Organisation structure and governance Flashcards
What are the main two factors affecting the way in which a business is structured ? P23
Size and nature
What are the three main structures of a business ? P23
- Functional
- Divisional
- Matrix
What is a functional business structure?P23
- Specialised functions/skills
- knowledge and expertise togeether
- efficient work & development of skills - more experienced staff
What is a divisional structure of a business ? P24
- larger business
- teams - individual product/service - geographical
- resources and function support - each division
- divisional director
- autonomous - own hiring , budgeting, finance, markerting
What are the advantages and disadvantages of a divisional structure ? P24
- Advatange - team spirit
- Advantage - expert development
- distavdantgae - unhealthy competition
What is a matrix structure ? P24
- Own departments & different teams
- new product - members different departments
What does the span of control refer to ? P25
- Managers- individuals they are responsible for
What factors will the span of control vary depending on ? P25
- 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
What is a tall organisational structure ? P25
- Function
- chain of command= several layers of management
- clear reporting lines
- narrow span of control
- longer decision making
What is a flat organisational structure, and its advantages and disadvantages ? P26
- fewer levels of management
- wider span of control
- efficient decision - info pass quickly
- Howveer- staff stagnate - fewer opportunities
What does the chartered governane institute define governance as ? P27
- framework for managing organisations
- identifies - who makes decisions
- authority to act organisation behalf
- accountable - organisation and people perform
What will a business with good governance have ? P27
- Delegated decision making - structural support
- scope of responsibility - not beyond
- board of directors & managements - legally, ethically, sustainability
- stakeholder and shareholder benefit
What are the three areas a business will have to think about relating to effective governance ? P27
- Corporate governance
- financial governance
- legal governance
What is corporate governance ? P27
- Board of directors - governance responsibility
- systems - direct and control operations
- setting stragtegic aims and objectives
- necessary leadership
What is financial governance ? P27
- Collects, manages , and controls financial information
- monitor operations & financial risks
- extreme - fraud / money laundering
- simple - amount due / owed paid
What is legal governance ? P27
- Legislation and regulation compilance
- appropriate levels of authorisation
- internal documented process
Aside from the authorisation to make decisions, what is another aspect of governance to consider ? P28
- Extent centralised
- centralised control
- decentralised control
What is centralised control ? P28
- Higher tiers
- staff to implement rather than contribute
- higher level = more influence
- distance - ‘coal face’ - actual activities
- top-down structure - less flexible than decentralised
What is decentralised control ? P28
- Lower level management - decision making authority
- departmental, branch, team
- not every decision checked - directors and senior management
- work - team members
- bottoms up - collaborative
What are the advantage and disadvantage of decentralised control ? P28
- 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
What effect will a larger business have on the organisational structure and governance of the organisation ? P28
- likely - tall structure - departments
- levels of management- levels of authority
- tending - span of control = narrow
What impact will a smaller business have on size and governance ? P29
Often - one/ two owners - large control span
flat organisational structure
few levels of management
When looking at governance of an organisation , what are the different levels of management and the type of decisions they are responsible for ? P29
- Strategic/ corporate level
- managerial level
- operational level
What is strategic / corporate level management ? P29
- Start at top
- affect whole organisation
- long term
What is managerial level governance ? P29
- middle level
- Achieving goals
- product to produce?
- competative price of product ?
What is the operational level of management ? P29
- Shorter term
- practical day to day operations :
- overtime?
- when raw material ordered ?
