Risk Management Issues and Internal Controls Essay

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The 10-K filings of Boeing and Lockheed Martin Corporation indicate that these organizations have to face certain risks. In particular, one can mention that Boeing is closely dependent on the limited number of commercial airlines (The United States Securities and Exchange Commission unpaged). The purchasing power of these customers can be affected by various factors as international relations, trade policies, epidemics, environmental regulations, competition and so forth. Each of them can limit the ability of an airline company to extend its fleet and purchase the products of Boeing. If these corporate clients encounter financial difficulties, Boeing will also be adversely affected.

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Furthermore, the management of Boeing cannot always ensure that their clients will fulfill their purchase commitments, especially after the end of the contract (The United States Securities and Exchange Commission unpaged). This is one of the main obstacles that Boeing has to overcome. Therefore, one can argue that Boeing can be strongly affected by the external forces that are beyond the control of the management.

It should be taken into account that the management exercises internal control over its financial reporting. The independent auditors believe that they fully disclose the information about the organizational performance and possible risks (The United States Securities and Exchange Commission unpaged). Moreover, the company uses price escalation formulas which enable the management to reduce potential losses (The United States Securities and Exchange Commission unpaged).

Nevertheless, the representatives acknowledge that these tools cannot completely eliminate risks. Therefore, this corporation cannot secure itself against possible losses that can be attributed mostly to the behavior of corporate clients. This is one of the main aspects that can be identified. This issue is of great importance to potential investors who want to evaluate the performance of this company and its long-term sustainability.

In turn, Lockheed Martin Corporation also has to manage some significant risks. To some extent, these threats are similar to the problems that Boeing encounters. In particular, this organization strongly relies on the contracts with the government. One should take into consideration that approximately 82 percent of their sales can be attributed to various governmental organizations (Lockheed Martin Corporation: Form 10-K unpaged).

More importantly, the main customer of this corporation is the Department of Defense that purchases various technologies from this company (Lockheed Martin Corporation: Form 10-K unpaged). In turn, the changes in the annual budget adopted by the government can lead to the significant losses for the company (Lockheed Martin Corporation: Form 10-K unpaged). Overall, the financial performance of Lockheed Martin Corporation can be influenced by various factors such as political situation in the country, economic development, international relations, and so forth.

The external auditors of this company believe that this organization exercises full control over its internal performance. Furthermore, its reports can tell the investors about the possible risks that this company can take (Lockheed Martin Corporation: Form 10-K unpaged). More importantly, its financial reporting is accurate. Overall, the management of this corporation ensures that the assets of the organization are run affectively. This is the main strength of this company. Nevertheless, their analysis indicates Lockheed Martin Corporation is vulnerable to external risks that cannot be fully mitigated by the business administrators. This is one of the main issues that should be taken into account by people who evaluate the sustainability of this organization.

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Works Cited

The United States Securities and Exchange Commission. Boeing: Form 10-K. 2012. Web.

—. Lockheed Marting Corporation: Form 10-K. 2012. Web.

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IvyPanda. 2022. "Risk Management Issues and Internal Controls." April 7, 2022. https://ivypanda.com/essays/risk-management-issues-and-internal-controls/.

1. IvyPanda. "Risk Management Issues and Internal Controls." April 7, 2022. https://ivypanda.com/essays/risk-management-issues-and-internal-controls/.


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IvyPanda. "Risk Management Issues and Internal Controls." April 7, 2022. https://ivypanda.com/essays/risk-management-issues-and-internal-controls/.

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