The concept of risk is not strange to businesses in particular and those who do business in general. “Doing businesses is taking the risk” became a popular saying of the business people, whether they are owners of large or small businesses.

Although business has to face with risk every day and every hour but risk management is relatively new concept, not many businesses have understanding about it. Therefore, the risk management activities of the business are often being conducted in a half-hearted way. Not many businesses, including large enterprises, have proper risk management departments in their organizational structure. Hence, the uncertainties and crises are usually occurs, causing negative effects and sometimes become disaster for the business.

There are always potential risks in any business environment, whether that environment is developed with clear and transparency rules, or that environment is primitive environment with many confusing and complicated. If the business environment is primitive with inexperienced entrepreneurs, there will be more risks. Risk can be derived from many factors in which the subjective factors may cause risk to occur more with more severe consequences, or vice versa, enterprise can stop the risk or significantly reduce its impact. This depends on the risk management capacity of organizations and businesses.

Risk management is the process of analyzing the environment (inside, outside) to identify, analyze, evaluate, classify, ranking and implementing appropriate solutions to respond to risks to eliminate or minimize the negative impacts that may have. In many cases, risk management includes identifying opportunities within the risk, in order to exploit, take advantage of them and bring benefits to compensate for the damages caused by the risk.

Risk management is different from risk control and risk handling. Risk control is the response activities for the risks that have been identified. Risk handling is dealing with risks and crisis after it has actually occurred. Risk management is the systematic activities, maintaining at every level and assigning to a specialized department.

Properly understand the nature and importance of risk management, business will definitely not hesitate in setting up a professional risk management system. An effective risk management system helps businesses to identify risks early (which are very diverse, extensive and constantly changing), evaluate the possibility to occur and the degree of harm to have effective response measures. Unfortunately, the subjectivity is still the characteristic of many businesses in the risky business environment.

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RISK MANAGEMENT: A VITAL ELEMENT WHEN DOING BUSINESS

Risk management is a vital element when doing business but so far, not many enterprises concern about it.

According to a recent survey with 522 companies, there are only 43 companies, accounting for about 8%, have the independent risk management department in their business. More noteworthy, the majority of these 43 companies operating in the banking and financial sector, which has nothing new to risk management. In fact, not all banks have independent and effective risk management departments. The negative problems related to the banking system in recent times somewhat showed the picture about the risk management of this sector.

Risk is understood as any events and situations that could harmful to the ability to achieve the business objectives of the enterprise. Risk management is organized in a formal way and is conducted continuously to identify, control and report the risks that may affect the achievement of the business objectives of the enterprise.

So why businesses are not interested in risk management? Part of this problem stems from the awareness of the leaders. In order to build and operate the risk management system in the enterprise, it needs the commitment of the senior leaders. If senior leaders do not aware of this problem, the administration process will be difficult to achieve the desired effectiveness.

Recently, there are many theories and systems of risk management but small and medium enterprises should be cautious when apply because system and theory are just general and they should be adjusted when applying to each business.

In order to form the culture of risk management, the leaders must along with the employees to implement it regularly and for each project. In theory, the risk management process is carried out in 5 steps: identify risk; evaluate its impact; determine the likelihood; action and measures; monitoring and evaluation.

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ALIBABA FROM CHINA ACQUIRES LAZADA VIETNAM

Recently, there is a trend that foreign company comes and buy company in Vietnam, in order to expand their business operation and also set foot in Vietnam market, where is emerging as a potential market of the area.

Alibaba Group – China’s giant technology corporation has spent 1 billion USD to acquire Lazada, thereby officially set foot in the online sales market of Vietnam.

On April 12th 2016, the China’s giant technology group named Alibaba Group announced that it has reached an agreement to acquire the control of e-commerce platform in Southeast Asia, which is Lazada with an amount of 1 billion USD , thereby officially set foot in Vietnam.

