Risks Financing:

• Risks in Financing RMG Sector       Investment Risk:
  • Over Investment- Over investment in office/ factory decoration.
  • Under Investment: Crisis of Fund/ Debt- Interest burden

    Under investment results to :

    • Selecting Overcrowded/ remote location for project.
    • Yield of investment, opportunity cost.

      Technical aspect: Machineries:

    • Over invoicing (imported)- Money laundering, fund diversion
    • Locally procured (Obsolete/ Reconditioned/ Old)
    •  
    • Construction and civil works:
      • Defective construction/ layout plan, [e.g. Rana Plaza]
      • Less participation of equity.
      • Divert borrowed money
      • To save costing, using inferior materials.
      • Less attention / avoidance tendency towards compliance issues (emergency exit stair, narrow stairs, fire extinguisher equipment, child care, doctor room, dining room etc ).Not getting export order from reputed foreign buyer .
      • Reluctant to provide work friendly atmosphere, space saving, light/ ventilation inadequate, unarranged storage of raw materials, unhealthy working environment.
      • Over dependency on hired truck, van (not own vehicle)
      • Manage approval from different authority by undue means.
      • Delay in commencement of commercial operation. Cost rise , bank loan fallen due for payment

      Entrepreneur:

      • Planning without sufficient information/ data, lack of supervision, monitoring, close involvement in production & marketing, unready successor/ 2^nd line management, one man show.
      • Lack of enough experience in related business line although successfully running other business .
      • Net worth position is weak, not sufficiently solvent to meet emergency need /fund requirement

      Human resource:

       

      • Unskilled/ semi skilled worker
      • De motivated staffs/ workers due to lower salaries/wages, management behavior.
      • Inefficient in “Staffing”. Inefficient in placing the right person in right place.
      • Switchover/ Turnover rate high.

      Marketing:

      • Saturated/ huge competition/ inability of market analysis.
      • Wrong selection of buyer (repatriation of proceed difficult).
      • Weak connectivity buyer.
      • Lack of knowledge & capacity to negotiate/ bargain with buyer.
      • Lack of foresight ness, international business trend, change in buyer’s taste attitude and fashion.
      • Accepting export order with minimum lead time (shipment validity is insufficient to execute export order in time)

      Production related:

      • Choosing sophisticated/ fashionable, complicated item difficult to produce with own factory
      • Stock lot for various reasons
      • Lost reputation in making payment/delivery of goods in time.

      Socio-economic- political:

      Appointing less qualified/ Production/ Factory Manager/ Merchandiser/ commercial due to lower salary/ compensation package.

      • Change in Fiscal, Monetary measure, Govt. policy/ incentives.
      • Political instability (Hartal, Strike, Lock out)
      • Price hike of imported raw materials
      • Competitor country’s conspiracy.
      • Fluctuation of exchange rate
      • Unexpected cost involve due to power/ electricity/ gas crisis
      • Theft, Robbery, Extortion
      • Harassment of Port / customs authority
      • Lack in Bank’s confidence on exporter.
      • Wage hike demand from labour union , if accepted without proper assessment and justification ,this sector may loose a considerable market share internationally.