Auditing Business Risk Assessment

This report provides a comprehensive business risk assessment for the GPT Group Stapled, a leading Australian real estate company. It begins by outlining the nature of the entity and its operations within the Australian real estate industry. A detailed analysis of the industry is presented, including growth rates, major players, and supply chain dynamics. The report then delves into the legal and external environmental factors impacting the company, utilizing PEST, SWOT, and Porter's Five Forces analyses to provide a holistic view. Key external factors such as political stability, economic conditions, social trends, and technological advancements are examined. The report also assesses business risks associated with industry development, new products and services, business expansion, accounting requirements, regulatory compliance, financing, IT security, and strategy implementation. Financial ratios (net profit margin, return on assets, return on equity, and asset turnover) are calculated and interpreted to understand the company's performance. Finally, the report explores the company's management and governance structures, including ethical values, board composition, interactions with auditors, and organizational structure, concluding with an overall assessment of the risks faced by GPT Group Stapled.

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Executive summary
In the competitive business environment, it is essential for an organization to analyze the
generating issues in the industry. An organization can use a systematic procedure to evaluate
these risk assessments in a systematic way. On the basis of different case studies, it is analyzed
that these are different internal and external factor that may impact on an entity therefore it is
essential for the organization to evaluate the related industry to get the organizational objectives
in effective manner. In this concern, an organization can use PEST analysis, SWOT analysis,
Porter’s five forces and other economic factors to analyze the industry and get intended business
results.

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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Part 1: Nature of the entity...............................................................................................................4
Part 2: Understanding the Industry..................................................................................................5
Part 3: Understanding the legal environment..................................................................................6
Part 4: Understanding external environmental factors....................................................................6
a) PEST analysis..........................................................................................................................6
b) SWOT analysis........................................................................................................................8
c) Porter’s five forces analysis.....................................................................................................9
d) Other external factor..............................................................................................................10
Part 5: Understand objectives, strategies and Assessing Business Risks......................................11
Part 6: Performing Analytical Procedures to understand Entity’s Performance...........................12
Part 7: Understand management and Governance.........................................................................13
Conclusion.....................................................................................................................................17
References......................................................................................................................................18

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Introduction
This report is analyzing business risk assessments for GPT Group Stapled organization that is a
leading real estate company of Australia. In this regard, the report is describing several criteria’s
such as understanding business nature, industry, legal environment, external environmental
factors, business risks, management and governance that may impact on an organization’s
profitability and performance.
Part 1: Nature of the entity
GPT Group Stapled is a leading real estate company of Australia, which is registered as name of
GPT Company in Australian Stock Exchange (ASX). The business operations of this company
are related to investment in commercial, retail, industrial, hotel and office park properties
through different segments such as office, retail, logistics, corporate and fund management. GPT
Group Stapled Company is standing with $20 billion market capitalization and has substantial
investor base more than 35000 investors (GPT, 2017).
The financial management platform of the company is focused on Australia’s office and retail
sector to enhance the growth profile and returns of the groups with leveraging the experience and
skills of the team members. Company’s financial management platform provides an important
source of income through property management, fund management and development
management charges. The financial management platform of the company comprises “GPT
Wholesale Office Fund (GWOF) with $6.6 billion and GPT Wholesale Shopping Centre Fund
(GWSCF) with $3.8 billion” to provide the high quality office assets in Australian real estate
market (The GPT Group, 2017).

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Part 2: Understanding the Industry
The Australian real estate industry is growing with 4.2% annual growth rate with presenting 18%
of the GDP. In Australia, the growth of the real estate market is supported by better supply chain
in the industry (KPMG, 2017). Supply chain system in Australia is accountable for the real estate
companies and procurement to make the effective portfolio strategy, analyzing the purchasing
initiatives, monitoring and delivery of the strategic management procurement events on time. In
this industry, the competent stakeholder management is demonstrated on the basis of effective
customer and supplier engagement, communication, consultation, negotiation and reporting
(Delacy, 2015). As well as the legal obligations and administrating policies also pursuant supply
chain system to improve the procurement results.
Furthermore, it is found that the major real estate players in Australia are Elders Real Estate, LJ
Hooker, Harcourts Group, Barry Plant and Richardson & Wrench. These players are devoted to
provide luxurious services in real estate market of Australia, which are supported by different
factors such as population growth, job creation, demographics, infrastructure, lifestyle and
amenity (Macro, 2017). In the recent years, the population of Australia has been increased due to
attractive business and educational environment. Due to these reasons the demand of houses in
Australia has been increased and provided opportunities for the real estate companies in the
country. As the Australian real estate market has greater opportunities for the investors, therefore
it also attracts new real estate companies for investment. In this concern, there is threat of new
competitors in the industry, which may impact on the established real estate companies.

