Session topics

Using strategy maps to do risk-based strategy execution

Enterprise Risk Management

Ethics: What it means to be a professional

IFRS: An executive view

Linking strategy to financial objectives and risks

Roundtable discussion: Communication tools and techniques for executives

Exploring the 'beyond budgeting' model

Dashboards and scorecards

Leadership in uncertain times
Speaker: Denise Zaporzan, CMA

Leaders today are facing unprecedented levels of uncertainty and stress. The magnitude of the recent financial upheaval has increased this exponentially. More and more, we are being asked to help leaders throughout all levels of an organization cope with their own anxiety as well as respond to employees’ increasing levels of stress as change continues at lightning speed.

This session explores practical strategies to help leaders and employees at all levels contribute to and create a healthier organizational climate. We explore changing career paradigms, the many different causes of stress, ways to increase both our personal and organizational resilience and a simple model for managing through these times of unparalleled uncertainty.

Using strategy maps to do risk-based strategy execution
Speaker: Dr. Norman Sheehan, PhD, CGA, CMA

Using practical examples, this presentation will outline how strategy mapping can be used to identify and assess strategic risks. It then outlines four levers managers can use to manage these risks and improve their strategic execution capabilities.

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Enterprise Risk Management (ERM) for competitive advantage
Speaker: Robert Torok, MBA, CA

A risk foreseen is half avoided. The foundation of any successful Enterprise Risk Management (ERM) program is the identification of risks, in the context of an organization's strategic objectives, followed by risk analysis, risk assessment and risk mitigation actions. This workshop will give you the critical elements needed to make your organization's ERM program a success by enabling you to see many risks before they occur and to take actions with a more complete understanding of the implications of those actions across the enterprise. The content will be brought to life through a short case study which will give participants an opportunity to apply the skills discussed during the workshop.

From this session, attendees will:

gain a perspective on common risks and types of risks;
learn techniques and tools to identify risks;
learn to work across organizational layers and boundaries;
learn to manage correlated and compound risks; and
learn risk assessment and prioritization approaches.

Ethics: What it means to be a professional
Speaker: Lynn Sugden, MBA, FCMA

Driven by his credo, Lynn continues to explore the profession and the behaviour of its members in relation to the standards set by society and the profession. This session looks at a variety of behaviors in conjunction with different standards of individual behavior, including legal and professional codes. In addition, various ethical bases will be introduced and discussed. Although behavioral change is not an explicit outcome of this session, it is Lynn’s intention to provide the foundation for a lifetime of ponder.

At the end of the session, the successful participant should be able to articulate and communicate:

standards of behaviour and practice;
function and dysfunction of contracts; and
benefits of diversity and conflict.

IFRS: An executive view
Speaker: Karine Benzacar, MBA, CMA, CPA (Del)

IFRS (International Financial Reporting Standards) is coming to Canada. By 2011, all publicly accountable companies, public companies listed on the Toronto Stock Exchange and crown corporations, will be required to report their financial results using IFRS instead of Canadian GAAP. These requirements include reporting a 2010 balance sheet (the opening balance sheet for 2011) under IFRS.

Accountants and preparers of financial statements will need to be aware of the technical details of IFRS. However, senior executives and members of the C-Suite need to be aware of the impact of IFRS on their organization and their role in terms of ensuring a smooth transition and reviewing IFRS statements.

At the end of this workshop, participants should be able to:

understand the major differences between IFRS and Canadian GAAP;
identify the impact of IFRS on their organization;
determine whether their organization is IFRS-ready;
understand areas their organization needs to review prior to releasing IFRS statements; and
increase their comfort level in signing off on the first IFRS statements.

Workshop format
This workshop is highly interactive. Participants will learn the international financial reporting standards by working through hands-on exercises and examples which compare Canadian GAAP to IFRS. This workshop will also present financial information from public companies which shows the impact on the financial statements of using different accounting standards. The workshop is also oriented towards senior-level executives and will not cover the material at the depth which would be required for analysts, managers, and directors.

