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.