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Part 3: Understanding the legal environment
The legal environment is a legal framework provided by the local or state authority of Australia
in which a firm operates its operational activities. The Australian government encompasses
different legislations such as statutory low, common law, company Act, Corporation Act and
consumer law that are essential to operate the business activities in Australia (Trade Portal,
2017). Furthermore, the disability discrimination legislation, age discrimination legislation, rise
in minimum remuneration and increased requirements for the organizations to recycle have been
affected to the organization’s operational activities. Furthermore, it is analyzed that the political
environment of Australia is stable that is beneficial for the companies because in a stable
political environment the organizations can flow the rights through to bottom line. Hence, the
legal and political environment of the country has greater opportunities for the businesses.
Part 4: Understanding external environmental factors
There are different types of external environmental factors that may impact on an organization’s
operational and functional activities. In this regard, different external environmental factors are
discussed as below:
a) PEST analysis
PEST analysis is an important external factor, which may influence to an organization’s
operational activities. It is a process of classifying political, economic, social and technological
factors of a specific territory that may impact on an organization. PEST analysis is used to
generate better understanding about the external environment in which an industry want to
operate its business activities (Kenis et al., 2012). In this concern, the PEST analysis of Australia
is analyzed as below:

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Political factors: In Australia, the political environment is stable that is supportive for the
growing industries as well as small enterprises. There are no conflicts and wars within the
country that make this nation attractive for the foreign investor. Australia has attractive trading
policies for the foreign investors with favorable conditions in their trades (Zalucki et al., 2011).
Therefore, the stability of political environment creates opportunities for real estate organizations
to expand business with lower risks.
Economic factors: In recent years, it is observed that the GDP growth rate and employment
growth rate of Australia are decreased that have impacted to Australian’s lifestyle. Due to
decreased economic growth Australia does not seem to be favorable for the businesses.
Furthermore, the Tax rates and interest rate in Australia are highly competitive in compare to its
major economies. The competitive tax rate seems to be feasible for GPT Group Stapled
Company to operate the business activities in a sound work environment (Queensland
Government, 2017). In addition, the interest rate in Australia is less than 3%. Therefore, the real
estate companies can get finance at lower cost for their daily operational activities.
Social factors: As Australia is an educational hub for the international students and attracts to
foreign workers, therefore the population of Australia tremendously increased in the recent years.
Due to immigrants in Australia from different countries created religious diversity and generated
different types of demand in the country. In order to meet housing demand of these customers,
the real estate companies obtained opportunities to develop their business in the territory.
Furthermore, the education standard of Australia is higher therefore the companies have needed
to provide detailed information regarding their products and services because the higher
educational environment has higher advantage for an organization in terms of the business

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operations (Kenis et al., 2012). Therefore, the social factors are favorable for GPT Group Stapled
Company in Australia.
Technological factors: Australia is a technological advanced economy in the world.
Advancement of technology can reduce production cost, improve quality and produce innovative
products. There are two government organizations namely CSIRO (Commonwealth Scientific
and Industrial Research Organization) and ASTEC (Australian Science and Technology Council)
that support to technological development in the country. Furthermore, there the information and
communication technology is also on higher stage, which supports to the organizations to
communicate easily with its stakeholders as well as customers (Queensland Government, 2017).
In this way, it is analyzed that the technological factors are favorable for GPT Group Stapled
Company to operate its business activities in the country.
b) SWOT analysis
SWOT analysis refers to strengths, weakness, opportunities and threats for an organization. In
this regard, the SWOT analysis of GPT Group Stapled Company is described in the below table:
Strengths
 Better strategic expansion and
development
 Better operating margin
 Standard quality of products and
Weaknesses
 The profiles are not too diversified
 Diminishing rent of offices in malls and
supermarkets
Opportunities
 Development of the industry in
growing and stable economy
Threats
 Strong competition in the market
 Indecisive microeconomic parameters