Specific topics to be covered:

Overview of IFRS
- Who, what, where, when and why
Major differences between IFRS and Canadian GAAP
Key accounting changes
- Fixed assets – valuation, depreciation, impairments
- Fair value measurements vs. historical cost
- Cash Generating Units (CGUs)
- Leases
- Provisions and contingent liabilities
- Constructive obligations
- Onerous contracts
Financial statement presentation – a new look and feel to financial statements
- Statement of financial position
- Statement of comprehensive income
- Statement of cash flows
- Statement of changes in equity
- Reconciliation schedule (cash flows to comprehensive income)
- New information in financial statement notes
Impact of IFRS on key ratios and possible impact on bank covenants
The year of transition and important dates
Impact of IFRS for senior executives and boards of directors

Linking strategy to financial objectives and risks
Speaker: Dr. Amin Mawani, PhD, LL.M, FCMA, CFP

Implementing an organization's strategy influences stakeholders' financial returns and risks and vice versa. Executives therefore need to consider both the impact of organizational strategy on risk/return and the impact of stakeholders' risk/return expectations on organizational strategy. Neither can be done in isolation. Both need to be considered simultaneously in light of industry conditions, market conditions and competitiveness of the sector. Accountability to stakeholders demands simultaneous consideration of both. This session will elaborate on how some common strategic decisions can impact stakeholders' financial returns and risks, as well as how stakeholders' financial expectations can shape organizational strategy.

After this session, participants will understand:

the link between an organization’s strategic objectives, risk and financial objectives;
how stakeholders assess risk and financial outcomes; and
how performance measures ought to be linked to decision rights and accountability.

Definition of terms

Organizational Financial Objectives
While accomplishing their strategic objectives, organizations also seek to meet the financial objectives that are required by its stakeholders. Such stakeholders generally require a risk-adjusted return on their capital that is commensurate with that offered by other organizations of similar risk. This required return is influenced by industry conditions and competitive strategy.

Assessing the risk of an organization
The risk of an organization refers to the variability of the returns or cash flows generated by the firm. Regular assessment of the variance of key performance measures is highly recommended for all organizations.

Financing Policy
The risk or variability of an organization’s cash flows and its tax position determine the amount of debt in its capital structure. Failure to meet regular debt payments can trigger violations of debt covenants that may require restructuring or renegotiation of debt. Frequent operating losses may reduce a firm’s effective marginal tax rate and thereby increase the after-tax cost of debt capital.

Investment Policy
Ultimately, value creation can only be accomplished through sustained positive cash flows in excess of the cost of capital over time. Shareholder value (or stock price) is driven by entrenching such value creation in shareholders’ expectations. Value creation is reflected by the growth in business. Sustainable growth requires developing and maintaining a consistent set of business strategies, investment objectives, operating goals and financial policies that reinforce each other rater than conflict. This requires reinforcing incentives for measuring and rewarding long-term performance.

Accountability
Responsibility centres should be consistent with how senior management decides to allocate decision rights to middle management. They should reflect operational independence, separable costs and revenues, and senior management intent. The three pillars of sound organizational architecture include:
• Allocating decision rights to individuals who have the knowledge to make decisions
• Linking performance measures to the decision rights granted
• Linking rewards to the performance measures selected

Alignment of these three pillars is necessary for an organization to function well in a decentralized context where managers can reasonably anticipate external shocks and react effectively to them.

Dividend Policy
In a competitive financial market, shareholders will demand a return on equity that is commensurate with the riskiness of the firm’s cash flows. Firms can offer such returns via dividends or capital appreciation in stock price. While the tax differential between dividends and capital gains at the personal level is largely disappearing, some shareholders may still have a preference for regular cash distributions as they believe such discipline may keep management’s feet to the fire. This explains why some income trusts may decide to not convert back to corporate form even after the tax advantages of being an income trust largely disappear.

Tax Strategy
Senior management remains responsible for incorporating effective tax planning into all business decisions. Such tax planning cannot be done in isolation or after the business decisions have been taken, since most business decisions have a direct impact on the tax position of a firm and vice versa.

Roundtable discussion: Communication tools and techniques for executives
Speaker: Kirby Wright

This session will involve a roundtable discussion about communication tools and techniques for executives. Participants will be interacting throughout the conversation, and Kirby Wright will moderate and lead the discussion.

Exploring the beyond budgeting model
Speaker: Dr. Murray Lindsay, FCMA

In this session, we will explore a “new” management model called ‘Beyond Budgeting’ that is focused around fostering real decentralization. The Handelsbanken case provides the exemplar application of the Beyond Budgeting model. A key aspect of this model is that traditional budgeting is considered to be suboptimal and even dysfunctional and, therefore, its proponents argue, should be avoided. To facilitate exploring the merits of this model and, in particular, the claim about the “evils” of budgeting, we will look at another case, Codman (a subsidiary of Johnson & Johnson) that also focuses on radical decentralization. However, Johnson & Johnson places great emphasis on budgeting. This leads to the question: If budgeting is so bad, how come J&J has, over so many years, been such a successful company? Through this contrast we will hopefully see what is truly problematic about budgeting.

