Proactive Risk Identification in the Changing Automotive Industry: A Comprehensive Framework

 

Harshil Wadhwana ¹, Dr. Megha Shah ²

 

¹ PhD Research Scholar, Faculty of Management, GLS University, Ahmedabad, Gujrat, India  

² Associate Professor, Faculty of Management, GLS University, Ahmedabad, Gujrat, India

 

1. INTRODUCTION

The automotive industry, which is at the front of continuous innovation, is continuously influenced by rapid technical advancements, changing consumer preferences, and regulatory mechanisms. Industry stakeholders are compelled to reassess conventional risk management approaches because of the multitude of new challenges and uncertainties arising from this continuous transformation. Effectively navigating a dynamic environment requires the ability to actively identify, evaluate, and mitigate potential hazards. Although reactive strategies have traditionally been the foundation of risk management in the automotive sector, they may not always be sufficient to address the intricate risks presented by factors such as supply chain weaknesses, legislative modifications, technical progress, market fluctuations, and cybercrime [1].

In light of the industry's transition towards electrification, connectivity, autonomous vehicles, and shared mobility, a fresh approach to risk management is necessary. These developments contribute to the heightened complexity and interdependence of hazards. This research paper introduces a comprehensive and proactive architecture that is especially tailored to adjust to the constantly evolving automobile sector in order to address this urgent problem. This conceptual framework seeks to offer a holistic method for identifying and managing risks by integrating several elements, including technical risk assessment, in-depth market analysis, regulatory anticipation, cybersecurity measures, and supply chain resilience [2].

This paper presents an analysis of the historical evolution of the automobile industry and evaluates current trends to demonstrate the insufficiency of current risk management paradigms and the necessity for a more forward-thinking approach. The objective of this study is to contribute to the current knowledge on proactive risk detection in the automotive industry by introducing a thorough methodology [3].

The Hazard Identification and Risk Assessment (HIRA) system is a risk assessment tool that enables users to identify hazards and estimate the inherent risk associated with each hazard. This risk assessment tool will identify and underscore the potential hazards associated with each departmental work. Estimation and classification of dangers will occur subsequent to hazard identification. An analysis of obstacles in green supply chain management using the Integrated Supply Chain Model (ISM): A case study of the Indian automobile industry. Recommended control measures will be proposed if the evaluated risk exceeds the low-risk level. Furthermore, the user has the option to enhance the existing information system by including new work plans, processes, and control mechanisms.

Furthermore, the paper will delineate certain challenges in implementing this proactive framework and offer tactics to surmount them. Cultivating a proactive risk management culture can ultimately enhance the decision-making, inventiveness, and resilience of stakeholders in the automotive sector when confronted with complexity. The primary objective of this study is to further the transformative path of the automobile industry by establishing the foundation for a proactive risk management paradigm that can effectively navigate uncertainty and capitalise on emerging prospects [4].

Figure 1

 

Figure 1 Framework for Risk Management (Hopkins (2012)

 

 

