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1.List and discuss several factors that would have contributed to an increased inherent risk assessment at the financial report level. Also identify which of these factors may be identified during the strategic business risk assessment.

2. List and discuss several inherent risk factors that would have contributed to an increased inherent risk assessment at the account balance level.

3. Do you believe that the area of going concern should be assessed as high, medium or low? Identify the factors that are the basis for your decision.

Problem

This project report will be developed in relation with the strategic business Risk assessment, preliminary going concern assessment and inherent risk assessment. In this report various aspects of risk will be explained on that basis assurance will be made about the safety of business from the various factors exists into the external environment of business. Assessment of risk is considered to be an essential element for this report in order to mitigate the risk factors and eliminate them by applying some set of appropriate strategies. In this project report One.Tel Company has been taken as organization in which survey would be conducted. It was established in year 1955. This company is indulged in offering several products and services to its consumers which involves national and international calls, internet, etc. One.Tel has been linked with a Tele Communication company which provides services of telecommunication business globally.

1. List and discuss several factors that would have contributed to an increased inherent risk assessment at the financial report level. Also, identify which of these factors may be identified during the strategic business risk assessment.

With the help of risk assessment it is to be identified that entire activities and functions of an organization are being performed in an organized and systematic manner as there are various factors into the external environment of market which can anytime influence the business activities (Pfizer and Allergan to Combine, 2015). The importance of risk assessment is to be identified because there are several internal as well as external factors that could affect the financial statement of an organization. Further discussion includes several factors which provide assistance in developing the chances of risk assessment.

Problem

Description

Low operating profits

Any organization dreams to earn more and attract large customers in order to increase its productivity and profit. After analyzing the case study, it is identified that One.Tel company has a base of large customers but even after that this company has been confronted the situation of loss (Managing Risk). In order to earn more, this company implemented the policy of low pricing but it resulted in situation of loss and less sales. It is also evaluated that debtors of company has also been increased which shows the company’s incapability in collection of funds from its customers at time which later on turned into debtors (Deutsch, 2016).

Inefficiency in managing financial statement of organization

Company can make its position and sustain into the market by managing its financial statement in an accurate manner. Accurate statement is necessary to maintain in order to attract large number of stakeholders. One.Tel company could not be able to make accurate financial statement which resulted in decreases the liquidity of organization (Porter,Hatherly & Simon, 2014).

Deficiency in activities of business operating

Through the deficiency of business operating activity One.Tel has faced the issue of loss. Losses of this company has been increased from 28.9 million $ to 168.7 million dollar in the 2000 year end when compared with the year 1999. To maintain its position and sustain into the market organization must enhance its sales and profit margin and decrease its losses (Pfizer and Allergan to Combine, 2015) .

Inefficiency in implementation of consumer credit policy

In this policy the time duration of cash payment that is to be received by the customers for the products and service being consumed by them will be decided. In this policy, Funds need to be collected from all debtors and customers of the company (Reuvid, 2014). This company fails in implementation of this policy in an efficient manner which resulted in increment in the number of debtor as compared with the company’s sales (Verbeke & Kano, 2012).

Not enough managerial skills

Company does not possess enough managerial skills by which it could not be able to manage its functions properly. Due to the shortage of time managerial skills could not be developed within an organization in a proper manner. Managerial functions help the organization in managing and monitoring the entire functions and activities of the business premises (Zafar, et. al., 2016).

Low costing policy

One.tel wanted to attract more customers in order to increase the sales and margin of profit. But as described in the case study that this company could not be able to apply this policy in a proper manner by the affect of which company sales and profit decreased (jarjo, 2015).

Accumulated

Parent Entity

Key Performance Indicators

2000
$M

1999
$M

modify
$M

Change in percentage

$M in 2000

 $M in 1999

Change
$M

 Change in percentage

Current Assets - receivable

218.4

72

146.4

203

104.0

58.9

45.1

77

Sales profit

653.4

326$

327.4

100

359.1

269.2

89.9

33

Operating (loss)/ profit after deducted income tax

(291.1)

7

(78.2)

7.9

Net profit to Sales Ratio (%)

-44.6%

2.1%

-21.8%

2.9%

Total Cash flows from operating activities

(168.9)$

(28.9)$

(140.0)

(40.5)

(0.9)

(39.6)

Cash at the year ending

335.7$

172.6$

163.1

164.2

170.8

(6.6)

Debtor collection period

122 D

81 D

106 D

80 D

There are various factors linked with the strategic risk assessment have been identified and explained as below:

  • Offering of products and services at low price – One.Tel has defined the prices of products and services at very low which are offered by them which resulted in decreasing the profit and sales of the organization (Zafar, et. al., 2016).
  • Customer credit policy – Company could not be able to execute this policy in proper manner which resulted in declining the liquidity of the organization as well as increasing the receivable (Shariff and Leong, 2009).
  • Company’s position – Proper managerial skills are required to be possessed by the company in order to maintain its position and structure of the company (Allen, 2015).
2. List and discuss several inherent risk factors that would have contributed to an increased inherent risk assessment at the account balance level.

