Business Risk Analysis: ComputerShare

This report provides a business risk analysis of ComputerShare Limited, an Australian-based company. It begins by describing the nature of the entity and its industry (Information Technology), examining the legal environment and external factors through PEST, SWOT, and Porter's Five Forces analyses. The report then assesses key business risks, including uncontrolled expansion and liquidity issues stemming from excessive investment. A detailed ratio analysis (liquidity, profitability, solvency, market strength) is presented, comparing performance over three years and against industry benchmarks. Finally, the report evaluates the effectiveness of the company's management and governance, concluding with recommendations for periodic risk assessment and proactive management.

BUSINESS RISK ANALYSIS – COMPUTER SHARE LIMITED INDUSTRY
Student Name: Student ID:
9/18/2017

EXECUTIVE SUMMARY
The title of the report is the business risk analysis of Computer share limited. As the title
suggests the main aim of the report is to analyze the risk factors and the causes which the
company has faced over the time and also is currently facing. The second major aim is to make
the readers understand about the nature of the entity and the industry within which the company
is operating. The third major aim is to identify the various environmental factors both internal
and external and how it has affected the working of the company. Last aim is to apply the
analytical procedures to better understand the working of the company. With these
considerations, the report has been divided into different section and headings.

Contents
EXECUTIVE SUMMARY.........................................................................................................................2
INTRODUCTION.......................................................................................................................................4
NATURE OF THE ENTITY.......................................................................................................................5
UNDERSTANDING THE INDUSTRY.....................................................................................................6
UNDERSTANDING THE LEGAL ENVIRONMENT...............................................................................7
UNDERSTANDING OF EXTERNAL ENVIRONMENTAL FACTORS.................................................8
ASSESSING BUSINESS RISKS..............................................................................................................11
ANALYTICAL PROCEDURES...............................................................................................................11
UNDERSTANDING OF MANAGEMENT AND GOVERNANCE........................................................13
CONCLUSION.........................................................................................................................................13
REFERENCES..........................................................................................................................................14

INTRODUCTION
Business is the term given to an activity in which persons which is carrying on that activity earns
his or her livelihood. The activity so carried on will always assumes some kind of uncertainty
which can be predicted in imaginary terms not in actual terms. The kind of uncertainty that the
company assumes is called the risk. The risk is the inbuilt characteristic of the business. The
main aim of this report is to assess all kinds of the business risks associated with the business of
the Computer Share Limited which is an Australian based company and listed in that stock
exchange only. In the first section, the nature of the business of the company has been discussed.
Second section contains the understanding of the industry happenings within which the selected
company is working. In the third and the fourth section the internal and external environmental
factors has been detailed as to how the same have affected the business of the entity. In the fifth
section, the objectives of the company along with the strategies adopted by the firm have been
discussed and the related risks has been identified and discussed. In the sixth section, the
analytical procedures have been adopted and the performance of the entity has been judged. In
the seventh section, the operation of the management of the company has been discussed along
with the workings of the people those are charged with the governance. At the end the study has
been concluded with the appropriate paragraph.
NATURE OF THE ENTITY
The company selected for the purpose of the business risk analysis project is the Computer Share
limited. The company has been incorporated in the year of nineteen hundred and seventy eight in
the country of Australia. The company has further listed on the recognized stock exchange of
Australia in the year of nineteen hundred and ninety four. In the few year of its incorporation the
company is engaged in the business of providing the services relating to the computers. In
the starting is provided only to those businesses which require automating the manual process in
order to save the time and effort. With the passage of time, the company has been entered into
the service of providing the computer based services to the share registrars. With this the market

