enterprise risk management final individual essay quantification of enterprise risk impact to vinhomes value

UEH UNIVERSITY COLLEGE OF BUSINESS SCHOOL OF MANAGEMENT UEH UNIVERSITY ENTERPRISE RISK MANAGEMENT FINAL INDIVIDUAL ESSAY QUANTIFICATION OF ENTERPRISE RISK IMPACT TO VINHOMES VALUE LECT

UEH UNIVERSITY COLLEGE OF BUSINESS SCHOOL OF MANAGEMENT

UEH

UNIVERSITY

ENTERPRISE RISK MANAGEMENT FINAL INDIVIDUAL ESSAY QUANTIFICATION OF ENTERPRISE RISK IMPACT TO

VINHOMES VALUE

LECTURER: Tran Thi Thanh Phuong

SUBJECT CODE: 23C1IMANS50209801

CLASS: ADCO01

STUDENT: H6 Lé Anh Duy - 31211020256

Ho Chi Minh City, 2024

_

Source of data

Table of contents

- Introduction and purpose

1.1 Introduction ccc cece ccesessesessesessensesereenestens

Sensitivity analysis

3.1 L-way analysis ccc cccccecccsceeseeseeeeeseeteenseeteeneees

3.2 2-way analySis ccccccccccccccceeceeseeseeseesseetesnseeteeneees

Scenario analysis

Monte Carlo (Crystal ball) analysis

5.2 LiquIdIty rIsk óc 2c 2211011221121 tre

5.3 Day recetIvable risk -.c c1 2212 12s

5.4 Sales rISK L2 1c 12011 0111111111211211111211 12k,

Risk scenario ranking,

Solution and conclusion

7.2 ConclÏusIon - L1 211222 2221112 1122 H12 Hà ray

12

14 14

1 Introduction and purpose

1.1 Introduction

In-depth quantitative risk analysis gives high-priority and/or high-impact ratings of risk mcidents to generate solutions to business-related problems After applying the methods of quantitative analysis to Vinhomes, many results have been ascertained that will prove useful for the company in managing their risks going forward as well as providing specific data and offering solutions to handle these risks

1.2 Purpose

This essay is meant to provide feedback on the quantitative risk analysis methodology and outcomes of our group work on the Vinhomes corporation Some of the aspects that will be cover in this report include our data source, our use of the quantitative analysis methods and our overall conclusions on the company’s potential risk, their impact, likelihood and effect on the firm’s valuation going into the near future while giving also giving our two sense on how to manage these risks

2 Source of data

Our analysis is based on solid foundation with first hand data taken directly

from the official financial reports’? provided by Vinhomes to their

shareholders and publicly available on their website Furthermore, the majority of information used in the group project is taken from verified sources with credible documentation, these are usually governmental and government-alligned sources or from organisations approved for operations

by government ministries Though some second-hand sources and opinion pieces were used to fill in some of the gaps in information, it’s fair to say that these were used sparingly and were given proper credit All of this provided solid ground for us to determine in an objective and accurate manner the impact values of potential risks on Vinhomes

3 Sensitivity analysis

A sensitivity analysis is a technique used to evaluate which inputs have the greatest impact on business value In our project we applied the I-way and 2-way analysis using a multitudes of elements to determine their impact on the main aspects affecting company performance, the results of which are

as follows:

3.1 1-way analysis

Unit: VND Gia

DT 2024-2025: 47%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

A one-way sensitivity analysis was used to estimate the influence of the Growth Rate on Earnings Before Interest and Taxes (EBIT), corporate value, and Company Intrinsic Value per Common Equity The results demonstrate a favourable association between the increase in Growth Rate and the three previously mentioned factors Vinhomes' business worth will increase the highest when the Growth Rate rises These insights can aid the company's strategic planning by stressing the need of boosting the rate of revenue growth This was the easiest and most direct means of determining the impact of the 4 risks analysed on company value because the three elements of EBIT, corporate value and Intrinsic Value per Common Equity were the most representative due to being effected the most by the risks

Unit: VND

Chi phi quan ly DN (% doanh thu)

