Current Factors and Risks Affecting Wallis Drilling

Question: Discuss about the Current Factors and Risks Affecting Wallis Drilling. Answer: Introduction Wallis Drilling Company is among the top companies in the world that have been providing drilling services for mining of minerals. Wallis Drilling has been operating for 52 years. Wallis Drilling is a private company that has the most efficient and advanced machines that can work on any terrain in Australia and other international countries (Wallis Company 2015, par. 1). With a sufficient number of competent employees, the services offered are world class. Even though returns are promising, there are some risks that are associated with Wallis Drilling that is significant for the survival of the company. Wallis Drilling company is affected by some international risks; the risks include; commercial risk, cross-cultural risk, country risk and the currency risk. Application of the theory to Wallis Drilling Commercial risk revolves around operational problems that are the issues that are associated with the day to day activities of the company. The operational problems may be the lack of liquid cash or the inability to settle the creditors. The other issue associated with commercial risk is the aspect of timing. A business may enter into an international trade at a time that the economic conditions are straining and thus little profits are earned at the end. In addition, the competition may be very stiff from the already progressed competitors thus making it extremely hard for the company that has not adopted some specific procedures (Burgess-Limerick 2010, p. 53).Lastly, a company may have adopted a strategy that is imperative for its for survival, but poor implementation of the strategy due to factors such as an incapable management can pose a great threat to companies such as Wallis Drilling. Currency risk is another problem that affects Drilling Company. The fact that most of such companies operate internationally is a major factor. Companies need to import or export machinery and equipment for their operations (Tenfelde 2016, p. 5). The prices of the drilling rigs are affected by the currency exchange rate in the international market. There are times that a company may fetch more or less in the same market. The fluctuation in prices of the commodities leads to losses. Currency risks are uncontrollable for they are influenced by externalities or economic conditions. Losses are the greatest worry for Wallis Drilling because of the instances of inflation and international taxation. Country risk majorly revolves around the current situations in the operating country. Companies that are operating internationally face the problems of unstable countries. When there is war in a country, there is no way that a company can be able to carry out its activities normally. The employees will fear for their lives, and thus the operations must be ceased until peace is restored (Tenfelde 2016, p. 7). Economic conditions in a country are also a factor of concern. A country that the company has got a contract in is influenced by factors such as inflation and the ability of the company to honor the terms of the contract like payment of the fee required. Country risk affects some profits and the efficiency of operations. Lastly, a cross-cultural risk is depicted by the factors that are associated with interacting with new people. Most of the time, they interact with individuals that have different approaches to their way of living and decision making. The cultural differences greatly affect the rate at which employees are operating internationally get to adapt to the environment that they are operating in. Negotiation styles may also be different, and thus it may take some time before a contract is fully settled. Conversely, the disparities in the ethical standards may be a factor of concern. If the ethical standards are different, then disagreements may be experienced, and this could reduce the number of contracts attained. Justification of the risks affecting Wallis Drilling Wallis Drilling is a victim of the risks that are associated with international trade. To begin with, Wallis Company employees have experienced difficulties in mingling with different cultures, sometimes the employees have been received with hostility or failed to blend their culture with that of the host country (Boomhower 2014, p.12). It becomes difficult to work in a condition that you are not conversant with. Most of the employees have left the company because of the unconducive working environment. Losing skilled employees to the rival company creates a very stiff competition that most of the time puts a strain on the limited resources available in the company. Also, Wallis Drilling Company has experienced losses due to the low prices of iron in the market. Since the decline of the iron prices due to economic conditions, the operation costs have not been compensated by the expected profits. When the prices for the minerals reduce, most of the mining sites have to be closed by the managing companies. Wallis Drilling has to wait until the prices of the minerals appreciate. Operating internationally has called for sensitiveness when it comes to the foreign exchange rates. For Wallis drilling, they have the threat of experiencing losses when they export or import their drilling rigs (Burgess-Limerick 2010, p. 51).The prices of the equipment are affected by the international economic factors that are beyond the control of the company. Lastly, the inability to pay its creditors the amount they owe them when time elapses. It is certain that Wallis Company being a large company it has various needs that must be allocated to enough resources. To fund its activities, most of the time, the company has to borrow from lenders. In the case that a mine is closed down because of reasons such as low prices in the international market, it becomes tough to honor the promises that were made to the creditors. Wallis Drilling Company thus has the risk of being bankrupt or liquidated by the creditors in case it is unable to honor its creditors (Boomhower 2014, p.78). References Boomhower, J 2014, Drilling like there's no tomorrow: Bankruptcy, insurance, and Environmental risk. EI@ Haas Working Paper, 254. Burgess-Limerick, R, Krupenia, V, Zupanc, C, Wallis, G Steiner, L 2010. Reducing Control selection errors associated with underground bolting equipment, Applied Ergonomics, vol. 41, no.3 pp.549-555. Tenfelde, AM., Esquivel, AO, Cracchiolo, AM, and Lemos, SE, 2016,Temperature change when drilling near the distal femoral physis in a skeletally immature ovine model, Journal of Pediatric Orthopaedics, vol. 36, no.7, pp.762-767. Wallis Drilling. A Deeper Understanding, viewed 16 March 2017, https://www.wallisdrilling.com.au/