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M92 > Company Structure & Management > Flashcards

Company Structure & Management Flashcards

1
Q

Proprietary companies

A

These have authorised and issued share capital to which shareholders subscribe. Profits belong to sharcholdes after provisions for expenses and reserves. Shareholder liability is limited to their share amount

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2
Q

Mutual companies

A

Insurance companies that have no share Capital stock & are owned by the policy holders

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3
Q

Takaful insurance

A

Roots in Islamic Financial service industry. Designed to meet needs of religious group. These policies do not include uncertainty gambling or interest & no profit is made. Takaful Insurance products need to be approved by Islamic scholars to ensure complaince

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4
Q

Facultative reinsurance

A

Reinsurance purchased on a specific policy

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5
Q

Composite insurance company

A

Transact both life & general insurance

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6
Q

Proprietary insurer

A

Authorised and issued share capital to which the original shareholders are subscribed. Shareholders’ liability is limited to the value of their shares, the company is liable for its debts and if solvency margin cannot be met the company risks of insolvency.

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7
Q

Demutalisation

A

Process of turning a mutual to proprietary company. This must be done to raise share capital

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8
Q

Syndicates

A

Members of the Loyd’s market place that underwrite for their own profit and loss

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9
Q

Managing agents

A

Appointed by underwriting members to carry out business on their behalf

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10
Q

Incentives of captives

A

• Obtain full benefits of groups risk control techniques by paying premiums based on loss experience
• avoidance of insurers overheads
• obtain a lower overall risk premium level by purchasing reinsurance at cheaper lower costs
• to achieve risk financing objectives

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11
Q

Reinsurance treaty

A

The reinsurer agrees to part of all insurances that the direct insurer underwrites

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12
Q

Multinational Company

A

A company that operates in a number of countries but has one home base. The aim is to have the ability to respond to local demands as the business is a semi-independent operation all working under the global brand

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13
Q

Global company

A

Where the company sees the whole world as one potential market. Very centralised business but one common brand e.g. Lloyd’s

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14
Q

Requirements for an international insurance market

A

• Political & economic stability
• Good geographical location
• Quality transport system
• Highly qualified personnel
• English as a business language
• Stable legal & regulatory environment
• Good time zone
• Foreign presence
• Developed financial centre

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15
Q

Customer Relationship Management (CRM)

A

Using info about customers to create sales and marketing strategies that develop and sustain desirable customer relationships

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16
Q

Business ethics

A

Standards & moral conduct that a business sets itself in its dealings both within and outside the organisation as a whole

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17
Q

Shareholder focus

A

Society is capable of looking after itself and the key responsibility of the business is to its shareholder

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18
Q

Stakeholder perspective

A

It is in the business and shareholders long-term interest to play a role in society beyond what is required by law

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19
Q

CII code of ethics

A

-Comply with the code and all relevant laws and regulations
-Act with the highest ethical standards and integrity
-Act in the best interest of each client
-Provide a high standard of service
-Treat people fairly regardless of; age, disability, gender, pregnancy, marriage, race, religion, sex and sexual orientation

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20
Q

Organic growth

A

Where a company develops and expands by increasing sales revenue and output through its own business activities rather than through mergers & acquisitions

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21
Q

Benefits of organic growth

A

• Increasing consumer incomes
• Ready availability of finance
• Low interest rates
• Buoyant markets
• Opportunities to develop products
• Export opportunities
• Economies of scale
• Increased revenue, profits and shareholder value

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22
Q

Organic growth drivers

A

• A sound means to measure progress and success
• More profitable rate with better investment return
• Enables executive management to demonstrate long term commitment to a business by building it with internal resource
• Management can fully focus on growing the business and achievement of goods and not be distracted by a merger or acquisition

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23
Q

Horizontal merger

A

The combination of two or more firms competing in the same space with the same goods or services.
• Improve a mediocre performance to a better market position
• Achieving economies of scale
• Improving competitiveness
• Possible opportunities for diversification

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24
Q

Vertical merger

A

When a company is trying to control a stage either closer to the source of the manufacturer or close to the source of the customers
• Reduce costs through economies of scale
• Gain more control of the market
• Add greater value to the customer

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25
Q

Merger

A

Two firms agree to join forces on a strategic basis

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26
Q

Acquisition

A

A company gains control by purchasing a majority shareholding

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27
Q

Reasons for M&A

A

• Growth
• Efficiency and improved performance
• Overcoming the costs of IT by sharing resources
• Provides investment capital if insurer has spare capital
• Spread risk

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28
Q

Disadvantages of M&A

A

• Reduced customer choice through reduction in number of organisations offering products to customers
• Impact on staff and potential redundancies
• Clash of corporate culture
• Reduced customer service while changes are implemented
• Expected savings not realised