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Unit: VND

Unit: VND

Tn a similar manner the four charts that follow employ one-way analysis to estimate the impact of various secondary factors on the same three

elements as before: EBIT, Company Intrinsic Value per Common Equity, and Company Intrinsic Value per Common Equity While two factors, Net fixed asset growth and Non operating working capital, only affect company value and Company Intrinsic Value per Common Equity, the other two factors, COGS and management cost, affect all three essential elements We can see that both COGS and business management costs have a negative impact on these three aspects, although increase in net fixed assets and non-operating working capital has a positive association with the same two elements we're looking at and is neutral to EBIT All of these statistics are significant in budget planning since they allow the organisation to be more accurate and effective with its money flows while also reducing waste It’s important to note that these four analyses provide useful data for the company and are most demonstrative of the potential risks facing the company The interest, liquidity, account receivable and sales risks all cause changes to the elements of NOWC and fixed asset growth as well as COGS and business administration costs

3.2, 2-way analysis

The two-way sensitivity demonstrates how the percentage cost of goods sold/revenue and the revenue growtl affect Vinhomes' intrinsic value per share

According to the data, changes in the revenue growth rate have the greatest impact on the value per share For exa

if the revenue growth rate goes from 5% to 10%, the value per share rises by about 15% Changes in COGS/rer percentage have a less impact on value per share For example, if COGS as a percentage of revenue rises from 5( 60%, the value per share falls by around 10%

The data gathered indicates that sales growth and percentage COGS/revenue are both connected to firm value ' Vinhomes should focus on lowering COGS/revenue and increasing revenue growth rate to maximise business valu

For investors, this demonstrates that the revenue growth rate is one of the

most significant elements to consider when appraising the company

4 Scenario analysis

Scenario analysis, also referred to as case analysis, is a technique for

creating many risky situations The situation we did involves four types of

risks: interest rate risk, liquidity risk, day receivable risk, and sales risk

47%

4%

26%

-166%

6,921,453 4,441,413 (443,326) (12,941,115) (71,702,951) 154,137,149 104,481,689 (69,612,350) (232,201,726) (1,383,194,337) 35,398.29 23,994.69 (15,986.79) (53,326.17) (317,656.78)

represents

changing cells at time Scenario Summary Report was

created Changing cells for each scenario are

highlighted in grey

20%

-20%

The following chart depicts a scenario summary with current values for

many sorts of risks, including interest rate risk, liquidity risk, day

receivable risk, and sales risk These risks indicate potential problems or

hazards that a company may encounter during its operations The table's

changing cells portion includes the revenue growth rate, cost of goods sold

as a percentage of sales, management expenses as a percentage of revenue,

and net fixed asset growth They are variables that strongly correlate with a

company's financial performance The result cells part of the table displays

numbers for EBIT (Earnings Before Interest and Taxes), FCF (Free Cash

Flow), total corporate value, and intrinsic value per share Each of the risks

indicated in the table, including interest rate risk, liquidity risk, day

receivable risk, and sales risk, have the ability to damage a company's value

Sales risk is the risk that can have the most negative consequences, as the anticipated intrinsic value per share of this risk is -317,656 VND, which is much lower than the baseline The following risks are liquidity risk (-53,326 VND per share) and account receivable risk (-12,204 VND per share) Even though it represents a large decline from the existing value, interest rate risk has the least influence on the company's intrinsic value per share

5 Monte Carlo (Crystal ball) analysis

5.1 Interest rate risk

100,000,000 120,000,000 140,000,000

Revenue growth rate Lognormal Standard deviation: 2%

Administrative expenses Beta 5% 7%

NOWC growth rate Beta -187% -153%

eC

Edit View Forecast Preferences Help

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Intrinsic value of common equity

24

0.02

2

3

3

2

Q o01

0.009

160,000,000 180,000,000

Certainty: 100.00

220,000,000 240,000,000

45

Cc

Edit View Forecast Preferences Help

1,000 Trials Frequency View 994 Displayed

Intrinsic value of common equity

| al lul

00œ i 40 100,000,000 120,000,000 140,000,000 160,000,000 180,000,000 200,000,000 220,000,000 240,000,000

Certainty: 100.00 % 4=

The analysis demonstrates that the interest rate, revenue growth rate, administrative costs, and NOWC growth rate are some of the variables that can affect the risks related to interest rates For instance, the study demonstrates that there is a large risk of capital loss for the portfolio when the interest rate is high On the other hand, there is less chance of the portfolio losing money if the revenue growth rate is similarly strong All things considered, the Monte Carlo approach offers a clear picture of the dangers related to interest rates

5.2 Liquidity risk

Revenue growth rate Lognormal Standard deviation: 2%

COGS (% Revenue) Triangular 50% 62%

Net fi et fixed assets growth Poison Rate: 13%

rate

NOWC growth rate Beta -196% | -160%

Edit View Forecast Preferences Help

Frequency View 995 Displayed Intrinsic value of common equity

1,000 Trials

=

(320,000,000) (280,000,000) (240,000,000) (200,000,000) (180,000,000) (120,000,000)

