Managing and Mitigation of Risk at Batik Laweyan During the COVID-19 Pandemic

The COVID-19 pandemic has severely impacted Indonesia's business sector, especially business at Batik Laweyan. Business at Batik Laweyan cannot be separated from the risks that cause disruption of sales and income earned. This study aims to identify the risks faced by Batik Laweyan and to provide alternative risk mitigation strategies for Batik Laweyan during the COVID-19 pandemic. The method used in this research is Failure Mode Effect Analysis (FMEA) which identifies risks by weighting the Risk Priority Number and Analytical Hierarchy Process (AHP) as an alternative strategy to determine the risk mitigation of Batik Laweyan during the COVID-19 pandemic. The results of this study processing FMEA data obtained a total of 12 risks and priority risks from each factor, namely the risk of changes in consumer behavior, the risk of decreasing demand, the risk of changes in the budget, and the risk of implementing large-scale social restriction (known as PPKM). To mitigate risk, 14 alternative strategies were developed, and priority mitigation strategies were selected using AHP. The priority mitigation strategies selected through the AHP method for each risk factor are optimally utilizing technology while realizing the digitization of MSMEs, innovation, and product shifting, producing products that are trending in the community and capable of being produced by MSMEs, improvement and cost control in production and purchasing of raw materials more structured and utilize e-commerce as a digital sales market and utilize digital as product promotion (Digital Marketing).

AHP; COVID-19; FMEA; Mitigation; Pandemic; Risk

        The current globalization has been growing rapidly. It affects the industrial world. The changes that are in line with the development of science and technology make competitiveness in the industrial world very tight (Muslimah et al., 2021). Each organization is always required to be able to develop by following the changing times (Kayi and Sakarya, 2020). Businesses that can survive and thrive generally have the right development and marketing strategies. The strategy of each business needs to be reviewed and developed continuously so that the strategies implemented can follow market changes that are always dynamic. The COVID-19 pandemic has had a broad impact not only on human health but also on almost all fabrics of human life (Candra et al., 2021; Al-Doori et al., 2021). On March 2, 2020, Indonesia reported two confirmed cases of COVID-19. As of March 25, 2020, Indonesia has confirmed reports of 790 COVID-19 cases from 24 provinces in Indonesia (Alfrian and Pitaloka, 2020). The spread of COVID-19 can indeed be increasingly widespread and spread throughout the world until finally, COVID-19 has been declared a global pandemic (Cunningham et al., 2021). The paradigm is that the growth of COVID-19 can develop rapidly and widely because transmission quickly occurs through human contact who has been contaminated with the virus by a person (Akseer et al., 2020). So that the current acceleration of the spread of COVID-19, which was initially only in the territory of China, has now reached all regions in Indonesia.
    The COVID-19 pandemic resulted in a huge loss due to the pandemic, which caused death. It brought social and economic instability to many regions (Berawi et al., 2020). Based on research from the Central Statistics Agency. There was a decline in income due to the COVID-19 pandemic, which had a very long impact and caused many businesses to suffer material and financial losses. Around 82.29% of UMB (Large Medium Enterprises) and 84.20% percent of MSEs (Small Medium Enterprises) experienced a decreased income due to the COVID-19 pandemic in 2020 (Hasibuan and Ashari, 2020). The COVID-19 outbreak has changed places and how people buy goods and services. Selling and accelerating structural changes in the industry that are felt by all people (Agus et al., 2021). Almost all groups of people are cautious in managing their financial expenditures because of uncertainty about when this pandemic will end (Pakpahan, 2020).
        Solo is a Central Java city still bound by Javanese culture (Muslimah, 2020). Solo is determined to continue maintaining and preserving Javanese culture; for example, Solo batik is known throughout Indonesia and is a mainstay product for export (Setyanto, Samodra, and Pratama, 2015). The batik industry is one of the Small and Medium Enterprises located in the Laweyan sub-district, Surakarta City, which has been affected by the COVID-19 pandemic. Batik Laweyan during the COVID-19 pandemic cannot be separated from the risks that cause disruption of sales and income earned. Hazards include experiencing fluctuations in raw material prices, a decrease in demand from retailers, damage to tools in batik printing, batik production that has not optimal quality, such as batik cloth has defects, and so on. Risks that occur as follows can result in decreased sales revenue and production volume during the COVID-19 pandemic. The changes can cause losses, so it cannot meet demand needs.
     This study wants to find out how companies deal with a pandemic. In responding to a pandemic, two questions are compiled, namely: what are the risks faced by companies during the pandemic? And how to handle and reduce these risks? 