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29
Q

Outsourcing

A

The use of skilled resources outside the company to handle work previously done in house

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30
Q

Advantages of outsourcing

A

• Business is guaranteed a certain level of service as set out in the contract
• The business can budget for pre agreed fixed costs
• Outsourcing companies are usually specialists and will bring new skills and working methods to the company

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31
Q

Disadvantages of outsourcing

A

• Business could loose customers and suffer reputational damage due to poor service standards
• The business could became dependent then have issues long term
• Care needs to be taken with customers confidential information and any mistakes are the responsibility of the business
• Control and direction is lost

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32
Q

Executive Director

A

Works full time for the business and is given Management responsibilities for running parts of the business

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33
Q

Non-executive director

A

Part-time work with the business chosen for their expertise

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34
Q

Responsibilities of the board

A

• Regulation of executive directors and other members of Senior management to ensure they uphold shareholder interests and the law.
• approves reports, accounts, annual budgets, strategy etc
• selecting apprising & rewarding the CEO and ensuring succession plans are in place
• overseeing risk management & ensuring necessary mitigations are implemented
• ensuring integrity & principles are upheld on critical matters like financial reporting accuracy, regulatory compliance and ethical standards

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35
Q

Corporate governance

A

Stringent regulation that determine the way by which companies (especially public companies) are controlled internally through the board and executive management

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36
Q

UK corporate governance code

A

Sets out UK standard practice in relation to issues such as
• board composition and development
• remuneration
• accountability and audit
• relations with shareholders

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37
Q

Roles of CEO

A

• Formulate company objectives and policy
• organise resource to translate board policy into operational policy
• lead the organisations structure and management style
• responsible for business functions and day to day activities

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38
Q

Roles of the financial director

A

• Responsible for economic model which helps set capital requirements
• scenario & stress testing to determine extreme risk
• propose to board forms of capital to hold in addition to share capital
• prepare board papers to assist in calculating dividends
• recommendations on appropriate capital levels of claims provisions to hold
• prepare accounts for board approval
• support investment analysts on reports on company performance and holders of company debt
• preparation of content for PRA and PRA main contact
• prepare management information on financial performance
• manage debt cash flow liquidity and treasury matters
• manage investment portfolio
• manage financial aspects of planning such as budget and forecast
• prepare for rating agency reviews and audits
• management of reinsurance accounting process

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39
Q

Company Secretary

A

Ensures all administrative and legal requirements are fulfilled by the company. All public companies must have one as a result of the Companies Act 2006

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40
Q

Chief actuary responsibilities

A

• technical pricing of new & existing products
• calculation of claims reserves
• calculation of risk-based capital requirements
• assessment of investment risk for funds supporting technical reserves

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41
Q

Other Senior positions

A

Chief risk officer
Head of internal audit
Underwriting director
Claims director
Marketing director
Head of HR
Head of IT
Strategy director
Investment director

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42
Q

Management actions

A

Planning
Organising
Leading
Controlling

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43
Q

Business components

A

Physical resources
Financial resources
Human resources

44
Q

Individual managers roles

A

• hiring & staffing
• training, coaching and developing employees
• dealing with performance issues and dismissal
• support problem resolution and decision making
• conducting timely performance evaluations
• translating corporate goals into functional and individual goals
• monitoring performance and initiating action to strengthen results
• monitoring and controlling expenses and budgets
• monitoring performance and taking action to strengthen results
• tracking and reporting scorecard results to senior management
• planning and goal setting for future

45
Q

Characteristics of effective internal communication

A

Accurate
Clear
Relevant
Reliable
Credible
Timely

46
Q

Barrier to effective communication

A

Organisation size
Natural reserve/fear/lack of confidence
Knowledge is power
Language
Time
Training
The grapevine
Failure to see the need
Inability to listen

47
Q

Benefits of effective communication

A

•Bring change in culture & structure of a business faster
•Reduce employee turnover
•Facilitate and improve decision making by including employees
•Encourage cooperation and innovation
•Ensure all relevant staff are helping to meet corporate objectives

48
Q

Action centred leadership (ACL)

A

Widely used model for effective leadership. Three key areas of team leaders’ effectiveness;
•The task
•The team
•The individual

49
Q

Open door Management

A

Managers are approachable at all times

50
Q

Autocratic Management

A

Control & power rests with a single individual, usually the chief executive

51
Q

Paternalistic Management

A

The company looks after its employees In a fatherly way, employees respect the company managers in the way a child respects their parents. This style is sometimes too interfering

