Strategy and Governance Flashcards
Purpose of Governance
o To reduce ambiguity and confusion in the org
o To enhance the effectiveness of strategy, risk mgmt., resource allocation, monitoring, and overall org effectiveness
o Enhance relationships between mgmt and principals (Owners and other stakeholders)
o Reduce the risk of org failure
Board of Director Committees
o Risk committee o Compensation committee o Audit committee o Nominating committee o Finance committee o Strategy committee o Public relations committee
The board of directors is responsible for
o Strategic direction
o Governance oversight
Canadian Securities Administrators National Policy best practices
o Adopt strategic planning process and approve strategic plan annually
o Identify principal risks and oversight of those risk mgmt. activities
o Monitor controls and information systems
o Develop corporate governance approach
o Develop roles and responsibilities of board members
o Appoint the CEO and succession planning
o Assess senior mgmt. performance and compensation
o Assess senior mgmt’s tone to ensure a culture of integrity
o Adopt a written business code of conduct and monitor compliance
o Adopts a communication policy
Organizational structure is influenced by what factors?
o Economic environment – May be under pressure to be lean in a declining economy
o Competition/industry: Will align themselves to address characteristics of the industry and competition
o Products/Services: May require alignment to support their offering, such as aftermarket service or financing
o Regulatory environment: May dictate departments or positions that are required
Types of organizational structure
o Simple structure: Owner = sole shareholder
o Functional structure: specialized departments
o Divisional structure: each division has own resources, managed as a separate business, decentralized and autonomous
o Matrix structure: functional and business unit structures are combined at the same level
o Network structure: No formal offices, most activities are outsourced to strategic partners
Key Enterprise Risks
o Strategic Risk
o Operational Risk
o Reporting Risk
o Compliance Risk
Risk assessment techniques
o Benchmarking
o Probabilistic models
o Sensitivity models
o Scenario analysis
Two main factors in assessing risk
o Impact
o Likelihood
Risk management steps
o Identification o Assessment o Risk Response o Internal Control Activities o Information and communication o Monitoring
Risk Response options
o Avoidance
o Reduction
o Transferring
o Acceptance
Internal Control: Residual risk formula
Inherent risk – Control activities = Residual risk
Common internal control activities
o Managerial review of information
o Information processing controls over accuracy, completeness, and authorization of transactions
o Enforcement of company policies including vacations
o Physical controls to safeguard assets
o Segregation of duties initiate/ authorize / process
Explain what a Vision statement is
- Purpose: A vision statement typically provides an ideal future for the organization. It focuses on what the ultimate goals are.
- What is the current Statement
- Issue?
- Recommendation
Explain what a mission statement is
- Purpose: A mission statement provides a clear statement of why the company exists.
- Current Statement
- Issue?
- Recommendation
Explaining Vision and Mission Statement
• Vision and mission statements should not only be used to communicate the company’s purpose to the bank but should also be part of the strategic planning process to assess whether the entity is achieving its intended purpose. When making strategic changes in a company you need to ensure that the decisions align with your mission and vision statements.