When looking at governance , what must each level of management in an organisation do ? P29
- work together - support
- good of organisation
- new product
- stragtegic level - decision develop
- managerial level - characteristics should have
- operational - sufficient & competent staff
What are the other key functions in a business that may operate with the finance function ? P29
- Operations/ production
- sales and markerting
- human resources
- information technology
- distributuon and logistics
What is the operation / production function? P31
- Heart of business
- production of goods
- provision of services
How does the finance production relate to operations/ production functions ? P31
- Provide financial information - function effectively:
- credit account set up
- inventory control
- budgeting
How does the finance department assist the operations/ production department through setting up credit accounts ? P31
- 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
What needs to be provided to the finance departmnet once a credit account has been set up for the supplier ? P31
- Documents - inventory purchases and issues
- orderds , delivery nores , goods received , invoices
- match documents - liase with production (issues)
- maintenance financial relationship with supplier - payment due
What type of inventory does a business need to operate effectively ? P31
- Sufficient inventory raw material
- right products at right time
- monitoring receipts and issues
- highlight further to be ordered
- monitored finished goods = timely customer orders
What checks must the finance team carry out on inventory ? P31/32
- regular inventory counts
- physical inventory = inventory records
- minimise unnoticed theft
- minimise unfulfilled customer order
What does budgeting in relation to operations and producution function ? P32
- actual results against budget = variance
- variance investigated
- no affect on profitability
What is the sales and markerting department responsible for and in what ways will the finance function work with them ? P32
- deal with customers / clients
- markerting products and services
- negotiating sales
- pricing
- setting rates for service
- budgeting
- performance indicators
What is the role of pricing the finance function must carry out for sales and markerting ? P32
- Calculating price for products - all costs met
- affected - market willing to pay
- profitable selling price importance
- setting discounts = profit after discount given
How may finance set rates of services for the selling department to use ? P32
- Rates:
- cover overheads, salaries, profit
- different rates - senority , qualifications , complexity of work
- specific services - maybe fixed price - finance to set
How will the finance function budget for sales and markerting ? P33
- Sale volumes
- prices
- effect of discounts
- discount - maybe reduces revenue & increase volume
What are performance indicators and how does this relate to the relationship between finance and sales ? P33
- 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
What is the human resources department and how does finance relate to this ? P33 / P34
- Responsible - people , welfare, wellbeing
- recruitement costs
- staff training and development
- pay and benefits
What must HR provide the fiannce team with when a new employee joins the business ? P34
- start date
- rate of pay
- overtime rates
- reflected in budget
- overtime hours communication - more staff ?
What is the information technology department , and how does the finance department relate to this ? p34
- information systems - hardware and software
- investment in IT
- data security
- performance indicators
What is the role of finance regarding investment in IT ? P34
- Limited resources - invest capital projects
- IT systems = significant investment
- investment appraisal ( cost benefit analysis)- investment criteria
What is the role of data security that finance must take when dealing with IT ? PP34
- 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
What performance indicators will be in place for IT departments ? P34
- Relevant perfomance indicators
- financial indicators - finance sets them up
What is the distribution and logistics function and what are the main factors to consider in its relationship to finance ? P35
- 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
What is inventory management , when looking at the relationship between finance and distribution and logistics? P35
- Sufficient inventory
- calculating reorder levels & lead times
- analysing usuage
- holding inventory costs - warehousing & risk of damage
- tying up inventory costs
What is exporting and importing when looking at the relationship between finance & distribution and logistics P35 ?
- Intention - import and export goods
- tax implication of trading overseas
What are the performance indicators - finance relatiinship with distribution and logistics ? P35
- relevant performance indicators
- finance setting up - monitor against actual performance
What is risk? P35
- Negative or undesirable outcome
- upside risk - possible bad outcome / possible positive outcome
- e.g. investing in machine
What is the difference between risk and uncertainty ? P36
- Decision maker - more than one outcome
- assess each possibile outcome
- uncertainty - doesn’t know possible outcome
- uncertainty - doesn’t know probability it will occur
What is the key thing to do when faced with risk and uncertainty ? P36
- gather much info
- decision - minimise uncertainty
- assessing risk
What are the diifferent types of risk ?
