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1807-5335 Future of Finance - Syllabus - WEB - R1 - IT PDF
1807-5335 Future of Finance - Syllabus - WEB - R1 - IT PDF
1807-5335 Future of Finance - Syllabus - WEB - R1 - IT PDF
Professional
Qualification
Syllabus
Reinventing finance in a digital world
Contents
“Digitalisation is transforming all industries. This is why digital
skills should be conveyed at all levels and in all forms of 2 Foreword 20 E1: Managing Finance in a Digital World
In an increasingly digital world, rapid changes in technology are creating challenges for the business models of 90 E3: Strategic Management
organisations. It is also making it difficult for business leaders and employees to create and preserve sustainable 12 Suggested order of exams
value. Against this digital backdrop, it is imperative that finance professionals possess relevant technical skills, a 104 P3: Risk Management
14 T
he syllabus in the context of the finance
sound understanding of their organisation, as well as the ability to influence and lead people. This will make them
function
capable of providing the insight their organisations need to craft and successfully execute their strategies. 114 F3: Financial Strategy
The 2019 syllabus continues to bridge the skills gap of newly qualified finance professionals worldwide, meeting 15 Summary of the 2019 Syllabus
124 Exam information and timetable
the employability needs of both business and people. In designing the syllabus, we set out to enhance the relevance
of the syllabus to employers; ensure the rigour of the related examinations and align the learning experience of 16 The Operational Level
candidates to the real world.
The changes in the syllabus are based on our three-stage research approach of employer interviews, roundtables
and a global survey to a range of stakeholders. We contacted over 6,500 finance professionals, from over 2,000
organisations, in over 150 countries. We have used the same research methodology as the previous syllabus
update but on a larger scale and with wider participation. This research has allowed us to capture the latest views Increasingly, the required skills of finance professionals are moving into the expert,
of finance professionals so that we can incorporate these into the syllabus. problem-solving arena and they must adopt competencies involved in influencing and
Importantly, the updated syllabus includes how the digital world affects finance; this can be seen through the change management. The finance professional needs a mindset that enables them to adapt
introduction of digital costing and digital strategy. Topics such as cybersecurity and business models have also
been incorporated. Existing areas, such as integrated reporting, have been expanded to reflect their growing through continuous learning.
prominence. Ultimately, these topics support CIMA’s desire to produce competent and confident management
accounting professionals who can guide and lead their organisations to sustainable success.
I strongly recommend the CIMA Professional Qualification to employers and to those wishing to pursue a
Mindset and Learning
successful and rewarding career in business. Challenges Performance
competencies systems
They Realise the challenges Comprehend the Understand the Use learning to
must … organisations face performance needed competencies and continually update
which threaten their from the finance mindset needed their competencies
Noel Tagoe, Ph.D., FCMA, CGMA
success team to address to perform at the and maintain a flexible
Executive Vice President — MA Research and Curricula
those challenges required level mindset for new
challenges
E1 P1 F1
Managing Finance Management Financial
in a Digital World Accounting Reporting
50
45
25
Digital 20
skills
15
10
Leadership People 5
skills skills
0
Entry level Manager Senior manager CFO
The CIMA Syllabus comprises nine subjects that are organised in three pillars and three levels. Strategic E3: Strategic Management P3: Risk Management F3: Financial Strategy
(Decide) A. The strategy process A. Enterprise risk A. Financial policy decisions
B. Analysing the B. Strategic risk B. Sources of long-term
The pillars • M
ake strategic organisational C. Internal controls funds
The three pillars represent specific areas of knowledge. for organisations. It develops the ability of students to decisions. ecosystem C. Financial risks
D. Cyber risks
progressively identify, classify and evaluate various risks • F
ormulate and C. Generating strategic D. Business valuation
The content of each pillar develops as students move to an organisation, including enterprise risk, strategic risk options
create strategy
up the qualification. The three pillars are interlinked to and cyber risk and manage these risks predominantly whilst managing D. Making strategic
provide a coherent body of knowledge that will equip through internal controls. the associated choices
successful students with the competencies they require. risks. E. Strategic control
The Financial Pillar focus is the financial accounting
The Enterprise Pillar focuses on the role of the finance F. Digital strategy
and reporting obligations of the organisation. This
function and how it interacts with the organisation using includes an understanding of the regulatory framework
data and technology. It looks at business models and and external reporting requirements, including integrated Management E2: Managing Performance P2: Advanced Management F2: A
dvanced Financial
the management of people and projects to achieve A. Business models and Accounting Reporting
reporting. The ability to construct and evaluate (Monitor)
organisational goals. It deals with the formulation and complex financial statements, including those relating value creation A. Managing the costs of A. Financing capital projects
the effective implementation of strategy. • M onitor B. Managing people creating value B. Financial reporting
to group accounts to show the financial position
implementation performance B. Capital investment standards
and performance of an organisation is essential.
The Performance Pillar uses the tools and techniques of decisions. decision-making
The principles of taxation and the tax implications C. Managing projects C. Group accounts
of management accounting and risk management C. Managing and controlling
of financing decisions are covered. It also looks at • M
onitor, manage D. Integrated reporting
to ensure that strategy is realistic and to monitor its and analyse the performance of
formulating financial strategy, which is linked to the organisational units E. Analysing financial
implementation. It shows students how to use their performance.
formulation of organisational strategy in the Enterprise statements
understanding of costs to construct budgets, make D. Risk and control
Pillar and assessing risk in the Performance Pillar.
decisions about prices and capital expenditure, manage
costs and manage performance. Digital costing is The subjects in each learning pillar are designed to
Operational E1: M
anaging Finance in P1: Management Accounting F1: Financial Reporting
introduced alongside traditional costing techniques and be sequential, from Operational to Strategic Level, a Digital World
(Implement) A. Cost accounting for A. Regulatory environment
cost management is expanded to reflect its growing encouraging the progressive development A. Role of the finance decision and control of financial reporting
importance in an increasingly competitive environment of knowledge, techniques and skills. • I mplementation function B. Budgeting and budgetary B. Financial statements
of decisions. B. Technology in a digital control C. Principles of taxation
• T
ranslate medium- world C. Short-term commercial D. Managing cash and
term decisions C. Data and information in decision-making
The levels a digital world
working capital
into short-term D. Risk and uncertainty in
The syllabus is also divided into three levels of manage organisational and individual performance, actionable plans; D. Shape and structure the short term
achievement. Students progress from the Operational allocate resources to implement decisions; monitor and then report on of the finance function
Level to the Management Level and finally to the report implementation of decisions; as well as prepare performance. E. Finance interacting with
Strategic Level. At each level students study subjects and interpret financial statements to show performance. the organisation
across the three pillars.
The Strategic Level focuses on long-term strategic
The Operational Level focuses on the short term and decision-making. Candidates will be able to support Enterprise Pillar Performance Pillar Financial Pillar
the implementation of decisions. Students will be able to organisational leaders to craft strategy; evaluate and
work with others in the organisation and use appropriate manage risks that might prevent organisations from Articulate a vision in Make the vision a reality Communicate and report
data and technology to translate medium-term decisions successfully implementing strategy; value organisations; a digital world. on the vision through a
How do we use costing
financial lens.
into short-term actionable plans. and source financial resources required to implement How do we articulate and budgeting for short-
the strategy. the role of the finance term decision-making? How do we prepare
The Management Level focuses on translating function in a digital financial statements?
