As there have been many economic declinations caused by many things since 2020 due to the COVID 19 surge, there are more risk factors that must be faced from various directions so that a failure does not cause a significant economic deficit in life. However, a failure is not the only make-or-break factor in life, even if a business or productive activity is already running, it is advisable to have a backup plan that can be executed immediately if the first plan does not work.

For example in 2023, the Bata shoe brand which originally came from the Czech republic and was founded by Tomas and Anna Bata, came to Indonesia in 1930 and closed its factory and laid off the majority of its factory employees. Bata itself has many branches around the world and was included in the guiness book of records in the category of the 7th most successful shoe company in South East Asia (SEA).

So why did Bata choose to close its factory in Purwokerto, it is related to the concept of Risk Management. In order to overcome failure and control the situation through planning so that sunk-cost-falacy does not occur, there is a concept called Risk Management. The concept of Risk Management is a strategy that is implemented with an effort to evaluate all risks and potentials that can occur in a step, both large and small. 

In addition, Risk Management helps agencies manage operational, financial, and reputational challenges so as to minimise potential losses and ensure more stable and efficient business continuity. A company can take drastic steps as a form of efficiency strategy through various things such as; asset liquidation, layoffs, and closing outlets or factories.

In risk management, there are several important things that need to be considered to ensure the process is effective and comprehensive. Here are the main aspects that must be considered:

1. Risk Identification: Identify and record all potential risks that could affect the organisation, both internal and external.

2. Risk Analysis: Evaluating the impact and probability of each identified risk to understand the extent to which it may affect the organisation's objectives.

3. Risk Evaluation: Determining the level of risk acceptable to the organisation and prioritising risks based on their impact and probability.

4. Risk Control: Developing strategies to reduce, avoid, transfer, or accept risks. These strategies may include operational changes, insurance, employee training, and improved safety procedures.

5. Action Implementation: Implementing the planned control measures and ensuring all parties involved understand their roles and responsibilities in this process.

6. Monitoring and Review: Continuously monitor risks and the effectiveness of control measures implemented. Conduct periodic reviews to ensure new risks are identified and managed effectively.

With the phenomenon of 'Impairment Assets' occurring in its products in Indonesia. Impairment Assets itself is a situation where the carrying value of an asset exceeds its recoverable value or fair value. This impairment occurs when the book value of the asset is no longer recoverable, which can be caused by various factors such as market changes, damage, or decreased performance.

To determine whether an asset is impaired, a periodic assessment or test is usually performed. If the carrying value of the asset is higher than the recoverable value that can be generated from its use or sale, then the company must recognise an impairment loss. 

Therefore, the decision of the Bata shoe company is one of the examples of Risk Management that has been implemented as a form of overcoming further deficits due to design liabilities and market share that is losing to competitors. Moreover, this was covered by Bata because its revenues in India continued to skyrocket by 6 billion far above 1 billion in Indonesia. This is a wise decision from the Bata company.

Risk Management not only serves to support the financial performance of an agency against inappropriate planning, but also serves as an evaluation that will be given to employees in terms of performance development and innovation. In the context of managing employees and companies, risk management plays an important role in ensuring employee welfare and safety, maintaining effective retention and recruitment, and ensuring compliance with laws and regulations. 

As a science that plays a role in dealing with deficits that are continuous or sustainable, it is an obligation for graduates of the Faculty of Business and Social Sciences, especially UNDIRA's Accounting and Management Study Programmes, to be able to apply risk management not only to businesses that are established but also to personal economic management.

(Sekar Ayu Putri / Humas UNDIRA)

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