TABLE OF CONTENTS

SL No Contents Page No

1.0 Introduction to Strategic 5

Management
1.1 Strategic Management - 5
Definition
1.2 What is Strategic Management 5
1.3 Why Strategic Management 6
1.4 Advantages of Strategic 6
Management
1.5 Disadvantages of Strategic 7
Management
1.6 Environmental Scanning 8
1.7 Why is Environmental 10
Scanning Important
1.8 What does Environmental 10
Scanning Accomplish
1.9 What are the various types of 10
environmental scanning
1.10 Importance of Environmental 10
Scanning
1.11 Conclusion 12
2.0 Introduction to Strategic 13
Planning and Formulation
2.1 Vision 14
2.2 Mission 14
2.3 Goals and Objectives 14
2.4 Developing Strategic 14
Alternatives
2.5 Evaluation of Strategic 16
Alternatives
2.6 Selection of Best Alternative 16
2.7 Strategic Decision Making 17
2.8 Company Secretary in 18
Strategic Planning and
Formulation
3.0 Strategic Implementation and 19
Control
3.1 Supporting Factors for 20
Strategy Implementation
3.2 Issues in Strategy 20
Implementation
3.3 Strategic Control 21
3.3.1 Role of Strategic Control 21
3.3.2 Control Process 21
3.4 Role of Company Secretary in 23
Strategy Implementation
4.0 Performance Evaluation 23
4.1 Why Performance Evaluation 23
4.2 Measures of Corporate 23
Performance
4.3 Stakeholder Measures 24
4.4 Balances Scorecard Approach 25
4.4.1 Evaluating Top Management 25
4.4.2 Choice of Performance Measure 26
4.4.3 Board Evaluation 26
4.5 Problems in Measuring Performance 28
4.6 Strategic Audit 28
5.0 Risk Management and Definition of Risk Management 30
5.1 Types of Risk 30
5.2 Risk Management 31
5.3 Risk Management Process 31
5.4 Strategies of Risk Management 32
5.5 Benefits of Risk Management 33
5.6 Risk Management of a Company from the perspective of a 33
Company Secretary
5.7 Conclusion 35
6.0 Meaning of Information 36
6.0.1 Meaning of Management Information System 36
6.1 Purpose of Management Information System 36
6.2 Information as Corporate Resource 36
6.3 Management Levels and their Information Needs 38
6.4 E-Governance and Strategic Management 39
6.5 MCA 21 Project a Key To Strategic Information 39
6.6 Challenges faced by Company Secretary in E-Governance 40
6.7 Suggestion for Successful Implementation Of E-
Governance

6.8 Conclusion 41
7.0 Introduction to Internal Control 42
7.1 Risks of Weak Internal Controls 42
7.2 Weak Internal Controls Increase Risk Through 42
7.3 Benefits of Strong Internal Controls 42
7.4 Key Internal Control Activities 44
7.5 Conclusion 45
1.0 Introduction

Most business owners want to make wise decisions, but they sometimes are at a loss of where to
begin. This is where strategic management comes into play. An important concept for business
owners and managers to grasp, strategic management entails evaluating business goals, objectives and
plans in light of your company focus on effectiveness and efficiency.

Fast-paced innovation, emerging technologies and customer expectations force organizations to think
and make decisions strategically to remain successful. The strategic management process helps
company leaders assess their company's present situation, chalk out strategies, deploy them and
analyse the effectiveness of the implemented strategies.

1.1 Strategic Management – Definition

The term ‘strategic management’ is used to denote a branch of management that is concerned with the
development of strategic vision, setting out objectives, formulating and implementing strategies and
introducing corrective measures for the deviations (if any) to reach the organization’s strategic intent.

1.2 What is 'Strategic Management?'

Strategic management is an often used and sometimes ill-understood concept in business. It helps to
consider the two words separately first. Strategies are the initiatives a company takes to maximize its
resources and to grow its business. This might involve financial planning, human resources
management or focusing on a mission statement. Management is the process of operating the business
on a day-to-day basis and planning for future success. When we put the two words together, strategic
management is about driving the company's growth through effective management techniques
focused on goal-setting.

Strategic management is the management of an organization’s resources to achieve its goals and
objectives. Strategic management involves setting objectives, analysing the competitive environment,
analysing the internal organization, evaluating strategies and ensuring that management rolls out the
strategies across the organization. At its heart, strategic management involves identifying how the
organization stacks up compared to its competitors and recognizing opportunities and threats facing
an organization, whether they come from within the organization or from competitors.

While an organization’s upper management is ultimately responsible for its strategy, the strategies
themselves are often sparked by actions and ideas from lower-level managers and employees. An
organization may have several employees devoted to strategy rather than relying on the chief
executive officer (CEO) for guidance. Because of this reality, organization leaders focus on learning
from past strategies and examining the environment at large. The collective knowledge is then used to
develop future strategies and to guide the behaviour of employees to ensure that the entire
organization is moving forward. For these reasons, effective strategic management requires both an
inward and outward perspective.

1.3 Why ‘Strategic Management’?

Strategic management is critical to staying competitive and standing out in a crowded marketplace. A
good strategy helps management prioritize activities within the company and how resources get spent.
It is a systematic way to execute a company's initiatives and goals under the guidance of its
leadership. Peter Drucker, an Austrian-born American business management consultant and a
significant thought leader in the area, believes that once a business has defined its goals and
objectives, the implementation of appraisal measures should be ensured at all levels to gauge
progress. But strategic management isn't all theoretical; it is a practical way to implement a company's
decisions, vision and goals.

For strategic management to be successful, the organization's leaders must have a thorough
understanding and analysis of their company. A SWOT analysis should be conducted (strengths,
weaknesses, opportunities and threats) to optimize the company's strengths and minimize the
organizational weaknesses. It's also crucial for leaders to know what opportunities are on the horizon
and how to address any threats that may be lurking.

Illustration: Anon-profit technical college wishes to increase enrolment of new students and
graduation of enrolled students over the next three years. The purpose is to make the college known as
the best buy for a student's money among five non-profit technical colleges in the region, with a goal
of increasing revenue. In this case, strategic management means ensuring that the school has funds to
create high-tech classrooms and hire the most qualified instructors. The college also invests in
marketing and recruitment and implements student retention strategies. The college’s leadership
assesses whether its goals have been achieved on a periodic basis.

1.4 Advantages of Strategic Management:

1. Discharges board responsibility

The first reason that most organizations state for having a strategic management process is that it
discharges the responsibility of the Board of Directors.

2. Forces an Objective Assessment

Strategic management provides a discipline that enables the board and senior management to actually
take a step back from the day-to-day business to think about the future of the organization. Without
this discipline, the organization can become solely consumed with working through the next issue or
problem without consideration of the larger picture.

3. Provides a Framework for Decision-Making

Strategy provides a framework within which all staff can make day-to-day operational decisions and
understand that those decisions are all moving the organization in a single direction. It is not possible
(nor realistic or appropriate) for the board to know all the decisions the executive director will have to
make, nor is it possible (nor realistic or practical) for the executive director to know all the decisions
the staff will make. As such, it sets a framework and clear boundaries within which decisions can be
made. The cumulative effect of these decisions (which can add up to thousands over the year) can
have a significant impact on the success of the organization.

