7 - The governing body and strategy Flashcards
What is considered the strategic expectation in a commercial organisation?
Maximising the long-term return to owners and enhancing the value of assets - promoting the success of the company
Governance involves responsibility and accountability for
the satisfaction of stakeholder expectations
What sits in the middle of the intersection between governance and operational management?
The role of the CoSec / governance professional
Operational management involves responsibility and accountability for
the delivery of process
Key differentiator between governance and operational management
Timescale involved
Op. management - short-to-medium frame
Governance - long-to-medium frame
Strategy should be aligned in triangulation with:
Risk and Control
4 stakeholder groups which must be considered per S.172
- Members as a whole
- Employees
- Suppliers and customers
- Community and environment
2 key benefits of controlling risk
Maximising the upside
Minimising the downside
Other than consideration of stakeholders, other required aspects of promoting success of company per S.172 (3)
Long-term consequences
High standards of business conduct
Acting fairly between members
3 areas in which stakeholders can be classified
Internal (owners and employees)
Market (suppliers and customers)
External - direct (banks) and indirect (government, environment/community)
Primary and secondary expectations of owners
P - financial return
S - added value
Primary and secondary expectations of employees
P - pay
S -work satisfaction, training
Primary and secondary expectations of customers
P - supply of goods and services
S - quality
Primary and secondary expectations of creditors
P - creditworthiness
S - payment on time
Primary and secondary expectations of suppliers
P - payment
S - long-term relationships
Primary and secondary expectations of the community
P - safety and security
S - contribution to community
Primary and secondary expectations of government
P - compliance
S - improved competitiveness
What does stakeholder mapping involve?
Look at the levels of power and strategic influence of different stakeholder groups and considering the impact of not satisfying their expectations
down the left - low/medium/high power to disrupt business
across the top - low/medium/high interest in business
Stakeholder mapping - 4 groups into which stakeholders will be categorised and how org needs to engage with them
Low power to disrupt, low interest - monitor
Low, high - keep informed
High, low - keep satisfied
High, high - actively engage
5 pros of stakeholder engagement process (there are more)
- Aids development of long term strategy
- Allows development of shared objectives
- Aligns strategy with activities of other orgs/groups
- Deters high risk activity
- Improves how org is viewed by prospective stakeholders (think investors)
4 cons of stakeholder engagement process (there are more)
- Impossible to satisfy everyone (usually)
- Process can be long
- Danger of interference from stakeholders if strategy needs to shift (or difficulty to change strategy without alienating stakeholders)
- Reduced independence to respond quickly
Two extremes of power dynamic
Traditional - centralised, bureaucratic, structured
Empowered - devolved, participative, fluid
Within which extreme of the power dynamic is their a greater ability for stakeholder influence
Empowered
Which extreme of power dynamic is typically focussed around a rational strategy approach?
Traditional
Empowered approach has a more collective and emergent approach
4 core forces which are continually impacting the organisation and its stakeholders
The law (UK, EU, worldwide)
Best practice (codes, customer expectations, industry norms)
Societal expectation (avoiding media criticism)
Visibility - dichotomy which exists between what we are willing to reveal about an organisation, and its strategic direction
Simple definition of risk
Any circumstance with more than one possible outcome
Is risk management important for a business? (good for exam)
Risk management is a critical aspect of any business. All companies must consider and
be explicit on their risk appetite, processes, and management. This includes having
backup options for business continuity planning.
Two possibilities for risk appetite
Risk averting
Risk seeking
A risk averse person (or group): (3)
- Looks for certainty of outcome (preferring facts to theories)
- Prepared to sacrifice opportunities that might exist for change
- May be intolerant to challenge
A risk seeking person (or group): (3)
- Accepts that life is full of options and uncertainty (preferring imagination to facts)
- Has confidence using their abilities to counter whatever they may face
- May dismiss the realities that confront them
Define risk capacity
Maximum level of risk that can be taken
5 perspectives (types) of organisational risk (with examples)
Financial - gearing considerations
Operational - supplier/customer issues damaging reputation
Competition - losing market share often as a result of reputational damage
Environment - tax affairs of entities damaging reputation
People - behaviour/words of leaders
4 aspects of risk control
KPIs
A risk register
A risk matrix
Balanced scorecard (has many uses asides from risk)
What does a risk matrix measure (2 axis)
Severity (impact)
Probability (likelihood)
What are the two options for risk matrix?
3x3 (low, medium, high severity and likelihood)
5x5 (severity and likelihood will be graded 1-5)
Disadvantage of risk matrix - how to mitigate
Ignores timeframe or indication of basis of data that has been used to produce it.
Useful to use risk register as well which will provide more detailed info
On what would risks be listed, categorised and weighted
A risk register
Three dimensions (stages) of risk management
Identification
Evaluation
Mitigation
Define reputation
The beliefs or opinions that are generally held about someone or something
