Great BU7006 Financial Risk Management Sample
Introduction
Financial risk management is referred to as the practice of economic value within a firm by using financial instruments to identify the risk, credit risk and liquidity risk (McLaney & Attrill, 2014).http://Great BU7006 Financial Risk Management Sample
This report will brief about the main problems of using the BSC within the organization.
Evaluation of capital measurement within Diva along with analysis of current quality cost and discussion will also be explained in this report.
Discussion of the main problems of using the BSC at this specifying company
The main problem of using the BSC at Diva organization is that the proposed measurement lacks meaningful insight into the business and fails to tackle issues at strategic, operational and tactical levels.
Poorly defined metrics are also a major problem that is associated with BSC because the balanced scorecard fails to depict visual indicators that provide a clear understanding of the overall financials of the firm.
It has also been noticed that there is a lack of measurement that is consistently applied across the firm, as because the differences in calculations might affect the overall performance Diva organization (Attrill & McLaney, 2008).http://Great BU7006 Financial Risk Management Sample
The system has sloppy and inconsistently defined metrics that become vulnerable to criticism and effects the accountability for results.
The lack of efficient data collection and reporting also makes it vulnerable for Diva organization to collect data and analyze the subsequent reporting trends to achieve good results.
Due to a lack of efficient data collection and reporting it has also been noticed that it takes too much time and energy to analyze information and interpret results (Collis, Holt, & Hussey, 2017).http://Great BU7006 Financial Risk Management Sample
Lack of formal reviewing structure is also the main problem that has been identified in the balanced scorecard as a result of which it fails to clearly define roles and standard agenda upon which actions will be monitored at each meeting.
Finally, the problem that has been identified with Diva business venture is that there is no process improvement methodology in BSC as a result of which solutions cannot be developed and performance gaps cannot be closed.
Comparison and evaluation of current measures and the consultants proposed measures
The current measures that are being used within the Diva organization include having three divisions that are being used to maximize the return to shareholders along with using return on capital employed (ROCE) as the indicator to performance measure for the objectives.
The three divisions that are being used within the firm comprises of the drug development division that is being used to develop new drug compounds, the drug development is also used for the regulatory system of different countries until they are approved for sale.
The second division includes the manufacturing division that makes up the compound. The third division is known as a sales division which is concerned with selling them (Drury, 2018).http://Great BU7006 Financial Risk Management Sample
Moreover, evaluating the case study it has also been noticed that Balance sheet card is also used as the part of current performance measures which are used by the management for measuring current performance which includes return on capital employed, average cost to develop a new drug and calculating revenue growth (Finkle, Smith, & Calabrese, 2018).http://Great BU7006 Financial Risk Management Sample
Currently, the CEO of the firm has also taken up the initiative of using the interim report as part of their current measures that include calculating return on capital employed, identifying the revenue growth that is accumulated through customers.
Using an internal business process to develop a new drug and finally, learning and growth which are used to provide training to the employees each year.
The proposed measures that were being provided by the consultant include calculating the ROCE, which are being used to generate profits.
The consultant mainly uses ROCE as because it becomes essential to compare the performance of the companies in capital intensive sectors such as utilities and telecoms.
Calculating the return on capital employed also provides a better indication of financial performance for the companies suffering from significant debt (Renz & Herman, 2016).http://Great BU7006 Financial Risk Management Sample
The consultant also provided the idea of using total quality management that is mostly used within the manufacturing divisions to improve the overall quality of the products.
Total quality management is also being used for the testing product within the factory department that costs around £ 12 million.
Product testing is used within the business to introduce new products through regular innovations.
The total quality management in the manufacturing division for Diva also helps them in calculating the raw materials that are used to design new products.
Evaluation of different profit and capital measurements available to Diva, and a recommendation on the most suitable measure for this company
Return on investment is termed as the measure of performance utilized for the investor efficiency of diversified range of investment (Bruce, Gómez‐village’s, & Montesinos, 2016).http://Great BU7006 Financial Risk Management Sample
Mainly, the operational cost of the firms are compensated through the investment of investors. So, managing the investors of Diva would be considered as first priority.
The main goal of the business is to maximize the return on capital employed which is not reflected in the performance of current year.
From the financial report of Diva, it has been stated that other costs and costs includes £5708 million which is to be controlled.
On the other hand, operating profit has also been considered as very crucial component for capital and profit measurement which is £1811 million.
The operating profit has been improved by controlling the resource usage and budget allocation.
Constant surveillance and monitoring of the business process also reduce the operational cost of business which is intended for Diva.
The management of Diva is recommended to improve their distribution process and logistics for improving the financial figures.
The cost section has required to be classified according to the function of departments which is also sub-categorized as operational cost, human resources, suppliers and other costs.
