Manage Risk: Information for Entrepreneurs 1

Milchy June A. Erasmo

Manage Risk: Information for Entrepreneurs

Management 21 – Risk Management

Danilo C. Labrador

October 2, 2018
 Manage Risk: Information for Entrepreneurs 2

I. Brief History of San Jose Public Market

San Jose Public Market is the center of commercial activities in the municipality of

San Jose. It is a public place where various owner-operated stalls conduct their daily

businesses serving diverse customers. Fresh and value-added foods, such as meat, fish,

vegetables, and fruits, among others, can be bought from this market. Based on Google

Maps, the public market is located at 12 Raja Soliman St, San Jose, Occidental Mindoro. It

opens from 4 o’clock in the morning and closes at 7 o’clock in the evening.

The first market building was built in the early part of 1956, during the term of Mayor

Isabelo Abeleda. In 1959, Dr. Felix Gabriel became the Mayor of San Jose. One of his

projects was to build a new market building, and so it was built. However, as fate would have

it, the public market put up during his time was wrecked to ashes or in layman’s terms,

burned. Due to this risk, the market vendors used pallets temporarily to sell their goods. They

weren’t also required to pay market fees, as the local government shouldered their expenses.

In 1980, Ernesto Jaravata has succeeded to become the mayor. He also constructed

one more building of the public market. Moving on, after the bloodless EDSA Revolution in

1986, Alvin Arevalo was appointed Officer in Charge (OIC) of San Jose by President

Corazon Aquino. One of his achievements was the construction of two buildings of the public

market.

In 1992, during the term of Mayor Juan Santos, Sr., who was also elected in 1967, the

public market of San Jose was again burned. Since the local government did not have enough

funds for the construction of a new building, Mayor Santos permitted the market vendors

whose stalls were burned to put up their own respective stalls. Likewise, he constructed the

new building of the public market when he was reelected in 1995.

When Jose T. Villarosa became the Mayor of San Jose, he allegedly wanted to

demolish the public market so that the municipality can use the space to erect the new "San
 Manage Risk: Information for Entrepreneurs 3

Jose Commercial Complex.” However, many opposed to this idea, thus complainants filed a

Petition for Prohibition with Urgent Application for the Issuance of Temporary Restraining

Order (TRO) and Writ of Preliminary Injunction (WPI) against the Municipality and Mayor

Villarosa. This is stated under the resolution of the petition, which is called as A.M. No. RTJ-

15-2405, filed against Mayor Villarosa for gross and serious violation of the Anti-Graft and

Corrupt Practices Act.

II. Types of Risk Observed in San Jose Public Market

1. Strategic risk

If a new competitor enters the public market, the strategy of a certain business in the

place becomes less effective, thus the business struggles to reach its goals. For example,

Goldilocks Bakeshop, that is known to produce and distribute cakes and pastries, puts up a

branch inside the public market. The businesses that will be most affected are the stalls that

sell bread and baked goods, most especially the bakeries that sell cakes. There is a large

number of buyers inside the market, and if percentage of this wants to buy Goldilocks’s

product but the main branch is far from the market, they will tend to purchase from the

branch which is located inside the public market instead.

2. Compliance risk

According to Chapter 4 of the Presidential Decree No. 856, also known as Code

Sanitation of the Philippines, rules and regulations are formulated for strict compliance of all

concerned. The rules and regulations shall apply to all markets including food terminals,

supermarkets, as well as public markets. If stall vendors failed to comply with the existing

laws, they will be punished by a fine not exceeding ₱1,000.00 or worst, by imprisonment for

a period not exceeding six months. This is based on the Section 8 or Penal Provision of this

decree.

3. Financial risk
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Vendors in the public market face a financial risk if they won’t be able to make good

sales every day. This is because there are diverse competitors inside the establishment that

offer similar products, too. Even though consumers have a high degree of buying power but

there are different sellers, then good sales are likely not that good for one store.

