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ACCA P1 GOVERNANCE, RISK AND ETHICS

Sample Study Note

For exams in DEC2014

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Lesco Group Limited, April 2015


All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without the prior written
permission of Lesco Group Limited.

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Sample Note Content:

MAIN STUDY NOTE CONTENT [TOTAL PAGES: 157]

PRODUCT SUMMARY
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LIVE ONLINE NOTE SAMPLE PLAN


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CHAPTER2 RISK MANAGEMENT

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SLIDE IN CLASS(RISK MANAGEMENT)

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DETAILED NOTES:

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Please note:
This is just the sample study note extracted from the main study note in your tuition study
[This tuition study note is consistent in basic/super/gold package]. There would be more
chapters in the main study note covering the whole ACCA syllabus.
You can also take a look at the content within the main study note below:

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Main study note content [Total Pages: 157]


CHAPTER1 CORPORATE GOVERNANCE ...... ERROR! BOOKMARK NOT

DEFINED.
Corporate governance definition:.............................................................. Error! Bookmark not defined.
Purpose and objectives of governance ...................................................... Error! Bookmark not defined.
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REGULATIONS: UK CORPORATE GOVERNANCE CODE OVERVIEW:

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REGULATIONS: UK CORPORATE GOVERNANCE CODE DETAILS:ERROR!

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SECTION A LEADERSHIP OF THE BOARD ... ERROR! BOOKMARK NOT

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A1: Unitary v two tier boards ..................................................................... Error! Bookmark not defined.
A2: CEO/Chairman role split ...................................................................... Error! Bookmark not defined.
A3: Chairman Role ..................................................................................... Error! Bookmark not defined.
A4: NEDs..................................................................................................... Error! Bookmark not defined.

SECTION B: EFFECTIVENESS OF THE BOARD ..... ERROR! BOOKMARK

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Effectives of board ..................................................................................... Error! Bookmark not defined.

SECTION C: ACCOUNTABILITY .. ERROR! BOOKMARK NOT DEFINED.


What is internal control system? General issues ....................................... Error! Bookmark not defined.
C1: Disclosure about internal controls....................................................... Error! Bookmark not defined.
C2: Best practise: [COSO framework or Turnbull report] .......................... Error! Bookmark not defined.
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Turnbull Report(3 sessions) ....................................................................... Error! Bookmark not defined.


C3: Audit committee .................................................................................. Error! Bookmark not defined.

SECTION D: DIRECTORS REMUNERATION . ERROR! BOOKMARK NOT

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SECTION E: RELATIONS WITH SHAREHOLDERS. ERROR! BOOKMARK

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Shareholders dialogue ............................................................................... Error! Bookmark not defined.

GLOBAL VARIETY ................... ERROR! BOOKMARK NOT DEFINED.


Principles and rule based approach ........................................................... Error! Bookmark not defined.
SARBANES OXLEY ACT 2002 Key features: ................................................. Error! Bookmark not defined.
Family structure: [Normally in Asia] .......................................................... Error! Bookmark not defined.
Insider structure:(2 tier board structure, usually in Europe) ..................... Error! Bookmark not defined.

CHAPTER2 RISK MANAGEMENT ........ ERROR! BOOKMARK NOT


DEFINED.
Management of risks: ................................................................................ Error! Bookmark not defined.
Role of risk manager: ................................................................................. Error! Bookmark not defined.
1. Identify risks: .......................................................................................... Error! Bookmark not defined.
2. Risk assessment: .................................................................................... Error! Bookmark not defined.
3. Risk strategy: .......................................................................................... Error! Bookmark not defined.
4. Implementation and monitoring risks: .................................................. Error! Bookmark not defined.
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Governance standards on risks: ................................................................. Error! Bookmark not defined.

CHAPTER3 ETHICS ............. ERROR! BOOKMARK NOT DEFINED.


STAKEHOLDER THEORY ...... ERROR! BOOKMARK NOT DEFINED.
Stakeholders identification: ....................................................................... Error! Bookmark not defined.
Should company be responsible for the stakeholders?............................. Error! Bookmark not defined.
Should company be accountable for the stakeholders? ........................... Error! Bookmark not defined.

