Managerial Accounting & Business Environment PDF

Chapter 1: Managerial accounting and the business environme nt Part 2 of 2 Here’s what the chapter talks about What managers do. Differences and similarities between financial and managerial accounting. The concept of enterprise risk management. The nature and importance of ethics. Corporate...

Chapter 1: Managerial accounting and the business environme nt Part 2 of 2 Here’s what the chapter talks about What managers do. Differences and similarities between financial and managerial accounting. The concept of enterprise risk management. The nature and importance of ethics. Corporate social responsibility. How intrinsic motivation, extrinsic incentives, and cognitive biases affect employee behaviour. The broader context of business A business process is a series of steps that are followed in order to carry out some task in a business. The broader context of business A value chain consists of the major business functions that add value to a company’s products and services. The broader context of business Business functions making up the value chain: Enterprise risk management Enterprises run risks at all points of the value chain Enterprise risk management ERM refers to proactively identifying and managing risks in order to protect the business. Examples of enterprise risks & controls Examples of business risk Controls to reduce the risk Products harming customers Establish a rigorous new product testing program Unforeseen actions by competitors Legally gather information about competitors’ plans and practices Adverse weather shutting down Have contingency plans in place for operations weather-related emergencies More examples of enterprise risks & controls Examples of business risk Controls to reduce the risk Website malfunction Thoroughly test the website before going “live” Supplier strike halting the supply of Establish relationships with other raw materials potential suppliers Unfairly reporting inventory values Periodical inventory counts Employees accessing unauthorized Establish strong and appropriate information access restrictions Ethics Standards of right and wrong that prescribe what humans ought to do Ethics Standards are usually defined in terms of rights, obligations, benefits to society, fairness, or specific virtues.  Ethical principles Business professionals (including accountants) should always be guided by ethical principles. Ethical principles They must maintain a level of competence appropriate to their role, by observing: ○ Confidentialit y ○ Integrity ○ Objectivity Corporate social responsibility (CSR) Firms consider the needs of all stakeholder s when making decisions. Corporate social responsibility (CSR) involves: Voluntary actions that satisfy stakeholder expectations. Going beyond mere legal compliance. Managers and leadership Leaders must be able to unite employees to pursue strategic goals and make optimal decisions. Managers and leadership Therefore, managers need to understand how intrinsic motivation, extrinsic incentives, and cognitive biases influence human behaviour. Motivations & Biases Intrinsic Motivation: Motivation that comes from within us. Motivations & Biases Extrinsic Incentives: A way to highlight important goals and to motivate employees to achieve them by offering a type of reward. Motivations & Biases Cognitive Biases: Everyone possess cognitive biases, or distorted thought processes. Motivations & Biases As leaders, managers need to recognize this while providing leadership.