Initial Risk Assessment
Nike Corporation was incorporated in 1967 under the law of the Oregon State. The primary business of the firm is to design, to develop, and make global marketing and selling athletic equipment, apparel, footwear, services, and other accessories (“Nike 2018 Form 10K” 55). As the world’s largest seller of athletic clothing and footwear, it uses Nike-owned retail stores, and its digital platforms distribute and sell its products to virtually all countries across the globe.
While Nike is the leading seller of athletic products and services in the world, it encounters a considerable number of risk factors. For instance, the forward-looking statements are inherent with uncertainties and risks, which may cause their differences with actual results (“Nike 2018 Form 10K” 60). Also, with the company operating in a rapidly changing environment characterized by high competition, there are often emerging risks, which make it difficult for the management to predict or assess the impacts of these risks.
Stiff competition is another risk affecting the Nike Company. The changing design of consumer products in the global market influences the demand trend for Nike’s products. The industry for athletic products is globally competitive. Today, Nike competes with a significant number of leisure and athletic footwear firms. Marketing expenditures, technologies, product offering, digital marketing avenues, and customer services are among the key areas where intense competition is prevalent (“Nike 2018 Form 10K” 60). For this reason, Nike should embrace strategies that will adequately address the competition, failure to which its market share will decline, and the cost of production will increase.
Regulatory and Compliance Concerns
Under section 13 or 15 (D) of the Security Exchange (SE) ACT of 1934, Nike Inc. is obliged to present an Annual Report to SE for every fiscal year ending May 31 and a Transition Report for the transition period. In addition to its employed specialists, Nike Inc. also seeks services of various professionals, such as sports coaches, podiatrists, orthopedists, and athletes who help in determining the design, the manufacturing process, and in meeting compliance and safety requirements of its products (“Nike 2018 Form 10K” 57).
In the 2018 financial year, Nike had to comply with rigorous personal data and business protection regulations that came into force all over the world. The company manager was aware that although the policies were costly to implement, failing to comply with these policies would ruin its reputation and attract legal suits (“Nike 2018 Form 10K” 63). For instance, the company had to strictly ensure that personal information was highly protected to avoid legal suits from the government entities, which would damage its credibility and reputation that could in turns hurt its revenues and profits.
Nike’s international operators are also obligated to comply with the US Foreign Corrupt Practices Act (FCPA) as well as other anti-corruption regulations. Since the firm sources most of its products from outside the US territory, Nike Inc. has proposed policies and procedures that serve as guidelines for the compliance to the FCPA. Also, Nike has more than hundreds of outsourced contractors who help the company in manufacturing the products. Besides, Nike’s license agreements allow unaffiliated parties to contract or make products using its intellectual property (“Nike 2018 Form 10K” 63). Nike requires contracted industries to consider safety and compliance with environmental regulations for the benefits of its employees.
According to the SEA of 1934, management is mandated to formulate and maintain annual internal controls over financial reporting. This legal provision seeks to ensure that reasonable assurance is given concerning the regular financial reports and formulation of financial statement for external auditing based on GAAP of the US. However, the limitations of internal control over fiscal reporting make it hard to prevent fraud or inaccurate financial statements. Such internal controls are prone to manipulation, where members of management agree to cooperate (“Nike 2018 Form 10K” 92). As a result, the degree of compliance with the laid down policies and procedures may be questionable.
Works Cited Nike 2018 Form 10K, 2018, https://s1.q4cdn.com/806093406/files/doc_financials/2018/... /Nike-2018-forum-10K. Pdf. Accessed 19 May 2019.