CoffeeVille: Risk Management Report: NSW Expansion Project Analysis

This report presents a comprehensive risk management analysis for CoffeeVille's business expansion project, focusing on the Lakes Entrance expansion. The report begins with an introduction to risk management and its importance in business practices, followed by a detailed risk review report which includes an assessment of potential risks, stakeholder roles, and PEST and SWOT analyses. The core of the report analyzes and treats identified risks, categorizing them into operational, financial, governance, and project management risks. A risk matrix is developed to evaluate the likelihood and impact of each risk, and a risk mitigation plan is proposed to address high-priority risks such as by-law compliance and financial risks. The report concludes with an overview of how to monitor risks and evaluate processes, emphasizing the need for sound internal controls, written policies, and adherence to legal and regulatory requirements. Email communication and meeting summaries with the CEO are included to illustrate stakeholder involvement in the risk management process. The overall aim is to provide a proactive approach to manage the identified risks.

MANAGE RISK
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Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT: TASK 1................................................................................................................1
Risk review report........................................................................................................................1
E-mail communication to stakeholders........................................................................................4
Summary notes from meeting with CEO.....................................................................................5
TASK 2 - ANALYZE AND TREAT RISK....................................................................................5
PART 1............................................................................................................................................5
Risk matrix...................................................................................................................................6
Risk mitigation plan.....................................................................................................................7
Risk Management Action Plan....................................................................................................9
PART 2..........................................................................................................................................10
1. Implementation of risk management treatment.....................................................................10
TASK 3 – MONITOR RISK AND EVALUATE PROCESSES..................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12
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INTRODUCTION
Every project is associated with number of risks such as operational, financial,
governance and project management. Risk management is the most important component of
good business practices that concentrates on proactive management of all the business risks. It
provides a basis to the firm for internal control mechanism and corporate governance
arrangements. CoffeeVille developed a chain of café in the Central Business District (CBD) of
Brisbane, Queensland and Sydney. Its Board of directors decided to expand their functions in
Lakes Entrance with the purchase & re-branding of its existing business. The current study
concentrate on identifying the key risks involved in the business expansion and make strategies
to overcome it.
ASSESSMENT: TASK 1
Risk review report
To: P. Kinsiki, Coffee Ville CEO
From: Ash, Assistant manager
Lakes Entrance CoffeeVille Café
Risk Management Framework
CoffeeVille defined risk as a likelihood of occurrence of risk in next 12 months and
determining their impact and consequences level to high, medium or low. High risk includes
significant shortfall by 40%, medium risk means shortfall of budget by 10%-20% or some
reduction in function or low indicates minor reduction in achieving targets or minimal reduction
in the performance. The project of expanding coffee Ville business subjected with various types
of challenges. CoffeeVille’s risk management framework aims to determine, analyze and take
attempts for the proactive management of all the risks (Connelly, 2014).
Scope
Risk management framework includes risk analysis, evaluation and taking control
measures. In order to determine risk, it is necessary to track external activities and identify
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potential threats and opportunities. Its scope encompasses policy formation, reporting structure,
business planning & budgeting, risk management review and external audit so as to adequately
respond operational, commercial, financial and strategic risks (Duckert, 2010).
Critical success factors, goals or objectives
 To develop a sound risk management framework
 To conduct external market analysis to find out opportunity and threats
 To take necessary preventive measures to control the risk occurrence
Stakeholders and their role in risk management process
Stakeholder Internal
/
External
Role in process Stake in
process
FARM (The Finance,
Audit and Risk
Management)
committee
Internal Committee plays a critical role in risk
management that is liable to timely report
about internal control mechanism to BOD.
High
Directors Internal To identify acceptable & unacceptable risks
Set standards
Approval of risk exposure decisions
Risk monitoring for significant risk elements
Change implementation
High
Café Employees Internal To follow set business standards
To actively implement the risk management
decisions
Low
Senior Management
Team
Internal Implement risk managerial policies & sound
internal control mechanism
Determining the areas of significant risks
Policy and strategy review and update
Undertake annual review of control
effectiveness and annual reporting to
Moderate
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directors
PEST Analysis
After reviewing the meeting notes with Ron Langford, it found that in the economic brief,
it discovered that Federal Government is going to introduce local by-law for the usage of
resources by industries. The existing by-laws charged a fine penalty up to $50,000 on Coffee
Ville for the breaches due to excessive usage. At the same time, installing a water tank in
Courtyard will enable café to use water efficiently. Current by-law also bring out an opportunity
for the firm to expand their footpath dining by which, business will be authorized to arrange
more chairs and tables outside premises and thereby serve more people (Fraser and Simkins, 2010).
