Big Rock Brewery Inc. Harvard Case Solution & Analysis

Big Rock Brewery Inc. Case Solution

Client Risk Profile

The client risk profile will be used to analyze the potential threats in the overall entity process, which means that the company can damage its internal and external controls after including in some of the circumstances where it is likely to subject for entity risk. Over here,some of the assumptions have been taken into consideration for analyzing the upcoming threats involved during the course of action.

Risk in the nature of business

As Big Rock Brewery was only focusing of the natural craft beer, thereforeit has the potential threat of various competitors which provide more quality services than the company itself and therefore, the only revenues of Big Brewery are coming from the same products. In the price and quality factor, the company is giving the competitive price advantage to its consumers however,the demand of such products can hinder the performance of the entity due to the new entry of potential competitors in the industry.

The other risk was the level of debt which it held to run the business as due to its low amount, the company would besubject to pay more taxes as compared to the debt ratio (where tax deduction has been granted to the company).) In the start of 2015, the long-term debt has been taken by the company to fill the right amount of earnings through tax deduction however,the limited volume of sales and less operations could damage the overall entity’s reputation.

The operations are not diversified because of the limited focus on sale for special product therefore, the company can negatively affectits going concern factor and subject to involve in a business risk of future performance.

Risk under the industry level

As discussed earlier, the company has limited number of sales volume and temporary market to capture therefore,the competition inthe industry is intense to survive. In the market of Alberta and Canada where it operates, the two major companies as Busch and Molson Coors control over 31% and 26.9% of the overall market respectively.

In the last decade, Canada faced an intense competition in the field of natural beer aspeople were likely to drink more beers after the working hours for relaxation. The net income of Big Rock in 2015 decreased due to large price competition among the market giants, which shows that the company was unable to meet the target to generate more revenues.Thisindicates that the cost of producing beer has changed and affectedthe level of inventory and other elements associated with it.

However, due to these fluctuated results, Big Rock is now facing the inherent risk for forecasting the future performance and also to review the fact that its going concern will damage the company’s reputation and lead ittowards the business risk.

Preliminary assessment of overall materiality

It is determined that the level of materiality can be assessed either by quantitativeor qualitative methods. In the case of quantitative method, the company must decide the level of materiality of the amount which will be best for the investors to assess the current performance. For example, earning after tax can be suitable for the company to assess in order to perform accordingly through transparency factor.

On the other hand,the internal processes of the company, which is responsible to control the entire operations, can be considered as the legal structure, compliance or other statuary control process. The function of these processes is to manage the company’s quantitative matters in order to provide relevant information to its customers. Therefore,the qualitative factor can be directly proportional to the company’s quantity issues...............

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