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Business awareness > Organisation structure and governance > Flashcards

Organisation structure and governance Flashcards

1
Q

What are the main two factors affecting the way in which a business is structured ? P23

A

Size and nature

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2
Q

What are the three main structures of a business ? P23

A
  • Functional
  • Divisional
  • Matrix
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3
Q

What is a functional business structure?P23

A
  • Specialised functions/skills
  • knowledge and expertise togeether
  • efficient work & development of skills - more experienced staff
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4
Q

What is a divisional structure of a business ? P24

A
  • larger business
  • teams - individual product/service - geographical
  • resources and function support
  • divisional director
  • autonomous - own hiring , budgeting, finance, markerting
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5
Q

What are the advantages and disadvantages of a divisional structure ? P24

A
  • Advatange - team spirit
  • Advantage - expert development
  • distavdantgae - unhealthy competition
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6
Q

What is a matrix structure ? P24

A
  • Own departments & different teams
  • new product - members different departments
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7
Q

What does the span of control refer to ? P25

A
  • Managers- individuals they are responsible for
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8
Q

What factors will the span of control vary depending on ? P25

A
  • Size of organisation -smaller business = wider span of control
  • type of work - easier larger (repitative tasks) < smaller (complex)
  • location of staff - located together = wider control
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9
Q

What is a tall organisational structure ? P25

A
  • Function
  • chain of command= several layers of management
  • clear reporting lines
  • narrow span of control
  • longer decision making
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10
Q

What is a flat organisational structure, and its advantages and disadvantages ? P26

A
  • fewer levels of management
  • wider span of control
  • efficient decision - info pass quickly
  • Howveer- staff stagnate - fewer opportunities
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11
Q

What does the chartered governane institute define governance as ? P27

A
  • framework for managing organisations
  • identifies - who makes decisions
  • authority to act organisation behalf
  • accountable - organisation and people perform
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12
Q

What will a business with good governance have ? P27

A
  • Delegated decision making - structural support
  • scope of responsibility - not beyond
  • board of directors & managements - legally, ethically, sustainability
  • stakeholder and shareholder benefit
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13
Q

What are the three areas a business will have to think about relating to effective governance ? P27

A
  • Corporate governance
  • financial governance
  • legal governance
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14
Q

What is corporate governance ? P27

A
  • Board of directors - governance responsibility
  • systems - direct and control operations
  • setting stragtegic aims and objectives
  • necessary leadership
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15
Q

What is financial governance ? P27

A
  • Collects, manages , and controls financial information
  • monitor operations & financial risks
  • extreme - fraud / money
  • simple - amount due / owed paid
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16
Q

What is legal governance ? P27

A
  • Legislation and regulation compilance
  • appropriate levels of authorisation
  • internal documented process
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17
Q

Aside from the authorisation to make decisions, what is another aspect of governance to consider ? P28

A
  • Extent centralised
  • centralised control
  • decentralised control
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18
Q

What is centralised control ? P28

A
  • Higher tiers
  • staff to implement rather than contribute
  • higher level = more influence
  • distance - ‘coal face’ - actual activities
  • top-down structure - less flexible than decentralised
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19
Q

What is decentralised control ? P28

A
  • Lower level management - decision making authority
  • departmental, branch, team
  • not every decision checked - directors and senior management
  • work - team members
  • bottoms up - collaborative
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20
Q

What are the advantage and disadvantage of decentralised control ? P28

A
  • Advantage: senior manager key - departmental day to day
  • Disadvantage: lower level inexperience
  • Disadvantage: lowe level manager team focused not business
  • Disadvantage: lower level manager - disconnection senior manager- loss of control
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21
Q

What effect will a larger business have on the organisational structure and governance of the organisation ? P28

A
  • likely - tall structure - departments
  • levels of management- levels of authority
  • tending - span of control = narrow
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22
Q

What impact will a smaller business have on size and governance ? P29

A

Often - one/ two owners - large control span
flat organisational structure
few levels of management

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23
Q

When looking at governance of an organisation , what are the different levels of management and the type of decisions they are responsible for ? P29

A
  • Strategic/ corporate level
  • managerial level
  • operational level
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24
Q

