Amazon COSO Analysis: Enhancing Risk Management and Internal Controls for Growth

Amazon is one of the biggest online selling companies that were founded by Jeff Bezos in 1994. The company has gradually grown from an online bookstore to the largest e-commerce and technological company. For its success, there are core values that guide the company. Some of these values include customer obsession. Amazon main focus is on its customers. The company is committed to understanding its customers’ expectations, providing wide range of products for exceptional customer experience (Huang, et al, 2020). This has helped in customer satisfaction by helping them in product selection and pricing of their products. Ownership is another core value that encourages the sense of ownership among the employees. The company believes employees who take ownership help in innovation which helps in problem solving, accountability and encourages the employees to treat the company as their own.

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Amazon COSO Analysis and Establish Processes

COSO framework consists of five interrelated components which include risk assessment, control environment, control activities information and communication and monitoring. Some of the components that amazon should apply are;

Control Environment

This component is special to a company in founding integrity and ethical behaviour throughout the organization. It is the setting of the right attitude and ethical standards which is transferred through all the levels of the company which includes the juniors and the seniors. If employees and the leaders of the company lack discipline, customer satisfaction will be poor and the company will make reasonable losses. Without the customer a business cannot grow hence customer satisfaction is essential. To establish control environment in Amazon, the company should organize regular training on its employees on leadership and ethical conduct to create a code of conduct that reflects the company’s values (Chiu & Wang, 2019). They should also have a hotline to encourage the reporting of unethical behaviour by their employees from their customers. This will help the company to get its customer’s feedback on their services and improve on them.

Risk Assessment

This component involves identifying and assessing risks related to achieving objectives. When a company understands the potential risks, it is able to address the challenges that might hinder its ability to achieve their goals like customer satisfaction and profit maximization. It involves identifying both internal and external risks factors that can impact the company (Oliveira, et al, 2020). Some of the external factors include competition from other companies who are providing the same services. They should be able to provide extra satisfaction to its customers. Internally, the company should involve their employees to help them in decision making which promotes development.

To achieve risk assessment, Amazon should implement a risk assessment process involving risk identification workshop, scenario analysis and utilizing risk management tools. Also it should establish a risk management committee to oversee and update risk assessment periodically. This will reduce surprises in case of an implementation of a certain project.

Monitoring

Monitoring is very crucial to the growth and development of a company. It involves overseeing all the activities including services in a company which allows assessment and adjustment of control processes. This ensures that all the established controls are operating effectively. Monitoring also allows assessment and implementation of decisions made in the company and their impacts. If the implemented processes and decisions are not effective a company calls for change and adjustments that will promote effectiveness. it gives a company an overview of its performance for the past few months or years after implementation of a certain decision.

For Amazon to implement this component there should be real-time monitor tools that function to rating the processes that a company has implemented. With these tools, a company is able to access their performance level without interference (Mjaku, 2019). Also conducting periodic internal audits to help keep track on their finances which is very crucial to a company. Financial loss can be a big blow to accompany and can eventually cause a loss and hence the need of regular internal audit.

Information and control

Information and control is another essential COSO component which involves communicating effectively internally and externally. Communication is very important as it allows employees to work towards a common goal provided by the management. It is important to give information with clarity to ensure that the goals of accompany are communicated effectively. This ensures that everyone in the company is aware of their control activities which also involve communicating with external stakeholders to maintain transparency.

For Amazon to establish information and control, it should develop clear and concise communication channels in various sectors by conducting regular training sessions, providing control responsibilities on control procedures (Akinleye & Kolawole, 2020). Every employee should have a clear communication about their objectives in the company to avoid conflicts between them and their leaders. This will create a healthy working environment as everyone is aware of their responsibilities. Also, any changes should be communicated to avoid any inconveniences. The company should also establish reporting mechanism and discussing control related issues both internally and externally. This will help the organization to work on their weaknesses and get into the opportunities that a market creates.

Conclusion

By implementing these four COSO components and their associated processes in Amazon, it can enhance its overall performance by aligning it internal control system. This helps a company to mitigate risks both internally and externally. It will also help improve on customer satisfaction and also reduce employee turnover. Customer satisfaction is crucial and hence Amazon should consider such components.

References

Akinleye, G. T., & Kolawole, A. D. (2020). Internal controls and performance of selected tertiary institutions in Ekiti state: A committee of sponsoring organisations (COSO) framework approach. International Journal of Financial Research, 11(1), 405-416.

Chiu, T., & Wang, T. (2019). The COSO framework in emerging technology environments: An effective in-class exercise on internal control. Journal of Emerging Technologies in Accounting Teaching Notes, 16(2), 1-10.

Huang, Y., Liu, H., Li, W., Wang, Z., Hu, X., & Wang, W. (2020). Lifestyles in Amazon: Evidence from online reviews enhanced recommender system. International Journal of Market Research, 62(6), 689-706.

Mjaku, G. (2019). Control activity and monitoring as COSO framework elements and their impact on the performance of entity: case study republic of Kosovo.

Oliveira, K., Méxas, M., Meirino, M., & Drumond, G. (2019). Critical success factors associated with the implementation of enterprise risk management. Journal of Risk Research, 22(8), 1004-1019.