ETHICS: ............................. ERROR! BOOKMARK NOT DEFINED.


WHAT IS ETHICS? .............. ERROR! BOOKMARK NOT DEFINED.
Absolutism VS Relativism ........................................................................... Error! Bookmark not defined.
Deontology VS Teleology ........................................................................... Error! Bookmark not defined.
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Ethical stages: ............................................................................................ Error! Bookmark not defined.
Kohlberg model .......................................................................................... Error! Bookmark not defined.
Grey, Owen & Adams ................................................................................. Error! Bookmark not defined.

HOW CAN YOU MAKE AN ETHICAL DECISION? .......... ERROR!


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Follow hierarchy......................................................................................... Error! Bookmark not defined.
IFACs code of ethics .................................................................................. Error! Bookmark not defined.
Threats to objectivity: ................................................................................ Error! Bookmark not defined.
Ameriacan Accounting Association (AAA)7 steps ...................................... Error! Bookmark not defined.
Tuckers 5 questions .................................................................................. Error! Bookmark not defined.

BASIC REVISION SESSION: ERROR! BOOKMARK NOT DEFINED.


CORPORATE GOVERNANCE: ......... ERROR!
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BOOKMARK NOT DEFINED.

Pilot paper Q4: ........................................................................................... Error! Bookmark not defined.


Answer to pilot paper Q4:.......................................................................... Error! Bookmark not defined.
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DEC2008 Q2 ............................................................................................... Error! Bookmark not defined.
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Extra Risk Question: ................................................................................... Error! Bookmark not defined.
Answer to extra risk question: ................................................................... Error! Bookmark not defined.

ETHICS QUESTIONS ........... ERROR! BOOKMARK NOT DEFINED.


DEC2008 Q1 (a) .......................................................................................... Error! Bookmark not defined.
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DEC2008 Q4 ............................................................................................... Error! Bookmark not defined.
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Product Summary

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Live online course timetable

Timetable: [Super+Gold package-additional revision would


be agreed between tutor and student]
Live Online Revision
Live revision1

Live revision2

F5 Performance management

25th Oct

22nd Nov 6:00a.m.-13:00

F7 Financial Reporting (INT)

2nd Nov 6:00a.m.-13:00

29th Nov 6:00a.m.-13:00

F8 Audit and Assurance (INT)

18th Oct

19th Oct 7:00a.m.-14:00

F9 Financial Management

4th Oct 7:00a.m.-14:00

5th Oct 7:00a.m.-14:00

P1 Governance, Risk and


Ethics

1st Nov 6:00a.m.-13:00

30th Nov 6:00a.m.-13:00

P2 Corporate Reporting (INT)

26th Oct 7:00a.m.-14:00

9th Nov 6:00a.m.-13:00

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7:00a.m.-14:00

7:00a.m.-14:00

P3 Business Analysis

11th Oct 7:00a.m.-14:00

12th Oct 7:00a.m.-14:00

P4 Advanced Financial
Management

8th Nov 6:00a.m.-13:00

23rd Nov 6:00a.m.-13:00

P5 Advanced Performance
management

15th Nov 6:00a.m.-13:00

16th Nov 6:00a.m.-13:00

P7 Advanced Audit and


Assurance (INT)

27th Sept 7:00a.m.-14:00

28th Sept 7:00a.m.-14:00

Last minute revision


Last minute revision

Tutor

F5 Performance management

28th Nov 12:00-14:00

Ian

F7 Financial Reporting (INT)

1st Dec 12:00-14:00

Steve

F8 Audit and Assurance (INT)

22nd Nov 14:30-16:30

Alan

F9 Financial Management

22nd Oct 12:00-14:00

Steve

P1 Governance, Risk and Ethics

30th Nov 13:30-15:30

Alan

P2 Corporate Reporting (INT)

16th Nov 14:00-18:00(4hrs)

Kieran

P3 Business Analysis

18th Oct 14:30-16:30

Alan

P4 Advanced Financial Management

19th Nov 12:00-14:00

Steve

P5 Advanced Performance management

21st Nov 12:00-14:00

Ian Janes

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P7 Advanced Audit and Assurance (INT)