4. Supports understanding & buy-in

Allowing the board and staff participation in the strategic discussion enables them to better
understand the direction, why that direction was chosen, and the associated benefits. For some people
simply knowing is enough; for many people, to gain their full support requires them to understand.
5. Enables Measurement of Progress

A strategic management process forces an organization to set objectives and measures of success. The
setting of measures of success requires that the organization first determine what is critical to its on-
going success and then forces the establishment of objectives and keeps these critical measures in
front of the board and senior management.

6. Provides an Organizational Perspective

Addressing operational issues rarely looks at the whole organization and the interrelatedness of its
varying components. Strategic management takes an organizational perspective and looks at all the
components and the interrelationship between those components in order to develop a strategy that is
optimal for the whole organization and not a single component.

1.5 Disadvantages of Strategic Management:

1. The future doesn't unfold as anticipated

One of the major criticisms of strategic management is that it requires the organization to anticipate
the future environment in order to develop plans, and as we all know, predicting the future is not an
easy undertaking. The belief being that if the future does not unfold as anticipated then it may
invalidate the strategy taken. Recent research conducted in the private sector has demonstrated that
organizations that use planning process achieve better performance than those organizations who don't
plan - regardless of whether they actually achieved their intended objective. In addition, there are a
variety of approaches to strategic planning that are not as dependent upon the prediction of the future.

2. It can be expensive

There is no doubt that in the not-for-profit sector there are many organizations that cannot afford to
hire an external consultant to help them develop their strategy. Today there are many volunteers that
can help smaller organizations and also funding agencies that will support the cost of hiring external
consultants in developing a strategy. Regardless, it is important to ensure that the implementation of a
strategic management process is consistent with the needs of the organization, and that appropriate
controls are implemented to allow the cost/benefit discussion to be undertaken, prior to the
implementation of a strategic management process.

3. Long Term Benefit vs. Immediate Results

Strategic management processes are designed to provide an organization with long-term benefits. If
you are looking at the strategic management process to address an immediate crisis within your
organization, it won't. It always makes sense to address the immediate crises prior to allocating
resources (time, money, people, opportunity, and cost) to the strategic management process.

4. Impedes flexibility

When you undertake a strategic management process,it will result in the organization saying "no" to
some of the opportunities that may be available. This inability to choose all of the opportunities
presented to an organization is sometimes frustrating. In addition, some organizations develop a
strategic management process that become excessively formal. Processes that become this
"established" lack innovation and creativity and can stifle the ability of the organization to develop
creative strategies. In this scenario, the strategic management process has become the very tool that
now inhibits the organization's ability to change and adapt.
1.6 Environmental Scanning

Environmental scanning is the process of gathering information about events and their relationships
within an organization's internal and external environments. The basic purpose of environmental
scanning is to help management determine the future direction of the organization.

Organizational environment consists of both external and internal factors. Environment must be
scanned so as to determine development and forecasts of factors that will influence organizational
success. Environmental scanning refers to possession and utilization of information about occasions,
patterns, trends, and relationships within an organization’s internal and external environment. It helps
the managers to decide the future path of the organization. Scanning must identify the threats and
opportunities existing in the environment. While strategy formulation, an organization must take
advantage of the opportunities and minimize the threats. A threat for one organization may be an
opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should
observe the internal organizational environment. This includes employee interaction with other
employees, employee interaction with management, manager interaction with other managers, and
management interaction with shareholders, access to natural resources, brand awareness,
organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and
surveys can be used to assess the internal environment. Analysis of internal environment helps in
identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment,
information from external environment adds crucial elements to the effectiveness of long-term plans.
As environment is dynamic, it becomes essential to identify competitors’ moves and actions.
Organizations have also to update the core competencies and internal environment as per external
environment. Environmental factors are infinite, hence, organization should be agile and vigil to
accept and adjust to the environmental changes. For instance - Monitoring might indicate that an
original forecast of the prices of the raw materials that are involved in the product are no more
credible, which could imply the requirement for more focused scanning, forecasting and analysis to
create a more trustworthy prediction about the input costs. In a similar manner, there can be changes
in factors such as competitor’s activities, technology, market tastes and preferences.

While in external analysis, three correlated environment should be studied and analysed:

a) Immediate / industry environment

b) National environment
c) Broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular organization and its main
rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It
also implies evaluating the effect of globalization on competition within the industry. Analysing the
national environment needs an appraisal of whether the national framework helps in achieving
competitive advantage in the globalized environment. Analysis of macro-environment includes
exploring macro-economic, social, government, legal, technological and international factors that may
influence the environment. The analysis of organization’s external environment reveals opportunities
and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but
also be able to predict its future positions.

1.7 Why is environmental scanning vital?

Scanning helps to identify threats and opportunities to help avoid unpleasant surprises, gain a
competitive advantage over others, and create more effective planning in both the long and short term.
Environmental scanning is an important means of organizational learning for companies, which
allows them to view and search for information. It covers everything from casual discussions to off-
handed observations to formal programs of market research and organizational planning.

1.8 What does environmental scanning accomplish?

Environmental scanning is essential to helping plot a future course for the company. Identifying
opportunities and threats is the very core of risk management. It enables companies to formulate
important strategies and plans of actions while minimizing threats and taking advantage of
opportunities that arise. Scanning also allows a company to differentiate between the two: What
constitutes an opportunity for one organization may actively threaten another.

1.9 What Are the Various Types of Environmental Scanning?

When a company performs environmental scanning, it looks for a broad range of things that can affect
future operations. These fall under major overarching umbrellas that can include the following:

a) Legal (legislative changes, best practices in health and safety)

b) Ecological (climate and green considerations)
c) Technological (adoption of new technologies, mobile platforms, and the like)
d) Sociological (different generations working together; managing changing expectations)
e) Economic (the public's tendency to spend money in varying circumstances)

1.10 Importance of environmental scanning:

1. Identification of strength:

Strength of the business firm means capacity of the firm to gain advantage over its competitors.
Analysis of internal business environment helps to identify strength of the firm. After identifying the
strength, the firm must try to consolidate or maximise its strength by further improvement in its
existing plans, policies and resources.
2. Identification of weakness:

Weakness of the firm means limitations of the firm. Monitoring internal environment helps to identify
not only the strength but also the weakness of the firm. A firm may be strong in certain areas but may
be weak in some other areas. For further growth and expansion, the weakness should be identified so
as to correct them as soon as possible.

3. Identification of opportunities:

Environmental analyses helps to identify the opportunities in the market. The firm should make every
possible effort to grab the opportunities as and when they come.

4. Identification of threat:

Business is subject to threat from competitors and various factors. Environmental analyses help them
to identify threat from the external environment. Early identification of threat is always beneficial as it
helps to diffuse off some threat.

5. Optimum use of resources:

Proper environmental assessment helps to make optimum utilisation of scare human, natural and
capital resources. Systematic analyses of business environment helps the firm to reduce wastage and
make optimum use of available resources, without understanding the internal and external
environment resources cannot be used in an effective manner.

6. Survival and growth:

Systematic analyses of business environment help the firm to maximise their strength, minimise the
weakness, grab the opportunities and diffuse threats. This enables the firm to survive and grow in the
competitive business world.

7. To plan long-term business strategy:

A business organisation has short term and long-term objectives. Proper analyses of environmental
factors help the business firm to frame plans and policies that could help in easy accomplishment of
those organisational objectives. Without undertaking environmental scanning, the firm cannot develop
a strategy for business success.

8. Environmental scanning aids decision-making:

Decision-making is a process of selecting the best alternative from among various available
alternatives. An environmental analysis is an extremely important tool in understanding and decision-
making in all situation of the business. Success of the firm depends upon the precise decision making
ability. Study of environmental analyses enables the firm to select the best option for the success and
growth of the firm.

