Risk management

After the Board was established, its first projects were the development of a risk appetite statement and the completion of a risk assessment. To prepare the risk appetite statement, SSM engaged its usual accounting firm, Parto Chartered Accountants. Parto Chartered Accountants has drafted the statement, and it has left SSM responsible for populating the risk appetite fields for each risk category.

SSM outsources most of its financial compliance work; however, it understands that the market is sensitive to economic conditions, and therefore must manage its financial risks to protect itself. Whilst SSM understands that it may not completely eliminate financial risks, it seeks to manage risk to a reasonable level.Product quality and supply

SSM prides itself on its broad range of fresh and packaged produce and its ability to consistently supply high quality goods to customers without running out of stock. To achieve this, SSM orders quality and in$-$demand produce at the required volume, which enables SSM to lock in supply of products at reasonable prices and ensures a steady supply for their customers. SSM recognises this strategy requires extensive forecasting to determine expected demand and optimal selling price.

Customer safety

Securing quality produce and ensuring that produce is safe for consumption are priorities for SSM$.$ The company sources mainly local products to limit the risk of contamination through handling and transit. Furthermore, SSM ensures staff are trained to make its stores a safe place for customers to shop, minimising the risk of customers having accidents in the stores. SSM takes great care to ensure customer safety as it highly values customer referrals in promoting its business.

Community involvement

As part of SSM$$s strategy to ensure connection between SSM stores and their local communities, SSM stores sponsor their local football clubs and hire staff from their local communities, including young employees who work after school and during holidays.

Focus on employees

SSM employs a significant number of staff. Its employees are paid per an industry award, which strictly sets out the requirements for payment, break times and when overtime rates should be paid. SSM values its employees and ensures that they are paid the right amount all the time. The company is also committed to staff safety, by encouraging operational health and safety training and ensuring a safe working environment by inspecting the premises daily for any hazards.Future Investment

One of SSM$$s independent directors is investigating a potential investment in self$-$serve checkout kiosks where customers scan and pay for their own goods at the check$-$out instead of being assisted by staff. This change would be expensive and would require a significant capital investment, as stores will need to be modified to fit in the new self$-$service checkouts and the new security equipment.

The director believes that these costs will be recovered quickly as customers would be able to move through the store quicker, therefore reducing in$-$store congestion. Installation of the kiosks would attract new customers who prefer self$-$service, and it would reduce staffing costs.

Furthermore, the kiosks would help to recover losses currently incurred from theft. They are installed with security cameras that could act as a deterrent for offenders and could record clips of customers making purchases, which could be reviewed for instances of shoplifting.Required

$1.$

In relation to the incomplete risk appetite statement in Appendix A:

$($a$)$

Review the statement in Appendix A and recommend two $(2)$ additional risk categories that should be added. Justify your recommendation.

$($b$)$

Determine the most appropriate current risk appetite level for the following four $(4)$ risk categories:

$$

Employee health and safety

$$

Legal and compliance

$$

Financial

$$

Operational

Justify your response.

$($c$)$

For each risk category listed in $1($b$),$ describe a countermeasure that will address the impact and likelihood of the risk.

$($d$)$

Explain how each of the countermeasures described in $1($c$)$ will mitigate the risk.

$2.$

In relation to the potential investment into self$-$serve checkouts:

$($a$)$

Identify one $(1)$ financial risk and one $(1)$ non$-$financial risk associated with the implementation of self$-$serve checkouts and recommend an action to mitigate each risk.

$($b$)$

Identify and explain an ethical dilemma that the company may face as a result of the implementation of the self$-$serve checkouts.