l

Strategic
Performance
management
THEORY
contents: Theory
1. Conceptual framework of performance management
2. Performance evaluation & improvement tools
3. Economic efficiency of the firm
4. Enterprise risk management

Conceptual framework of performance management

1. Performance management-concepts, components
2. Performance, productivity & efficiency
3. Financial performance analysis
4. Supply chain management
5. customer relationship management & customer
profitability analysis.

Performance management concepts components

-

Performance management is continuous process

a

of identifying ,
developing
measuring and
performance
in
organisations by linking each individuals
performance t to the
objectives organisations
overall
mission and
goals .

Its two main

components are -

continuousness performance management is ongoing

-

It involves never
a
ending process of setting goals
& objectives
observing performance and giving t
,

receiving ongoing coaching & feedback .

Linklomissionhgoals performance management

-
 #
Congruent:in connection with

to that employers activities

requires
one ensure
& manager are
congruentwith the
organisations
Performance management creates direct
goals.
0

link between employee performance & organisational

goals. Assessment Evaluation
Appraisal /
performance appraisal is the ongoing proces
ofevaluating employers performance. Itis the review
of employs performance time. over

appraisal
Perance management
permane

1
owned
by HR departmentowned by line
managers
often linked to
pay
Less
likely to be
directly
unked to pay.
o

use
ofratings Ratings less common

Annual appraisal meeting continuous review with one

as more formal reviews.

Focus on
quantified Focus on values and behaviours

objectives. as well as
objectives.

↑mance
diagram! -
managementslee
- Q

Follow Review Act

< L
Monitor
 Performance management -

concept
Itfocuses mainly on the achievement of result
-

It differentiates the aspects such as being engaged ,

and
producing results .

It directs the business to the overall achievement

-

with the assessment of employees effectiveness by the

implementation of performance appraisal at regular
internal .

It is owned line
by managers
-

It is a continuous review process

¥s of performance management
-

④ Performance
② Performance appraisal &
planning
reviewing
③ feedback on the performance followed by personal
counselling and performance facilitation .

④
⑤
Rewarding good performance
Performance improvement plans
⑥ Potential appraisal .

Performanceptanng Performance planning is done

-

jointly by the appraiser and reviewer The employees .

decide upon
the
targets and
key performance area

which performed
be over
year within the
can a

performance budget ,
which is finalized after a mutual
between
agreement reporting officer &
employee .

organisations using balance score card ,

drill
KPIs down the
hierarchy to that each employee is
responsible for definite results .
 [Link]#ewing- The inappraisals
the
are
normally performed twice in year
annual reviews which
a

form of mid reviews

-

and
is held at the End of F. Y In this the
.

process ,

appraise first offers the self filled up ratings in

the self appraisal form and describe his/her
achievements over
period of time After the self
a .

appraisal the final ratings are provided The entire

,
.

process of review seeks an active participation of

both employee and appraiser for analyzing the
causes of loopholes in the performance .

Feedbackontheperformanufollouedbypessonalcou
nsdling&perfounanttion- This the stage is
which the acquires awareness from the
in
employee
appraiser about the areas of improvement and also
information on whether the employee is contributing the
expected levels of performance not The employee or .

receives transparent feedback and along with this

a

training and development needs of the employee is

also identified .

Reeoardingqoodperformane -

It determines the
Dark motivation of
employee an . An
employee is
publicly recognized and aoarded for qead performance .

[Link] stage fresh ,

set of goals set up for an employee and

are neo

deadline is provided for accomplishing the objectives

 WI -

It forms a basis for both lateral

& vertical movement
employees Potential appraisal&
of .

is performed
by implementing competency mapping
Various assessment techniques .

Performance , productivity and

efficiency and
In an organisational scenario
, productivity efficiency
reflects overall performance .
This could lead to increase
decrease in shareholders Hence Government
" "
wealth
'

or .
,

economist and professionals are concerned with

defining
the concept of
productivity and
efficiency .

productivity examines the relationship between input &

output in a
given production process It does not merely
.

define volume of output

the ,
but output obtained in
relation to the sources employed .

[Link]#/InputCD-/
Productivity is
closely related of efficiency with that .

Efficiency reflects the ability of firm a

to obtain maximum output from given set of inputs a .

If firm is obtaining maximum output from

a set of a

inputs it is said to be an efficient firm Alternative

,
.

ways of improving the productivity of the firm is like ,

producing goods with fewer inputs or

,

producing output with same quantity of inputs

more

increasing productivity implies

either
Hence more
,

output is produced with fewer inputs output or more

with same quantity of inputs so

in
productivity growth
.

encompasses changes
definitely raises
efficiency and
productivity
increasing efficiency
.
 consequently if ,
the
growth of an
org higher
.
is than
that of its competitors ,
that firm performs better and
is considered to be more effi
In the public sector, it is about how
you
maximise
quality scope and timeliness (waiting times
the ,

of your service delivery while minimising the inputs

that are
required ultimately performance is about
.
,

utilising the amountwill of output energy from system a .

Hence
,performance be product of efficiency a ,

utilisation &
productivity .

Efficiency ,
utilisation ,
productivity

Performance
 performance
Financial analysis
Itis the process of
i dentifying the financial strengths
and weakness of the firm by properly establishing the
relationship between the items balance shutand of profit
and loss account. It helps in shortterm long term
->

forecasting. The growth can be identified with the help

offinancial performance analysis. This
analysis can be
carties
undertaken
by managementofthe firm or
by I
outside the firm
namely, owners, conditors, investors.

various interestid such

shareholders, creditors, tax
groups
authorities and
as

others
managers,
seeks
anown to the
following importantquestions:
-

1. Whati s the
position ofthe firm at a given period oftime?
2. How is the
financial performance ofthe firm over a given
period oftime?
Financial analysisinvolves the
offinancial use

statements. Generally,i.e. a financial statementrefers to 3

basic statements Balance sheet, Income statement &

ash flow statement.
Balance sheet itshows the financial position ofthe
-

given pointoftime. Itis a summary ofa

-

firm at a

financial position on
firms
·

thatshows
given date a

Total assets Total liabilities owner's

equity.
-

#me statement-itreflects the performance ofthe

firm over a period oftime. It is the summary ofa
frims anvenues and expenses over a
specified period,
ending with notincome or loss for the period.
 flow statement. It depictscash accrual
& for the
consideration. It can be prepared
either
⑤

period under
directmethod ofreceipts a indirect
by payments
by
method of adjusting inc/dec. in liabilities
& non cash
assets to profit/loss. Direct method is more simple ↓
to understand while indirect method is much
easy
informative.
Areas offinancial performance analysis -

financial analysis often

assers the
following-
1.
firms production productivityperformance
2.
profitability performance
Liquidity serformance

:.
I
.
working capital performanc
performance
fixed asset
Fund flow
performance
social
1conformance.
financial health is measured from the following perspective -

