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Operative Risk Analysis of Industrial Small and medium Enterprises
This document analyzes the operational risk of small and medium industrial enterprises (SMEs) in Antioquia, Colombia. It presents statistics showing that SMEs make up 20% of the total industry in Antioquia and 32% of non-traditional exports. Imports grew 11.9% while non-traditional exports increased 31.1%. The document analyzes risk using the analytical hierarchy process to evaluate five indices of operational risk for a particular company compared to its industry: profitability, efficiency, indebtedness, viability, and liquidity. It determines the company has slightly higher risk than its industry for most indices except indebtedness and liquidity.
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Operative Risk Analysis of Industrial Small and medium Enterprises
- 1. Operational Risk Analysisof Industrial Small and Mediun Enterprises - SMEs Jorge A. Restrepo, M.Sc. Ph. D (c). Jairo Ángel Díaz. M.Sc. (c). Beatriz Mora M.Sc. (c).
- 4. Opinion Survey JointIndustrial - OSJI – Antioquia Ind. make up 20% total C.I.M. and 32% of nontraditional exports. Antioquia represent 22% total employment ->population -> 13% country's. Imports displayed a large growth-> 11.9% U.S.$4,8M. Most relevant data comes in nontraditional export increased->U.S.$4,5M. up 31.1%.
- 5. Risk Management Different authorsM. Castillo (2008), Jorion (2000), JP Morgan. (2011), Medina (2006), Sturm P. (2013) presents the following classification: Operative Risk Financial Risk Reputational Risk Risk High Severity
- 9. Phases of theanalytical hierarchy process according to Saaty (1980, 1994) illustrated with the Brunswikian lens model adapted from Scholz and Tietje (2002).
- 10. Paired comparisons usingAHP Technique A 1 2 3 4 5 7 1 2 3 4 Profitability - Pro B Eff Deb Via Liq More Important A A B A Intensify 4 4 2 4 1 = Indifferent Deb Via Liq A B A 5 4 5 Via Liq B A 9 2 Liq A 7 Efficiency - Eff 5 6 1 2 3 4 5 1 2 3 4 Indebtedness Deb Viability - Via 5 = Strong degree of preference 9 = Extremely preferred 3 = moderately Preferred 7 = Very strong preference
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- 13. Indices PROFITABILITY Gross Margin (%) Operatingmargin (%) Net margin (%) Return / Equity (ROI) (%) EFFICIENCY Asset Turnover (times) Portfolio turnover (days) Rotation suppliers (days) Inventory turnover (days) Operating cycle (days) DEBT Debt to equity ratio (%) Financial obligations / liabilities (%) Total Liabilities / Sales (%) Current Liabilities / Total Liabilities (%) VIABILITY Ebitda (MLL) EBITDA / Sales (%) Sales / Financial duties (sometimes) LIQUIDITY Current ratio (times) Acid test (times) Working capital (MLL) 𝒎 𝒏 𝑹𝒐 = 𝒋=𝟏 𝒊=𝟏 𝑾𝒋 𝑿𝒊 Equation 1. Where: J = 1-5 represents the major indices: profitability, leverage, efficiency, viability and liquidity I = 1 to 19, represents the two level indices summarized in Table Profitability 22,3% Efficiency 12,7% Indebtedness 6,0% Viability 52,7% Liquidity 6,4%