How do we monitor and
long-term decisions into medium-term plans. Candidates world? control activity to ensure How do we interpret
will be able to use data and relevant technology to How do we manage performance? financial statements
performance through and use them to support
How do we identify,
people and projects? strategy?
mitigate against and
How do we develop manage risks to the How does financial strategy
and manage strategy? organisation? drive the ambitions of the
organisation?
5
Evaluation
Each syllabus section contains one or more lead learning outcomes, Advise Counsel, inform or notify
How you are expected
related component learning outcomes, topics to be covered and Assess Evaluate or estimate the nature, ability or quality of
to use your learning
explanatory notes that help provide the context for that topic area. Evaluate Appraise or assess the value of
to evaluate, make
Each lead learning outcome defines the skill or ability that a well-prepared decisions or Recommend Propose a course of action
student should be able to demonstrate at the end of the period of learning. recommendations Review Assess and evaluate in order, to change if necessary
4
The lead learning outcomes are part of a hierarchy of learning objectives.
The verbs used at the beginning of each learning outcome relate to a Analysis
specific learning objective. How you are Align Arrange in an orderly way
expected to analyse Analyse Examine in detail the structure of
Eg, ‘Analyse the features of internal control systems’. The verb ‘analyse’ the detail of what
Communicate Share or exchange information
indicates a high-level learning object (level 4). Because learning objectives you have learned
are hierarchical, it is expected that at this level, students will be able to Compare and contrast Show the similarities and/or differences between
examine and communicate the role, features and purpose of internal Develop Grow and expand a concept
controls in managing organisational risks. Discuss Examine in detail by argument
Examine Inspect thoroughly
The following table lists the learning objectives and the verbs that appear
Interpret Translate into intelligible or familiar terms
in the syllabus learning outcomes.
Monitor Observe and check the progress of
Prioritise Place in order of priority or sequence for action
3
Application
For the first time, from 2019 examinations onwards, CIMA will
How you are Apply Put to practical use
publish examination blueprints based on the syllabus. It will
expected to apply Calculate Ascertain or reckon mathematically
set out in detail what is examinable in each of the objective
your knowledge. Conduct Organise and carry out
tests and case study examinations for a given period and will
provide information about the format, structure and weightings Demonstrate Prove with certainty or exhibit by practical means
of the assessments. It is intended that blueprints will be Prepare Make or get ready for use
updated and published annually. Reconcile Make or prove consistent/compatible
2
For more information, go to cimaglobal.com/examblueprints.
Comprehension
What you are Describe Communicate the key features of
expected Distinguish Highlight the differences between
to understand. Explain Make clear or intelligible/state the meaning or purpose of
Identify Recognise, establish or select after consideration
Illustrate Use an example to describe or explain something
1
Knowledge
What you are List Make a list of
expected to know. State Express, fully or clearly, the details/facts of
Define Give the exact meaning of
Outline Give a summary of
The case study examination is a role simulation, Objective tests for each of the individual subjects
requiring candidates to respond to authentic work-based ensure the acquisition of the breadth of knowledge, Assessment of practical experience requirements (PER)
activities presented during the examination, drawing skills and techniques which provide the foundation
together learning from each of the three subjects for approaching the case study examination.
Strategic Strategic Case Study Exam
to provide solutions to the issues and challenges
More details of both types of assessment can Level
presented.
be found in the examination blueprints at
Case study materials are provided in advance of the cimaglobal.com/examblueprints.
examination to allow candidates time to immerse
themselves in the fictional organisation and industry All assessments are computerised and CIMA works in E3 P3 F3
within which the simulation will occur and to undertake partnership with Pearson VUE, who have over 20 years
of experience in offering electronic testing. There are Strategic Risk Financial
analysis of the organisation’s current position prior to
currently over 5,000 Pearson VUE test centres in Management Management Strategy
the examination.
180 countries. Locations of Pearson VUE test centres
can be found via the CIMA website.
Management AWARD: CIMA Advanced Diploma in Management Accounting (CIMA Adv Dip MA)
Level
Management Case Study Exam
Suggested order of examinations
The case study examination can only be attempted Performance Pillars operate. The Performance E2 P2 F2
after all objective tests for the level have been Pillar provides the context of what management
Managing Advanced Management Advanced Financial
completed successfully. accountants do within an organisation, and the
Performance Accounting Reporting
Finance Pillar considers the reporting and the
Within each level, students are free to study and take implications of this activity. It is for these reasons
objective tests in any order they wish. CIMA’s suggested that this order is suggested.
order of study is to begin with the Enterprise Pillar Operational AWARD: CIMA Diploma in Management Accounting (CIMA Dip MA)
subject, then move to the Performance Pillar subject For example, CIMA would recommend students studying Level
and then to the Financial Pillar subject. The syllabus the Operational Level to start with E1, then move to Operational Case Study Exam
has been designed so that, at each level, the Enterprise P1 and then to F1 before sitting the Operational Case
Pillar gives the broad context in which the Finance and Study examination.
E1 P1 F1
Managing Finance Management Financial
in a Digital World Accounting Reporting
Enterprise Pillar
pillar Performance pillar
Performance Pillar Financial pillar
Financial Pillar
The
On completion candidates should be able to: work with
others in the organisation and use appropriate data
and technology: translate medium-term decisions into
short-term actionable plans; analyse new situations that
Operational
arise in the short term to support decisions that create
further value for the organisation; evaluate and manage
risks associated with the short term; and report on the
performance, position and prospects of organisations. P1
Level
Management
Narrow scope
Accounting
Financial but some quantitative non-financial What the finance
information function does
Short term
Internal orientation
F1
Focus on details rather than the big picture Financial Reporting
What the finance function
Information and some insight
does and its
implications
Finance in a
Digital World The technology landscape and
its impact on organisations
and the finance function
Data usage by the finance function
C. Data and information in a digital world Structure and shape of the finance
function linked to the roles
D. Shape and structure of the finance function
1. E xplain the roles of the finance function Explain how the finance function: • T
he fast-changing and unpredictable Describe the increasingly disruptive contexts
in organisations. a. Enables organisations to create and preserve contexts in which organisations operate in which organisations and their finance teams
value • E
nabling value creation through planning, operate and how these contexts shape the role
forecasting and resource allocation of finance. Take each role and show how finance
b. Shapes how organisations create and preserve performs it in a typical organisational setting.
value • S
haping value creation through performance The coverage should be introductory and brief.
c. Narrates how organisations create and management and control It is meant to set the scene for subsequent
preserve value • N
arrating the value creation story through sections and draw a link between the roles and
corporate reporting the topics that will be covered in other areas of the
Operational Level.
