Pumpkin Patch’s business is reliant on information technology systems to manage stock, costs, stock despatch, a retail database and retail sales. These computer based systems are essential to managing the business. Pumpkin Patch is exposed to a number of risks, including:
Complete or partial failure or sabotage of the information technology systems;
Inadequacy of information technology systems used by Pumpkin Patch due to, among other things, failure to keep pace with developments;
Capacity of the existing systems to effectively accommodate Pumpkin Patch’s growth and business development; and
Inability of separate systems to successfully integrate and communicate with each other.
To mitigate some of these risks, Pumpkin Patch has disaster recovery, system development and strategic plans
in place. However, any failure or inadequacy in Pumpkin Patch’s systems could result in business interruption, the loss of customers, damaged reputation and weakening of Pumpkin Patch’s competitive position and could therefore adversely affect the business. No assurances can be given that Pumpkin Patch’s information technology systems will, in the future, be adequate to manage the business or that its disaster recovery and system development plans will be adequate.
Public and Product Liability
Pumpkin Patch markets its products in several countries. Regulations relating to product quality and safety, and public and product liability differs in each of these countries. Pumpkin Patch has procedures in place to ensure that relevant requirements are reviewed and evaluated prior to supplying product to these countries, and, where appropriate, insurance cover is obtained.There is a risk, however, that notwithstanding these procedures,
Pumpkin Patch may be liable in respect of its product supplied in New Zealand and internationally.
Pumpkin Patch’s performance is dependent on the efforts and abilities of its executive management (see pages 23 and 24). While each of these executives is party to an employment contract, under the terms of the contracts each executive is permitted to terminate the contract upon notice. Pumpkin Patch’s success is also dependent on its ability to hire additional personnel as necessary to meet its business needs. Whilst every effort is made to retain key employees, plan for succession and recruit new personnel as the need arises, the loss of one or more key personnel may adversely affect Pumpkin Patch’s business and earnings or growth prospects.
Reputation or Brand Damage
Pumpkin Patch’s reputation and brand are valuable components of its business. Pumpkin Patch has in place procedures to set relevant terms of trade with suppliers and buying agents to ensure that the quality of the product is maintained and also to deal with other activities of suppliers which could affect the quality of the product or the reputation or brand of Pumpkin Patch. Notwithstanding these efforts, it is possible that customers’ perceptions of a reduction in quality in Pumpkin Patch products or a perceived association by Pumpkin Patch with socially irresponsible behaviour or supply practices may damage Pumpkin Patch’s reputation or brand and thereby adversely affect its earnings or growth prospects.
Pumpkin Patch is reliant on third parties to deliver its stock to its distribution centre in New Zealand and stores in various markets around the world. Industrial relations at sea ports and airports in New Zealand and overseas are traditionally volatile. There is a risk that delivery of product to the distribution centre and stores may be delayed by reason of industrial dispute or other factors affecting the transport arrangements. This may adversely affect Pumpkin Patch’s ability to deliver stock to the stores which may adversely affect business and earnings.