1.11 Conclusion

Business environment is dynamic. Many elements in the environment undergo changes.

 Technological changes are frequent.
 Tastes and the preferences of the people change.
 The competitive situation changes.
 Demographic factors, including population size, change.
 Attitude and value systems also undergo changes.
 Economic factors like income, change continuously.
 Government policies and regulations also change to cope with the changing environment.
All these factors indicate that a business policy should be dynamic enough to be successfully
adaptable to the changing environment. Therefore, the success of a business today, depends on its
ability to foresee the environmental changes and to modify its strategies appropriately with internal
and external environmental changes.
 STRATEGIC PLANNING AND FORMULATION

2.0 Introduction

Company Secretary plays vital role in planning Company’s future. A Company Secretary who
represents a company to the internal and external stakeholders, coordinates the management functions
and company policies, keeps an eye on ethics and mutual trust, helps in strategies decisions aligning
the company towards excellence. Setting of organizational objectives is the starting point of the
strategic management. Since organizations are deliberate and purposive creations, they have some
objectives, the end results for which they strive. These end results are referred to as ‘mission‘,
‘purpose‘, ‘objective‘, ‘goal‘, ‘target‘, etc.On the one hand, there may be enduring reasons why an
organization exists and on the other hand, there may be specific results that an individual in the
organization achieves in a specified period.
2.1 Vision

It is especially important for any organization to agree on the basic vision that the organization strives
to achieve in the long run. A vision statement should answer the basic question, “What do we want to
become?” It concentrates on future; it is a source of inspiration and it provides clear decision-making
criteria.

A clear vision provides the foundation for developing a comprehensive mission statement. Many
organizations have both a vision and a mission statement, but the vision statement should be
established first. The vision statement should be short, preferably in one sentence.

2.2 Mission

Mission is a general statement of what distinguish the organization from all other of its types. It
should address the basic purpose of the firm, the reasons for which it exists. Mission is the answer
of basic question, - What is our business? A clear mission statement is essential for effectively
establishing objectives and formulating strategies.

2.3 Goals And Objectives

As a Company Secretary the primary goal and objective is to assist the organization in a way that can
help management to take decisions quickly and more logically in the existing situation for the future.
Goals and objectives are the end results which an organization strives for. Thus, goal and objective
consists of a projected state of affairs which a person or a system intends to achieve. It is the desired
end- point in some sort of assumed development. Objectives and goals are more precise than vision
and mission.

 Objective Setting

Organization identifies two types of objectives:

(a) General Objectives- To assist the management to take effective decisions.

(b) Specific Objectives- To increase sales by 3% p.a.

2.4 Developing Strategic Alternatives

An organization has to follow a strategy or a set of strategies to achieve its vision, mission, goals,
objectives, etc. A number of strategic options are available to an organization to achieve its multiple
objectives. A Company Secretary plays a vital role to assist an organization to choose one or a set of
strategies meeting its requirements. Although an organization may set the strategies which may be
unique, the essential nature of it, sets the goals and action plans which tends to be one or some
combination. Two organizations could have the same strategic posture but they would be
differentiated by their specific quantitative and qualitative goals, corporate- and business-level
strategies, and functional strategies.

Broadly strategies may be divided into number of categories such as:

 Offensive Strategies,
(i) Concentration Postures or Strategies
(ii) Market Penetration
(iii) Market Development
(iv) Product Development
(v) Horizontal merger
(vi) Niching

 Focus Strategies,

 Integration Strategies,
(i) Backward Integration
(ii) Forward Integration
(iii) Horizontal Integration
(iv) Vertical Integration

 Diversification Strategies,
(i) Concentric Diversification or Related Diversification;
(ii) Conglomerate Diversification or Unrelated Diversification.
(iii) Internal Diversification
(iv) External Diversification
(v) Vertical and Horizontal Diversification

 Defensive Strategies.

(i) Retrenchment Strategies

(ii) Divestment Strategies
(iii) Liquidation
 Other Strategies

(i) Joint Venture

(ii) Harvesting
(iii) Mergers and Acquisitions
2.5 Evaluation Of Strategic Alternatives

Once the organization identifies various strategic alternatives, the next important step of strategic
management process is to make a choice among available alternative strategies. The rationale of
strategic choice is to direct resources towards objectives in accordance with chosen strategy.

The alternative strategies may range from offensive strategies to defensive strategies including
retrenchment and divestment strategies.

Different approaches are developed by experts to evaluate strategic alternatives and choose the best
among them subject to given conditions. Broadly speaking, we can classify the evaluation approach
in the following categories:

(i) Simple Approach

(ii) Analytical Models Approach.

A number of analytical conceptual models have been developed by experts for managers to evaluate
strategic alternatives before making a choice. Some of them include: Growth share Matrix—Boston
Consulting Group (BCG) Model, General Electric‘s Stoplight Grid, Life Cycle Theory, etc.

2.6 Selection Of Best Alternative

Several structures have been proposed for testing the acceptability of a chosen strategy. They consist
of lists of criteria that the goals and action plans should meet. They can be used as the elements on
one axis of a matrix and has the strategy set choices arranged on the other. Then each strategy can be
 scored on each criteria. The sum of criteria scores for each strategy can then be used to select the
best one(s). In this way the criteria can be used in place of other measures of strategy acceptable in a
modified rational model. The strategy choice criteria have been synthesized as under:

The selected strategy should be consistent with the—

(a) Organization's environment,

(b) Internal capabilities and characteristics,
(c) Available resources, and
(d) Risk preferences.
The action plan choices should be aimed at clearly identified goals (objectives and targets) and
should have a high chance of successfully reaching or guiding behavior towards them.

The selected strategy should have appropriate timing. The strategy choice should allow sufficient
flexibility for adjustment to deal with competitors' responses and environmental changes. The
organization's leadership should be committed to support the chosen strategy.

2.7 Strategic Decision Making

Strategic decision making involves the usual decision-making process-specific objectives derived
from organization‘s strategic intent, search for alternatives to achieve those objectives, evaluation of
these alternatives and choice of the most appropriate alternative.

Strategic Decisions

Individual Group Organization Institutions Global

1. Rational Decision Model1.Group Model 1.Systems Model

Approach

2. Intuitive Approach 2. Elite Theory 2. Organizational Process Model

3. Adaptive Approach
Thereafter, this choice is put into action. Strategic choice cannot be taken without careful thought as
to their implementation. It must be feasible as well as appropriate to the requirement of the situation.
After strategic decision has been made, then the process of formulation of the planning takes place.

2.8 Company Secretary In Strategic Planning And Formulation:

The Company Secretary plays an important role to assist the management in the strategic planning
and formulation. Some of the major roles played by company secretary as a Strategic planner are as
follows;
 3.0 STRATEGIC IMPLEMENTATION AND CONTROL

Strategic implementation concerns the managerial exercise of putting a freshly chosen strategy into
action. Strategic implementation is concerned with translating a strategic decision into action, which
presupposes that the decision itself (i.e., the strategic choice) was made with some thought being
given to feasibility and acceptability.

Strategic management process does not end when the firm decides what strategies to pursue. There
must be a translation of strategic thought into strategic action. This requires support of all managers
and employees of the business. Implementing strategy affects an organization from top to bottom; it
affects all the functional and divisional areas of a business. Strategy implementation requires
introduction of change in the organisation to make organisational member adapt to the new
environment.
A good strategy without effective implementation is futile for success of an organization.

