Business Risk of UD Berdikari Meubel

COMPANY PROFILE

At the first time, UD Berdikari Meubel was established in 1975 at Laksda Adisucipto street km. 7 Tambakbayan Babarsari Yogyakarta. The founder is Mr. Ignatius Supomo. Then in 1984, the head office and store moved at Jl. Laksda Adi Sucipto km. 8 Rejowinangun Maguwoharjo Yogyakarta, while the company’s production facility is located in Kadirojo Sambisari Kalasan. UD Berdikari Meubel is a producer and seller of furniture. Until now, the company has 2 branches, the first branch named Sami Berdikari and the second branch named Berdikari Makmur.

Over the past decade, Company has built a series of key relationship with other furniture companies. For example, Berdikari partner with Airland, Ligna, and Quantum to fulfill the needs of spring bed. Besides that, the company also has relationship with other national furniture company such as Olympic and Expo that supply many kinds furniture. Company is serving both the regional and inter-regional area such as Sumatera and Bengkulu.

ANALYSIS

Business of UD Berdikari Meubel

UD Berdikari Meubel which particularly focuses in service and product sales of furniture industry already has organizational structure. Management structure is not a department-shaped structure, but it is still run by individuals. Below is a chart of organizational structure:

Any decisions related to finance, marketing and sales are still decide by the owner. Meanwhile, vice from the owner is his wife who has authority to decide expenditures. So the vice has two roles following replacing the owner in certain condition and managing circulation of money within company. There is a difference task between administration and treasurer. Administrative division only has job to record the total spending and income in paper while the decision to spend money will be directly handed by the treasurer.

For goods that are ready for sale, Company get from two ways. The first way, company does the production process. The production process consists of several step following cutting, forming, and finishing. For wood supply, Berdikari has been entrusted to the state forestry or called “Perhutani” which has a legal permit for timber harvesting. While the production stage performed by company’s employees of production division. Company also conducted second way that is supply of furniture from major manufacturers such as Olympic and Expo. Not only order furniture, but also spring bed from other large suppliers. Berdikari Meubel will order the products that they want from the supplier and it will be requisitioned as store displays.

UD Berdikari Meubel that primarily serving furniture market in Yogyakarta, has three fleets to deliver order product to customer. Each fleet will has responsible for the goods that they deliver, so consumers will get the product in the best condition. But also serve consumer from other region, company do not close possibility to send the goods out of Yogyakarta region.

    Looking from the financial aspect, Berdikari Meubel tries to make smart financing decision by setting debt around 20% and 80% equity.  20% of the debt already includes of display items that placed by supplier in the shop. Percentage of debt is not in large amount; it is because a large amount of debt would give greater risk to the company.

Identifying and Manage Furniture Risk

If company really knows about the difference between risk and uncertainty, then company will be able to identify risks that they face. UD Berdikari Meubel also faces market risk that related with business of furniture. There are risks that faces by Berdikari Meubel that influence by external factors:

1. Economic: economic turmoil will affect the level of demand for furniture. For instance, the economic turmoil that occurred during the monetary crisis in 1997. It is make the amount of company’s sales decreased in massive quantities. Other cases occurred when oil prices soared in 2005. The amount of profit declined by the increasing cost of production. There is no action that can be taken to prevent the decline of demand. The solution is Berdikari tries to increase the number of sales with the promotion and exhibition of furniture to cover the losses suffered during the crisis.
2. Legal/regulatory: law violation is hampering the business of company.  Berdikari Meubel is conducting his business in accordance with applicable law in Indonesia.  has to legalize the business by Trade Business License or “Surat Ijin Usaha Perdagangan” (SIUP), Company Registration Number or “Tanda Daftar Perusahaan” (TDP), and disturbance permits or “Ijin Gangguan”. Moreover, for suppliers of wood, Mr. Pomo have been entrusted to Perhutani that has licensed for logging. For business taxes, company hires someone who has potential or superiority term of tax issues. That’s all done by company as a precaution from legal/ law sanctions.
3. Political trends: political changes will automatically affect the condition of economy so it also will give effect to the company. For example, politic policy that set by SBY in Indonesia to increase the price of oil. Indirectly, that politic policy made the price raw material and other material of production increased. Then it gave impact to the revenue of company because the cost of product higher than before.   
4. Technological: use new technologies will not always be profitable. This condition felt by Berdikari in term of transactions record. Companies decided to use traditional recording without computerization until now. This decision applied because when company tried to use computerization system for transaction record, company lost the data because of technical problems (error). Fortunately, the company still has back-up of data in manual transactions record.
5. Environmental: natural disaster caused the company suffering physical loss financially. There are many thing form of natural disaster such as flood, fire, windstorm, etc. Natural disaster such as an earthquake that occurred in 2006 is also an example of risk factors that derived from the organization external environment and these factors cannot be predicted.  Berdikari Meubel only can minimize the risk of damage due to natural disasters by construct the building accordance with operating standards that established in Indonesia. 
6. Socio-Cultural/ customer wants: missing customer because company late to follow trend of home style. In the furniture industry, the growth of trend is very important. This is affect consumers' choice of furniture that will be purchased because form of furniture depends on the design of building. According to that condition, Berdikari Meubel always try to follow the change of market trends by reading magazines, doing directly survey by observation or receive advice from employee and customers. Nowadays, market trend was referring to the minimalist design because of that UD Berdikari focus to provide products with simple designs to follow the minimalist trend.