of the computer bases services have been increased and thereby the company has extended his
step into the business of the share registry by entering into the various areas which includes the
equity plans for the employees, the working of the corporate governance, administration of the
suits filed by the stakeholders and administering the action suits if any filed by the stakeholders
of the company and so on.
The major investment activity of the company is the purchase or acquisition of the companies
and entities including the goodwill amounting to $167848 thousand and the purchase of the
Property plant and equipment amounting to $25317 thousand. The main deviation in the finance
activities has been encountered due to the high amount involved in the purchase of the entities
which are under the direct control of the company and the other like businesses. The cash flows
from the financing activities have been greatly hampered. It means that for the last financial year
ending tow thousand and fifteen has encountered the decrease in the net cash flows from the
financial as $19691 thousands and for the year two thousand and sixteen the decrease in the net
cash inflows due to the financing activities has gone up to $125581 thousands.
The company has been following the generally accepted accounting principles along with the
Australian accounting standards which has be issued by the Australian Accounting Standard
board in the true spirit. Neither any wrong remark has been made by the auditors of the company
in their independent auditor’s report rather any deviation in the terms and the provisions of the
accounting standards and related concepts has been mentioned and observed nor thus, is the
reporting practice okay. Therefore, the reporting practice that the company has adopting and is
pursuing is true and correct in accordance with the nature and size of the business and also in
accordance with the prevailing market condition.
UNDERSTANDING THE INDUSTRY
The industry is the term which denotes the detail about the major head within which the
company is operating. The industry to which the company belongs is Information Technology.
The term information technology denotes the area related to the computer and in which the new
and innovative technologies are used and developed on the timely basis. Following are the

recent facts and figures of each of the criteria for assessing the industry of information
technology of Australia:
- Industry Size – The industry of the information technology of Australia is regarded as the
fourteenth largest market the information technology in Australia. It is also regarded as
the fifth largest company in the information technology market across the region of the
Asia – Pacific which means after the countries of India, Korea, Japan and China. The net
worth of the information technology industry sector amounts to Australian dollar one
hundred and twenty.
- Industry Growth –The country of Australia has developed itself in the very decent
breaking the World records over the period of time. Since its incorporation the company
has been striving to have the world and the country records. With the passage of time, the
company’s worth has been increased and thus have thereby increased the worth of the
company and have been able to increase the growth rate of the industry in Australia
rating to approximately to 11.56% and has left five major countries from Korea, Taiwan,
Singapore, Hong Kong and Japan.
- Industry Supply Chain – In the country of Australia, manufacturing has not been
promoted for years after years rather the trading has been promoted. But in the
information technology sector, many innovative processes have been done, research and
development centre have been made and similar other scenarios are there. The supply
chain has been from the country where the companies are making the purchase and the
supply chain is very progressive in this sector.
- Major Players – The major players are regarded as the companies who are having the key
position in the business line of the Information Technology are Acer Computers
Australia, APCS Information Technology, Cannon, Data com, Hewlett Packard, IBM,
Infosys, West Net, Alcatel Australia, APCS Information technology, CSC, EDS, EMC
and Techex Communications, etc.
- Market shares of the Industry Players represents that how much market has been captured
by these players. The major player is the Canon which approximately holds the 30percent
market share of Australia in the Information technology industry. All other players hold
10percent to 20percent frame.

- Critical Success factors – The critical success factor that has observed in the industry is
that the proper and adequate investment shall be done in the sector of the information
technology because Australia has been recognized as the best platform for undertaking
the testing work. The innovative environment with new software and technologies has led
many companies to develop their own software like IBM, Google, Canon, etc.
- Major threats - The first and foremost threat is that due to new updates every day and as
and when the update cones then the company is required to perform the same. And thus
major threat is the up dation of new facility in time which will reduce the time, effort and
recovery of cost.
UNDERSTANDING THE LEGAL ENVIRONMENT
The legal environment plays the very importance role in the success of the business. The legal
environment is defined as the environment which contains only the law matters which are
required to be complied by the companies operating within the same industry. In the case of the
companies, various legal factors will occur and it will includes the laws relating to the
accounting for the transactions of the company in accordance with the accounting standards of
the company, how the accounting data shall be presented on the defined format and what matters
are required to be reported while preparing the financial statements of the company and for
who’s interest the financial statements of the company is prepared and presented, etc.
In the given case study of Computers Shares Limited, the financial reporting framework is
required to be discussed under the legal environment and whether the same is being followed by
the company or not. This framework is commonly known as the Conceptual framework of
accounting. The conceptual framework of accounting means the structure that has been
developed from the accounting concepts and accounting data has been placed accordingly.
Conceptual framework of accounting consists of three features namely faithful representation,
relevancy and consistency. The term faithful representation has been further explained that the
financial statements shall be error free or neutral. The term relevancy means that the financial
statements shall be relevant for the users of the financial statements so as to make them able to

