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Organisation structure and governance Flashcards

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1
Q

What are the main two factors affecting the way in which a business is structured ? P23

A

Size and nature

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2
Q

What are the three main structures of a business ? P23

A
  • Functional
  • Divisional
  • Matrix
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3
Q

What is a functional business structure?P23

A
  • Specialised functions/skills
  • knowledge and expertise togeether
  • efficient work & development of skills - more experienced staff
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4
Q

What is a divisional structure of a business ? P24

A
  • larger business
  • teams - individual product/service - geographical
  • resources and function support - each division
  • divisional director
  • autonomous - own hiring , budgeting, finance, markerting
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5
Q

What are the advantages and disadvantages of a divisional structure ? P24

A
  • Advatange - team spirit
  • Advantage - expert development
  • distavdantgae - unhealthy competition
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6
Q

What is a matrix structure ? P24

A
  • Own departments & different teams
  • new product - members different departments
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7
Q

What does the span of control refer to ? P25

A
  • Managers- individuals they are responsible for
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8
Q

What factors will the span of control vary depending on ? P25

A
  • Size of organisation -smaller business = wider span of control
  • type of work - easier larger (repitative tasks) < smaller (complex)
  • location of staff - located together = wider control
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9
Q

What is a tall organisational structure ? P25

A
  • Function
  • chain of command= several layers of management
  • clear reporting lines
  • narrow span of control
  • longer decision making
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10
Q

What is a flat organisational structure, and its advantages and disadvantages ? P26

A
  • fewer levels of management
  • wider span of control
  • efficient decision - info pass quickly
  • Howveer- staff stagnate - fewer opportunities
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11
Q

What does the chartered governane institute define governance as ? P27

A
  • framework for managing organisations
  • identifies - who makes decisions
  • authority to act organisation behalf
  • accountable - organisation and people perform
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12
Q

What will a business with good governance have ? P27

A
  • Delegated decision making - structural support
  • scope of responsibility - not beyond
  • board of directors & managements - legally, ethically, sustainability
  • stakeholder and shareholder benefit
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13
Q

What are the three areas a business will have to think about relating to effective governance ? P27

A
  • Corporate governance
  • financial governance
  • legal governance
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14
Q

What is corporate governance ? P27

A
  • Board of directors - governance responsibility
  • systems - direct and control operations
  • setting stragtegic aims and objectives
  • necessary leadership
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15
Q

What is financial governance ? P27

A
  • Collects, manages , and controls financial information
  • monitor operations & financial risks
  • extreme - fraud / money laundering
  • simple - amount due / owed paid
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16
Q

What is legal governance ? P27

A
  • Legislation and regulation compilance
  • appropriate levels of authorisation
  • internal documented process
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17
Q

Aside from the authorisation to make decisions, what is another aspect of governance to consider ? P28

A
  • Extent centralised
  • centralised control
  • decentralised control
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18
Q

What is centralised control ? P28

A
  • Higher tiers
  • staff to implement rather than contribute
  • higher level = more influence
  • distance - ‘coal face’ - actual activities
  • top-down structure - less flexible than decentralised
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19
Q

What is decentralised control ? P28

A
  • Lower level management - decision making authority
  • departmental, branch, team
  • not every decision checked - directors and senior management
  • work - team members
  • bottoms up - collaborative
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20
Q

What are the advantage and disadvantage of decentralised control ? P28

A
  • Advantage: senior manager key - departmental day to day
  • Disadvantage: lower level inexperience
  • Disadvantage: lowe level manager team focused not business
  • Disadvantage: lower level manager - disconnection senior manager- loss of control
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21
Q

What effect will a larger business have on the organisational structure and governance of the organisation ? P28

A
  • likely - tall structure - departments
  • levels of management- levels of authority
  • tending - span of control = narrow
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22
Q

What impact will a smaller business have on size and governance ? P29

A

Often - one/ two owners - large control span
flat organisational structure
few levels of management

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23
Q

When looking at governance of an organisation , what are the different levels of management and the type of decisions they are responsible for ? P29

A
  • Strategic/ corporate level
  • managerial level
  • operational level
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24
Q

