Managing Risks in Strategic Alliance T. K. Das

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Managing Risks in Strategic Alliance T. K. Das
Bing-Sheng Teng

• Yi Pan
• Amarisa
• Lewis
• Beverly

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Aim of Paper

• How can management effectively deal with the
  major risks of the management of alliances?

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Interested Parties

• Management of various alliances
• Employees
• Analysts
• Potential investors
• Shareholders

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Recommendations/Strategies

• Protection of core resources
• Knowledge
• Balance between flexibility rigidity
• Choice of partners
• Complement or supplement resources
• Similar cultures
• Learning barriers
• Influence/control
• Contracts, equity ownership, managerial influence

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Implications for Accountants

• Reflect economic reality
• Should such relationships be reported?
• Contractual obligations?
• Equity ownership?
• Managerial control?
• Mutual agreements
• If so, how should they be recorded?
• E.g. significant influence
• E.g. control
• E.g. contractual obligations

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Implications for Accountants
Alliances orientation Mgmt Intent Valuation
Control -Contractual control -Equity control -Managerial control Exercise some control Fair value method Equity method Equity method or consolidation
Flexibility -Incremental investment Plan to sell or exercise some control Fair value method Equity method
Securities Plan to sell or exercise some control Fair value method Equity method
Productivity Plan to sell or exercise some control Fair value method Equity method
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Implications for Auditors

• Appropriate disclosure and recording GAAP
  FASB
• Investments
• Expenditure
• Contractual obligations
• Consider risks and nature of strategic alliance
• Impact on future viability of company
• Consider informal partnerships
• E.g. integrated supply chains
• Exposure to operational and business risks

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Discussion Questions