1.
Working capital analysis
2. Financial structure analysis
3.
Activity analysis
4.
Profitability analysis
5.
Salvency Analysis
offinancial performance analysis
significance
-

Interest of various related is

groups affected by the
financial performance of a
firm. Therefore, these groups
analyse the financial performance of firm.
o

# creditors interested in the

-

liquidity ofthe
firm. (appraisal offirm'sliquidity)
 Bondtedders interested In the cash-flow ability of
-

the firm (appraisal of firms capital structure )

I¥ interested in present and expected future
-

earnings as bell as stability of these earnings (appraisal

of firm
's
profitability & financial condition)
internal control better
Managed interested in
-

financial
condition and better performance (appraisal of
firm's present financial condition evaluation , of opportunities
in relation to the current position , ROI)

Types of financialErrancies
performance analysis
-

1-
analysis -1

1-
Material used
-1 1-
Modus operandi -1
External Internal Horizontal vertical
analysis analysis analysis analysis
* Modus operandi → A particular way of doing something .

EEE -

analysis
This
business
is undertaken by
the outsiders of namely ,
investor ,

credit agencies ,

Govt
agencies
.
,

creditors
They mainly use
published financial statements for
the analysis as it serves limited purposes .

Internally -

It is undertaken
by executives
and
employees
the of
Govt
organisation
court
or
by officers
appointed by or .
 Horizontally financial statements for
-
Here
a of years
number reviewed and
are
analyzed This .

analysis helps the management& to have an insight into

levels and of strength
areas Deaknesses It is also .

called Dynamic analysis .

k¥0 -

Here
study is made of quantitative
relationship of the Various items of financial statement
This
analysis is helpful in comparing the performance
of several companies in the same group (division ( deft .

in the same It is also called static analysis

company . .

Techniques (tools of performance analysis

financial -

There various
are
accounting techniques such as ,

•
comparative financial analysis
Common size financial analysis
•

Trend
analysis
•

Fund Flow
analysis
•

cash flow analysis

•

•
Crp analysis
Ratio analysis
•

•
Value added analysis
Trendanalysis -

ft indicates changes in a item ( group

of items over a
period of time In this technique a
.
,

base is chosen and the amount of item for that

year
taken that the basis of that
year is as 100
for year on .

the index numbers for that year are calculated .

 Ratioanalysis -

Rato express the numerical relationship

between
two or more things This relationship can be
.

expressed as percentage , fraction proportion

,
.
Ratios are
used to describe
significant relationship which between
exist
balance sheet , in account Ratio
figures shown on a a Pl .

analysis helps in
determining the financial strengths &
weaknesses of a
analysis
company This has
.
also reveals whether
Companys financial position been
Improving or

deteriorating over time .

into 4
Ratios can be
classified different groups ,

liquidity ratio
ratio
Leverage
Profitabilityratio ratio

Activity
°6mmonsizefihanudanakp -
suppsupply chain management
on

is
management a setofapproaches utilized
to
efficiently integrate supplies ·manufacturers, warehouses
and stores, that merchandise
so is produced
and
distributed atthe right quantities, and righttime the
to
rightlocations in order to minimize system wide costs
service land requirements
which
satisfying

supplie
supply chain management
-Distributor
↳Manufacturer
↳ Retailor
↳ Logist
&
"Consumer
ecoresof
supplychainmaterials
management- -

· and matonal movement

·
Minimise
inventory investment
·
ENW
timely delivery ofmaterials at every
level of
the
supply hair and to customers
used manufacturing /
Ensure
qualityofmaterials
⑥
in

sorias are productavailability and delivery speed.

Need for supply chain management -

⑥
Match demand
Improve operations
·

inventories
Maraging
·

Increasing Globalisations

complexity competitive or
·
Handle ene
·
 ⇐ of chain
supply management -

Return
Plane It is strategic portion
-

where a
strategy is
required for managing all the resources to meet customer
demand for product & services .

choose the suppliers that

Source will deliver the &
goods
-

Q Develop a set of payment

.

pricing delivery
,
and

processes with suppliers and create metrics for monitoring

and
improving the relationships .

schedule the activities

Mede -
This is the
manufacturing step .

necessary for production testing packaging

, ,
& preparation
for delivery .

I -

part that many insider refer to as

This is the

logistics Co ordinate the receipt of orders from customers

.
-

developing the network of oared oases pick carriers to get ,

customers
products to and set up an
invoicing system to
receive
payments .

Return The problem part of

-

supply chain .
create -

a
fretwork
for receiving defective and products back from
'

excess

customers &
supporting customers who have problem
relating to delivered products .
 Development of supply chain
management
-
The development
udes decision such as , product architecture
make or
buy
selection
supplier
Supplier Involvement

Plantago [Link]#iiurshifs
{
y
.

produce

t
Development
soured
:
Etheredge fth involvement
chain
: strategic partnership

→
f
→
{ .
supplier selection
supplier
n'
contracts
→ seed
is
Global optimization is made difficult because supply
chain needs to be
designed for uncertain environment hence creating ,

enormous risk to the

organisation A Variety of factors .

contribute to this -

to
Matching supply and demand ,
it is a
major
challenge
2 .

Inventory and back order levels fluctuate across the

supply chain ,
even when customer demand for specific
products does not
vary greatly .

3 .

Forecasting does not solve the problem .

It is
impossible to predict the precise demand for a
specific
item ,
even with the most advanced forecasting techniques
Delivery
.

4. is not the
only source of uncertainty there ,

are some other factors like ,

delivery lead times ,

manufacturing yields transportation ,

times and Components
5 Recent trends
. such lean as
manufacturing outsourcing ,

and focus on cost reduction increases risk

offshoring .

optimization refers to the optimal value

* Global
finding
of given function among all possible functions
a
.
Customer Relationship management
CRM is a business
strategy to manage all
your company's
relationships and interactions with customers & potential
customers. Itsmain objective is to improve business
relationships. Ithelps in contact management, profitability,
sales management, productivity etc.

The adoption ofCRM is very importantbecause

long term relationships with customers are one ofthe most
important assets of the
organisation. busines
D

CRM is
-

strategy thate nables businesses to -

·
understand the customer
·
Retain customers through better customer experience
·
Attractno customers
·
win new clients of contracts
Increase
profitability
·

customer
Decreav
managementcasts
·

customer Relationship
managementapplication
/
L ↓
X
Analytical operative collaborative

customer
-
↓ collaborative
CRM operative Analytical ④
atone
Warehouse

*office
objectives for using CRM applications -

Ttosplport customer service

2 .
To
support business to business activities
3 .
To support business to consumer activities
4. To the call center
manage
5. To increase effectiveness of direct sales force .

Benefits of CRM
-

I .
Better customer relationships -

This enables
you
to

forge a much stronger

connection and a deeper
relationship with clients
2.
Infrared ability to cross sell The more
you
know
-

about clients need

your
the better able
,

you are
to provide solution to
their problems .

