Tuesday

Question 1

Explain the three lines of defence as an internal control model

Answer 1

1) Internal Controls
* Encompasses the whole system of financial and non-financial controls
* Owned by senior management

2) Assurance
* Management oversight function of the first line
* Also owned by senior management but for oversight
* Includes: risk management, quality control, compliance and security

3) Internal Audit
* Reports to board, separate from the other two lines.
* The board then sets the risk appetite which feeds down to senior management

Question 2

What criteria should we explore when deciding on new debt?

Seven

Answer 2

• Time-scale (when the funds are needed)
• Liquidity (where to get the funds from)
• Flexibility of funds
• Credit Rating
• Gearing
• Tax (interest is tax deductible)
• Type of debt

Question 3

Explain Ansoff’s Matrix (with examples)?

Answer 3

• Market Penetration - acquire a rival company (Pavrobot Group)
• Market Development - set up business in new countries
• Product Development - development of more technologically advanced AMRs
• Diversification - develop new business lines, such as data analytics to manage client inventory

Question 4

What are three internal currency hedges?

Answer 4

1. Leading/lagging
2. Matching payments and receipts
3. Using foregin currency bank accounts

Question 5

What are four governance challenges after an acquisition?

Answer 5

1. Board restructure for both parties - Robobryces is currently unbalanced for NED
2. Internal audit needs to do a full check of the acquired company
3. Post-acquisition share-price - Need to ensure synergies realised and shareholder wealth maximised
4. Management of any non-controlling parties - Mendelow’s matrix