Business Risk Analysis Report: Sonic Healthcare, Healthcare Industry

This report conducts a comprehensive business risk analysis of Sonic Healthcare Limited, a major Australian healthcare company. It begins by outlining the company's operations in the health and medical diagnostics industry, including its investments in innovative technologies and its compliance with accounting and auditing standards. The report then analyzes the industry context, highlighting its growth, employment figures, and key players, while also acknowledging the threats posed by new entrants, economic shifts, and government regulations. External environmental factors are examined through PEST, Porter's Five Forces, and SWOT analyses, providing insights into the political, economic, social, and technological influences, as well as the competitive dynamics and the company's strengths, weaknesses, opportunities, and threats. Finally, the report incorporates financial ratio analysis to assess the company's performance and concludes with recommendations based on the overall findings. This report is a valuable resource for understanding the complexities of business risk within the healthcare sector and is available on Desklib, a platform offering AI-based study tools.

Running head: BUSINESS RISK ANALYSIS REPORT
Business Risk Analysis Report
Name of the Student
Name of the University
Author’s Note

1BUSINESS RISK ANALYSIS REPORT
Executive Summary
The main objective of this report is to analyze various risk factors of the healthcare
organizations. For this particular report, Sonic Healthcare Limited is taken into consideration.
Sonic Healthcare Limited is one of the major ASX listed healthcare companies in Australia.
Different parts of this study evaluate various aspects of the company for the development of risk
analysis report. This analysis also includes PEST, SWOT and Porter’s Five Forces analysis. In
addition, various financial ratios are analyzed in order to measure the financial performance of
the company. Based on the whole analysis, a conclusion along with recommendations is drawn.

2BUSINESS RISK ANALYSIS REPORT
Table of Contents
Introduction......................................................................................................................................3
Part 1: Understanding Nature of the entity......................................................................................4
Part 2: Understanding the Industry..................................................................................................5
Part 3: Understanding the Legal Environment................................................................................6
Part 4: Understanding External Environmental Factors..................................................................7
PEST Analysis.............................................................................................................................7
Porter’s Five Forces Analysis......................................................................................................9
SWOT Analysis.........................................................................................................................11
Part 5: Understand Objectives, Strategies and Assessing Business Risks.....................................12
Part 6: Performing Analytical Procedures to Understand Entity’s Performance..........................14
Part 7: Understand Management and Governance........................................................................20
Conclusion.....................................................................................................................................21
Bibliographies................................................................................................................................22

3BUSINESS RISK ANALYSIS REPORT
Introduction
Twenty-first centuries is known for the development of various businesses all over the
world. With the increase in different businesses activities, it has been seen that various risk
factors in the businesses are also increasing. For this reason, it is required for every business
organizations to analyze and evaluate different risk factor affective the business operations of the
companies1. This aspects lead to the preparation of Risk Analysis Reports of the business
organizations. The main objective of this report is to develop a business risk analysis report by
taking into consideration various necessary factors. For this particular report, Sonic Healthcare
Limited is taken into consideration. Sonic Healthcare Limited is one of the major ASX listed
healthcare companies in Australia. At present, Sonic Healthcare is the third largest medicine
companies in the world. The company operates in the health and medical diagnostics industry.
Sonic Healthcare Limited was established in the year of 1987 and the headquarter of the
company is at Macquarie Park, Sydney in Australia2. The company has an employee base of
32000. Different parts of this study evaluate various aspects of the company for the development
of risk analysis report. This analysis also includes PEST, SWOT and Porter’s Five Forces
analysis. In addition, various financial ratios are analyzed in order to measure the financial
performance of the company. Based on the whole analysis, a conclusion along with
recommendations is drawn. Thus, it can be seen that this particular report has its importance in
1 Cox, Louis Anthony Tony. "Confronting deep uncertainties in risk analysis." Risk
Analysis 32.10 (2012): 1607-1629.
2 "Sonic Healthcare". Sonichealthcare.com, 2017. Online. Internet. 4 Sep. 2017. . Available:
https://www.sonichealthcare.com/about-sonic/our-history/.

