Chapter 1: Role of the finance Function

• What is an organisation?

  Social arrangement chasing goals while controlling performance and has boundaries.
• Types of priv sectors?

  1. Profit seeking - Sole traders/Limited liability
  2. Multinational orgs
  3. Non Profits - Charities
  4. Mutual orgs - Building societies
• What are public sector organisations?

  • Companies funded by government
  • Aim is to maximise resources
• What are vision, mission, and objectives?

  1. Vision = Where business will be in the future
  2. Mission = business we are
  3. Objectives = Targets (SMART) Specific, measurable, achievable, Relevant and time related
• How to monitor macro environment?

  PESTEL ANALYSIS:

  P = Political

  E = Economic

  S = Social

  T = Technology

  E = Environmental

  L = Legal
• How do you monitor Micro?

  Porters Five Forces:

  1. Threat of new Entrants
  2. Barganing power of Suppliers
  3. Barganing power of buyers
  4. Threat of subs
  5. Industry Rivalry
• What are the consequences of being connected technologically?

  1. Increase in levels of competition
  2. Communication is easier
  3. Changes to who key stakeholders are
• What are the concepts of value?

  1. Economy = Producing at lowest cost
  2. Efficiency = Producing at minimum labour hours
  3. Effectiveness = Maximum output with minimum resources
• What is the finance function value matrix?


  The Y-axis represents what the finance function does and the X-axis represents why finance function performs it.
• Finance function value matrix?

  1. Data integrity = FF is trusted sources of information
  2. Value analysis = FF Provides insights into drivers of organisational value
  3. Stewardship = FF make strategic decisions.
  4. Value enabling = FF works with other users to fix issues

  
• What are the value activites?

  Creating Value:

  1. Planning = Taking companies goals and outlining how they will get there
  2. Forecast = Estimations to create a budget
  3. Resource allocation = Ensuring resources are allocated efficiently

  Shape value:

  1. Performance Management + Control = Watching Orgs performance and taking corrective stance.

  Narrate Value:

  1. Financial reporting
• What is corporate governance?

  The system of rules, practices, and processes by which a company is directed and controlled.
• Examples of poor corporate governance?

  1. Domination of one board member.
  2. Lack of board involvement~
  3. Lack of internal audit
  4. Poor external audit
  5. Lack of supervision
  6. Focus on short term profits
  7. Misleading info
  8. Lack of contact with shareholders
• What are the UK corporate governce code areas?

  1. Board leadership
  2. Divsion of responsibility
  3. Composition, succession and Evaluation (Nomination)
  4. Audit committee
  5. Remuneration
• What is board and leadership?

  1. Effective entrepreunial board
  2. Promote long term success
  3. HALF the board should include NED's
• What are NEDS?


  They are directors who are independent and are appointed to the board but don't have any involvement in the day to day running.

  MUST NOT:

  1. Have been an employee for 5 years
  2. Have any interest in business in last 3 years
  3. No relationships
  4. Cant last longer than 9 years
• What is division of responsibilties?

  The CEO and chairman have to be separate.
• What is composition, success and evaluation?

  This is the nomination committee who are responsible for effective succession. (Klopp to Slot)

  Made up of:

  1. 50% NEDs (2 if small company)
• What is audit committee?

  Must consist of:

  1. All NEDs
  2. Indepenent
• What is the remuneration committee?

  Setting an appropriate reward policy that motivates executives to achieve the long-term interests of the investors/shareholders.

  Must consist of:

  1. At least 3 NED's (2 if smaller)
  2. Chairman Of Org cant be the chairman of the committee but can be a member.
  3. Chairman has to have been member for at least 12 months.
• What are the CIMA Fundamental Ethical Principles?

  Remember, PIPCO.

  P = Professional competence and due care (Having appropriate skills for the job.)

  I = Integrity (Dont tell lies or deceptive behavior.)

  P = Professional behavior (Acting responsibly)

  C = Confidentiality

  O = Objectivity (Avoiding bias, prejudice and Partiality)
• What are the 4 types of CSR Resonsibilities?

  1. Economic responsibility = Economic responsibility refers to the practice of making financial decisions based on a commitment to doing good. 
  2. Legal responsibilities = Expected to follow legislation
  3. Ethical responsibilities = Ethical responsibility refers to a company’s commitment to operate their business in an ethical manner that upholds human rights principles, such as fair treatment of all stakeholders, fair trade practices and equal pay. 
  4. Philanthropic = Doing charity