• T
he role of ethics in the role of the finance
function
2. Describe the activities that finance professionals Describe how the finance function: • H
ow data is collected, cleaned and Use “information to impact” framework to describe
perform to fulfil the roles. a. Collates data to prepare information about connected by finance the primary activities finance professionals
organisations • Types of analysis to produce insights perform. Relate it to how data is generated,
transformed and used. Link it to how technology
b. Provides insight to users by analysing • H
ow finance communicates to influence could be used to improve the productivity of
information key stakeholders (audiences, frequency, finance professionals in these areas and the threat
c. Communicates insight to influence users format, etc.) of automation.
d. Supports the implementation of decisions to • H
ow finance uses resource allocation
achieve the desired impact and performance management to enable
organisations to achieve their objectives
e. Connects the different activities connect to
each other • Potential impact of technology
1. Outline and explain the technologies that affect a. Outline the key features of the fourth industrial • C
haracteristics and dynamics of the fourth The aim is to create awareness of the technologies
business and finance. revolution. industrial revolution that drive the digital world and how they interact
• Cloud computing with each other. The technologies outlined by the
b. Outline and explain the key technologies that define
major advisory firms and the World Economic
and drive the digital world. • Big data analytics Forum digital transformation initiative provide the
• Process automation material on which learning and related activities can
be based.
• Artificial intelligence
• Data visualisation
• Blockchain
• Internet of things
• Mobile
• 3-D printing
2. E xamine how the finance function uses digital Examine how finance uses the following to guide how it • How finance uses technologies listed above Examine how finance professionals use the relevant
technologies to fulfil its roles. performs its roles: • A
reas of finance susceptible to automation technologies to fulfil their roles. Explain how the
and why technologies affect various activities finance
a. Digital technology
professionals perform in the “information to impact”
b. Digital mindsets • New areas for finance to focus on framework. The intention is to move from creating
c. Automation and the future of work • Digital mindsets for finance awareness to generating understanding of how
finance can use these technologies to increase its
d. Ethics of technology usage • Ethics of the use of technology
value and relevance to organisations.
1. Describe the ways in which data is used by the Identify the ways in which the finance function Using data for: Build on the previous section on technology to
finance function. uses data: • Decision-making explain why, in the digital world, finance professionals
must place more focus on using information than on
a. In a general sense • Understanding the customer collecting and/or processing information. Outline and
b. Specifically in each of the primary activities • D eveloping customer value proposition describe the various uses of information. Link them
of finance to the primary activities that the finance function
• Enhancing operational efficiency
performs and to the topics to be covered in other
• Monetising data modules of the Operational Level.
• Ethics of data usage
2. E xplain the competencies required to Explain the competencies that finance professionals • A ssessment of data needs Highlight and explain the data competencies required
use data to create and preserve value need in: • E
xtraction, transformation and loading in the digital world. Locate where finance has a
for organisations. (ETL) systems competitive advantage and where finance will need
a. Data strategy and planning
to work with data scientists.
b. Data engineering, extraction and mining • Business Intelligence (BI) systems
c. Data modelling, manipulation and analysis • Big data analytics
d. Data and insight communication • Data visualisation
. .
1. Describe the structure and shape of the finance Describe the: • Structure
of the finance function from the roles Introduce candidates to the structure of the finance
function. that generate information to the roles that turn function and outline the broad areas of finance such
a. Evolution of the shape of the finance function
information into insight and communicate as finance operations, external reporting, financial
b. Shape of the finance function in the digital era insight to decision-makers planning and analysis (FP&A), decision support etc.
• Hierarchical shape of finance function Describe the evolving shape of the finance function
from the triangle to the diamond shape. Link the
• S
hared services and outsourcing of finance description to the impact of digital technology and
operations automation on the finance function.
• Retained finance
• A
utomation and diamond shape of
finance function
2. E xplain what each level of the finance Explain the activities of: • F
inance operations to generate information and The focus is the diamond shape and the four levels
function does. preliminary insight within this shape. Explain what each level does, the
a. Finance operations
• F
P&A, taxation, corporate reporting, decision relationship between the levels, and the link between
b. Specialist areas including financial reporting the levels and the basic finance activities covered
support to produce insight
and financial planning and analysis (FP&A) under the role of finance.
• B
usiness partnering to influence organisation to
c. S trategic partnering for value
make appropriate decisions
d. S trategic leadership of the finance team
• L
eading the finance team to create the required
impact for the organisation
1. Describe how the finance function interacts Describe: • Process management Describe how finance plays its role by interacting
with operations. • Product and service management with the rest of the organisation. Bring together the
a. Main role of operations
issues raised in the previous sections and link them
b. Areas of interface with finance • S upply chain management to what the other areas of the organisations do.
c. Key performance indicators For example, address how finance and marketing
interact using data and collaborative technology
to achieve organisational goals and the individual
2. Describe how the finance function interacts Describe: • Market segmentation functional goals of both finance and marketing.
with sales and marketing. a. Main role of sales and marketing • Big data analytics in marketing Describe how the use of KPIs influence these
interactions and how the KPIs of finance and these
b. Areas of interface with finance • Channel management
areas can be aligned to ensure they work together
c. Key performance indicators • S ales forecasting and management effectively.
A. Cost accounting for decision and control Budgets to translate Short-term decisions to exploit
medium-term decisions into new opportunities to create
B. Budgeting and budgetary control actionable short-term plans or preserve value
32 33
P1: Management Accounting
P1A: C
ost accounting for decision
and control
This section is about understanding why costing is done and what it is used for. It introduces candidates to the
basic building blocks of costing and how to apply them in the costing methods and techniques organisations use.
In a fast-changing digital world this understanding is critical and can enable candidates to develop their own ways of
calculating costs when existing methods are no longer appropriate. Digital costing is introduced in this section.
1. Distinguish between the different rationales a. Define costing • Inventory valuation This seeks to address the following pertinent
for costing. • Profit reporting questions: What are reasons for calculating costs?
b. Distinguish between the rationales for costing
What types of costs are appropriate for a particular
• C ost management and transformation purpose and why?
• Decision-making
2. Apply the main costing concepts to organisations a. E xplain the main costing concepts • C ost elements Examine the basic building blocks of costing and how
and cost objects. • Costs structure they apply to different types of organisations and
b. Apply costing concepts to different organisations
operating contexts (e.g., manufacturing and service
and cost objects • Cost behaviour sectors). How has the digital world affected the nature
• Cost drivers of these building blocks of costing?
• C
osting applied to different types of
organisations
• C osting applied to digital cost objects
3. Apply costing methods to determine the costs Apply the following: • Trace, classify and allocate costs Investigate how costs are traced, classified,
for different purposes. • Marginal costing accumulated, allocated, apportioned and absorbed to
a. Cost accumulation, allocation, apportionment
arrive at the costs of a product, service or other cost
and absorption • Absorption costing object. Calculate the costs of products or services
b. Standard costing • Price and rate variances using various costing methods. Determine which
c. Variance analysis (without mix and yield variance) costing methods are appropriate and why?
• Usage and efficiency variances
d. Activity based costing • Interpretation of variances
e. Digital costing • Product and service costing using ABC
• Advantages of ABC over other costing systems
• Features of digital costing
1. Distinguish between the different rationales a. E xplain the role of budgets. • Planning Why do organisations prepare budgets? In what ways
for budgeting. b. Distinguish between the different rationales • Communication are the different rationales for preparing budgets
for budgeting. compatible with each other? How do organisations get
• Coordination the most out the budgeting process?
• Motivation
• Control
3. Discuss budgetary control. Discuss: • Feedback and feedforward control What is budgetary control? Describe and discuss
a. The concept of budgetary control • Flexed budgets how and why the budgetary control system provides
feedback and feedforward to the organisation. What
b. Human dimensions of budgeting • Target setting and motivation are the behavioural impacts of budgetary control and
• C ontrollable and uncontrollable outcomes how are they managed?
