Business Risk Analysis.

Running Head: Business Risk Analysis 1
Business Risk Analysis

Business Risk Analysis 2
The business risk summary report is based on the Australian mining organisation BHP Billiton
which extracts copper from its mines. The biggest exporter of the mineral resources is China and
if the country stops demanding those minerals, the company would face severe losses. The
financial analysis show that the company has not been able to generate substantial return off its
assets. In this scenario the audit risks take place owing to either overstatement or understatement
of the assets to manipulate the data in its favour (Carson, Fargher, & Zhang, 2016). The Samarco
dam failure has been quite eventful for BHP grabbing attention of the market and affecting its
business as well.
It is noted that the multinational status of BHP bothers its function as it runs the audit risk in
terms of complying with the tax obligation pertaining to different countries. The company also
examines audit risk owing to certain changes in its portfolio as BHP strive to undertake mergers
and acquisition activities of the businesses across its operating market (Hayes, Gortemaker, &
Wallage, 2014). BHP trades in mineral resources but the business risk is that the resources are
exhaustive in nature and with the passage of time the mines would go dry. BHP also undergoes
business risks like that of increase in commodity prices and the risk of fluctuating exchange rate
(BHP, 2018). This particular risk of exchange rate possess audit risk as well as the figures often
get misinterpreted owing to volatility of the rates.
The key performance indicators of BHP include sustainable development and financial
performance and both the elements are crucial to the business for its proper functioning. The debt
scenario is a concern to the business and a lower dividend rate is shaking the confidence of the
investors on the company (Arens, Elder, & Beasley, 2013). The Internal audit advisory at the
company is not effective in running an efficient internal control adding to its business risk. It has
been alleged that the decision making mechanism in the business scope of BHP is limited to a
few executives negating the very concept of the decision making system undertaken by the
Board. The organisational staff are quite proficient in maintaining a suitable ethical and
behavioural code to abide by the system (Leung, Coram, Cooper, & Richardson, 2015). The
business risk of BHP lies in its tarnished reputation during the Olympic events in Beijing, 2008
the company got involved with certain regulatory measures.
The audit risk for BHP Billiton could be substantially decreased by undertaking an improved
governance mechanism by engaging more numbers of Independent Directors (Eilifsen, Messier,