What is strategic / corporate level management ? P29

A
  • Start at top
  • affect whole organisation
  • long term
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25
What is managerial level governance ? P29
* middle level * Achieving goals * product to produce? * competative price of product ?
26
What is the operational level of management ? P29
* Shorter term * practical day to day operations : * overtime? * when raw material ordered ?
27
When looking at governance , what must each level of management in an organisation do ? P29
* work together - support * good of organisation * new product * stragtegic level - decision develop * managerial level - characteristics should have * operational - sufficient & competent staff
28
What are the other key functions in a business that may operate with the finance function ? P29
* Operations/ production * sales and markerting * human resources * information technology * distributuon and logistics
29
What is the operation / production function? P31
* Heart of business * production of goods * provision of services
30
How does the finance production relate to operations/ production functions ? P31
* Provide financial information - function effectively: * credit account set up * inventory control * budgeting
31
How does the finance department assist the operations/ production department through setting up credit accounts ? P31
* finance input: agreeing prices, negotiating credit terms , agreeing discounts * finance input: maximum price - margin maintenance * finance input: credit terms - cashflow * finance input: discounts - comparable business
32
What needs to be provided to the finance departmnet once a credit account has been set up for the supplier ? P31
* Documents - inventory purchases and issues * orderds , delivery nores , goods received , invoices * match documents - liase with production (issues) * maintenance financial relationship with supplier - payment due
33
What type of inventory does a business need to operate effectively ? P31
* Sufficient inventory raw material * right products at right time * monitoring receipts and issues * highlight further to be ordered * monitored finished goods = timely customer orders
34
What checks must the finance team carry out on inventory ? P31/32
* regular inventory counts * physical inventory = inventory records * minimise unnoticed theft * minimise unfulfilled customer order
35
What does budgeting in relation to operations and producution function ? P32
* actual results against budget = variance * variance investigated * no affect on profitability
36
What is the sales and markerting department responsible for and in what ways will the finance function work with them ? P32
* deal with customers / clients * markerting products and services * negotiating sales * pricing * setting rates for service * budgeting * performance indicators
37
What is the role of pricing the finance function must carry out for sales and markerting ? P32
* Calculating price for products - all costs met * affected - market willing to pay * profitable selling price importance * setting discounts = profit after discount given
38
How may finance set rates of services for the selling department to use ? P32
* Rates: * cover overheads, salaries, profit * different rates - senority , qualifications , complexity of work * specific services - maybe fixed price - finance to set
39
How will the finance function budget for sales and markerting ? P33
* Sale volumes * prices * effect of discounts * discount - maybe reduces revenue & increase volume
40
What are performance indicators and how does this relate to the relationship between finance and sales ? P33
* Indicator set up - sales and markerting monitored * sales revenue against target * comparing individuals - sales * markerting campaigns take up * budgetting products , branch , sales teams - monitor actual performance
41
What is the human resources department and how does finance relate to this ? P33 / P34
* Responsible - people , welfare, wellbeing * recruitement costs * staff training and development * pay and benefits
42
How would the finance department be involved withy recruitment costs for HR ? P33
* recruitment costs and salary * included- costs budget
43
How would finance be involved in staff training, which is also a concern for HR ? P33
* Regular training = maintain competence * costs for training - justification eed & inclusion in departmental budget
44
What must HR provide the fiannce team with when a new employee joins the business ? P34
* start date * rate of pay * overtime rates * reflected in budget * overtime hours communication - more staff ?
45
What is the information technology department , and how does the finance department relate to this ? p34
* information systems - hardware and software * investment in IT * data security * performance indicators
46
What is the role of finance regarding investment in IT ? P34
* Limited resources - invest capital projects * IT systems = significant investment * investment appraisal ( cost benefit analysis)- investment criteria
47
What is the role of data security that finance must take when dealing with IT ? PP34
* Work together - data protection regulation * customer data - sales and receivables * supplier data - purchases and payables * personal staff data - payroll * sensitive product and sales info - not for competitors
48
What performance indicators will be in place for IT departments ? P34
* Relevant perfomance indicators * financial indicators - finance sets them up
49
What is the distribution and logistics function and what are the main factors to consider in its relationship to finance ? P35
* key element of supply chain * distribution - actual delivery of products and service * logistics - inventory organisation, storage and control * inventory management * exporting and importing * performance indiciators
50
What is inventory management , when looking at the relationship between finance and distribution and logistics? P35
* Sufficient inventory * calculating reorder levels & lead times * analysing usuage * holding inventory costs - warehousing, risk of damage , tying up inventory costs
51
What is exporting and importing when looking at the relationship between finance & distribution and logistics P35 ?
* Intention - import and export goods * tax implication of trading overseas
52
What are the performance indicators - finance relatiinship with distribution and logistics ? P35
* relevant performance indicators * finance setting up - monitor against actual performance
53
What is risk? P35
* Negative or undesirable outcome * upside risk - possible bad outcome / possible positive outcome * e.g. investing in machine
54
What is the difference between risk and uncertainty ? P36
