SHR Corporation is a midsize, publicly traded direct marketer and retailer of outdoor sporting goods based in the United States. Its common stock is listed on the New York Stock Exchange under the symbol “SHR.” The company prides itself on selling high-quality outdoor sporting goods at competitive prices and providing outstanding customer service. SHR directly markets its merchandise through two major channels — its catalogues and its website — to customers in the United States and nearly 100 other countries. It currently has retail stores and distribution centres in the United States, Canada, and Europe. A sales force is responsible for dealing with buyers at both the wholesale and retail levels.SHR Corporation recently purchased MVF Company, a manufacturer of high-quality outdoor sportswear. The manufacturing process involves the use of technology-based machinery to cut cloth into various sizes, sew the cloth to conform with the size requirements of the sportswear, and use a series of dies and chemicals to ensure the colours meet consumer expectations. SHR also purchases merchandise from highly reputable vendors in the United States and several other countries.SHR Corporation has enjoyed several consecutive years of sustained growth as reflected in the selected financial information, expressed in millions of dollars, presented below: 200920082007Total Assets$700.5 $546.5$491.3Sales Revenue763.5665.7589.8Operating Income57.545.038.9Net Income34.3 29.026.0Senior management is continuing its efforts to grow the company, increase its market share, and enhance shareholder value by:Further expanding its direct sales globally.Systematically increasing the number of retail stores.Selectively acquiring other businesses that are aligned with its core competencies.Increasing competition over the past several years has motivated management to continuously pursue new and innovative ways to differentiate SHR’s products, streamline the company’s business processes, and take full advantage of advances in information technology. Operating efficiency is a critical component of SHR’s competitive pricing strategy.The risks that concern senior management the most heading into fiscal 2010 include the following:The current economic slowdown may decrease discretionary consumer spending, which in turn will adversely affect the company’s sales and profitability.Mounting competition in the industry may make it increasingly difficult to differentiate the company’s high-quality merchandise at prices consumers are willing to pay.Deterioration of the company’s brand or its positive image in the marketplace may adversely affect sales and profitability.Failure to successfully integrate newly acquired businesses may adversely affect the company’s performance.The inability to generate operating efficiencies and leverage information technology may adversely affect the company’s profits.Placing too much emphasis on operating efficiencies may adversely affect product quality and customer service.During the first six months of 2010, SHR has experienced slower sales growth and higher operating expenses than anticipated. There is growing concern that forecasted performance targets for the year will not be achieved.Required:Given the background information for SHR, apply the COSO ERM framework to identify, assess, and manage its risk. You should limit your response to approximately 750 words. Specifically:Define SHR’s strategic objectives.Identify three events that you feel might adversely affect the entity’s ability to successfully implement strategy and achieve objectives.Break down these events into their inherent risk and residual risk categories.Based on the limited information provided in this case, provide a recommended risk response to these events according to the COSO categories of avoidance, reduction, sharing, and acceptance.