Strategy Formulation vs. Strategy Implementation:

Strategy Formulation Strategy Implementation

It focuses on effectiveness It focuses on efficiency
Strategy formulation is primarily an intellectual Strategy implementation is primarily on
process operational process
Strategy formulation requires conceptual and Strategy implementation requires motivation
analytical skills and leadership skills
Strategy formulation requires coordination Strategy implementation requires coordination
among the executives of the top level among the executives at the middle and lower
levels
.

Sound A B

Strategy Formulation
C D
Flawed

Weak Excellent

Strategy Implementation

Figure: Strategy formulation and implementation matrix

The Figure shows the distinction between sound/flawed strategy formulation and excellent/ weak
strategy implementation.

Square A is the situation where a company apparently has formulated a very competitive strategy, but
is showing difficulties in implementing it successfully. This can be due to various factors, such as the
lack of experience (e.g. for start-ups), the lack of resources, missing leadership and so on. In such a
situation the company will aim at moving from square A to square B, given they realize their
implementation difficulties.

Square B is the ideal situation where a company has succeeded in designing a sound and competitive
strategy and has been successful in implementing it.

Square D is the situation where the strategy formulation is flawed, but the company is showing
excellent implementation skills. When a company finds itself in square D the first thing they have to
do is to redesign their strategy before readjusting their implementation/execution skills.

Square C is denotes for companies that haven’t succeeded in coming up with a sound strategy
formulation and in addition are bad at implementing their flawed strategic model. Their path to
success also goes through business model redesign and implementation/execution readjustment.

3.1 Supporting Factors for Strategy Implementation

An effective implementation of strategy in an organization needs multiple supporting factors and

some of these are:

 Action Planning
 Organizational Structure
 Human Resource Factors
 Annual Business Plan
 Monitoring and Control
3.2 Issues in Strategy Implementation

An organization is confronted with a number of issues in the process of strategy implementation.

Some of the important issues are discussed as follows:

 Project Implementation
 Procedural Implementation
 Organizational Structure and Policies
 Resource Allocation
 Functional Implementation
 Leadership
  Challenges to Change
 Behavioural implementation
Winning companies know how to do their work better.

Wal Mart’s Approach to Strategy implementation with regard to “Standards for Suppliers”

During the 1990s, WalMart began establishing standards for its foreign suppliers particularly those
having a history of problematic wages and working conditions. This has been done to make the
suppliers practice compatible with the standards established by Wal-Mart. The object behind
execution of this strategy was Wal-Mart‘s concern for its reputation with customers and shareholders
which could be affected due to divergent practices adopted by its suppliers. Not only has Wal-Mart
established a set of suppliers standards but has also established standards to monitor compliance
therewith by the foreign suppliers. Wal-Mart has set up factory certification teams based in Dubai,
Singapore, India & China to monitor foreign factory compliance with company supplier standards.

3.3 Strategic Control

Strategic control is an integral part of strategic management. It focuses on whether the strategy is
being implemented as planned and the results produced are those intended. In addition, we will also
have an overview of the emerging concepts in strategic management, namely, strategy audit, business
process reengineering and benchmarking.
Strategic control processes should ensure that strategic aims are translated into action plans designed
to achieve these aims, and that the effectiveness of these plans is monitored
3.3.1 Role of Strategic Control:

 Measurement of Organizational Progress

 Feedback for future actions
 Linking performance and rewards

3.3.2 Control Process:

The control process consists of following steps:
 Setting performance standards
 Measuring actual performance
 Comparison of actual performance against standards

3.4 Role of Company Secretary in Strategy Implementation:

Under the Companies Act, the role of a secretary is three-fold, viz., as a statutory officer, as a co-
ordinator and as an administrative officer if so authorized. Similarly, the responsibility of company
secretaries extends not only to a company, but also to its shareholders, depositors, creditors,
employees, consumers, society and government.
Since the secretary has an opportunity of looking at the entire organisation, he has the scope to advise
the top management including the Board of directors on the need to develop a good structure to take
better managerial decisions on the Strategic Planning and its implementation.

Moreover, now a days, the role of Company Secretaries are not restricted/limited to certain areas like
Secretarial department or legal department, rather their role is extended to involve in the real time
business operations and give necessary advise/suggestion to the management on strategic planning
and implementation. As many have seen the Company Secretaries are holding good positions in top
companies in the categories of Directors, Chief Financial Officers and Manager level and on various
occasions they need to formulate good strategies and involve in its successful implementation.
4.0 Performance evaluation

Performance evaluation is the basis of a management control system. Organizational control is the
process whereby an organization ensures that it is pursuing strategies and actions which will enable it
to achieve its desired goals. The measurement and evaluation of performance are the vital components
of control.

By evaluating one’s performance and by finding out what has actually been happening, senior
management can determine with considerable certainty the direction in which the company is going
on and, if everything is going well as per the standard, continue with the existing activities. In case, if
the performance measurements indicate that there are difficulties on the horizon, management may
slightly change the procedure or even alter the course altogether

Some of the important performance indicators used by the organization are competitive advantage;
financial performance; quality of service; flexibility; resource utilization; innovation, etc. These
measures reflect the success of the chosen strategy. Performance evaluation is necessary not only for
judging the validity of strategies used but also for formulating future strategies.

4.1 Why Performance Evaluation?

 Helps in Sound decision making

 Builds commitment on the part of those who are evaluated to make critical improvements
 Greatly improves the management and effectiveness of an organization and its programs
 Performance evaluations allow managers to help employees with career development.
Performing an unbiased evaluation can point out where employees are excelling and the areas
needing improvement.
 Performance evaluations give managers a chance to recognize employees who performed well
during the evaluated period.
4.2 Measures of Corporate Performance:

Simple financial matters such as return on investment, earning per share, etc. are used to assess
overall performance of the organization. However, a broad range of methods are recommended to
evaluate success or failure of a strategy. Some of them are:

1) Earning Per Share (EPS): It is the portion of a company's profit allocated to each
outstanding number of shares. It is calculated as: Net Profit/ No. of Shares outstanding

2) Return on Investment (ROI): A performance measure used to evaluate the efficiency of an

investment or to compare the efficiency of a number of different investments. This is the most
 commonly used measure of corporate performance in terms of profits. It is calculated as
follows: Net Operating Profit/Total Investment

3) Return on Equity (ROE): A measure of a corporation's profitability reveals how much profit
a company generates to the shareholders. Return on equity is calculated as: Net
Income/Shareholders'Equity

4) Market Value Added (MVA): Market Value Added (MVA) measures the share market;
estimate of the net present value of firm’s past and expected capital investment projects. The
formula for MVA is: MVA = V – K. The higher the MVA, the better. A high MVA indicates
that the company has created substantial wealth for its shareholders i.e., if MVA is positive,
the firm has added value and if it is negative, the firm has destroyed value.

5) Economic Value Added (EVA) : Economic Value Added measures the difference between
the pre-strategy and post-strategy value of the business. In other words, EVA is after tax
operating profit less the total annual cost of capital. EVA = Net Operating Profit After Tax –
Cost Charges for Capital Employed. EVA could be misleading as a wealth measure because it
reflects momentary swings in the capital markets rather than inherent company performance.
EVA is also shareholder centric and hence of little relevance to the rest of the stakeholders.