52
Q

Militaristic/hierarchical Management

A

Management is structured in a formal way, with clear job demarcations

53
Q

Democratic/consultative Management

A

Decisions are taken with prior reference to as many employees as possible

54
Q

Chaotic/laissez-faire Management

A

A more modern style of management. The Manager is a mentor and the employees are allowed to let their own ideas and creativity flourish in specific areas

55
Q

Setting a strategic business plan

A

Needs to cover key areas that allow for company objectives to be to be achieved, including:
• setting objectives
• identify what needs to bedone to achieve objectives
• creating appropriate organisation structure
• allocating responsibilities to senior managers
• agreeing consistent management styles
• agreeing and setting budgets
• agreeing staff incentives
• setting sales targets
• planning most efficient use of resources
• setting timetables and deadlines
• identifying contingency plans

56
Q

Implementing business plans

A

Pleas are created for each division Project or operational area & should include:
• SMART objectives (specific, measurable, achievable, relevant and time defined)
• strategy for achieving objectives
• specific activities that will be done
• allocation of responsibility for each activity
• specific estimates of resource requirements for the implementation period
• expected cost
• expected result

57
Q

The budgeting process

A

• Guidelines from CEO
• consultation & preparation
• review by budget committee
• communication
• monitoring

58
Q

Top-down budgeting

A

Owners/directors decide on the individual plans for each department and function and these plans are given to the individual managers for implementation

59
Q

Bottom-up budgeting

A

Individual manages construct their own budgets within set guidelines. These are then passed up to managers & directors who incorporate individual budgets into the organisations master budget

60
Q

Fixed budget

A

Does not change once it has been set, regardless of company’s performance. Projected figures gre compared to actual figures at the end of the year

61
Q

Flexible budget

A

Changes in accordance with actual company performance

62
Q

Zero-based budgeting

A

Managers justify expenditure from zero. Any amount they subsequently decide must be justified through a formal process. This process is completed by Senior manages rather than department budget-holders. Usually employed in research or legal teams

63
Q

Rolling budgets

A

Budgets that constantly look forward. As you come to the end of a month a new month is added on to the rolling period e.g. 12 months. Managers are always looking ahead and alterations to future budgets are made regularly

64
Q

Budget variance

A

Difference between actual & budgeted performance

65
Q

Types of variance

A

Unfavourable: budgets not met (preventative action needs to be implemented)
Favourable: budgets are exceeded

66
Q

Causes of variance

A

• Inadequate pricing
• Higher expenses than planned
• Random events
• Operating efficiency

67
Q

Five C’s of decision making

A

Consider
Consult
Crunch
Communicate
Check

68
Q

Strategic information

A

Used by Senior Management to plan the objectives of their organisation and to assess whether objectives are being met

69
Q

Tactical information

A

Used by middle managers to ensure that resources of the business are employed to achieve the strategic objectives of the organisation

70
Q

Operational information

A

Used by front-line managers like supervisors to ensure specific tasks are planned and carried out properly

71
Q

Management information systems (MIS)

A

Database of Financial information used to produce regular reports on operations for every level of management. Gives managers feedback on their own performance and enables senior management to monitor the company as whole

72
Q

Features of Management Information System

A

•Information flows horizontally and vertically
•Centre core of data is likely tactical info for management control, but subsystems have operational and strategical data too
•The control cycle (comparison of actual results v plan) requires that the plan is carefully prepared
•Precise and well drawn up specification of areas of management responsibilities is essential
•Information produced must be able to measure actual v plan results in a way that control decisions can be taken at all levels

73
Q

Knowledge management

A

Compilation and redistribution of an organisations collective skills and experience for the benefit of the organisation as a whole

74
Q

Codification strategy

A

Knowledge is carefully codified and stored in a database where it can be accessed and used easily by appropriate employees

75
Q

Personalisation strategy

A

Knowledge is closely tied to the person who developed it and is shared person to person and through training courses. Computers are used purely for communicating not storing knowledge

76
Q

Main role of audit committees

A

•Monitor integrity of Financial statements
•Review internal Financial controls
•Monitor & review effectiveness of internal audit function
•Make recommendations to board e.g. appointment of external auditor
•Review external auditors independence, objectivity and effectiveness
•Develop and implement policy on external audit supplying non audit services
•Report to board matters where action or improvement is needed and recommended next steps

77
Q

Listing rules

A

Rules for listed companies administrated by the FCA. Dictates matters such as contents of prospectus for a company seeking listing and on going obligation such as disclosure of price sensitive information

78
Q

Companies House

A

Three statutory functions:
•Incorporate and dissolve limited companies
•Examine and store information delivered under the companies act and related laws
•Make info public

79
Q

Companies listed on the London stock exchange must follow which reporting standard?

