Problem
Consider the following system of companies:
A. Companies of type A manufacture smart phones and sell direct to individuals as well as mobile phone shops.
B. Companies of type B are mobile phone shops. All of these are large national chains.
C. Companies of type C manufacture components that are used by the smart phone manufacturers (A).
D. Companies of type D process the raw materials used in smart phone manufacture such as rare metals and plastics.
E. Companies of type E are mines that extract and purify the metals used by type-D companies.
Type A, B and C companies are all based in the same country. The type D and E companies are all based in different countries from the type A, B and C companies. Companies of type A, B and C all pay invoices at the latest possible date before late-payment penalties are incurred.
I. Identify the main stakeholders in this system. Write a sentence or two on each that explains why they have a significant interest in the system.
II. Assess the supply chain risk that arises in this system.
Your answer might include some hypothetical scenarios to illustrate your points.
(Here, supply chain risk should be interpreted as the risk that interruptions to the planned delivery of goods or materials disrupt the activities of companies of different types and/or have an impact on company finances.)
III. Explain and write brief notes on contagion.
IV. Analyse whether or not this system is exposed to systemic risk and systematic risk.
Your answer might include some hypothetical scenarios to illustrate your points.
V. At present the system (extraction through to production) is not regulated in any way.
You have been asked to review the following approaches to regulaion of the system and its exposure to systemic and systematic risk:
a) continuation of no regulation;
b) full or partial regulation by the government (if so which government); and
c) formal or organised self-regulation by the companies themselves (if so by which ones).
For each approach:
a) State the purpose of regulation;
b) Discuss its advantages and disadvantages.
Finally, make a recommendation for how the system might or might not be regulated. Justify your answer.