.

The word “uncertainty” is an encompassing term that establishes risk as a threat solely, as
per the current trend as generally accepted by practitioners and researchers in the field of risk
management. According to Heldman (2005) most of the research overlooks the other side of
the picture, thereby considering risk as a threat in every project. However, in the automotive
sector it is mandatory that the opportunity aspect of risks is considered as proper risk
identification will help ensuring thorough study of the markets and increasing revenue.

In distinction to the view of identifying risk as an event with a certain effect on the
manufacturing project objectives, if at all it occurs, it is viewed as an uncertainty. As mentioned
by Jaafari (2001) uncertainty was termed as a probability of any event that may be derived
from principle sources, internal business strategic changes, external factors and ill-defined
ways for project realisation. However, Chapman and Ward (1997) debate to distinguish risk
as an uncertain effect itself than being the cause of an effect on the project’s performance

10
such as cost, quality and time. Therefore, the term uncertainty is linked to risk as it includes
‘variability’ and ‘ambiguity’ causing lack of clarity in project objectives.

In contrast to the above discussed perspectives on the definition of risk, Dowie (1999)
constantly restrains to use the term “risk” as he describes that the word has multiple contextual
meanings which creates misunderstandings and vagueness thereby affecting overall quality
of project judgements.

The classification of the term “risk” is based on the decision including both opportunities and
threats being influential project success elements as pointed out by Hillson (2002b). Hence,
for the success of automotive projects it is important that both are dealt effectively through risk
management methods, which are further discussed in the next section.

2.2 What is Risk Management?

Risk management as per Cagnin et al. (2016) is defined as the identification, evaluation and
prioritising the risks followed by coordinated and cost-efficient resource application,
manoeuvring to monitor and control the possibility or impact of uncertain events.

According to the Project Management Institute (2004) the process of protecting the benefits
against the potential losses that may hit the project is defined as risk management. It is
mentioned in the PMBOK guide as the underlying principles of dealing with risk using a
suitable framework with defined processes to perform planning, identification, analysis,
responses and monitoring and control of risks on a project. The Association for Project
Management (2006) aims of understanding and managing risk occurrences and overall project
risk in a proactive and effective manner.

Cretu et al. (2011) recommends risk management being crucial for the project should:

• Generate value and become a vital part of the project organisation.

• Tackle ambiguity, making the best decisions with the available information.
• Be organized, methodical, iterative and reactive to change.
• Be clear and inclusive for incessant inventions and developments.
• Consider the human influenced factors.

The notion of risk management in projects is varied and extensive with few of the definitions
focussed on decision-making process. There has been use of different terminologies for
defining risk management. Chapman and Ward (1997) define the process of risk management
to facilitate better business and project results, providing improved insight, knowledge and a

11
superior decision-making capability. However, as suggested by Raftery (1994) risk
management is not a wand that may remove all the risks in a project, although, it does provide
an opportunity to make informed decisions thereby, reducing effect of potential negative risks.

2.3 Benefits of Risk Management

According to Gajewska and Ropel (2011) to ensure the optimum productivity of risk
management, the risk management practices should be developed throughout the entire
lifecycle of the project. It will ensure the identification of risks and therefore devise ways to
tackle them through each phase. The process of risk management benefits the actors involved
in the project along with the overall project. The primary objective is to clearly understand and
be aware of the potential risks arising in the due course of a project. Risk management
practices allows an improved viewing of the future consequences that result from the
unmanaged risks and find solutions to avoid them. This will further increase the level of control
on the project with efficient decision-making and problem-solving methods. It will also reduce
the occurrence of unforeseeable abrupt surprises. The benefits of risk management in the
automotive industry reflects on the economy of the nation as this industry enables boosting
important factors such as employment, export and FDIs.

Implementing risk management is certainly useful for the swift simple running of the projects.
On the basis of risk management approaches adapted, Gajewska and Ropel (2011) classifies
the firms as follows:

• Risk natural firm: It is aware of the crucial risks and shows minimal investment in risk
management.
• Risk averse firm: The firms that do not show any involvement to address or mitigate the
risks.
• Risk seeker firm: Often called as ‘gambler’ , these firms are interested to face all the
risks involved in the project.

Largely, the risk seeker firms acquire a lower profitability as compared to that of the risk
natural firms, since huge amount of investments are made to repeatedly handle the risks over
and over again, even before the risk actually occurs.

2.4 Evolution of Automotive Industry in the UK

The Society of Motor Manufacturers and Traders (2016) in their SMMT-KPMG EU report state
that a huge chunk of Britain population work in the automotive manufacturing sector

12
contributing around 4% of GDP (£60.5 billion). However, there has been a distinctive
productivity difference between UK and its European rivals, France and Germany.

According to Thoms and Donnelly (1985) the automotive trade industry started the production
in the mid to late 18th century in countries like France and Germany. Britain joined in soon
after hundreds of small to medium companies produced hand-made cars for the elites.
Although, not many of the companies lasted, two emerged as an exception, Ford in America
and Rolls Royce in the UK. They understood the engineering expertise required in shaping
the manufacturing industry and linked it to the market requirement and sales. Henry Ford set
up the Ford’s first production plant in Manchester in 1913, kickstarting large-scale
manufacturing in the UK which was followed by Wolsey, Humber, Rover and Sunbeam. The
UK adapted similar mass-producing techniques as that of the USA by 1939, however, they
catered to two different markets as UK market was much smaller and restrictive. Between
1920 to 1930, trends shifted and three companies dominated 75% of the market namely
Austin, Morris and Singer.

Boschma and Wenting (2007) mention that after the settlement of World war II situation, Ford
and Vauxhall (American owned companies) shared 30% of the entire British market, more
chunk of share than either of the top two British companies. This scenario drove the inception
of British Motor Corporation (BMC) and dominated the British market. The creation of British
motor trade in 1952 included names like Wolseley, Morris, Austin, Riley and MG which
captured major automobile market in the country.

The UK’s Department of Trade and Industry (1998) has been constantly highlighting the
absence of competitiveness in the Automotive Components Sector of the country. The study
stated the shortage of suitable qualified engineers leading to a competitive disadvantage of
the UK manufacturing firms. This requirement has been reiterated again regularly addressing
the shortage of skills and gaps at all levels in the companies. However, there has been
minimum addressal to this issue and the ways of handling the shortages has been criticised.
In 1998, Japanese component firms surveyed the firms in UK and emphasised critically on the
old-fashioned teaching and equipment used in the country.

With the initiation of the 21st century, Bevis (2011) mentions that the UK Automotive Supply
sector was found in a fragile and edgy state. The sector was under pressure from the distant
and European markets. Vauxhall and Rover emerged to be the recent most examples
amongst the vehicle manufacturers. As a result of globalisation, a number of companies
entered the market and related the customers and the local suppliers with ease of access. In
order to grow, the small and medium sized firms needed a plan to sustain in the market.

13
In March 2000, at the Lisbon Council, European government set a 10-year target to make the
EU as the most dynamic economy in the world, with the capacity of sustained growth in the
economy (Leitch, 2005). Leitch described the demand for skills and maximising performance
and productivity through better judgement and flexibility, therefore requiring better trained,
innovative and determined employees.

As reported by Segal (2017) In 2016, the British automobile industry coped up well even after
selling the major British brands to overseas companies. It established the biggest
manufacturers in the industry planting companies in the UK including Nissan, Toyota and
Honda. Over 75% vehicles manufactured in the year 2015 were exported out of the 1.6 million
vehicles built in the year.

The Society of Motor Manufacturers and Traders (2020) consistently has been suggesting the
catastrophic impact of Brexit in the automotive sector as it would hamper the smooth trade
with European countries, adding to the costs of import and export. Any investment in recent
years has dropped down by 80%, reducing the car manufacturing in the UK by 9% in the year
2019. The automotive industry contributes around £18.6 billion to the UK economy with more
than £82 billion turnover. It accounts for 14.4% of exported goods from the UK with around
168,000 people employed in the automotive industry directly. There were over 1.3 million
passenger cars, 78,270 commercial vehicles and 2.5 million engines manufactured in the
country in 2019.

As per Hertzke et al. (2020) the UK automotive sector will be impacted for more than two years
due to the Covid-19 situation as social distancing and lockdown have made remote working
mandatory resulting in a drop of consumer needs.

2.5 Evolution of Automotive Industry in India

Although the automotive industry in India started developing in the 1940s, there has been a
distinctive upscale only in the 1970s. As cars were considered to be ultra-luxury entities,
manufacturing was licensed strictly with limited expansion and restricted tariff structure. In line
with Miglani (2019) significant changes by the Indian Government in the economic and
industrial policies lead to market liberalization leading to successful prospering of the Indian
automobile industry. The decade of 1985 to 1995 witnessed the arrival of Maruti Udyog in
collaboration of Suzuki from Japan in the passenger car segment of the industry. It was only
after 1991 economic reforms in India, the automotive industry opened up by mid-1990s,
characterizing the entry of global automotive manufacturers through joint endeavours in India.

14
Miglani (2019) also highlights that in 1997, the introduction of automotive FDI approval of joint
ventures with a major stakeholder share of 51% was allowed for the foreign partner. This
policy attracted many competitive manufacturers to a completely unsaturated market of the
country through an easy profitable route of joining in with Indian manufacturing firms. Table
2.1 shows the establishment of various automotive companies in the Indian market.

