Textbook Notes (381,335)
CA (168,503)
UTSC (19,326)
MGA (381)
MGAD40H3 (7)
Chapter 13

Chapter 13 Notes

2 Pages
77 Views

Department
Financial Accounting
Course Code
MGAD40H3
Professor
Prof.Jan Klakurka

This preview shows half of the first page. Sign up to view the full 2 pages of the document.
Chapter 13 – Managing Strategic Risk
-Strategic risks are managed primarily by communicating effective boundaries – both business conduct and strategicand installing good internal control
systems.
-Boundary systems are designed to communicate risks to be avoided and to remove any ability to rationalize actions that could expose the firm to
undesirable levels of risk
-Internal control systems are designed to protect assets and to remove the opportunity for inadvertent error or wilful wrongdoing in transaction processing
and performance me asurement.
BELIEFS AND BOUNDA RIES
-To ensure employees engage in the right type of activities, managers must first inspire commitment to a clear set of core values (the beliefs that define
basic principles, purpose, and direction)
-Core values provide guidance about responsibilities to customers, employees, local communities, and stockholders. They explicitly define top
managements views on trade offs, and provide guidance to employees where rules and standard operating procedures alone cannot suffice.
-Inspirational leaders: (1) articulate a vision that addresses the values of the participants, (2) allow each individual to appreciate how he or she can
contribute to the achievement of that vision, (3) provide enthusiastic support for effor t, and (4) encourage public recognition and reward for all successes.
-In small companies, communication of core values can be accomplished informally, but large companies must for malize this process by articulating and
communicating formal beliefs systems.
-Belief systems are the expl icit set of organizational definitions that senior managers communicate formally and reinforce systematically to provide basic
values, purposes, and direction for the organization.
-Managers should never delegate the preparation of missions and credos, they should personally reinforce core values and their importance.
-Two ways to control human behaviour is to (1) tel l them what to do (and not to do), and (2) hold them accountable for outcomes.
-Managers inspire their employees to maximum effort and innovation by (1) creating shared beliefs and missions, (2) setting challenging goals, (3) linking
incentives to accomplishments, (4) declaring certain actions off limits.
BUSINESS CONDUCT BOUNDARIES
-Boundary systems commun icate specific risks to be avoided. The most basic business conduct boundaries are those that define and communicate
standards of business conduct for all employees.
-The greater the performance pressures and temptations in their bus iness, the greater the need for business conduct guidelines
Incentives for complianc e
-Instead of rewarding good behaviour, mangers generally punish the instances of incompliance.
Business Conduct Boundaries and Organizationa l Freedom
-Constraints provides the freedom in which creativity can flourish
INTERNAL CONTROLS
-Because of inevitable risks, managers must install internal controls (the policies and procedures designed to (1) ensure reliable accounting information
and (2) safeguard company assets)
-Internal controls can be segregated into 3 categories:
Structural Safeguards
-Designed to ensure clear definition of authority for individuals handling assets and recording accounting transactions. They include:
oSegregation of dutiesone person to check or reconcile the work of another
oDefined levels of authoriza tion – individuals access to funds are proportionate to their level or responsibility
oPhysical security for valuable assets – valuable assets should be protected
oIndependent auditexamine the integrity of the firms internal controls
System Safeguards
-Designed to ensure adequate procedures for transaction processing, as well as timely management reports. They inc lude:
oComplete and accurate record keeping – all transactions recorded accurately
oRestricted access to infor mation systems and databasesrestricted to only people who have a legitimate right to change or view account ing
transaction records
oTimely management reporting – receive accounting reports timely.
Staff Safeguards
-Designed to ensure that accounting and transaction processing staff have the right level of expertise, training, and resources. They include:
oAdequate expert ise for accounting and control staffCPA, CMA, etc
www.notesolution.com

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
Chapter 13 Managing Strategic Risk - Strategic risks are managed primarily by communicating effective boundaries both business conduct and strategic and installing good internal control systems. - Boundary systems are designed to communicate risks to be avoided and to remove any ability to rationalize actions that could expose the firm to undesirable levels of risk - Internal control systems are designed to protect assets and to remove the opportunity for inadvertent error or wilful wrongdoing in transaction processing and performance measurement. BELIEFS AND BOUNDARIES - To ensure employees engage in the right type of activities, managers must first inspire commitment to a clear set of core values (the beliefs that define basic principles, purpose, and direction) - Core values provide guidance about responsibilities to customers, employees, local communities, and stockholders. They explicitly define top managements views on trade offs, and provide guidance to employees where rules and standard operating procedures alone cannot suffice. - Inspirational leaders: (1) articulate a vision that addresses the values of the participants, (2) allow each individual to appreciate how he or she can contribute to the achievement of that vision, (3) provide enthusiastic support for effort, and (4) encourage public recognition and reward for all successes. - In small companies, communication of core values can be accomplished informally, but large companies must formalize this process by articulating and communicating formal beliefs systems. - Belief systems are the explicit set of organizational definitions that senior managers communicate formally and reinforce systematically to provide basic values, purposes, and direction for the organization. - Managers should never delegate the preparation of missions and credos, they should personally reinforce core values and their importance. - Two ways to control human behaviour is to (1) tell them what to do (and not to do), and (2) hold them accountable for outcomes. - Managers inspire their employees to maximum effort and innovation by (1) creating shared beliefs and missions, (2) setting challenging goals, (3) linking incentives to accomplishments, (4) declaring certa
More Less
Unlock Document


Only half of the first page are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit