Question

Develop a scenario using two risks from previous case review [Review Craft Brew Alliance (CBA) 2019 10-k. Just using the 10-k, identify business and industry risks for this company. (Go to sec.gov, filings, company, filing search)] and identify a response that management could have to that risk using the four possibilities described above.

Example:

Business Strategy for CBA: Expand Sales Globally

Business Risk: Quality issues with production of product oversees

Audit Risk: Inflated sales

Potential accounts that would be affected: Sales, A/R, Inventory, Cost of Goods Sold

Our audit plan to address risk: Segment Global Sales and test sales, A/R, inventory and cost of Goods Sold separately; Test Process for Global Business and related controls; Contact foreign affiliate for assistance

This risk could fall under several categories:

• Political – are there foreign tariffs associated with beer if it is imported?
• Economic – is the foreign country in a recession? Would craft beer be considered a luxury item?
• Social – Is beer a socially acceptable beverage in this foreign market?
• Rivalry/Competition – Is craft beer being offered locally? Which companies do we compete with in this market?
• Threat of Substitute -is wine the beverage of choice in this market? Is hard alcohol the beverage of choice in this market?

Directions: Summarize TWO risks as follows:

Avoid:  

Accept:

Reduce:

Transfer:

EX:

Avoid: Do not go global with craft beer; stay local.

Accept: Don’t worry, just enter the market with the craft beer and hope that it is a widely accepted success.

Reduce: Conduct market research; do a test market; evaluate results; continuous monitoring of market.

Transfer: Find an established Beer or Adult Beverage Company and have them purchase the beer or rights to produce the beer (with royalties) in the foreign country.

Answer 1

A MORE DISCIPLINED PROCESS INVOLVES USING CHECKLISTS OF POTENTIAL RISKS AND EVALUATING THE LIKELIHOOD THAT THOSE EVENTS MIGHT HAPPEN ON THE PROJECT. SOME COMPANIES AND INDUSTRIES DEVELOP RISK CHECKLISTS BASED ON EXPERIENCE FROM PAST PROJECTS. THESE CHECKLISTS CAN BE HELPFUL TO THE PROJECT MANAGER AND PROJECT TEAM IN IDENTIFYING BOTH SPECIFIC RISKS ON THE CHECKLIST AND EXPANDING THE THINKING OF THE TEAM. THE PAST EXPERIENCE OF THE PROJECT TEAM, PROJECT EXPERIENCE WITHIN THE COMPANY, AND EXPERTS IN THE INDUSTRY CAN BE VALUABLE RESOURCES FOR IDENTIFYING POTENTIAL RISK ON A PROJECT.

GOVERNMENT:

THE REASON FOR COUNTRIES THAT DID NOT ENTER INTO RECESSION IS MAINLY BECAUSE OF THE FOLLOWING FACTORS:

• EXTREMELY LOW LEVELS OF BANK LENDING
• A RELATIVELY VERY SMALL MORTGAGE MARKET
• LACK OF OVER-DEPENDENCE ON A SINGLE EXPORT SECTOR
• A TRADITION OF GOVERNMENT FISCAL RESPONSIBILITY
• A RELATIVELY LARGE INTERNAL MARKET
• LOW LABOUR COSTS ATTRACTING CONTINUED FOREIGN DIRECT INVESTMENT

FILING TAX:

CERTAIN ALCOHOL BUSINESSES, INCLUDING THOSE LISTED BELOW, MUST FILE AN APPLICATION WITH AND RECEIVE APPROVAL FROM TTB BEFORE ENGAGING IN BUSINESS.

COMPANY:

EXPORT PRICING IS THE MOST IMPORTANT FACTOR IN FOR PROMOTING EXPORT AND FACING INTERNATIONAL TRADE COMPETITION. IT IS IMPORTANT FOR THE EXPORTER TO KEEP THE PRICES DOWN KEEPING IN MIND ALL EXPORT BENEFITS AND EXPENSES.

HE VARIOUS TYPES OF EXPORT RISKS INVOLVE IN AN INTERNATIONAL TRADE ARE AS FOLLOW:

CREDIT RISK, POOR QUALITY RISK, TRANSPORTATION RISKS, LOGISTIC RISK, LEGAL RISKS, POLITICAL RISK, UNFORESEEN RISKS, EXCHANGE RATE RISKS ETC.

FILING SEARCH:

THE CASE OF CGST AND SGST, NO CROSS UTILIZATION OF INPUT TAX CREDIT IS ALLOWED. THIS MEANS THAT INPUT TAX CREDIT OF CGST CAN ONLY BE UTILIZED FOR CGST AND IGST, AND AN INPUT TAX CREDIT OF SGST CAN ONLY BE UTILIZED TO PAY FOR SGST AND IGST.