• D ysfunctional behaviours in budgeting
• Ethical considerations in budgeting
1. Describe the main types of short-term decisions a. Describe pricing and revenue maximising • M
arginal and full cost recovery for pricing Describe the types of short-term decisions
made by organisations. decisions. decisions organisations make and the circumstances that
• D
ifferences in pricing and revenue maximisation give rise to them. What do these short-term
b. Describe product decisions.
for the short term and long term decisions seek to achieve? How important are they to
performance of organisations? The emphasis is on
• Product mix both revenue and costs.
2. E xplain the underlying concepts used for a. E xplain the objectives of decision-making. • I mplications of commercial decision-making What are the objectives and underlying concepts that
short-term decision-making. in the short term are used to guide short-term decision-making and
b. E xplain the underlying concepts of short-term
• Relevant revenues why? Distinguish between those concepts of revenue,
decision-making.
costs and information from other concepts.
• Relevant costs
• Difference with profit reporting
3. Apply appropriate techniques to support Apply the following to support short-term • Make or buy decisions Use data (financial and non-financial) and the
short-term decisions. decision-making: • Discontinuation decisions appropriate concepts and techniques to support
decision-making to achieve organisational objectives
a. Relevant cost analysis • Multi-product break-even analysis of value creation and preservation.
b. Break-even analysis • U
se of data and technology to analyse
c. Product mix decisions with constraints product mix decisions
d. Data and technology • E
thical considerations in short-term
decision-making
1. Apply basic risk management tools in the a. E xplain nature of risk and uncertainty in • Stress testing What types of risks and uncertainties do organisations
short term. short term. • S ensitivity and what-if analysis face when preparing and implementing budgets and
when making short-term decisions? How are those
b. Apply basic sensitivity analysis to budgeting • Probability distributions risks and uncertainties identified, assessed and
and short-term decision-making.
• Decision trees managed?
F1: Financial
Regulatory issues that provide the basis
for preparing financial statements
B. Financial statements
Implications
C. Principles of taxation
42 43
F1: Financial Reporting
F1A: R
egulatory environment of financial
reporting
The preparation of financial statements is regulated by laws, standards, generally accepted accounting principles and
by codes. The regulations ensure that financial statements of different entities are comparable and that they present a
reasonably accurate picture of the performance, position and prospects of the organisation to their users. This section
covers who the regulators are, what they do and why and how the regulations are applied. The objective is to provide
candidates with a strong foundation for preparing and interpreting financial statements.
1. Identify regulators and describe their role. a. Identify the major regulators. • National regulators Who are the regulators who determine how financial
b. Describe what they do. • IFRS foundation statements are prepared? What do they do? What
value do they contribute to the production of financial
c. E xplain why they regulate financial reporting. • IASB statements? Coverage will include national and
• I nternational Organisation for Securities international regulators, stock exchange regulators and
Commissions (IOSCO) various accounting and financial reporting standards
boards and major influential bodies like the IIRC.
• S tandard setting process
• D
ifferences between rules-based and
principles-based regulations
• O
thers such as International Integrated
Reporting Council (IIRC)
2. Apply corporate governance principles a. Describe the role of the board in corporate • N
eed and scope for corporate governance Boards have overall responsibility for ensuring that
to financial reporting. governance. regulations executives of organisations create value for their
b. Apply corporate governance and financial • D
ifferent approaches to corporate governance stakeholders and safeguard their assets. The role of
stewardship principles to financial reporting. regulations boards is incorporated in various corporate governance
codes. What are the main principles as they apply to
financial reporting and the oversight of boards?
1. Identify the main elements of financial a. Identify the main elements of financial • O
bjectives and overall purpose of financial This sets the main principles that underpin the
statements. statements contained in the IFRS conceptual reporting preparation of financial statements. The focus is
framework. on the main principles. No detailed treatments are
• Q
ualitative characteristics of financial
expected.
information
• Reporting entity and its boundaries
• Recognition (and derecognition)
• Measurement bases
• Presentation and disclosure
• C oncept of capital maintenance
2. E xplain specific financial reporting standards. xplain the specific financial reporting standards
E • I AS 16 — Property, Plant & Equipment Examine the requirements for how major items of the
related to: financial statements are to be recognised, measured
• I FRS 5 — Non-current Assets Held for Sale
a. Non-current assets or Discontinued Operations and disclosed. This covers the main areas and not
specialist topics.
b. Leases • IFRS 16 — Leases
c. Impairment • I AS 36 — Impairment of Assets
d. Inventory • IAS 2 — Inventories
e. Events after the period • I AS 10 — Events After the Reporting Period
3. Apply financial reporting standards to prepare Apply financial reporting standards to prepare: • IAS 1 — Presentation of Financial Statements Give hands-on experience of preparing basic financial
basic financial statements. a. S tatement of financial position statements by bringing in all the elements.
• I AS 7 — Statement of Cash Flows
b. S tatement of comprehensive income
c. S tatement of changes in equity
d. S tatement of cash flows
1. Distinguish between different types of taxes. Distinguish between • Features of direct and indirect taxes Gives a broad overview of the different types of taxes,
a. Direct versus indirect • Features of corporate and personal taxes who they affect and why they are used.
2. Calculate tax for corporates. a. E xplain the basis of taxation • E xempt income The focus shifts here to corporate taxation. The main
b. E xplain the difference between accounting profit • Income taxed under different rules area covered is the difference between accounting
and taxable profit profit and profit for taxation purposes. No national law
• Allowable expenditure is applied here. The main thing here is coverage and
c. Calculate corporate tax application of principles.
• Capital allowances
• Reliefs
• Tax on sale of asset
3. E xplain some relevant issues that affect Explain: • C orporate residence Given the increase of cross-border trading and revenue
taxation. a. Taxation across international borders generation in the digital world what are the key issues
• T
ypes of overseas operations (e.g., subsidiary
or branch) affecting international taxation? What are the ethical
b. Ethics of taxation issues that arise in the computation and payment of
• Double taxation taxes?
• Transfer pricing
• Tax avoidance
• Tax evasion
1. Distinguish between the types and sources of Distinguish between • Trade payables What are the main types of funds needed for the short
short-term finance. a. Types of short-term finance term? Where can those funds be accessed? How
• Overdrafts
does one determine which type or source of finance is
b. Financial institutions • Short-term loans appropriate?
• Debt factoring
• Trade terms
• Trade partners
• Banks
2. E xplain and calculate operating and cash cycles. Explain and calculate • Inventory days The operating and cash cycle is one of the main
a. Operating cycle • Trade receivable days means of putting together various elements of cash
and near-cash items in a coherent manner to explain
b. Cash flow cycle • Trade payable days the cash needs of the organisation. What are these
elements? How do they affect the availability and
adequacy of cash for short-term operations?
3. Apply different techniques used to manage a. Apply policies relating to elements of operating and • Receivables management What are the policies that organisations should
working capital. cash cycle put in place to manage working capital? How is
• Payables management
b. Prepare forecasts the appropriate level determined, forecasted and
• Inventory management accessed? What are the risks associated with
c. E xplain risks relating to working capital accessing such funds?
