LSB Memo

Question 1

(a)

2 marks per risk if well explained. Can also receive 1 mark only if not well explained or if a
relatively minor risk

Risks must be applied – generic risks should not receive marks

1. Listed company = additional reporting requirements

2. Operate in one country only – risk is not diversified
3. Food and home delivery is very competitive field – strong international competition
4. App may malfunction, Very reliant on IT
5. Will have to collect payment information – which is very sensitive – high risk of hacking
6. Dependent on Google Maps – external party
7. Delivery persons independent workers = difficult to discipline, may easily go to competitor
8. Delivery persons get fixed percentage = therefore may be more likely to not follow traffic
rules to increase volume of deliveries
9. 20% of tip to LSB = reputational risk for not treating delivery people well. Demotivational
10. Sudden increase in profit = may be indicator of risky accounting practices, especially given
that high debt levels and further expansion plans
11. India is completely different market = difficult to understand customs and expectations
12. Currency risk with India expansion
13. CEO has given his shares as collateral for personal loans – may be more inclined to
encourage aggressive accounting applications

There are more potential risks – they can also receive marks if well explained.

(b) 2 marks per risk if well explained – but risks must be related to changed operating environment

1. Have to comply with rules – if they don’t, they might get shut down
2. Less cash flow, as customers only focused on necessities due to their own lack of income
3. Compliance with rules may lead to additional costs
4. Potential liability if they spread the virus
5. Possible that customers will not order food, because of fears of coronavirus
6. Potential liability if delivery person contracts virus during deliveries – is LSB liable?

There are more potential risks – they can also receive marks if well explained.

Question 2

Very wide possible answers.

Not reporting the issue or dealing with the issue will gain maximum 1 mark

1. Unacceptable behaviour
2. Will have to investigate
3. Information must be gathered from secretary, or she must be advised to report it, and/or to
get legal advice
4. If found to be true, CEO must be sanctioned
5. Reputational damage to company is IRRELEVANT