What is strategic / corporate level ? P29

A
  • Start at top
  • affect whole organisation
  • long term
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25
Q

What is managerial level governance ? P29

A
  • middle level
  • Achieving goals
  • product to produce?
  • competative price of product ?
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26
Q

What is the operational level of management ? P29

A
  • Shorter term
  • practical day to day operations :
  • overtime?
  • when raw material ordered ?
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27
Q

When looking at governance , what must each level of management in an organisation do ? P29

A
  • work together - support
  • good of organisation
  • new product
  • stragtegic level - decision develop
  • managerial level - characteristics should have
  • operational - sufficient & competent staff
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28
Q

What are the other key functions in a business that may operate with the finance function ? P29

A
  • Operations/ production
  • sales and markerting
  • human resources
  • information technology
  • distributuon and logistics
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29
Q

What is the operation / production function? P31

A
  • Heart of business
  • production of goods
  • provision of services
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30
Q

How does the finance production relate to operations/ production functions ? P31

A
  • Provide financial information - function effectively:
  • credit account set up
  • inventory control
  • budgeting
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31
Q

How does the finance department assist the operations/ production department through setting up credit accounts ? P31

A
  • Purchasing - commercial relationship with supplier
  • finance input: agreeing prices, negotiating credit terms , agreeing discounts
  • finance input: maximum price - margin maintenance
  • finance input: credit terms - cashflow
  • finance input: discounts - comparable business
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32
Q

What needs to be provided to the finance departmnet once a credit account has been set up for the supplier ? P31

A
  • Documents - inventory purchases and issues
  • orderds , delivery nores , goods received , invoices
  • match documents - liase with production (issues)
  • maintenance financial relationship with supplier - payment due
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33
Q

What type of inventory does a business need to operate effectively ? P31

A
  • Sufficient inventory raw material
  • right products at right time
  • finance production - operations (purchasing) - production maintenance
  • monitoring receipts and issues
  • highlight further to be ordered
  • monitored finished goods = timely customer orders
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34
Q

What checks must the finance team carry out on inventory ? P31/32

A
  • regular inventory counts
  • physical inventory = inventory records
  • minimise unnoticed theft
  • minimise unfulfilled customer order & loss
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35
Q

What does budgeting in relation to inventory entail ? P32

A
  • profit aim
  • establish costs of products
  • charging price = profit
  • actual results against budget = variance
  • variance investigated
  • aim - no affect on profitability
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36
Q

What is the sales and markerting department responsible for and in what ways will the finance function work with them ? P32

A
  • deal with customers / clients
  • markerting products and services
  • negotiating sales
  • pricing
  • setting rates for service
  • budgeting
  • performance indicators
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37
Q

What is the role of pricing the finance function must carry out for sales and markerting ? P32

A
  • Calculating price for products - all costs met
  • affected - market willing to pay
  • profitable selling price importance
  • settling discounts = profit after discount given
38
Q

How may finance set rates of services for the selling department to use ? P32

A
  • Rates:
  • cover overheads, salaries, profit
  • different rates - senority , qualifications , complexity of work
  • specific services - maybe fixed price - finance to set
39
Q

How will the finance function budget for sales and markerting ? P33

A
  • Sale volumes
  • prices
  • effect of discounts
  • discount - maybe reduces revenue & increase volume
40
Q

What are performance indicators and how does this relate to the relationship between finance and sales ? P33

A
  • Indicator set uo - sales and markerting monitored
  • sales revenue against target - areas of business
  • comparing differing individual members
  • take up rate for markerting campaigns - assess
  • budgetting products , branch , sales teams - monitor actual performance
41
Q

What is the human resources department and how does finance relate to this ? P33 / P34

A
  • Responsible - people , welfare, wellbeing
  • recruitement costs
  • staff training and development
  • pay and benefits
42
Q

What must HR provide the fiannce team with when a new employee joins the business ? P34

A
  • start date
  • rate of pay
  • overtime rates
  • reflected in budget
  • overtime hours communication - more staff ?
43
Q

What is the information technology department , and how does the finance department relate to this ? p34

A
  • information systems - hardware and software
  • investment in IT
  • data security
  • performance indicators
44
Q