• Risk of overtrading
• S hort-term cash flow forecasting
• Investing short-term cash
Management Managing
Performance
The
On completion, candidates should be able to performance
use data and relevant technology to: manage
organisational and individual performance;
translate long-term decisions into medium-term
Management
plans; allocate resources to implement decisions;
monitor and report implementation of decisions; P2
provide feedback up and down the organisation; Advanced
and prepare and interpret financial statements Management
Level
to show the performance, position and prospects Accounting
of their organisations. Making medium-term
decisions and
Wider scope managing costs and
performance
Integrated within limits
Medium term F2
Advanced
Monitor implementation of decisions Financial Reporting
Performance
A. Business models and value creation
56 57
E2: Managing Performance
1. E xplain the ecosystems of organisations. Explain: • D efinition of ecosystems What is the nature of the ecosystem? What are its
a. Markets and competition • Participants and roles critical elements and how do they interact with each
other? How do they impact the organisation?
b. Society and regulation • Interactions and dynamics
• Rules and governance
• Technology
• Risks and opportunities
2. E xplain the elements of business models. Explain the following • S takeholders and relevant value This section covers the concept of value from different
a. Concept of value and the business model • Stakeholder analysis stakeholder perspectives. It examines the various
elements of the business model, their interaction
b. Defining value • R
esources, process, activities and people with each other and their implication for costs and
c. Creating value in creating value revenue. The section also covers the connectivity and
d. Delivering value • P
roducts, services, customer segments, alignment between the ecosystem and the elements
channels and platforms to deliver value of the business model.
e. Capturing and sharing value
• Distribution of value to key stakeholders
3. Analyse new business models in digital a. Analyse digital business models and their related • Disruption New business models have evolved to disrupt
ecosystems. operating models industries and their ecosystems. What are they?
• W
ays to build disruptive and resilient
business models How have they redefined their industries?
1. Compare and contrast different types of Compare and contrast: • Power, authority, delegation and empowerment Leadership is key to performance management. In a
leadership and management styles. a. Different leadership concepts digital world it is an area that is least susceptible to
• C ontingent and situational leadership
automation. What constitutes leadership? What are the
b. Types of leadership • Transactional and transformational leadership different types of leadership? How does one choose a
c. Leadership in different contexts • Leadership of virtual teams style of leadership that is appropriate for the particular
context?
• Leadership and ethics
2. Analyse individual and team performance. Analyse the following: • Target setting and employee alignment Individual performance is achieved through structured
a. Employee performance objective setting • Employee empowerment and engagement processes and approaches. These include objective
setting and regular review of performance against
b. Employee appraisals • Performance reporting and review objectives. How should these processes be developed
c. Coaching and mentoring • R
ewards and sanctions in managing to ensure employee engagement, empowerment
d. Managing workplace environment performance and alignment? How should the work environment
be configured to enhance performance? What is the
• D
ifferent approaches to coaching and mentoring
role of the leader in coaching and mentoring for high
to improve performance
performance?
• Diversity and equity practices
• Health and safety
• Organisational culture
3. E xplain how to manage relationships. Explain the following in the context of managing • Characteristics of high-performing teams Individuals work in teams and their performance
relationships: contributes to the team performance. How should
• Motivating team members
a. Building and leading teams teams be built and led to improve performance? How
• C ommunication process is collaboration enhanced using technology? How can
b. Communications conflicts be managed?
• Digital tools for communication
c. Negotiations
• Negotiation process
d. Managing conflicts
• S trategies for negotiation
• S ources and types of conflicts
• S trategies for managing conflicts
• Leadership and ethics
1. Describe the concepts and phases of projects. Describe the following: • O verall project objectives Projects are the primary means by which many
a. Project objectives • O bjectives relating to time, cost and quality organisations implement strategic decisions. It is
also how organisations ensure cross-functional
b. Key stages of the project life cycle • P
urpose and activities associated with key collaboration. This section covers the key elements
c. Project control stages of the project life cycle of project management. It seeks to provide both
awareness and understanding of the project
management process and the ability to apply tools
and techniques to participate in projects and to
identify, evaluate and manage project risks. The
objective is not to train project managers but to
equip finance people to work within projects and to
2. Apply tools and techniques to manage projects. Apply the following to manage projects: • Workstreams
lead some parts of projects.
a. Project management tools and techniques • W
ork breakdown schedule, Gantt charts, network
b. Project risk management tools analysis
• PERT charts
• S ources and types of project risks
• Scenario planning
• Managing project risks
• Project management software
P2: Advanced Managing costs using costing Capital investment decisions to acquire
Management
and cost driver analysis the capacity to create value
1. Apply cost management and cost Apply the following to manage costs and improve • Engendering a cost-conscious culture One of the reasons for calculating costs is to enable
transformation methodology to manage profitability: organisations to manage and possibly transform
• L
ogic of ABC as the foundation or managing
costs and improve profitability. a. Activity based management (ABM) methodology their costs. ABM is a key technique that is used to
costs
achieve this objective because of its link to ABC.
b. Cost transformation techniques • A
BM to transform efficiency of repetitive This revolves around the logic of ABC that links
overhead activities costs to resource consumption and levels of activity
• A
BM to analyse and improve customer and is related to the business model framework.
profitability Customer and channel analysis have become
very important in the digital world — particularly
• A
BM to analyse and improve channel
as customers shift from products and services to
performance
experience. How profitable are the segments and
channels they use?
2. Compare and contrast quality management Compare and contrast: • I mpact of JIT and quality management on Quality management is an important part of
methodologies. a. Just-in-time (JIT) efficiency, inventory and costs managing and transforming costs. What are the key
• B enefits of JIT and TQM methodologies? How do they affect the costs of
b. Quality management products, services and the channels that are used to
c. Kaizen • K
aizen, continuous improvement and cost deliver them?
of quality reporting
d. Process re-engineering
• E
limination of non-value adding activities and the
reduction of costs using process re-engineering
3. Apply value management techniques to manage Apply the following to manage costs and value • D etermination of target costs from target prices Cost transformation must always be linked to the
costs and improve value creation. creation: value that organisations create. This part provides
• C omponents of the value chain
a. Target costing the link between costs and value.
• Profitability along the value chain
b. Value chain analysis
• L
ife cycle costing and its implication for
c. Life cycle costing market strategies
1. Apply the data required for decision-making. Apply the following for decision-making: • Incremental cash flows The quality of decisions depends on the quality and
a. Relevant cash flows • Tax, inflation and other factors type of data that is available to decision-makers.
What type of data do decision-makers need for
b. Non-financial information • Perpetuities medium-term decisions? Where do they get this
• Qualitative issues data? In a digital world this would come from data
lakes through to data warehouses and business
• S ources and integrity of data
intelligence systems.
• Role of business intelligence systems
3. Apply investment appraisal techniques Apply the following to evaluate projects: • Process and calculation This part covers a straight forward application of the
to evaluate different projects. a. Payback techniques used to appraise projects. These should
• S trengths and weaknesses
be extended to deal with the evaluation of digital
b. Accounting rate of return • Appropriate usage transformation projects that do not have the same
c. IRR • U
se in prioritisation of mutually exclusive profile as other capital projects.
d. NPV projects
1. Analyse the performance of responsibility centres a. Analyse performance of cost centres, revenue • O bjectives of each responsibility centre What are responsibility centres and how should they
and prepare reports. centres, profit centres, and investment centres. • C
ontrollable and uncontrollable costs and be matched to the strategy of organisations? What
revenue are the KPIs of each type of responsibility centre?
b. Prepare reports for decision-making.