3. Increased team collaboration -

It helps increased
in
team collaboration .

4. Improved efficiency in
serving clients If CRM is used
-

to record customer
interactions then others are
,

able to serve the client

with the knowledge of what
has been
previously
client
discussed
with the .

5 . Greater staff satisfaction -

Having an accurate and

upto date CRM
helps employees
solve client
problems It leads .

to
greater staff satisfaction .
6. Increased revenue and
profitability-It helps insales
productivity increase,
cycle decrease
and also provides
additional products & services to
clients and client satisfaction
rises.
7. Less client attrition when clientis
a
engaged
-

only
with
one member, the risk
ofattrition is 40%. When fire or
more partners are involved in
a
client relationship, the
risk of
attrition falls to less than 5%

of Reus
Nation
2. Technical support
3.
4.
Security is us

5.
Required
Eliminate
training
human element
customer profitability analysis
Customer
profitability
thatshifts the
Analysisis a managerial accounting
tool from
focus productline
profitability
to individual customer
profitability. Activity based costing
looks atthe various costdrivers to
accurately isolate
costs & determine a products profitability.
In other words, itfocuses on
analysing
profitper customer rather than profitper product.

Benefits ofcustomer profitability analysis -

1.
Improved profitability by eliminating non profitable
customers and sales services to profitable
maximising or

customers.

2. Itprovides method ofidentifying customer

a
groups
who are of lifetimes value to
the
company
3.
Improved strategic decision making by providi ng
useful information for customers related decisions ind
pricing, discounting & marking decisions

Disadvantages of customer
profitability Analysis
-

1.
Companies may nothave data capture systems to
produce an accurate estimation ofcustomer segmental
revenues and costs.

to
2. There
may
be practical difficulties relating cont
calculations attributable to each
segment
 2. Performance Evaluation and improvement tools
1. Balanced score card ( BSC )
2. Du pont analysis
3. Benchmarking & Bench trending
4. satisfied Quality control ( SQC )
5. Management information system
6. on line analytical processing tools
7. Tools to improve productivity and profitability
8. Total productivity management ( TPM )
9. Total Quality management ( TQM )

Balanced score card

Balanced scorn card is a
strategy
performance management
too-a semi standard structured report, thatcan be
used
by managers
to keep track of the execution of
activities the staffwithin their control and to monitor
by
the
consequences from these actions.
arising
Four
perspectives ofBS are, Financial,
customers, Internal busines process, learning & growth
↑
The cial
to succeed
financially what kinds of

->
financial
performance should we
provide
to ourinvestors?
L

↳tomer
To achieve our
[ ion,
Mission
one -
and end
Proces
busine

lastomers?
Vision how should
- To satisfyour shareholders
/
we be seen a
& cntomers at what
L business mustwe exal?
↓

⑭ng
T achieve
& growth
vision, our he shall
sustain to
we our
ability change
and improve?
 steps in
developing BSe-

Identifythe key
outcomes succus of
to the arisation
·

org.
·
these outcomes
Identifythe process that leads to
·

Develop key performance indicators for the processes.

·
captions and measurementsystems
Develop reliable data
them to the relevant
Develop a mechanism for reporting
·

managers & staff

·
Enactimprovement to thatperformance
programs ensure

improves,

nefits
A of
BSe -

·
Itavoids managementreliance on shortterm financial
measures
·
It helps in
clarifying and
updating budget
It
identifying aligning strategic initiatives
o

helps in and
It helps conductofperiodic performance
0

in reviews
o
·

to learn aboutand improve strat-egy.

·
It can assiststakeholders in evaluating the firm
It helps the whole
organisation the
o

in
focusing
-

·
on

key things
few It needed create
to breakthrough performanc
to corporate programs
like
helps integrate various
initiatives.
re-engineering, customer service
#tations ofBSe -

· There is no dear relation between BSE & sharch older

value.
Itdoes not read to
·
a
single aggregate summary of
control
·
the measure
may give conflicting signals and

confess management
·
I involves substantial shifts corporate
in culture.
 DupontAnalysis company's
-

ability to increase its ROE

The Dupont analysis also called the Dupontmodel is a

based on the return on

financial ratio equity ratio that
is used to analyze a
return
a
company's bility to increase

onequityords, this
its
model breaks down the
return on
equity ratio to explain how
companies can increas
return
their for investors.
#o E
-> -

It suites sell potetoncom esp

capitalstruct
are Tax
Leverage
equity impactimpact impact-

Benchmarking is&theBinchtrending
Benchmarking continuous proud of enlisting
butpractics
the in for the prou, goals &
the world

objectives leading to world class levels of achievement.

These are
differenttypes ofbench marking.
These are as follows-
Product
Benchmarking (Reverse Engineering

4.
competitive 19

process 11

Internal 11

strategic 11

Global
 Product Benchmarking (Reverse Engineering) It is an
age
-

old
practice of product oriented reverse engineering .

Every organisation buys its rival products and tears

down to find out how the features r performances etc ,

compare with its products This could be starting point .

of improvement .

Competitive Benchmarking It involves comparisons of -

process with those of competitors In this type the process .

studied may include marketing finance , ,

HR ,
R&D . ele
Process
Benchmarking and Itis the
-

activity of measuring
discrete performance functionality against organisation
through performance in excellent analogous business
process .

For e.
g
.

forsifsfdychainmanagementthebestpractiah
ouldbethatofMwmbabbaoaas .

Internal application of process

Benchmarking tf is an
-

benchmarking within an
organisation by comparing the
units
performance of similar business
strategic Benchmarking It differs from operational benchmark:p
-

in its scope It helps to develop vision of the

.

changed a

organisations It develops
. core competencies .

Global
Benchmarking Itis an extension of strategic
-

benchmarking toFor include benchmarking partners on a

global scale e.
g
Ford co of USA benchmarked ils
. . .

Ale
payable functions with that of Masada in Japan
and
surprisingly found that the entire function was

managed by 5 persons against 500 in Fordas .

# in
process of Benchmarking -

# Description

a÷F¥mEt!÷
Planning
Determination of Benchmarking goal statement
⑥
Identification of best performance

if .at?q.:.FII7onnr measures

3
Analysis of findings based on data collection
the
4 Formulation tempt emendation of recommendation
5 Constant monitoring &
reviewing .

stagetoollanning
⑨¥HEYMANN 0 -
This
requires identification of
to be areas benchmarked ,

which uses the

following criteria
Benchmarking for customer Benchmark for improving

[Link] [Link]/sernie/:Engde-ntof reie

satisfaction Bottom line (profit)
levels
: ,

performance work in
Delivery
•

progress
• -

aestomoilttoimmts
-

Responsiveness to .
cost of sales
Adaptability to
special needs sales per employee
• •
.

