Role of the finance function Flashcards
What are Objectives?
Translate an organisation’s mission into more specific milestones and targets for the business strategy to follow and achieve.
What are the 5 functions of establishing an organisation’s Objectives?
- Planning - define and set out milestones on how organisation will achieve its mission and vision.
- Responsibility- to define responsibilities of managers and departments
- Integration - to support other objectives and be consistent.
- Motivation - to motivate managers.
- Evaluation- to provide benchmarks for performance assessment and control
What are Critical Success Factors (CSF’s)?
Organisation may break objectives into smaller goals, things that organisations must do well in order to succeed.
What are Key Performance Indicators (KPI’s) ?
Are specific, measurable objectives that need to be achieved for organisation to reach the level of performance that it aspires to.
What are the three principles through which value is added to an organisation?
- Economy - concept of performing activity at minimum of cost
- Efficiency- Concept of performing an activity for minimum of time
- Effectiveness- concept of achieving maximum output given the resources of input.
What is the definition of Corporate Governance?
The system by which companies are directed and controlled.
What are the 8 signs of bad Corporate Governance?
- Domination by single group/person
- Lack of involvement of board
- Lack of adequate control function
- Lack of supervision
- Lack of independent scrutiny
- Lack of contact with shareholders
- Emphasis on short-term profitability
- Misleading accounts and information
What are the 6 Principles of the OECD’s guide to develop Corporate Governance?
- Framework should promote transparent and fair markets, efficient allocation of resources.
- Framework should protect and facilitate the exercise of shareholder’s rights and equitable treatment
- Provide sound incentives through investment chain and provide for stock markets.
- Recognise rights of stakeholders established by law or mutual agreements.
- Timely and accurate disclosure is made on all material matters regarding corporation.
- Ensure strategic guidance of the company, effective monitoring of management by board, board’s accountability to company and shareholders.
What are the 5 Principles for the Uk Corporate Governance Code?
- Board leadership and company purpose.
- Division of responsibilities
- Composition, succession, evaluation
- Audit, risk and internal control
- Remuneration
What are the 5 key points of the SOX Corporate Governance?
1.) Auditor Independence
2.) Increasing financial disclosures
3.) Us Stock exchange regulations
4.) Internal control report
5.) Audit Committee
What is the definition of Corporate Social Responsibility?
This can be thought of as a set of actions which an organisation is not obliged to take but takes them anyway for the well-being of the stakeholders and public.
What are the 4 Types of CSR?
- Economic- are responsible for providing a return to shareholders, remuneration to staff and value for money to customers.
- Legal - follow legal legislation
- Ethical - may exceed legal responsibilities in order to act in a way and just way
- Philanthropic- have desire to exceed ethical responsibilities and offer opportunities to improve society.
What are the 5 Corporate Digital Responsibilities?
- Companies must engage in digital stewardship
- Need to develop strategies to manage growing customer expectations for greater digital transparency
- Can use data under their control to offer customers digital empowerment.
- Give customers greater digital equity.
- Business should seize opportunity to practice digital inclusion.
What are the 5 effects of organisation type on the finance function?
- Who the owners and stakeholders are
- Sources of funding for the organisation
- Overall goal of organisation
- How performance is measured
- Use of technology
What are the 3 advantages to the Rules-based approach?
1.) Consistent application
2.) Breaches easy to identify
3.) Rules for specific outcomes
What are the 3 disadvantages of Rules-based approach?
1.) Cannot learn every rule
2.) Removes member discretion
3.) Long and lengthy rulebooks
What are 4 advantages of a Principles based approach to CG?
1.) Encourages proactive actions
2.) Treats members as individuals
3.) Flexibility helps in complex situations
4.) Harder to search for loopholes
What are 4 Disadvantages of Principles based approach?
1.) Interpretations can be subjective
2.) Potential for inconsistency
3.) Ambiguity may be confusing
4.) Guidelines eventually become rules
What are the 4 steps to take when dealing with an Ethical Dilemma?
1.) Whether more information or evidence is required
2.) Whether there is an internal system in place for dealing with ethical concerns
3.) Whether it is necessary or important to pass the matter up the organisation’s hierarchy
4.) Whether to obtain a professional advice or consult CIMA
(IF ALL OF THESE STEPS HAVE BEEN TAKEN WITHOUT A RESOLUTION, RESIGN OR TAKE LEGAL ACTION)
Name the 4 CSR strategies?
1.) Proactive - Discovers a fault in product and retracts it and fixed it without having been asked to
2.) Reactive - occurs when situation is allowed to continue unresolved until public, government or consumer groups find out about it.
3.) Defence strategy - involves organisation minimising or attempting to avoid additional obligations arising from a particular problem
4.) Accomodation - Takes responsibility when they get encouragement from special interest groups, perception that failure to act will result in government intervention.