- business
- strategic
- financial
- operational
- cyber
- reputational
What is the definition of business risk ? P36
- Vulnerability to factors
- decrease profits
- cause business to fail
What is strategic risk ? P37
- 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
What is financial risk ? p37
- 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
When looking at financial risk , why are repayments important ? P37
- customers Able to pay invoices due
- non payment = hugely expensive
- reduce - regularly monitoring credit ratings
What is operational risk ? P37
- Way organisation operates business function
- broad- risks - peope, systems , process, ethical attitude of organisation
What are the main examples of operational risk ? P37
- Process risk
- People risk
- system risk
- legal and regulatory risk
- event risk
What does process risk within operational risk entail ? P37
- risk of loss inherent - processes of business
- internal controls - bank reconciliations
- no bank rec = money taken from business
What does people risk within operational risk entail ? P37
- risk - employees
- e.g. references - qualifications & experiences
- no reference = incompetence / dishonest employees
- over-reliance :
- lose skills - irreplaceable employee
What does system risk within operational risk entail ? P38
- Most organisation = computer system depend
- strong controls necessary
- no control - fraudulent transactions - e.g. payroll - fictitious employees - fraudulently paid
What does the legal and regulatory risk within operational risk entail ? P38
- Loss risk - failure to comply legislation / regulations
- e.g.:
- health and safety regulations
- industry regulation breach = risk of fines
What does event risk within operational risk entail ? P38
- External factors / events affecting business
- causes:
- physical event
- social event
- political event
- economic event
What does physical event risk, within operational risk entail ? P38
- Fire/ flood - document/ asset damage, interrupt business
What does social event risk entail ? P38
- Socially aware public
- e.g. inexpensive labour = ‘slave labour’
What does political event risk entail ? P38
- government decisions affecting business
- e.g. rates of taxation
- environmental legislation
What does economic event risk entail ? P38
- E.g. bank of england - interests rate raised
- impact - lender charging interests
- risk - business paying interests on loans
What is cyber risks ? P38
- Increased use of technology = increase in cyber risk
- PwC definition:
- Risk with financial loss, disruption, or damage - reputation
- ^failure, unathorized, erroneous - information systems
Where does cyber risks most commonly come from and what are examples of this ? P38
- Outside organisation
- phishing
- malware
- ransomware
- distributed denial of service attack
- spyware
- keylogging
- password attack
- browser hijacking
What does phishing, within cyber risk, entail ? P38
- message to person in business - trick open email/ attachment
- malware/ ransomware release
- identify info - enable access / withold access - network and data
What is malware in the context of cyber risk ? P39
- Post phishing
- breach - weaknesses in network
- e.g. viruses, keyloggers , spyware, worms, or ransomware
What is ransomware in the context of cyber risk ? P39
- Lock users out - ransom to be paid
- no payment = releasing confidential info to public
What is the distributed denial-of-service attack in the context of cyber risk ? P39
- data requests to central server
- system hostage - meeting demands
What is spyware within cyber risk ? P39
- enables spying on operation
- gather info covertly
What is keylogging in the context cyber risk ? P39
- Recording keystroke - identify passwords & sensitive info
What is a password attack ? P39
- Attempt steal passwords - short, easy to guess passwords
- automated programmes - ‘guess’ password
What is browser hijacking ? P39
- Change default homepage - malicious programme
- unwanted advertising / popups
- steal information - maleware usuage
What is reputational risk ? P39
- Threatens name & reputation
What can reputational risk come from ? P39
- Direct actions of business
- action one/more of employees
- third party - partner/supplier
What is the effect of reputational damage to a business ? P39
- Loss of sales and profit
- employee resignation
- supplier, customer, investor reluctance
- e.g. starbucks - avoiding tax in UK
How can an organisation avoid reputational damage ? P40
- Good codes of conduct
- strong governance
- transparent in dealings
- socially responsilr
- environementally conscious
What must a business do once risks have been identified ? P40
- Manage risks
What is the first step of risk management ? P40
- Evaluating risks:
- liklihood of occuring
- risks if occurs
What is the second step of managing risks ? P40
- Managing risks step
What does evaluating rsisk entail ? P40
- risk matrix
- table chart : impact one axis , liklikood on another axis
- graded - impact * liklihood
How does an organisation manage risk ? P41
- TARA framework - 4 actions for each risk
- Transfer
- Avoid
- Reduce
- Accept
What does transfer mean in relation to risk management ? P41
- Transfer to third party
- third party - most/all of loss
- building insurance - loss transferred to insurance:
- Small excess > insurance payout
What does avoid mean within risk management ? P41
- Complete avoidance
- some risks unavoidable - withdrawal from opportunity
- avoidance = highly likely risk & significant impact
What does reduce mean within risk management ? P41
- Proactive steps reducing risks & minimising effect
- e.g. regular staff training - necessary skills
What is acceptance in managing risk ? P41
- Acceptance risk occurence
- conscious decision to deal with
- unlikely risks / insignificant effect
How can the tara approach be displayed ? P41
Risk map
**look at book **