As stated by Sahoo et al. (2011) the automotive industry, particularly the passenger car
segment, was primarily occupied by Maruti Suzuki, Tata Motors, Hindustan Motors and
Premier Padmini till the 1990s. Whereas, the commercial automobile segment was largely
occupied by manufacturers like Ashok Leyland, Tata Motors and Mahindra & Mahindra with
Bajaj Auto ruling the two-wheeler market. Subsequently, to identify the Research and
Development (R&D) in the country, the Core Group on Automotive Research & Development
(CAR) was set up in the year 2003.

The industry has grown in the country from just being a “job fulfiller” to becoming an “integrated
organisation”. It has been a significant driver in the growth of Indian economy and emerged to
be a successful sector with immense participation from global value chains. According to Kale
(2017) and Miglani (2019) with an average production of around 29 million vehicles in 2017-
2018, out of which 4 million were exported, India became the sixth largest producer of
automobiles in the world. The contribution of the automotive sector in the country’s GDP has
increased from 2.77% since its inception in 1992-1993 to about 7.1% in 2019, accounting for
about half of the manufacturing GDP (2015-2016). The sector indirectly and directly employs
of more than 29 million people with an annual turnover of approximately US$ 67 billion (£50
billion) (2016-17). Globally, as per OICA statistics, the Indian automotive industry was solely
responsible for 4.92% of vehicle manufacturing in 2017.

15
 Table 2.1: Establishment of Automotive companies in the Indian market (Ramachandran, 2011)

Global collaborations have enabled upgrade in technology and upscaled the production in the
automotive industry. The largely unsaturated domestic market for small cars, low production
costs and immensely skilled engineering talent are a few of the many reasons for the
impressive growth achieved by the Indian manufacturers particularly in the last two decades.
However, in March 2020, the Original Equipment Manufacturers (OEM) saw a tremendous
drop in the quantity because of the Covid- 19 situation. As reported by The Economic Times
(2020) vehicle manufacturing in India has shrunk by 8.3% in the year 2020 and has also made
the shift to the Bharat Stage (BSVI) emission standards problematic.

2.6 Risks in an Automotive Industry

Risk is commonly defined as the possible variations caused due to expected outcomes.
Across various disciplines, risk has been widely examined including the field of economics

16
and management. In project management, the important thing is to ensure that the inevitable
risk of a project is at an acceptable level to manage it effectively. According to the Project
Management Institute (PMI, 1996) risk management processes include identifying, analysing
and responding to the risk related to the project including minimum impact of adverse events
and maximum optimization of positive opportunities.

In the automotive industry, the time to innovate and develop new vehicles is significantly
decreasing due to competitiveness of the current models. This makes it difficult to identify
errors in the manufacturing process and thereby reduces the reaction time. To successfully
launch new models; it is important to detect possible risks and act on them effectively in time.

2.6.1 Financial:

In keeping with Copeland (2005) the automotive sector has a strong interdependency with
macroeconomic factors. Per capita income, level of employment, interest rates are a few
important economic aspects that broadly affect this industry. Usually, a steady country with
least political risk would urge foreign investment while, a country with huge political influence
tends to restrain any foreign investment.

Barumwete and Rao (2008) highlight that the movement in the value of a currency
denomination determines the pricing of overseas export and even domestic consumption.
There is a constant exchange rate risk associated to foreign trade and investments. With the
upsurge of raw material costs, especially metal and energy rates, the escalation of this sector
is considered highly volatile in the past few years.

2.6.2 Design and Technical:

In the opinion of Christensen and Bower (1996) creating innovative solutions is a risky affair.
This may create high revenues, but they tag along a lot of uncertainty, with low hit rates and
high expenses rate. Although, automotive manufacturing industry go through considerable
amount of pressure to involve in innovative efforts for maintaining the business competitive
advantage over one another in the industry.

A risk in innovation demands for core product reduction. Bekefi et al. (2008) gives an example
of the Toyota developed Prius gas-electric car hybrid version, a decade before the other
competitors in the market. As a result, it was a competition against time thinking about the
invention ahead of its time visualising the future of the industry in advance.

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2.6.3 Operational:

It is one of the oldest risk and as defined by the Basel Committee of Banking Supervision
(2001) it is the risk of any loss that results from inadequate internal processes, people and
arrangements or from external variables.

According to Atan et al. (2017) operational risks are classified categorically into people,
process and asset risks. They are vastly interlinked, making it difficult to strategize the
functional limits and successfully cater to the three key areas of operational risks in the
automotive industry. This type of risk refers to a series of possible operational failures that
may not be related to financial risk.

Frost et al. (2001) mentions that strategic operational risks occur also due to environmental
factors, for instance a new competitor arriving in the market and altering the usual paradigm
of the business, any new governmental laws implemented, natural calamities etc. beyond the
influence of the company. All businesses depend on people, methods and expertise and the
potential for failures prevail.

2.6.4 Supply Chain:

The automotive industry globally faces augmented supply chain risks because of the
constantly recurring quality management issues in the network of their suppliers. Therefore,
this impacts the delays in production and safety issues. According to a survey conducted by
J.D. Power and Associates (2015) one of the most reputed automakers, Toyota, recalled
around 9 million cars in the USA due to faulty floor mats that led to 52 car crash deaths.

Current integration of IT trends, augmented outsourcing, reduced lifecycle of products has

further increased the vulnerability of supply chains, creating more supply chain risks (Manuj
and Mentzer, 2008). Moreover, the supply chain is elongating and becoming more complex
triggering major quality risk and thereby causing a supply chain disruption.

Harland et al. (2003) defines supply chain risk as the damage calculated by its possibility of
occurrence, impacting more than one company while originating in a single company within or
in the surroundings of supply chain. Therefore, supply chain risk rises from an unsettled course
between organisations. The flow, however, could be related to raw materials, data or
monetary. An important element of supply chain risk is that it ranges beyond one particular
organisation (Tang, 2006). Thus, optimum supply chain management is important for
regulating the operational costs and provide customer satisfaction in the automotive industry.

18
2.6.5 Health and Safety:

Sukadarin et al. (2012) outlines that health and safety culture plays a vital role to determine
any company’s success or failure. The industry with strong safety culture, particularly in
automotive sector, allows to reduce potential accidents that occur in routine schedules. Safety
ethos can be identified as a proven technique of improving workforce principles, behaviour
and attitude in order to provide productive outcomes.

Zuber et al. (2014) explains that safety training, communication and systems should be
considered on priority during the development of any organisation. Very gradual and stable
measures are required to implement and establish a safety culture in a company. There have
been a number of hazards occurring annually in workplaces resulting into death and serious
injuries to millions of workers. The involvement of industrial machines is often involved in such
accidents. The insufficient importance given to health safety by the management in a
workplace lead to such disasters.

The current pandemic of the outbreak of the coronavirus has largely affected the entire world
and all segments of the society. The automobile industry is evaluating the impact it has caused
to overcome the challenges whilst providing services to the employees and consumers.
According to an article by Deloitte (2020), the automobile industry has observed the diverged
requirement of the customers to buy cars which will henceforth decrease shortly because of
the current case scenario. This has also made it difficult to plan wholesale production and
would lead to imbalance in the inventory. However, the company suggests some coping risk
responses to deal with the pandemic and its effects. It advises to focus more on the health
and safety of the people, prioritise on cash flow risks and also improve the flexibility of the
supply chain of the industry.

2.6.6 Environmental:

An automobile, since inception of its manufacturing process till its usage and end of its
scrapping, leaves a huge carbon and metal footprint with toxic chemical wastes, leading to all
kinds of pollution. The movement of people and goods leads to even more greenhouse gas
emission and pollution (Barbero and Geleota, 2019). The automotive manufacturers hence
should mitigate the commonly identified risks by devising alternate risk barriers.

Also, the demand of vehicles may lie low during a certain time of the year (such as rainy
season) whereas, it may boom during a festive season, depending on the countries. The
automobile manufacturers should be able to cope up with such fluctuations and adapt to

19
mitigation strategies. Busse et al. (2015) discovered that an automobile purchase is quite
reliant on the weather and is therefore regulated by physiological effects.

2.6.7 Legal, Regulatory and Political:

The tax policies in a country refers to the incentives provided by the government in order to
establish control on the distinction in demands and consumption rate. They may include
corporate taxes, indirect taxes etc. Studies by Pritchard and DeBoer (1995) define the change
of customer behaviour in vehicular purchase with variation in taxes. The demand rises or
lowers with the benefits gained by any established policy from the government.

Alberini and Bareit (2016) point out the laws implemented by the government of a country to
address the current issues of increasing environmental pollution and are termed as
environmental laws. Typically, in the automotive industry there are environmental laws around
manufacturing of vehicles that run on electricity, modified types of fuel or renewable energy
sources rather than the non-renewable sources like oil.

These regulations and constant changes in the laws cause a negative impact on consumers
as it creates a confusion to purchase a vehicle. For instance, The Economic Times (2020)
reports that in India, the demand of IC-engine vehicles is stagnated as the government’s policy
to switch to Bharat Stage (BSVI) (cleaner fuel) from BSIV by April 2020 in order to reduce air
pollution is regulated.