    The research was conducted at the Batik Laweyan Center, located at Jl. Dr. Rajiman No. 521, Laweyan, Surakarta. The village of Laweyan is home to one of the oldest and most central traditional batik industries in Indonesia. This study uses a quantitative approach to obtain relevant data about the characteristics, behaviors, and variable relationships of existing group representations (Suci, 2017). Five stages of the research procedure were completed in this study.

      The first stage is to identify the problem, problem formulation, and research objectives. The second stage is data collection. Primary data sources were obtained from observation, interview, and questionnaire techniques. The primary data needed is what risks have occurred and the potential risks that may occur. Questionnaires were conducted on batik entrepreneurs in Kampung Batik Laweyan. The selected respondents were 3 entrepreneurs with large enough capital, 2 entrepreneurs with medium capital, and 2 administrators at the Kampoeng Batik Laweyan Development Forum. To complement and support the primary data, researchers need to conduct literature studies related to the research topics mentioned above, such as books, journals, electronic articles, and library research.

    The third stage of data processing, identification, and risk assessment uses FMEA, which has a scale value of 1-10 in each aspect, namely Severity (S), Occurrence (O), and Detection (D). It then ranked and determined the risk level based on the Risk Priority Number for each aspect of the existing danger. The following is the determination of the risk level based on the RPN value can be seen in Table 1.

Table 1 Risk Level Based on RPN Value

        Through the RPN classification, it can be seen that the risk of a high RPN value is included in the very high category so that it can be used as a priority to determine prevention, mitigation, and strategies for the highest level of risk so that the company's business operations can continue to operate in the best way if problems or disasters occur.

        The fourth stage is determining alternative risk mitigation strategies and processing questionnaire data from the AHP method. Risk mitigation is taking steps to reduce and overcome losses that can result from the impact of risk (Oktiarso and Nadira, 2019). In the AHP questionnaire, quoted (Ganguly and Kumar, 2019) specifying, the quantitative has a scale of 1-9 in the assessment of the comparison of the importance of an element to other elements. Then a hierarchical structure was made based on the calculation of the AHP method and design to mitigate the risks to Batik Laweyan during the pandemic, variables with priority risk, and alternative strategies with proposed strategies to mitigate the existing priority risks.

        The fifth stage is to analyze the processing results and draw research conclusions. Based on the results and conclusions, the proposed alternative mitigation strategy for Batik Laweyan during the COVID-19 pandemic was determined.

3.1.  General Description

      This research was conducted at the Batik Laweyan Center, located at Jl. Dr. Rajiman No. 521, Laweyan, Kec. Laweyan, Surakarta City, Central Java. This study involved the administrators of the Batik Laweyan Development Forum. To determine alternative strategies, the researcher also consulted with several Batik owners in Laweyan, such as Batik Putra Laweyan, Batik Mahkota, Batik Lor'ing Market, Batik Ozz, and Batik Ekru.

3.2.  Identification of Risks in Batik Laweyan

    Risk identification is carried out through literature studies, observations, and interviews with respondents involving experts, namely the management of the Batik Laweyan Development Forum. In the process of collecting risk data, researchers use a business framework that makes several aspects, namely risks in raw materials (input), production processes (process), and finished goods (output) (Santoso et al., 2018).

3.2.1 Risk Measurement - Risk in Batik Laweyan

        Where S is Severity, O is Occurrence, and D is Detection. Based on the assessment result, three risk indicators have the highest RPN and need to be managed and solved soon (Rahmatin et al., 2018).

3.2.2. Rating and Risk Determination on Batik Laweyan

        The ranking or sorting of the risks that have been previously identified is given a rating based on the results of the calculation of the value of the Risk Priority Number from the highest value to the lowest value can be seen in Table 2 below which has several criteria with a certain rating.

Table 2 Batik Laweyan Risk Rating

        According to (Sharma and Srivastava, 2018), they are Ranking the highest order based on the risk with the highest RPN value. Based on the calculation of Table 2, the RPN value is the highest order and classified as very high risk. Namely, the risk of changes in consumer behavior is 294, the risk of decreasing demand is 252, the risk of changes in the cost budget is 216, and the risk of implementing PPKM is 210. After obtaining the level of risk in Batik Laweyan, alternative proposals are given to overcome the risks.

3.3.  Determination of Alternative Risk Mitigation Strategies in Batik Laweyan

       Mitigation strategies are set to mitigate risks based on expert considerations in this field, namely the parties from Batik Laweyan, namely the administrators of the batik.

