1.

ACKNOWLEDGEMENT

All praise goes to Allah the Lord of Universes.

It has been real privilege to work under our lecturer, Encik Ismail Bin Ibrahim who has
been a wise facilitator of our learning and development during the Risk Management (FIN 610)
subject. Thanks to his warm and cool personality, thanks for his unfailing guidance, valuable
suggestions, advice and useful criticism for setting us on the path to being an effective students
and for always saying yes-even when he was busy and tired. As a matter of fact, if it had not
been for his help and understanding, this report would not have been possible. Our debt to his
leadership, guidance, and support can never be adequately expressed with words. Suffice to
say that we are regarding his as our role model of whom we will always be appreciating.
Instead of that, our deepest thankfulness and gratitude to Mr Lim Soon Huat, the
Manager of Merison (M) Sdn Bhd, the independent distributor of Nestle (Malaysia), for the
territory of Melaka. He has given a very good cooperation and gave all information that we need
during the interview for the purpose of our research.
Our thanks go to our families, thank you for all their prayers and for their emotional
support which gave us strength and determination to continue our report. A special word of
appreciation goes to Universiti Teknologi Mara Kampus Bandaraya Melaka, for allowing us to
pursue our Bachelor in Accountancy (Hons), and for the facilities offered here.
Our thanks are also extended to all our friends, especially for all group members for the
effort given during the process of doing this group project paper and also special gratitude
particularly for our classmates BACC 8A and other classes in the same FIN 610 course and who
assisted us in one way or another during the period of this.
To all those whom we may have forgotten to mention, THANK YOU!

2.0

INTRODUCTION

The purpose of our research study is to identify any risks associated in a company and
how they manage the risks. This project is undertaken for the subject of Risk Management (FIN
610) as for completing our Bachelor of Accountancy. From the discussion with all group
members, we have decided to choose Nestle (M) Bhd for our research on this Risk
Management subject. It is an independent distributor for Nestle Product for the area of Cheng,
Melaka. In order to complete our research, we have conducted an interview with Manager of
Merison (M) Sdn Bhd.
As we know, Nestle (Malaysia) Berhad is an investment holding company. It is a large
company which has two segments under it business including of food beverages products and
also other nutrition products. Under Nestle (Malaysia) Berhad, there are several distributors
which are located in many countries in Malaysia. One of the distributors in Melaka is Merison
(M) Sdn Bhd which is managed by Mr. Lim Soon Huat.
In order to finish our report, we have to understand first the concept of risk and what is
meant by risk. Risk is a situation that involving exposure to any danger. On the other hand, the
meaning of risk management is the process of identifying the potential risks, evaluating and
analyzing the risks and also the techniques on how to manage the risks. Risks are come from
different types and originate from different situations. The several types of risk are business
risks, liquidity risks, financial risks, and sovereign risks, insurance and so on. These risks have
to be identified first. After these risks have been identified, then we can measure and analyze
the risks in order to minimize the possible loss. Once we have analyzed the risks, we can select
an implement any method or technique to reduce or eliminate these risks. The measurement of
risks are being taken in order the business can run the business smoothly a can minimize any
possible losses.

3.0

OBJECTIVE
2

There are several objectives of our research. The first objective is to identify any risks
that are associated with the trading company. Running a business can be a dangerous
occupation of different kind of risks. Some of these potential hazards can destroy a business,
while others can cause serious damage that can be costly and time consuming to repair.
However, the risks that were associated in trading company did not always the same as the
other company. Despite the risks implicit in doing business, the risk management officer in a
company must have knowledge on how to identify any risks that being associated with the
company. In order to identify these risks, we have got the information from the Managing
Director and also from online research.
The second one is evaluating the risks and analyzing the risks that are associated with
the trading company. Once the risks are been identified, we have to evaluate and analyze the
risks associated. As the risks identified must be dealt with specific ways, these risks must be
evaluated and analyzed in a proper way in order to minimize any possible loss that can occur. In
order to evaluate these risks, we have made detailed study and research on this distributor of
international food and beverages in order to get sufficient and correct information.
The third one is selecting and implementing the risk management decision as well as
monitoring and reviewing the risk management process. After the risks is being identified,
evaluating and analyzed, the appropriate risk management techniques must be implemented to
ensure that the operations of the company is going smoothly and any risks occurred can be
manage well. Loss prevention, reduction and also avoidance technique must be taken in the
trading industry distributor in order to minimize and eliminate the risks without an adverse effect
on the goals of the business. However, for the risks that cannot be avoided, a consideration
should be given to available loss control measures such as risk retention or risk transfer. These
techniques must be implemented to minimize the possible loss. Besides that, the risk
management process must be reviewed and monitored in order to ensure that all parties in the
organization have complied with the requirement.