4.3 Stakeholder Measures:

Each stakeholder has his own set of criteria to determine how well the company is performing. These
criteria deal with direct and indirect impact of corporate activities on stakeholders interests. The
management should establish the following possible short-term measures as well as long-term
measures for each stakeholder category so that it can keep track of stakeholders concern:

Stakeholder Category Possible Short-term measures Possible Long-term measures

Customers Sales in rupees and volume New Growth in sales
customers and their needs. Turnover of customer base
Ability to control price.
Suppliers Cost of raw material Increase in
Delivery time raw-material cost
Availability of raw material. Delivery time
New ideas from suppliers
Employees Number of suggestions Number of promotions
Productivity Labour turnover.
Number of grievances.
 Financial Institutions Earning per share Convince stock market
Share price Growth in return on equity
Return on equity.
Government Number of new legislations that Number of new legislations
affect the firm that affects industry.
Access to key members and staff.

4.4 Balanced Score Card Approach : The balanced score card (BSC) is a strategic planning and
management system that is used extensively in business and industry, government, and non-profit
organizations worldwide to align business activities to the vision and strategy of the organization. The
balanced scorecard suggests the following four perspectives:

4.4.1 Evaluating Top Management:

How should
we appear
to our share-
holders?

Business
Processes
How should we
What business
appear to our processes must we
customers? excel at?

How will we
sustain our
ability to
change and
improve?

Many organizations realize that it is important for the company to have a good management team. The
problem of evaluating management is a difficult exercise because many aspects of the job are
intangible. It's clear that investors can't always depend on companies’ disclosure by only persuing and
analyzing financial statements. The Board of Directors closely evaluates the job performance of the
CEO and the top management team by a strategy of management audit. It is basically concerned with
overall corporate profitability as measured quantitatively by return on investment, return on equity,
earning per share and shareholders value. The Board of Directors, however, are also concerned with
other factors. The core idea is that to establish strategic direction, build management team and provide
leadership is more critical in the long run than few quantitative measures. The Board of Directors
evaluates top management on the typical output oriented quantitative measures as well as the
behavioural measures i.e. factors relating to its strategic management practices.

4.4.2 Choice of Performance Measure:

The choice of a performance measure requires a theory which predicts when one performance
measure will dominate another. The determinants of performance measurement enable one to predict
when a division will be organized as a profit center, cost center, investment center, revenue center, or
expense center. The choice between an expense center and the other options is essentially the choice
over whether to monitor the division directly from higher in the hierarchy. This option will be more
attractive when it is easier to evaluate the performance of the division from higher levels of the
hierarchy. When it is difficult to decentralize the monitoring function to users of the output of the
division, it is difficult to identify a set of users who could be charged for the output of the unit. Such
users must be individuals whose valuation of the center’s output is equal to the value of the
organization as a whole.

4.4.3 Board Evaluation:

Board evaluation, until recently, was recognised as a good corporate governance practice and largely
undertaken voluntarily. The erstwhile Clause 49 of the Listing Agreement as a non-mandatory
requirement, provided for performance evaluation of non-executive directors by a peer group. Further,
the Corporate Governance Voluntary Guidelines 2009 recommended that the Board should undertake
a formal and rigorous evaluation of its own performance and that of its committee and individual
directors. The Companies Act, 2013 (the Act) now mandates formal annual evaluation of the Board,
its committees and individual directors. Section 134 of the Companies Act, 2013 inter- alia specifies
the contents that are required to be part of Board’s Report. According to Section 134 sub-section 3(p)
read with Sub-rule (4) of Rule 8 of the Companies (Accounts) Rules, 2014 every listed company and
every other public company having paid- up share capital of twenty five crores or more calculated at
the end of the preceding financial year should include in the report by its Board of Directors, a
statement indicating the manner in which formal annual evaluation has been made by the Board of its
own performance and that of its committees and individual directors

 Requirements under schedule IV of Companies Act, 2013: The Schedule IV i.e. “Code for
Independent Directors” provides that independent directors shall bring an objective view in
the evaluation of the performance of Board and management. The independent directors of
the company shall hold at least one meeting in a year, without the attendance of non-
 independent directors and members of management. All the independent directors of the
company shall strive to be present at such meeting. The meeting shall:

(a) review the performance of non-independent directors and the Board as a whole;

(b) review the performance of the Chairperson of the company, taking into account the views of
executive directors and nonexecutive directors;

(c) assess the quality, quantity and timeliness of flow of information between the company
management and the Board that is necessary for the Board to effectively and reasonably perform their
duties.

 Role of Nomination & Remuneration Committee in Board Evaluation : Nomination &

Remuneration committee constituted under section 178 of the Act has been made responsible
for carrying out evaluation of every director’s performance. Section 178(2) states that the
Nomination and Remuneration Committee shall identify persons who are qualified to become
directors and who may be appointed in senior management in accordance with the criteria laid
down, recommend to the Board their appointment and removal and shall carry out evaluation
of every director’s performance. It is pertinent to note that for the smooth and timely
evaluation, the Nomination and Remuneration Committee plays a crucial role starting from
developing the questionnaire to overseeing the evaluation and finally analyzing the feedback.

 Broad Evaluation Methodologies: The Act is silent on how the Board evaluation is to be
undertaken. It only provides that the Nomination & Remuneration Committee shall carry out
Board evaluation. Further Schedule IV of the Act provides that the independent directors shall
bring an objective view in the evaluation of the performance of Board and management.
Listing Agreement is also silent on what process needs to be adopted for the purpose of
evaluation. Companies should ensure that the process for evaluation of the board, committees
and directors should be developmental rather than just a compliance exercise. Doing just bare
minimum of compliance would mean squandering the opportunity of genuinely improving the
work of the Board. Typically, the Board evaluation process should comprise of both
assessment and review. This would include analysis of how the Board and its committees are
functioning, the time spent by the Board considering matters and whether the terms of
reference of the Board committees have been met, besides compliance of the provisions of the
Act. Generally Board appraisals include following components:
 1. Evaluation of the Board as a whole: a. Internally b. Externally

2. Evaluation of Individual Directors (Independent, Executive, Non- executive, Whole

Time Director): a. Self evaluation b. Peer to Peer evaluation c. External
3. Evaluation of the Committees: a. Internal (by the Board) b. External
4. Evaluation of the Chairperson: a. All Directors b. External

4.5 Problems in Measuring Performance: The measurement of performance is a critical part of

evaluation and control. The lack of quantifiable performance standards and the inability of the
information systems to provide timely and valid information are two obvious control problems.
Without objective and timely measurements, it is very difficult to make operational and strategic
decisions. However, the use of timely, quantifiable standards does not guarantee good performance.
The act of monitoring and measuring of performance can cause side effects which interfere with the
overall performance of the organization. The most frequent negative side effects are short term
orientation and goal displacement.

(i) Short-term Orientation: Senior executives find that in majority of situation they analyse
neither long-term implications of present operations on the strategy they have adopted nor
the operational impact of a strategy on the corporate mission.

(ii) Goal Displacement: Goal displacement is the confusion of means with ends and occurs
when activities originally intended to help managers attain corporate objectives become
ends in themselves and are adapted to meet ends other than those for which they were
intended. Goal displacement may be behaviour substitution and sub-optimisation.
Behavior substitution refers to a phenomenon where people substitute activities that do
not lead to goal accomplishment for activities which do lead to goal accomplishment
since the wrong activities are being rewarded. Sub-optimisation refers to the situation
when a unit optimizes its goal accomplishment to the detriment of the organization as a
whole. The attention in large organizations on developing separate responsibility centers
may create problem for the organization. to share its new technology or work process
improvements.

