Risk Assessment Of Telecommunication Industry In Australia - Essay.

Discuss about the Risk Assessment of Telecommunication Industry.

EA Partners have decided to take a risk assessment report and audit plan and preparation of Mobile Australia Pvt Ltd, a new firm starting as manufacturing cum service providing in the telecom and mobile industry of Australia. The new entrant is always required to follow industry guidelines and norms for better survival. The strategy of the new company is very bold as very few companies deal with both manufacturing mobile set as well as telecom service provider setup.

The risk assessment process includes understanding of the inherent risks in a telecommunication and technology company. The risk assessment report on this firm is prepared for the first time for managing its audit plan and preparation. 

The industry competition is the biggest risk in the business apart from the involvement of OTT (Over the Top) players. The new entrant is just one year old and expect to grow very fast in this new age of 4G and the incoming age of 5G which are still in nascent stage and the new company’s target will be to grow and keep pace with other big players in the Australian telecom and mobile market like Optus, Telstra, Vodafone as service provider and Apple, Samsung, Sony, Nokia, Microsoft, etc (telecomitalia, 2016).

The assessment of the current market scenario and growth expectation will reveal the industry risk for the company wile 4G LTE and 4G VoLTE service is in offering from various major operators in the market.

Assessment of the ability of new company’s management and particularly the Board of Directors, a plan for risk assessment and audit plan and preparation guideline are to be implemented. The market suggest that the new company will have to make the break even within next 3 years time to get a ground in the mobile market and service provider.

The risk assessment made by the EA Partners team is to be taken very seriously as they needs to be looked into with right approach. After studying and comparing with the telecom industry it is observed that the following areas are to be taken care of. The Risk Assessment Report including mitigation process thus prepared by EA Partners is as follows—

The telecom giants in Australia like Optus and Vodafone and lost a visible market share from FY 2014 although Telstra have retained the business somehow although the market is very stagnant in such situation the new company needs to focus to give something new in comparison to what the existing players were given but despite that the market became bit stagnant as almost 86% of the Australian household is having Smartphone’s and digital connections.

Inherent Risk in the Business

Overall revenue growths have dropped by 1% for FY 2014. The new company needs to put up a big fight by the way of extensive push sales and making general public aware of their new entry in the already stagnant telecom industry although the stagnancy is temporary phase.  Mitigation in this case to be done by making the present subscriber base slowing understand the areas where the big players don’t take care of but new company will do so, hence the creation of opportunity is advised  (willistowerswatson, 2016).

The mobile market have grown by 132% and there is very good demand despite stagnancy which means handset market is still booming. The new company is to take hard lines for promotion of their handset with lots of promotion and freebies to get a substantial initial market share where Samsung and Apple are the market leaders in Australia. Mitigation in this case is to be done by direct marketing and promotion in aggressive manner.

The existing players like Telstra have 16 million subscribers having 61% market share of revenue, Optus have 9.4 million subscribers and Vodafone have around 5 million subscribers. The subscriber base of Vodafone have dropped substantially from 7.6 million in 2010 to 5 million in 2014 just because of network failures the subscribers shifted their base with others. Hence it is to be looked into by new company that the new service thus to be provided must be failure free to the utmost (Wigginton, 2015).

The marketing needs to be very aggressive by way of direct marketing for providing broadband and WIFI which is very popular and in demand. There has to be something new in the package given as per the anticipation and actual demand of the subscribers with other players.

The media survey by Deloitte in 2016 have made certain observations which states that 25% of women have involvement in digital entertainment in social media while only 17% men are doing same. Thus it shows that usage of good telecom provider and mobile handset with all facilities but at reasonable price is required. Hence the market is very much there for the new company to grow in this area and it is suggested to target this customer base extensively to make growth and mostly the age groups will 14-26, 27-32, 33-49 and 50-68 (dnvgl, 2012).

This demand of social media is showing up very fast and in demand. The market for smart phones grew by 50% from 2015. 69% are very convenient on selection of their devices for the usage of their digital demand. Mitigation in this case will be to use demand of right device where the opportunity lies and can be easily exploited by the new company (protiviti, 2012).

Risk Assessment by Auditors

The Deloitte study further reiterated that social media digital demand is the key areas where mobile devices are still in great demand hence the opportunity is open and better digital service is expected from all age groups. Mitigation in this case will be to target the entire college going and office going customer base by free service and better service. 

The initial report by the EA partner senior auditor with full discussion with the team regarding inherent and current risk of the business is stated below—

A detailed report is to be prepared by the EA partners to compare the growth share of the existing players and the growth strategy of the new company vis-à-vis other players in the Australian telecom and mobile handset industry.

A market survey to be conducted by the company to assess the demand nature of different hand set and actual demand or actual expectation of the general customers and a separate survey to be conducted to find out the actual experience and real expectations of the Australian customers from the telecom players existed (Ey, 2014).