4.0

SCOPE OF LIMITATION OF STUDY

3

There are several limitations that we faced in order to complete our research. The first
one is the time consuming to finish our research. As we are part 8 student of Bachelor of
Accountancy, we have many fieldworks that we have to conduct. As a student, it is a challenging
for us to manage and arrange our time so that we can finish and complete this report. We also
have to face with other assignments, tests, quizzes and other events to do and to attend to.
Therefore, it is a very crucial and difficult for us to find the company, arrange for an interview
and find the suitable time to make the interview with manager.
Besides that, we have also to incur some cost of travelling to the company which is
located at Cheng which is quite far from our campus. As nobody in our group members having a
car, we have to borrow car from our classmate. We need to travel from our campus to Cheng to
make an interview with Mr. Lim, the Managing Director. The expenses incurred during the travel
are petrol, food and so on. Instead of that, as nobody in our group do not have a printer, we
have to send our report to the shop that provides printing services. This also has contributed to
the cost limitation for us to handle.
Furthermore, we have also a problem to find a company to do this research. This is
because, we have tried to call many companies but many of them have rejected our request to
make an interview. Some of them said that they do not give any information to outsiders and
some of them told us that they do not provide any information to student for doing any research.
This situation has brought difficulties for us to start our research.

5.0

RESEARCH METHODOLOGY
In order to complete our research, we have used several methods to collect all the

information needed. The first method that we used is through the analyzing the document. In
this project, we have gather information through the newspapers, review from articles, journals,
references of Risk Management books and also the text books as well. These references are
from the competent experts in the risk management industry. Through the analyzing of these
data, we have understanding and having a discussion with our group members on how to deal
with the risks in the trading industry.
Besides that, we have also conducted an interview with Mr. Lim, a Managing director of
the distributor Nestle (Malaysia) Bhd. Mr. Lim is the owner of the company. He is managing the
family business since he has a wide knowledge on the food and beverages product. In order to
conduct this interview, we have made twice appointment with the manager. The first time we
came, Mr. Lim was having a meeting in Kuala Lumpur. So we have to come back another day
after we have talked to him through a phone call. In the conversation, we have set the interview
time in a week earlier. We have also explained to him on the scope of what we are going to ask
during the interview session so that he will be more prepared to give us the sufficient
information.
Instead of analyzing the document and conducting an interview, we have also found the
information from the internet. As we know, many researches are found from the internet and we
can find much information from that source. From the website of the company, we have found
the information about the company such as company background, the core business and other
related information regarding the risk management.
Furthermore, we have also made a direct observation the warehouse of the business.
We have the opportunity to observe the operation of the premise, the sprinkler system installed
in the warehouse and also the logistic system. This observation have give us clear
understanding of the business operation instead of explanation that have been given by Mr. Lim
regarding their operation of business.

6.0

FINDING

We have called Nestle office number to make an appointment to meet representative. We had
set the appointment to meet the Manager at 9.00am in the morning at his office on 6 th
December 2013. On that day, we have borrowed our friend car and collect our team member at
their house as we cannot gather at one place due to transportation limitation. We started our
journey at 8.30am and reached Merison (M) Sdn Bhd at 8.50am. The meeting was held on the
manager office himself.

At the time of our arrival, we have meet Mrs Yong Siew Fong who are the executive of Nestle
distributor to pick us up at the outside of the building. She bring us to waiting room as Mr Lim
Soon Huat, the Managing Director of Merison (M) Sdn Bhd do not arrive at his office yet. She
told us about the meeting of Nestle was held in Kuala Lumpur yesterday and that is why the
appointment was made on that day. We waited for 15 minutes before Mr Lim Soon Huat
pleased us.

We have been taken to 2nd floor which the manager office are situated. The session of the
interview started with introducing our self and explanation about our purpose of interview. We
have given the letter from UiTM as it is a standard procedure to be done to overcome any
misunderstanding.

