ACC 333 FINAL - ACC 333 Final Exam Study Guide Specific and...

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ACC 333 Final Exam Study Guide Specific and General Knowledge Article Decision rights are given out to individuals based on rules established by top level management A CEO does not have the mental capacity to make every detailed decision personally, any CEO that tries will commit major errors In order to make smart decisions CEO must collocate the decision responsibility with the knowledge that is valuable Must beware of Agency Cost- costs resulting from conflicts of interest in cooperative behavior o Sum of costs of designing, implementing, and maintaining appropriate control and incentive systems and the residual loss from the difficulty of solving these problems completely Must determine the optimal level of decentralization by balancing the costs from poor information and inconsistent objectives o It is too expensive to acquire all information that is relevant o Costs due to poor information will lower as the CEO delegates the decision rights to lower levels of the organization Specific information does exist at all levels o Ex: Machine operator, CFO, CEO As size gets bigger the costs from poor decisions and inconsistent objectives rise Technology will impact centralization and decentralization o As technology makes it easier to transfer specific knowledge from lower levels to higher levels there will be a shift towards centralization o As technology makes it easier to transfer specific information to lower levels of the organization there will be a shift towards decentralization Increased government regulation tends to increase centralization because of the amount of specific CEO cannot solve firms organizational problems by using alienability o Set rules Spread decision making rights to agents throughout the organization Create control system that provides measures of performance and specifies relationships between rewards and punishments regarding the measurements of performance ERM and CSR PowerPoint What is ERM? Cross functional approach taken by organizations to better manage the outcomes that result from uncertainty: o Negative Outcomes (e.g., risks) o Positive Outcomes (e.g., opportunities) Royal Dutch Shell- learn from BP’s mistake
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Eli Lily, Pfizer; made all of the money paid to doctors for advertisements transparent to public Trick is to optimize, not minimize, outcomes o Requires a portfolio approach across the entire organization Plotting Risks and Opportunities Two factors usually considered: o Likelihood of risk actually occurring (0<X<1) o Magnitude of impact if risk actually does occur Time IT system being down, revenues lost, costs incurred, reputation damage or enhancement… Risk appetite- shows risk and opportunities Crisis management o Low likelihood, high impact (ex: tornado striking FSB) Responding to Risks Three Basic risk options o Accept- do nothing differently o Avoid- cease conducting the underlying activity o Reduce- form an alliance (outsource partner), share/transfer (insurance
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ACC 333 FINAL - ACC 333 Final Exam Study Guide Specific and...

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