HI6006 Competitive Strategy Editing Service
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In the recent time of fast-moving and interdependent world, the various organizations are increasingly facing by several risks that can be in nature complex and has a worldwide consequence. Such kinds of risks are very difficult to anticipate and deal with, even for the large business entities. The Businesses all over have set their priorities on the basis of their own position as compared with the related business in the market. The businesses primarily focus on the areas that the organisations expect to have more risk in business (Hall, Mikes & Millo, 2015). However, the process may or may not be so well structured and at times business risks are not efficiently understood or visualised. This is because of the lack of formality and understanding of the same. There is also exists a risk of not realising what are the greatest risks and which of them are needed to be focused upon by the particular organisation. For improving the business decision making, the process of efficient risk management is rapidly gaining acceptance and is aiding the organisations to manage their businesses more effectively.
Woolworths is the largest Australian shopping that deals with food products and beverages in Australia and New Zeeland. The company has also diversified its offerings by investing in gaming poker. Woolworth’s financial goals, budget policies, and business policies are at the center of the management. The company has succeeded in implementing its business policies and key performance indicators by building a strong team of staff. The company has invested heavily in improving safety governance to improve safety of staff (Born & Pfeifer, 2014). The main competitor of the organization is Wesfarmers which is the largest retail industry firm in the current market.
The company of Woolworths Limited has been committed to the various ongoing strategic developments and uses a consistent enterprise-wide approach for the risk management by a risk-aware culture. The Policy of risk management applies to every person who works for Woolworths Limited in, New Zealand, Australia and overseas.
For the chosen company of Woolworths limited, the concept of Risk refers to the probability of not getting sufficient return on the various investments made by the company. It involves an anticipation of future loss. The general types of risk that are identified are as follows:
1. Strategic risk: The strategic risks are the risk of change in the reference of the customers or changes in the technology that may lead to the company adapting a new strategy accordingly (Tricker & Tricker, 2014).
2. Compliance risk: the risk of the compliance refers to the risks that are related to the bureaucratic or legislative regulations. Tis includes the various areas of employee protection regulations like those imposed by the Occupational Safety and Health Administration, or environmental concerns like those covered by the Environmental Protection Agency or even state and local agencies.
3. Financial risk: The financial risk is the anticipation of the loss that may take place due to the operations of the business. The Financial risks also consider interest rates along with the various international businesses, foreign exchange rates.
4. Operational risk: Operational risks result from internal failures. From the various internal processes, people or systems fail unexpectedly (Bromiley, McShane, Nair & Rustambekov, 2015). The operational risks can take place from the unforeseen external events like transportation systems breaking down, or a supplier failing to deliver goods and many more.
5. Reputational risk: The loss of reputation of the company may take place from the product failures, negative publicity or lawsuits. The Reputations are crucial for the company good will and profit. Therefore a company must be aware of the same.
The analytical procedure refers to the financial audit process that would help the auditor to understand the business of the company whose audit and verification of the financial reports they are conducting. In the analytical process comparison is to be done of the various financial data of the business wt respect to the prior periods, budgets and with similar industries
While preparing financial report of the company the directors are responsible to assess the company’s ability regarding continuation as going concern. They are required to disclose the matters applicable for going concern and using the same basis unless the company is intended to liquidate or cease the operation. As per the report of the auditors and audit evidences till the date of auditor’s report, the company is able to continue as the going concern (Woolworthsgroup.com.au, 2018).
Audit risk model is associated with the concepts of materiality and audit risk. Audit risk is likelihood that financial statements of the entity are misstated after it is determined by the auditor that the financial reports are free from any material misstatement. Under this, the auditors develop the audit procedures that focus on the greatest risk areas (Contessotto & Moroney, 2014). The auditors are responsible for addressing that the audit risk model is sufficient and cast and time saving. Further, it will improve the quality of audit and will add value to the client’s business.
1. Inventories – risk involved with the inventories are completeness and occurrence. Completeness risk states signifies that the inventories may not have been recorded at the amount at which it has been recognized (Kot & Dragon, 2015). The occurrence risk signifies that the inventories may not have been existed actually at the closing of the period.
2. Intangibles – risk involved with intangibles are rights and obligation that is the company actually have rights for the intangibles reported in the financial statement of the company. Another risk involved with the intangibles is valuation that is the intangibles have been valued properly as per the valuation principle followed by the entity (Louwers et al., 2015).
3. Fixed assets – risk associated with fixed asset is right and obligation that is the company actually have rights for the fixed assets financial reported in the financial statement of the company. Another risk associated with fixed asset is completeness risk that is the fixed asset may not have been recorded at appropriate amount after providing depreciation and amortization, if any.
4. Foreign exchange transactions – the company is exposed to movements in the exchange rate of foreign currency through – (i) term borrowing that is denominated in the foreign currency (ii) anticipated equipment and inventory purchase and (iii) translation regarding the net investment in the foreign subsidiary that is denominated in the foreign currencies. To hedge against these risks the company enters into the forward exchange contract and the agreements for cross currency rate of interest (Cheng, Ioannou & Serafeim, 2014). Further, all the currency terms are entirely hedged through swap agreements of cross currency rate of interest
1. Corporate governance – the company is subject to various corporate governance regulations, laws and arrangements and is exposed to the adverse legislative or regulatory changes. Breaches of the adverse changes may lead to negative impact on company’s reputation as well as on its profitability. However, the company has the conceptual framework at place and various policies are established for facilitating the internal protocols and regulatory as well as legal compliances (McCahery, Sautner & Starks, 2016). Further, the company has code of conduct programs for promoting awareness regarding the requirement of regulatory, internal and legal policies.
2. Independent director – the company has 8 directors in its board. Out of total members one member is the independent chairman, one member is managing director and other 6 members are independent director. As maximum number of members are independent that is more than 2, the company is maintaining the prescribed limit with regard to independent directors.
3. and risk committee – main objective of this committee is providing assistance and advice to the board related to governance framework of the entity that includes internal control and risk management systems, compliance with the systems and policies and functions related to external and internal audit. The committee is authorised for performing the activities those are set out under the responsibilities and making proper suggestions to the board. The committee is further authorised for meeting the internal as well as the external auditors without the presence of other members. It is authorised for obtaining the independent legal or any other professional advice those may be considered as appropriate for executing the functions. The committee is further has responsibilities and duties regarding governance, risk management, financial reports and compliance (Hematfar & Hemmati, 2013). The committee is comprised of minimum 3 directors, majority of which are independent directors. Further, all the members have required business expertise and are financially literate.
The audit testing refers to the examination of the financial records and the transactions off the company. In this case of Woolworths, at the time of audit testing the identification is done of the at results of a test cycle, the process by which the results were obtained, and the tools and components a test has used to obtain these results (Wu, Chen & Olson, 2014).
The inherent risk of planning refers to the risk of material misstatement that takes place due to error or omission of the company data. On the other hand the control risk refers to the material misstatement risk due to absence or failure of the company’s control or governance. For the company of the chosen company of Woolworths, the analysis of the inherent and control risk has been discussed in the above report.
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