It is identified that there are several factors which indulged into the internal and external environment of the company so that company’s activities and its functions get influenced. Risk assessment is considered as an important tool in this project report by which generated risk will be recognized and eliminate it as soon as possible (Suter, 2007). There are several issues identified within the One.Tel organization which resulted in decreasing the company’s performance. On the basis of case study it is to be revealed that this company has implemented some strategies like low pricing policy, customer credit policy, etc. by the effect of which company is facing the problem of declining  profit and sales as it has become failure in implementing these policies. This organization only wanted to entice more and more customers for that it implemented the low pricing policy but in this policy the prices of the products and services offered by them has been set at very low and from that company could not be even able to receive its original costs that results in declining the profit of company and sales has also been declined (Porter,Hatherly & Simon, 2014). Another factor which has been determined as crucial is deficiency of implementation of managerial skills within the premises due to the shortage of time by which managers of the company could not be able to manage any functions and activities by the affect of which company has faced the situation of loss. As it is assumed that managerial skills are important for an organization to maintain and evaluate the company’s structure and position (Martin, 2008). In order to achieve profit it is important having effectual managerial skills into the manager of organization. With the absence of proper managerial skills, company’s receivables have been increased and profit has been decreased. In this case, risk assessment is essential to be conducted in proper time period in order to identify all the negative factors that can be vicious to the organization and reduce them accordingly (Aven and Zio 1164-1172).

3. Do you believe that the area of going concern should be assessed as high, medium or low? Identify the factors that are the basis for your decision.

It is identified that the concerned areas should be evaluated as on the level of high priority in order to make sure about the factors of risks related within the organization (Shariff and Leong, 2009).  Some factors are described as under and on that basis decision is to be taken.

  • Lower liquidity position – One.Tel company has to face the situation of lower liquidity because its receivable has been increased that leads to unstable liquidity position. To manage the organization’s liquidity is considered as the main aspect which must be taken as on high priority because through its liquidity position company’s structure and position would be revealed (Managing Risk).
  • Indulged in the situation of high losses – One.Tel Company has to face the situation of high losses also due to incapability of implementation of low pricing policy. Company adopted the low pricing policy in which it decreases the prices of products and services being delivered by them that much low which results in incapability of receiving the actual amount of products and services (Armstrong, Rhys-Jones and Dresner).
  • Profit and sales has been declined – Even after having large customer base, organization has to face the situation of loss because of low pricing policy by which the sales of company has been decreased and receivables have been increased (Armstrong, Rhys-Jones and Dresner).
  • Receivables increased – when comparison is done with the sales of One.Tel company with its receivables, it is identified that company has more receivables than its sales which resulted in increasing the debtors. Company could not be able to collect the funds at time from its customers so that company’s profit has been decreased with its sales (Zafar, et. al., 2016).

Conclusion   

Through this project report, several aspects of risk assessment have been recognised in relation with the One.Tel Company. In this company there are various issues occurred which are being faced by the company. These issues have increased the possibility of involving assessment of risk which needs to be done in an efficient manner in order to mitigate the risk factors and reduce them as soon as possible. If these issues would not be identified on time then the activities and ongoing functioning of One.Tel Company can be influenced. Through this project report a proper set of understanding has been established regarding the risk factors and according to them an appropriate decision can be taken associated with the process of risk assessment.  Several set of proper strategies must be develop in frequent manner in order to reduce the risk factors and could be again able to maintain its position into the external competitive market.

References 

Suter, G., 2007. Ecological risk assessment. Boca Raton: CRC Press/Taylor & Francis.

Armstrong, Jonathan, Mark Rhys-Jones, and Daniel Dresner. Managing Risk. Hoboken: Taylor and Francis, 2013. Print.  

Aven, Terje, and Enrico Zio. "Foundational Issues In Risk Assessment And Risk Management". Risk Analysis 34.7 (2013): 1164-1172. Web.

Managing Risk. London: Pre-school Learning Alliance, 2009. Print.   

Martin, Duncan. Managing Risk In Extreme Environments. London: Kogan Page, 2008. Print.

Shariff, A. and Leong, C., 2009. Inherent risk assessment—A new concept to evaluate risk in preliminary design stage. Process Safety and Environmental Protection, 87(6), pp.371-376.

jarjo, H., 2015. Strategic Real Estate Development (RED): Risk Assessment, Capability, Strategy Flexibility, Competitive Strategy, and RED Performance Empirical Study of RED Firms. Professionals Center for Business Research, 2(02), pp.17-34.

Verbeke, A. & Kano, L., 2012, “The transaction cost economics theory of the family firm: Family-based human asset specificity and the bifurcation bias.(Report)”, Entrepreneurship: Theory and Practice, 36(6), 1183.

Zafar, I., Yousaf, T. & Ahmed, D., 2016, “Evaluation of risk factors causing cost overrun in road projects in terrorism affected areas Pakistan – a case study”, KSCE Journal of Civil Engineering, 20(5), 1613-1620.

Pfizer and Allergan to Combine, 2015, “M2 Presswire, p”, M2 Presswire, Nov 24, 2015.

Deutsch, G. M., 2016. Risk Assessments for Financial Institutions. s.l.:LexisNexis.

Porter, B., Hatherly, D. & Simon, J., 2014. Principles of External Auditing. s.l.:Wiley.

Reuvid, J., 2014. Managing Business Risk: A Practical Guide to Protecting Your Business. s.l.: Kogan Page Publishers.

Allen, M., 2015. Strategic Communication for Sustainable Organizations. s.l.:Springer.

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My Assignment Help (2021) Factors Contributing To Increased Inherent Risk Assessment In Financial Report And Account Balance Levels Are Crucial For Accurate Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/ha3032-auditing-and-assurance-services/strategic-business-risk-assessment.html
[Accessed 29 May 2024].

My Assignment Help. 'Factors Contributing To Increased Inherent Risk Assessment In Financial Report And Account Balance Levels Are Crucial For Accurate Essay.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/ha3032-auditing-and-assurance-services/strategic-business-risk-assessment.html> accessed 29 May 2024.

My Assignment Help. Factors Contributing To Increased Inherent Risk Assessment In Financial Report And Account Balance Levels Are Crucial For Accurate Essay. [Internet]. My Assignment Help. 2021 [cited 29 May 2024]. Available from: https://myassignmenthelp.com/free-samples/ha3032-auditing-and-assurance-services/strategic-business-risk-assessment.html.

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