* Decision maker - more than one outcome * assess each possibile outcome * uncertainty - doesn't know possible outcome * uncertainty - doesn't know probability it will occur
55
What is the key thing to do when faced with risk and uncertainty ? P36
* gather much info * decision - minimise uncertainty * assessing risk
56
What are the diifferent types of risk ?
* business * strategic * financial * operational * cyber * reputational
57
What is the definition of business risk ? P36
* Vulnerability to factors * decrease profits * cause business to fail
58
What is strategic risk ? P37
* risk from Fundamental decisions - directors * objectives and strategies * car manufacturing - models overseas : Upside - positive move : downside - exchange rate risks : downside - working conditions :downside - duties on imports & exports
59
What is financial risk ? p37
* risk from change in financial conditiosn * interests rates change = costs of borrowing increase * credit rate deterioration (customer) * interests rate change = highly geared business - increased repayments
60
When looking at financial risk , why are repayments important ? P37
* customers Able to pay invoices due * non payment = hugely expensive * reduce - regularly monitoring credit ratings
61
What is operational risk ? P37
* Way organisation operates business function * broad- risks - peope, systems , process, ethical attitude of organisation
62
What are the main examples of operational risk ? P37
* Process risk * People risk * system risk * legal and regulatory risk * event risk
63
What does process risk within operational risk entail ? P37
* risk of loss inherent - processes of business * internal controls - bank reconciliations * no bank rec = money taken from business
64
What does people risk within operational risk entail ? P37
* risk - employees * e.g. references - qualifications & experiences * no reference = incompetence / dishonest employees * over-reliance : * lose skills - irreplaceable employee
65
What does system risk within operational risk entail ? P38
* Most organisation = computer system depend * strong controls necessary * no control - fraudulent transactions - e.g. payroll - fictitious employees - fraudulently paid
66
What does the legal and regulatory risk within operational risk entail ? P38
* Loss risk - failure to comply legislation / regulations * e.g.: * health and safety / industry regulations = fines
67
What does event risk within operational risk entail ? P38
* External factors / events affecting business * causes: * physical event * social event * political event * economic event
68
What does physical event risk, within operational risk entail ? P38
* Fire/ flood - document/ asset damage, interrupt business
69
What does social event risk entail ? P38
* Socially aware public * e.g. inexpensive labour = 'slave labour'
70
What does political event risk entail ? P38
* government decisions affecting business * e.g. rates of taxation * environmental legislation
71
What does economic event risk entail ? P38
* E.g. bank of england - interests rate raised * impact - lender charging interests * risk - business paying interests on loans
72
What is cyber risks ? P38
* Increased use of technology = increase in cyber risk * PwC definition: * Risk with financial loss, disruption, or damage - reputation * ^failure, unathorized, erroneous - information systems
73
Where does cyber risks most commonly come from and what are examples of this ? P38
* Outside organisation * phishing * malware * ransomware * distributed denial of service attack * spyware * keylogging * password attack * browser hijacking
74
What does phishing, within cyber risk, entail ? P38
* message to person in business - trick open email/ attachment * malware/ ransomware release * identify info - enable access / withold access - network and data
75
What is malware in the context of cyber risk ? P39
* Post phishing * breach - weaknesses in network * e.g. viruses, keyloggers , spyware, worms, or ransomware
76
What is ransomware in the context of cyber risk ? P39
* Lock users out - ransom to be paid * no payment = releasing confidential info to public
77
What is the distributed denial-of-service attack in the context of cyber risk ? P39
* data requests to central server * system hostage - meeting demands
78
What is spyware within cyber risk ? P39
* enables spying on operation * gather info covertly
79
What is keylogging in the context cyber risk ? P39
* Recording keystroke - identify passwords & sensitive info
80
What is a password attack ? P39
* Attempt steal passwords - short, easy to guess passwords * automated programmes - 'guess' password
81
What is browser hijacking ? P39
* Change default homepage - malicious programme * unwanted advertising / popups * steal information - maleware usuage
82
What is reputational risk ? P39
* Threatens name & reputation
83
What can reputational risk come from ? P39
* Direct actions of business * action one/more of employees * third party - partner/supplier
84
What is the effect of reputational damage to a business ? P39
* Loss of sales and profit * employee resignation * supplier, customer, investor reluctance * e.g. starbucks - avoiding tax in UK
85
How can an organisation avoid reputational damage ? P40
* Good codes of conduct * strong governance * transparent in dealings * socially responsilr * environementally conscious
86
What must a business do once risks have been identified ? P40
* Manage risks
87
What is the first step of risk management ? P40
* Evaluating risks: * liklihood of occuring * impact if occurs
88
What is the second step of managing risks ? P40
* Managing risks step
89
What does evaluating rsisk entail ? P40
* risk matrix * table chart : impact one axis , liklikood on another axis * graded - impact * liklihood
90
How does an organisation manage risk ? P41
* TARA framework - 4 actions for each risk * Transfer * Avoid * Reduce * Accept
91
What does transfer mean in relation to risk management ? P41
* Transfer to third party * third party - most/all of loss * building insurance - loss transferred to insurance: * Small excess > insurance payout
92
What does avoid mean within risk management ? P41
* Complete avoidance * some risks unavoidable - withdrawal from opportunity * avoidance = highly likely risk & significant impact
93
What does reduce mean within risk management ? P41
* reducing risks & minimising effect * e.g. regular staff training - necessary skills
94
What is acceptance in managing risk ? P41
* Acceptance risk occurence * conscious decision to deal with * unlikely risks / insignificant effect
95
How can the tara approach be displayed ? P41
Risk map **look at book **

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