⑥
best
tdentificationofbestperformanae -

To arrive at the
better
is both time
expensive and
consuming .
so it is
to
identify a
company which has recorded performance
success in a similar area .

This should include

④
[Link] -

persons who are most

knowledgeable about An internal

operations .
 relevant
④
¥Gws will not include the
-

measures
only measures used
by
the firm but also it help to comprehend the true
performance differences Developing good measurement
.
is the

key to successful benchmarking .

Sfage2:cedlectionofdatakinformation# involves
following steps ,

compile data and info performance

.

on

t
select and contact partners
I
Develop a mutual understanding about the procedures
I tobey jwed .

Prepare questions to
agree terminology & performance measures

I
Distribute a schedule of questions to each partner
I
undertake information & data collection method
by chosen
e.
g interviews site visits
.

,
email ,
.

I
collect the
findings to enable analysis
Stagesiottnahpisoffindings
⑨ the
Review t findings produce tables ,
charts , graphs to

support analysis .

⑥
Identify
gaps in performance
⑨ seek explanations for the gaps in performance
⑨ Ensure that comparisons are meaningful
④ communicate the findings
# realistic opportunities for improvement
Identify .
 Stagecothecommendations
Imfdementihgrecommendationsn
M¥¥
the
Deciding feasibility of making Implement
the action plans .

the improvement in the light of

conditions that
apply within firm .

monitor
Attend [Link] tutor man "
-

Producing report
•
a on the .
Reward & communicate

benchmarking In which the success .

recommendations are included .

obtaining support of owners [Link] owners Ima nagement formed

'

the
'
-

management for making the of progress .

changes needed
/
.

Developing action plans for

implementation .

stageboomonitoringandrevieoing This involves

-

⑨ Evaluating
the benchmarking process undertaken

⑥ the lesson available

Documenting learnt t make them

⑨
Periodically re
considering the benchmarks for
-

continuous improvement .

Pre -

requisites of Bench
marking
-

IEnent senior should to mmitment

.

[Link]#9ae i-mftnah fhdtage %f amum%7at

managers
-

support benchmarking for continuous clarity of objectives

improvement .

Appropriate scope

.mn
 Appropoualtscofe -

The scope of the work should be

appropriate in the leaflet of objectives ,
resources ,
time
available .

Resource -

sufficient resources must be available to

complete projects within the required time scale .

Skills Benchmarking teams should have appropriate

-

skills & competencies .

Communication stakeholders -

, staff and their representatives

are to be kept informed of the reasons of benchmarking
Difficulties in implementation of Benchmarking -

Time
consuming

{ Pdgf
Benchmarking lack of management support
is time consuming and at times Resistance from employees
difficult It significant
puff
.
has

requirement of staff time and .

attitude

Company resources .

[Link] marking implementation

requires the direct involvement of all
managers a

Resistanafromeorfyees -

Ites likely that their

may
be
resistance from employees
1¥ -

Companies have some

pre determined goals .

not to process but to match

The
goal
best
becomes
at
improve
cost
,

the practices any

.

Copypastealtitude The key element in

benchmarking is the
-

adaptation of best practice without this step

a .
,
a
company
merely adopts another
company
's process .
 Bench difference from Benchmarking-
trending and its the
Bench latestapproach to benchmarking
Trending is
Iinvolves continuous monitoring ofspecific process
performance with a selected of group partners.
benchmarking

Statistical Qualitcontrol
y
The application ofstatistical techniques to measure
and evaluate
the
quality of product, service or pou
a

is termed as SSC.
Two basic categories: -

1. Statistical process control(SPC)

The application ofstatistical techniques to determine
whether a
process is
functioning as desired.
2.
Acceptance sampling to determine
The application ofstatistical techniques
whether population ofitems should be
accepted
②

rejected based on inspection of a sample ofthose items

 Management information system CMD -

Mls is a
systematic
of providing relevant info
process
in
right time in right format to all levels of users in
the
organisationto for effective decision making Mls is .

also defined be
system of collection processing , ,

retrieving and transmission of data to meet the info

requirement of all levels of managers in an organisation .

Ives of Mls
levels
managers at
with
To provide the all
timely and
•

accurate information .

•To
highlight the critical factors in the operation of the
business for appropriate decision
making -

• To develop a
systematic and regular process of communication
within the organisation .

•To use the tools tr techniques available under the

system
•
To provide best services to customer
• To gain competitive advantage
• To
provide information support for business planning for
future .

strategic level information system -

•
Helps senior tacklemanagement to strategic issues
within the external environment
org & .

The
principal concern is matching
•
changes in external
environment with existing
organisational capability .

•
This system help top management with information
that assist them in
making long range planning decisions .

Tactical level information system -

Helps middle level managers

•
in
taking decisions for a

period of 2- 3 years .

•
The
managers are
typically concerned with planning ,

controlling and summaries transaction to

of help decision making
 operational level information system-
operational level managers
Ithelps
tokeep traderintests,
&

activities
and transactions
elementary
cash deposits, flew ofmaterials etc.
·
Ittracks flow of transactions
on-line analytical processing (OLAP7
thatenables analysts,
OLAP is a software technology
managers & executives to gain insight into data through
o

fast, consistentinteractive access to a wide variety of

information.
Actions ofOLAP-
1. Calculations & dimensions
modeling applied accross

through hierarchies.
2. Trend
analysis
over sequential time periods.
3. subsets
Slicing for on screen view
·nqu
4. Drill down to deeper levels of consolidation.
3. Reach through to
underlying detail data ⑧

6. Rotation to new dimensional comparisons in

viewing area
#pes
of OLAP- hierarchical
structure

1A,
ATTIRS
#OLAP

TAPOLADOLAP
OLAP-It is
#in an extended RDBMS along with
multidimensional data to perform the data relational
mapping
operation.
Benefits -

efficiency
data
High
Limitations slow
query performance
-
Multidimensional
LLAP -

Stemplemeats operation in multidimensional data .

Benefits -

fast Query performance .

Limitations
containing detailed data
not capable of
-

LEAP Ih Ho LAP approach aggregated totals

-

,
are

in multidimensional database while the detailed

stored a

data is stored in the relational database .

Benefits -

Allows faster performance for all

types of data
level
limitations -
Greater
complexity
Web0_LAP -

Neb OLAP Is accessible Via the Deb browser .

It is tiered architecture client

3
,
namely
middleware
database software

Desktop
-

th desktop OLAP ,
a user downloads part a

the database on their desktop &

of the data from locally or

analyze it .

to
AP -

It helps user access and

analyze OLAP
data mobile
using their devices .