Their new expectations are to be assessed to find the area where the new company can easily place itself in comparison with the existing players both in telecom industry and mobile handset where already OTT players as well new entrants from China, India are making inroads in various world markets. The survey also needs to find out and fix a time frame for pushing the new products with promotions and with what format to be followed to make the introduction of the new products to the Australian existing market with right approach of marketing and sales promotion strategy (Spark, 2016). 

1. The next action includes is to make plan and preparation of the audit of the new company so that it can be assessed to know that whether the start up is in the right direction or what rectifications are required to make any misconduct correct and to devise the right steps  (VIZCAYNO, 2012).
2. The audit plan and preparation is to be based on the following format—

1. To study the entire documents prepared and the formats followed.
2. To study the manufacturing setup procedures and the entire layout planning as well as office layout planning is to be studied for better office management.
3. To study the Marketing strategy followed for the last one year to market and promotion of the new mobile handset and service provided.
4. To study the statutory compliances followed and if any more to be done in that area.
5. To study the Taxation compliances followed and if any strategy in place is formulated for.
6. To study the entire personnel details if their desired experience and qualifications are right and in accordance with the actual requirement for the new company to compete and survive the market conditions as the personnel plays the most important role in the growth of any industry whatsoever. The hierarchy is to be studied also to see the right placement with market requirement for making a great inroad in the entire Australian market.
7. To study the administrative setup and guidelines formulated and followed for better and correct functioning.
8. To study all assets and liabilities are in accordance with the actual requirement and also the accounts, trial balance, profit and loss account and Balance Sheet is correctly prepared and all accounting procedures are right and with right accounting package.
9. To study the most important aspect of a new business is to determine the cost and expense involved in each operation or job work and to suggest minimal involvement to reach the breakeven in the shortest possible time by cost control from initial stage (Sara Benolken, 2016).

Conclusion: 

The said procedures are detailed to the entire team handling the audit and risk assessment. The risk areas are to be highlighted and the suggestions on control methods are to be provided to make this new firm more viable and sustaining in the mobile manufacturer and service provider industry. The market is not expected to give a huge profit for the new entrant due to licensing norms and offering of the service based on leasing network. It is seen that if the expectations are fulfilled then the existing subscribers will change their base with the new company. Hence customer confidence is the key factor for growth. In this case is also to be followed by aggressive marketing and targeting a small but possible aggrieved customer base who are not satisfied with existing players.

References: 

Dnvgl, 2012. Key Sustainability Risks and Challenges in the Telecommunications Sector. [Online] blogs.dnvgl.com Available at: https://blogs.dnvgl.com/sustainability/2012/01/key-sustainability-risks-and-challenges-in-the-telecommunications-sector/  [Accessed 06 September 2016]. 

Sara Benolken, 2016. The future of the technology, media and telecommunications sector. [Online] blog.willis.com Available at: https://blog.willis.com/2016/05/the-future-of-the-technology-media-and-telecommunications-sector/  [Accessed 06 September 2016]. 

VIZCAYNO,D.,2012.RiskManagement – Telecommunication Industry. [Online] dcvizcayno.wordpress.com Available at: https://dcvizcayno.wordpress.com/2012/04/12/risk-management-telecommunication-industry/  [Accessed 06 September 2016]. 

Wigginton, C., 2015. Telecommunications Industry Outlook. [Online] www2.deloitte.com Available at:   https://www2.deloitte.com/us/en/pages/technology-media-and-telecommunications/articles/telecommunications-industry-outlook.html  [Accessed 06 September 2016]. 

Ey, 2014. Top 10 risks in telecommunications 2014. [Online] www.ey.com Available at:https://www.ey.com/Publication/vwLUAssets/EY_-_Top_10_risks_in_telecommunications_2014/$FILE/EY-top-10-risks-in-telecommunications-2014.pdf  [Accessed 06 September 2016].

 Protiviti, 2012. Top Priorities for Internal Audit in Telecommunications. [Online] www.protiviti.co.in Available at: https://www.protiviti.co.in/en-US/Documents/POV/2012-Internal-Audit-Survey-Telecommunications-Industry-Protiviti.pdf  [Accessed 06 September 2016]. 

Spark, 2016. Controlling and managing risks. [Online] www.spark.co.nz Available at: https://www.spark.co.nz/content/0,8748,204683-203840,00.html  [Accessed 06 September 2016]. 

Telecomitalia, 2016. Risk Management. [Online] www.telecomitalia.com Available at:  https://www.telecomitalia.com/tit/en/investors/risk-management.html  [Accessed 06 September 2016]. 

Willistowerswatson, 2016. Technology, Media and Telecommunications Risk Index 2016. [Online] www.willistowerswatson.com Available at: https://www.willistowerswatson.com/en/insights/2016/05/technology-media-telecommunications-risk-index-2016  [Accessed 06 September 2016].