ACCA F1 flashcards – set 2

– profit
– people
– planet

By “environmental footprint” is meant the attempt to evaluate the extent of a company’s impact on the environment and, in particular, the company’s consumption of resource, the extent of harm to the environment caused by company emissions and a measure (quantitatively or qualitatively) of resource usage and pollution emitted

– waste management and waste minimisation
– energy efficiency
– material efficiency
– water
– waste
– biodiversity
– emissions

Tucker’s five step model involves:
– profitability
– legality
– fairness
– ethics
– environmental acceptability

Represents investors, financial intermediaries, companies academics and others interested in the development of global corporate governance practices. The organisation believes that good corporate governance is a prerequisite for effective competition and prospering economies.

– integrity
– objectivity
– competence
– confidentiality
– professional behaviour

ISO14000

Eco-Management and Audit Scheme

“Professionalism” is defined as “the conduct aims or qualities that characterise or mark a profession or professional person”

“Profession” is defined as “a calling requiring specialist knowledge and often long-term intensive academic preparation”

– a criminal offence
– someone’s health and safety is threatened
– risk of or actual damage to the environment
– a miscarriage of justice
– the company is breaking the law
– belief that someone is covering-up a wrong-doing

– Effectiveness
– Efficiency
– Economy

– Explicit
– Tacit

– financial
– manufactured
– intellectual
– human
– social and relationship
– natural capital

– prevention
– detection
– response

– incentive/motive
– opportunity
– attitude/dishonesty

– A supervisory board
– A management board

– Equal opportunities/discrimination
– Bullying
– Use of the Internet
– Reporting wrong-doing
– Bribery
– Money-laundering
– Response to conflicts of interest

– severity/impact
– frequency/probability

– Consider the facts
– Consider the ethical principles involved
– Consider the related fundamental principles
– Consider relevant internal procedures
– Consider alternative courses of action
– Consider the consequences of each alternative course of action

– business probity
– internal environment
– objective setting
– event identification
– risk assessment
– risk response
– control activities
– information and communication
– monitoring

– Strategic
– Operational
– Reporting
– Compliance

“the process effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives”

In the context of risk management, the acronym ALARP stands for As Low As Reasonably Practicable

Any five from:
– fee received from client exceeds maximum guideline
– beneficial interest in the success of the company (by way of shareholding)
– loans to / from the company
– gifts and benefits received from the company
– overdue fees
– contingent fees
– close business relationships
– close family and personal relatioships
– low-balling
– recruiting staff on behalf of the client

– advocacy
– self-interest
– intimidation
– familiarity
– self-review

– high impact, low probability: transfer eg insure
– high impact high probability: avoid/abandon
– low impact, high probability: reduce
– low impact, low probability: accept

The letters in “accurate”, used for remembering the characteristics of “good” information, refer to the following:
– accurate
– complete
– cost-beneficial
– user-targeted
– relevant
– authoritative
– timely
– easy to use

– organisation
– arithmetic and accounting
– personnel
– management and supervision
– physical
– authorisation and approval
– segregation
– management
– personnel

– carry out the business of the enterprise in an efficient and orderly manner
– ensure adherence to management policies
– safeguard the assets
– prevent and detect fraud and error
– completeness and accuracy of the records
– timely preparation of financial information

The four identified ways of managing risk are:
– transfer
– avoid
– reduce
– accept

(TARA)

A whistle-blower is a person who notifies relevant authorities about perceived breaches of external or internal rules or regulations

Integrated reporting

– Planning ie define the goals
– Analyse existing activities
– Design new or improved processes
– Development
– Implementation/transition
– Review

– control environment
– risk assessment
– control activities
– information and communication
– semonitoring

The model which maps the stakeholder level of interest against their power is Mendelow’s Model

– The risk register

Strategic drift is the slow divergence of an organisation’s capabilities and activities compared to the environment in which it operates. A disruptive technology is a very sudden shift in the environment brought about by technological or other breakthroughs.

– Is it profitable?
– Is it legal?
– Is it fair?
– Is it right?
– Is it sustainable or environmentally sound?

