the management process part two

The Management Process Part two

Measurement, Monitoring and Controlling Risk

Risk in business involves:The possibility of lossA threat which may prevent or hinder the ability to

achieve business objectivesThe chance that a hoped for outcome will not occur


Measuring Monitoring and controlling involves:

Proactively planning for risks Identifying risksAnalysing the risksMonitor the risks until they no longer existControl risk outcomes


To monitor and control risk we need to develop the following procedures:

Risk response plans Tracking identified risks Monitoring residual risks Identifying new risks

This involves Inputs

Risk register Risk management plan Performance reports


Tools and Techniques

Risk audits, is the project working to identify the risks, and working on plans to deal with risk

Risk re-assessment, a periodic review to consider any variance's and trend analysis.

Reserve analysis , does any newly identified risk require

additional reserves. Status meetings

Outputs

Risk register updates. Corrective action and preventive

action. Organisational process assets

updates, updating best practice information on risk management


Activities performed continuously by the process owner. In Step 1, the process owner defines the process control objectives.http://www.clir.org/pubs/reports/pub90/appendix1.html


Risk management for different organisational departments,

source http://www.tutor2u.net/blog/index.php/business-studies/comments/revision-presentation-managing-risk


Budgetary and Non-Budgetary Controls.A budget is an itemized summary of likely income and expenses for a

given period. It helps you determine whether you can grab that bite to eat or should head home for a bowl of soup.

It is typically created using a spreadsheet, and it provides a concrete, organized, and easily understood breakdown of how much money you have coming in and how much is going out of the account.

It’s an invaluable tool to help you prioritize your spending and manage your money—no matter how much or how little you have.

Planning and monitoring your budget will help you identify wasteful expenditures, adapt quickly as your financial situation changes, and achieve your financial goals.


Budgetary ControlIn business the actual results for are period of trading are

compared with the budgeted figures, if there are differences then corrective action must be taken.

This applies whether the difference is positive or negative!

This corrective action is what is meant by budgetary control which has the following features.


Features of Budgetary Control.

1. Responsibilities: Managerial responsibilities must be clearly defined.

2. Action Plan: Individual departmental budgets contain a detailed plan of action for achieving their targets.

3. Adherence: Once budgets have been approved managers have a

responsibility to follow the set budget.

4. Monitoring: Actual performance is monitored continuously and compared with

budget targets.

5. Correction: Corrective action is taken if required.

6. Approval: Departures from the budget are only permitted if they have prior approval from senior management.

7. Variances: Are subject to investigation


Non Budgetary Control

Non-budgetary control involves controlling using non budgeted expenses i.e. those expenses not defined in normal budgeted expenses. The techniques for non-budgetary control are: Statistical data Analysis. Breakeven analysis. Gantt charts. (Illustrate a project schedule and breakdown of work structure) PERT. ( ‘Performed Evaluation and Review Technique’. A statistical tool used in

project management designed to analyse and represent the tasks involved in completing a given project.)


Most organisations have several budgets for example, sales, production and administration. These are then combined to form the Master Budget.


Some important information

Planning Questions;

1. Where are we now?

2. Where are we going?

3. How will we get there?

4. How will we know that we have arrived?


What is the purpose of business planning? Business planning is done to provide direction and

increase the probability for success within any business. There are some important sources of uncertainty which

include production risk, price risk, financial (or interest rate) risk, and changes in government programs.

The business planning process allows the planners to develop objectives and goals for the business that should keep things running smoothly and allow everyone to know where the business is headed.


Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders , particularly financial stakeholders.

They typically have detailed information about the organization or team attempting to reach the goals.

Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business plan is often developed in conjunction with a balanced scorecard or a list of critical success factors.

This allows success of the plan to be measured using non-financial measures.