P3 - 4/5. Strategic Risk and Responses

Question 1

What are the 4 main ways that reputational risk can occur?

Answer 1

1. Unethical behaviour
2. Absence of CSR
3. Customer service failures
4. Data breaches

Question 2

What 4 costing control systems can be implemented to manage some aspects of risk?

Answer 2

1. Activity Based Costing
2. Standard costing
3. Target costing
4. Life cycle costing

Question 3

What are the 4 main Human Resource management controls?

Answer 3

1. Recruitment policy
2. Contracts of employment
3. Discipline and reward policy
4. Performance appraisal and feedback

Question 4

What are the 2 main advantages of performance related pay?

Answer 4

1. Known, tangible and understood measures
2. Aligns interests of managers with shareholders

Question 5

What are the 3 main disadvantages of performance related pay?

Answer 5

1. Profits can be manipulated
2. Can lead to short term behaviour
3. Non financial factors should be considered

Question 6

What are the 4 main advantages of outsourcing?

Answer 6

1. Focus on core strengths
2. Access to expert skills and knowledge
3. Risk of turnover passed to partner
4. Saves time and money

Question 7

What are the 4 main disadvantages of outsourcing?

Answer 7

1. Lose in house skill
2. Quality needs to be assured
3. Confidentiality issues
4. Supplier in strong bargaining position

Question 8

What are the 4 goals of an effective transfer pricing policy?

Answer 8

1. Goal congruence
2. Autonomy (motivation)
3. Performance evaluation
4. Minimising tax liability

Question 9

What are the 4 main options for setting a transfer price?

Answer 9

1. Market price
2. Standard cost
3. Mark-up on cost
4. Dual pricing system

Question 10

What 3 additional considerations need to be made when assessing divisional performance?

Answer 10

1. Age of division/assets
2. How long current manager has been in place
3. Market conditions

Question 11

What are the positive and negative changes in behaviour seen when performance is monitored?

Answer 11

+ve Improved efficiency and motivation
+ve Achievement of targets
-ve Stress and illness
-ve Opposition of targets

Question 12

What are the 3 benefits of employees participating in target setting?

Answer 12

1. Improved motivation
2. More informed budget
3. Greater commitment

Question 13

What are the 3 difficulties with employees participating in target setting?

Answer 13

1. Time consuming
2. Slack
3. Local objectives not corporate goals