– performance
-conformance

The frequently quoted example of a rules-based system of corporate governance is the Sarbanes-Oxley system as used in the USA

The two approaches are “rules based” and “principles based”

– People
– Organisation
– Processes
– Organisation
– Information technology

These are the areas that must be considered in any organisational change.

It is the centralisation of certain service functions of an organisation. For example, all time records and client billing for all of an accountant’s offices are handled by one service centre.

– Ethical principles to be followed
– Recognition of the threatsto which these are subject
– Establishment of safeguards to eliminate the threats or reduce them to an acceptable level.

IFAC defines this as:

The net benefits derived for, and procedural rigour employed on behalf of, all society in relation to any action, decision or policy’
Essentially it is exercising social responsibility and a recognition that many stakeholders’ interests have to be considered.

– economic
– operational
– social
– technical

– Pure risk: there is only downside risk (as opposed to speculative risk which go either way)
– Gross risk: the risk before steps have been taken to reduce or mitigate it.
– Net risk: the risk left (residual risk) after the gross risk is mitigated.

An induction process is a process whereby a new director (executive or non-executive) is given information about the company to better enable the director to make meaningful and effective contributions

– providing leadership to the board, including
– setting the agenda for board meetings
– chairing all meetings (board/sub-committees/members)
– ensuring the continuing quality of information given to the board
– enabling effective NED contributions
In addition, the chair will with major and institutional shareholders and will communicate shareholder views and concerns to the full board

Out of all the permutations of events that could happen, a relatively few consistent and viable sets of believable futures (scenarios) are investigated.

– The asset subject to the risk.
– The threat to the asset.
– The vulnerability of the organisation.

– Volume
– Velocity
– Variety
– Veracity (a late addition)

Entrepreneur: someone willing to undertake risk and expend time and money to set up a new business.

Intrapreneur: an employee who promotes innovation and new business ideas within and existing organisation.

– remuneration levels should be sufficient to attract, retain directors of appropriate skills,
– a company should seek to avoid paying in excess of the levels needed to attract, retain and motivate
– portion of director’s remuneration should be linked to performance
– formal/transparent procedure for developing remuneration policy
– no director should be determining their own remuneration level

the board should:
– present a balanced and understandable assessment of the company’s performance, position,
– establish formal/transparent procedures for consideration of their approach to internal control and risk management
– establish procedures for ensuring that an appropriate relationship is maintained with external auditor
– the board is responsible for determining the nature and extent of significant risks which it is willing to take in achieving its strategic objectives

– the board and its sub-committees should have an appropriate balance of skills
– a balance of executive/non-executive directors
– there should be a formal, thorough and transparent procedure for the appointment of new directors
– directors should be able to allocate sufficient time to company to discharge their responsibilities effectively
– directors should be: given a induction course when joining / be able to update their knowledge on regular basis
– the board should be supplied in a timely manner with necessary information
– board’s performance should be evaluated
– subject to regular re-election

– every company should be headed up by an effective board of directors, collectively responsible
– there should be a clear division of responsibilities at the head of the company.
– the Chairman is responsible for the leadership of the board
– in a unitary board the NEDs should constructively challenge and assist in the development of strategy

– leadership
– effectiveness
– accountability
– remuneration
– relations with shareholders

– Concern for individuals
– Concern for the group
– Concern for the task

– Organisational profile
– Measurement, analysis and knowledge management
– Strategic plannning
– Leadership
– Customer focus
– Workforce focus
– Operations
– Results

Moving production abroad or outsourcing to a foreign-based company. Often done to obtain cost advantages.

A stakeholder is any person or group that can affect or be affected by the policies or activities of an organisation

– regulators
– Government
– the Stock Exchange
– small investors
– institutional investors
– society in general

– the strict adherence to an appropriate moral or ethical code
– being honest and straightforward
– standing up for what you believe is right

Software and data are held on the server and processing takes place on the server. The client (local) machine acts as an interface. Client machines do not need to be particularly powerful (thin clients) and only one copy of the software is needed – making updating much easier.

– Qualified
– Experienced
– Independent
– Professional

– UK companies (and also companies in many other jurisdictions) now have include risk reports as part of their annual company reports. They inform shareholders and others about the organisation’s main risks and what the company is doing about them.

