Quick and Efficient Gas Business Plan — Risk Analysis
Regulatory price risk, safety incidents, supply interruption and the cash absorbed through the ramp, with trigger points for each.
Risk Analysis
Jump to section
- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. The Business and the Regulated Price
- 3. Licensing, Safety and Compliance
- 4. Market and Customers
- 5. SWOT and Competitive Position
- 6. Operations
- 7. Financial Plan
- 8. Break-Even and Debt Service
- 9. Investment Analysis
- 10. Sensitivity and Scenario Analysis
- 11. The Margin Squeeze
- 12. Risk Analysis
- 13. Implementation Roadmap
- 14. Key Performance Indicators
- 15. Key Assumptions
- 16. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Volume, Price and Cost Schedules
- C. Appendix C: Funding, Debt and Working Capital Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 12.1 The risks that matter
- 12.2 Risk register
- 12.3 Trigger points
12.1 The risks that matter
A wholesale price rise without a matching rise in the cap is the defining risk of a price-capped business. It is high in likelihood and severe in impact, and the break-even buying price of R34.39 a kilogram against a planned R30.80 leaves headroom of only 12 per cent. It is mitigated only by supply agreement terms and by growing the unregulated accessory business.
Licence or consent use refused is medium in likelihood and severe in impact. Without a filling licence and municipal consent the business cannot trade at all, and R2 691 000 of installation is sunk into a site that cannot be used. It is mitigated by obtaining an in-principle indication before the lease is signed; there is no fallback.
Volume below plan is high in likelihood and high in impact. Break-even is 30.9 fills a day against a plan of 47, and the residual risk in Year 1 at 27.3 fills a day is that the shop trades below break-even for a full year — which is exactly what the model shows.
Winter supply failure is medium in likelihood and high in impact. Peak demand needs 4.9 bulk deliveries in July against 1.2 in January, and the vessel cannot be stockpiled. A contractual winter delivery commitment and a second approved supplier are the only mitigations available.
Loss of the SAQCC-registered filler is medium in likelihood and high in impact, because the shop cannot lawfully fill without a registered practitioner on site. Training a second employee to registration within eighteen months converts a single point of failure into a redundancy.
12.2 Risk register
|
Risk |
Likely |
Impact |
Mitigation and residual position |
|---|---|---|---|
|
Wholesale price rises without a matching rise in the cap |
High |
Severe |
The defining risk of a price-capped business. Break-even buying price is R34.39/kg against a planned R30.80 — headroom of 12%. Mitigated only by supply agreement terms and by growing the unregulated accessory business |
|
Licence or consent use refused |
Medium |
Severe |
Without a filling licence and municipal consent the business cannot trade. Mitigated by obtaining an in-principle indication before the lease is signed; there is no fallback |
|
Volume below plan |
High |
High |
Break-even is 30.9 fills a day against a plan of 47. Mitigated by site selection, trading hours and delivery; residual risk high in Year 1 |
|
Illegal decanting competition |
High |
Medium |
Unlicensed operators undercut the capped price with no compliance cost. Cannot be matched on price; compete on fill accuracy, safety and certification |
|
Fire or gas incident |
Low |
Severe |
Catastrophic for people, assets and licence. Mitigated by SANS-compliant design, fire system, trained staff, and insurance conditional on compliance |
|
Winter supply failure |
Medium |
High |
Peak demand needs 4.9 bulk deliveries in July against 1.2 in January. Mitigated by a contractual winter delivery commitment and a second approved supplier |
|
Loss of the SAQCC-registered filler |
Medium |
High |
The shop cannot lawfully fill without one. Mitigated by training a second employee to registration within 18 months |
|
Cash trough in the low season |
High |
Medium |
Year 1 operations consume cash before the winter peak. Mitigated by the committed facility drawn at inception rather than sought later |
|
Regulated price frozen for policy reasons |
Low |
High |
Government has social objectives for LPG affordability. A deliberate margin compression at retail level is possible and cannot be mitigated |
|
Cylinder theft and float loss |
Medium |
Medium |
The cylinder float is R512 000 of capital. Mitigated by deposit systems, marking and stock counts |
|
Warm winter |
Medium |
Medium |
Heating demand is weather-dependent. A mild season removes volume that cannot be recovered later in the year |
12.3 Trigger points
|
Point |
Trigger |
Committed response |
|---|---|---|
|
Month 3 |
Below 19 fills a day |
Review trading hours, signage and delivery offering before spending on advertising |
|
Month 6 |
Gas margin below R9.00 per kg |
Renegotiate supply or approach a second wholesaler. Do not absorb it quietly |
|
Month 9 |
Accessory gross profit below 15% of total |
The attachment rate is failing; review range, display and staff incentives |
|
Month 12 |
Below 31 fills a day |
The business is below break-even. Engage the lender before covenant testing begins |
|
Any month |
Cash below R100 000 |
Draw against a written plan, not to fund ordinary losses |
|
Any time |
A reportable safety incident |
Stop filling, investigate, notify insurer and authority. Never trade through an unresolved incident |