How is their performance evaluated and why? What
• C
osts variability, attributable costs and revenue types of reports are prepared for responsibility centre
and identification of appropriate measures managers? How do they use analytics, visualisation
of performance and self-service technologies to enhance the
• U
se of data analytics in performance performance management of responsibility centres?
management of responsibility centres
2. Discuss various approaches to the performance a. Discuss budgets and performance evaluation. • K
ey performance indicators (e.g., profitability, How are budgets used to evaluate the performance
and control of organisations. liquidity, asset turnover, return on investment of responsibility centres? What is best practice in this
b. Discuss other approaches to performance
and economic value) area? How are other methodologies like the balanced
evaluation.
• B enchmarking (internal and external) scorecard useful in managing performance?
3. E xplain the behavioural and transfer Explain: • Internal competition What are the behavioural issues in responsibility
pricing issues related to the management • Internal trading centre performance management — in particular
a. Behavioural issues
of responsibility centres. as they affect controllable and non-controllable
b. Use and ethics of transfer pricing • T
ransfer pricing for intermediate goods where costs and revenue? How should they be managed
markets exist and where no markets exist so that responsibility centres work effectively with
• Types of transfer prices and when to use them each other to maximise performance of the whole
organisation rather than each responsibility centre?
• E
ffect of transfer pricing on autonomy, and
What role can transfer pricing play in this area?
motivation of managers of responsibility centre
• E
ffect of transfer pricing on responsibility centre
and group profitability
1. Analyse risk and uncertainty associated with Conduct • Quantification of risk What risks do organisations face in relation to
medium-term decision-making. • U
se of probabilistic models to interpret capital investment decision-making and the
a. Sensitivity analysis
distribution of project outcomes implementation of those decisions? How are those
b. Analysis of risk risks incorporated in the decision-making process
• S tress-testing of projects and managed in the implementation of
• Decision trees the decisions?
• D ecision-making under uncertainty
2. Analyse types of risk in the medium term. a. Analyse types of risk • Upside and downside risks
b. Manage risk • TARA framework — transfer, avoid, reduce, accept
• Business risks
• U
se of information systems and data in
managing risks
Financial
Reporting Financing capital Prepare group accounts Integrated reporting in a
projects for stakeholders. multi-stakeholder world
A. Financing capital projects
C. Group accounts
D. Integrated reporting
74 75
F2: Advanced Financial Reporting
1. E xplain relevant financial reporting standards for Explain the financial reporting standards for: • I FRS 15 — Revenue from Contracts with How should important elements of the financial
revenue, leases, financial instruments, intangible Customers statement be treated in the books? What principles
a. Revenue
assets and provisions. • IFRS 16 — Leases should underpin these? How do financial reporting
b. Leases standards help to ensure this? Using financial reporting
• I AS 37 — Provisions, Contingent Liabilities standards terminology this part will be looking at
c. Provisions
and Contingent Assets issues in recognition and measurement. The most
d. Financial instruments
• IFRS 9 — Financial Instruments important issues will be considered here.
e. Intangible assets
• I AS 32 — Financial Instruments: Presentation
f. Income taxes
• I AS 38 — Intangible Assets
g. Effect of changes in foreign currency rates
• IAS 12 — Income Taxes
• I AS 21 — Effect of Changes in on Foreign
Exchange Rates
2. E xplain relevant financial reporting standards for a. E xplain the financial reporting standards for the key • I AS 1 — Presentation of Financial Statements What are the key principles that should govern the
group accounts. areas of group accounts • I AS 27 — Separate Financial Statements preparation of group accounts? How are they reflected
in financial reporting standards? The approach should
• I AS 28 — Investment in Associates and Joint focus on the aspects of group accounts that are
Ventures essential for discussions with the rest of the business.
• IFRS 3 — Business Combinations Therefore, the emphasis should be on awareness
• I FRS 5 — Non-current Assets Held for Sale or creation and basic understanding of the technical
Discontinued Operations elements.
1. Prepare group accounts based on IFRS. Prepare the following based on financial reporting • I AS 1 — Presentation of Financial Statements This is about the preparation of basic group accounts
standards: • I AS 27 — Separate Financial Statements applying the financial reporting standards learned
in the previous section. Basic understanding of the
a. Consolidated statement of financial position • I AS 28 — Investment in Associates and Joint technical issues is required. Thus, it should cover the
b. Consolidated statement of comprehensive income Ventures rules of consolidation, goodwill, foreign subsidiaries,
c. Consolidated statement of changes in equity • IFRS 3 — Business Combinations minority interests and associated companies.
These should be placed in the context of the
d. Consolidated statement of cash flows • I FRS 5 — Non-current Assets Held for Sale or
organisation’s strategy as executed through mergers
Discontinued Operations
and acquisitions and the setting up of subsidiaries.
• IFRS 10 — Consolidated Financial Statements In addition, it can be linked to the performance
• IFRS 11 — Joint Arrangements management of responsibility centres.
2. Discuss additional disclosure issues related to the Discuss disclosure requirements related to: • I AS 24 — Related Party Disclosures What other issues should be disclosed outside the
group accounts. • I AS 33 — Earnings Per Share financial statements? Why? Again, the focus is on
a. Transaction between related parties
building awareness and basic understanding of the
b. Earnings per share technical issues in order to equip finance professionals
to conduct meaningful discussions with the rest of
the organisation about the performance, position and
potential of the organisation.
1. Discuss the International <IR> Framework a. Describe the role of the International Integrated • C ontext of integrated reporting This section looks at the International <IR> Framework
activities. Reporting Council. • International Integrated Reporting Council as a means of addressing the need for wider
forms of reporting in a multi-stakeholder world. It
b. E xplain integrated thinking. • Integrated thinking introduces the role of the IIRC and uses the concept
c. Discuss the International <IR> Framework. • International <IR> Framework of integrated thinking as the foundational concept of
the International <IR> Framework. It also discusses the
• B enefits and limitations of the Framework
Framework, its benefits and limitations.
2. E xplain the Six Capitals of Integrated Reporting. E xplain the measurement and disclosure issues of: • D efinition of the six capitals The six capitals are a key part of the International
• M
easurement and disclosure issues relating <IR> Framework. This section defines the six capitals
a. Financial capital
to the six capitals and explains the measurement and disclosure issues
b. Manufactured capital
relating to them.
c. Intellectual capital
d. Human capital
e. Social and relational capital
f. Natural capital
1. Analyse financial statements of organisations. Analyse financial statements to provide insight on: • Ratio analysis The financial statements narrate how organisations
• Interpretation of ratios create and preserve value using financial numbers.
a. Performance
Analyses of financial statements allows finance
b. Position • R
eporting of ratios along the dimensions of professionals to go beyond the numbers and put
the Gartner Data Analytics maturity model — the narrative into everyday business language to
c. Adaptability
descriptive, diagnostic, predictive and prescriptive facilitate discussions and collaboration with the rest
d. Prospects
• Link to organisation’s business model of the organisation. The analysis could be based on
the Gartner Data Analytics model which presents
information as descriptive, diagnostic, predictive and
prescriptive. Thus, it will cover hindsight, insight and
foresight into the organisation’s performance, position,
resilience (or adaptability) and prospects. The analyses
can be linked to the organisation’s business model.