After that, Mr Lim explained to us about the company background and scope of work as the
independent distributor of Nestle. After that, we continue our interview session regarding risk
assessment include identification of risk, risk control and risk financing. The interview session
has last for 1 and half hours. We went out from Merison (M) Sdn Bhd at approximately 11.00am.

7.0

COMPANY BACKGROUND
Merison Marketing Sdn Bhd is located in Melaka, with four branches in Johor Bahru,

Batu Pahat, Segamat and Seremban. Founded in year 1999, with 13 years experience in the
fast moving consumer goods (FMCG) line, and now, Merison (M) Sdn Bhd is one of the largest
and established distributor in the Southern region of Malaysia, partnering top companies such
as, Procter & Gamble (M) Sdn Bhd, Kraft Malaysia Sdn Bhd, Dutch Lady Milk Industries, Yeo
Hiap Seng (Yeo's) and is one of the independent distributors for Nestle Bhd products in Melaka.
The company situated in Cheng, Melaka which is 15 minutes away from Melaka city. The
company address is Plot 2-24, Jalan Ttc 8, Kawasan Perindustrian Cheng, Mukim Cheng,
75250 Melaka. As we know, Nestle (Malaysia) Berhad is an investment holding company. It is a
large company which has two segments under it business including of food beverages products
and also other nutrition products. The company is managed by Mr. Lim Soon Huat, the Manager
of the company.

A simple belief, Merison (M) Sdn Bhd believes that their people are their greatest and
most valuable asset. In the same way their people strive for the Company's success, and the
Merison (M) Sdn Bhd strive to create an environment for them to succeed in career and life.
Poeple at Merison Marketing are benefited not only by well-rounded compensation packages,
but more importantly, opportunities to obtain professional training to build their capabilities.

8.0

RISK ANALYSIS
8

8.1

Techniques of identification of risk

Risk identification techniques are refers to the process of identifying dangerous or hazardous
situations and trying to characterize it. It is a procedure to deliberately analyze, review and
anticipate possible risks that the company might faces in carrying out the daily business
activities. It is important to risk management of the company to successfully identify most
appropriate techniques to be used as it is one of the important parts in the management.
Choose the right technique eventually help the company to identify perils and severity of the
risks, as well as analyze the potential losses that might be arose from the risk. There are
several techniques used by Merison (M) Sdn Bhd in identifying risk. Among the technique are
discussed below.

i.

Analysis of document

Analyzing the document is one of the effective techniques in identifying the risk. Documents are
being analyzed thoroughly in order to obtain sufficient and reliable information from the past and
current activities that are properly being recorded and kept by the management. This technique
also useful as it helps to investigate resources allocation, strategic planning and also the
decision making by the management. The management of Merison (M) Sdn Bhd used this
technique to analyze the risk from the document that is being recoded and properly kept. These
documents contain all the data and information, related to the past activities, as well as the
current in order to analyze the existing and potential risk of the company. Information regarding
to the business are also recorded, documented and properly kept as for the reference by the
management itself, and also for external parties, such as auditors and the Nestle (Malaysia)
Bhd. To ensure the reliability, accuracy and usefulness of the information, all the data are also
being recorded and physically kept as for the evidence in the futures.

ii.

Interview

Another technique to identify the risk is by interview. This is also another effective way to obtain
any information related to any particular issues, as it will not consume a lot of cost in term of
9

financial and time. The information gain from the interview are also said to be unbiased since
the information is obtained directly from the interviewee by the interviewer. The manager, Mr.Lim
had done many interviews in order to analyze and recognize any risk that are arising from the
sales and distribution department, starting from the bottom line employee (distributor), up to the
management personnel (supervisors). All information from the interview regarding to the risk
analysis is properly recorded and taken into consideration for further investigation and
discussion with the management.

iii.

Inspection

Inspection is another technique that can be used in identifying the risk. Inspection process is
done by any authorize personnel from time to time in any areas of the business, checking
whether is there any risk associated with the business and also controlling the business daily
activities to ensure the efficiency and effectiveness of the business. Mr.Lim does the inspection
once every two week at the warehouse that enables him to understand the whole picture of the
risk environment in the business, as well as having the face-to-face conversation with the
workers on the floors. From the inspections, it helps him in identification of risk along with the
suggestions of managing the risks.

iv.

