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Managing Strategic Risk - ch.13

5 Pages
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Department
Financial Accounting
Course Code
MGAD40H3
Professor
Prof.Jan Klakurka

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MGTD54 Week 10 March 24, 2011
Ch. 13 Managing Strategic Risk
-Communicate effective boundaries and internal control systems
-Communicate risks to be avoided
-Remove ability to rationalize actions risky to the firm
Beliefs and Boundaries
- Managing tensions of short-term vs. long-term, self-interest vs. organizational
success results in innovation that enhances firm value and strategy
-Inspire commitment to core set of values
Core values: beliefs that define basic purpose, direction, principles
Guides responsibilities to customers, employees, stockholders, communities
Top mgmt view tradeoffs
Inspirational leaders:
1.Articulate vision
2.Explain how to contribute to achieve vision
3.Enthusiastic support for effort
4.Encourage public recognition and reward for success
-Formalize communication of core values by articulate formal beliefs systems
Belief systems: explicit set of organizational definitions that senior managers
communicate formally and reinforce systematically to provide basic values, purpose, and
direction for the organization
-High level of abstraction and generality
Controlling human behaviour:
Tell people what to do through command and control approach
Hold ppl accountable for outcomes, leave to initiative and creativity to perform job
effectively
-Define boundaries by telling what not to do
Inspire employees for maximum effort by:
www.notesolution.com
1.Create shared beliefs and mission
2.Setting challenging goals
3.Linking incentives to accomplishment
4.Declaring certain actions off-limits
Business Conduct Boundaries
-Communicate specific risks to be avoided
Business conduct boundaries: define and communicate standards of business conduct
for all employees
codes of business conduct
Off-limit behaviours:
Conflicts of interest
Anti-trust laws
Disclosure of confidential company info
Trading based on nonpublic info
Illegal payments to government officials
-Strategy built upon trust and reputation for quality and integrity
-Catastrophic to value of franchise
-The greater the performance pressures and temptations in business, the greater the
need for business conduct guidelines
Incentives for Compliance
-Expect complete integrity without need for explicit incentives or rewards
-Punish noncompliance
-Grounds for disciplinary action up to dismissal
Business Conduct Boundaries and Organizational Freedom
-Confidence to be creative within defined sphere of activity
-Act independently and create value within defined boundaries
- Mngrs communicate beliefs of importance of integrity
-Guidelines empower employees to refuse to do wrong
Internal Controls
-Ensure transaction info accounted for properly
-Employees denied opportunity to misappropriate assets
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Description
MGTD54 Week 10 March 24, 2011 Ch. 13 Managing Strategic Risk - Communicate effective boundaries and internal control systems - Communicate risks to be avoided - Remove ability to rationalize actions risky to the firm Beliefs and Boundaries - Managing tensions of short-term vs. long-term, self-interest vs. organizational successresults in innovation that enhances firm value and strategy - Inspire commitment to core set of values Core values: beliefs that define basic purpose, direction, principles Guides responsibilities to customers, employees, stockholders, communities Top mgmt view tradeoffs Inspirational leaders: 1. Articulate vision 2. Explain how to contribute to achieve vision 3. Enthusiastic support for effort 4. Encourage public recognition and reward for success - Formalize communication of core values by articulate formal beliefs systems Belief systems: explicit set of organizational definitions that senior managers communicate formally and reinforce systematically to provide basic values, purpose, and direction for the organization - High level of abstraction and generality Controlling human behaviour: Tell people what to do through command and control approach Hold ppl accountable for outcomes, leave to initiative and creativity to perform job effectively - Define boundaries by telling what not to do Inspire employees for maximum effort by: www.notesolution.com
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