Please read the Case below:Pizza Inc.

Pizza Inc., a pizza take-out and delivery chain, is experiencing decreasing revenues and steadily losing market share despite favorable market testing of its products/recipes. The company's strategy has traditionally been defined as gaining increased market share through customer satisfaction. Management has asked your internal audit function to help them understand the reasons for declining sales at the Uptown location and how the decline might be related to internal operations. Yourpriorinternal auditexperienceand directobservation of work performed at the troubled location identified the following information:

In 20XX, Pizza Inc.'s corporate office screened this site location prior to construction to ensure that neighborhood demographics supported the ideal business environment. This resulted in locating the chain near a suburb where typical residents were in the mid- to upper- middle class income range and who owned homes with three to four bedrooms. Despite the favorable location, the site you are reviewing continues to have gross and operating margins lower than their local competitors.

On-the-job training is the primary method used by managers to communicate company policy and procedures. However, documented policies and detailed procedures do exist for each key process and are available by request from the shift manager. Employees are typically male (comprising 65 percent of total staff), 17 to 23 years old, with little or no prior work experience at the time of hire. Unscheduled absenteeism is high and part-time shift assignments are rotated frequently to reward those individuals who regularly work as scheduled. The internal audit team noted in last year's review that management has documented an average annual turnover rate of 18 percent.

The shift manager is responsible for ensuring that all pizza orders are completed within the advertised time deadlines, a long-held competitive advantage. Drivers are required to record on a delivery ticket the time of their arrival at the delivery location. This time is compared with the time recorded on the order ticket to calculate total elapsed minutes. Review of the last six month's delivery tickets indicates that the company benchmark delivery cycle time of 25 minutes from "placing the order to when we're on the doorbell" has slipped to an average of 43.8 minutes. For months there have been persistent rumors about bets placed on one driver's notorious reputation for beating the delivery deadline every time.

Delivery promptness is also dependent on the volume of completed pizzas at any given time and the neighborhood traffic pattern. Drivers are initially screened at hire for outstanding traffic violations or other infractions (such as driving while intoxicated). The original site manager posted a large map on the wall so drivers can identify their routes. Mileage is reimbursed as part of the compensation for using their own vehicles so each driver turns in a mileage log at the end of the shift to indicate both starting and ending mileage. The manager randomly checks the recorded starting or ending mileage against the cars' odometers.

Pizza Inc.'s company policy requires that each location restrict itself to a five-mile service area; however, if an order comes in, the work is never refused. Phone orders occur in predictable patterns, but walk-in orders are more random and less frequent. Scheduling staff to match the anticipated workload is done one week in advance. The average workload during peak hours is 29 orders taken per hour. Orders are manually written on pre-numbered pads. When mistakes are made, the original order ticket is tossed out and a new order form is created to avoid confusion. Information captured includes: date, time of call (or walk in), name, address, phone number, type of crust, and toppings requested. Hand calculators are available to assist with pricing quotes that are told to the customer and recorded on the delivery ticket. Shift managers check every order to ensure that information is complete prior to processing the order.

Employees who make the pizza are instructed in the proper quantity of ingredients for various standard topping combinations. Frequently, special request orders are received that add items to the standard recipe. Measuring cups are available, but your internal audit team noted on prior visits that when activity reaches peak load, employees generally "know" how much of key ingredients to use. The manager monitors the supply cabinets and refrigerators at the end of the shift to ensure adequate inventory is on hand. Several months ago, the

evening shift manager determined that inventory deliveries should be increased to four per week, up from the usual three. Oven temperatures are monitored closely to ensure that pizzas are properly cooked. Employees who bake the pizza rely on a centrally located wall clock to time the various combinations. There are cooking guidelines posted for each standard topping combination with instructions on what to do if a pizza is overcooked. Generally these are available to employees for snacking.

All employees are responsible for ensuring the baked pizzas are cut, boxed, hand-labeled for delivery, and assigned to the next available driver. (Drivers work in a first-in/first-out method.)

Your internal audit team determined, after reviewing information received from various external sources and reading Pizza Inc.'s internal communications on strategy, mission, and vision, that linking the business risks to business processes will assist Pizza Inc.'s CEO, chief financial officer, and chief operating officer with identifying the critical business processes and key success factors for each process.

Please complete the following tasks in a memorandum format addressed to the leadership group of Pizza, Inc. that contains the following:

1.A list offivekey processes used by Pizza Inc. at their individual site locations. For example:Deliver Pizza.

2.A list oftenbusiness risks for the typical site location.

3.A risk-by-process matrix based on combining the two lists above which also includes your assessment of key vs. secondary links. See exhibit 5-11 for a sample matrix (pg. 5-17).

4.Next, focusing only on theDeliver Pizzakey process, present a risk/control matrix, similar to exhibit 5-14 (pg. 5-23):

oProvide for at leastfiveactivities or sub-processes within theDeliver Pizzakey process.

oList the related risk statements, the potential impact, with corresponding impact and likelihood ratings.

oList the control risk response (i.e. actions management currently takes, if any), based on the facts presented in the case.

oIn addition, include techniques for assessing the effectiveness of the existing risk response controls.

5.A list of recommendations to mitigate the existing risks and improve performance based on your observations and opinion of the potential effectiveness of the current risk response activities to address risks in theDeliver Pizzaprocess.