Sy’s Fish Company Risk Analysis Essay

As Sy’s business grows there are certain risks and that must be acknowledged and addressed in order to make operations run smoothly and efficiently. Below are the risks that have been identified and recommendations to mitigate them. Risk: Sending documents to Sy via mail. There is a high probability that the documents could be lost and therefore the transactions never recorded. Mail can take up to a week to receive so the timing would be affected. Transactions would be recorded in the wrong period and adjustments would have to be made to correct this. Recommendation: Sy should implement an information technology system so documents can be recorded in a timely manner and not lost in the mail. Risk: Return policy There is not a limit of days a customer has to return the fish. A customer can order fish, and if they are unhappy three months later, they can return the fish for a full refund no questions asked. This is a risk because customers can take advantage of this policy therefore affecting sales revenue. Recommendation: Sy sells only fresh fish to customers. Because of this, he needs to change his return policy to 15 days. This will ensure that customers do not wait to return fish months later after the fish has gone bad. Risk: Bookkeeping and Job Responsibility All of Sy’s bookkeeping is done by various employees from various stores. Having employees from various locations doing different parts of bookkeeping is risky because not one person is held responsible. Transactions cannot be collaborated from beginning to end until all the paperwork is received from each individual. Recommendation: If Sy plans on growing his business he is going to have to hire more employees to help with the bookkeeping. He should have separation of duties to avoid falsifying of information. All the bookkeeping should be done in one location. Internal controls should be set up for the process of recording transactions. Risk: Accounts payable procedure Natalie holds all the miscellaneous payable documents for payment at the end of the month. She records the document being received on the same day she issues payment. This is a risk because it effects what period the documents are recorded. Natalie pays all fishers in one lump sum instead of separating each payment. This is risky because it could be recorded incorrectly and there is no way to know which order was input wrong. Recommendation: She should record each miscellaneous payable document on the date received and the date paid should be when the check was written. She should record each fisher payable document individually. Risk: Bad Debt Sy does not know how much each customer owes or when they will receive payment. This is a risk because he will not be able to account for bad debt. Recommendation: He should make an accounts receivable ledger to study which customers have not paid and how long they are past due. By keeping records it will be easier to account for bad debt. Risk: Payables checking account Money in the payables checking accounts that has not been claimed cannot be traced back to the vendor. This affects revenue recognition and is a risk because Sy does not know where this money is going. Recommendation: There should be a record of what vendors have cashed their checks. Implement a direct deposit system to pay vendors and fishers. Risk: AFS securities There is no documentation on Sy’s AFS securities. There are no footnotes or explanations on the beginning balance sheet (Appendix 1). This is a risk because external users do not know where Sy’s investments are going. If there are no footnotes or explanations for the security investors they might not want to invest. Reccomendations Sy needs to add additional disclosures to explain his security and what he plans on doing with it.