23rd Nov 13:30-15:30

Chapter2 Risk management

Slide in Class(risk management)

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Alan

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Detailed notes:
Management of risks:

1. Identify risks:
How:
1. Models that may be used
SWOT
PESTEL
2. Other ways:
Interview
Questionnaires
Consultants
Brainstorming
Audit reports

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Different categories of risks:

Category

Action

Financial

Credit control procedures/Hedging /Export insurance

Environmental

Environmental Scanning /Contingency planning

Business/Operational Risk

Internal control procedures /Recruitment & selection


/Testing /Training /IT controls /Insurance

Reputation Risk

Stakeholder analysis /inform about any


changes/Compliance checks /Training

International Risk:

Transaction risk

Different hedging techniques

Economic risk

Diversification of business

Translation risk

Match assets with liabilities

Political risk

Keep an eye on governments latest regulations

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Who manages risks?

Risk committee:
Risks can be identified and dealt with by risk committee.
In most organizations the risk committee and audit committee would be the same
but in large corporations there would be a separate risk committee dealing with
risks issues.

Risk correlation:

There would be positive or negative risk relationship.

Positive relationship means as one risk arise or decrease then another risk would
arise or decrease.

Negative relationship means as one risk arise or decrease then another risk would
decrease or arise.

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2. Risk assessment:

This means the board is going to prioritize risks and focus on really problematic
ones.

Tool: risk mapping.

Impact

Big

Small
Likelihood
Impossible

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Almost

certain

The prioritization of risks would be based on objective and subjective assessment.

Objective assessment:
By reference to statistics or other forecasts by different experts.

Subjective assessment:
Would be based on 3AsRisk Authority: if its up to board of directors who are going to manage the risks
then they would have much auithority to deal with risks more properly.

Risk Appetite: this means whether company is risk aggressive or risk averse? And
risk appetite is the combination of risk attitude(willingness to accept risks) and risk
capacity(ability to accept risks, ie, do you have enough skills and resources).

Risk Awareness: this means when company is dealing with risks then it would affect
different stakeholders within the organization and hence company need to analyse
these potential negative impact on those stakeholders like customers, suppliers etc
before any prioritization of risks is taking place.

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3. Risk strategy:

Transfer
Using insurance; setting up a joint venture would be ways to transfer risks to 3rd
parties.

Avoidance
Totally reject a project.

Reduction
You can either use proactive approach or reactive approach to reduce risks.
Proactive approach means we can embed risks in culture:
1. It means ensuring that staff are thinking about risk issues as an integral part of
their work.
2. Staff should know that taking unnecessary risks will not only lead to disciplinary
action, but be regarded as unacceptable by their fellow employees.
3. So Risk management should be a part of everybodys job description, to ensure
that staffs responsibilities are clearly defined.
Reactive approach means we can embed risks in culture in internal control
systems:
Firstly, it suggests the need for proactive investment in systems so that their
technologies are reliable and fully functional so as to deliver required results
consistently into the future.
Secondly, such system must be monitored through the development of control
systems coupled with appropriate reporting on system operation and output.

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Acceptance
Accept the risk and not taking any measures to deal with it.

Principle: ALARP
Risk strategy is really something that occurs between avoidance and acceptance of
risk. The continuum that operates between these two points sees an interplay of
reduction and transference approaches.
Where, along the line between avoidance and acceptance, strategy plays out,
depends in part on risk attitude. Greater acceptance of risk often leads to greater
rewards. Greater avoidance of risk often leads to fewer rewards.
The concept of ALARP (As Low As is Reasonably Practicable) asks the board to
consider how many activities or risks it considers acceptable, how may it will avoid
and how high or low it is willing to push the remainder through investment in risk
management. ALARP could be viewed as a tool or technique to focus the mind, it
could also be simply a statement used to govern board deliberations, providing a
sense of prevailing risk attitude.

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4. Implementation and monitoring risks:

Risk management system is a cycle and it needs to be reviewed frequently.

The frequency would depend on companys environment:

If the companys environment is quite static like charities then it would need less
review.

If the companys environment is quite dynamic like financial services industry then
it would need more review.

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