Besides the risk above, there are risks that relating to existing operation that can control by company following: 

Delivery: the employee fault causes product can’t deliver on time. Error in delivery can be happen because of two things following accidents that caused by employees during the shipping time and delays due to scheduling. For both of reason, company deals with that condition by giving responsibility sanction against employees who make mistakes during the delivery process. So this way will minimize the personal error because the cost of damage in delivery time will guaranteed by employee.  

Capacity and capability 

• Resources: risks of resources can come from the financial sector, human resources, information and physical assets. Financial risk could be derived from income or expenditure of the company. The fault of record in financial term can be a negative risk for company. Because of that, company always tries to keep correct records on every transaction. In addition, all expenditures of money have been made by the representative of the owner who is his wife so that the control of the money circulation can be done directly. Besides that, Berdikari also realized about the risk of debt. According to that condition, UD Berdikari decided to financing company by using only 20%. If looking from human resources point of views, the recruitment system handled directly by the owner which has experience more than 30 years in furniture business. So that company can find employees who match with the owner’s criteria. Berdikari Meubel believed that good recruitment will affect the performance of company.
• Relationship: threat to commitment to relationship with supplier and customer. Maintain good relationships with suppliers and customers are very important because they provide advantages for the company. Because of that reason, the company always makes an effort to keep commitments with customers and suppliers. Keep payments on time can be good way to maintain good relationships with suppliers. While for the relationships with consumers, company always tries to serve good service in term of sales and delivery. UD Berdikari Meubel has slogan "2S" (Selalu Senyum) or Always Smiling. This is one way of company to make consumers feel more appreciated.
• Operations: problems in the production process led to decrease quality of products. The quality of furniture is strongly influenced by the production process so that Berdikari Meubel gives attention to each stage of production that is performed. For instance, furniture will have a long durability, if the “oven” process is done well. Because the “oven” process will affect the moisture content of wood which is give impact to the durability of products. Finishing process also becomes very important because it determines the final outcome of products. 
• Reputation: bad management of business caused the company loss the trust of stakeholders. Stakeholders in the company are not only a supplier that distributes furniture but also consumers, employees, suppliers of raw materials, and the government. Company must be able to maintain the confidence of them by running business in the right way and accordance with the law. Berdikari Meubel is applying the principle of familiarity in the management. So they can build long relationship with stakeholder. Besides that, management control is also important concept that applying in the production process, delivery, and transaction so that all activities accordance with requirements. In addition, the action to safe the interest of residents around company is also very necessary. UD Berdikari makes a good waste disposal circulation as a one way to decrease environmental damage around the plant. 

Risk management performance and capability

• Scanning: Error in reading market conditions caused loss for company. The importance of determining the selling decision is largely influence by market conditions. The owner of Berdikari always tries to read the condition of market in the right way. For example, if closing from month of Ramadan, the company will perform exhibitions of furniture and give a discount for the products that will be sold. This is due to increasing of market demand for furniture in the month of Ramadan. This Opportunity is always successfully exploited by company. 

• Security: Loss of physical assets and corporate information can reduce the revenue. Physical assets and corporate information is very important for company. Loss of physical assets and financial information will affect financial of company.  Berdikari Meubel is very aware by this risk. To reduce the risk of loss from physical assets, Berdikari has division that must maintain the security of all assets. While, for important information such as financial and circulation of money, UD Berdikari makes it as a secret that only known by employees and owner.

The last category of risk comes from the risk that occurs when company makes decision to pursue new endeavors beyond current capability, following:

1. Change programs: develop the capacity of the company will increase the market risk. The decision of   to open two new branches will certainly increase the risks that face by company because the market capacity is also bigger than before. The owner of UD Berdikari Meubel realized about that condition so the management control still do centralized. The founder of company still do directly control for all activities that conducted in both branches. This action has purpose to keep the quality of product and performance of each branch.

"CONCLUSION"

UD Berdikari Meubel is a company that has good management of business risk. The company can make identification of risk that will give outcome in the future although the form is negative or positive. The ability to make identification is very important for company because it can provide information for ranking the importance of risk. Then the ranking will influence the company allocation of resources for managing and controlling the risk.
Looking from the way of UD  Berdikari Meubel manage risk, we can conclude that the company really knows about the kind of risks that will be faces in furniture industry because each type of industry will have different type of market risk. It is means that each industry also has different way to deal with market risk. And the last, the way of company manage the risk will affect the business that they do. 

REFERENCES

Keegan, Mary. 2004. The Orange Book: Management of Risk – Principles and Concepts. HM Treasury.
William, JR., Smith, Young. 1998. Risk Management and Insurance, Eleven Edition. McGraw Hill.  
Actuarial Society, Casualty. 2003. Overview of Enterprise Risk Management. (CRP)

The BIG HUG for: Administration division of UD Berdikari Meubel (Mba Gesti) that gave me opportunity to do interview ^^.