ACCA P1 GOVERNANCE, RISK AND ETHICS

Sample Study Note

For exams in June2014

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 Lesco Group Limited, April 2015 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Lesco Group Limited.

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Sample Note Content:

MAIN STUDY NOTE CONTENT [TOTAL PAGES: 157] PRODUCT SUMMARY LIVE ONLINE NOTE SAMPLE PLAN CHAPTER2 RISK MANAGEMENT SLIDE IN CLASS(RISK MANAGEMENT) DETAILED NOTES:

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Please note:
This is just the sample study note extracted from the main study note in your tuition study [This tuition study note is consistent in basic/super/gold package]. There would be more chapters in the main study note covering the whole ACCA syllabus. You can also take a look at the content within the main study note below:

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Main study note content [Total Pages: 157]

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Product Summary
content Basic package Super package Gold Package Oxford Brookes BSc in Applied Accounting

ACCA HD quality super tuition videos

ACCA HD quality super revision videos

Last minute revision ACCA Live online tuition(4sessions) ACCA Live online revision(14hours) ACCA Mock exams(with tutor mark) ACCA Tutor support ACCA Electronic study note ACCA Student online forum Pass Guarantee ACCA Final revision mock exam paper ACCA Super Live online session (2030hours) ACCA Super Live online revision (Super 3 days) ACCA 1V1 Career Advice ACCA Extra exam techniques demonstration Live online mentoring

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Live online note sample plan

Live online tuition note plan for June2014 P1 Exam [Only for super / gold package (there would be a unique plan for gold package)]

Live sessions: [2 hours/session---live online + recorded after class]: Live session1: corporate governance summary Live session2: corporate governance questions go through: DEC2007 Q1+ DEC2011 Q3+pilot paper Q4 + June2010 Q2 Live session3: Risk management summary+ DEC2008 Q2 Live session4: Ethics summary+ DEC2008 Q1(a)+ June2012 Q1(b)+June2009 Q2

Live revision note for June2014 P1 exam: [will be available since mid April 2014]: Live revision1+2: [There would be a separate live revision note detailing all past exam questions with answers to go through]

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Live online course timetable: Live session/revision for F4-P7

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*Please Note: This Timetable may be subjected to future changes. Kindly check regularly for any possible updates.

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Chapter2 Risk management

Slide in Class(risk management)

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Detailed notes:
Management of risks:

1. Identify risks: How: 1. Models that may be used SWOT PESTEL 2. Other ways: Interview Questionnaires Consultants Brainstorming Audit reports

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Different categories of risks:

Category Financial Environmental Business/Operational Risk

Action Credit control procedures/Hedging /Export insurance Environmental Scanning /Contingency planning Internal control procedures /Recruitment & selection /Testing /Training /IT controls /Insurance

Reputation Risk

Stakeholder analysis /inform about any changes/Compliance checks /Training

International Risk:

Transaction risk

Different hedging techniques

Economic risk

Diversification of business

Translation risk

Match assets with liabilities

Political risk

Keep an eye on governments latest regulations

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Who manages risks?

Risk committee: Risks can be identified and dealt with by risk committee. In most organizations the risk committee and audit committee would be the same but in large corporations there would be a separate risk committee dealing with risks issues.

Risk correlation:

There would be positive or negative risk relationship.

Positive relationship means as one risk arise or decrease then another risk would arise or decrease.

Negative relationship means as one risk arise or decrease then another risk would decrease or arise.

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2. Risk assessment:

This means the board is going to prioritize risks and focus on really problematic ones.

Tool: risk mapping.

Impact

Big

Small Likelihood Impossible Almost certain

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The prioritization of risks would be based on objective and subjective assessment.

Objective assessment: By reference to statistics or other forecasts by different experts.

Subjective assessment: Would be based on 3AsRisk Authority: if its up to board of directors who are going to manage the risks then they would have much auithority to deal with risks more properly.

Risk Appetite: this means whether company is risk aggressive or risk averse? And risk appetite is the combination of risk attitude(willingness to accept risks) and risk capacity(ability to accept risks, ie, do you have enough skills and resources).

Risk Awareness: this means when company is dealing with risks then it would affect different stakeholders within the organization and hence company need to analyse these potential negative impact on those stakeholders like customers, suppliers etc before any prioritization of risks is taking place.

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3. Risk strategy:

Transfer Using insurance; setting up a joint venture would be ways to transfer risks to 3rd parties.

Avoidance Totally reject a project.

Reduction You can either use proactive approach or reactive approach to reduce risks. Proactive approach means we can embed risks in culture: 1. It means ensuring that staff are thinking about risk issues as an integral part of their work. 2. Staff should know that taking unnecessary risks will not only lead to disciplinary action, but be regarded as unacceptable by their fellow employees. 3. So Risk management should be a part of everybodys job description, to ensure that staffs responsibilities are clearly defined. Reactive approach means we can embed risks in culture in internal control systems: Firstly, it suggests the need for proactive investment in systems so that their technologies are reliable and fully functional so as to deliver required results consistently into the future. Secondly, such system must be monitored through the development of control systems coupled with appropriate reporting on system operation and output.

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Acceptance Accept the risk and not taking any measures to deal with it.

Principle: ALARP Risk strategy is really something that occurs between avoidance and acceptance of risk. The continuum that operates between these two points sees an interplay of reduction and transference approaches. Where, along the line between avoidance and acceptance, strategy plays out, depends in part on risk attitude. Greater acceptance of risk often leads to greater rewards. Greater avoidance of risk often leads to fewer rewards. The concept of ALARP (As Low As is Reasonably Practicable) asks the board to consider how many activities or risks it considers acceptable, how may it will avoid and how high or low it is willing to push the remainder through investment in risk management. ALARP could be viewed as a tool or technique to focus the mind, it could also be simply a statement used to govern board deliberations, providing a sense of prevailing risk attitude.

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4. Implementation and monitoring risks:

Risk management system is a cycle and it needs to be reviewed frequently.

The frequency would depend on companys environment:

If the companys environment is quite static like charities then it would need less review.

If the companys environment is quite dynamic like financial services industry then it would need more review.

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