2. RELATED WORKS

As part of their evaluation of the CSR agenda, risk managers should look for ways to apply risk management strategies and tools to other areas of focus. Corporate social responsibility (CSR) and the larger corporate governance agenda (CG) may benefit from the same risk management methodology as risk assessment, control measure identification, and compliance audits. It is the purpose of this article to examine several quantitative models for risk management in the supply chain. It also looks at the literature on supply chain risk management (SCRM) and how different solutions compare to real-world implementations. This document has a triple purpose. We begin by creating a standard method for categorizing SCRM content. Secondly, we are crossing our fingers that our review will help scholars make sense of the mountain of literature on this vital topic. Third, we intend to encourage scholars to create new models for reducing supply chain interruptions by drawing attention to the disconnect between theory and reality [5]. Businesses nowadays are confronted with a heightened degree of danger. Continuous risk assessment is a must for businesses. Due to the interdependencies of risks and events and the difficulty of obtaining appropriate data, risk modeling is an arduous undertaking. This paper's goal is to present a continuously updated model for enterprise risk assessment [6]. This article delves at the impact of a supply chain interruption in a dual-sourcing scenario. The three-tiered supply chain is depicted using a system dynamics model. In order to determine whether inventory replenishment policy responds better in the case of an interruption, two policies are being studied: APIOBPCS and APVIOBPCS [7]. The development of the ISM diagraph reveals the interdependent nature of the obstacles. The government's assistance and production technological skills stand out as the most important variables, with a moderate level of reliance and high driving power [8]. New forms of NPD and their effects on risk framing are the primary foci of this study. In this paper, we integrate the notions of NPD with the complexity theory concept of CAS. Emerging NPD categories can be better understood from a CAS viewpoint. Because of their unique nature, emphasis, and method of product development, new NPD types have a distinct strategy for risk framing if they are to offer adequate risk management within the context of an NPD [9]. A comprehensive literature evaluation utilizing descriptive, thematic, and content analysis of 354 papers published between 2000 and 2016. Classifying risks and suggesting ways to lessen their impact have received a lot of attention. There has been less theoretical grounding in the research, with an emphasis on organizational reactions to supply chain hazards. There are ten main areas where study should go from here [10]. In this article, we show how to establish a sustainable supply chain management framework and how to put it into action using two analytical steps. In an exchange relationship, we combine objective metrics for environmental impact, economic impact (costs and benefits), social impact, and risk with subjective metrics for penalties, intangible risk, and transaction costs (using tools like balanced scorecard). With the proposed methodology—which is based on math programming with the three elements and a parameter, it is possible to find the best solution for a given collection of piece-wise Verified and approved [11]. With the help of AHP, managers are able to prioritize supply chain objectives, choose the best supplier out of several options, and detect risk indicators and the impact of undesirable occurrences and cause and effect links throughout the chain. Understanding how to use cognitive maps and Analytic Hierarchy Process to detect and evaluate supply chain risk in various product categories is the main goal of this article [12]. Analysis of potential dangers to the car industry's supply chain: Too little is known about models tailored to the automobile sector. The international network and large number of multitier suppliers give the automotive supply chain its unique complexity. Beyond demand uncertainty, there are other potential threats to the automotive supply chain that need more research. These include call-back risk and the best ways to construct a robust network [13]. Based on statistics pertaining to global, EU, and domestic output, our study has shown the importance of the automobile sector. Information that has an impact on Hungary's present situation is the most crucial [14]. According to the results, SMEs may successfully lower their OSR in one of three ways: directly, through supplier integration, or by focusing on the three aspects of buyer-supplier social capital. It is proven that OSR has a detrimental effect on the operational performances of SMEs and that supplier integration mediates the link between social capital and OSR [15]. Iranian financial institutions that were either listed on the stock market or held a license from the country's central bank (CBI) made up the study's sample. This study used a new metric to measure the application of ERM. In addition, two metrics for organizational success were Tobin's Q ratio and return on equity (ROE). Unlike return on equity (ROE), which did not exhibit a positive and statistically significant association with ERM adoption, Tobin's Q ratio did. According to the results, an ERM strategy has a greater impact on a company's long-term success than on its short-term success [16]. An examination of risk assessment and threat analysis as they pertain to the automobile industry is presented in this study. To start, a new way of categorizing various TARA approaches has been suggested. We compared and assessed the available methodologies. After that, we compared the performance of many widely used tools that are applied to TARA. Next, a method called attack-defense mapping is suggested for determining which mitigations are most suited to the system's identified vulnerabilities and threats. Finally, we have covered the future plans for TARA's expansion in the automobile industry [17]. The new energy vehicle sector in Jiangsu province was assessed for risk in July 2019 using the entropy weight-cloud model. Exogenous risk had a bigger effect on the industry than endogenous risk, according to the results, and industrial risk was somewhat higher than medium risk. Improving the industry's internal risk resistance and strengthening the industry's soft environment are two of the many proposals made for preventing risk in the business [18]. Research from various nations was compared with this one's conclusions. The study's caveats were carefully considered, and we concluded that future comparison studies including small, medium, and big businesses on a global scale are urgently needed [19]. The logical approach to improving the risk assessment system involves determining the causal link between non-compliance and potential repercussions across different requirements levels. This employer will intentionally enhance working conditions using its own resources, considering local production characteristics, and intending to attain specified targets. Additionally, employees might be informed about regulatory mismatches and their potential health and safety implications [20]. Business Excellence via assessed risk can lead to better customer satisfaction than technology leadership. With a Permanent, low-risk category, consider feasible control methods.

A mould facility with four diametric lines and Kunkel Wagner line is recommended. Users can add an in-house pattern and die shop with CAD/CAM, new work plans, tasks, and control measures to the CAE de fonds system, which specializes in ductile manufacturing, to update current information [21]. The survey revealed that Indian retirees can invest up to a specified amount under the pension program. Pension investment and capital market development stimulate country's economic development at a wide scale and increase pension investment returns, according to the study. This supports pension fund investment, which can boost the country's capital market [22]. Over the past 20 years, the number of publications on automotive supply chain disruption risk management has progressively expanded from five in 2000 to 105 in 2021. This suggests society and academia are paying more attention to automotive supply chain disruption risk management studies. Identifying influential books, authors, and research clusters/themes [23]. Long and complicated supply chains, as well as the supply chain procedures that companies use, are two factors that make supply chains more vulnerable, according to the research. Experts can strengthen supply chains by taking suitable mitigation actions after conducting relative assessments of susceptibility elements. Contributing to the development of a model for internal, controlled supply chain vulnerability variables is this research [24].