Orientation

Another risk technique is also one of the methods that can be used in identifying the risk in

the

business. Since the company, Merison (M) Sdn Bhd is a small company and also independent
distributor of Nestle (Malaysia) Bhd, there is no risk manager for the company. Mr.Lim, manager
of sales and distribution department of the company, is well aware of his responsibility in
identifying the risk occurs in his business. He well

understands of the organization missions

and visions, objective and the functional department.

Throughout his time in managing the business, he has developed sufficient skills, knowledge
and expertise regarding the overall operations of the organization to ensure the data and
information that he gained could be used in identifying the risk associated to the business.
As an authorized dealer for Nestle (Malaysia) Berhad, it has been part of Nestle (Malaysia)
Berhad responsibility in recognising the importance of risk management and internal controls,
10

the Board of Nestle (Malaysia) Berhad has established a structured risk management
framework to identify, evaluate, control, monitor and report the principal business risks faced by
the Group on an on-going basis.

8.2

RISK FACTORS

Once the appropriate technique to identify the risk faces by the company, it is easy for the
management to list down those risks and analyze it. Below are the risk that have been identifies
from the research.

11

i.

Property risk

One of the most crucial risks that the company faces is the property risk. Such business
activities like Merison (M) Sdn Bhd faces risk of loss or damages of the company property from
variety of perils such as flood, fire, earthquake and others. The property such as office buildings,
warehouse, inventory, furniture, office equipment and valuable papers, books and documents
are those items that are exposed to the damages and loss.
ii.

Credit risk

Credit risk refers to the risk that a customer will default on any type of debt by failing to make
payments which it is obligated to do within the credit limits term. This is a common situation of
risk for a trading business as it involved day-to-day transaction with the customers, from
consumer to business entities where credit risk arise when the debtor (consumer and business)
failed to pay trade invoice when it due.
iii.

Crime risk

Crime risk is one of the risks that are commonly faces by any trading company. Crime risk can
be avoided by the company, however it is hard for the company to controlled and predict this
risk since this criminal risk derive from the criminal act of person, in which it is not under the
management control. Eventually, many criminal losses from this criminal risk cannot be detected
obviously by the company.
iv.

Operational risk

Merison (M) Sdn Bhd also exposed to the operational risk whereby it is a risk of loss resulting
from inadequate or failed internal processes, people and systems or from external events. It is a
form of risk that summarizes the risks a company undertakes when it attempts to operate within
a given industry.

8.3

UNIQUE

RISK

OF

TRADING

INDUSTRY

12

Unique risk is exposure to loss associated with a specific investment or investment strategy, and
which can normally be reduced by diversifying the investment portfolio. It is also called as
unsystematic risk or idiosyncratic risk.
Nestle Sdn. Bhd. is also exposed to some unique risk for example regarding the Halal noncompliance risk and equity investment risk.
i.

Halal non- compliance risk

Nestle (Malaysia) Berhad, Marrison (M) Sdn Bhd is exposed to this risk if they failed to comply
with Halal certification rules and principles. Malaysia as an Islamic country is the only country in
the world whereby the government provides full support in promoting the Halal Certification
process on products and services. But if Nestle (Malaysia) Berhad failed to complied with Halal
requirements at all stages of the production and supply chain, including procurement of raw
materials and ingredients, logistics and transportation, packaging and labeling, it will affecting
Marrison (M) Sdn Bhd business in distributing the products to the customers. It also affects the
sensitivity of Muslim community not only to the distributed area but also the whole country.

ii.

Equity investment risk

Marrison (M) Sdn Bhd is legally binding to contractual agreement towards Nestle (Malaysia)
Berhad as an authorized distributer of Nestle (Malaysia) Berhad products. Let say if anything
happened to Nestle (Malaysia) Berhad, it will affected the equity investment Marrison (M) Sdn
Bhd as they has contributed and invested certain amount of money in

Nestle (Malaysia)

Berhad. From that, there are some possibilities of the risk arising from entering into a
partnership for the purpose of undertaking or participating in a particular financing or general
business activity as described in the contract.