take the effective and efficient decision. The term consistency is that the financial statements of
the company so shared has been prepared and presented in the manner that has been followed in
the earlier years like the accounting method for calculation of the depreciation, valuation of the
assets, etc. The annual report of the company for the year ending 2016 does not have any
indication that the financial statements does not contain any information which has not been
presented with the faithful facts and has presented the financial statements in the untrue and
unfair manner (Ullah, 2010).
Therefore, in this way the company has foll0wed the legal framework as defined by the
conceptual framework of accounting.
UNDERSTANDING OF EXTERNAL ENVIRONMENTAL FACTORS
After having the legal environment informing about the various laws that the company is
required to complied with and how the same have been applied, it is now very necessary to get
the information about the environmental factors which can hamper the financial position and the
financial performance of the company. The external environmental factors have been discussed
in the following manner:
- PEST Analysis – As in the case of the financial accounting and reporting, conceptual
framework of accounting provides the platform for preparation and the presentation of
the financial statements, likewise, pest analysis provides the framework which is used in
the scanning of the environmental factors belonging to the operation of the company.
Following diagram presents the PEST analysis with headings of the main concern areas.
Political factor will consider the legislation that is operating previously and now
currently, the policies of the government that might come during the course of time
change in the government and funding of the government subsidies, etc. Economic factor
considers the trend analysis and the growth of economy (Ha & Coghill, 2008). Social
factor consists of the change in the trends of the consumer pattern, differences in the
gender and many more. Last technological factor consists of the new innovative
technologies, incurring of the expenditure on research and development, etc

- SWOT Analysis - There are many observations which are considered as necessary to be
reported to the management of the company. The analysis describes as to what are the
strengths that is being possessed by the company, what are the weaknesses that the
company is facing, what are the opportunities that is available for the company but the
company is not interested in materializing it and the threat analysis describes as to how
the company have threat of doing something or not doing something (Ullah, 2014; Helms
and Nixon, 2010).
POLITICALSOCIAL

- Porter’s five forces analysis – This tool help the company to analyze how much
competition the company is facing. According to this force, five factors are
 Threat of having the new entrants in the business. This has been overcome as the
company has secured the highest position in the market.
 The company can have the great threat of having the substitutes but again the
company has overcome as the company has inbuilt software and other capacities.
 There might be chances of having the threat of bargaining from the side of creditors.
 There might be chances of having the threat of bargaining from the side of buyers.
 And last one the rivalry that has been started or prevailing with industry.
- Other External Factors – Other factors includes the environment and occupational
hazardous.

ASSESSING BUSINESS RISKS
The one of the major risk that has been observed and will soon affects the financial terms is the
expansion of business that the company is doing continuously year on year basis. This is being
done by the company irrespective of the disclosure of the said statements in the annual report of
the company. The company has been in the phase of worst expansion which has led to decrease
in the sales revenue from the year of 2015 to the year of 2016. The basic reason is the loss of
control of the management of the company over the operations of the company including the
finance department function.
The second major business is the oversight over the cash flows of the company leading to the
liquidity risk. The company had during the year spent an amount on the expansion of the
business irrespective of the fact that whether the assets so acquired will be able to generate the
equivalent profits or not (AASB, 2013).
The above two major business risks are the exhaustive one.
ANALYTICAL PROCEDURES
The analytical procedures are conducted by calculating the accounting ratios for the last three
years keeping the last year as base (Company Official Website, 2017; Company Official
Website,2016;, Company Official Website2015; Delen, 2013, PCAOB, 2017). These are as
follows:
STATEMENT SHOWING THE RATIO ANALYSIS
S.
No. PARTICULARS 2017 2016 2015

1 Liquidity Ratios
A Current Assets 1315186
122783
7 1117541
Less Current Liabilities 796337 723695 834582
Working Capital 518849 504142 282959
b Current Ratio 1.65 1.70 1.34
c Debtors 425343 361185 374445
Revenue 1957860
196619
2 2011416
Debtors Turnover Ratio 4.60 5.44 5.37
2 Profitability Ratios
a EBIT 245009 243171 325628
Revenue 1957860
196619
2 2011416
Net Profit Magin 12.51 12.37 16.19
3 Long Term Solvency Ratios
a Debt 178611
262381
4 2540988
Equity 1108733
117764
1 1267212
Debt to Equity 16.11 222.80 200.52