The transaction includes an investment of 500 million USD in Lazada’s newly issued equity and the repurchase of shares of some Lazada’s shareholders include Rocket Internet SE, Tesco Plc and Investment AB Kinnevik with a total investment value of Alibaba reach approximately 1 billion USD.

This acquisition is expected to help worldwide brands and distributors that are trading on the platform of Alibaba, as well as local vendors can reach the consumer market of Southeast Asia. In addition, Alibaba deal with a certain number of shareholders of Lazada, giving Alibaba the right to purchase and shareholders the right to sell its remaining shares in Lazada at the market prices in 12-18 months after the completion of the transaction.

Lazada is headquartered in Singapore, which was founded and operated by Rocket Internet SE from Germany. The company carries out e-commercial activities in Indonesia, Singapore, Malaysia, Philippines, Thailand and Vietnam.

According to Bloomberg, the deal came from the objectives set by the billionaire cum Alibaba’s chairman Jack Ma, targeting at least half of company revenue comes from markets outside of China.

Through the deal with Lazada, Alibaba generate more revenue from sale of clothing and electronics in 6 regional markets in Southeast Asia where Lazada if operating, including Vietnam.

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SAIGON CO.OP COOPERATED WITH WILMAR (JAPAN) TO BUILD SAUCE FACTORY

Nam Duong International Food Co., Ltd will implement the project with a total investment capital of 577.2 billion VND (equivalent to 25.6 million USD) to build a new factory in Hiep Phuoc Industrial Zone (Nha Be, Ho Chi Minh City).

Accordingly, Nam Duong International Food Co., Ltd is a joint venture between Saigon Co-op (a large retailer in Vietnam) and Wilmar International Limited (Singapore) with the capital contribution ratio is 49% and 51% respectively.

After the joint venture was established, the preparing procedures for the new factory will be conducted expeditiously. The factory will specialize in manufacturing sauces and spices to serve the domestic and export market.

The brand “Nam Duong” owned by Saigon Co.op, which was founded in 1951, is one of the brands in the sauces and spices industry in Vietnam, with products: soy sauce, sauce, chili and tomato sauce. These products are preferred by domestic and abroad consumers. These products are now being exported to markets such as the US, Canada and Europe.

As the leading retailer in Vietnam, Saigon Co.op understands the trend, tastes and appetites of consumers. On the other hand, Wilmar Group which has extensive experience in manufacturing and distribution of food worldwide. Through this joint venture, the Nam Duong’s sauces and spices products will meet the international production standards and safety and will be sold in a global distribution network but still preserve the traditional flavors in each product.

The main objective in the development strategy of Wilmar is aimed at building and developing closed business models with diverse agricultural commodities, proactive from input raw materials to produce and distribute finished products. Currently, the Group has more than 500 factories in China, India, Indonesia, Indonesia, Vietnam and 50 other countries worldwide. The Group develops based on multinational human resources base with 92,000 employees.

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Vietnam to be a favorite destination for Thailand investors

Since Vietnam has become a full member of ASEAN in 1995, positive results in trade and investment relations between Vietnam and Thailand have been observed. Particularly, the two countries upgraded their relationship to a strategic partnership, on the occasion of the General Secretary H.E. Mr. Nguyen Phu Trong’s official visit to Thailand in 2013, meaning that Thailand attached much importance to its relations with Vietnam. Later in 2014, on the occasion of Thai Prime Minister Prayut Chan-o-cha’s official visit to Vietnam, the two sides signed the Action Program to implement the Vietnam-Thailand Strategic Partnership during the period from 2014 to 2018.

Over the past years, the two-way trade turnover between Vietnam and Thailand has experienced fast growth. The turnover was valued at US$9.4 billion in 2013, 9.2 percent higher than 2012, and it reached US$10.6 billion in 2014, 12.5 percent higher than 2013. As of June 2015, Thailand with registered investment capital of US$6.8 billion has ranked 10th among the 101 investors in Vietnam. Thai firms mainly invest in machinery manufacture, food and forestry processing, construction, wholesale and retail networks, and machinery repair. Meanwhile, Vietnam has 7 investment projects in Thailand with total investment of US$11.35 million and the Vietnamese firms focus their investment on property, household goods, tourism and software.