Any five of:

– Management can focus on core activities
– Cost savings
– Cost certainty
– Cost restructuring
– Access to expertise
– Better quality
– Risk transference
– Capacity management

– Risk capacity
– Risk attitude

A value network recognises that when consumers obtain products many organisations are involved such as raw material suppliers, component suppliers, the production company itself, logistics companies and retailers. Each of these has its own value chain and each adds value to the final consumer’s experience. If a component does not add value, why is it there?

Corporate Governance is defined as “the system by which companies are directed and controlled”

Suitability
Acceptability
Feasibility

The fit must be tested using the coefficient of correlation (r), or the coefficient of determination (r2).
If only a few points are used the results are not reliable
Extrapolation (predicting outside the range) is dangerous
Other known influences (such as inflation) should be removed first.
Even good correlation does no prove cause and effect.

The trend (the underlying increase/decrease);
The seasonal variations

0.3 x 3000 + 0.7 x 5000 = 4400

Problems:
How are probabilities estimated
The expected value is usually not ‘expected’
Risk is not captured (eg a poor outcome of 3000 is quite possible in the above case)

Establish needs (market research) and develop the appropriate product or service (R&D).

* Quality
* Design
* Brand
* Packaging

A data warehouse is a vast collection of historic transaction data (eg, sales by a supermarket).
Data mining is searching though that looking for patterns and associations that might be helpful in increasing profits.

When customers consider more than the price when buying. For example, a strong brand can stimulate sales.

A very low initial price to gain a large market share. A very large market share might allow the low price to be sustained and can act as a barrier to entry.

Initially a very high price (as some customers will pay that). Then the price is lowered to attract other customers and to sale greater numbers o goods.

Transactions marketing: Focuses on the product and develops marketing mixes for it according to the needs customers satisfy when they buy it.
Relationship marketing: Seeks to attract, maintain and enhance customer relationships by focusing on the whole satisfaction experienced by the customer when dealing with the firm.

An organisation such as a firm of lawyers of accountants.
Characterised by a short middle line so that there is good vertical communication and a small technostructure because every job is different and therefore standardisation is limited.

* Post-project review – This is about how well the project was conducted
* Post implementation review – This is about what the project achieved eg costs v benefits

Benefits arising from projects are not automatic even in a technically successful project.
Therefore, the project manager should carry out tasks such as: demonstrations and presentations, training, managing and championing change.

How well is the project scope defined?
How large is the project?
How complex is the project?

* Cost
* Time
* Quality
* Scope

* Leadership abilities, including the ability to motivate
* Technical ability in running projects and in the subject matter
* Ability to negotiate with project sponsors, project team members and suppliers.
* Reporting on progress and difficulties
* The ability to stay calm in a crisis
* Excellent communication
* Ability to delegate to team members.

* Defines the project, its scope and its deliverables.
* Justifies the project: cost/benefit analysis; risk analysis.
* Secures funding for the project.
* Defines the roles and responsibilities of project participants.
* Gives people the information they need to be productive and effective right from the start.
What? Who? How? How much? Why? When?

* Observable
* Measurable
* Quantifiable
* Financial

* Net present value/payback/ROCE
* Sensitivity analysis and risk analysis
* Forecasting techniques
* Expected values
* Decision trees

* Initiation/initial screening
* Risk assessment
* Business case
* Project plan
* Executing
* Monitoring and controlling/project milestones
* Closing: delivery/review

A start/end, non-routine
Novel, unique challenges
Team members from different backgrounds so different: priorities, terminology and outlooks
No benefit until finished

Transactional: focus on short term, control, maintain/improve current situation, plan, organise, control, defend existing culture, positional power exercised
Transformational: long-term vision, climate of trust, empowerment, change culture, power from relationships.

– Top managers have more time for strategic decisions.
– Better decisions: fast, functional experts, geographical experts.
– Motivation of staff.
– Training and assessment of staff

* Power
* Role
* Task
* Person

* Symbols and titles
* Power relations
* Organisational structure
* Control systems
* Rituals and routines
* Myths and stories
* Organisational assumptions (paradigm)

Set-up costs
Type of business
Running costs
Time to set up system
No in-house skills
Suppliers/customers not interested
Security worries