- 15. Gross Margin (%) GrossMargin (%) Gross Margin (%)Forecast (double exponential smoothing) Gross Margin (%)Forecast (exponential smoothing) 10% 10% 5% 5% 0% 0% 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 9 8 9 -5% -5% -10% -10% Operating margin (%) Operating margin (%) Operating margin (%)Forecast (exponential smoothing) 40,00% 40,00% 20,00% 20,00% 0,00% -20,00% 0,00% 1 2 3 4 5 6 7 8 9 -40,00% -20,00% 1 2 4 5 6 7 -40,00% Net margin (%) Net margin (%) Net margin (%) Forecast (exponential smoothing) Net margin (%) Forecast (double exponential smoothing) 60,00% 50,00% 40,00% 20,00% 0,00% 0,00% -20,00% 3 1 2 3 4 5 6 7 8 1 9 2 3 4 5 6 7 8 9 -50,00% -40,00% Return / Equity (ROI) (%) Return / Equity (ROI) (%) Return / Equity (ROI) (%) Forecast (double exponential smoothing) Return / Equity (ROI) (%) Forecast (exponential smoothing) 60,00% 100,00% 40,00% 50,00% 20,00% 0,00% 0,00% 1 -50,00% 2 3 4 5 6 7 8 9 -20,00% -40,00% 1 2 3 4 5 6 7 8 9
- 16. Periods PROFITABILITY Gross Margin (%) GrossMargin (%)Forecast (exponential smoothing) e^2 Gross Margin (%)Forecast (double exponential smoothing) Lt (Estimating orderly) Estimating the slope e^2 Operating margin (%) Operating margin (%)Forecast (exponential smoothing) e^2 Operating margin (%)Forecast (double exponential smoothing) Lt (Estimating orderly) Estimating the slope e^2 Net margin (%) Net margin (%) Forecast (exponential smoothing) e^2 Net margin (%) Forecast (double exponential smoothing) Lt (Estimating orderly) Estimating the slope e^2 Return / Equity (ROI) (%) Return / Equity (ROI) (%) Forecast (exponential smoothing) e^2 Return / Equity (ROI) (%) Forecast (double exponential smoothing) Lt (Estimating orderly) Estimating the slope e^2 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Indices Percentage Growth Period 2000-2009 -1,62% -0,03% -7,42% 5,75% 2,75% -2,70% 1,42% -7,96% -4,84% -1,62% 0,03% -1,38% 0,37% -2,31% 0,65% -1,07% 0,15% -0,48% 0,05% -0,82% 0,05% -0,47% 0,56% -1,63% 0,10% -1,97% -1,97% 0,00% 0,04% 23,07% -0,45% -0,45% 0,00% 0,49% -25,88% -7,52% -7,52% 0,00% 1,76% 21,10% 4,13% 4,13% 0,00% 0,02% 8,47% 3,64% 3,64% 0,00% 0,40% 5,33% -1,92% -1,92% 0,00% 0,11% 1,08% 1,01% 1,01% 0,00% 0,80% 7,49% -7,74% -7,74% 0,00% 0,08% -22,56% -12,15% 12,41% -12,15% 1,89% -12,15% 11,05% -12,15% 4,25% -12,15% 3,05% -12,15% 1,75% -12,15% 3,86% -12,15% 1,08% -12,15% -12,15% 0,00% 0,00% 46,29% -12,15% -12,15% 0,00% 12,41% 8,14% 46,29% 14,55% 23,07% 23,07% 0,00% 23,96% -22,26% 33,61% 31,22% -25,88% -25,88% 0,00% 22,07% 31,12% 15,04% 2,59% 21,10% 21,10% 0,00% 1,59% 9,68% 20,38% 1,14% 8,47% 8,47% 0,00% 0,10% 18,94% 16,83% 0,04% 5,33% 5,33% 0,00% 0,18% 1,54% 17,53% 2,56% 1,08% 1,08% 0,00% 0,41% 0,69% 12,22% 1,33% 7,49% 7,49% 0,00% 9,03% -23,43% 8,39% 10,12% 46,29% 46,29% 0,00% 0,00% 49,35% 46,29% 46,29% 0,00% 14,55% 1,93% 8,14% 8,14% 0,00% 9,24% -22,16% -22,26% -22,26% 0,00% 28,50% 31,42% 31,12% 31,12% 0,00% 4,59% 9,37% 9,68% 9,68% 0,00% 0,86% 21,80% 18,94% 18,94% 0,00% 3,03% 1,90% 1,54% 1,54% 0,00% 0,01% 7,11% 0,69% 0,69% 0,00% 5,82% -31,51% 49,35% 22,48% 34,50% 32,11% 16,76% 2,15% 21,35% 1,44% 17,60% 0,18% 18,91% 2,89% 13,59% 0,42% 11,56% 18,55% 49,35% 49,35% 0,00% 22,48% 1,93% 1,93% 0,00% 5,81% -22,16% -22,16% 0,00% 28,72% 31,42% 31,42% 0,00% 4,86% 9,37% 9,37% 0,00% 1,54% 21,80% 21,80% 0,00% 3,96% 1,90% 1,90% 0,00% 0,27% 7,11% 7,11% 0,00% 14,92% -1,62% -1,62% 0,00% 0,00% -12,15% 49,35% 49,35% 0,00% 0,00%