       Laweyan Development Forum in the business fund industry, research, and development sector. They involve several Batik owners in Laweyan, such as Batik Putra Laweyan, Batik Mahkota, Batik Loring Pasar, Batik Ozz, and Batik Ekru, and literature study on risks. The purpose of determining and developing this strategy is to minimize the occurrence of risks by reducing the occurrence of risks or reducing the impact caused by threats to Batik Laweyan.

3.3.1. Risk of Changes in Consumer Behavior

     The business at Batik Laweyan is one of the businesses that is experiencing the risk of changing consumer behavior due to the COVID-19 pandemic. (Prakoso, 2020)  states that Consumer behavior refers to the decision-making process that consumers go through when buying and consuming a product. At Batik Laweyan, businesses have noticed a change in consumer behavior, as more consumers are opting to shop online and are also placing greater emphasis on health and hygiene concerns. In addition, consumers also want the products they buy to be free from the risk of exposure to COVID-19. To mitigate risk, there are several alternative strategies, namely consumer research and adapting to take advantage of technology optimally while realizing the digitization of MSMEs; utilizing social media as an attraction to buyers; conducting advertising with an educational context to support sales; and improving quality and service.

3.3.2. Risk of Declining Demand

    During the COVID-19 pandemic that hit Indonesia, demand at Batik Laweyan experienced a significant decline. According to (Amri, 2020), demand means the consumer's desire to buy an item at various price variants during a certain period. One of the causes of the decline in demand is caused by the tastes or habits of the people that can affect the demand for an item. If people's appetite for an object increases, the demand for that item will also increase. To mitigate risk, there are several alternative strategies, namely conducting customer reviews on customer service, innovation, and product shifting. Producing products that are trending in the community and capable of being produced by MSMEs; and providing promotions and discounts on certain products.

3.3.3. Risk of Budget Changes

        The pandemic resulted in the risk of changing the budget for Batik Laweyan. According to (Amri, 2020), during a pandemic, every business or business globally experienced a setback, and every company was forced to be able to change its cost budget and start switching and adapting to the pandemic so that the company could ensure the continuity of the company could continue to survive. To mitigate risk, there are several alternative strategies, namely delaying expansion, cutting the workforce to make it more efficient, as well as improvement and improving cost control in the production and purchase of raw materials in a more structured manner.

3.3.4. Risks of Implementing PPKM

       PPKM (Pemberlakuan Pembatasan Kegiatan Masyarakat) or Enforcement of Restrictions on Community Activities, hurts Batik Laweyan's business because Batik Laweyan's business is daily, which must rely on direct interaction with consumers. So that the implementation of PPKM makes the business at Batik Laweyan less than optimal in marketing its products, even consumer demand. To mitigate risks, there are several alternative strategies available. These include utilizing E-commerce as a digital sales market and digital marketing as a means of promoting products. Another strategy is to conduct virtual events to market products. Additionally, businesses could consider restructuring their systems and focusing on the local target market during PPKM.

3.4.  Calculation of Determination of Alternative Risk Mitigation Strategies

       The appropriate alternative strategy is then selected based on the predetermined risk mitigation strategy alternatives. After determining alternative strategies to overcome risks, AHP data processing is carried out to choose alternative methods (Djunaidi et al., 2019). Based on the calculations made from the results of the questionnaire assessment, the value of each criterion and an alternative strategy were obtained. The hierarchical structure and the results of calculating the weight of the requirements and alternative methods obtained can be seen in the hierarchical structure of risk minimization of Batik Laweyan during the COVID-19 Pandemic in Figure 1.

Figure 1 Hierarchical Structure in Batik Laweya

     The AHP method calculates that the consistency ratio (CR) value for the risk of changes in consumer behavior is 0.0123, the risk of decreasing demand is 0.0055, the risk of budget changes is 0.0011, and the implementation of PPKM is 0.0257. The CR value obtained in the calculation for each level is below or less than 0.1. According to (Muslim, Riansa, and Komarudin, 2017), these results show that the CR value is 0.1, which means the degree of consistency of the calculation is good and does not need to be recalculated.