Following The Nation - the most updated English news website of Thailand, there have been so far 2,000 Thai enterprises who wish to invest and did register with Thailand Embassy in Vietnam. Many small and medium Thai enterprises (SMEs) are developing their activities in Vietnam to obtain more shares in this potential market.

Although coming a bit later than Japanese and Korean investors but seeming to have more giant moves, Thailand companies are significantly penetrating Vietnam’s market by taking over existing business chains. Many recent signals showed that Thai groups are planning giant investment projects in Vietnam.

Saha Group, one of Thailand biggest manufacturers and traders of consumer products, is negotiating with its Japanese partner for joint expansion of its logistics and property ventures in Vietnam next year, reported Bangkok post. "We want to invest more abroad. For Vietnam, we're interested in logistics, property and wholesale," the executive said.

The Ton Poh Thailand Fund, a Bangkok based boutique fund management company, became major shareholder of Hoang Huy Investment Services (HHS) after buying more than 5.9 million shares on May 7, holding 5.32% stake after the deal. Moreover, this Fund, in March this year, had bought 2.5 million CTD shares, holding 5.92% stake and becoming the largest shareholder of CotecCons JSC.

Besides, the Bangkok-based Chairatchakarn, a Thai automobile enterprise which trades Toyota and Hino brand vehicles, bought 2 million shares of HCM City-based Truong Long Automobile, becoming a large shareholder of the Vietnamese automobile firm with 22.6 percent of shares.

Also, in early this year, Thai billionaire Charoen Sirivadhanabhakdi, who did spend nearly US$900 million to buy out German retailer’s Metro Cash-and-Carry in Vietnam, which is considered the biggest foreign-owned retailer in Vietnam and possesses 19 supermarkets nationwide, has confirmed his interest in bidding for 40% shares of Saigon Beer, Alcohol and Beverage Corporation (Sabeco), Vietnam’s largest beverage producer, with an offered price being 60% higher than the price on over-the-counter market.

It can be seen that Vietnamese market is attracting much attention from Thai funds and enterprises. Following Mr. Tussin Mahamongkol, vice chairman of the Thai Business Association in Vietnam, Thai products are quite appreciated by local customers. Therefore, it’s a good opportunity for Thai enterprises to enter and position in the market.

According to Bank of Thailand, investment from this country into Vietnam increased 11.8%, up to US$2.5 billion in 2014 - of which, investments in industry sector account for approximately US$112 million.

To explain why Vietnam is so attractive to Thai investors, many reasons have been mentioned including Vietnamese government’s preferential policies aiming to attract investment (foreign businesses could win tax waivers for four to nine years and though land ownership is prohibited, the lease period is as long as 50 years, etc.), a young and somewhat skilled labor force with thirst for knowledge, a growing domestic purchasing power and a convenient transport route to China, Japan, Oceania and the American west coast.

Warrick Cleine, chairman and chief executive of KPMG in Vietnam and Cambodia, said at a recent briefing in Bangkok that Vietnam could be a destination for investment in several areas including food, retail, high-value consumer goods, and condominium development.

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He noted that Vietnam's young population was ready to purchase and spend. Young Vietnamese make frequent visits to supermarkets and demand good-quality consumer products. Condominiums are also in high demand in Hanoi, Ho Chi Minh City and Danang. "Vietnamese consumers show great excitement for foreign brands. Asian tastes are more suitable for them. It's happening right now. There is a very big opportunity to come," Cleine said.

In one hand, the arrival of big Thai investors to Vietnam can bring in their experience as well as good management skills and somehow benefit the local enterprises. In the other hand, the tough competition, which goes along with, will push these latter to improve their performance in order to avoid being losers in the domestic market.

VIETRADE

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