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 Scope of diversification it its profile
c) Porter’s five forces analysis
In the revolutionary business world Porter’s five forces analysis is used as a marketing strategy
to analyze the external market. These five forces are discussed as below:
Threat of New Entrants: It is analyzed that the Australian real estate market has better
opportunities for the investors. Therefore, there are threats of new entrance in property market
that may impact on the profitability of GPT Group Stapled Company.
Bargaining Power of Suppliers: Generally, the real estate companies buy their raw materials
from different suppliers that may impact on margins their margins. In the real estate industry,
bargaining power of the suppliers is higher that may impact on profitability of GPT Group
Stapled Company (Kenis et al., 2012).
Bargaining Power of Buyers: The buyers mostly wan to buy products and services at lower
prices with superlative offers. In this regard, it is analyzed that the there are higher bargaining
power of the buyers that have impact on the GPT Group’s profitability.
Threat from Substitute Products: In Australian real estate marker, there are big players who
are providing the dwelling facilities same as GPT Group in the industry. The similar products
and services may impact on the profitability of GPT Group. There is high range of substitute
products and services in the real estate therefore the company should focus on core needs of the
customers to compete in the market rather than what the customers are buying.

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Rivalry among the existing players: GPT Group is operating its operational activities among
the existing big players in Australia, which may affect the overall profitability of the group. The
competitive rivalry firm may force other organizations to drive down pieces. Hence, the
Australian real estate market highly competitive due to existing rivalry firms.
d) Other external factor
There different external factor such as economic condition, availability of finance, interest rates,
currency revaluation and inflation that have impact on real estate industry of the nation. In
regard, it is observed that the economic condition of Australia is strong in the world (Trading
Economics, 2017). Furthermore, there are various financial institutions and banks, which are
providing the finance at the competitive interest rates for the investors. The below table is
presenting the Australia’s competitive interest rate:
(Source: Trading Economics, 2017)
In addition, the inflation rate of Australia has increased in the present year which have
depreciated the currency and increased the cost of dwelling for the customers (Trading

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Economics, 2017). Due to increasing inflation rate the operational activities of real estate
organizations have been affected in great manner.
Part 5: Understand objectives, strategies and Assessing Business Risks
a) Industry development: The real estate industry is rapidly growing industry in the world with
having the contribution 18% in the country’s GDP (KPMG, 2017). But, the industry is facing
lack of expert labour in construction industries, which may impact on the organization’s
performance.
b) New products and services: GPT Group introduces new and attractive for the customers but
it also increase the liability of safe and eco friendly services in the market.
c) Expansion of the business: In Australia, GPT Company is expanding its business activities
but it also has some business risks. In this concern, it is identified that due to increasing
population of migrants it become difficult to estimate the actual demand of property. In addition,
the inflation rate and fluctuated exchange rate also generate the risks in expansion of the business
operations.
d) New accounting requirements: The technological development also changed the accounting
requirements for the organizations. In this concern, the real estate organizations are facing
improper accounting implementation and increasing costs in their accounting processes.
e) Regulatory requirements: There are strict and standard rules and regulations for the real
estate organizations to regulate their business activities. As well as, the increased legal exposures
are also generating the problems in front of the real estate organizations.

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f) Current and prospective financing requirements: It is analyzed that the financial
requirements of GPT Group has increased due to business expansion in recent years. As well as,
the liabilities of the company also increased that would be risky for the company in making
better financial performance in future.
g) Use of IT: Protection of data and information is an essential technical tool for the
organization. Due to developing IT the real estate organizations are facing incompatible
processes and systems that may result of loss of relevant data.
h) Effects of implementing a strategy: In an organization, the implementation of a new strategy
has need of expertise for successful results. If, the strategy is implemented in improper way than
there may be risk of business failure.
Part 6: Performing Analytical Procedures to understand Entity’s Performance
GPT Group Stapled:
Calculation of Ratio
Ratio 2014 2015 2016
Net Profit margin % 99.32 122.1 153.16
Return On Assets % 6.59 8.2 10.1
Return on Equity % 9.46 12.01 14.58
Assets Turnover (Average) 0.07 0.07 0.07
(Sources: GPT Group, 2017)
L J Hooker:
Calculation of Ratio