2.7 The Risk Management Process

Risk management plays an important role in the management of the automotive industry. The
risk management department in the automotive firms adopt a systematic and dynamic
approach to control the risks and reduce its uncertainty. An in-depth study will be conducted
as per the risk management theory provided by George L. Head and Stephen Horn (1985) to
critically evaluate the risks and create a framework to reduce the risk in the automotive
organisation.

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 Figure 2.1: The risk management process (Head & Horn, 1985)
2.7.1 Risk Identification:
According to Patterson et al. (1999) at the initial stage of the project, decisions are made by
the managers considering great uncertainty. This is because within the early stage of the
project, the factors affecting the project cannot be decided. However, it is mandatory that the
high- risk decisions should be made at the early stage of the project and all the resources for
the same must be allocated and authorized. Therefore, large amount of time and effort must
be spent by the manager at this stage to ensure wise decisions are made and summarize all
the knowledge and expert advice available. This will help ensuring that the process or the
product does not need to be restructured at a later stage and it does not fail.

Hence, the risk identification stage is vital within the risk management process as without the
proper identification of risks, the accomplishment of the remaining processes becomes
difficult. Some of the risk identification techniques have been explained below:

2.7.1.1 Brainstorming:
Morano et al. (2007) describes brainstorming as an idea generation group technique divided
in two steps. The first step is the idea generation, where the members generate as many ideas
as possible. The second step is where each member supports his/her idea to convince the
other members of the group. In this step the ideas are filtered, keeping on with the ones
approved by the group. The brainstorming technique follows four basic rules:

i. Ruling out the criticism.

ii. Encourages free- wheeling.

21
 iii. Demands quantity. Greater the number of people, greater is the number of ideas and
more likely chance of finalising the useful ones.
iv. Improvement and combination.

However, over the time this method has created confusions and misunderstandings among
the group which has led to improper identification of the risks.

2.7.1.2 SWOT Analysis:

According to Martins et al. (2011) Strengths, Weakness, Opportunities and Threat (SWOT)
analysis is a strategic tool that helps in the decision-making process of projects. Easy
understanding and quicker implementation are benefits of this analysis. It involves all the main
managers and makes decisions based on relevant and crisp issues of the project. The four
perspectives are usually presented in the form of a quadrant chart. One of the disadvantage
of this analysis is that it doesn’t produce in depth details of risks.

2.7.1.3 Risk Register:

Chapman (2011) defines risk register as the starting point for risk analysis and plans. It is a
document which contains all the necessary information regarding the risks in the organisation.
Hence, it is considered as the central part of the risk management process.

Dunovic et al. (2013) mention that risk register even after being inevitable in the current risk
management methodologies, it is only used in two methodologies as the central part of the
management process that is the CIRIA and ATOM methodology wherein it is considered as
the outcome of the risk assessment process and also used as a tool for storage and controlling
the risk management process. Even though a number of foreign companies use this method
to achieve a competitive edge in the market, not many research or studies have been done
on the risk register, its procedure, structure and trends. 67% companies use some form of
register to store possible risks of their organisation in paper or electronic format whereas, 78%
of such companies have created their IT systems to do so, neglecting the risk register. Table
2.2 illustrates the contents of a risk register in detail.

Dunovic et al. (2013) outlines the following steps for the development of the risk register.

i. Defining expectations and current practices relating to its use.

ii. Analysis of components available in literature.
iii. Classification of risk for identification and to define responsibilities.
iv. Implementation of the framework so as to enable the risk register to take proper role.

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 Table 2.2: Contents in the risk register (Chapman, 2011)

2.7.1.4 Delphi Technique:

According to the RAND Corporation (1969) Delphi technique is defined as a method for
eliciting and refining group judgements. It is used for enabling structured group communication
to resolve complex problems and uncertain outcomes by gathering expert opinions. This
method works on the basic principle that more minds are better than a single mind. When this
technique is used as a forecasting tool, an organised and structured group communication
gives accurate forecasts than an unstructured group.

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According to Grime and Wright (2016) the Delphi method follows a basic structure when it is
used for forecasting. A series of questions have been created and all the members have to
anonymously offer numerical responses. Once all the responses are gathered, an aggregate
is generated and the feedback is placed in front of the group with the reasons for the
responses. On the basis of the feedback the members than have an option of repolling, that
is changing their earlier response. This iteration method is carried out till a predesignated
stopping point is reached. It is said that even without conducting the repolling, simply utilizing
the median of the group’s responses will give more accurate results than the individual
panellists. By using the feedback and repolling method, the median of the group responses
comes closer to the outcome predicted. Hence, Delphi groups are considered as more
accurate than the traditional ones. According to a research conducted by Rowe and Wright
(2001) the Delphi groups outplayed the traditional groups by score of 5 is to 1, giving this
method an upper hand for its usage in organisations.

Figure 2.2: Steps in the Delphi Method (RAND Corporation, 1969)

2.7.2 Risk Analysis:
As per Chapman (2011) the risk analysis is followed by the risk identification stage in the risk
management process. This step includes data collection and can be stated as an approach of
judgement provision of the likelihood of occurrence of the threats and opportunities. This
informs the sequence of pain and reward in the risk at each time of its occurrence. As the
quantitative analysis is not as accurate, the term ‘an order of’ is used based on subjective
assumptions. Therefore, the credibility of such analysis is often questioned because of its
vagueness. Although, these quantitative analysis methods enhance an informed decision-

24
making. On any uncertain event in a project, this type of an analysis guides to resolve the
issue by providing a certain framework. The decision making becomes easier and quicker as
soon as the risks are quantified as per priority and it thereby improves the analysis with
enriched information.

According to Gajewska and Ropel (2011) there are a number of methods for the risk analysis
but a number of factors are to be considered while selecting the appropriate method. Some of
the factors on which the selection of the method depends are:

i. Cost – Cost of the method and cost of employment.

ii. Adaptability of the method.
iii. Complexity of the technique.
iv. Credibility and Completeness.
v. Validation of the results and understandability.

2.7.2.1 Monte Carlo Simulation:

According to Palisade Corporation (2010) Monte Carlo methods are a class of computational
algorithms that can be applied to a number of problems. It was first invented during the early
1940’s in the context of development of the atomic bomb. This method relies on the repeated
random sampling. It is generally used for finding solutions in cases where numerical or
analytical solutions are too difficult to implement. This methods helps evaluating cost, demand,
duration in the projects. Its applications include numerical integration, error estimation,
optimization problems and numerical solutions. Figure 2.3 shows examples of the Monte Carlo
Simulation charts.

The Monte Carlo Simulation follows the below steps:

i. It determines the statistical properties of the possible inputs.

ii. It generates sets of possible inputs that follow the above properties.
iii. A deterministic calculation is performed with these sets.
iv. It statistically analyses the results.

25
 Figure 2.3: Monte Carlo Simulation Charts (Novkov, 2019)
2.7.2.2 Pareto Analysis:
According to the Queensland Government State Department (2002) to focus on the important
risks in a project, principles of Pareto analysis is to be followed that is focusing and allocating
resources to the significant few than the insignificant many. In Pareto analysis a simple method
of ranking the risks is followed to determine the order in which the risks should be managed.
The Pareto analysis is also called as 80/20 rule. The Pareto diagram represents that 80% of
the overall risk impact is due to the 20% risk within an analysis. According to Chapman (2011)
This method is usually used for problem solving and continuous improvement activities. 80%
of welfare comes from the first 20% of the endeavour, 80% of the grievances are about the
same 20% of your service provided are some of the examples of how the pareto analysis
function. The risk significance can be communicated to the project group involved in the
analysis of risk by combining Pareto analysis with Expected Monetary Value (EMV)
calculations. While a Pareto chart may only indicate qualitative data, it rarely displays the
frequency of an attribute which leads to inaccuracy in the interpretations.

2.7.2.3 Sensitivity Analysis:

According to Chapman (2011) this method is beneficial to use in a project while evaluating the
profitability of an investment proposal. In this method a single variable like volume or sales is
taken and examined on the likely performance of the project. While examining the changes
that occur, it shows how sensitive changes arrive for the projected outcomes. When there is
a positive appraisal for the investment, each value in the input can be investigated to check
how much the estimated figures can be changed before the project starts becoming
unprofitable based on the particular input alone. As this method examines only one variable
at a time, the other variables that impact the performance of the project may be examined
consecutively. The other form of performing this method is by forming a series of ‘what-if’

26
questions like what if the sales volumes is 5% higher than expected or what if it is 10% lower
than expected etc. The answers to such questions give a better effect of forecast inaccuracies
to the final outcome of the project. However, sensitivity analysis does not consider more than
one variable at a time on the projected outcomes neither does it assign probabilities to each
possible change.

2.7.3. Risk Evaluation:

In the risk management process, the subsequent step after risk identification and its analysis
is evaluation of the identified risk. During this procedure, the manager must ensure that the
risks are considered separately. Refsdal et al. (2015) suggest that risks can further be
classified into opportunities and threats. They may also be placed according to the priority
level of their occurrence. It is beneficial to rank the risks because they simplify the identification
of the treatment of risk and helps to provide the required decision provision. Qualitative
methods are used to prioritise the identified risks in risk evaluation. A few of the risk evaluation
techniques are as follows:

2.7.3.1 Hazard and Operability Studies (HAZOP):

According to Product Quality Research Institute (2015) HAZOP is an evaluation technique

initiated by Imperial Chemicals Ltd. to identify risks in chemical plants. It is a flexible approach
used to identify probable threats in all the operational stages during its inception design and
development phase too. As a risk analysis tool, HAZOP is illustrated as a brainstorming
methodology to assess risk effectively. Figure 2.4 illustrates a HAZOP template.