9.0

WAYS

TO

OVERCOME

RISK

CONTROL
13

9.1

THROUGH RISK ASSESSMENT

Risk control refers to method by which firms evaluate potential losses and take action to reduce
or eliminate such threats. Risk control is a technique that utilizes findings from risk assessments
by identifying potential risk factors in a firm's operations, such as technical and non-technical
aspects of the business, financial policies, and other policies that may impact the well-being of
the firm, and implementing changes to reduce risk in these areas.
Risk control takes that information gained during risk assessments and develops and applies
changes to control the risks. Risk control can involve the implementation of new polices and
standards, physical changes and procedural changes that can reduce or eliminate certain risks
within the business. Risk control is an important action taken by firms that is intended to
proactively identify, manage and reduce or eliminate risks.
The objective of a risk control programme is to minimize the total cost of risk of an organization
and to ensure the long term economic survival of the organization after the occurrence of a
major loss event. Cost of risk includes the cost of losses that occurred and are retained, cost of
financing loss (insurance premium), and cost of implementing risks control measures. Effective
risk control strategies reduce the frequency and severity of losses. Their impact is to reduce the
level of retained losses, the risk of financing cost especially important if the insurance premium
is based on loss experience of the organization and the annual cost of risk incurred by the
company. Reducing cost of risk incurred will increase the profit and the organizations
shareholder value in the long run.

i.

Property risk control

Merison (M) Sdn Bhd has taken some precautionary actions to avoid property risk from happen.
In this case, the company itself was made an Installation of Automatic Sprinkler System. This is
to provide best counter protection over any occurrence of fire at workplace. How this system
works by, a network of piping filled with water under pressure is installed behind the walls and
ceilings, and individual sprinklers are placed along the piping to protect the areas beneath them.
Because the water is always in the piping, the fire sprinkler system is always "on call". If fire
breaks out, the air temperature above the fire rises and the sprinkler activates when the air
temperature gets high enough. The sprinkler sprays water forcefully over the flames,
14

extinguishing them completely in most cases, or at least controlling the heat and limiting the
development of toxic smoke.
Sprinklers are so effective because they react so quickly. They reduce the risk of death or injury
from a fire because they dramatically reduce the heat, flames and smoke produced, allowing
people the time to evacuate from the burning place and fire sprinkler systems release
approximately 10-25 gallons of water per minute.
In industrialization sector, there are 5 common sprinkler systems used today. They are wet pipe,
dry pipe, pre-action, deluge and combined dry pipe as well as pre-action sprinkler systems. The
selection of a system to be used by particular business organization depends largely on the
nature of the area to be protected, its construction and the hazards involved. However, each
system must at least have one water supply, control valve piping in order to flow the water
throughout the structure and sprinkler heads to discharge the water. Each system type may
have several configurations depending on the manufacturer and special requirements. In this
case, Merison (M) Sdn Bhd also has installed this automatic fire sprinkler system really close to
its warehouse where they locate the inventories and also in the office buildings where the entire
important document are located. Maintenance, inspection and review of this system are
regularly done to ensure this system is functioning all the time. Until now, the system is doing
well and minimal inspection and maintenance are required. This installation of sprinkler system
may cater to reduce the risk of spreading the fire to the whole business premise and convenient
because there are availability of sources of water supply around the premise. This installation of
sprinkler system comes with a very efficient alarm system attached to the whole business
premise.

ii.

Crime risk control

Merison (M) Sdn Bhd have implemented some measurement to prevent any crimes such as
theft, robbery, embezzlement and fraud committed by employees. This measurement can
focuses on the prevention and minimization of losses from such crimes.
15

1.

Physical protection for premises area

The installation of good locks, grates, bars and similar devices avoid or delay access by
the burglars.
2.

Installation of alarm system and using of security guard

The alarm help in detecting any action to access premises area by unauthorized person.
The security guard help in monitoring and guarding the premises area in timely basis or
based on the alarm.
3.

Installation of CCTV

The company is being installed with CCTV especially in area which potential to be a
crimes areas. Through the CCTV, it can discourage the criminals to do crimes as they
could be caught for their actions.
4.

Effective prevention procedures

The company provides training for employees of the procedures in handling money and
stocks to avoid theft and fraud.

iii.