Spatula -

Ites created to facilitate management

of both spatial & non -

spatial data in a
Geographic
information system fits)
Tools to improve productivity
MRP 1
&
,
profitability
MRP ERP 11
-

,
MRP is a
system used for planning production tenrenting
,

control .
It integrates todata of production schedules with
calculate & schedules
inventory and BOM
purchasing shipping
the materials that required to build FG The 3 basic
for are .

steps of MRP are -

Determine
Quantity Requirements
MRP calculations
completion of orders
 AimsofMRP-
•
Determine for final products what should be produced &
at what time .

•
calculate the required production of sub assemblies
•
Determine the regimement for material based on an
up to date Bill of material (Bord
•
Calculate inventories D I P batch sizes and manufacturing
,
-
-

& lead times

packing .

[Link]
determines
quality the and
timing of FG demanded
•
It determines team phased requirements of the demand
for materials , components assemblies
& sub .

•
It computes the inventories D EP batch sizes and
,
-

manufacturing &
packing lead times .

controls
It inventory by ordering Components and
•

materials in relation to orders received rather than

ordering them
from stock .

Benefitsofmkp
-

on time
•

availability of the right materials required for

production .

Timely delivery of manufactured goods to customer

•

o
optimal of manufacturing a production resources
use

levels
• Decrease in capital cost due to creased
inventory
•

collecting business data for analysis & data

planning .

p
-

•
High costs and technical complexities in implementation
Dependence forecast values
•
on
•
Estimated lead times can some time be
misleading
'b-requisitiesforsucussfulopoationofMR#
-

The latest production and

purchasing schedules prepared
•

should be
strictly adhered
•
Rao materials ,
sub -

assemblies and components required

for production should be predetermined
°
Dork force must be appraised of the system
internal control system should be developed
Necessary
•

Accuracy of the data supplied is vital to system

•
MRP .

Dataouquirementsofmkp
-

Material -

A- specifies the quantity of each

finished unit of products to be produced along edith time .

B¥¥ It specifies the sub assemblies -

components material requirement for each item of FG

,

IF It maintains details of items in hand for

-

each sub assemblies

-

components and materials required

,
.

ROH It specifies the sequence of operations

-

required to manufacture components sub assemblies & FG ,

.

It contains information about the production

-

time of sub assemblies & Components produced and lead times

Manufactwungousouruplanningfarpidm
RP
integrated method of operational
it is an

& financial
planning for manufacturing companies .

MRP it serves as an extension of MRP

MRP its
H and interfaces
MR④
-
-
I -

'
A¥ MiFk¥④
 elements of MRP 11
Essential
Demandant
Production
planning
Resource
planning
Rough cut planning
capability schedule
Master production
Bill of material
Detailed material &
capacity plans
shop and purchase order release
shop floor control
Purchase and
inventory control .

Ehterprisepesouraplanningfkp
business
ERP is the process management
software that allows an organisation to
use a
system of integrated applications
to business and automate
manage the
many back office functions related
to
technology , services and human resources .

characteresticsoftkp
An ERP system is not only the

integration of various
functional
systems in the organisation but ,

has more characteristics to

qualify as a
full fledged ERP solution :

Flexibility
•

•
Modular and open
•
Comprehensive
Beyond the Company
•

•
Best business practice
 Flexibility
-

An ERP system is
flexible enough to respond
fast to the
changing needs of the organisation
Modular and open -

ERP systemhas the open architecture

i. e modules can be interfaced detached (
any
without
affecting the rest of the
modules
comprehensive -

ft supports various organisational functions

and suitable for wide
range of business

organisations .

Beyond the
company
-

It is not confined to
boundaries rather it is extended to
the
organisational
the external business entities connected
to the organisation
with online
connectivity
Best business practice -

A- has inbuilt best business

practices applicable worldwide & imposes
its own strategies and
logics over

existing culture & processes of the

organisation .

- Benefits of ERP -

Tangible benefits Intangible benefits

Inventory reduction facilitates strategic planning
-

Lead tune reduction uniform reporting

-

Reduced stock obsolescence -

Improved customer response

Improved productivity process High organisational transparency
-
-

faster product look & up ordering

-

saves enormous time

saving tune and money .
and effort in data entry
-

Automated ordering and payment -

More controls
thereby
lowering the risk of
mis utilisation .
Reasonsforfailureoferp
-

Lack of effective project management

-

Inability to resolve issues and make decisions in time

unavailability of resources
-

Lack of executive support

-

Software fails to meet business needs

-

Improper communication
-

Insufficient end user

training
-

Failure In
gap analysis
Failure to identify future business needs
-

Technological obsolescence
-

checklist
unavailability of user friendly
-

Evaluation of
its applications
ERP
-
package and

Evaluation of right ERP is

Very
crucial . Evaluation & selection
involves ,

checking whether all functional

-

aspects of the business are covered .

checking whether all business

-

functions & processes fully are

integrated .

checking whether all the latest IT trends are covered

-

checking whether the vendor has

customizing and
-

implementing capabilities .

truther the business capital

checking can absorb both
-

investment in hard o are t software t maintenance costs

is optimum
checking whether the ROI
-

.
 Total
productivity management
TPM is maintenance
a
philosophy
designed to integrate equipment
maintenance into the
manufacturing
process .

Its objective is to eliminate

losses tied to equipment
maintenance

start TPM
steps to the
-

Identify key people

-

Management should learn the

philosophy
Management must promote the philosophy
-

Training for all employees

-

Identify the where

areas improvements are needed
-

Make an implementation plan

-

form an autonomous group .

Benefits of TPM
 Total
management (TDand
Quality TOM '
ND
CIMA
defines ,
as
integrated Comprehensive
system of planning &
controlling ofwhich
all business
functions
so thatproducts are
produced meets customer
expectations .

philosophy
It is a
of business behaviour ,

embracing principles such employee involvement

as
,

continuous improvement ,
customer focus as well as
collection of related techniques aimed at
being a

improving quality as well as full documentation of activities ,

clear goal selling .

3
principles of TOM are as
follows
customer focus
⑥
Managerial Leadership
⑨ Belief continuous improvement
in
The current thinking of TBM is moving from
Quality
also
of product
service to
Duality of people to embrace
Quality of environment I so 14000 standard support it
.

TOM seeks to increase customer satisfaction by

.

finding the factors that limit current performance The .

TDM approach highlights the need for a customer

oriented approach to management eliminating reporting ,

tractional
reporting practices .

design & build to

The
emphasis of TOM is
quality in the product rather Thethan allow defectives &
then inspect &
rectify them
rather than symptoms of poor
focus is on the causes
.

quality .

z core concepts of TOM are -

quality control

{ Quality assurance
Quality Management
.
 Quality -

It is concernedwith past .

It deals with data obtained from

control
-

previous production which allows action

,

to be taken to stop production of

defective units

Quality -

It deals with present .

It focuses to create and operate

assurance
-

appropriate systems to prevent

defects from occurring .

Quality
-

It is concerned with future .

It
manages people in
-

a
management process
of continuous improvement to the
products offered by the firm .