Rausand (2011) suggests that this method recognises hazards and operability problems. The
study should be conducted in the early phase of the design stage. However, it is carried out
as a concluding check after design completion. The best use of HAZOP is to measure hazards
in services, equipment and procedures. Following are the advantages of HAZOP:

i. Useful to confront hazards that are tough to compute and calculate.

ii. In-built brainstorming approach.
iii. Organised and inclusive practice.
iv. Simpler and instinctive than other common traditional risk management tools.

27
 Figure 2.4: HAZOP template (IEC, 2016)

2.7.3.2 Failure Modes and Effects Analysis (FMEA):

This very technique was originated in the aerospace and defence industry. Stamatis (1995)
refers this as a tool used to identify what could go wrong with the project in its manufacturing
stage. FMEA is a problem deterrence tool, to develop the fundamental customer needs and
avoid customer satisfaction at the design stage. Figure 2.5 shows the FMEA template.

Besterfield et al. (2004) expresses the use of FMEA as an effective tool, leading to a reduction
of cost internally. This also allows lesser customer complaints and provide warranty return
cost. On implementing FMEA, it enhances the quality of the product/ process and increase
the reliability to ensure customer satisfaction. Following are the advantages of the FMEA
method:

i. The FMEA procedure is an efficient way to calculate developments, services or

projects as it guides the implementation of new approaches.
ii. This identifies the failure spots in the early stages of the project.
iii. It is a rational and planned way to classify areas of issues whilst lowering
development time and expenses.
iv. This also enables the identification of areas that require improvement and where
there is a lag of performance.

28
 Figure 2.5: FMEA template (Martin, 2018)
2.7.3.3 Risk Matrix Chart:
This method is used to separate higher impactful risks from low impact risks. The chart is
frequently used in risk management workshops to identify and analyse the risks as per their
probability and impact on the project. As defined by Cox (2008) risk matrix is a table with
categories of ‘probability’, ‘frequency’ on the rows (or columns) and other factors like ‘severity’
and ‘impact’ on its columns (or rows, respectively). Usually, risk matrix has values in numbers
linked to it. Figure 1.2 illustrates the risk matrix.

A risk matrix can be beneficial to exhibit simple results of a risk analysis. However, Cox (2009)
argues that risk matrix is widely used but it avoids correlations in the risks. The matrices are
a convenient way to prioritise risks, but companies should be flexible enough to alter the
design and size of the risk matrices as required.

2.7.4. Risk Response

Risk response encompasses crucial steps for prospects and reactions to threats. The
responses to the involved risk generally are classified into the following types:

2.7.4.1 Risk Avoidance / Removal:

Chapman (2011) mentions that this method is adopted to remove a particular prospective
hazard by either eradicating the cause of the risk from its very source or by eluding the projects
that are prone to the risk. This approach is implemented to purge a risk completely when an
undesirable outcome is expected in a project.

2.7.4.2 Risk Reduction / Mitigation:

According to Wilkinson (2003) the existence of a risk is dependent on its possibility of
occurrence and its impact on the project outcome. This technique contains reducing the
probability or lowering its effect and sometimes both. The acuteness of injuries from falling of
equipment or its part used in the automotive manufacturing industry, for instance, could be

29
reduced by usage of hard hats and the implementation of secure working practices can reduce
the probability of falling heavy tools and equipment.

2.7.4.3 Risk Transfer:

As per Perry (1986) the reassignment of a risk refers to a strategy taken on to shift a risk onto
another project or organisation. The financial contracts are the most common way in which
risks are transferred while abiding the terms and conditions. The easiest way to transfer risk
is through insurance wherein, only the potential financial outcome of a risk is transferred and
not the entire accountability for handling the risk. Therefore, the transfer of risk does not
remove or reduce the existence of the risk, but it leaves that part of the project for others to
bear the consequences.

2.7.4.4 Risk Retention:

According to Merna and Al- Thani (2008) this method is also known as acceptance and
absorption. It usually is applied to save cost or when there is no other alternative left other
than accepting the result as the preference to transfer, reduce or remove the risk is not
accessible. The threats could be intentionally or unintentionally retained. If a risk is not
recognised or if its outcomes are not predicted in time, then the company is improbable to
evade or condense or move it willingly. Risk retention could be cost effective to a limit,
subsequently growing more expensive than feasible.

2.7.5 Risk Monitoring:

The vital tasks of monitoring and review procedures in a project includes response execution,
effective monitoring and application of corrective measures. Therefore, these tasks include
the following:

2.7.5.1 Execution:
As per Chapman (2011) this is a crucial step in the process of risk treatment, in terms of
implementing the planned activities to revert to the identified threats and opportunities. The
responsibility of executing the required tasks in the risk treatment course will be already
agreed upon in the initial stage of the project.

2.7.5.2 Monitor:
After the execution of the steps in the risk management stage, it is important to review and
keep observing the development. Chapman (2011) refers monitoring as a neutral event and
as valuable as execution. But, it does not affect the outcomes.

The monitoring actions should comprise of the following understanding:

i. Employees and senior managers working effectively together.

ii. Identification of new risks and opportunities across all sectors of the project.

30
 iii. Updated risk register.
iv. Risk management should be implemented strategically.
2.7.5.3 Control:
According to Drucker (1979) controlling of the steps is not an unbiased activity, unlike
monitoring. This entails interference regularly and it requires to focus on the information
collected from monitoring to make an informed decision for further steps. To establish control,
the following conditions must be satisfied.

i. They must be feasible.

ii. They must be suitable and significant.
iii. They must be judicious.
iv. They must be consistent and straightforward.
v. They must be functional.

2.8 Case Study

In this section of the research, a varying set of case studies of the automotive industry are
discussed from the two countries – the UK and India. Analysis has been carried out on the
basis of different risks faced by these companies. A framework is further developed with the
help of the conducted research, to understand the ideal risk management methodology to be
practiced and the approaches to be adopted.

2.8.1 Dyson in UK:

Being horrified, looking at the smoke cloud generated by the back of vehicles, James Dyson
had the driving urge to solve this problem, even as a child. Although, recently through
alternatives, less smoke emitting petrol and diesel engines are available, they are still not
entirely free from toxic gases. As expressed by Walker (2019) Tesla initiated exploring the
electric cars as the issues with combustion engines existed and were rigorously ignored by
the traditional automakers. Dyson, after developing technologies like their own batteries and
motors, switched to creating a car to build a radical car completely technology loaded.

According to Holder (2019) a possible series of risks led to the scrapping of the Dyson electric
car in a short period of time :

1. Design and Technical Risk:

The battery used in the electric car was not delivering the expected outcome. The
electric cars relied on solid state batteries, that promise extended life and requires less
charge at affordable rates. But other competitive companies have also tried to produce
such batteries on cheaper rates and failed. Dyson perhaps faced the same issues.

31
 2. Financial Risk:
The electric cars are extremely expensive to manufacture and its production brought
huge loss to the automakers. The company had supposedly invested £2.5 billion for
this project. These losses affected the manufacturing company as the trade of electric
cars let them to compensate against retailing traditional vehicles that usually earn a lot
of revenue.

3. Supply Chain Risk:

The company was in the production raising stage. However, it is assumed that the
base of supply chain at Singapore was not as seamless as expected. Also, the
commercial viability of the non-automotive company producing an electric automobile
was queried.

2.8.2 Tata Nano in India:

Farris (2009) refers The Tata Group of Industry as an assorted multinational organisation with
global interest in production, power, information systems and communications, resources,
service, user products and chemicals etc. It employs 650,000 people in 96 companies across
six continents. Tata Motors became the world’s sixth largest commercial vehicle producer in
the world and was one of the largest automotive companies in India. It was the first Indian
company to show up on the New York Stock Exchange in the year 2004. In the same year,
the company bought one of Korea’s highest truck manufacturers, the Daewoo Commercial
Vehicle Co. Ltd. In 2005, it purchased 21% stake in a Spanish bus company, Hispano
Carrocera SA.

The automotive company, Tata motors had plants located in a number of Indian cities and
assembly operations in countries like Malaysia, Kenya, Bangladesh, Russia, Spain, Ukraine
and Senegal. As mentioned by Sengupta and Ramesh (2011) on nearing the launch of Tata
Nano, the company faced a downfall in the market in September 2007 from £ 13.93 per share
to £ 7.14 in September 2008, almost dipping by 50% in a year.

Tata Nano

Ratan Tata, Tata Motors Chairman, observed that Indian families commonly commuted on a
two-wheeler or motorbike with their three and four members of the family. He envisioned to
make a secure family vehicle for the mass population of India, a four-wheeler transport to be
made from the usual scooter parts (Sengupta and Ramesh, 2011). The engineers achieved
their design and developed the product in about five years (2003-2008).

According to Farris (2009) on 10th January 2008, at the 9th Auto Expo in New Delhi, India, the
company announced and introduced the Nano to the audience with a price of £1875, the

32
cheapest car in the world. The value proposition for the product was a secure, inexpensive
and an appealing compact car. It got positive reactions initially, from the industrial analysts,
automotive dealers and also the customers. In November, although economy of India was
booming with overall automobile sales of over 22%, Tata was able to sell only 509 units of
Nano cars, rashly lower than the previous July wherein 9000 cars were sold.