Credit risk control

Marrison (M) Sdn Bhd also faced credit risk such as late payment by the small retailer and other
customers, a business cant pay their employee's earned wages when due and a business or
consumer does not pay a trade invoice when due and others.
In our interview, we have been informed that the company usually reviews of recent credit
history of their customers before make distribution of their products to those particular
customers. If the retailer have a perfect payment history in the past twelve months, so Merison
(M) Sdn Bhd will continue distribute their product to that customers.
Merison (M) Sdn Bhd have experienced faced credit risk in term of difficulty to obtain loan and
refining the existing loan. So, they have maintained a good credit score to get trust by the
lenders in getting loan and refinance their existing loans. A credit score is a number that helps
16

lenders evaluate a person's credit report and estimate the companys credit risk. Mr. Lim, the
manager of Merison (M) Sdn Bhd said that keeping current credit situation under control is the
first step in rebuilding the credit history.
But a credit score alone doesn't tell the whole story of the companys credit history. The full
report will show a lender which credit products contribute to the score. Late payments will be
shown by month, which will tell them whether it is a chronic problem or a one-time issue. For
example, if a person is late with credit card payments three months in a row two years ago
when you were in the hospital, a bank can consider those circumstances or incidents when
assessing that person reliability, especially if that person has been current with payments since.

iv.

Operational risk control

Merison (M) Sdn Bhd also exposed to the operational risk which is a risk incurred by an
organizations internal activities. It is focusing on the risks arising from the people, systems and
processes through which a company operates.

1)

Limited Access Control

The organization has imposed a limited access to the companys property, system and assets to
only authorized personnel only. For Merison (M) Sdn Bhd, only certain personnel are authorized
to gain access to the accounting and documentation system of the organization. There have
been a strict guidelines and regulations being provided to emphasize on this matter. For
example, only personnel are authorized to have access to the businesss accounting system to
avoid any manipulation of information. Also, access into warehouse also only allowed to certain
personnel to prevent theft.

2)

Proper Guidelines and Regulations for Forklift Drivers

Merison (M) Sdn Bhd set strict guidelines in handling the forklift to load and unload the
inventories from the trucks. For example, there is a forklift driving restrictions imposed to the
forklift drivers such as limited speed and other mechanism. These are all highlighted by the
organization as to prevent any accidents and disruptions from occurring that may affect the
17

business operations. To ensure its effectiveness, the performance of the forklift drivers are
monitored by supervisor to obtain insightful view on the usefulness of the implementation of loss
prevention measures being implemented.

9.2

THROUGH TRAINING

General awareness
General awareness is necessary to provide the employees with the relevant knowledge
regarding health and safety measures that needs to be implemented in their work environments.
This general awareness includes of environmental awareness, fire awareness, and electrical
awareness. Example training fire awareness that conduct by Merison (M) Sdn Bhd is fire drill.
The training itself help in risk control by makes the employees feel that they are part of your
company family. Training programs demonstrate the employer interested in their employees'
professional development or skill enhancement. When the employees realize that the employer
is investing in them, they pay back with loyalty. By that, crimes risk such as fraud and theft by
the employee can be avoided.
Through training it can increases the motivation of employees as knowledgeable employees
make fewer mistakes which reduce the risks. The training provided by Merison (M) Sdn Bhd is
continuously and ongoing to ensure it provide a great and comfortable place for employees to
work.

10.0

RISK FINANCING

A variety of uncertainties are challenging development interventions on a daily basis.

The necessity and demand for increased effectiveness and efficiency of these interventions is
greater than ever. Thus, it is vital for one company to develop risk management in the
organizations as it is crucial in managing risk that could happen. Different categories of risk
18

given different impact to the organization follow the degree of the risk. The primary objective of
any organization is to maximize wealth. The main criteria are to maximize returns and minimize
risks related to any decision.
Safety environment and good health of the employee will bring greatest benefit for the
business. Therefore, good risk assessment and management will make an organization able to
reduce the tendency of loss if there are any risk intervention occurs in the company. Risk
financing will make the employee feel protected from any accident and the company can
recover from any losses and the good name of the company can be maintain.
Risk financing is a planning process to arrange for funds that are reliable and cost
effective to finance losses that might happen, as well as actually paying for losses that do occur.
In addition, risk financing plays a key role in the provision of fund to finance the recovery of the
organizations to continue normal business interruptions caused by major accidental events or
disaster. Such recovery is crucial for company going concern and pursue organizational
objective.

i.

Risk Transfer
Risk transfer enables an organisation to transfer its financial responsibility for a potential
loss to an insurer which is insurance transfer who agrees to indemnify the organisation
for the loss. In the event of loss, the organisations are responsible for the loss but the
financial loss will be reimbursed by the indemnity payment from the insurer under
insurance contract.

ii.

Risk Retention
Risk retention refers to the use of an organisations internal funds to finance the loss. .
Risks that cannot be avoided or reduced are normally retain as there are no way to deal
with it. Risk retention includes paying losses as current expenses and established
reserve and captive insurance arrangement.