 

3. RISK MANAGEMENT IN THE AUTOMOTIVE SECTOR

In the past, reactive tactics were the mainstay of risk management in the automobile industry, with an emphasis on quickly resolving specific, easily identified problems. While these conventional approaches work well for handling well-known risks, such as production flaws or interruptions in the supply chain, they frequently fail to deal with the new and complicated hazards that are a part of today's automotive industry. The shortcomings of these conventional methods are becoming more and more exposed as a result of these revolutionary shifts. Cybersecurity threats, software vulnerabilities, and the unknowns surrounding the adoption of new technology are just a few examples of the additional dimensions of danger brought about by the recent proliferation of technical innovations like electric and driverless automobiles.

The systematic examination of possible hazards within an operational framework is the basis of Risk Identification and Risk Assessment (RIRA). This all-encompassing method entails answering three basic questions about risk: hazard, which looks at possible bad things that may happen; consequences, which looks at how bad those things could be; and likelihood, which looks at how likely it is that these bad things will happen. An RIRA research has a multipronged ultimate goal. The primary objective is to thoroughly investigate and assess any potential risks related to operating procedures, services, persons, and equipment. Second, it tries to identify the current protections that lessen these dangers [25]. The research also hopes to suggest further management strategies that might bring these risks even lower to a manageable level. Crucial to this process is the development of a Risk Register, which will play an essential role in continuously tracking these risks, identifying changes, and checking that measures are working as intended.

Risk Identification and Risk Assessment is a very thorough and targeted investigation. It entails breaking down the complex processes that run a plant into its component parts and studying them in great detail. Possible risks to workers' health and safety are uncovered as a result of this thorough investigation. The next thing to do is use a Risk Matrix to combine the likelihood and impact of each risk in order to determine the degree of risk. Furthermore, the study thoroughly examines the current control mechanisms and offers insightful suggestions for new actions to reduce risks to a reasonable level based on these results. It is impossible to exaggerate the importance of RIRA. Because risk assessment and hazard identification are the bedrock of risk mitigation techniques, it is the central tenet of risk management initiatives [26]. The most cost-effective way to guarantee the process or activity will continue to run safely in the future is to do risk analysis at the beginning of the project, while it is still in its early phases. In addition, the understanding of hazards that come from these investigations is essential for a facility to implement different process safety management actions. Ineffective resource allocation or unintentional exposure to dangers above the community's or company's actual tolerance limits might arise from any risk assessment error.

A RIRA study can be carried out at any point in a project's life cycle, including the conceptual, preliminary, and detailed design stages, as well as during building, operation, decommissioning, or destruction. In most cases, it is more cost-effective to eliminate or manage a danger if it is detected early, particularly during the conceptual design stages [27]. Research conducted at various points in time meets unique contextual needs; this includes work done in engineering or corporate offices during the design phase, as well as work done in the plant environment prior to decommissioning, during operation, or during start-up.

 

4. IDENTIFYING RISK FACTORS, METHODS AND EVALUATING RISK

Identification of the risk factors such as Technological Advancements, Market Dynamics, Regulatory Changes, Supply Chain Vulnerabilities and Environmental and Social Risks plays an important role. It is important to identify the dangers that are linked with developing technologies such as software-driven functionality, artificial intelligence, networking, and autonomous and electric cars [28]. Cybersecurity threats, software vulnerabilities, data breaches, and functional failures of the system are all examples of potential risks. The identification of hazards and the evaluation of risks. Examine the alterations in the market, the shifting tastes of consumers, and the worldwide trends that are having an effect on the automobile industry. Determine the risks that are associated with changes in demand, new competitors, fluctuations in consumer expectations, and disruptions in the market that are brought about by new entrants or shifting preferences. Maintain an up-to-date knowledge of the ever-changing regulatory landscapes that comprise safety standards, pollution laws, trade rules, and compliance needs in various locations. The risks connected with non-compliance, the uncertainty of regulatory requirements, and the possible influence on product development and market are all things that need to be identified. Assess the risks that are present within the automotive supply chain, such as reliance on key suppliers, geopolitical conflicts that have an influence on sourcing, interruptions in logistics, quality control concerns, and environmental considerations that have an impact on sourcing sites. conduct an analysis of the dangers that are connected to issues of sustainability, environmental repercussions, labour practices, and social obligations. These characteristics have the potential to affect how consumers perceive a brand, as well as compliance with regulations and reputation.