Risk management has been recognised as a vital step in the manufacturing industry of a new
product (Lamas et al., 2012). Risk management affects the entire development of the project.
Since, the multinational company did not assess risk accurately, Tata Nano failed miserably
due to the following:

1. Design and Technical Risks:

As per Eyring (2011) behind the novel idea of replacing the two-wheelers with
comfortable cars, the manufacturers did not realise the ease of parking of a two-
wheeler and that created an issue with the consumers as the car did not allow them to
navigate swiftly through the traffic and thereby creating parking a tedious task. Also,
the absence of standard features of a car, that exist by default in the competitive
vehicles made the Nano seem cheaper.
Several reported accidents made matters worse for the automobile company and they
transferred the incidental allegations to foreign faulty equipment exhausting earlier
than the supposed duration. The manufacturing company refused to recall the cars
with faulty parts and hence, bad customer service also added to the failure of the Tata
Nano.
2. Operational Risks:
According to Waeyenberg and Hens (2008) the controversial safety rating of the Tata
Nano was one substantial issue of the car. The automaker anticipated a four-star rating
in the Euro New Car Assessment Program (NCAP) test. However, on testing it in 2014
by a German automobile club, the product failed dejectedly. It needed airbags and
appropriate adult safety protection. Also, the automobile was not as safe as Tata
declared because it did not meet the fundamental safety obligations of the UN.
3. Financial Risks:
Eyring (2011) also mentioned that the people’s car, Tata Nano had serious
maintenance cost and it became costlier to maintain the car than a two-wheeler thus,
making car possession more expensive. The misconception of a low-price car being
enough reason to attract the consumers led to its collapse. As in Indian market, cheap
product is equivalent to low quality and poor build.
The status conscious people in a society tend to upgrade to cars from two-wheelers.
However, a cheaper version of the vehicle would not serve the purpose of boosting the

33
 social status of the buyer. So, poor marketing was one of the prime reason for the
failure of the Tata Nano.
4. Supply Chain Risks:
Sengupta and Ramesh (2011) highlighted a major issue with Tata Nano was its
delivery waiting time. The product was to be manufactured in a fresh plant in West
Bengal. Although, as there were issues with land acquisition, they switched to their
other manufacturing plant in Gujarat.
The initial demand of the Tata Nano, being high while the production capacity being
low due to the late commencement of the manufacturing led to shortage of the supply
and many consumers were unable to buy the car as there were not any available.
5. Other Risks:
Eyring (2011) agrees that even though, the idea behind the inception of the Tata Nano
was poignant, the company failed to publish advertisement to emotionally connect with
their target audience and form a bond with the customers attracting them to experience
their product. This emotional disconnect in a country like India, caused major difference
between the automaker and consumers.
As reported by Times of India (2020) in June 2018, only three Tata Nanos were retailed
and one manufactured in Gujarat. In February 2019, a single car was sold. As per a
regulatory filing of the company, the company had zero production and sales in
October 2019 but the year before it produced 71 units and sold 54 units.

2.9 Chapter Summary

A deep dive into literature has been provided starting with the definitions of the concepts such
as risk, risk management process and its benefits along with insights about the evolution of
the automotive sector in UK and India . The various risks that the automotive sector face have
been explained in detail. Further, the risk management process has been explained step by
step with emphasis on each stage of the process. Case studies were used to add more depth
and lucidity to the chapter. Moreover, the literature review was conducted keeping in mind the
questions of the research.

34
CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction
This chapter discusses the several practices and methods that were used to plan the research
including the data collection, data analysis, presentation and conclusive reporting of the
outcomes. Aligning to the objectives of this research paper, this section intends to initially
exhibit the primary data collected through different methods. Furthermore, a hybrid mixed
research method of merging qualitative and quantitative research methods is used.

A detailed division of primary and secondary data sources is depicted. The data encompasses
compilation from the target audience, HR managers, project managers, engineers from
various automotive organisations in the UK and India. Data collection has been carried out
primarily through a google form quantitative survey, results have also been presented within
this research paper. Analysis through different scales have been used and further evaluated
using SPSS software. Validation is done with the help of a validation quantitative survey,
circulated only to professional project managers and senior engineers. The pros and cons of
the google form survey technique are also described.

3.2 Research Design

A range of criteria was used in the research to accomplish great perceptions in the process of
data collection, analysis and representation. A vast literature review was prepared to inspect
the different trends since the inception of automotive industry in both the countries i.e. the UK
and India to understand their individual journeys of the manufacturing of automobiles and
know the current case scenario. A varied set of perspectives about the recent trends were
also grasped by the current working professionals of the automotive manufacturing sector.

An amalgamation of qualitative and quantitative research approaches is used, as suggested

by Cooper and Schindler (2005) to assemble data required for analysing the results. This
research navigates from a probing and vivid form to an analytical design approach.

3.2.1 Mixed Method Research:

This research consists of quantifiable data including statistics and words. It comprises different
approaches like internet and cellular surveys of the current risks and risk management
practices particularly related to the automotive industry. Electronic and digital media were
selected to cope with the current pandemic situation and avoid personal interviews, thereby
saving cost. Google survey was used as the software to generate and distribute the
quantitative survey conducted for the working professionals. The software is free of cost with
a user-friendly interface and varied options to analyse the acquired results.

35
The data collected from the International and Government publications, books, journals,
research papers etc. were used as qualitative data for the research methodology. The case
studies of failure in risk management, leading to major loss for the companies in both the UK
and India, was done to recognise the flaws and discuss the probable solutions to the issues
identified.

On culmination of both quantitative and qualitative research methods, two perspectives have
been observed and a framework is developed easily. Although, it made the research overall
challenging and time consuming, but it did provide a different insight through the results.

3.3 Data Collection Methods

After finalising the research method, preliminary communication with the professionals was
done to inform them about the research topic and thereafter, requesting their participation.

3.3.1 Primary Sources:

Google Forms:

One of the most common data collection tools in today’s environment is online surveys that
are exclusively used by the researchers in the academia. The benefit of using web technology
is to design, develop and obtain a user’s response and record it simply on a database. It
originated back to the telephonic interview, fax and e-mails. The google forms is a data
management tool (cloud-based), used to design and develop questionnaires.

Advantages of using google survey:

i. It is freely available and provided by Google Inc. to create surveys for anyone to
operate.
ii. Prompt functioning than the conventional questionnaire techniques.
iii. Quite flexible to edit, distribute and thereby making it user friendly.
Challenges in using google survey:

i. Although there has been immense advancement in technology, web-based survey

needs careful planning before its distribution. Particularly, low response rate, privacy
and security issues (Zhang, 1999) are important factors to be taken into consideration
for running an online survey.
ii. In countries like India, that do not have internet connectivity as high as compared to
developed countries, carrying out a web-based survey is a dreadful task.

36
Questions in the Survey:

Measurement and Scales

The scale ranges from 1-point to a 5-point number. It varied according to the nature of the
questions. A number of scale ranges can be merged together, according to Cooper and
Schindler (2005) to achieve a better sensitivity and accurate outcomes.

Following rating scales were included in the survey:

i. A simple category scale: It was used for the question on demographics to rightly
recognise age distribution.
ii. Likert scale: The choices range from ‘Low effective (1)’ to ‘Very effective (5)’.
iii. Multiple choice-Single response scale.

3.3.2 Secondary Sources:

1. This comprised of data collected from the records of the Government.

2. Books, published sources, journals, new articles, websites, blogs were also used for
the completion of this research.

37
3.4 Data Analysis- SPSS
The responses for the survey was received on google forms platform. This data was then
exported to MS Excel before adding it on to SPSS. Graphical representations such as pie
charts, histograms, bar graphs were made using Microsoft Excel. In depth editing and analysis
of the complex data was done using IBM SPSS.
This software is renowned for its high accuracy level and correct representation of the views.
IBM SPSS version 26 is used in this research which has statistical analysis features such as
frequencies, standard deviations, mean, percentages, cumulative percentages etc. This
software was learnt by self-learning using YouTube tutorials and sessions.
3.5 Validation Procedures
To ensure the quality of this research, a number of opinionated questions were put in the
google survey, with the guidance of the author’s supervisor. The survey was prior tested a
number of times before sending to the participants to check the user interface and
interpretation. The numeric data collected was added to the quantitative research.

Also, profound use of literature from research papers, journals and case studies have been
vividly used to authenticate and support the research.

An additional survey was created for the validation of the new developed framework which
was sent to professionals in the automotive manufacturing industry to gain the practical
perspective of the market and its requirements.

3.6 Ethics Consideration

i. The aim of this study was explained descriptively while sending the survey to the
participants.
ii. The participants were clearly aware and informed about the identity of the researcher.
iii. The privacy and security norms were also declared prior to starting the survey.
iv. To protect the confidentiality clause of the involved participants, results were kept
anonymous.
3.7 Assumptions of the Research
i. The involved participants were well versed with the current trends of automotive
industry and the overall importance of risk management in manufacturing of the
automobiles.
ii. There was no spam in emails, thereby confirming the receipt of all the sent surveys.
iii. The data and information received from this study was beneficial to know the
drawbacks of not following proper risk management practices in the manufacturing
industry and the threats that are caused by the common risks of the automotive sector,
globally.

