Problem: Pizza Inc., a pizza take-out and delivery chain, is experiencing decreasing revenues and is steadily losing market share despite favorable market testing of its products/recipes. The company's strategy has traditionally been defined as gaining increased market share through customer satisfaction. Management has asked your internal audit function to help them understand the reasons for declining sales at the Uptown location and how the decline might be related to internal operations. Your prior internal audit experience and direct observation of work performed at the troubled location identified the following info: In 20XX, Pizza Inc.'s corporate office screened this site location prior to construction to ensure that neighborhood demographics supported the ideal business environment. This resulted in locating the chain near a suburb where typical residents were in the mid- to upper-middle class income range and who owned homes with three to four bedrooms. Despite the favorable location, the site you are reviewing continues to have gross and operating margins lower than their local competitors. On the Job training is the primary method used by managers to communicate company policy and procedures. However, documented policies and detailed procedures do exist for each key process and are available by request from the shift manager. Employees are typically male, 17 to 23 years old, with little or no prior work experience at the time of hire.

Unscheduled absenteeism is high and part-time shift assignments are rotated frequently to reward those individuals who regularly work as scheduled. The internal audit team noted in last year's review that management has documented an average annual turnover rate of 18 percent. The shift manager is responsible for ensuring that all pizza orders are completed within the advertised time dead lines, a long held competitive advantage. Drivers are required to record on a delivery ticket the time of their arrival at the delivery location. This time is compared with the time recorded on the order ticket to calculate total elapsed minutes. Review of the last six month's delivery tickets indicates that the company benchmark delivery cycle time of 25 minutes from "placing the order to when we're on the doorbell" has slipped to an average of 43.8 minutes. For months there have been persistent rumors about bets placed on one driver's notorious reputation for beating the delivery deadline every time. Delivery promptness is also dependent on the volume of completed pizzas at any given time and the neighborhood traffic pattern. Drivers are initially screened at hire for outstanding traffic violations or other infractions. The original site manager posted a large map on the wall so drivers can identify their routes. Mileage is reimbursed as part of the compensation for using their own vehicles so each driver turns in a mileage log at the end of the shift to indicate both starting and ending mileage. The manager randomly checks the recorded starting or ending mileage against the cars' odometers.

Pizza Inc.'s company policy requires that each location restrict itself to a five mile service area; however, if an order comes in, the work is never refused. Phone orders occur in predictable patterns, but walk-in orders are more random and less frequent. Scheduling staff requirements to match the anticipated workload is done one week in advance. The average workload during peak hours is 29 orders taken per hour. Orders are manually written on pre-numbered pads. When mistakes are made, the original order ticket is tossed out and a new order form is created to avoid confusion. Information captured includes: date, time of call, name, address, phone number, type of crust, and toppings requested. Hand calculators are available to assist with pricing quotes that are told to the customer and recorded on the delivery ticket. Shift managers check every order to ensure that info is complete prior to processing the order. Employees who make the pizza are instructed in the proper quantity of ingredients for various standard topping combinations. Frequently, special request orders are received that add items to the standard recipe. Measuring cups are available, but your internal audit team noted on prior visits that when activity reaches peak load, employees generally "know" how much of key ingredients to use. The manager monitors the supply cabinets and refrigerators at the end of the shift to ensure adequate inventory is on hand.

Several months ago, the evening shift manager determined that inventory deliveries should be increase to four per week, up from the usual three. Oven temperatures are monitored closely to ensure the pizzas are properly cooked. Employees who bake the pizza rely on a centrally located wall clock to time the various combinations. There are cooking guidelines posted for each standard topping combination with instructions on what to do if a pizza is overcooked. Generally these are available to employees for snacking. All employees are responsible for ensuring the baked pizzas are cut, boxed, had-labeled for delivery, and assigned to the next available driver. (Drivers work in a FIFO method.) Your internal audit team determined, after reviewing info received from various external sources and reading Pizza Inc.'s internal communications on strategy, mission, and vision, that linking the business risks to business processes will assist Pizza Inc.'s CEO, and chief operating officer with identifying the critical business processes and key success factors for each process. As leader of the internal audit team, you have agreed to:

1. Map the identified risks according to their inherent impact and likelihood of occurrence.

2. Based on the case facts provided above, identify controls (actions management currently takes) to mitigate the identified risks and put them on the risk/control matrix.