       Based on the AHP calculation, priority weights for risk mitigation can be determined, as shown in Figure 1. The following risk mitigation strategies have been identified as having high importance and should be immediately implemented by Batik Laweyan:

a.         Innovation and product shifting, producing products that are trending in the communityand can be made by Micro, Small and Medium Enterprises (MSMEs), the weight value is 0.538. Innovation is significant in business competition (Rajapathirana and Hui, 2018). The invention aims to improve and increase the value of a product so that it is different from other products from the consumer's point of view (Kanagal, 2015). Innovation capabilities are needed to direct organizations to develop continuous innovation to respond to  changing market environment (Slater, Hult, and Olson, 2010). The current pandemic conditions have changed customer behavior in buying goods (Agus et al., 2021). Product Shifting is done so that a business can earn income by producing products that are trending in society (Rosita, 2020). Batik Laweyan can take advantage of people working from home by issuing products that consumers often use while working from home comfortably and are guaranteed to be free from COVID-19.

b.        Utilizing e-commerce as a digital sales market and digital as product promotion (Digital Marketing), the weight value is (0.535). Digital marketing is using digital media or the internet to carry out marketing activities or promote brands or products. Elements of digital marketing include online advertising, email marketing, social media, text messaging, affiliate marketing, search engine optimization (SEO), and pay-per-click (PPC) (Yasmin, Tasneem, and Fatema, 2015). The purpose of digital marketing is to quickly attract consumers and potential customers (Alfrian and Pitaloka, 2020). Many in Batik Laweyan are not used to using online marketing models (e-commerce). With the pandemic and the implementation of PPKM, Batik Laweyan must adapt because, nowadays, the online system is one of the strengths of MSMEs, so their products are widely absorbed by the public and digitally. It is one of the most effective and readily accepted advertising media by consumers, and digital use is essential in promoting products that will be sold to consumers. An effective marketing strategy and precise use of technology enable companies to identify product trends, determine the right marketing strategies, and improve sales cycles (Desai, 2019)

c.         Improvements and cost control in the production and purchase of raw materials are more structured, with a weighted value of 0.494. MSMEs need to adjust efficiency and use of costs in the cost of raw material supplies, production costs, and balance to product prices (Irawan, Santoso, Mustaniroh, 2017). The efficient use of natural materials can reduce production costs (Wellmer and Hagelüken, 2015). The cost of raw materials has been fluctuating due to uncertain market demand each month. One of the strategies adopted by Batik Laweyan to overcome this is to change their production system. The company has transitioned from a make-to-stock system to a make-to-order system. The characteristic of the make-to-order system is that production begins when the product has been ordered in advance and is adjusted at the customer's request (Saniuk and Waszkowski, 2016). Another strategy that can be applied is changing the pattern of the Batik Laweyan worker system by using a weekly work shift system, rotating workers each week to minimize costs in production and purchasing of raw materials while optimizing sales promotions that have taken place.

       Consumer research and adaptation to take advantage of technology optimally while realizing the digitization of MSMEs, the weight value is 0.332. The pandemic has dramatically changed consumer behavior, and the MSME Batik Laweyan must also immediately conduct consumer research caused by the pandemic. According to Alfrian and Pitaloka (2020), consumer research is the process of identifying customer behavior, preferences, and motivations when purchasing products or services. Batik Laweyan needs to conduct consumer research to determine the community's needs, how services can be provided under pandemic conditions, and how to utilize technology to improve sales efficiency. Batik Laweyan needs to implement a Customer Relationship Management system, a business strategy that combines processes, people, and technology to attrac potential customers, turn them into customers, and retain existing customers. Technology can make a system in a business run effectively and efficiently without having to spend too much money to survive and develop while realizing the digitization of MSMEs (Marlina, 2020).

        Based on the results of data processing, it can be concluded that from data processing using the FMEA method, 12 risks are obtained, which include several aspects, namely: aspects of raw materials, four risks, aspects of the production process, five risks and aspects of product risk three risks, with the priority risk of each factor being the risk of change. Consumer behavior is 294, the risk of decreasing demand is 252, the risk of budget changes is 216, and the risk of government policies related to PPKM is 210. Meanwhile, the calculation to mitigate the risk is developing 14 alternatives and choosing priority mitigation strategies with AHP. The alternative mitigation strategies chosen for each risk factor are the risk of changing consumer behavior, consumer research choice strategies, and starting to adapt to optimally utilize technology while realizing the digitization of MSMEs with a value of (0.332), the risk of decreasing demand for selected alternative innovations and product shifting, resulting in products that are trending in the community and can be made by MSMEs with a value of (0.538), the risk of changes in the selected cost budget for alternative improvements and cost control in the production and purchase of more structured raw materials with a value of (0.494), and the risk of implementing the selected alternative strategy of PPKM using e-commerce as a digital sales market and utilizing digital as product promotion (Digital Marketing) with a value of (0.535). This study has provided ways to reduce risk. However, this study has not discussed the relationship between risk mitigation and more technical matters, such as whether to build e-commerce or use an existing platform, which platform is suitable for Batik Laweyan's conditions, and how to use e-commerce. Future studies could discuss the relationship between risk mitigation and the implementation of risk mitigation.

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