38
3.8 Chapter Summary
This chapter highlighted the type of research used for this study. The author has used the
mixed method approach for this study, combining quantitative and qualitative. The sources
used for this research have been mentioned in detail. In order to facilitate the ease of
conducting the survey, google forms have been used based on its advantages. For the
analysis of data collected through the quantitative survey SPSS was used. Further, in this
chapter the researcher has presented the validation procedure, ethics considerations and the
assumptions made in the research.

39
CHAPTER 4: SURVEY RESULTS ANALYSIS AND DEVELOPED FRAMEWORK
4.1 Introduction:
In this chapter, results of the collected data have been discussed using visual representations
such as tables, pie charts, graphs etc, to depict the trends and pattern in the data sets. Inputs
were taken from professionals working in the automotive industry majorly in the UK and India,
to get an idea of the prevailing risk management process in their organisation. A total of thirty-
eight (38) responses have been received and results of these responses have been
presented.

Initially, the operational parameters used for the evaluation of data on the SPSS tool have
been mentioned. The results of the data are then categorized according to various sections.
First, background information of the participant is provided by asking demographic questions
such as age group, profession and level of expertise. Secondly, findings on the questions of
the research have been explained.

4.2 Demographic Characteristics

4.2.1 Distribution by Age Group:
The first question in the survey asked the participants their age. From table 4.1 it can be seen
that 60.5% of the participants were in the age group of 26-40 and 21.1% of the participants
are in the age group 41-60. This gives an understanding that the participants of the survey are
mature working professionals.

Table 4.1: Distribution by age group (Author, 2020)

4.2.2 Distribution of Automotive Experts by Profession:

Question 2 required selection of the job role of the participant. This was used to understand
mindsets of various professionals working in the automotive organisations. Table 4.2 indicates
that majority of the participants work as project managers (36.8)% and engineers (31.6%) in
their organisations. As the project managers and engineers play a crucial part in the risk
management of the automotive firms, a majority of the respondents from this profession
helped making the data more reliable.

40
 Table 4.2: Distribution by profession (Author, 2020)

4.2.3 Distribution by Region:

Question 3 asked the participants for the location of their organisation. As shown in Table 4.3,
11 out of 38 respondents were from the United Kingdom and 24 respondents were from India.
As the objective of the research is to find out the risk management processes in the UK and
India, it was important that majority of the participants were from these regions.

Table 4.3: Distribution by region (Author, 2020)

4.2.4 Distribution by Professional Experience in the Automotive Organisation:

The fourth question in the survey asked for the experience of the respondents in their
organisation. From table 4.4 it is evident that most of the participants have worked for 1-5
years with their organisation. This group had a frequency of 22 (57.9%) of the total
participants. This was followed by 8 (21.1%) participants worked for 5- 10 years and 5 (13.2%)
participants who worked for more than 10 years. Overall, it can be said that the respondents
have good knowledge and experience about their organisation.

41
 Table 4.4: Distribution by professional experience (Author, 2020)

4.3 Distribution by Risk Management Processes

4.3.1 Distribution by Risk Management Practices:
Question 5 in the survey asked the respondents whether their organisation follows risk
management practices. Table 4.5 illustrates that 78.9% of the organisations follow risk
management practices, while 7.9% organisations don’t follow the risk management practices
despite it being crucial for the organisation. A total of 5 (13.2%) respondents selected don’t
know as their answer, this means that a number of professionals are still unaware about the
risk management practices in their organisation.

Table 4.5: Distribution by risk management practices (Author, 2020)

4.3.2 Distribution by Top Risks:

Question 6 and 7 asked the respondents to select the top most risk in their organisation and
a Likert scale was provided to represent the severity of these risks in their organisation
respectively. From a total of 38 responses, 12 (31.6%) respondents said that supply chain is
the top most risk in their organisation. This was followed by legal and environmental risks 7
(18.4%) and health and safety risks 5 (13.2%). Addressing of the top most risk helps in the
planning of the risk management process. The other risks option had a frequency of 6 (15.8%).
The design and technical, financial and operational risks had frequencies of 3 (7.9%), 2 (5.3%)
and 3 (7.9%) respectively. Figure 4.1 illustrates the top risks in the automotive organisations
in the form of clustered bars.

42
 Table 4.6: Distribution by top risks (Author, 2020)

Figure 4.1: Clustered bar representation of the top risks (Author, 2020)
Table 4.7 indicates the severity of the top risks. On a Likert scale from Less effective (1) to
Very effective (5), It can be seen that 22 ( 57.9%) of the respondents rated the impact as 4. 7
(18.4%) participants selected the severity as 5. These figures clearly indicate that the risks in
the automotive industry are quite severe and need to be treated by proper strategic planning.

43
 Table 4.7: Severity of the top risks (Author, 2020)

4.3.3 Distribution by Review of New Activities:

Question 8 asked how frequently the organisation reviews new activities during the planning
stage to identify and address the risks. 44.7% of respondents said usually and 31.6% said
always. 16% selected sometimes. Overall, majority of the responses said usually and always.
This means that the automotive organisations are aware of identifying the risks and addressing
them in the initial stage of the project. A graphical representation of the same is shown in
Figure 4.2.

Table 4.8: Distribution by review of new activities (Author,2020)

44
 Figure 4.2: Graphical representation of the review of new activities (Author, 2020)
4.3.4 Distribution by Risk Identification Method:
Question 9 and 10 asked about the risk identification method used in the organisation and the
effectiveness of the identification method was rated on a Likert scale of 1-5. From Table 4.9,
it can be seen that Brainstorming (23.7%) is the most used risk identification method in the
organisations. It is followed by SWOT analysis (21.1%) and PESTEL analysis (15.8%). The
Risk register (13.2%) and Delphi method (8%) are the least used risk identification methods.
A graphical representation of the same is shown in figure 4.3.

Table 4.10 illustrates the effectiveness of the above risk identification methods. It can be seen
that 21 (55.3%) respondents answered the effectiveness of the used method as 3. This means
that the method is a 50-50 situation, it may or may not work in favour of the project.

Table 4.9: Distribution by risk identification method (Author, 2020)

45
 Table 4.10: Effectiveness of risk identification method (Author, 2020)

Figure 4.3: Graphical representation of the risk identification method (Author, 2020)

Figure 4.4: Histogram for effectiveness of risk identification method (Author, 2020)

46
4.3.5 Distribution by Risk Analysis Method:
Question 11 and 12 asked about the risk analysis method used in the organisation and the
effectiveness of the analysis method was rated on a scale of 1-5. From Table 4.11 it is seen
that Monte Carlo simulation is the least used method with a frequency of 5 (13.2%). Pareto
and Sensitivity analysis had a frequency of 7 (18.4%) each. Whereas, other methods such as
Decision analysis etc had a frequency of 13 (34.2%).

Table 4.12 illustrates the effectiveness of the risk analysis method in the organisation. It can
be seen that the scales hit the scores 2 and 3 the most that is 13 (34.2%) and 11 (28.9%)
respectively. Only 23.7% of the cumulative total were for 4 and 5, which is quite less. This
means that most of the risk analysis method used in the organisations are not up to the mark
and needs a lot of improvement.

Table 4.11: Distribution by risk analysis method (Author, 2020)

Table 4.12: Effectiveness of the risk analysis method (Author, 2020)

47
 Figure 4.5: Histogram for effectiveness of risk analysis method (Author, 2020)
4.3.6 Distribution by Risk Evaluation Method:
Question 13 and 14 asked about the risk evaluation method used in the organisation and the
effectiveness of the evaluation method was rated on a scale of 1-5. From Table 4.13, it is seen
the risk matrix chart is the most frequently used risk evaluation method with a percentage of
31.6%. The probability impact method is used by 7 (18.4%) of the organisations. HAZOP and
FMEA are least used evaluation methods with frequencies of 4 (10.5%) and 5 (13.2%)
respectively.

Table 4.14 shows the effectiveness of the risk evaluation method used in the organisation. It
can be clearly seen that the ratings for 1, 2 and 3 have a cumulative frequency of 71.1% which
indicates that the methods used by the organisation is very less effective for their projects and
just like risk analysis, the risk evaluation method also needs improvements so that the risk
management process on a whole is carried out effectively.

48
 Table 4.13: Distribution by risk evaluation method (Author, 2020)

Table 4.14: Effectiveness of the risk evaluation method (Author, 2020)

Figure 4.6: Histogram for effectiveness of risk evaluation method (Author, 2020)

49
4.3.7 Distribution by Risk Response Method:
Question 15 and 16 asked about the risk response method used in the organisation and the
effectiveness of the response method was rated on a Likert scale of 1-5. Table 4.15
demonstrations that Risk mitigation/reduction is the most used method with a cumulative
frequency of 22 (57.9). The risk transfer, acceptance and removal have received frequencies
of 7 (18.4%), 6 (15.8) and 3 (7.9%) respectively.

Table 4.16 illustrates the effectiveness of the risk method used in the organisation. The
cumulative frequency of rating 4 and 5 on the Likert scale was 73.7%, which is excellent. This
means that the risk mitigation method used in the organisation has been very effective for the
organisations.