- 17. Major Indices Level1 Secondary Indices Level 2 Historic Value Risk without Weighted Name Industry Company Company vs Weight Risk Risk Industry AHP Historic Value Risk Weighted Name Ratio Weight AHP Industry Company Industry Company Value Risk Company vs Industry Gross Margin (%) 222,6% 215,0% 19,3% 18,7% -3,5% Operating margin (%) 9,5% 9,4% 170,8% 222,4% 165,0% 225,0% 16,1% 21,0% 15,6% 21,2% -3,4% 1,2% Return / Equity (ROI) (%) 19,9% 205,6% 201,0% 40,9% 40,0% -2,3% 52,5% 194,1% 190,0% 101,9% 99,8% -2,1% Asset Turnover (times) 30,7% 0,0% 1,0% 0,0% 0,3% 460,5% Portfolio turnover (days) 95,5% 8,7% Return of Assets 97,4% -1,9% Major Industry 13,2% 172,6% 155,0% 22,8% 20,5% -10,7% 12,7% Rotation suppliers (days) 22,3% Net margin (%) Profitability -5,7% 178,0% 168,2% Minor Efficiency Major 189,1% 6,0% 191,1% Industry Indebtedness 147,8% 143,5% -3,0% Minor 52,7% Industry Viability -3,9% 181,5% Liquidity Operative Risk 174,5% Minor Industry 145,0% 140,8% -3,0% 6,4% 350,0% 56,4% 53,7% -4,9% 262,8% 250,0% 24,0% 22,8% -5,0% Operating cycle (days) Debt to equity ratio (%) Financial obligations / liabilities (%) Total Liabilities / Sales (%) Current Liabilities / Total Liabilities (%) Ebitda (MLL) 31,6% 64,5% 236,5% 183,9% 224,0% 186,0% 74,8% 118,6% 70,8% 119,9% -5,4% 1,2% 8,2% 13,2% 253,3% 177,3% 245,0% 187,0% 20,9% 23,3% 20,2% 24,6% -3,3% 5,3% 14,1% 78,2% 186,8% 137,4% 187,0% 145,0% 26,4% 107,4% 26,4% 113,4% 0,1% 5,4% EBITDA / Sales (%) Sales / Financial obligations (times) 12,6% 140,8% 138,0% 17,8% 17,4% -2,0% 9,2% 246,3% 138,0% 22,7% 12,7% -57,9% 12,7% 168,0% 152,0% 21,3% 19,3% -10,0% Acid test (times) 70,5% 208,3% 204,0% 146,8% 143,8% -2,1% Working capital (MLL) 1,0% 367,7% 9,1% Current ratio (times) Industry 15,3% Inventory turnover (days) 16,8% 79,6% 68,0% 13,4% 11,4% -15,8% 100,0% Kind of Risk= minor Industry
- 18. Name Profitability Industry Risk Company Company vsWeighted Risk Industry AHP 97,4% 95,5% -1,94% 22,3% Efficiency 178,0% 168,2% -5,70% 12,7% Indebtedness 189,1% 191,1% 1,05% 6,0% Viability 147,8% 143,5% -2,99% 52,7% Liquidity 181,5% 174,5% -3,93% 6,4%
- 19. Industry Company Gross Margin (%) Workingcapital (MLL)400,0% Operating margin (%) 350,0% Acid test (times) Net margin (%) 300,0% Current ratio (times) 250,0% Return / Equity (ROI) (%) 200,0% Sales / Financial obligations (times) 150,0% 100,0% Return of Assets 50,0% EBITDA / Sales (%) Ebitda (MLL) Current Liabilities / Total Liabilities (%) 0,0% Asset Turnover (times) Portfolio turnover (days) Rotation suppliers (days) Total Liabilities / Sales (%) Inventory turnover (days) Financial obligations / Operating cycle (days) liabilities (%) Debt to equity ratio (%)
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