4BUSINESS RISK ANALYSIS REPORT
order to identify various risk factors in the health and medical diagnostic industry of Australia
and in Sonic Healthcare Limited.
Part 1: Understanding Nature of the entity
As per the earlier discussion, it can be seen that Sonic Healthcare Limited operates in the
health and medical diagnostic industry. The major business operations of Sonic Healthcare
Limited are to provide laboratory services, pathology services and radiology services3. As per the
annual report, Sonic Healthcare Limited has made investments in the innovative software tools.
As per the latest cash flow statement of the company, Sonic Healthcare Limited has made severe
investments for the purchase of property, plant and equipment for the business. Other investing
activities of the company includes proceed from the sales of non-current assets; payments for
investments, intangible assets; payments from loans and others. The annual report of Sonic
Healthcare Limited states that proceed from the issues of equity shares and other equity
securities is one of the major financing activities of the company. Other major financing
activities of the company are incomes from borrowings, repayments of the term loans,
transactions with non-controlling interests, dividend paid to the shareholders and others.
According to the declaration of the board of directors of Sonic Healthcare Limited, all the
financial reports of the company are prepared based according to the principles and standards of
Accounting Standard AASB 1039: Concise Financial Reports. At the time of auditing the
3 "Sonic Healthcare". Sonichealthcare.com, 2017. Online. Internet. 4 Sep. 2017. . Available:
https://www.sonichealthcare.com/about-sonic/overview/.

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financial reports of Sonic Healthcare Limited, the company follows the standards of Corporation
Act 2001. In case of auditor’s independence, Sonic Healthcare Limited follows the principles of
APES 110 Code of Ethics for Professional Accountants.
Part 2: Understanding the Industry
Health and medical diagnostic industry of Australia is one of the major growing
industries. As per the statistics for the year ended 2016, it can be noticed that this particular
industry had a total revenue of $ 4 billion. From the financial year 2012 to 2016, this industry has
been successful to register a growth of 5.7%. In Australia, more than 16500 people are employed
in this industry. It needs to be mentioned that there has been a 75.4% increase in employment in
this industry from the financial year 2010. In the health and medical diagnostic industry of
Australia, 29.3% is the average business profit margin that is good4. There are some key business
players in this industry; they are Sonic Healthcare Limited, Primary Healthcare Limited, I-MED
Radiology Limited and others. In this regard, it needs to be mentioned that health and medical
diagnostic industry is one of the most important industries in Australia as the majority portion of
Australian population use the services of this industries on a regular basis. For this reason,
providing good quality of medical and diagnostic services is the key factors in this industry.
However, the entry of various new competitors with superior technology is creating threats for
the existing companies of this industry. On the other hand, the shift in economic condition is
creating threats for the companies in this industry, as there is a chance to decrease the revenue
and profitability of the companies. Most importantly, various regulations and legislations from
the government end can pose threat for the companies in this industry.
4 Healy, Judith. Improving health care safety and quality: reluctant regulators. Routledge, 2016.

6BUSINESS RISK ANALYSIS REPORT
Part 3: Understanding the Legal Environment
At the time to carry on the business operations, Sonic Healthcare Limited has to comply
with different kinds of regulations. According to the annual report of Sonic Healthcare Limited,
the company has to comply with the regulations and standards of Australian Accounting
Standard AASB 1039 Concise Financial Reports. At the time of presenting the financial
statements, Sonic Healthcare Limited follows the principles of Accounting Standard AASB 101.
In addition, Sonic Healthcare Limited complies with the regulations of Corporation Act 2001 for
the audit operations of the company. The remuneration report of the directors of Sonic
Healthcare Limited is prepared based on the principles and regulations of Corporation Act 2001
section 300A. In this regard, it needs to be mentioned that Australia has a stable political
condition that supports the business operations of Sonic Healthcare Limited. In addition, the
companies in the heath and diagnostic industry of Australia have to comply with various
regulatory and legislative restrictions. For this reason, Sonic Healthcare Limited has to comply
with the regulations and legislations of Australian Government. Thus, based on the above
discussion, it can be seen that various regulations and legations are the important factors in the
health and diagnostic industry5.
Part 4: Understanding External Environmental Factors
It can be seen that there are some major external environmental factors that have large
effects on the business operations of the companies. There is not any exception of this fact in
5 Johar, Meliyanni, Glenn Jones, and Elizabeth Savage. "Healthcare expenditure profile of older
Australians: Evidence from linked survey and health administrative data." Economic Papers: A
journal of applied economics and policy 31.4 (2012): 451-463.

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case of Sonic Healthcare Limited health and diagnostic industry of Australia. Some major tools
are there for the analysis of the effects of external environmental factors on companies; they are
PEST Analysis, Porter’s Five Forces Analysis and SWOT Analysis. All these factors are
discussed below:
PEST Analysis
The major factors of PEST analysis are as follows:
Figure 1: Factors in PEST Analysis
(Source:6)
6 Gupta, Abhishek. "Environmental and pest analysis: An approach to external business
environment." Merit Research Journal of Art, Social Science and Humanities 1.2 (2013): 13-17.
PESTAnalysisPOLITICALECONOMICSOCIALTECHNOLOGICAL