Table 4.15: Distribution by Risk response method (Author, 2020)

Table 4.16: Effectiveness of the risk response method (Author, 2020)

4.3.8 Distribution by Pandemic Readiness:

The final question of the survey was asked based of the current Covid-19 situation on whether
their organisation is pandemic ready or not. 13 (34.2%) out of 38 respondents selected no as
their answer, whereas 22(57.9%) respondents selected maybe which means that most of the
participants are unsure about the situation. Only 3 people responded yes, this leads to an

50
interpretation that organisations are not pandemic ready and this hampers the growth of the
economy. Figure 4.4 illustrates a graphical representation of the same.

Table 4.17: Distribution by pandemic readiness (Author, 2020)

Figure 4.7: Graphical representation of pandemic readiness (Author, 2020)

4.4 Developed Framework for the Risk Management Process:

From section 4.3.2 it is evident that supply chain risk is the top risk in most of the organisation.
On the basis of the data collected, literature review, learnings from the case studies and
expertise advice the researcher has developed a new risk management framework to
overcome the drawbacks of the existing ones and make the risk management process in the
automotive industry highly effective. The new framework has been developed emphasizing
majorly on the supply chain risks. However, the framework can be used to tackle other risks
in the automotive firms as well. This framework was then sent to a few professionals of the
automotive industry and a set of questions were asked along with it to validate its usage.
Figure 4.5 illustrates the developed framework.

51
 Figure 4.8: Developed Framework (Author, 2020)
Risk Identification:

From section 4.3.4, it can be interpreted that brainstorming is the most used method in the
organisation and the overall current risk identification methods have a mean effectiveness of
2.89 which is not much reliable. Hence, a change in the risk identification method is needed.

The numbers in section 4.3.4 show that the Delphi method and risk register are used only by
21% of the organisation. From section 2.7.1.3 and 2.7.1.4 it can be seen that the risk register
method and Delphi method respectively are of great significance when it comes to identifying
the risks. Therefore, after thorough research and analysing the advantages of the Delphi
method and risk register, the author has suggested these two methods for the identification of
risks.

52
The advantages of using the Delphi method according to Fink - Hafner (2019) are as follows:

i. The responses in the Delphi group are anonymous this helps avoiding confrontation of
the experts with each other. This brings out honesty, creativity and balanced
consideration of ideas.
ii. It focuses on problem solving more as the effect of noise in the group communications
are less and confusion created by methods like brainstorming are avoided.
iii. This method solves high complexity problems, saves money, reduces travel costs,
saves travel time and the communications are free from geographical constraints,
which is very critical considering the current Covid-19 situation.

The drawback of this method is that the procedure is quite longer as a number of iterations
are performed. But sheer dedication and perseverance can overcome these difficulties and
make the risk identification process more effective.

Risk Analysis:

From section 4.3.5, it can be seen that the mean effectiveness of the currently used risk
analysis methods is 2.71. As the number is on the lower side, change in the risk analysis
method is mandatory.

To overcome the drawbacks of the frequently used risk analysis methods, the author based
on literature has suggested the usage of Monte Carlo Simulation. From 4.3.5, only 13% are
using this method despite it being effective. Section 2.7.2.1 explains the importance and
procedure of the Monte Carlo method.

According to Chapman (2011) following are the advantages of Monte Carlo Simulation:

i. Models are simple to develop and can be extended whenever needed. The level of
Mathematics required to understand this method is also quite easy.
ii. Softwares are available. Simulations, correlations can be modelled and complex
problems can be solved just by increasing the number of iterations.
iii. The results can be feasibly interpreted and it is widely accepted all over.

Risk Evaluation:

Section 4.3.6 shows that risk matrix chart is the most frequently used method for the risk
evaluation. Despite this method being handy, the mean effectiveness of the evaluation
process is quite low that is 2.92. Hence, the author has proposed methods which will help
improving the effectiveness of the evaluation methods in the organisations.

53
Section 2.7.3.1 and 2.7.3.2 explains how the HAZOP and FMEA method are of great
significance. These methods are already used by some organisations but it loses its
effectiveness down the process as the organisation fail to properly identify the risks in the
earlier stages. Therefore, a systematic risk identification process that will be followed will make
these methods work in favour of the organisations.

Risk Response:

The methods of risk response are highlighted in the section 2.7.4. From Section 4.3.7 it is
evident that risk mitigation is the most used risk response method in the organisations. The
mean effectiveness of this is 3.6 which is quite significant. Hence, in the new proposed
framework risk mitigation will function as the risk response method.

Risk Monitoring:

This stage is also as important than the other stages in the risk management process. Most
of the times project managers neglect the importance of this stage in the process. As
mentioned in section 2.7.5, this stage consists of three procedures that are execution,
monitoring and control. The proposed framework will work out if these procedures are honestly
followed by the managers.

4.5 Chapter Summary

The results of the survey were analysed in depth. The survey was sent to professionals
working in the automotive industry in the UK and India. The first part of the questions in the
survey were demographic based whereas, the second part were regarding the risk
management processes in the organisations. These questions gave a clear idea on the
prevailing risk management practices in the organisation. Based on the interpretations of the
survey and literature review the author has successfully developed a framework and explained
it in detail in this chapter.

54
Chapter 5: FRAMEWORK VALIDATION, DISCUSSIONS and CONCLUSION
5.1 Introduction
In this section of the research the developed framework is validated by working professionals
from the automotive manufacturing industry in the UK and India. Furthermore, a vivid
discussion is carried out on the dependency of the factors like economy, trade, employment,
technology and innovation and their impact on automotive industry in the two countries. With
the research directed and organized, conclusions are derived with some suggestive
recommendations for future research purposes.

5.2 Validation of the Developed Framework

The risk management framework was developed through literature review and quantitative
survey. The validation of the survey was done through literature and to test the proposed
framework practically, the framework was sent to a few professionals of the automotive
industry along with a short quantitative survey testing the effectiveness of the same.

Following are the questions of the validation survey:

1. How effective is the risk identification technique proposed in the framework?

2. How effective is the risk analysis technique proposed in the framework?

3. How effective is the risk evaluation technique proposed in the framework?

4. How effective is the risk response technique proposed in the framework?

5. How do you rate the overall proposed risk management framework?

6. Will you use this risk management framework in your organisation for your future projects?

A total of 5 responses were gathered and the survey was analysed in SPSS software and the
results were interpreted. Following are the results of the validation survey:

5.2.1 Effectiveness of Proposed Risk Identification Method:

Question 1 asked the participants to rate the proposed identification method on a Likert scale
of Less effective (1) – Very effective (5). From table 5.1, out of the 5 responses, 60% of the
rating was for 4 and the remaining 40% for 5. This means that the professionals found the
proposed risk identification method effective.

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 Table 5.1: Effectiveness of the proposed risk identification method (Author, 2020)

5.2.2 Effectiveness of Proposed Risk Analysis Method:

Question 2 of the survey asked the respondents to rate the proposed risk analysis method on
a scale of 5. From table 5.2, 60% of the respondents rated the method as 3. 20% of the
respondents rated 2 and 4 each. Moreover, the mean effectiveness was 3 which is slightly
better than the effectiveness in first survey.

Table 5.2: Effectiveness of the proposed risk analysis method (Author, 2020)

5.2.3 Effectiveness of Proposed Risk Evaluation Method:

Question 3 of the survey asked the respondents to rate the proposed risk evaluation method
on a scale of 5. From table 5.3, 80% of the respondents rated the method as 4. 20% of the
respondents rated as 5. This indicates that these methods have been highly effective.

Table 5.3: Effectiveness of the proposed risk evaluation method (Author, 2020)

56
5.2.4 Effectiveness of Proposed Risk Response Method:
Question 4 of the survey asked the respondents to rate the proposed risk response method
on a scale of 5. From table 5.4, 60% of the respondents rated the method as 5. 20% of the
respondents rated as 3 and 4 each. The effectiveness of this method is high as it was earlier.
Hence, this method is appropriate for risk response.

Table 5.4: Effectiveness of the proposed risk response method (Author, 2020)

5.2.5 Effectiveness of Proposed Risk Management Framework:

Question 5 of the survey asked the respondents to rate the proposed risk management
framework. From table 5.5, 60% of the respondents rated the method as Very good. 20% of
the respondents rated as good and excellent each. Hence, it can be interpreted that the
proposed risk management framework is quite effective and is rated highly by the participants.

Table 5.5: Effectiveness of the proposed risk management framework (Author, 2020)

5.2.6 Acceptance of the Proposed Framework:

Question 6 of the survey asked the respondents whether they would accept the proposed
framework. From table 5.6, 80% of the responses were yes. 20% of the responses were
maybe. Hence, it can be said that the proposed risk management framework is practically
feasible and will be effective in the risk management process for future projects in the
automotive industry.

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 Table 5.6: Acceptance of proposed framework (Author, 2020)

5.2 Importance of Risk management in the Automotive Industry in the UK and India
To create a new product for retail in a competitive market as that of automobiles, is the riskiest
business. The automotive industry is crucial for the world economy and enhance its affluence.
In case of troubles in this sector, it will cause serious issues for the economy of any given
country. In order to protect the economy and reduce the impact of any unforeseeable risk,
there should be crucial risk management and analysis done prior to facing the uncertainty.

To overcome the challenges such as covid-19, there should be better support for automakers,
suppliers and dealers with forceful short-term solutions. Although, the government and
manufacturers should prepare better for the acute point of the pandemic.