It has an opportunity to expand their business by opening more cafes at surrounding
places. Currently, its dishwater has a Water Efficiency Labeling and Standards Scheme (WELS)
rating of 3; and in order to increase it to 5-6, it would incur a cost of $6,000 or above. In the
social factor, as the store is located at the corner of two main streets therefore, due to closeness,
it will be able to attract large number of local customers and tourists (Hampton, 2009). Moreover,
it will attract a large percentage of retirees due to easy access to buses. Technological
advancement through WiFi in the café provide free of cost internet accessibility to people. In
addition to this, federal Government’s National Broadband Network will allow café so to
efficiently and effectively use video streaming and teleconferencing system that will help in
technological advancement.
SWOT analysis
Strengths Weaknesses
 Qualified chef who provides innovative
and popular range of tasty, healthy and
gourmet rice wraps
 Innovative frozen par-bake cooking system
to cook fresh bakery items just in 30
minutes
 Lack of sales promotion techniques
 Lack of proper record-keeping system and
documentation in place
 No system in place to deal with work place
incidents and injuries
 Unattractive fit-out
 Inefficient use of utilities like water
 Verbal setting of policies and procedures
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 Delayed delivery as it take two-hours to
reach the delivery of fresh pastries after the
morning crowd
Opportunities Threats
 Business expansion
 Opening more café
 New technology implementation
 Upcoming of new local by-laws
 Tough level of competition with other café
Risk analysis
After reviewing the meeting notes, it analyzed that acquisition and re-branding of NSW
expansion store is associated with following set of key problems presented below:
1. There is no sound internal control mechanism exist at workplace, more importantly, firm did
not have sound control over cash handling, monitoring and recording activities.
2. Company did not have any policy to prevent the occurrence of accidental cases at workplace
thus, failure to meet with the legal compliance standard, Work Health and Safety law.
Moreover, all the details about workers and financial performance of the business are
keeping computerized but not protected by password setting that breach the statutory
requirements of privacy law. In addition to this, non-compliance with local by-laws and
industrial relations law are the major risks.
3. As said earlier, that policies and procedures are set verbally however, in case of any sort of
disputes, written evidence must be exist so that it can be use as a legal proof is necessary.
Hence, lack of written policy & procedure is another major risk that does not guide staff in
carrying out their assigned duties timely (Awadallah, Milanovic and Jarman, 2015).
4. Being a family run business, Café requires adopting and following a professional culture
however, absence of this may bring obstacles in sound management.
5. In the current age, business requires track of market fluctuations to grab the benefits of
opportunities and plan to prevent against threats.
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E-mail communication to stakeholders
To: Stakeholders
From: Ash, Assistant manager
This mail is just to inform all the stakeholders about the major risks elements that are
accompany under the NSW Expansion plan and seeks advices and opinion how to manage it.
Although, CoffeeVille had its own risk management framework, in which, FARM, board of
director and senior managerial team is involved with the process of risk identifying,
measurement, analysis and control measure. Still business need to work upon putting a superb
internal control mechanism, especially with reference to cash transactions in the register. Besides
this, the plan of expansion encompasses compliance and regulatory risk, poor internal control
mechanism, lack of written policy & procedures, lack of sound business culture and failure to
cope up with the external market environment. All these risks require to be manage properly to
enhance the project success rate.
Summary notes from meeting with CEO
 In the meeting, CEO replied that first of all, all the policies and procedures must be set in
written and convey to all the employees to guide them for statutory compliance.
 Areas where currently, no policy is in place needs policy formulation, especially, cash
management, internal control and monitoring framework to keep control over staff activities
(Bainbridge, 2009).
 All the activities and operations must be document well such as wages and superannuation,
taking from cash register by family staff members and others. Moreover, sound operational
strategy must develop to properly utilize utilities, ensure timely delivery and other areas for
sound growth.
 Business information is required to be computerized manage with password protection to
restrict unauthorized access and compliance with the mandatory laws and principles of
privacy law.
TASK 2 - ANALYZE AND TREAT RISK
PART 1
Type of risks Key reasons Impact Likelihood
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/Consequences
Operational risks Legal and regulatory
compliance risk with WHS,
Privacy and industrial laws
High (3) High (3)
Financial risks Poor cash management and
ineffective monitoring over
its usage, fraudulent activities
or theft by staff
High (3) Moderate (2)
Governance risk Lack of internal control
management and poor
documentation
Moderate (2) Moderate (2)
Project management
risks
Verbal policy setting, poor
monitoring issues, lack of
sound culture post the risk of
conflicts among stakeholders,
delay in conducting training
sessions
Low (1) Moderate (1)
Risk matrix
Likelihood * severity table
Consequences
High (3) 3 6
Financial risk
9
By-law
compliance Risk
Medium (2) 2 4
Governance risk
6
Low (1) 1 2
Project
Management risk
3
Low (1) Medium (2) High (3)
Likelihood
After looking to the risk matrix, it found financial and operational (by-law compliance
risk) are the two unacceptable risks. In this regards, operational risk expects to have catastrophic
consequences with high possibility of occurrence. The main reason behind this is as from the
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scenario; it is clearly stated that currently, CoffeeVille is not complying with the workplace
health and safety laws and at the workplace, there are not proper arrangements kept in place.