Some primary concerns regarding risk are:

·        Risk - Can something bad happen?

·        How terrible would the repercussions be?

·        How frequently is it likely to occur?

The identification of risk factors and the assessment of hazards within the ever-changing landscape of the automobile industry calls for a strategy that is both proactive and complex. The stakeholders in the automotive industry can better navigate uncertainties and position themselves to capitalize on opportunities while simultaneously minimizing potential disruptions if they recognize potential risks early on, conduct thorough assessments, prioritize mitigation efforts, and continuously monitor the environment. In order to evaluate risks, it is necessary to conduct both quantitative and qualitative evaluations. Utilize data-driven analysis wherever it is appropriate to do so, such as through the use of statistical tools, simulations, or financial models. In addition, qualitative evaluations that include the opinions of specialists, scenario planning, and the examination of historical data can give useful insights.

We are particularly interested in the following risk categories out of all the possible ones: The following hazards are identified based on the relative positions of the object and the source of danger:

1)    Systemic: Dangers stemming from improper internal operations, uncontrollable external factors (force majeure), and making decisions in the face of ambiguity.

2)    According to their impact, which determines the necessity of preventive measures, viability impacts are classified as either insignificant, tolerable, or excessive.

3)    A risk is considered insurable if it can be transferred to an insurance company, and non-insurable if no such products are available.

4)    When does it happen? There are three distinct types of risks: retrospective, present, and prospective. It is easier to assess the former two types with knowledge about the former.

5)    Impact on business and drivers: establishes a five-point scale from "very high" to "insignificant" to measure the seriousness of potential outcomes.

An improved version of the Elmery index, the suggested MIR index classifies safety requirement mismatches as either "mandatory" (M), "important," or "recommendations," providing a thorough framework for risk assessment. To indicate the relative importance of each level in terms of potential harm to workers' health on the job, we've given them numerical values: M = 3, I = 2, and R = 1. By providing a thorough assessment of safety compliance, this index helps to prioritize tasks and highlight key areas that require quick attention.

The MIR index is more than just an evaluation tool; it's a useful instrument for constant workplace communication and monitoring. Employees are able to track changes in safety levels through regular measurements and the sharing of information, which promotes a sense of shared responsibility for improving safety. On top of that, it serves as helpful criticism that promotes growth without coming off as critical. To put it into practice, certification control systems use the MIR index to assess whether or not an employer follows labour protection laws. As a foundation for creating safety assessment processes tailored to each workplace, it takes into account the three different degrees of requirement significance (M, I, and R). Using a "comply-does not comply" methodology, these processes allow for thorough evaluations of every workplace. Efforts to improve working conditions and reduce hazards can be objectively measured by the MIR index. In addition to facilitating compliance monitoring within the context of labour protection legislation, it encourages ongoing improvements. Its practical application is further enhanced by the creation of workplace-specific safety assessment methods, which ensure a holistic approach to risk assessment and management.

 

 

 

 

5. CONCLUSION

B.V. Kisulenko's work on vehicle safety evaluation, which introduced a matrix for complicated design safety, is highlighted by the observation. This matrix provides a quantitative rating of a vehicle's safety level by taking into account the reliability and consistency of expert assessments of the impact of operational parameters on possible damage risks while driving. According to Kisulenko, 𝜑 is a complicated security indicator that takes into account expert evaluations, matrix size, design implementation coefficients, and weighting to indicate the effect of design features on individual damage risks. In addition, the observation cites many sources on risk assessment methodologies, classifying them as either quantitative or qualitative, and determining whether they are suitable in situations of complete or partial certainty. Although they are time- and resource-intensive, expert approaches that rely on point scales and the judgments of subject-matter experts provide versatility across fields. Despite their adaptability, these approaches present difficulties in interpretation because they are subjective and depend on the opinion of experts.

Additionally, the observation addresses the shortcomings of expert methodologies and proposes new approaches to risk assessments that use quantifiable indicators to reduce interpretational subjectivity. Despite their limitations, analytical and computational approaches allow for quantitative risk assessment, which is especially useful when statistical data is scarce. on situations when there is a lack of comprehensive statistical data, these strategies, which are grounded on mathematical relationships between indicators, are more suited for real-world use. The importance of analytical and computational methods in identifying potential risks and facilitating decision-making processes regarding vehicle design modifications or rejections is further highlighted, as is the significance of considering risk assessment during the vehicle design or solid modelling stages.

 

CONFLICT OF INTERESTS

None. 

 

ACKNOWLEDGMENTS

None.

 

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