What is the role of finance regarding investment in IT ? P34

A
  • Limited resources - invest capital projects
  • IT systems = capital investment
  • investment appraisal
  • cost benefit analysis- investment criteria
45
Q

What is the role of data security that finance must take when dealing with IT ? PP34

A
  • Work together - data protection regulation
  • customer data - sales and receivables
  • supplier data - purchases and payables
  • personal staff data - payroll
  • sensitive product and sales info - not for competitors
46
Q

What performance indicators will be in place for IT departments ? P34

A
  • Relevant perfomance indicators
  • financial indicators - finance sets them up
47
Q

What is the distribution and logistics function and what are the main factors to consider in its relationship to finance ? P35

A
  • key element of supply chain
  • distribution - actual delivery of products and service
  • logistics - inventory organisation, storage and control
  • inventory management
  • exporting and importing
  • performance indiciators
48
Q

What is inventory management , when looking at the relationship between finance and distribution and logistics? P35

A
  • Sufficient inventory
  • calculating reorder levels & lead times
  • analysing usuage
  • holding inventory costs - warehousing & risk of damage
  • tying up inventory costs
49
Q

What is exporting and importing when looking at the relationship between finance & distribution and logistics P35 ?

A
  • Intention - import and export goods
  • tax implication of trading overseas
50
Q

What are the performance indicators - finance relatiinship with distribution and logistics ? P35

A
  • relevant performance indicators
  • finance setting up - monitor against actual performance
51
Q

What is risk? P35

A
  • Negative or undesirable outcome
  • upside risk - possible bad outcome / possible positive outcome
  • e.g. investing in machine
52
Q

What is the difference between risk and uncertainty ? P36

A
  • Decision maker - more than one outcome
  • assess each possibile outcome
  • uncertainty - doesn’t know possible outcome
  • uncertainty - doesn’t know probability it will occur
53
Q

What is the key thing to do when faced with risk and uncertainty ? P36

A
  • gather much info
  • decision - minimise uncertainty
  • assessing risk
54
Q

What are the diifferent types of risk ?

A
  • business
  • strategic
  • financial
  • operational
  • cyber
  • reputational
55
Q

What is the definition of business risk ? P36

A
  • Vulnerability to factors
  • decrease profits
  • cause business to fail
  • further analysis
  • strategic
  • financial
  • operational
  • cyber
  • reputational
56
Q

What is strategic risk ? P37

A
  • risk from Fundamental decisions - directors
  • objectives and strategies
  • car manufacturing - models overseas
    : Upside - positive move
    : downside - exchange rate risks
    : downside - working conditions
    :downside - duties on imports & exports
57
Q

What is financial risk ? p37

A
  • risk from change in financial conditiosn
  • interests rates change = costs of borrowing increase
  • credit rate deterioration (customer)
  • interests rate change = highly geared business - increased repayments
58
Q

When looking at financial risk , why are repayments important ? P37

A
  • customers Able to pay invoices due
  • hugely expensive
  • regularly monitoring credit ratings
59
Q

What is operational risk ? P37

A
  • Way organisation operates business function
  • broad- risks - peope, systems , process, ethical attitude of organisation
60
Q

What are the main examples of operational risk ? P37

A
  • Process risk
  • People risk
  • system risk
  • legal and regulatory risk
  • event risk
61
Q

What does process risk within operational risk entail ? P37

A
  • Loss inherent - processes of business
  • internal controls - bank reconciliations
  • no bank rec = money taken from business
62
Q

What does people risk within operational risk entail ? P37

A
  • risk - employees
  • e.g. references - qualifications & experiences
  • no reference = incompetence / dishonest employees
  • over-reliance :
  • lose skills - irreplaceable employee
63
Q

What does system risk within operational risk entail ? P38

A
  • Most organisation = computer system depend
  • strong controls necessary
  • no control - fraudulent transactions - e.g. payroll - fictitious employees - fraudulently paid
64
Q

What does the legal and regulatory risk within operational risk entail ? P38

A
  • Loss risk - failure to comply legislation / regulations
  • e.g.:
  • health and safety regulations
  • industry regulation breach = risk of fines
65
Q