Evidencing from the case study, currently, chairs and tables become obsolete, unstable and
broken, which pose the risk of workplace incidents. Besides this, some parts of the worn carpet
simply taped over with gaffer tape. Besides this, non-compliance with the Water Efficiency
Labeling and Standards Scheme (WELS) due to excessive usage of water had brought
compliance risk and created adverse image about the business (Marchetti, 2011). All these have
catastrophic impact over the business because non-compliance will result in loss of brand
recognition by building a poor reputational image among all people. It seems unacceptable risks
and requires immediate action of the management to control its occurrence.
Besides this, finance is the most important business requirement because in the volatile
and competitive world, none of the business can successfully survive in the market without
having proper financial management. However, considering the current case of CoffeeVille, it is
identified that café did not manage cash effectively as all the takings out from cash registers are
not managed properly. Moreover, administrators do not have effective control over the cash-
related transactions hence, the risk of theft or misuse of monetary resource seems an obvious risk
(Poolsappasit, Dewri and Ray, 2012). It will also bring considerable impact on the business
henceforth, considered as an acceptable risk. These two risks must be prioritize over others
because of strong severity impact over CoffeeVille.
Effective operational management requires sound internal control and proper
documentation of all the events is necessary. However, as noticed in CoffeeVille, lack of
managerial control over the daily functions is a main risk; still, such risks expects to have
moderate likelihood with moderate severity over the enterprise, hence, it is founded as
undesirable and require to be controlled promptly by corrective measures (Rampini, Sufi and
Viswanathan, 2014). Lastly, as every policy must be clearly set out on the documents in written,
which were not currently, follow by CoffeeVille. In spite of this, professional culture, ethical
business practices and others are necessary to comply with, absence of such cultural practices at
family-running business bring out the possibility that risk may take place medium likelihood and
low severity.
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Risk mitigation plan
Risk Risk mitigation strategy Suitability
By-law
compliance
risk
One of the most important ways of
mitigation for the company is to
document al legislator requirement
comprising WHS, local by-laws,
industrial regulations and others in
written and convey them to all the
staff members to guide them that they
must comply with the set standards
(Bromiley and et.al., 2015).
To take strict actions against the
responsible person when he or she is
found in breach of the law
To conduct audit program to discover
areas of violation and follow-up
policies
Written policies in the staff manuals
to aware them about the regulatory
requirements clearly instruct people to
follow rules
Conducting external audits will create
a risk factor among people and help to
know areas where statutory
requirements are not complying with
Excessive
usage of water
Installing water tank, dual-flush toilets
Conducting training sessions on Water
consumption plan
New policy to comply with the by-law
water conservation
Installation of 5-star dishwasher
Applying ‘make good’ principle to
follow acceptable benchmark of water
usage
Teleconferencing system
Although installation of water tank
incurs cost, still, it will help to
minimize its wastage.
Training on the water-saving system
guide people about the innovative
ways to how to conserve it efficiently
Governance
risk
Internal audit is the best way for
undertaking strong internal control
mechanism on the routine activities.
Proper documentation
Internal audit helps to discover fraud
and manipulation activities and aware
manager to identify lacking areas that
can be control by timely remedial
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actions.
Financial risk Training on daily banking deposits
Financial control, management and
regulatory framework
By providing training to the
workforce, they will be able to
efficiently use their funds
(Christoffersen, 2012). Moreover, strict
monitoring and controlling framework
will enable the entity to reduce its
usage.
Project
management
risk
It is require setting written policy
including travel policy, harassment
policy, no discrimination,
organizational culture policy and
others.
Corporate governance mechanism
needs to be design by which all the
staff members must be adhere.
By communicating all information to
staff members about business policy
via manual helps to establish sound
management
Risk Management Action Plan
Risks Risk
score
Controls Monitoring Action
priority
Timelines Responsible
By-law
compliance
risk
9 Audit
Follow-up
policies
Compliance
with the legal
standards and
regulations
Audit will help
to continually
keep track over
the business
activities to
identify that
whether
statutory
requirements
are following or
1 Once a year Gold smith
Partner
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not
Governance
risk
4 Internal audit
Proper
documentation
and record
keeping system
Internal audit
and continuous
monitoring by
sudden check of
the accounts by
manager
3 2 times in a
year
CEO, Board
of Directors
Audit
committee
Financial risk 6 Financial
management
policy
Special training
to workers
Manages will
consistently
keep track over
employees
activities so as
to recognize the
risk of misuse
of monetary
resources and
fraudulent
activities
2 Throughout
the year
Financial
controller
Project
management
risk
1 Written
documentation
Managerial
policies
Staff training
Regular
analysis of the
daily functions
helps to manage
functions in an
effective
manner.
4 Throughout
the year
Store
manager
PART 2
1. Implementation of risk management treatment
As examined, by-law compliance risk is a major risk that may threaten the business
survival by creating adverse opinion about the business. In order to implement the created risk
management treatment, it is necessary to convey all the policies and legal compliance
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