2. Recommend actions based on insights from a. Recommend actions • Linkages between different areas of performance Draw logical conclusions from the analysis. The
the interpretation of financial statements. • Predictive and prescriptive ratios focus is mainly predictive and prescriptive areas of
data analytics. The recommendations should also
• I mpact of recommendations on wider be organisation wide and must encompass the
organisational ecosystem ecosystem. A link with the business model framework
in E2 is essential.
3. Discuss the limitations of the tools used for Discuss: • Q uality and type of data used What are the limitations of the data and techniques
interpreting financial statements. • C
omparability — both in segment and used in the analyses of financial statements? How do
a. Data limitations
internationally they affect the recommendations? How could they
b. Limitations of ratio analysis be overcome?
The Strategic
On completion candidates should be able to: implementation.
support organisational leaders to craft strategy;
evaluate and manage risks that might prevent
organisations from successfully implementing
Level
strategy; value organisations; and source financial
resources required to implement of strategy.
P3
Wide scope Risk Management
Long-term decision-making
Management
A. The strategy process Deploy strategic control
Analyse organisational
systems to create and
ecosystem to diagnose Search for, develop Make strategic choices
communicate action
B. Analysing the organisational ecosystem the opportunities and evaluate strategic and integrate them into
plans and allocate
and challenges to options. a coherent strategy.
resources to
create value.
C. Generating strategic options implement strategy.
E. Strategic control
90 91
E3: Strategic Management
1. E xplain the purpose of strategy. a. Define strategy. • Different definitions of strategy This section introduces the rest of E3. It provides
• Essential features and characteristics of strategy the various definitions of strategy and outlines
b. E xplain the purpose of strategy.
its essential features and characteristics. It
discusses the different types and levels of
strategy and the leaders who have responsibility
2. Discuss the types and levels strategy. Discuss for them. Finally, it looks at the strategy
• Intended and emergent strategy process from both the rational and emergent
a. Types of strategy
perspectives.
b. Levels of strategy • C orporate, business and functional strategies
3. Outline the strategy process. a. Outline the rational and emergent processes of
arriving at strategy. • A nalysis of organisational ecosystem
• Generating options
• Strategic choice
• Strategic control
1. Analyse the elements of the ecosystem. Analyse • S WOT analysis What types of markets do organisations operate in?
• PESTEL analysis What are the “rules of the game” in these markets?
a. Markets and competition
What are the sources and opportunities for disruption
b. Society and regulation • Competitor analysis in the market? How does society regulate the markets
• Customer analysis and provide “permission to play” for organisations?
• Wider ecosystems
• Industry ecosystems
2. Discuss drivers of change in the ecosystem. Discuss the following drivers of change: • Globalisation What are the drivers of change in the ecosystem?
• Geopolitics How are the individual drivers linked? What type of
a. Institutional and systemic
outcomes do they bring individually and collectively?
b. Social • Demography What risks and opportunities do they bring
c. Market • Customer empowerment organisations?
3. Discuss the impact of the ecosystem on a. Discuss the impact of strategic networks and • Value creation in ecosystems In a digital world what is the importance of networks
organisational strategy. platforms on organisational strategy • P
articipants and interactions in networks and platforms? What are the roles, interactions, and
and platforms governance systems in the ecosystems? Who are the
b. Conduct stakeholder analysis in networks
key players? How does this affect the business model
• Technology enablers in networks of organisations?
• Process of creating networks and platforms
• S takeholder analysis in networks
• C orporate social responsibility
2. Discuss how to generate and develop options. Discuss how to: • Product/market matrix What are the core strategic questions to ask and what
• Generic strategies are the criteria and constraints for asking them? What
a. Frame key strategic questions
is the organisation’s starting point? Where and how
b. Diagnose organisation’s starting position • Trend analysis does it make money? What potential futures might
c. Forecast potential organisational operating • System modeling it inhabit and what are the forces potentially driving
ecosystem these futures? What are the potential pathways to this
• Scenario planning
future? What new business models are in play?
d. Use various frameworks to generate options • T
angible and intangible value drivers and
data to measure them
• Game theory perspectives
• Real option perspectives
. .
1. Evaluate options. a. Develop criteria for evaluation. • S uitability, acceptability and feasibility framework What are the different criteria to guide the choice of
options, one how are they prioritised and why?
b. Evaluate options against criteria.
c. Recommend appropriate options.
2. Produce strategy by the integration of choices into Conduct: • Value chain analysis What are the criteria to ensure effective integration and
coherent strategy. • Managing product portfolio why? What are the trade-offs to be made when putting
a. Value analysis
the individual choices together? How does one ensure
b. Portfolio analysis integrated thinking?
1. Develop strategic performance management a. Develop detailed action plans • Action plans How does the organisation prepare the grounds
system. • Target setting for executing strategy? How does it create and
b. Communicate action plans
communicate action plans for implementation? How
c. Monitor implementation • Critical success factors (CSFs) is the whole organisation mobilised, motivated and
d. Align incentives to performance • Key performance indicators (KPIs) incentivised to implement the plans? What role can
integrated reporting play?
3. Recommend change management techniques a. Assess impact of strategy on organisation • Types of change What is the impact of the new strategy on the whole
and methodologies. • Impact of change on organisational culture organisation, parts of the organisation and partners of
b. Recommend change management strategies
the organisation? What transformation is required
c. Discuss the role of the leader in managing change • Resistance to change and how does the organisation drive these changes?
• A pproaches and styles of change management
• Role of change leader in communication
. .
1. Describe the governance of digital transformation. a. Describe the roles and responsibilities of the board • R
ole of board and senior leadership in digital Who is responsible for leading the process of
and executive leadership in digital strategy. strategy digital transformation? What is their role in the
process and why?
2. Analyse digital transformation. Analyse • Cloud computing What are the technologies that underpin digital
• Big data analytics transformation? How are they evolving and what
a. Digital technologies
impact do they have on the organisation and its
b. Digital enterprise • Process automation immediate and wider operating environment? What
• Artificial intelligence type of organisation do such technologies create?
What are the elements of the business and operating
• Data visualisation
models of such digital enterprises.
• Blockchain
• Internet of things
• Mobile
• 3-D printing
3. Discuss the various elements of digital Discuss: • Business case for digital transformation What is the economic and business case for
strategies. a. Economics of digitisation • P
articipants, interactions and dynamics of digitisation? How does the organisation create
ecosystem and impact on strategy partnerships in the ecosystem to ensure strategic
b. Digital ecosystems
success? What are key trends underlying the
• T
rends in consumption (e.g., hyper personalisation,
c. Digital consumption consumption of the organisation’s products and
move from products and services to experience)
d. Data and metrics services by customers and consumers? What data and
• N
ew metrics (scale, active usage and engagement metrics should organisations use to evaluate success
e. Leadership and culture metrics) of digital enterprises? How should leaders and their
• Leadership in digital transformation organisations think, act and react differently because
of digital transformation?
P3: Risk
Identify and evaluate
enterprise risks and their
sources that can impede the
implementation of strategy.
B. Strategic risk
C. Internal controls
D. Cyber risks
Develop appropriate responses
to strategic risks.