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Ratio 2014 2015 2016
Net Profit Margin % 3.47 5.15 6.53
Return on Assets % 5.09 7.71 9.16
Return on Equity % 5.97 9.06 10.79
Assets Turnover (Average) 1.47 1.49 1.4
(Sources: LJ Hooker, 2017)
Interpretation:
As per the given ratio, it can be concluded that the profitability ratio of the company in terms of
net profit margin ration in 2016 is 153.16 as compared to both years. Company has earned more
profit in the year of 2016. At the same, return on assets in 2014is 6.59 to 2016 is 10.1. It is
favorable for the company. In addition to this, the return on equity ratio in 2015 is 12.01 an in the
year 2016, it is 14.58. It shows that the company has doing its business effectively. The
Company earns good profit in 2016. On the other hand, compared with the competitive firm, the
GPT group has earned more profit as compare with LJ Hooker.
Part 7: Understand management and Governance
Communication and enforcement of integrity and ethical values:
GPT Group increases the robust framework in its business operations that clearly indicate the
code of internal and ethics communication policies, which helps the management in taking
effective decision (Thomas and Sassi, 2011). The bank is effectively designed, implemented and
increased an integrated compliance framework, which set by the compliance policy and

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supported by compliance process, assurance and plans. Likewise, the board offers a strong
compliance culture, which has disseminated at all hierarchical levels as well as has based on the
sound regulations, best practices and sound law.
Participation by those charged with governance:
 Experience and Stature of Board members: In present, there are 9 board members with
having more than 30 years experience in their duties. One is group chief executive and
chairperson and 7 members is non- executive director (Woods, et al., 2012).
 Interactions with external and internal auditors: The board of director has
appropriately evaluated the reports previously represented to the external auditors (Mihret
and Admassu, 2011). The board of directs have evaluated and admired the whole report
before representing to the auditors and yield appropriate response in any issue.
 The extent of involvement: The association of the board has to present the stakeholder
and serve the interest of the business with analyzing its strategies, performance and
policies. Besides, the company’s performance has monitored by the board and makes
sustainable value for stakeholder during agreement with duties and responsibility by the
board of company and law (Şendağ et al., 2012).
 Independence from management: The director’s independence level has based on the
conditions. Following the some condition as per below:
1. The company within the previous five years associates with the director.
2. The company’s director has established several compensation and fees during the
type of share and cash as well as whether or not the director contributions during the

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company’s executive shared the option performance pays schemes (Ben-Amar and
Zeghal, 2011).
3. The director has significant investment in the business and if he/she present and
signify the significant investor of the business.
Organisational structure:
Criteria of taking and management of business risk: An important part of business is
comprises of management of business risk. It exists in the form of two categories. Initial risk is
associated with finance, which is effectively managed by the finance team (Bromiley, et al.,
2015). This may happened due to inefficient management of cash flow to operations. Another
risk is associated with the fall in sale and profitability.
Action and attitude for financial reporting: Fairness, consistency and transparency are some
of the attributes provided by financial reporting standards. Subjective judgment of management
faces several types of issues like valuating profits and measures of deprecation. Financial issue
profits an understanding on various issues and behavior to the auditor (Lou and Wang 2011).
Attitude towards information processing and accounting functions and personnel:
Optimum qualified staff equipped with full finance and information technology is very essential
connections with third parties, control and administrative systems aids in taking strategic
decisions to the managers (Egan and Mullin, 2012).
Structure of organization: An ISA 315 standard provides structure to bank. It means that
framework of banking activities provides help in achieving its objectives (Ong, et al., 2014). In

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the documents of the company GPT has situates in different countries and it has operating its
business in different countries.
Human Resource policies and practices: In order with ISA 315, human resource has a key
matter into the business, which concerned the standards of control. In the IAS 315, the plans and
necessities have structured by this manner that make sure which only competent individuals by
integrity that has employed with the company. The company member has allotted the task and
compare with the performance according to the standers (Alfes, et al., 2013). The company has
accomplished the induction program for the new workers. On the other hand, the company has
provided the suitable training to the workers according to their position and role.
Assignment of authority and responsibility: The Company’s procedures have spread in the
different countries. The workforce size has the large that shows the larger amount of the
assignment of the responsibility and authority (Dafflon, 2015). The clear authority and
responsibility has construction, which specify points the objectives, responsibility and action of
the entities, which helped the decision-making.

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Conclusion
From the above discussion it can be concluded that the external factor have impacted to an
organization in great manner. It is analyzed that the Australian real estate market is highly
competitive in the world therefore the related organizations must evaluate the industry with
analyzing different external factors for better business results.

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