1. Overview of the Two selected Companies and their 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.
• List the major stakeholders and explain why they are important. Are they the same stakeholders for both companies? Discuss any key differences and how this may affect their risk profile.

Note: The 10-K Item 1 will provide a description of the company’s business and segment financial reporting.

• Select ONE of the following topics from THREE alternatives.

You must choose and complete only ONE of the following alternatives.

Alternative A: External and Internal Factor Analysis of the Companies

Perform an external and internal risk factor analysis of the two companies and in your own words, based on your analysis of the industry and the companies selected. You should address the following as part of your analysis:

• Identify and describe the main strategic objectives of the two companies and discuss any similarities and differences.
• Complete a SWOT analysis for BOTH companies individually to identify at least four internal and four external factors that are likely to act on each company’s objectives.
• Based on your analysis of objectives and sources of uncertainty, identify and describe the key risks facing these two companies. Discuss any similarities and differences.
• Compare your findings with the companies’ 10-K reports Item 1A. Did you identify the same or different risks?

Alternative B: Risk Taxonomy Comparison

Using the information contained in both companies’ 10-k Item 1A:

1. 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;
2. 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;
3. 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,
4. 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 C: Risk Analysis

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

1. Explain the nature of this risk discussing how it arises and what consequences it causes using the company’s descriptions in their annual reports;
2. 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 hypothetical controls and their intended operation and position on the bow-tie;
3. Using your bow-tie diagram, discuss what hypothetical Key Risk Indicators could be used to provide a leading indicator of changing risk levels; and
4. 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.