1
Q
5 Categories of Business Process Management
A
- Design
- Modeling (what-if?)
- Execution (need indicators of success)
- Monitoring
- Optimization
2
Q
Purpose of BPM
A
*coordinate the functions of an organization to increase customer satisfaction
3
Q
Business Process Management Techniques & Approaches
A
Plan - design
Do - implement
Check - monitor
Act - continuously improve
4
Q
Indicators of Success
A
- Gross Revenue
- Customer Contacts
- Customer Satisfaction
- Operational Statistics
5
Q
Benefits of BPM
A
Efficiency
Effectiveness
Agility
6
Q
Implications for Shared Services
A
- service flow disruption
2. failure demand
7
Q
BPM vs. Reengineering
A
BPM = incremental change Reengineering = radical change
8
Q
JIT
A
- pull approach
- reduction in # of suppliers
- benefits > cost
- inventory does not add value
- empowered employees with more skills
9
Q
Quality =
A
product’s ability to meet or exceed customer expectations
10
Q
Conformance Costs
A
Prevention (PREVENT)
*redesign, training
Appraisal (DETECT)
*testing, inspection
11
Q
Nonconformance Costs
A
Internal (BEFORE)
*rework, scrap, tooling changes
External (AFTER)
*liability, lost customers, warranty costs, returned
12
Q
Total Quality Principles
A
*please customers: quality and continuous improvement
13
Q
GAP Analysis
A
*comparing to industry standards
14
Q
Lean Manufacturing
A
- cut the fat
- does NOT focus on quality
- waste reduction
15
Q
Kaizen
A
- continuous improvement
* resource usage stays within target costs
16
Q
Theory of Constraints
A
- focus on the bottleneck
* works around or leverages the constraint
17
Q
Six Sigma
A
- emphasis on cost reduction and quality
* rigorous metrics are used
18
Q
5 Major Processes of Project Management
A
- Authorization
- Planning
- Implementation
- Monitoring
- Closing
*all are the role of the project manager
19
Q
Authorization
A
- charter = permission
* statement of work = describes deliverables
20
Q
Planning
A
= establish baseline for quality
*ACQUIRING NEEDED EQUIPMENT AND SUPPLIES GOES HERE
21
Q
Implementation
A
- assure quality
* completing the work
22
Q
Monitoring
A
*observe project execution and identify any problems
23
Q
Closing
A
*ensure objectives have been completed
24
Q
Project Manager
A
- responsible for day-to-day oversight
- CEO of the project
- communicates to the project sponsor
25
Project Members
*perform the project tasks
26
Project Sponsor
* executive level of management responsible for allocating funds
* RESPONSIBLE FOR OVERALL PROJECT DELIVERY
* communicates to the steering committee
27
Executive Steering Committee
* group of executive level people
| * similar to a board of directors
28
Planning for Risk Management
Risk Assessment and Risk Control (tradeoff between risk and return for projects)
29
Human Resource Plan
*documents workers and hours needed for a project
30
Responsibility Assignment Matrix
*shows all activities associated with one person and all people associated with one activity
31
Project Scope
* must define deliverables
| * defines work that will take place
32
Scope Baseline
*describes final product and scope of project
33
Requirements Documentation
| Requirements Management Plan
*project requirements vs. how it will be evaluated and documented and analyzed
34
Cost Baseline
* the amount of money to be spend
| * follows an S curve distribution
35
Ways to Estimate Costs
1. parametric estimating (statistical relationship)
2. analogous estimating (similar sized projects)
3. work breakdown structure (bottom-up analysis)
4. three point estimate (high, low, probable)
5. reserve analysis
36
SMART Goals
```
S pecific
M easurablee
A ttinable
R ealistic
T ime bound
```
37
How is globalization measured?
*world trade as a % of GDP
38
The comparative advantage in global markets?
*specialization
39
What causes markets to be imperfect?
1. regulations
| 2. physical immobility of resources
40
What is Global Sourcing?
*using an combination of globalization methods
41
Content or Value Added Limits
e. g. NAFTA
| * disclose percentages of materials and labor in various products
42
3 Types of Economic Systems
* central planning
* market economies
* conglomerates
43
Multipolarity and Interdependence Types
1. Functional Interdependence (worldwide organizations and tasks)
2. Systemic Interdependence (global issues that affect all nations)
3. Multipolarity (vs. unipolar)
44
Diversification Risk Types
Systematic: market risk
Unsystematic: diversifiable
45
Types of Financial Risk
1. interest rate risk
2. market risk
3. credit risk
4. default risk
46
When does the APR equal the effective rate?