104 105
P3: Risk Management
1. Analyse sources and types of risk. Analyse: • Upside and downside risks What are the types and sources of risks that would
• Risks arising from internal and external sources prevent organisations from implementing their
a. Sources of risks
intended strategy?
b. Types of risks • Risks arising from international operations
• S trategic and operational risks
2. Evaluate risk. a. Evaluate the impact of risk • Q uantification of risk exposure What is the impact of the risks on the organisation?
• Risk maps What techniques are available to evaluate the impact
b. Assess the likelihood of risks
of such risks?
c. Analyse the interaction of different risks
1. Analyse risks associated with formulating strategy. a. Analyse relevance of the assumptions on which • A nalysis of strategic choice What are the risks that the strategy of the
strategy is based. • Scenario planning organisation is wrong? What are the sources of such
risks? How does the organisation evolve its strategy
b. Discuss potential sources and types of disruptions • Stress-testing strategy in a dynamic environment to keep it relevant?
to strategy.
2. Evaluate the sources and impact of Evaluate: • Risks of unethical behaviour What is reputational risk and why is it an important
reputational risks. • Impact on brand and reputation of organisation strategic risk? What are the types and sources of
a. Sources of reputational risk
reputational risks and what is their impact on the
b. Impact of reputational risk on strategy organisation? How can they be managed?
3. E xplain governance risks. Explain: • S eparation of the roles of CEO and chairman What is the role of the board in risk management?
• Role of non-executive directors How does governance risk occur? How is this role
a. The role of board and its committees in managing
governed by the various corporate governance
strategic risk • R
oles of audit committee, remuneration codes and principles?
b. Failure of governance and its impact on strategy committee, risk committee and nomination
committee
• Directors’ remuneration
1. Analyse internal control systems. a. Discuss roles and responsibilities for internal • R
ole of risk manager as distinct from internal What are the roles of internal control systems in
controls. auditor managing risks? What are its key features and why?
b. Discuss the purpose of internal control. • C ontrol systems in functional areas
c. Analyse the features of internal control systems. • O perational features of internal control
2. Recommend internal controls for risk a. Discuss the Committee of Sponsoring Organisations • Governance and culture This introduces the COSO framework as a
management. of the Treadway Commission (COSO) internal control comprehensive way of looking at internal controls in
• S trategy and objective setting
and risk management framework. risk management. The objective is to get candidates
• Performance to understand the key elements and know how to
b. Assess control weakness.
• Review and revision apply them in evaluating internal controls.
c. Assess compliance failures.
• Information, communication and reporting
d. Recommend internal controls for risk
management. • I dentifying and evaluating control weakness and
compliance failures
1. Analyse cyber threats. Analyse: • Malware This part looks at where and how organisations
• Application attacks can be vulnerable to cyber threats and the type and
a. Nature and impact of cyber risks
sources of such threats. In addition, it looks at the
b. Types of cyber risks • Hackers impact such threats can have on organisations.
c. Risk of security vulnerabilities. • R
esult of vulnerabilities including downtime,
reputational loss, customer flight, legal and
industry consequences
2. Review cyber security processes. Review: • Protection, detection and response The principal aim here is to enable candidates to
• C entralised management understand how to manage cyber threats through
a. Cyber security objectives
cyber security processes. What objectives should
b. Security controls • C entralised monitoring organisations set in this area? What controls are
c. Centralisation in cyber security available to organisations?
F3: Financial
of long-term finances to meet
the organisation’s financing
requirements.
Strategy
Make financial policy decisions Identify, assess and manage
A. Financial policy decisions that align to the organisation’s financial risks associated with
strategic objectives. cash flows and capital projects.
B. Sources of long-term funds
C. Financial risks
D. Business valuation
114 115
F3: Financial Strategy
1. Advise on strategic financial objectives. a. Analyse different types of organisations and their • Profit and not-for-profit organisations This section is about aligning financial objectives and
objectives. • Quoted and unquoted companies policies to the strategies of the organisation. The key
aim is to make sure that the organisation has a proper
b. Advise on financial objectives. • Private and public sector organisations basis to determine what types of funds to access and
c. Advise on non-financial objectives. • Value for money, maximising shareholder wealth how to use those funds. To do this effectively finance
professionals must be able to evaluate the opportunities
• Earnings growth, dividend growth
and constraints placed on them in the operating
• Impact of underlying economic conditions and environment — particularly financial market requirements,
business variables on financial objectives the impact of taxation and the requirements of industry
• Enhancing the value of other non-financial capitals and financial market regulators.
(human capital, intellectual capital and social and
relational capital)
• United Nations Sustainability Development Goals
2. Analyse strategic financial policy decisions. Analyse the following policy decision areas: • Use of policy decisions to meet cash needs of entity
a. Investment • Sensitivity of forecast financial statements and future
cash position to these policy decisions
b. Financing
• Consideration of the interests of stakeholders
c. Dividends
d. Interrelationships between policy decision areas
3. Discuss the external influences on financial Discuss the influence of the following on financial • Lenders’ assessment of creditworthiness
strategic decisions. strategic decisions • Consideration of domestic and international
a. Market requirements tax regulations
b. Taxation • Consideration of industry regulations such as
price and service controls
c. Regulatory requirements
4. Evaluate dividend policy. Evaluate policy in the following areas: • Features and criteria
a. Cash dividends • I mpact on shareholder value and entity value,
financial statements and performance
b. Scrip dividends
c. Share repurchase programmes
1. Discuss the sources and types of financial risks. Discuss: • Economic risk Managing risks related to finances is similar to
a. Sources of financial risk • Political risk managing other types of risks in general approach
and methodology. However, there are specific
b. Types of financial risk • Currency risk differences such as the sources and types of
• Interest rate risk financial risks, how they can be quantified and
ways in which they are managed. This section
looks at the very specific issues related to
managing financial risks within a general risk
2. Evaluate financial risks. a. Evaluate how financial risks are quantified • T
heory and forecasting of exchange rates management framework
(e.g. interest rate parity, purchasing power
parity and the Fisher Effect)
• Value at risk
1. Discuss the context of valuation. Discuss: • Reasons for M&A and divestments This section looks at the conditions under which
• Taxation implications organisations need to calculate their own value
a. Listing of firms
or the value of other organisations or sub-units
b. Mergers and acquisitions (M&A) • P
rocess and implications of management thereof. It introduces candidates to valuation
buy-outs techniques. Of particular importance in the digital
c. Demergers and divestments
• A
cquisition by private equity and venture world is the valuation of intangibles. This links also
capitalist to how to report intangible value and their drivers
in integrated reporting. In addition, how should
digital assets be valued? One of the reasons for
valuation is when merging or acquiring firms. How
2. Evaluate the various valuation methods. a. Evaluate different valuation methods • Asset valuation should such deals be structured, implemented
b. Discuss the strengths and weaknesses of each • Valuation of intangibles and closed? For example what should the forms
valuation method of the consideration be? What are the terms of
• D
ifferent methods of equity valuation (share
the acquisition? How does one enable benefit
prices, earnings valuation, dividend valuation,
realisation, particularly for synergies once the
discounted cash flow valuation)
acquired organisation has been integrated into the
• Capital Asset Pricing Model (CAPM) acquiring organisation?
• Efficient market hypothesis
Operational Level
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