4.6 Strategic Audit:

Strategic audit refers to a checklist of questions, by area or issue which enables a systematic analysis
of various corporate functions and activities to be made. This is a type of management audit and is
useful as a diagnostic device to pin-point corporate wide problem areas and to highlight
organizational strengths and weaknesses. It also helps to determine why certain areas create problems
for a company and help to generate solutions to these problems. It is not an all-inclusive list, but it
presents many of the critical questions needed for a detailed strategic analysis of any business
organization. The following are the common area in which a common strategic audit can be
undertaken:

(i) Evaluation of current performance

(ii) Review of corporate governance
(iii) Scan and assess the external and internal environment
(iv) Analysis of strategic factors (SWOT)
(v) Strategic alternatives
(vi) Implementation of strategies
(vii) Evaluation and control.

Therefore, to conclude, Performance evaluation is the process of attaching value of weights to various
measures of performance to represent the importance of achievement on each dimension. It's a
challenge to avoid coming off as overly critical.
 RISK MANAGEMENT

5.0 Definition of risk:

Risk is the probability or threat of loss, damage, liability that is caused by external or internal
vulnerabilities.

The term uncertainty is often used in connection with the term risk, sometimes even interchangeably.
Uncertainty is the lack of complete certainty, i.e., the existence of more than one possibility. The true
outcome/state/result/value is not known. Risk is a state of uncertainty where some of the possibilities
involve a loss, catastrophe, or other undesirable outcome. Hence one may have uncertainty without
risk but not risk without uncertainty.

5.1 Types of risk:

There are different types of risks such as Systematic risks, unsystematic risks, financial risks, disaster
risks, inflation risk, business risk, systems risk, political risk, operational risk etc.

Examples of risks which are common to any organization:

Some common risks include failure to recognise and take advantage of opportunities, failure of a
project to reach its objectives, failure of physical infrastructure, equipment etc, customer
dissatisfaction, unfavourable publicity, a threat to physical safety, a breach of security,
mismanagement, a breach of legal or contractual responsibility, fraud, financial crunch, political and
regional agitation, failure in quality management, natural calamities, deficiencies in financial controls
and reporting etc.

Certain types of risks for example disaster risk cannot be eliminated. They can only be mitigated by
an effective risk management plan.
5.2 Risk Management:

Risk Management is a logical and systematic process of establishing the context, identifying,
analysing, evaluating, treating, monitoring and communicating risks associated with any activity,
function or process, in a way which enables an organisation to minimise losses and maximise
opportunities.

Risk management has become a prime concern for every business because of Bankruptcies and huge
losses.

5.3 Risk Management Process:

(i) Identification of risks: Risk cannot be managed unless it is first identified. This is done by
generating a comprehensive list of sources of threats, risks and events which might have an impact on
the achievement of each of the objectives as identified at the time of preset ideas and past events.

The following identification techniques may be considered:

(i) Team-based brainstorming where workshops can prove effective in building commitment and
making use of different experiences;

(ii) Structured techniques such as flow charting, system design review, systems analysis, hazard and
operability studies, and operational modeling;

(iii) For less clearly defined situations, such as the identification of strategic risks, processes with a
more general structure such as what-if scenario analysis could be used.

(ii) Risk assessment: Risk assessment may be done in two ways, either by qualitative or quantitative
risk analysis. The qualitative data involves subjective units such as high, low, or critical. The
quantitative data uses numerical units such as workdays or monetary units.

(iii) Risk measurement and analysis: This is done using Past experience or data and records, reliable
practices, international standards or guidelines, market research and analysis, experiments and
prototypes, economic, engineering or other models, Specialist and expert advice.

(iv) Risk evaluation:It implies ranking in terms of importance, and ranking suggests measuring some
aspect of the factors to be ranked.The result of a risk evaluation is a prioritized list of risks which
require further action. In the case of loss exposure, the following two components should be
considered:

(a) The potential severity of loss.

(b) The potential probability of loss.

(v) Risk treatment: It is basically concerned with identifying options for treating or controlling risk, in
order to either reduce or eliminate negative consequences, or to reduce the likelihood of an adverse
occurrence. Risk treatment should also aim to enhance positive outcomes. It is often either not
possible or cost-effective to implement all treatment strategies.

(vi) Risk Monitoring and Review:A business owner must monitor risks and review the effectiveness
of the treatment plan; strategies and management system which have been set up to effectively
manage the risk.In the final stage, the risks elements identified and evaluated will be communicated to
personnels at different levels in the organization for consultation and initiating suitable measures to
mitigate the loss.

5.4 Strategies of risk management:

Following are the various strategies of risk management:-

(i) Transfer Risk: Where a Company or a firm finds that it is dealing in an area where it does not have
the core competence to deal with it seeks the help of another agency which has the specific core
competence to transfer its own risk.

(ii) Tolerate Risk:It is retention of the risk. All risks that are not avoided, reduced or transferred are
retained by default. This includes risks that are so large or catastrophic that they either cannot be
insured against or the premiums would be infeasible. Risk due to war is an example.

(iii) Reduce Risk:By far the greater number of risks will belong to this category. Internal controls are
actions instigated from within the organization which are designed to contain risk to acceptable levels.

Outsourcing could be an example of risk reduction if the outsourcer can demonstrate higher capability
at managing or reducing risks.

(iv) Avoid Risk:This method results in complete elimination of exposure to loss due to a specific risk.
It can be established by either avoiding to undertake the extremely risky project or discontinuance of
an activity to avoid risk.

(v) Combine Risk:When the business faces two or three risks the overall risk is reduced by
combination. This strategy is suitable mainly in the areas of financial risk. Different financial
instruments say, shares and debentures are taken in a single portfolio to reduce the risk.

(vi) Sharing Risk:Insurance is a method of sharing risk for a consideration. For example by paying
insurance premium the company shares the risk with companies and the insurance companies
themselves share their risk by doing re-insurance.
(vii) Hedging Risk:Exposure of funds to fluctuations in foreign exchange rates, prices etc., bring
about financial risks resulting in losses or gain. The downside risk is often taken care.

5.5 Benefits of Risk Management:

Some of the benefits of risk management are:

A) It saves resources — time, assets, income, property and people are all valuable resources.

B) Risk management protects the reputation and public image of the organization.

C) It prevents or reduces legal liability and increases the stability of operations.

D) It helps in getting a good credit rating.

E) Improves confidence of investors etc.

5.6 Risk Management of a Company from the perspective of a Company Secretary:-

A company secretary can contribute to the process of risk management by helping the company in
handling certain types of risks like compliance risk, legal and contractual risk, cyber security risk etc.

Some of the risks which can be managed effectively by a Company Secretary are:

1. Compliance risk :-

A company is required to comply with the provisions of various Acts such as Companies Act 2013
Income Tax Act 1961, General laws, environmental laws, payment of gratuity Act 1972, Indian
Contract Act 1872, FEMA 1999 and other Industry specific Acts/ laws.

A listed company in addition to the above is also required to comply with SEBI regulations.

A Company Secretary as the compliance officer of the company advises the Board of Directors and
brings to their attention various penalties and fines that could arise on non Complaince with the
applicable laws.
For example under Companies Act, every company has to file an annual return with the MCA within
60 days from the date of AGM or where such AGM is not held , within 60 days from the due date for
holding AGM. If not the delay fees will be Rs 100 for each day of default - Companies Amendment
Act , 2017- Notified provision.

As per SEBI circular dated 3rd May, 2018, non- submission of financial results under regulation 33
within the time period prescribed will result in a fine of Rs. 5000 per day.