Steps to be taken to implement TDM -

 six Sigma Methodologies .

Six
Sigma has two
key methodologies DM Ak and DM ADV
:

DMAK is used to improve an

existing business

process .
DM IA DV is used to create product
new or
process
signs for predictable , defect free performance .

DN
Basic methodology consists of the following five (5) steps:

1. Define the process improvement goals that are consistent with customer
demands and enterprise strategy.
2. Measure the current process and collect relevant data for future comparison.
3. Analyze to verify relationship and causality of factors. Determine what the
relationship is, and attempt to ensure that all factors have been considered.
4. Improve or optimize the process based upon the analysis using techniques like
Design of Experiments.
5. Control to ensure that any variances are corrected before they result in defects.
Set up pilot runs to establish process capability, transition to production and
thereafter continuously measure the process and institute control mechanisms.

DMlh
Basic methodology consists of the following five steps:

1. Define the goals of the design activity that are consistent with customer
demands and enterprise strategy.
2. Measure and identify CTQs (critical to qualities), product capabilities,
production process capability, and risk assessments.
3. Analyze to develop and design alternatives, create high-level design and
evaluate design capability to select the best design.
4. Design details, optimize the design, and plan for design verification. This
phase may require simulations.
5. Verify the design, set up pilot runs, implement production process and
handover to process owners.
6. Some people have used DMAICR (Realize). Others contend that focusing on
the financial gains realized through Six Sigma is counter-productive and that
said financial gains are simply byproducts of a good process improvement.
 -55A in
Quality management
SEIKI -

organisation or Re -

organisation
SEI TON -

Neatness
SE ISO
cleaning
-

SELKE TSU -

standardisation
SHITS UKE -

Discipline
straighten
" "

SEIKI -

This
Japanese word means & contain
It means get rid of waste and put things in such
a
way so as to have quick access .

SEI TON -

It helps us to decide the way things are

to be placed so that our

Dorking is smooth .

SE ISO take up the

It job of cleaning It
-

means .

should be extended to the entire surroundings

SEIKETSU It means to maintain standardisation in
-

the
system .

SHITS UKE It means

discipline which calls for changing
-

from our
present unsystematic way of
adherence to set procedures Systems function .

in an
orderly manner .

Different types of Quality costs

costs
Qualify can be
analyzed under 2
major categories
(a) Costs of quality assurance incurred
by the manufacturer
⑥ costs of at
quality "
assurance the users
costs !
end which
are called users
quality
 costs prevention of the

Quality
Internal a
Appraisal
- fail wr
i

is measure
achievementofcomplete
of all cost directly
associated with
the conformance to product
quality requirements. These are notjustthe costof
quality management
costs
or
inspection function.
Quality
(9) prevention costs
are the sum total of

(b) Appraisal costs

C) Fail we costs

user
quality cost

Quality small
circle.
Itisa group of6 employees doing similar
to 12
work who
voluntarily meettogether
in their
regular basis on a

to
identify
improvements respective work areas

using proven techniques for analysing and solving work

related problems.
Itis way of capturing
a the creative & innovative
power that lies within
the work force.
objectives of Quality circles

change in attitude -

continuous improvement in
quality of work
life
through human's ation of work .

' '
Self development Bring out Hidden potential of people
-

Development of team spirit -

Eliminate inter departmental conflicts

Improved organisational culture -

Positive working environment .

Participate in management process .

' '
' '

Zero defects and Rights first time Philip crosby

-

'

not
'

Philip Crosby prompted the phrases ,

Zero defects does mean

mistakes never happen ,

rather than there is no allowable number

of built into
errors product process and that it
a is to be right
or

first time He believes that management should take prime responsbiktg

.

for quality and worker only follow their managers example .

Philip cros
bys four absolute quality management
(a) Quality is conformance to requirements
⑥
Quality prevention is preferable to quality inspection .

defects quality performance standard

¥
Zero is .

Quality is measured in monetary terms the

price of nonconformance
-
 steps to qualify improvement
(a) Committed to
quality
⑥ creation of quality improvement teams representing all the department
⑨ Measure to determine current & potential quality issues
processes .

(d) calculate cost of

quality
④ Raise employees
quality awareness of all

Take action to correct quality issues

¥ Monitor progress of quality improvement
④ Train supervisions in quality improvement
' '

⑨ Hold Zero defects days

⑤ Encourage employees to create their own
quality improvement goals
④ Encourage employee Communication with
management about obstacles
quality
Recognise participants effort
(m) create
quality councils
④ Do it over
again quality improvements does not end
-

She cohort cycle or plan -

do check
- -
act (PDC A)
she heart cycle Deming cycle wheel
PD CA
or or or
Deming or

PDSA is explained as follows -

Plan -
Establish the objectives &
processes
necessary to deliver results in accordance
with specification
Do -

Implement the
processes .

check -
Monitor & evaluate the processes
and results as
agent objectives & specifications and report the

outcome
Act -

Apply actions to the outcome for

necessary improvement .

That means
reviewing all steps (plan Do check Acth modifying
, , ,

the process to improve it

before it next implementation .
 3. Economic efficiency of the firm-performance analysis
1. Profit maximisation under different market structure.
2. Market factors affecting pricing decision.

Profit maximization under different market structure

concept of market and Demand
The concept ofdemand establishes a relationship between
of a commodity its
quantity demanded and
price .

The demand for

any always
commodity time involve
ire
2
things price and unit of .

Demand Schedule -
The demand schedule explains the
relationship between price and demand .

Demand schedules are

of 2 types -

Individual demand schedule

-

Market demand schedule .

Individual V ari¥y that would

demand be purchased by anime at
schedule is called individual demand
schedule .

Market Vari#iufFilhat oould

demand be purchased by 1¥ In the
schedule MII is called market demand schedule .

Demand Curve -

As there is Perverse relationship

between price and demand
,
the individual demand Carre

slopes downwards from left to

right .
 Price n

/
Derived Demand -

The Commodities D

\
which not needed
are
for direct

Ft÷¥¥ confetti
which are have direct demand
said to
.
.
D

are said to have desired demand -

°
.

For the demand for raw materials

e.g .

labours machines etc have a derived In this

demand
,

is the demand
DD
diagram ,

curve which slopes

from left to right .

Determinants of demand

eotofqntdusmfnfdfdgqeff .ua
-

I .
Price
of the commodity substitutes are those
goods
2. Price of substitutes which can be used in
other or tea
¥ Enough
e.

5. Taste & preferences of the e-

household .

6. The amount advertisement of the

annually spent on

product and sales promotion

Feds 9*4%4%9
.

Example of complementary
Law of demand
-
.

when the price of the product

increases then its demand will
,

fall and vice-versa .

 )
EXLEY of Law of demand Giffenparadox
Gile
-

As per law of uhfuftatftreousbofioomds

demand , when price rises Trade
cycles
1-
-

demand falls & Vice -

versa .

