Podcast
Questions and Answers
What is the main purpose of enterprise risk management (ERM)?
What is the main purpose of enterprise risk management (ERM)?
Which of the following is a function of the value chain?
Which of the following is a function of the value chain?
Which ethical principle should guide business professionals?
Which ethical principle should guide business professionals?
Which of the following can be considered an enterprise risk?
Which of the following can be considered an enterprise risk?
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What type of testing program should be established to mitigate the risk of products harming customers?
What type of testing program should be established to mitigate the risk of products harming customers?
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Which control should be in place to address the risk of adverse weather conditions impacting operations?
Which control should be in place to address the risk of adverse weather conditions impacting operations?
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How can a company prepare to address the risk of a supplier strike halting the supply of materials?
How can a company prepare to address the risk of a supplier strike halting the supply of materials?
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What should be routinely conducted to prevent the risk of unfairly reporting inventory values?
What should be routinely conducted to prevent the risk of unfairly reporting inventory values?
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Study Notes
Managerial Accounting and the Business Environment
- The chapter covers differences and similarities between financial and managerial accounting.
- It discusses the concept of enterprise risk management.
- The nature and importance of ethics is explored.
- Corporate social responsibility is examined.
- The impact of intrinsic motivation, extrinsic incentives, and cognitive biases on employee behavior is discussed.
Business Processes
- A business process is a series of steps followed in a business to complete a task.
Value Chain
- A value chain consists of major business functions that add value to a company's products and services.
- The value chain includes support activities (firm infrastructure, human resources, technology development, procurement) and primary activities (inbound logistics, operations, outbound logistics, marketing & sales, service).
Enterprise Risk Management (ERM)
- Enterprises face risks at all points in the value chain.
- Risks are categorized as quantitative (financial, business, operational, strategic, ESG) and qualitative (reputation).
- ERM involves proactively identifying and managing risks to protect the business.
- ERM includes risk identification, risk-aware culture, risk profile, risk tolerance, roles/responsibilities, risk measurement, risk controls, monitoring activities, and reporting.
Examples of Business Risks and Controls
- Business risks include products harming customers, unforeseen competitor actions, and adverse weather.
- Controls to reduce risk include product testing, gathering competitor information, and contingency planning.
- Additional risks include website malfunction, supplier strikes, unfairly reporting inventory values, and unauthorized employee access.
- Controls to mitigate these include testing websites, establishing supplier relationships, performing regular inventory counts, and enforcing access restrictions.
Ethics
- Ethics are standards of right and wrong that prescribe what humans ought to do
- Ethics are defined in terms of rights, obligations, benefits to society, fairness, or virtues. Examples of ethical frameworks are: Utilitarian Ethics, Deontological Ethics, and Virtue Ethics.
Ethical Principles
- Business professionals, including accountants, should always be guided by ethical principles.
- Key ethical principles include: promise keeping, integrity, concern for others, fairness, commitment to excellence, law-abiding, honesty, respect for others, loyalty, leadership, accountability, reputation, and morale.
- Professional ethics, including integrity, objectivity, professional competence, due care, confidentiality, and professional behavior, must be maintained.
Corporate Social Responsibility (CSR)
- Firms consider the needs of all stakeholders when making decisions.
- Stakeholders include employees, managers, owners, suppliers, customers, society, government, creditors, and shareholders.
- CSR involves voluntary actions that satisfy stakeholder expectations.
- It goes beyond mere legal compliance.
Managers and Leadership
- Leaders need to unite employees to pursue strategic goals and make optimal decisions.
- To do so, managers need to understand intrinsic motivation, extrinsic incentives, and cognitive biases.
Motivations and Biases
- Intrinsic Motivation - Engaging in a behavior because it's personally rewarding, not for external incentives.
- Extrinsic Motivation - Behavior driven by external rewards like money, fame, or praise.
- Cognitive Biases - Everyone possesses cognitive biases, which can distort thought processes. Examples are: only tuning into confirming news, assuming one is always correct, and blaming others. Recognizing these biases is helpful to improving leadership.
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Description
This quiz covers key concepts in Managerial Accounting, including the differences between financial and managerial accounting, enterprise risk management, and the importance of ethics. It also explores the value chain's role in adding value to products and services, as well as the impact of motivation on employee behavior. Test your knowledge on these essential topics in business processes and management.
