Business - Organizational Objectives, Behavior, and Performance Flashcards
Organization Objectives
1) Defines what the organization wants to achieve
2) Ongoing success will depend on if the organization completed the objectives
3) Indicate what is expected from a governance, risk management, & internal control perspective
Primary Blanket Objective
Enhance Stakeholder Value
Where are objectives reflected?
Organizations mission and vision statement
What is the best way to get people to buy into an objective?
Getting input from all people when creating or updating the objective
Mission Statement
1) Broad expression of what the organization wants to achieve in the present
2) Indicates the organizations purpose
- Reason for being
- How it will add value to customers & stakeholders
3) Serves as a day to day charge to employees
Vision Statement
1) Conveys what the organization aspires to achieve or become in the future
2) Highest aspiration view and goals in context of serving and adding value to it stakeholder’s
What guides the development of strategic objectives and to preform strategic planning, which results in strategic plans?
Mission and Vision Statement
Strategic Objectives
1) Desired outcomes set by management that specifically relate to stakeholder value enhancement
What could strategic objectives relate too?
1) Innovation
2) Growth
3) Cost Control
4) Investment’s in the organizations people
5) Social Responsibility
Where are strategic objectives reflected?
Organizations strategic planning process and plans
Strategic Planning
Disciplined upper management and board level future oriented process that determines the direction the organization will take to achieve objectives over the long term given the changing business environment
Strategic planning involves?
1) Evaluating change in the environment and then determining how to create a competitive advantage in this environment
2) Gathering input from multiple stakeholders
3) Innovating and Brain storming, followed by feasibility analysis of ideas
4) Coming to agreement on priorities and initiatives for the best use of limited resources
5) Determining the desired end result, how to get there and how to determine if the strategy is successful
6) Documenting the results of this process in the organizations strategic plans
Strategic Plans
high level, long term plans for multiple years into the future
Strategic Plans are valuable what?
Communication tools
Strategic Plans sent the tone for?
Proper Governance
Strategic Plans are an important input or subject for many assurance and consulting engagements, those consist of?
1) Understanding of the strategy, key business objectives, associated risks, and risk management processes is vital for setting the context for must engagements
2) Assurance engagements may verify that the organizations strategy aligns with its risk appetite
3) Assurance Engagements often check that plans and objectives for the audit area align with and integrate into top level plans
4) Assurance engagements related to strategic plans may need to verify that the plan is effectively communicated
5) Consulting engagements related to improving the strategy or strategic planning may asses whether the organization has a sound strategy and/or strategic planning process
Who does the CAE need to consult to gain an understanding of the organizations strategy?
Entity’s board and senior management
What does the organizations strategic plan need to reflect?
Global & Competitive Considerations
The organizations success depends on?
1) successful execution
2) opportunities & risks that exist in the organizations environment
Sources of competitive advantage?
1) Labor Market: low cost, high skill, wide labor pool
2) Suppliers & Raw Materials: favorable prices, good or long term relationships with vendors, supplier proximity, degree of ownership or control of supplier
3) Customer Base: Established customer base/market share, loyal and satisfied customers
4) Process & Methodology Maturity: Risk, control, quality, change management, manufacturing or other frame works; maturity level and difficulty in achieving that maturity
5) Supply Chain & Transportation: Relative cost and speed of supply chain, # of options for a level of convenience to customers
6) Regional economy & politics; culture, legal and regulatory environment
Organizations Strategy seeks to?
1) Leverage relative strengths & mitigate relative weaknesses in order to asses opportunities (ex: online, locally, or globally)
2) Minimize the likelihood of impact of risks, including competitors taking market share
What will internal audit be assessing in regards to a companies strategy?
Is the organization altering its strategy fast enough to survive and thrive when such factors are changing quickly
What is COSO’s Internal Control - Integrated Framework?
Framework used by organizations to evaluate internal controls, identifies three categories of such objectives: operations, reporting, compliance
What does the entity side of the COSO’s cube represent?
The overall entity, divisions, subsidiaries, and so on
What 5 components are required to represent adequate governance, risk management, and internal control?
1) Control environment
2) Risk Assessment
3) Control Activities
4) Information and Communication
5) Monitoring Activities
Operations Objectives
Relate to the effectiveness and efficiency of operations, including but not limited to operational and financial performance goals and safeguarding of assets
Reporting Objectives
relate to financial and nonfinancial reporting, both internal and external, and may include reliability, timeliness, transparency, completeness, or other terms as identified by the standards setters, regulators, or policies of the entity
Compliance Objectives
Relate to laws, regulations, policies, and procedures to which the entity is subject and the entity’s adherence to the same. Subcategories may include compliance with contracts, industry standards and best practices, and internal policy.
Performance Measurement
a management process of determining appropriate metrics to measure performance, setting related performance targets, communicating these measurements and targets to responsible persons or entities, monitoring performance against these targets, and following up on variances to correct course as needed.
Key Performance Indicators (KPIs)
a subset of performance measures that focus on accomplishments or behaviors that are valued by the organization and are needed to successfully achieve the organization’s strategy and mission. Valid KPIs need to measure the right things and be understandable to management (who use them to guide and improve performance in key areas related to strategy).
KPIs may
1) Be measure of outcome (sales, production)
2) Be measure of process characteristics (timeliness, accuracy)
3) Be quantitative (% of )
4) Be qualitative (appropriate use of)
What are KRIs?
When KPIs measure risk
Leading Indicator
measured used to predict future performance because the metric is an input to a process
Lagging indicator
measure used to confirm past performance because the metric is an output of a process
When can management identify and correct the root cause before actual damage occurs?
If a KRI is a leading indicator that is trending dangerously upward or crosses a predefined threshold
Efficiency
minimizing the use of resources in a process as compared to target expectations
Effectiveness
Outputs and the degree to which an organization’s goals and objectives are achieved.
Performance Target
The expected level of performance outcome for a measurement or key performance indicator
Internal Targets
1) Based on the level of performance in the measurement area that is needed to achieve organizational objectives
2) Targets should be challenging but feasible
3) Some organizations set both minimum and stretch goals for a metric
External Targets
Reflect the requirements of regulations, laws, or voluntary standards
