Introduction to Risk Principles

  1. Instructions

 

  1. This is an individual assignment.

 

  1. This assessment is designed to test your achievement of Objectives 1 to 5 as detailed in the Unit Outline.

 

  1. The maximum word limit for this assignment is 2,500 words with a 10% allowance (2,750 words). The word count includes: the Title Page, Executive Summary, body of the report and all Appendices. The Bibliography, Table of Contents, figures and tables are excluded from the word count limit.

 

  1. The assignment will be marked out of a total of 100 marks, and will count toward 20% of the total marks for this Unit.

 

  1. Work submitted for assessment must be accompanied by a completed and signed assignment coversheet (link available on Moodle).

 

  1. The assignment must be submitted via Moodle by the due date and time. Please note penalties will apply to late submissions. A penalty of 5% of the total mark allocated to this assessment task will be deducted for each day, or part thereof, if it is late. Multiple submissions are permitted up to the due date and time.

 

 

 

 

 

  1. Researching your topic

 

For the purpose of this assignment, assume that you work for a Risk Analytics firm called “Phoenix Analytics Group”. You have been engaged to research and write a comparative risk report about two companies in the same industry. You must select TWO companies from the same industry, as shown in Section 4. Your selected companies must be used in this assignment. Failure to comply may result in a zero grade.

 

Should you have any queries regarding your selection of the two companies, contact the Unit

Coordinator using only your Monash student email address and include “BFF5902 Assignment” in the subject line in the email. Be sure to include your name, student number and a valid telephone contact number in any email sent. The Unit Coordinator can be contacted by email at: iain.maclachlan@monash.edu

 

For this engagement you will have to research and analyse relevant information from internet sources and databases (e.g. Company Annual (10-K) and Sustainability reports and other investor information from company websites, Reuters, Bloomberg, NASDAQ and Yahoo Finance internet sites). Relevant electronic databases are also available from the Monash Library such as MarketLine IBIS World,Hoover’s, FACTIVA databases.

 

To use and analyse data from the EDGAR web site run by the Securities & Exchange

Commission (SEC) go to:  https://www.sec.gov/edgar/searchedgar/companysearch.html.

Type in the company name and then filter results under Filings for 10-K and 10-Q results.

 

Think creatively in performing your analysis and make justifiable assumptions ​ where necessary to overcome the hurdles you may confront such as any deficiencies in data availability about the company, its industry, and its competitors.

 

You will find most of what you need from careful reading of the annual report and the company’s website. Background information on their business and risks will usually be found in the 10-k Item 1. Relative financial performance compared to peers may be found using Yahoo Finance. Other databases may be necessary to find their position in their industry.

 

 

  1. Style of your report

 

Your written report must include the following components (reports not in this format will be penalised):

 

  • A Title Page for the report;
  • An Executive Summary which highlights the scope of the report, and its most significant findings and recommendations (typically 1 page at most);
  • A Table of Contents;
  • An appropriate introduction that discusses the purpose of the report, the report structure (which should reflect the scope of work performed) and any limitations;
  • The body of the report should include the outcomes of the research and analysis
  • A conclusion that summarises the analysis and findings;
  • Appendices should be used for detailed and/or large tables and figures; and ● A bibliography of references used should be included.

 

As this is a professional standard report it is important to use general principles of good business report writing to communicate succinctly. Use of tables, figures and summary dot points is encouraged. When using tables and figures remember to label them and reference and discuss their content in the text. Detailed analysis can be contained in tables and appendices in preference to the main text. Each section of the report should flow logically to the next and be consistent in argument. Remember diagrams are not included in your word count and may convey information more succinctly.

 

Work submitted for assessment must be consistent with the guidelines set down in the Q Manual, which is the faculty’s student guide for producing quality work on time. Copies of this manual can be purchased at the bookshop or accessed online at:

http://www.buseco.monash.edu.au/qmanual/qmanual.pdf

 

Marks may be deducted where in-text citations and/or the reference list is not consistent with the American Psychological Association (APA) style, which is illustrated in the Q Manual.

 

 

 

  1. Tasks to be completed

 

You must select one pair of US exchange-listed companies from three alternative pairs shown in the table below. The companies you choose should be on the same row.

 

Base your analysis on the most current information and most recent annual reports. It does not matter if the annual reports (10-K SEC filings) are for different balance dates. Important: make sure you use the tickers provided in parentheses to find the correct companies.

 

prepare your report.

