Risk Modelling in Financial Feasibility Study for Caesalpinia sappan Natural Dyes Factory in Surakarta

Abstract

Emerging concern for sustainability issues in textile industry has increased the interest to use natural dye in the textile wet processing as it offers a solution for a non-polluting waste. One of the popular sources for natural dye is Caesalpinia sappan barks. However, the decision to build a factory specializing in producing natural dye powder from Caesalpinia sappan would expose several risks and it will need supporting data from a feasibility study especially from the financial aspect that consider the risks. This research aimed to construct a financial model that can be used to identify risk drivers and their impact on the financial result. The risk modelling was conducted using 3-points estimates with Monte Carlo simulation. This research found that the net present value (NPV) is at IDR 1.080.570.007 which is considered as feasible. There are three main risk drivers that have significant impact namely selling price, market share, and material cost. The Monte Carlo simulation from 100 iterations reveals that the mean and median for the NPV is at around IDR 900 million.