4. Operational risk

Natural disasters like typhoon and earthquake may cause disruptions to the day-to-day

operations of stores inside the public market, thereby creating risks to the businesses. The

history of the San Jose Public Market mentioned about fire events that happened before.

Although it didn’t mention the cause of fire, it is understood that fires may be natural or man-

made depending on what originally caused the event. Say, for example, leaked gas from the

public market is considered man-made. There could also be some errors or faulty mechanical

mistakes inside the place.

III. The Risk Management Process

Strategic risk

Step # Elements Description

I. Identify and Useful identification methods:

understand the risks. 1. questionnaires

Goldilocks Bakeshop 2. analysis of other events

puts up a branch 3. careful analysis of the firm’s customers

inside the public Question to ponder in identifying the risk:

market.  What could cause an impact?

II. Evaluate the risks. If Goldilocks Bakeshop puts up a branch inside the public

market, the customer targeting strategy of stores will be

affected, as well as their sales. If such event often happens,

this would result in bankruptcy. Thus, it is a critical risk.

 Manage Risk: Information for Entrepreneurs 5

III. Select methods to Methods of mitigating the risk:

manage risks. 1. Avoid – choose a different site of business away

from Goldilocks, instead of doing business inside

the public market.

2. Reduce – bakeries should develop more unique

goods so that they won’t lose a lot of buyers. They

should also offer quality products but with

affordable prices. This is because not every

shoppers can afford high prices from Goldilocks

Bakeshop.

3. Transfer – share or transfer the risk by purchasing

an insurance.

4. Accept – take no action in relation to the risk.

IV. Implement the Once the stores have made a decision, this should be

decision. followed by actions, such as:

 They may purchase an insurance.

 They may reserve dedicated funds to cope with the

associated harms from the risk.

V. Review and evaluate. Reviewed and evaluated after a week, the risk management

program functioning within the public market has been

very effective and efficient. The local bakeries have

developed more unique products as compared to their past

products. Therefore, the risk from being critical has become

extremely important.
 Manage Risk: Information for Entrepreneurs 6

Compliance risk

Step # Elements Description

I. Identify and Useful identification methods:

understand the risks. 1. analysis of other events

Punishment as a 2. careful analysis of the firm’s facilities

result of not obeying 3. careful analysis of the firm’s operations

the Code Sanitation Question to ponder in identifying the risk:

of the Philippines  How serious could that impact be?

II. Evaluate the risks. This risk is a moderately important risk because when a

fine is implemented, the store vendors may use their current

income or existing assets to cover the loss.

III. Select methods to Methods of mitigating the risk:

manage risks. 1. Avoid – the stores should obey the Code Sanitation

of the Philippines in order to avoid the risk.

2. Reduce – the store owners and vendors should have

an adequate understanding of the Code to reduce the

impact of the risk.

3. Transfer – share or transfer the risk by purchasing

an insurance.

4. Accept – take no action in relation to the risk.

IV. Implement the Once the stores have made a decision, this should be

decision. followed by actions, such as:

 purchasing an insurance

 reserving dedicated funds to cope with risks

V. Review and evaluate. Reviewed and evaluated after a week, the store owners and
 Manage Risk: Information for Entrepreneurs 7

vendors now have adequate understanding of the Code

Sanitation of the Philippines. Although the risk is still

under moderately important, the number of owners and

vendors not obeying the Code in the public market has been

reduced.

Financial risk

Step # Elements Description

I. Identify and Useful identification methods:

understand the risks. 1. analysis of other events

2. analysis of financial statements

The stores being 3. careful analysis of the firm’s customers

incapable of making Question to ponder in identifying the risk:

good sales  What is the likelihood of the risk occurring?

II. Evaluate the risks. This is a critical risk because good sales are not always

guaranteed. Since there are diverse competitions in the

public market, customers tend to buy from different stores

and not just from a certain store always. If stores won’t be

able to make good sales, this could result in bankruptcy.

III. Select methods to Methods of mitigating the risk:

manage risks. 1. Avoid – instead of being lost in the conduct of

business, the stores in the public market should

develop a strong business plan to avoid the risk.