Requirement underSEBI ( Listing Obligations and Disclosure Requirements) Regulations 2015:-

As per SEBI ( Listing Obligations and Disclosure Requirements) Regulations 2015, In case a
Company falls under the category of top 100 listed companies ( based on market capitalization), it is
required to form a risk management committee where the majority of members of Risk Management
Committee shall consist of members of the board of directors and the Chairperson of the Risk
management committee shall be a member of the board of directors and senior executives of the listed
entity may be members of the committee.

The Board of Directors of the Company shall define the role and responsibility of the Risk
Management Committee and may delegate monitoring and reviewing of the risk management plan to
the committee and such other functions as it may deem it.

A company exists in a very dynamic environment. It is very important for a Company to keep up with
the changing environment.

Ignorance of law is not an excuse and fines and penalties affect the reputation of a Company.

By following a Compliance calendar and helping the Company in keeping up with the latest changes
and amendments, a Company Secretary can help in mitigating this Compliance risk.

2. Legal and contractual risk:-

A Company in its usual course of business enters into contracts with various parties. A company
before entering into any contract should ensure that the Contract is well drafted.

It is important to check the terms of confidentiality, warranty and indemnity clauses and also the exit
clause before proceeding with a contract.

A company secretary with his expertise in drafting and vetting of legal documents can play a great
role in reducing the legal and contractual risk.
3. Cyber security risk:-

One of the good corporate governance practices is to ensure that there is a good cyber security system
in place. It is important to identify the various information assets that could be affected by a cyber
attack (such as hardware, systems, laptops, customer data and intellectual property).

A Company Secretary should ensure that there is no breach of cyber security systems.This can be
done by ensuring that there are firewalls installed. Installation of anti virus and anti spyware softwares
can help in protection against Malware. Technology audit or an information systems audit has to be
conducted on a periodical basis.

It is very important to ensure that there is no violation of cyber laws.

Risk- return trade off:-

It is an investment concept according to which projects with lower risks carry a lower rate of return
and projects with higher risk carry a higher rate of return. It is necessary to evaluate the risk and
potential return before investing in a project.

5.7 Conclusion:-

For effective risk management a Company should have a risk management plan and should regularly
update the plan as per the changing needs. Keeping a record of risks as well as steps taken to manage
risks is useful for future references.
 ROLE OF MANAGEMENT INFORMATION SYSTEM AND E-GOVERNANCE IN
STRATEGIC MANAGEMENT

6.0 Meaning of Information

The word information derives from the Latin informare (in + formare), which means “to give form,
shape, or character to” something.i

6.0.1 Meaning of Management Information System

Management Information System (MIS) could be defined as creation of timely, specific and accurate
information at all levels of the organization in order to achieve the objectives of the organization.

6.1 Purpose of Management Information System

A well defined MIS provides information at all levels of the management for the following purposes:

 To define the objectives of the organization.

 To formulate strategies and policies to achieve the objectives set by the management.
 To prepare future plans for short and long term basis.
 To allocate different types of resources to different functional areas.
 To develop database of business partners and to devise procedures to deal with them.

6.2 Information as Corporate Resource

Information can be considered as the raw material used in producing each and every decision taken in
an organization. Organizations need to decide regularly on what objectives to be achieved, what
actions to be taken to achieve these objectives, how and when these actions are to be taken, and the
resources to be used for all these activities. These decisions are taken by all the people in the
organization who work at different level of organizational hierarchy and handle different aspect of the
organizational work. The basis of any information is data. This data could be quantitative data or
qualitative data. The
 Data

Action Information

Evaluation

Data: This is the first step in the information process. Businesses obtain raw data in the form of
numbers. This data could be obtained from various processes like internal, external, primary,
Secondary etc. Mere existence of data is unusable by businesses. The top management in an
organization receive this unstructured information which they use to give directions to businesses.

Information: This is the next stage in the information process. Businesses analyse the data and arrive
at conlusions that are economically viable and meaningful. The Company Secretary helps the top
management to analyse this information. For instance, the organization could get the salaries of
Managing Directors of various Companies in the industry. Once this data is analysed by the top
management and they decide to pay a certain sum of remuneration to the Managing Director, the
Company Secretary could guide the Board in the maximum amount of remuneration payable to the
Managing Director.

Evaluation: This step in the information process consists of studying the various alternatives based
on the information generated. Evaluation of alternatives and choosing the optimum alternative would
help the management in saving costs and thereby improving the bottom line.

Action: Based on the decision of the best alternative, the business would want to invest or carry out a
business transaction. This would generate further data in terms of profit/loss, employee turnover etc.
6.3 Management Levels and their information needs

Levels of
Management

Strategic Tactical
Operational
Planning Planning
Planning

a) Top Level (Strategic level) Management and their Information Needs

Top Management in an organization generally consists of the Chairman, Board of Directors, Chief
Executive Officer, Chief Financial Officer, and Company Secretary who are concerned with the
overall tasks of designing, directing and managing the organization in an integrated manner.

The information used by the top management is mostly futuristic and external in nature. The
information required to make appropriate decisions should be structured and systematic in nature.
However, the information received by the top management are unstructured and ad-hoc. The
Company Secretary plays an important role in giving a structure to the unsystematic information. For
instance, forecasts of future stock market trends may be using the opinions of stock buyers, sales
people, or market analysts etc. Company Secretary can provide timely suggestions to the board with
his knowledge in securities law and finance to forecast the movement of stock prices.

b) Middle level (Tactical level) Management and their Information Needs

Middle level management is defined as a group of management positions which tend to overlap the
top and supervisory management levels in the hierarchy. The nature of information required at the
middle level is less diverse and complex. Middle management is fed with information from both the
top management and supervisory management. For instance, the Company Secretary, being an expert
in labour laws can guide factory heads on leave policy of the factory or overtime wages payable to the
workers. The Company Secretary may also guide the factory heads in successful conduct of factory
audits.

c) Operational Level (Supervisory level) Management and their information Needs

Supervisory management is defined as a team of management positions at the base of the hierarchy. It
consists of section officers who are directly responsible for instructing blue collar employees and
workers. The nature of information required to take decisions are routine and repetitive in nature.
Based on the information available in the internal documents of the company the Company Secretary
may guide the employees in taking decisions. For instance, the Company Secretary may guide the IT
personnel to automate the payroll of the employees up to a certain level.

The Company Secretary thus plays a pivotal role across all levels of management by providing timely
and appropriate information to the management. The Company Secretary provides strategic
information not only to the management but also to other stakeholders. Especially, the contribution of
a Company Secretary as a Governance professional to various regulators is important to say the least.
The next section looks into how e- governance could help the organization to achieve its goal of
becoming transparent and in turn making the whole nation a SMART nation.

6.4 E- Governance and Strategic Management

E-Governance or ‘electronic governance’ is basically the application of Information and

communications Technology to the processes of Government functioning in order to bring about
‘Simple, Moral, Accountable, Responsive and Transparent’ (SMART) governance ii. E- Governance is
the basic requirement in today’s information age. As Indian economy gets integrated further into the
world economy, the nature and dimension of e-governance is only going to increase. Company
Secretaries will play an integral and important role in e-governance. The role of Company Secretaries
in the e-governance project is not new. The roll out of MCA 21 project by the Government of India in
2006 is a giant leap in the direction of e-governance.