*when pay is annual
47
Effective Annual Interest Rate Formula
= (1 + (i/p))^p -1
```
i = stated interest rate
p = compounding periods per year
```
48
Compound Interest Formula
= P0 x (1 + i)^n
49
Nominal Rate of Return =
risk free rate + inflation rate
50
Types of Risk Premiums
* maturity risk
* purchasing power/inflation
* liquidity risk (short-term sale of asset)
* default risk
51
Risk Exposure Categories
1. Transaction Exposure (g/l on specific transaction; NET THEM)
2. Economic Exposure (increase/decrease of cash flows)
3. Translation Exposure (MUST BE CONSOLIDATED SUBSIDIARY; balance sheet items change)
52
Identifying Net Transaction Exposure
* net the total impact
| * effective and selective hedging
53
Futures Hedges
*usually used for smaller transactions
54
Risks with Net Transaction Exposure
* A/R: P goes down; sell
| * A/P: P goes up; buy
55
Forward Hedge
* private and larger transactions
| * uses a contract
56
Money Market Hedge
*international money market to plan to meet future currency requirements
57
Currency Option Hedges
* if FC increases, buy a call option
| * if FC decreases, buy a put option
58
Other Techniques for Transaction Exposure Mitigation
1. LT forward contracts
2. Currency Swaps
3. Parallel Loan (you buy back your own currency eventually)
59
Alternative Hedging Techniques
1. Leading and Lagging - favorable exchange rates using subsidiaries
2. Cross-Hedging - hedging a hedge
3. Currency DIVERSIFICATION
60
Managing Economic Risk and Translation Exposure
*depends on which line item (revenue or expense) are denominated in which currency
* want sales when FC increases
* want costs when FC decreases
61
Transfer Pricing
* minimize tax liability in certain jurisdiction
| * reduce revenues and increase expenses
62
Strong vs. Weak Cash Position
Strong: pay other subsidiaries in advance
Weak: pay richer subsidiaries after obligations were incurred as a means of preserving cash
63
Short-term vs. Long-term Financing
```
Short-term = lower cost, higher profits, higher risk
Long-term = higher cost, lower profits, lower risk
```
64
Short-Term Financing Factors
* rates are lower
* higher liquidity
* increased conversion in operating cycle, therefore higher profits
* interest rate risk
* credit risk
65
Long-Term Financing Factors
* higher rates
* decreased interest rate risk
* decreased credit risk
* lower profitability
* decreased liquidity
66
Working Capital Financing
*spontaneous financing of current assets with trade accounts payable and accrued liabilities
67
Letter of Credit
*third-party guarantee (usually required by a vendor
68
Line of Credit
*renewable; represents a loan, not a guarantee
69
Leasing Options
* operating lease
| * capital lease
70
What is the effect of issuing new debt?
*it decreases the company's credit worthiness
71
Debentures vs. Bonds
```
Debentures = unsecured
Bonds = secured
```
72
Income Bonds
*pay interest only upon achievement of some income level
73
Junk Bond
*unsecured, high risk, high return
74
Debentures and Bonds vs. Equity Financing
Debentures and Bonds: decrease credit worthiness, increase EPS
Equity: increase credit worthiness, decrease EPS
75
Degrees of ownership interest ________ as rights to income decrease
*increase
76
Preferred Stock is also known as a
hybrid security
77
Debt Covenants
* protect value of debt by protecting credit rating of debtor
* debtor agree to secure a lower cost of borrowing for a new loan
78
Violation of Debt Covenants
* technical default
| * negotiate
79
Financial Valuation of Perpetuities s
P = D/R
```
D = dividend
R = required return
```
80
Dividend Discount Model
P(t) = (D(t+1)) / (R -G)
```
R = required rate
G = growth
D(t+1) = dividend in next period
```
81
Price-Earnings Ratio for Forecasts
P0 = E1 x (P0/E1)
```
E = future EPS
P0 = price today
```
*sometimes the P/E ratio will just be given
82
PEG Ratio
PEG = (P/E/G)
G = % x 100
P = PEG x E x G
83
Price-to-Sales Ratio
*used for start-ups
P/S(1)
```
P = price today
S(1) = sales in one year
```
84
Price-to-Cash-Flow Ratio
= P/CF(1)
85
Behavioral Biases
Excessive Optimism
Confirmation Bias
Overconfidence
Illusion of Control
86
Impact of Loss Aversion
1. Losses are more distracting than gains (riskier behavior to regain losses)
2. managers are generally averse to sure losses (escalation of commitment)
87
Code of Ethics for Internal Auditing
Integrity
Objectivity
Confidentiality
Competency
88
Three General Standards for Internal Auditing
1. Attribute standards
2. Performance standards
3. Implementation standards
89
How often should the chief internal auditor report the organizational independence of the audit team?
*annually
90
How often should external assessments of internal auditors be performed?
*at least once every five years
91
Internal Audit Performance Standards
* managing the internal audit activity
* nature of work
* engagement planning
* performing the engagement
* communicating results
* monitoring progress
* management's acceptance of risk
92
Internal Audit Engagement Planning & Objectives
* objectives must be established for each engagement
| * must reflect a preliminary risk assessment
93
Internal Audit - Performing the Engagement
1. identifying information
2. analysis
3. evaluation
4. documenting
94
Management's Acceptance of Risk - Internal Auditor Responsibilities
* report to management
| * report to board only if management's response is inadequate
95
Parties Involved in Assurance vs. Consulting Services
Assurance: auditee, internal auditor, user (sponsor)
Consulting: internal auditor, user (sponsor)
96
Internal Auditing can be described as a
*disciplined and systematic approach
1 Becker BEC
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