Session objectives:

to expose you to the 'Beyond Budgeting' model of management that aims to promote decentralization;
to examine the problems with traditional budgeting practices as espoused by Beyond Budgeting advocates;
to examine an exemplar application of Beyond Budgeting—Handelsbanken;
to examine a highly successful company—Johnson & Johnson—who uses their budgeting system extensively. Through this contrast, we hope to shed light on the key aspects of traditional control practices that may be dysfunctional; and
to report findings of a North American budgeting survey.

Cases to be discussed in the session:

Svenska Handelsbanken: Controlling a Radically Decentralized Organization by R.M. Lindsay and T. Libby (Published in Issues in Accounting Education, 2007

Codman & Shurtleff by Robert Simons, Harvard Business School Publishing

Questions to think about for the Handelsbanken case:

1. What is wrong with traditional budgeting? Do you agree with Wallender’s view that “A budget will thus either prove roughly right, and then it will be trite, or it will be disastrously wrong, in which it will be "dangerous.”

2. What do you believe are the key control mechanisms that allow Handelsbanken to manage without the use of budgets? Has the absence of traditional budgeting controls hurt or helped them?

3. Arne Mårtensson stated that the bank replaced the budget with “an excellent accounting system” that permitted honest and frank discussions to occur. What do we learn about what makes an excellent accounting system? Is Handelsbanken’s accounting system measuring the right things?

4. Why would information sharing and assistance occur among the branches given the use of performance league tables which makes branches and regions compete against one another?

5. Do you agree with Wallander’s position regarding the importance of incentives near the end of the case (quote page 16)?

6. Is the success of Handelsbanken’s management system tied to the right match of cultural environment? Would it work in North American companies?

Questions to think about for Codman and Shurtleff:

1. Be sure to understand Codman’s rather complex budgeting process (annual budgeting, revisions to the annual budget, and long range planning). Who gets involved, when, and in what way?

2. Why does Codman use the same two long range planning years over a 5 year horizon in their 5 and 10 year plans?

3. Won't managers try to bias their estimates 5 and 10 years out to avoid being committed to tough profit plans?

4. Does the tremendous amount of focus on establishing the annual budget, along with the revisions (three times during the year), and the weekly reports to Stolzer result in an orientation to manage for the short term?

5. Do we really need such formal systems to force managers to think strategically or to be innovative? Wouldn’t good managers do this anyway?

6. Why does Johnson & Johnson go to such tremendous trouble to track performance and then back off and not link rewards directly to budget target attainment?

7. Key issue: Over the last several years, Fortune Magazine has polled the CEOs of the 250 largest U.S. companies to gather data on the management quality of major U.S. organizations. In responding, they have repeatedly ranked J&J as one of the most innovative and well-managed firms in its industry. If budgeting is such a bad practice, how can a company place so much reliance on their budgeting system to control the company and yet be so successful? Does this case (in juxtaposition with the Handelsbanken case) shed any light on what is truly problematic with traditional budgeting practices?

Recommended Reading:

Pfeffer, J. 1998. Six Dangerous Myths about Pay. Harvard Business Review (May-June).

Corporate Budgeting is Broken – Let’s Fix it,” M. Jensen, Harvard Business Review, 2001.

Libby, T. and R.M. Lindsay, Budgeting – the Unnecessary Evil? CMA Management (March 2003).

Libby, T. and R.M. Lindsay, Booting the budget: How the BBRT envisions a world without traditional budgeting, CMA Management (April 2003).

Dashboards and scorecards
Speaker: Brett Knowles

Keeping score – that’s our role in organizations – but how do we effectively keep score in today’s environment when more than 75 per cent of value comes from intangible (non-monetary) assets, environmental conditions change daily and the biggest assets companies have are either their employees’ or customers’ loyalty. Financial statements, scorecards and dashboards each play important, but very different, roles in the strategic management process. It is important that we as practitioners know which is the right tool to use when.

This hands-on workshop will help participants understand:

the critical role of scorecards and dashboards in measuring and monitoring performance;
how to build effective scorecards and dashboards; and
how the organization should use scorecards and dashboards to drive order-of-magnitude performance improvements.

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