2. Reduce – in order to reduce the impact of the risk,

the stores should make sure that their vendors are

 Manage Risk: Information for Entrepreneurs 8

properly trained in terms of communicating well

with their buyers.

3. Transfer – share or transfer the risk by purchasing

an insurance.

4. Accept - take no action in relation to the risk.

IV. Implement the Once the stores have made a decision, this should be

decision. followed by actions, such as:

 purchasing an insurance

 reserving dedicated funds to cope risks

 risk control and risk financing

V. Review and evaluate. Reviewed and evaluated after two weeks, the stores now

have a proper management in terms of their finances. The

vendors have improved their way of communicating with

their buyers. The risk from being critical becomes

moderately important.

Operational risk

Step # Elements Description

I. Identify and Useful identification methods:

understand the risks. 1. insurance policy checklist

2. analysis of other events

Natural and man- 3. careful analysis of the firm’s facilities

made disasters Question to ponder in identifying the risk:

 Can the risk be reduced or eliminated?

II. Evaluate the risks. These risks are extremely important because the stores
 Manage Risk: Information for Entrepreneurs 9

may need additional investment capital to continue

operations. There might be big damages that they may

encounter if disasters are likely to occur. To fix the

damages, they may ask for additional fund. They may ask

help from the Local Government Unit (LGU). For instance,

the general guidelines of the Local Budget Circular No. 117

include public markets in the Local Government Support

Fund in case of reconstruction or repair.

III. Select methods to Methods of mitigating the risk:

manage risks. 1. Avoid – avoiding such disasters are almost

impossible since they are unpredictable in nature

and occur all of a sudden. However, the stores

should take certain precautions that will help keep

the level of damages down. It is also essential that

they should be aware of the Philippine Disaster Risk

Reduction and Management Act of 2010.

2. Reduce – be informed. The store owners and

vendors should be attentive enough when extreme

weather conditions threaten so that they could plan

and prepare beforehand.

3. Transfer – share or transfer the risk by purchasing

an insurance, specifically business interruption

insurance.

4. Action – take no action in relation to the risk.

IV. Implement the Once the stores have made a decision, this should be
 Manage Risk: Information for Entrepreneurs 10

decision. followed by actions, such as:

 purchasing business interruption insurance

 reserving dedicated funds to cope with risks

 risk control and risk financing

V. Review and evaluate. Reviewed and evaluated after a month, the damages caused

by natural or man-made disasters are repaired immediately

unlike before. It is also to be noted that, both the store

owners and vendors now fully understand that resilience of

local communities to disasters should be built, as stated on

on the Section 2 of the Philippine Disaster Risk Reduction

and Management Act of 2010.

References

Google Maps (2018). San Jose Public Market directions. Retrieved September 23, 2018 from

www.google.com/maps

Rudy Candelario (n.d.). History of the town of San Jose. Retrieved September 23, 2018 from

https://sites.google.com/site/occidentalmindorohistory/historysanjose

Department of Health (1999). Code Sanitation of the Philippines (Presidential Decree no.

856). Retrieved September 24, 2018 from https://www.doh.gov.ph/node/5731

Department of Budget and Management (2018). Local Budget Circular No. 117. Retrieved

September 24, 2018 from www.dbm.gov.ph/index.php/205-latest-issuances/local-

budget-circular/2018/513-local-budget-circular-no-117

Official Gazette (2010). Republic Act No. 10121: Philippine Disaster Risk Reduction and

Management Act of 2010. Retrieved September 24, 2018 from

http://www.officialgazette.gov.ph/2010/05/27/republic-act-no-10121/
 Manage Risk: Information for Entrepreneurs 11

Supreme Court Manila (2015). A.M. No. RTJ-15-2405 [Formerly OCA I.P.I. No. 12-3919-

RTJ]. Retrieved September 28, 2018 from

http://www.chanrobles.com/cralaw/2015januarydecisions.php?id=57

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