Ignorance
, of the Consumers
But to Robert
,
according Sir
Griffen though the price forarenecessary goods rise demand ,
will not fall These
.

goods called
Griffen goods For .

example wheat , ,
rice which are
very essential .

Prestigious The law of demand will not operate

-

in case of
prestige goods like diamonds cars etc The ,
.

demand for these

goods shall rise With the Here at
price as it is related to prestige .

Ethno The law of demand do not operate -

in case of
speculative business If people think that the .

prices of good may increase in future so they buy more ,

units of that
commodity .

T¥tradeThe of demand do not operate in

-

law
periods of cycles During the prosperity period .

people may buy more goods at higher prices In .

period of depression even

, people buy fewer goods
though prices are less .

[Link]#
-

The law of demand Is not

applicablein case of ignorant consumers By ignorance .

people think that high priced goods are qualitative

goods hence they buy more goods at higher
prices .
 function and Demand Curve
#mand

ourmoms
price ($) per uniti .ex f()
=

constomninpenman
see
Sty demanded

In come demand
Income demand explains the between income
relationship
and demand. Various quantities ofgoods that would be
purchased by the consumers atdifferentlevels of
called income demand. Other things
income is
the income increases the
remaining
the
same, when demand for
the commodities also
will increase.
This
can be explained with the help of the following
tables /

this table atRs.100 unit,

Incomet
In income Demand
the consumer purchased 50 units Cunits
ofa commodity atRs.3007, 150 100 50
100
units of
commodity purchased. 200
150
300

cross demand
The in demand for one commodity due to the
change
changes inthe prices ofrelated goods like substitutes
demand.
and
complementary goods called
is cross
Efasticityofdemand The
elasticity of demand
between
expresses
the relationship proportionate
change in demand to a
proportionate
in
change price .

Elasticity of demand =
Proportionatechangeindemand
Proportionate change in price

#of Elasticityof Elasticity of

of demand is demand
-

types ire 3

⑨ price
elasticity of demand
④ Income demand
elasticity ofdemand
⑨ cross
elasticity of
price
elasticity ofdemand
demand relationship of
Price
elasticity of
to
explains the a percentage
in
change in demand
percentage change price .

demand (Ed) in
Price
elasticity =
%
change demand
%
change in price

Types of price elasticity of demand -

l .

Perfectly elastic demand

inelastic
2
Perfectly
.
demand
inelastic
3 .

Relatively demand
4 demand
.

Relatively inelastic
5 elastic
.

unitary demand

Income elasticity of demand relationship of

The income
elasticity of demand explains the proportionate "

change in income and proportionate change in demand

 demand
Income
elasticity of =
Proportionate change in demand
Proportionate change in income

Types of income
elasticity of demand

1 .
Zero risk
elasticity of demand
2 .

Negative income
elasticity of demand
3 .

unitary iincome
elasticity of demand
4 . Income
elasticity of demand is greater than one
5 . Income elasticity of demand is less than one .

Cross
elasticity of demand
rate of in demand due
The
change for one
commodity
in the of its
to the change price substitutes and

complementary goods is called cross

elasticity of
demand .

elasticity of demand %
Change in the demand for
the price of #
Cross =

%
change in
Factors involved in demand forecasting
-

l . Time factor
2 .
Level Factor
3 .
General or
specific purpose factor
4 .
Product
5 .
Nature of the product
6 .

Competition
7 .
Consumer behaviour
 Market
refers to the place
Market or
locality where
commodities are taught or sold .

Elements of Market -

l .
Seller and
buyer agree to transact at a
particular
price of a product
of the is to
2 . Nature
commodity known both parties .

3. Price of the product is determined under conditions

the market
off .

Competition
.

depend on the increase in the

buyers
& seller .

5 .

If there is increase in number of buyers , price

it is treated
'

• ill increase and as sellers market and

vice -

versa .

6 .
Free communication between buyers & sellers .

7 . Size of the market is not restricted

Product is
8 .

homogeneous in case
of perfect
competition .

Monopolistic
competition

Perfect competition Monopoly

Market

imperfect competition oligopoly

Duopoly
 Factors
influencing the price of the product
-

Target customers

otprihro.t /sg ae:[Link] g-

Target customers -

cost of the product

Price of the product defends competition

Fought Fantoni
Cost of the product
-

Distribution channel

Pricing is
primarily to
based on ,
Economic environment
how much it costs produce Price
elasticity of demand
and market the product

competition severe competition indicate lower

may a
-

than when there is little

price monopoly or

competition .

Law -

Government authorities place numerous restrictions

on
pricing activities .

Social
Responsibility
-

Pricing affects many parties ,

incl .

employees ,
shareholders & public at
large .

Market position of the firm The position of the market

-

may
also influence the
pricing decision of the firm
Distribution channel of the product
policy
-

The
prices
will also defend upon the policy regarding
distribution channel The longer the channel
.
the higher ,

would be the distribution costs and

consequently
higher the prices .
There are
different types of methods of Pricing The .

main
pricing practices can be classified into following
broad
categories ,

I .

Competition oriented Pricing

Going rate
pricing
-

Trade Association
pricing
-

Customary pricing
-

Price leadership
-

sealed bid
pricing
-

2 Demand oriented
.

pricing
-

Differential Pricing or Price discrimination

-

perceived Value Pricing

3 .

Pricing based on other economic condition

Administered
Pricing
-

Dual
Pricing
-

shadow
pricing
-

Multiple Product pricing

4 .

Pricing policies based on Market conditions

perfect competition
-

Monopoly
-

Temporary monopoly
-

skimming price policy

-

Duopoly
-

oligopoly
-

Monopolistic competition
-

The role of demand in decisions

pricing ,

I .

Market vs . Firm
elasticity
for buyers output
'

2 .
Demand
3. likelihood ofcompetitive entry
4 . Demand consequences of a product line
 Market vs .
Firm
Elasticity
Price
elasticity of demand is a measure of the
to which
degree buyers are sensitive to price changes .

In there are two demands

any market actually , ,

I demand for the general product (Primary market

.

lid demand for the firms specific offering (secondary

market
to
In
general secondary
,
demand is
found be more

price elastic .

for buyers output

'

Demand
The market for buyers products
actually be price
'

may
elastic . so, a reduction in price by a
firm would
raise demand for its product .

Likelihood for entry

competitive
High prices rapidly
or
increasing prices may force
to reconsider their and perhaps
buyers need

actively seek out competitive substitutes .

Demand consequences of a Product line

Most firms sell a aide
variety of products requiring
a different marketing strategies
varietylineof there . within a

product are
usually some products that
are
functional substitutes for each other and
some products that are
functionally complementary .

For e
8 A
-
'

line includes such

photographic product
item like cameras films flash bulbs projectors
, , , ,

screens and other accessories .

