Management Planning and Control Systems AKADMS 4570 3'0 A

1
Management Planning and Control SystemsADMS 4570

Strategic Risk

• Bad surprises

• Alter the strategy implementation

• Related with the industry

• Control or manage the risk

2
Type 1 of bad surprises (risks) Operations

• Core operating capability

• Control quality, maintenance, safety,
  logistics, record integrity.

• Trigger employee errors

3
Type 2 of bad surprises (risks) Asset
Impairment

• Future value or service to be provided.

• Control market value, credit risk, unauthorized
  use of intellectual property, facilities,
  processing capacities.

• Trigger willful actions to cover errors or to
  achieve performance targets.

4
Type 3 of bad surprises (risks) Competitive

• Changes in the competitive environment.

• Control competitors moves, regulation,
  customers and suppliers.

• Trigger external changes (exposure level
  defined by the industry)

5
Type 4 of bad surprises (risks) Franchise

• Consequence of excess risk.

• Control type 1, 2 and 3 risks.

• Trigger employee actions and external changes.

6
Increase of risk exposure due to Growth

• Pressure for performance.

• Rapid expansion of scale of operations.

• Decreasing experience of employees.

• Reduction of shared values.

7
Increase of risk exposure due to Culture

• Entrepreneurial risk taking.

• Early warning information not communicated

• Spirit of internal competition.

• Decisions based on incomplete information.

8
Increase of risk exposure due to
Information Management

• Transaction velocity.

• Transaction complexity.

• Critical performance measures not included.

• Decentralized decision making.

9
The origin of bad surprises (source of risk)
could also be willful misdoing of people.

• Pressure for performance.

• Opportunity for discretionary behavior.

These 2 factors lead to a temptation for
committing fraud.
Engagement in fraudulent behaviors occurs more
easily if it can be rationalized.
10
Ways to manage or control strategic risk

• Beliefs (culture).

• Boundaries personal behavior (culture)
• strategic domain (growth)

• Diagnostic (information management).

• Interactive (growth and inf. management).

• Internal controls.

11
Core Values (beliefs) Mission Philosophy
Risks to be avoided (boundaries) Limits to the
strategic domain
Business Strategy
Screening of strategic uncertainties
(interactive) Dialogue on performance measures
Critical Performance Variables (diagnostic)
Targets and outputs
12
Situation Boeing and Jets Go
What do you need to constantly monitor to keep
strategy implementation under control?

• Operations

• Asset Impairment

• Competitive

• Franchise

13
Situation Boeing and Jets Go
What are the factors that increase the risk
exposure and, therefore, need to be controlled?

• Growth

• Culture

• Information management

14
Situation Boeing and Jets Go
What control mechanisms or systems do you think
were needed?

• Beliefs

• Boundaries personal behavior
• strategic domain

• Diagnostic

• Interactive

• Internal Controls

15
Situation Boeing and Jets Go
What rationalization argument could have been
used by managers?

• Pressure for performance

• Opportunity for discretionary behavior

• Temptation for fraud

• Rationalization

16
Situation Top Business Schools
What do you need to constantly monitor to keep
strategy implementation under control?

• Operations

• Asset Impairment

• Competitive

• Franchise

17
Situation Top Business Schools
What are the factors that increase the risk
exposure and, therefore, need to be controlled?

• Growth

• Culture

• Information management

18
Situation Top Business Schools
What control mechanisms or systems do you think
were needed?

• Beliefs

• Boundaries personal behavior
• strategic domain

• Diagnostic

• Interactive

• Internal Controls

19
Situation Top Business Schools
What rationalization argument was used by
applicants?

• Pressure for performance

• Opportunity for discretionary behavior

• Temptation for fraud

• Rationalization

20
Management Planning and Control SystemsADMS 4570

Take a 10 minutes break. Get ready to discuss
the case of Hamilton Financial Investments A
Franchise Built on Trust