As the firm has dealt with the drug manufacturing, consultation with practitioners and patients help to incline with their demand which has become simplified through emergence of digital medium (Dyson & Franklin, 2017).http://Great BU7006 Financial Risk Management Sample
The cost for the first division i.e. handling the legal section has to be decreased and the delivery operation has to be improved.
Cost associated with raw ingredients has also been controlled by evaluating wide range of suppliers across the country.
The implementation of digital system assist the employees to simplify their job which assures the quality of products by proper batch testing.
So, the strategic decision of the business should be applied by controlling the operational cost and other costs.
Analysis of current quality cost and discussion of the effects of introducing Total Management into the division
From the cost information of manufacturing division, it has been identified that the rejected batches is of £17 million with a scarp value of £4 million.
The quality of the products or services has not been maintained properly which is reflected from the cost data of manufacturing unit of Diva.
Due to late delivery and customer retention, the firm have to provide discounts of £ 22 million.
On the other hand, training for the employees is considered as very crucial which allocates £8 million. It helps the business to progress the efficiency of business function and profitability.
The productivity of the business has been improved under quick time and controlled cost assist the business to compensate the long term debt of the business (Horngren, Sunder, Burstable, & Schwartzberg, 2017).http://Great BU7006 Financial Risk Management Sample
The business has also need to compensate the regulatory fine because of not following regulatory guidelines for drugs which is of £5 million.
The first unit of the business must be assisted by the digital system as the administrative jobs has been fulfilled with quality by the system.
The factory testing department cost includes £12 million which is required to be utilized in such a manner that the defected lots are removed properly.
The main allocation has been done in the raw materials supplier which is of £1008 million.
The business has intended to be inclined with the principles of total quality management which comprises continuous improvement, systematic approach, proper decision making, system integration, communication and employee engagement.
Maintaining stable communication with the employees and proper assistance to use the digital system for recording data help the workers to execute the goal of business.
It will help the business to attract new customers by getting benefitted from the drugs which are manufactured by the firm. The marketing has also been developed through digital medium that is executed by implementing the digital system (Coleman, Coati, & Farhat, 2016).http://Great BU7006 Financial Risk Management Sample
The cost associated with lower level employees has been educed along with its work pressure which is indicated as profitable after 1 year.
The application of total quality management has been applied by decision making according to the external environment analysis.
Discussion of lean systems and how such a system can be implemented into the drug development division
The usage of the new information system will assist their researcher chemists in identifying new drug compounds for testing and developing.
Moreover, it has also been identified that the new information system will also be used to perform calculations and simulations which will require high computational power and memory but it will also be used to have access to extreme data sources so that the professionals can keep themselves updated with the developments and access new growth of opportunities.
Moreover, the lean system will also be used to calculate the cost associated with quality issues within the divisions (Prowler & Lucas, 2016).http://Great BU7006 Financial Risk Management Sample
The lean system can also be used for the development of a drug that includes reducing the wastages from the management and benchmarking the drugs that improve the drug designs so that quality and standards can be maintained.
The lean system also benefits in reducing defects by fixing errors that improve quality within a process and assure the development of the best available drugs.
Conclusion
From the above study, it has been concluded that the management of Diva required to control the operational cost for integrating the business process with demands of customers.
The system has sloppy and inconsistently defined metrics that become vulnerable to criticism and effects the accountability for results.
The first unit of the business must be assisted by the digital system as the administrative jobs has been fulfilled with quality by the system.
References
Atrill, P., & McLaney, E. (2008). Financial accounting for decision makers. London: Pearson Education.
Brusca, I., Gómez‐villegas, M., & Montesinos, V. (2016). Public financial management reforms: The role of IPSAS in Latin‐America. Public Administration and Development, 1(36), 51-64.
Coleman, S., Cotei, C., & Farhat, J. (2016). The debt-equity financing decisions of US startup firms. Journal of Economics and Finance, 1(40), 105-126.
Collis, J., Holt, A., & Hussey, R. (2017). Business accounting. London: Palgrave.
Drury, C. (2018). Management and Cost Accounting. London: Cengage learning.
Dyson, J., & Franklin, E. (2017). Accounting for non-accounting students. London: Pearson.
Finkler, S., Smith, D., & Calabrese, T. (2018). Financial management for public, health, and not-for-profit organizations. London: CQ Press.
Hornren, C., Sundem, G., Burgstahler, D., & Schatzberg, J. (2017). Introduction to Management Accounting (16 ed.). London: Pearson.
McLaney, E., & Atrill, P. (2014). Accounting and finance: an introduction. London: New York: Pearson.
Prowle, M., & Lucas, M. (2016). Management Accounting in the contemporary business world. London: Palgrave.
Renz, D., & Herman, R. e. ( 2016). The Jossey-Bass handbook of nonprofit leadership and management. London: John Wiley & Sons.
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