 

 

 

  1. Overview of Companies and Industry

 

Perform a comparative analysis of your two selected companies’ business operations and discuss the industry in which they operate. You must address the following questions as part of your analysis:

 

  • What do your companies make, sell or do? What are their key products and markets?
  • What is your companies’ size in the industry in which they operate (eg. level of sales, number of staff, total assets etc.)
  • How does your company’s performance compare to other companies in the industry? (eg. growing faster/slower/declining)
  • Note any significant differences between their operations and markets that may influence their risk profiles.

 

  1. Risk identification

 

  • List the major s​ takeholders and explain their objectives for both firms. Are they the same stakeholders for both companies? Discuss any key differences and how this may affect risk identification.
  • Identify and describe the main strategic objectives of the two companies and discuss any similarities and differences and how this might affect their identifications of risk.

 

 

  1. Risk Analysis

 

Select ONE of the following from TWO alternatives choices for your analysis.

 

Alternative A: Risk Taxonomy Comparison

 

Using the 10-k report (Item 1 A) disclosures:

 

  • Complete a risk taxonomy for BOTH companies summarising and mapping their stated risks into either strategic, operational, financial or compliance/reputation risks, and other subcategories.
  • Compare and discuss similarities and differences between the risk taxonomies of the companies including noting the difference in ranking of similar risks (Item 1A lists risk in descending order of importance). Consider and discuss possible sources of the differences including operational, regulatory, stakeholder or strategic reasons;
  • Complete a hypothetical consequence scale (using the risk categories strategic, operational, financial and compliance/reputation risks), a hypothetical likelihood scale and a hypothetical risk matrix for ONE of the companies; and,
  • Using your hypothetical risk matrix, suggest what you would rate the intrinsic risk of the three (3) highest ranked risks reported by the company in its 10-k Item 1A reporting.

 

 

 

Alternative B: Risk Analysis

 

Using the 10-k report (Item 1A) disclosures, select ONE risk SUBTYPE that is common between your two companies (eg. Fraud subtype in Operational risk type), and:

 

  • Explain the nature of this risk discussing how it arises and what consequences it causes using the company’s descriptions in their annual reports;
  • Perform a detailed Bow Tie analysis of the risk highlighting both the causes and consequences of the risk involved. As part of this answer be sure to propose and explain your own hypothetical controls and their intended operation and position on the bow-tie;
  • Using your bow-tie diagram, discuss what hypothetical Key Risk Indicators could be used to provide a leading indicator of changing risk levels; and
  • Describe an AS ISO 31000:2019 compliant risk management process to manage this risk. Explain what risk management framework components you recommend to govern and manage this risk.

 

Note: You may not be able to find detailed information about the actual controls and risk management process used by the company (unless described in the annual report). So, in order to answer this question, you may need to use the lecture material, recommended readings, and your own research to propose a reasonable hypothetical approach.  

 

 

What information to source

Your primary source is the annual report known as the 10-K report available from each company’s website under SEC filings. Use the most recent information available, which might mean that the dates are different for the companies.  The annual reports will discuss the business, its segment performance (brands, products, countries etc.) and key risks.

 

In addition, it is a good idea , particularly with potential COVID-19 impacts, to look at the investor relation information on the company’s websites for updated information and quarterly reports. You will also find there other stakeholder information such as sustainability reports and  shareholder presentations that often discuss key strategies especially if not clear in the annual reports themselves.

 

Remember to cite your sources and answer the questions in your own words.

 

 

Word Limit

It is easy to write a lot in this assignment. Keep your discussion concise and use tables, charts and graphs to illustrate your arguments (it is a business report!). To save your word count, you can copy and paste tables as a picture.Remember to place large tables in the Appendix so that the body of your report flow.

 

 

  1. Criteria for assessment

 

The following rubric provides information regarding the criteria that will be used in marking.

 

 

Table 2 Assessment Rubric

    Unsatisfactory

<50%

Adequate 50% to 60% Satisfactory

60% to 70%

Good 70% to 80% Very Good 80% to 90% Excellent

>=90%

Component Marks Available Fails to satisfy the minimum requirements Satisfies the minimum requirements Demonstrates an average level of

understanding,

interpretation, originality,

insight and presentation

Demonstrates a high

standard of

understanding,

interpretation, originality,

insight and presentation

Demonstrates a very high

standard of

understanding,

interpretation, originality,

insight and presentation

Demonstrates an outstanding

or exceptional standard of

understanding,

interpretation, originality,

insight and presentation

Overview of the companies              
and industry 20            
Alternative A,              
B or C 50            
Report quality and              
compliance 10            
Quality of analysis              
performed 10            
Quality and breadth of              
research 5            
Originality 5            
TOTAL 100