4 Enterprise risk management
1. Risk management
2. Corporate risk management
3. corporate failures

Risk
management has -

÷ ÷:÷.:÷f¥ ÷:÷ ÷ I
Risk
management M¥0 of this chapter at a
glance .

become the most important Risk , Types

of risk .

topic for banks in the

Risk & its
management objectives
Risk measurement
recent Risk
years .

Risk
pooling

Risk Risk retention

:÷÷:÷: : :÷ . ..

A risk is a random event Risk reduction

that
may possibly occur Geographic information system (GID
and if it did occur corporate failure & its
symptomscauses
corporate
,

it
Distress analysis
-

then would have

causes of sickness
for a project
negative impact on the -

goods of the organisation It is .

the
probability of incurring
loss due to unexpected and unfavourable movement of
certain parameters .

Risk component has 3 elements i -

e scenario

prob of occurrence
.

size of its impact

Types of risk .

Country Risk
Economic Risk
social Risk
External Risk
Exchange Risk
Business Risk
Financial Risk
systematic Risk
unsystematic Risk
Market risk Risk
Interest rate Risk
Purchasing power Risk
Default Risk
Risk
Collabililf
convertibilityRisk
Risk
Industry
currency Risk
operational Risk .
 Definition of risk
management
Risk
management is the process of measuring assessing
risk
developing
and
strategies to
manage it It is .

a
systematic approach in identifying analysing , ,

controlling
unwanted
areas or events with a
potential for
causing changes .

objectives of the
risk
management
⑨
Anticipating uncertainty does not happen the way
they are planned .

⑥
channelizing events to happen the way
at the earliest
they are

deviations
planned
opportunity
.

⑨
Setting right , ,

from plans ,
wherever
they occur .

(d) Incase the expected event is

frustrated making damage
,

minimal .

Risk measurement
Evaluation of the likelihood extent
and or
magnitude of
risk is known as Risk measurement .

It provides fundamental support to decision making

within the insurance
industry .

Risk
pooling
A risk pool is one
of the forms of risk
management
mostly practiced by insurance companies .
under this
system ,
insurance companies come together to form
a
pool which can , provide protection to insurance
companies against catatrofhic risks such as floods
or
earthquakes .
 Risk analysis
Risk analysis is a
technique used to
identify and assess

factors that may jeopardize the success of a

project or
↳ threaten
achieving a
goal .

Risk mapping
Risk
mapping is the first step in operational risk measurement
It requires
identifying all potential risks to which the
bank is exposed

Benefits
Promotes awareness
of significant risks
-

Enables the of solutions & services

delivery the
-

across

entire risk
management Value chain .

serves as a
powerful aid to strategic business planning
-

Assigns clear responsibilities to individuals for the

-

management of particular risk areas .

Provide
opportunity to leverage risk
management
-

an

as competitive advantage .

Facilitates the development of strategic approach to

-

insurance
programme design .

Key risk indicator

key risk indicators come out as the result of the mapping
used to
process and should
It is
be provide anticipatory
signals useful for both operational risk prevention
.

& measurement In particular

they should provide early
.

signals to anticipate the most critical operational events .

*¥E¥
Process Identification Definition of potential impact

no
phase .
for action .
 corporate risk management works to
corporate risk management ensure the

safety of the business ,

guarding it from risk of
loss to optimize risk
injury or
financial .
It helps
taking of an
organisation .

Enterprise risk management

ERM
defined as
is process effected by
a
entity's board
,
an

of directors management and other personnel applied in

, ,

strategy setting the enterprise

across
designed to identify ,

potential events that may affect the entity and manage

risk to be within its to risk reasonable
appetite , provide
assurance
regarding the achievement of entity objectives .

From the above definition ERM is ,

-

⑨
process ongoing & following through an entity
A .

④
Effected by people at every level of an organisation .

⑥ Applied in strategy setting .

⑨ Applied across the enterprise at every level

Needs for implementing
ERM
ERM needs to be implemented for
following reasons ,

④ Reduce unacceptable
performance Variability
④ Align and
integrate varying views of risk management
⑨ Build confidence of investment community & stakeholders .

④ Enhance corporate Governance

(e)
Successfully respond to a changing business environment

f) Align strategy and corporate culture .

 Risk retention
Risk retention is to take
resfonsbililef
Companys decision
'

for a
particular risk it transferring the
faces ,
as opposed to
to an insurance
risk over
company Companies often retain .

when they believe that the cost of

risks
doing so is less
than the cost of fully or
partially insuring against it .

Advantages Disadvantages
losses
save
money
Possible higher
-
-

Lower expenses Possible higher expenses

-
-

Encourage loss prevention Possible higher tax

- -

Increase cash flow

-

Risk reduction .

Risk reduction is the risk management technique It .

refers to the
way an insurance
company can reduce if
financial losses
by implementing measures that will

prevent actualizing risks or

minimizing the number that
can
actually happen .

Geographic information system GIs)

A GIS is to
a
system designed
capture ,
stare , manipulate analyze , ,

and present geographic

manage ,

data .
GIS applications tools that
are

allow users to create interactive

queries analyze spatial information ,
,

edit data in maps and present the

results of all these operations .
 Corporate failure
corporate failure refers to
companies ceasing operations
following its inability to make profit or
bring in
enough to revenue cover its
expenses This can occur as .

a result of poor management skills , insufficient marketing

symptoms of corporate failure .

There 3 are classic

symptoms of corporate failure .
These
are discussed below -

I .
Low
profitability
2 .

High earning
3 .
Low
liquidity .

Each of these
symptoms are interrelated It
may be .

indicated the trends

by in the
's
company accounts .
The

path
classic to corporate failure starts with the
company
experiencing low profitability This be indicated by
may
.

trends in the ratios for :

Profit margin
•

Return on capital expenditure

°

Return on net assets

corporate Distress analysis -

cause
1.
Technological causes
Ij working capital problems
Economic distress
4 .

Mismanagement
5. over
expansion and diversification .

6. Fraud
by management
structured
7
8
.

.
Poorly
Financial distress
board
 Causes of sickness for a
project
Just
either
as a human
born sick or
two
beings fall
sick
ways viz by .

sickness
acquiring into during growth ,

an
industry can either run trouble even during
the implementation stage itself or
develop sickness
during its lifetime .

The causes of sickness can be

categorized into
two Viz .
internal cause
External cause
The
internal
management of the
organisation control
has
over issues ,
hence ,
it can be avoided at initial

stage
least
. However
control
, the
management of the
organisation has

over external factors like emergence of strong

competitors , plans and actions failure of
Govt .

,
monsoon

etc Sometimes
. the
management may be able
,
to revamp
the
organisation plan suitable strategies take
, ,
on external
factors to reduce their impact .

The areas in which these causes exist

may
and their effects can be understood .

project formulation .

project implementation
-

Production

Marketing
-

Finance
General and personnel administration
-