6.5 MCA 21 Project a Key To Strategic Information

The MCA21 project is designed to fully automate all processes related to the proactive
enforcement and compliance of the legal requirements under the Companies Act,
iii
2013 . The MCA 21 website provides plethora of information to regulators and other stakeholders
regarding the level of compliance done by the company. The various e-forms that are filed by the
Companies are important data points for the regulators. For instance, the e-form MGT-7 filed by
companies provides data on the number of layers that are available for the company.

Many of the documents filed by Companies are accessible to the public. This has brought in more
focus and enormous amount of accountability on both the Company Secretary who is employed and
the Company Secretary in practice. The documents like AOC-4 XBRL, CHG-1 etc are available to the
public for their inspection. With the introduction of XBRL mode of filing the financial statements, the
Company Secretary must ensure that the information available in the annual report and the
information filed with MCA through Aoc-4 XBRL is one and the same. Any discrepancies found in
filing would attract heavy penalty and loss of reputation for the Company. This places an enormous
amount of responsibility on the Company Secretary. While the Company Secretary must be cautious
in providing the right information to the regulators, the Company can be rest assured that with the
presence of the Company Secretary the level of compliance is complete.

The Company Secretary can play an important role in enhancing the level of Compliance of the
Company in liaison with technology experts. Artificial Intelligence (AI) is currently bringing in
sweeping changes in the way businesses operate. The activities done by men are being replaced by
machines. The use of AI in the area of governance and compliance in India is still in its nascent stage.
While the introduction of AI in the field of compliance may put the Company Secretary in jeopardy,
this opens up a new area for the profession. With the recent and continuous amendments to the
Companies Act, 2013, the company needs experts from both technology and law to update the AI
tool. The technology expert may know how to make a robot work; it is the Company Secretary that
has to tell the robot how to work in the right way.

6.6 Challenges Faced By Company Secretary in E- Governance

There are number of challenges which a Company Secretary has to overcome before the E-
Governance programme as envisaged by the organization is in place. Few of the Challenges are
enumerated below:

 Lack of IT Literacy and awareness regarding benefits of e-governance.

 Underutilization of existing ICT infrastructure.
 Attitude of Employees.
 Lack of coordination between Govt. Department and Solution developers.
 Resistance to re-engineering of departmental processes.
 Lack of Infrastructure for sustaining e-governance projects on national level.

6.7 Suggestions For Successful Implementation Of E-Governance

(a) Create Literacy and commitment to e-governance at high level.

(b) Conduct Usability Surveys for assessment of existing e-governance projects.
(c) Starting with implementation of pilot projects and replicating the successful ones.
(d) Follow the Best Practices in e-governance.
(e) Build National resource Database of e-governance projects.
(f) Have clearly defined Interoperability policy.
(g) Manage and Update content on govt. websites efficiently and regularly.
6.8 Conclusion

Information plays a key role in management decision making. iv. Further, the flow of information
begins with data collection. This data collection is an important step but this is only the first step in
management decision making. Creating an economic sense from this data is the next step in the
information process flow. The Management further evaluates the information and chooses the
optimum alternative. The information needs vary based on the level of management. While the
information received by the top management is largely unstructured and sporadic, the direction issued
by the top management to other employees is from this kind of information. The top management
must ensure that the company has proper management systems in place to process this information.
The middle level management has information needs to run the business. The middle level
management is fed with information both from the top management and operational management.
Company Secretary plays a very critical role in maintaining and disseminating this management
information. Being the mouth piece of the Board he uses this information to take the organization in
the line of profits and yet keeping the soul of the organization intact.

The Company Secretary being governance professional plays a critical role in E- governance. E-
Governance envisages running the organization in a SMART manner. The MCA 21 project is an
important mile stone by the Government to create SMART organizations and in turn SMART
economy. The creation of MCA 21 has helped the Company and its various stakeholders immensely.
As India gets integrated further into the global economy management information and its right usage
assumes greater importance and organizations must have the right systems and infrastructure in place
to create competitive advantage to their businesses.
 Internal Control System

7.0 Introduction: Internal Control is a process, effected by an entity’s board of directors,

management, and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives relating to:

Management has a fundamental responsibility to develop and maintain effective internal control.

7.1 Risks of Weak Internal Controls

 Financial misstatements
 Business loss
 Loss of funds or materials
 Incorrect or untimely management information
 Fraud or collusion
 Tarnished reputation with the public
 Program Sustainability compromised
 Missed goals
7.2 Weak Internal Controls Increase Risk Through:

 Business Interruption - system breakdowns or catastrophes, excessive re-work to correct for

errors.

 Erroneous Management Decisions - based on erroneous, inadequate or misleading

information.

 Fraud, Embezzlement and Theft -by management, employees, customers, vendors, or the
public-at-large.

 Statutory Sanctions- penalties arising from failure to comply with regulatory requirements, as
well as overt violations.

 Excessive Costs/Deficient Revenues - expenses which could have been avoided, as well as
loss of revenues to which the organization is entitled.

 Loss, Misuse or Destruction of Assets -unintentional loss of physical assets such as cash,
inventory, and equipment.

7.3 Benefits of Strong Internal Controls

 Reducing and preventing errors in a cost- effective manner.

 Ensuring priority issues are identified and addressed.

 Protecting employees & resources.

 Providing appropriate checks and balances.

 Having more efficient audits, resulting in shorter timelines, less testing, and fewer demands
on staff.

7.4 Key Internal Control Activities…

1. Separation of Duties

Divide responsibilities between different employees so one individual doesn’t control all
aspects of a transaction.

Reduce the opportunity for an employee to commit and conceal errors (intentional or
unintentional) or perpetrate fraud.

2. Documentation
Document & preserve evidence to substantiate: Critical decisions and significant events
typically involving the use, commitment, or transfer of resources. Transactions. enables a
transaction to be traced from its inception to completion.
Policies & Procedures…documents which set forth the fundamental principles and
methods that employees rely on to do their jobs.
3. Authorization & Approvals
Management documents and communicates which activities require approval, and by
whom, based on the level of risk to the organization.Ensure that transactions are approved
and executed only by employees acting within the scope of their authority granted by
management.
4. Security of Assets
Secure and restrict access to equipment, cash, inventory, confidential information, etc. to
reduce the risk of loss or unauthorized use. Perform periodic physical inventories to
verify existence, quantities, location, condition, and utilization. Base the level of security
on the vulnerability of items being secured, the likelihood of loss, and the potential
impact should a loss occur.

5. Reconciliation & Review

Examine transactions, information, and events to verify accuracy, completeness,

appropriateness, and compliance.
 Base level of review on materiality, risk, and overall importance to organization’s
objectives.

Ensure frequency is adequate enough to detect and act upon questionable activities in a
timely manner.

COSO CUBE – 5 INTEGRATED COMPONENTS:

Entity-Level Controls

Control Environment
Fraud Controls, including Controls Over Management Override

Risk Assessment and Related

Policies

Monitoring
Controls

Financial
Information Statement Financial
Transactions
Systems Close Statements
Process

Control Activities, Including Fraud

Controls

7.5 Conclusion:

We’ve reached the end of this session on internal controls. To review, here are a few of the key points
we covered:

• Remember that the best way to identify internal controls is to first identify the Objectives and
Risks to those objectives. The controls mitigate those risks.

• Remember that the Five interrelated components of Internal Control are:

1. The control Environment

2. Risk Assessment

3. Control Activities
 4. Information and Communication, and

5. Monitoring

• Which operate along 3 main objectives:

1. Operations

2. Reporting, and

3. Compliance

• And apply across the organization, starting at the entity level and running all the way down
to the process functions.