VND

>- Certainty: 10000 % 4-

Forecast: Intrinsic value per share = n x

Edit View Forecast Preferences Help

1,000 Trials Frequency View 995 Displayed

Intrinsic value per share

(70,000.00) (60,000.00) (50,000.00)

VND

Certainty: 100.00 % 4-

}-

One comment that can be made is that the analysis only considers four risk variables, which may not be sufficient for a comprehensive assessment of liquidity risk Other relevant factors, like funding outflows, market liquidity, and contingent liabilities, are not included and are recommended

5.3 Day receivable risk

Revenue growth rate Lognormal Standard deviation: 3% Administrative expenses Beta 41% 5%

NOWC growth rate Beta -292% -239%

Forecast: Intrinsic value of common equity = x Edit View Forecast Preferences Help

1,000 Trials Frequency View 1,000 Displayed

Intrinsic value of common equity

24

22

002 20

Probability ° s

oom (200,000,000) (150,000,000)

(100,000,000) (50,000,000)

Certainty:

50,000,000

100,000,000

1I

Edit View Forecast Preferences Help

1,000 Trials Frequency View 1,000 Displayed

Intrinsic value per share

2 E

| lụ (40,000.00) (30,000.00) (20,000.00) (10,000.00) 0.00 10,000.00 20,000.00 30,000.00 II

bi Certainty: % qs

Overall, our Monte Carlo analysis indicates three major risk variables that can affect day receivables: revenue growth rate, administrative expenses, and NOWC gerowth rate By simulating the impact of these risk variables

on day receivables, the research can shed light on the potential range of day receivable outcomes However, it is vital to highlight that the analysis's accuracy is limited by the accuracy of the assumptions used For example,

if the actual sales growth rate is lower than the expected growth rate, the day receivables are likely to exceed the simulated values

5.4 Sales risk

Revenue growth rate Lognormal Standard deviation: 3%

COGS (% Revenue) Triangular 48% 58% Administrative expenses Beta 4% 7% Net fixed assets growth rate Poison Rate: 24%

12

© Forecast: Intrinsic value of common equity - n x Edit View Forecast Preferences Help

1,000 Trials Frequency View 990 Displayed

Intrinsic value of common equity

0.05

0.04

2 003

5

©

2

°

a 0.02

0.01

a,

d- Certainty: 100.00 % 4-

N

© Forecast: Intrinsicvalue per share = Oo x) Edit View Forecast Preferences Help

1,000 Trials Frequency View 990 Displayed

Intrinsicvalue per share

0.05

48

44

004 40

36

3

2 003 3

= 285

2 24g

& 002 zo 9

16

12

001

8

4

0 (330,000.00) (320,000.00) (310,000.00) (300,000.00)

VND

- Certainty: 100.00 % 4-

This analysis suggests that the revenue growth rate is likely to exceed the standard deviation This indicates that sales will likely exceed forecasts However, there is a chance that sales will come in below forecasts

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6 Risk scenario ranking

Base on their likelihood and impact on Vinhomes’s valuation through the following metrics including: growth in revenue, fixed asset, NOWC and COGS as well as business administrative expenses, the following ranking

of the risk scenarios can be made from most to least impactful:

Day receivable

Sales

Liquidity

Interest rate

7 Solution and conclusion

7.1 Solution

The following are some solutions or ways to manage the risks that we would propose to Vinhome Group

For sales risk, one suggestion is to diversify product and customer base, reducing dependence on individual products or segments by offering a wider range and targeting different clienteles Investing in marketing and sales to strengthen brand awareness, build relationships with new clients, and optimise lead generation efforts Thirdly, implement dynamic pricing, adapt pricing based on market conditions, demand, and competitor offerings

As for, day's receivable risk, we suggest providing early payment discounts, Incentivizing speedier payments via discounts or other perks Tighten credit and payment terms, before extending credit, properly assess creditworthiness and establish explicit payment deadlines Thirdly, streamline invoicing and payment processes, allowing clients to pay fast and conveniently And finally follow up with delinquent payments, this can

be done by implementing a proactive collection approach to reclaim unpaid

bills

In terms of liquidity risk, the company should maintain cash reserves, allocating a portion of income to readily available cash for unexpected expenses or contingencies Secondly, they should diversify funding sources

by securing funding from multiple sources, such as banks, investors, and

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