A

International Financial Report Standards (IFRS)

80
Q

3 things most financial accounts will include

A

Income statement
Balance sheet
Directors repot

81
Q

First line of defence

A

Once a risk strategy is set it is primarily the responsibility of front line manages to ensure risks are identified and controlled in keeping with the strategy and control environment

82
Q

Second line of defence

A

The risk management department will be actively involved in discussing the best control to be put in place, accountability for the delivery of risk control remains with the operational management

83
Q

Third line of defence

A

The internal audit team has the responsibility of reviewing the overall risk management operation. Auditing both front line managers and the effectiveness of the risk management department

84
Q

4 key risk categories for insurance companies

A

Strategic
Underwriting & reserving
Investment / market
Credit

85
Q

Statutory external audit

A

Under the companies act 2006 external audit must be conducted by an approved entity and a report to shareholders published. Companies with 2 of the following require external audit:
•Turnover > £10.2m
•Net assets > £1.2m
•More than 50 employees

86
Q

Benefit of internal audit

A

•Maintain a sound system of internal controls
•Reviewing board reports to ensure they show a balanced and understandable viewpoint
•Ensure directors are up to date with new accounting & auditing issues e.g. International accounting standards
•Communicating with external auditors and ensuring a unified approach to work and that the board receive the correct information

87
Q

Role of compliance

A

Ensure that processes and activities are carried out in compliance with established operational procedures and meet requirements of regulators

88
Q

GDPR (General Data Protection Regulation)

A

New EU law on data protection and privacy for individuals

89
Q

Data controller

A

Someone who determines why and how personal data is processed

90
Q

Data processor

A

Someone who processes data on behalf of a data controller

91
Q

Data Protection principles

A
  1. Personal data shall be processed fairly & lawfully
  2. Personal date shall be obtained only for a specified and lawful purpose and should not be processed in any manor incompatible with that purpose
  3. Personal data should be adequate relevant and not excessive
  4. Personal data shall be accurate and where necessary up to date
  5. Personal data shall only be kept for as long as is necessary
  6. Personal data shall be processed in accordance with the rights of data subjects
92
Q

Rights of data subjects under GDPR

A

The right to be informed
The right of access
The right of rectification
The right of erasure
The right to restrict processing
The right to data portability
The right to object
Rights relating to automated decision making and profiling

93
Q

Strategy team

A

Undertake projects for the Senior executives on new areas of business or perhaps look into expansion and development of existing business lines on operations

94
Q

SWOT analysis

A

Strengths
Weaknesses
Opportunities
Threats

95
Q

Strategy team activities

A

Mergers & acquisitions
Classes of business
Geographical spread
Partnerships
Outsourcing
Advertising & marketing
Broker or direct
Time horizons
Business planning

96
Q

Coverholder

A

The party whom authority has been delegated to

97
Q

Binding authority

A

Sets out the scope and extent of the authority delegated to the coverholder

98
Q

Role of claims team

A

To ensure that when claims are made the policyholder receives fair and equitable settlement, in accordance with the contractual obligations of the policy

99
Q

Marketing team roles

A

•Market research
•Competitor research
•Customer profiling, target markets and segmentation
•Develop strategic and operational marketing plan
•Advertising
•Media relations
•Public relationships and sponsorship
•Product development
•Relationship management including sales management and customer service

100
Q

Pre-transactional customer service

A

Customer service mission statement, staff training, complaints handling process and preparation of warranties

101
Q

Transactional customer service

A

Managing customer service demand patterns, timing and monitoring levels of customer service delivery

102
Q

Post-transactional customer service

A

Claims handling service, handling complaints and cross-selling

103
Q

Risk Management Standard

A

Identifying strategic objectives
Risk identification
Risk analysis
Risk reporting
Monitoring & iteration

104
Q

Risk register

A

Centralised data source on all known risks, kept up to date by the risk management department. Significant finds are reported.
Risks are assessed as inherent or residual and rated from 1-15. They are assigned a Red (9-15) Amber (5-8) or Green (1-4) colour based on impact and probability

105
Q

Compliance roles

A

•Communicate all regulatory requirements to employees and update on any changes
•Regulator point of contact
•Ensure all procedures are followed on every sale
•Carry out anti money laundering and fraud procedures
•Ensure credit checks are carried out
•Deal with complaints fairly
•Develop new procedure and audit existing procedure
•Ensure all staff in controlled functions are Approved Persons
•Regular reporting on compliance performance and any breaches
•Create and maintain compliance manual

106
Q

Typical recruitment process

A

Sign off
Recruitment
Interview
Job offer
Induction

107
Q

Facilities Management

A

Responsible for obtaining and maintaining adequate workspace and equipment, office procurement, may be involved in business recovery planning and arrangements

M92 (5 decks)

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