What does event risk within operational risk entail ? P38

A
  • External factors / events affecting business
  • causes:
  • physical event
  • social event
  • political event
  • economic event
66
Q

What does physical event risk entail ? P38

A
  • Fire/ flood - document/ asset damage, interrupt business
67
Q

What does social event risk entail ? P38

A
  • Socially aware public
  • e.g. inexpensive labour = ‘slave labour’
68
Q

What does political event risk entail ? P38

A
  • government decisions affecting business
  • e.g. rates of taxation
  • environmental legislation
69
Q

What does economic event risk entail ? P38

A
  • E.g. bank of england - interests rate raised
  • lender charged increased interests rates
  • risk - business paying interests on loans
70
Q

What is cyber risks ? P38

A
  • Increased use of technology = increase in cyber risk
  • PwC definition:
  • Risk with financial loss, disruption, or damage - reputation
  • ^failure, unathorized, erroneous - information systems
71
Q

Where does cyber risks most commonly come from and what are examples of this ? P38

A
  • Outside organisation
  • phishing
  • malware
  • ransomware
  • distributed denial of service attack
  • spyware
  • keylogging
  • password attack
  • browser hijacking
72
Q

What does phishing, within cyber risk, entail ? P38

A
  • message to person in business - trick open email/ attachment
  • malware/ ransomware release
  • info - enable access / withold access - network and data
73
Q

What is malware in the context of cyber risk ? P39

A
  • Post phishing
  • breach - weaknesses in network
  • e.g. viruses, keyloggers , spyware, worms, or ransomware
74
Q

What is ransomware in the context of cyber risk ? P39

A
  • Lock users out - ransom to be paid
  • no payment = releasing confidential info to public
75
Q

What is the distributed denial-of-service attack in the context of cyber risk ? P39

A
  • data requests to central server
  • system hostage - meeting demands
76
Q

What is spyware within cyber risk ? P39

A
  • enables spying on operation
  • gather info covertly
77
Q

What is keylogging in the context cyber risk ? P39

A
  • Recording keystroke - identify passwords & sensitive info
78
Q

What is a password attack ? P39

A
  • Attempt steal passwords - short, easy to guess passwords
  • automated programmes - ‘guess’ password
79
Q

What is browser hijacking ? P39

A
  • Change default homepage - malicious programme
  • unwanted advertising / popups
  • steal information - maleware usuage
80
Q

What is reputational risk ? P39

A
  • Threatens name & reputation
81
Q

What can reputational risk come from ? P39

A
  • Direct actions of business
  • action one/more of employees
  • third party - partner/venture
82
Q

What is the effect of reputational damage to a business ? P39

A
  • Loss of sales and profit
  • employee resignation
  • supplier, customer, investory reluctance
  • e.g. starbucks - avoiding tax in UK
83
Q

How can an organisation avoid reputational damage ? P40

A
  • Good codes of conduct
  • strong governance
  • transparent in dealings
  • socially responsilr
  • environementally conscious
84
Q

What must a business do once risks have been identified ? P40

A
  • Manage risks
  • evaluate - deciding liklihood
  • impact - if risk happens
85
Q

What does evaluating rsisk entail ? P40

A
  • risk matrix
  • table chart : impact one axis , liklikood on another axis
  • graded - impact * liklihood
86
Q

How does an organisation manage risk ? P41

A
  • TARA framework - 4 actions for each risk
  • Transfer
  • Avoid
  • Reduce
  • Accept
87
Q

What does transfer mean in relation to risk management ? P41

A
  • Transfer to third party
  • third party - most/all of loss
  • building insurance - loss transferred to insurance:
  • Small excess < insurance payout
88
Q

What does avoid mean within risk management ? P41

A
  • Complete avoidance
  • some risks unavoidable - co
  • avoidance = highly likely risk & significant impact
89
Q

What does reduce mean within risk management ? P41

A
  • Proactive steps reducing risks & minimising effect
  • e.g. regular staff training - necessary skills
90
Q

What is acceptance in managing risk ? P41

A
  • Acceptance risk occurence
  • conscious decision to deal with
  • unlikely risks / insignificant effect
91
Q

How can the tara approach be displayed ? P41

A

Risk map
**look at book **

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