Inherent risk Essay Example | Topics and Well Written Essays - 1500 words

Inherent risk - Essay Example The impact of this on the total shareholdings needs to be independently addressed by the auditors. Undervaluation of shares: The management believes that the shares of the Company have been undervalued and hence has reduced the holdings on 30.6.2007 by buying back 5.2.Million Shares valued at $9.3m. (Speciality Fashion Group Annual Report. 2007. P. 8). Its impact on the present holdings needs to be reviewed by auditors. Climatic Risks that impinge upon Co.'s business: It is seen that the Company, which specializes in women's garments has had lowered business trends during the winter months, especially the peak Christmas season. Moreover the various seasonal competitions has also slackened business prospects. Risks associated with the rapport and reliability of key employees: The management functions as a closely knit operational team and decisions are made on consensus. Although the members of the team are highly motivated, committed and dependable, there are always risks of management employees' attrition, for better prospects and higher positions. This could be perceived as an inherent risk in this Company Risks Risks associated with need for strategic growth: The women's garment industry in Australia and New Zealand are the main areas of marketing focus by this Company. There is always a dormant risk that customer preferences and tastes may change, due to conspicuous changes in fashion industry needs and competitive environment, in which the Company operates. Although the Company has designed garment wear for all age groups, income stratas and lifestyles, the inherent risks of a high degree of fashion obsolescence cannot be ruled out, which could affect demand for the products and cost of carrying inventories. Supply Chain Management risks and strategic vendor relationships: The Company presently has 784 locations situated in Australia and New Zealand. (Speciality Fashion Group Annual Report. 2007. P. 10). Many more stores are going to be opened to future to cater to the increasing clientele and it is necessary to have the necessary efficient logistics in place so that all the stores are well stocked with stocks at all times. It is therefore a test for the supply chain management systems in operation to build up efficiency and prompt dispatches and also have excellent vendor network so that goods are speedily replenished and restocked at all locations. The inherent risks arise when, due to failure of the system, ordered supplies are not available on demand, which could reflect upon the reordering systems in vogue.