Following are the factors affected by the automotive industry in a country:

5.2.1 Economy:
Rhodes (2019) reports that in 2018, the contribution of automotive sector in the United
Kingdom economy was £16.6 billion and 8% to the manufacturing sector output. The worth of
motor vehicle manufacturing was 0.8% of the entire UK economy. The UK market has seen a
tremendous increase in the automotive sector since the great recession.

According to the SMMT (2020) report in 2020 due to the Covid-19 situation, the International
Monetary Fund (IMF) has estimated that the global economy would shrink by -3.0% in 2020,
which is a major worse value than the -0.1% witnessed in 2009 recession. Due to the
pandemic, the UK economy would dip to -6.5% approximately, the biggest drop since 1921.

As reported by Bajwa (2020) the automobile industry plays a vital role in the Indian economy
as it is one of the fastest developing sectors in the country. It easily contributes to 7.5% of the
GDP with about 49% share in the overall manufacturing GDP. In 2018, a 14.8% growth in the
automobile manufacturing was seen as 29.08 million vehicles were produced in the year
which was 25.33 million in 2017. In comparison to the financial year 2017-18 there has been
an increase in the sale of passenger vehicle by 2.70%, 4.86% in two-wheeler and 10.27% in

58
three wheelers in the financial year 2018-19. Seeing the growth rate, it is estimated that by
2021 the Indian market will emerge as the third largest passenger vehicle market.

Hence, to keep up with the growth rate in the industry and sustain its share in the nation’s
economy, it is mandatory that the automotive companies in the UK and India adopt strong risk
management practices to avoid future mishaps.

5.2.2 Trade:
As reported by Rhodes (2019) the UK automotive industry is heavily dependent on trade. A
value of £40.1 billion was generated through exports in the year 2018. In the same year, the
import value was £56 billion. Since the year 2009, the exports have grown twice. However,
the imports have also elevated to 50% making the trade balance negative. In 2018, 43% of
automotive exports went to the EU whereas, the imports from them was 83%. The political
uncertainty surrounding Brexit can be one of the reasons for this.

As per the SMMT (2020) report the automotive sector of UK was a major facilitator of
international trading of automobiles, before facing the pandemic. It was worth more than £100
billion for three years consecutively before abruptly halting due to Covid-19.

Hence, it is important that the automotive firms develop a solid risk management plan to tackle
the risks in the industry arising due to the Brexit deal and the Covid- 19 situation. Drop in the
exports of this sector will definitely hurt UK’s economy for a longer time hence, being prepared
further is the only way out.

According to Shastri and Pradhan (2013) the Indian automotive industry has risen as a ‘sunrise
sector’ in the economy of India. It has turned out to be one of the fastest developing passenger
vehicle producing market and second largest motorbike manufacturer in the world. It also is
fifth largest producer for the commercial vehicle manufacturing. It has a huge export base for
Europe to export compact passenger cars. In early 2020, the overall automotive export saw a
growth rate of 2.95%. The sector bought in £18.16 billion FDIs too, that is 5.1% of the inflows
in the FDI which is exciting for the economy. Hence, it is crucial that the automotive company’s
in India be prepared against the risks surrounding the industry to successfully tackle it and be
ahead its position in the global automotive race.

5.2.3 Employment:
The automotive sector enabled 166,000 jobs in the UK in the year 2018. This resulted to 7%
of the employees in the manufacturing sector. Employment in this industry grew constantly
since the great depression. There was a slight drop in 2017 since then, however, in 2018 it
rose again (Rhodes, 2019). With sales dropping tremendously in the year 2020, the sector
has seen a lot of job cuts recently. Therefore, it is important that the automotive organisations

59
are prepared for such risks as recession in the job markets is a severe problem and affects
the economy of the nation terribly.

As per Asher (2020) in 2017, 1.3 million people were employed in the Indian automotive
industry. In 2019, the Indian market was one of the largest in this sector globally. However,
there was a slowdown in the sales numbers midway through the year 2019. This led to an
increase in the inventory numbers leading to supply chain problems and eventually production
haulage and loss in employment. By mid-2019, around 350 thousand employees were laid off
from the component and tyre manufacturing departments. One of the country’s leading car
producer Maruti Suzuki cut its workforce by 6%. Stagnant production problems were faced by
other companies such as Mahindra and Tata Motors.

Hence, it is important for organisation to estimate the demand efficiently. Wrong estimations
arise tension in supply chain department which then requires high investments to find solutions
leading to financial risks. Therefore, risk management is evidently very crucial in the
automotive industry and needs to be treated at priority always as it affects employment.

5.2.4 Technology and Innovation:

According to SMMT (2020) right from the invention of autonomous emergency breaking, to
the three-point seat belt and airbags the UK automotive industry has been innovating
continuously to promote green and safer motoring. The Research and Development (R&D) in
the UK is highly reliable on this industry for advancements. An enormous amount of £2.4 billion
had been invested on R&D of this sector. The country is Europe’s largest investor in R&D with
£20 billion invested per year.

According to Khaire and Singh (2017) the Indian automotive industry spends 8% on its
research and development department. Some of the reasons for such investments on this
department is the manufacturing of low-cost cars, increase in the Indian OEMs and increasing
consumer numbers and expectations.

Therefore, it is the responsibility of the industry to perform well consistently as technology and
innovation are one of the key factors that drive the economy of the nation. As innovation is a
high-stake game and demands trials and errors, it is mandatory that the organisations identify
all the risks involved and plan out their risk management strategy efficiently.

60
5.3 Conclusion
• This research indicates that there are several risk identification methods such as
brainstorming, risk register, SWOT analysis, PESTEL analysis, Delphi method etc.
However, the Delphi method and risk registers are unpopular among the organisations
but are of great significance, if put into practice. Thus, the author as urged the usage
of this method to identify the sources of risks at the initial stage of the project.
• There are several methods to analyse and evaluate the risks in the risk management
process. Through literature and quantitative data collected from the validation survey
this research confirms that Monte Carlo Simulation for risk analysis and HAZOP or
FMEA for risk evaluation are the most suitable methods for these process and should
be incorporated by the organisations for future projects.
• Risk Mitigation is the most widely used risk response method. This method has proved
to be useful for many organisations. Hence, usage of this method should be continued.
The risk monitoring and control stage of the process is quite essential as it evidently
highlights whether the used strategies in the risk management process are effective or
not. The risk monitoring process also has the advantage of identifying new risks
throughout the process. Therefore, organisations should not neglect this stage in the
process.
• Organisations should implement the newly developed and validated risk management
framework in the initial stages of all their upcoming projects. This will help them identify
risks easily in their initial stages and also give them a chance to counter it with ease.
Apart from this, the organisations should also start implementing it in their existing
projects steadily so as to strategically develop a risk management culture in the
organisation. Adoption of a single risk management process in the entire organisation
will help making the risks in various departments transparent. This will help firms hire
employees who will dedicatedly work for the risk management department.
• The aims and objectives of this research have been successfully achieved and the
research questioned have been answered based on literature review, learnings from
the case studies of both the countries and surveys. The new framework developed by
the researcher will help tackle key economic factors such as trade, employment,
technology and innovation that are dependent on the automotive sector. The author
urges a strong belief that if the framework is put into practice in the automotive industry
in the UK and India, it will help them resolve the recently arising risks with ease and
help sustaining the economic growth.

61
5.4 Recommendations and Future Scope
Following are the recommendations for the automotive organisations so that they perform well
in the upcoming years.

• Develop a transparent image of the current risks affecting the organisation and the
possible drop blocks in the future. This will benefit the organisations in avoiding quick
fix costs due to the sudden risks and also enable them to understand the problems
and risks.
• Authorize risk-based culture in the organisations. This will help organisations
understand the operations of risk management in various departments.
• Mandatorily incorporate the risk register in the organisation so that it serves as a
central source for all risk related information.
• The risk management should be a continuous process and should be analysed at
different stages of the project to gain better results.
• Adopt to smart analytical tools and softwares to monitor the risk indicators and key
performers. Use of such tools will also facilitate data storage and keep a track of the
various trends in the risk management process. They should also implement risk audits
regularly.
• The automotive organisations should save funds and act maturely to avoid panic in
times of economic crisis such as a pandemic, recession etc
• The UK automotive organisations should be prepared for the new trade deals due to
Brexit. It should also keep exploring and establishing new markets worldwide so that
the sales numbers are not hampered.
• The Indian automotive industry must study the needs of the consumers accurately and
make full use of the enormous Indian market and also work in cooperation to the new
reforms made by the government to reduce the risk of loses.
• Treating risk as an opportunity and implementing a regular risk management practice
in the organisations will benefit both the countries to grow in the automotive sector and
accelerate its performance in the global market.

5.5 Chapter Summary

The validation process is thoroughly explained in this chapter. The author has validated the
developed framework on the basis of literature and quantitative validation survey, which was
sent to automotive sector professionals for testing the framework practically. Further, the
importance of risk management in the automotive industry has been discussed in reference
with the impact that this sector has on the various key aspects of the economy. Finally, the
research has been concluded and recommendations are given for future work.

62
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APPENDIX A

Google Forms Quantitative Survey Questions

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APPENDIX B

Google Forms Quantitative Survey Questions Used for Validation

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