Merison (M) Sdn Bhd uses several medium to transfer the risk of the company rather than retain
the risk. The medium are:

19

a) SOCSO
b) EPF
c) Insurance (Zurich Insurance Malaysia Berhad)

i.

SOCSO
The Social Security Organization provides social security protection by social insurance
including medical and cash benefits, provision of artificial aids and rehabilitation to
employees to reduce the sufferings and to provide financial guarantees and protection to
the family. Every company is required to contribute SOCSO for its employees, whether
they are full or part time, permanent or temporary, employment or contract. A company
must remit the contribution sum to SOCSO Office before the end of the following month.
The employee of Merison (M) Sdn Bhd is entitled to the employment injury scheme of
the Social Security Organisations (SOCSO). All employees will be protected under this
scheme if there any accident occurs and the employees and their family will get benefit
from it.

ii.

Employment Provident Fund (EPF)

Employees Provident Fund is a compulsory savings scheme in Malaysia. Its primary aim
is to provide a measure of security for old age retirement to its members. It also provides
supplementary benefits to members to utilize part of their savings for house ownership
and other withdrawal schemes. Employees of Merison (M) Sdn Bhd are eligible for this
benefit. Employee can withdraw the money from their account for their own use such as
for purchasing house and medical payment but with certain condition must be fulfil and
at the specific time.

iii.

Insurance (Zurich Insurance Malaysia Berhad)

Merison (M) Sdn Bhd have chosen Zurich Malaysia Malaysia Berhad as their
insurance for the company and employee. Merison (M) Sdn Bhd have paid specific
amount of premium to Zurich as this amount are sufficient enough in order to cater the
sale of Nestles product in certain selected region in Melaka Darul Azim. This insurance
will be contingency plan for the company if there are accident occur which may incurred
losses for the company. The insurance will cover any losses and this will enlighten the
burden of the company.

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As for employee, Merison (M) Sdn Bhd also provides insurance so that all
employees will be covered if there any accident happen in the workplace that cause
injury or death. This will make all employee of Merison (M) Sdn Bhd feel protected from
any discomfort at the workplace.
As for the business, it will give confident to the company to be more risk taker as
by having insurance covered, it will eliminate certain uncertainty that may become the
factor for company that stop them take risk in certain area. Thus, this will promote
company business and increased overall company business productivity

11.0

CONCLUSION

As a summary, Nestle Sdn. Bhd. has shown their credibility and accountability in its risk
management. They have implemented the model of effective risk management the model of
effective risk management in order to ensure the companys sustainability. The elements
including in the model of effective risk management are risk identification, risk analysis /
assessment, monitoring and review and risk treatment. The model of effective risk management
to be made as reference for the business owner as well as to all of the staff in the organization
to give them some ideas about risk management at the workplace portray in illustration to
facilitate their understanding.
From the research and interview we have conducted with Mr. Lim Soon Huat, the
manager of independent distributor of Nestle Sdn Bhd, Marrison (M) Sdn Bhd according to him,
and the biggest challenge that the companies have to face is actually managing their personnel.
He also pointed out that, the challenges including the risk of burglary, theft and misappropriation
of inventory and cash among the employees. So, it is very crucial to instill the knowledge among
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the management and importantly to the employees so that the company is concerns about
these risks and have taken proper measures to manage such risks to avoid any potential losses
and damages.
Therefore, it is important to get the cooperation and commitment from the personnel as
they are the drivers and heart of the organization. Besides that, all of the personnel also must
be made aware and well-educated on all aspects regarding the risks management so that they
can know how important it is in the organizations objective to achieve greater performance and
effects in their risk management strategy and plan.

12.0

REFRENCES

Book
Risk Management (2011) Second Edition text book, Ainon Basar, Ang Chung Hwa,
Hayati Mohd Dahan, Tan Liam Seng, Yon Bahiah Wan Aris, Zuriah Abdul Rahman.

Website
http://www.investopedia.com/terms/r/riskmanagement.asp
http://www.zurich.com.my/
http://www.theirm.org/
http://www.investopedia.com/terms/r/risk-control.asp
https://www.travelers.com/business-insurance/risk-control/index.aspx

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http://www.investopedia.com/terms/r/risk-analysis.asp
http://www.drj.com/new2dr/w3_030.htm

13.0

APPENDICES

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