Assessment of the impact of risk factors on the financial performance of licensed buying companies in the internal marketing of cocoa in Ghana: A case study of Fortune Tree Company Ltd.
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Date
JULY 2015
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Abstract
Risk may be defined as the likelihood of a negative outcome of an institution and this may inhibit the success of Licensed Buying Companies. This study aimed at assessing the impact of risk factors on the financial performance of Fortune Tree Company Limited as a Licensed Buying Company in Ghana. Through an explorative qualitative research approach, thirty five (35) experienced employees were interviewed out of the fifty three (53) to ascertain the issues on the ground regarding the various risks factors associated with the financial performance of Fortune Tree Company Limited. The findings of the study showed that, certain activities of purchasing clerks which include improper drying of cocoa beans before taking them to takeover points and also defaulting in the payments to farmers when cocoa beans are purchased were threats to the overall financial performance of Fortune Tree Company Limited. Moreover, production risks that were identified to be associated with the operations of Fortune Tree Company Limited included disease and pest attacks, bushfires, drought, soil infertility and excessive rainfall. Environmental risks that were discovered to be associated with the operations of Fortune Tree Company Limited included smuggling of cocoa by some farmers and purchasing clerks to nearby countries and also breakdown in some of the tools of trade such as tarpaulin and cocoa scales. However, market risks associated with the operations of Fortune Tree Company Limited consisted of delays at the takeover points (ports) as well as higher interest rates accrued on monies borrowed from banks for the purchasing of cocoa. Another risk that was identified as market risk was farmers who were pre-financed but could not pay back the money. These kinds of risks identified in the study had contributed to financial loss to the company especially in the year 2013. In conclusion, the study revealed that the various kinds of risk factors identified, have serious impact on the financial performance of Fortune Tree Ghana Limited. The study therefore recommended the need for management of Fortune Tree Company Limited to train its purchasing clerks on risk management and also set up an inspection team that will ensure that all cocoa beans taken to the takeover points by purchasing clerks are well dried and also in the best condition for export. Additionally, the study recommended that policy on pre-financing farmers before bringing their produce be strengthened so as to reduce losses.
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A Thesis submitted to the School of Business, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the award of Master of Business Administration Degree in Accounting,