Mitigation Strategies – NBC Institute

FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze potential agency conflicts between company owners and managers and methods to mitigate these issues.

Question

Agency theory was developed by Jenson & Meckling (1976), defining the agency relationship as a form of contract between a company’s owners and its managers, where owners appoint agents (managers) to manage the company on their behalf. As part of this arrangement, owners delegate decision-making authority to management. In this relationship, owners expect agents to act in their best interest.

Required:

a. Agency conflicts may arise in various ways. Discuss four of these conflicts. (9 Marks)

b. State four methods by which problems arising from these conflicts could be reduced. (6 Marks)

Answer

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Tags: Agency theory, Corporate Governance, Managerial Actions, Mitigation Strategies, Principal-Agent Conflict, Shareholder Interests
Level: Level 3

Topic: Corporate Governance and Financial Strategy

AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

Question

You are the internal auditor of Moovy Magic Limited, which runs a chain of video rental stores.

The company guarantees that if a video is not available for rental, the customer will get a free rental when that video comes back into inventory. It is not possible for customers to pre-book videos. The company purchases a number of copies of each video, taking the above policy into account, but has no way of monitoring whether their procurement strategy is effective. Procurement decisions are made and auctioned locally, and no central budgets are produced.

You have been asked by the directors to review the procurement and other strategies of the company.

Required:

Identify and explain the potential business risks arising from the above procurement and other strategies. Suggest controls and strategies that the management of Moovy Magic could instigate to mitigate those business risks. (9 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Risks, Internal Controls, Mitigation Strategies, Procurement, Video Rental
Level: Level 2

Topic: Risk Assessment and Internal Control
Series: MAY 2016

FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze potential agency conflicts between company owners and managers and methods to mitigate these issues.

Question

Required:

a. Agency conflicts may arise in various ways. Discuss four of these conflicts. (9 Marks)

b. State four methods by which problems arising from these conflicts could be reduced. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agency theory, Corporate Governance, Managerial Actions, Mitigation Strategies, Principal-Agent Conflict, Shareholder Interests
Level: Level 3

Topic: Corporate Governance and Financial Strategy

AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

Question

You are the internal auditor of Moovy Magic Limited, which runs a chain of video rental stores.

You have been asked by the directors to review the procurement and other strategies of the company.

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business Risks, Internal Controls, Mitigation Strategies, Procurement, Video Rental
Level: Level 2

Topic: Risk Assessment and Internal Control
Series: MAY 2016

Question Tag: Mitigation Strategies

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FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze potential agency conflicts between company owners and managers and methods to mitigate these issues.

AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze potential agency conflicts between company owners and managers and methods to mitigate these issues.

AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

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Question Tag: Mitigation Strategies

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FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze potential agency conflicts between company owners and managers and methods to mitigate these issues.

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AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

You're reporting an error for "AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control"

FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy

Analyze potential agency conflicts between company owners and managers and methods to mitigate these issues.

You're reporting an error for "FM – Nov 2018 – L3 – Q7 – Corporate Governance and Financial Strategy"

AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

You're reporting an error for "AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control"

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