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Justification for an Internal Control System

.... controls regarding risk mitigation. For example, we are insured against potential losses of shipments due to unforeseen weather circumstances, including the events transpiring in the gulf. We also adopt a so-called portfolio based strategy of risk management. Regarding our popular Kids Chicken Nuggets, we use multiple suppliers of poultry to ensure that if one source is deemed unsafe, dramatically increases in price, or becomes unavailable, we will still have access to the needed input materials of white chicken meat.

However, the problem with any external approach of risk management is that it assumes that things will go wrong, and merely provides a way of mitigating the risk, rather than avoiding risks altogether. Regarding insurance, quite often even a strong insurance policy such as ours will not provide enough money to pay for the losses after a disaster. And not all potential hazards are covered by insurance policies. For example, a house insured for fire and flood damage might be hit by golf ball-sized hail during a freak storm. Using salmonella-tainted peanut butter by accident could result in a costly lawsuit and if our workers are found to have deviated from standard operating procedures, insurance many not cover the damages