8BUSINESS RISK ANALYSIS REPORT
Political Factors: Australia has a stable political condition that supports the growth of all the
businesses in the country. Some of the major results from the stable political condition of the
country are stable business environment, skilled employees, strategic time zone and others. In
case of the health and diagnostic industry of Australia, the political situation of the country is a
major political influence. The Government of Australia has taken various steps in order to
harmonize the healthcare and diagnostic industry of Australia.
Economic Factor: Deep effect of global economic crisis can be seen on the economy of
Australia. Still, in this situation, the Government of Australia has taken some major steps in
order to increase the amount of spending on the healthcare and diagnostic industry of Australia.
Due to the global economic downturn, reduction has been noticed in the per capita income of
Australians. This aspect has affected the revenue and profitability of the companies of healthcare
and diagnostic industry. For this reason, the healthcare and diagnostic companies are forced to
reduce the price of their products and services.
Social Factors: The increase in the ageing population of Australia is creating business
opportunities for the companies of healthcare and diagnostic industry. Thus, it is needed for
Sonic Healthcare Limited to capitalize these business opportunities. The expectations and
demands of the patient parties have been increasing due to the increase in different kinds of
diseases. This can be considered as the business opportunities of the healthcare and diagnostic
companies of Australia.
Technological Factors: Australia is well known for the technological developments in different
business sectors. In case of Sonic Healthcare Limited, the use of advanced technologies will help

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to create more business opportunities. Thus, it can be said that technological development has
positive effects on the business operations of Sonic Healthcare Limited.
Porter’s Five Forces Analysis
Porter’s Five Forces analysis is the most important tool in order to gain insight about the
competitiveness of a particular industry or country. There are five major factors in the Porter’s
model. They are discussed below:
Figure 2: Porter’s Five Forces Analysis
(Source:7)
7 E. Dobbs, Michael. "Guidelines for applying Porter's five forces framework: a set of industry
analysis templates." Competitiveness Review 24.1 (2014): 32-45.
ExistingRivalryThreatofNewEntrantsBargainingPowerofBuyersBargainigPowerofSuppliersThreatofSubstitute

10BUSINESS RISK ANALYSIS REPORT
Existing Rivalry among companies: In the healthcare and diagnostic industry of Australia, it has
been observed that there are some major competitors of Sonic Healthcare Limited like Primary
Healthcare Limited, I-MED Radiology and many others. It can be seen that all these companies
are of almost same size and power. For this reason, massive competition can be seen in this
industry. Thus, this threat is high.
Threat of New Entrants: Huge amount of capital is needed in order to establish business in the
healthcare and diagnostic industry, as the new companies need to expenses a huge amount of
money for the development of research and development facilities. On the other hand, the new
companies have to comply with different kinds of government rules and regulations for the
establishment of new business. Thus, this threat is low here.
Bargaining Power of the Buyers: As there are not many companies in healthcare and diagnostic
industry of Australia, the buyers do not have much power. They are forced to go to these centers
when they fall sick. Thus, this risk is low.
Bargaining Power of Suppliers: Limited number of suppliers can be seen in the healthcare and
diagnostic industry. The types of facilities, equipments and medicines that healthcare and
diagnostic companies need are not possible for everyone to supply. For this reason, suppliers in
this industry enjoy high power. Thus, the risk is high.
Threat of Substitute: There are not any substitute products of healthcare and diagnostic services
and products. People take these facilities whey they fall ill when they need it. Thus, there is not
any substitute products of these. Hence, this risk is low.
SWOT Analysis
The SWOT analysis of Sonic Healthcare Limited is shown below:

11BUSINESS RISK ANALYSIS REPORT
Strengths Weaknesses
 Over the year, Sonic Healthcare
Limited has been able to deliver quality
services to the people of Australia.
 The use of advanced technology in
various dimensions of business is one
of the major strengths of Sonic
Healthcare Limited.
 Well-qualified, experienced and
efficient employees of the company are
strength of Sonic Healthcare Limited.
 In the process of delivering high-level
of quality services in lower prices,
Sonic Healthcare Limited sometimes
has to face high cost that reduces that
reduces the profitability of the
company.
 Sometimes, it is not possible for the
people from middle-class families to
afford the services of Sonic Healthcare
Limited. This can be considered as a
weakness.
 Little access to some of the major
healthcare services is a weakness of the
company.
Opportunities Threats
 Healthcare and diagnostic industry of
Australia gets good support from the
government of the country and it helps
to create business opportunities for
Sonic Healthcare Limited.
 Recent economic development of
Australia has been a major force behind
the increase of disposal income of
Australian people. This aspect creates
business opportunities for Sonic
Healthcare Limited.
 The research and development cost of
this industry s very high and this can be
a major threat in the near future for
Sonic Healthcare Limited.
 It is the responsibility of the
government to develop the
infrastructure of primary health
services.