Subject: STRATEGIC CASE STUDY

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SCS – Nov 2024 – L3 – Q5c – Board Independence and Accountability in Corporate Governance

Evaluation of how the governance structure at BOGML affects board independence and accountability.

There are a number of concepts of good corporate governance that every entity, including BOGML, must strive to adhere to.

Required:
Provide an evaluation of how the existing corporate governance structure at BOGML may undermine or compromise the following key concepts of good corporate governance, with particular reference to the current composition and organisation of the board.

i) Independence
ii) Responsibility and accountability

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SCS – Nov 2024 – L3 – Q5b – Board Responsibilities in Corporate Governance

Evaluate the role of the board in corporate governance, focusing on responsibilities for strategy, oversight, and ethical leadership.

The role of the board of directors is critical in corporate governance. The National Corporate Governance Code for Ghana (the National Code) issued in November 2022 outlines the board’s core responsibilities.

Required:

Advise the board of BOGML on the FIVE key responsibilities of the board of directors as outlined in the National Code.

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SCS – Nov 2024 – L3 – Q5b – Board Responsibilities in Corporate Governance

Identify and explain the five governance pillars in the National Corporate Governance Code for Ghana 2022.

It is evident that all is not well with the current corporate governance at BOGML. However, for the company to achieve sustainable growth and remain competitive, it must adhere to sound corporate governance principles.

Required:

Using the FIVE governance pillars identified in the National Corporate Governance Code for Ghana 2022 (the National Code), issued in November 2022 by the Institute of Directors-Ghana, advise the company on how to improve upon its current governance structure.

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SCS – Nov 2024 – L3 – Q4c – Forward Rate Agreement for Interest Rate Risk Management

Calculation of settlement amount for FRA under different Ghana Reference Rate (GRR) scenarios.

The company has decided to use a Forward Rate Agreement (FRA) to manage its interest rate risk likely to arise from the short-term loan of GH¢15 million it intends to borrow in three months for a period of six months.

Required:

i) What is the purpose for a company to enter into an FRA arrangement? (2 marks)

ii) Calculate the amount of money that will be paid to settle the FRA at the beginning of the FRA period if, at the end of month 3, when the FRA becomes effective, the six-month Ghana Reference Rate (GRR) is as follows:

a) 37.50%
b) 28.50%

In each case, clearly state the party (i.e. FRA buyer or FRA seller) responsible for making the payment.

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SCS – Nov 2024 – L3 – Q4b – International Tax Considerations

Key tax issues for BOGML’s planned international expansion to minimize total group tax payable.

The company is planning to expand its operations to Tanzania and South Africa in 2026. As a result, transactions between the head office in Ghana and the prospective foreign subsidiaries will likely take place, leading to potential international tax implications.

Required:

Briefly identify and explain TWO key issues to consider for the company to minimise total tax payable on the group profits.

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SCS – Nov 2024 – L3 – Q4a – Capital Budgeting Framework

Explanation of the five key elements in the capital budgeting framework for investment appraisal.

One of the Board members, Dr. Halimatu Sadia, has expressed concerns regarding Dr. Ayimadu Baffour’s consistent failure to conduct investment appraisals and capital budgeting when making long-term investment decisions.

Required:

Advise Dr. Ayimadu Baffour on the capital budgeting and strategic planning framework used for conducting investment appraisals by briefly outlining the FIVE key elements of the framework.

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SCS – Nov 2024 – L3 – Q3a-b – SBUs and Growth Phases

Evaluate BOGML’s SBUs using Ashridge Matrix and analyse growth phases with Greiner’s Model.

a) The company has presented information on the various products and services (i.e. the strategic business units (SBUs)) within the company’s portfolio.

Required:
Using Ashridge Portfolio Display Matrix and based on the performance of each SBU, clearly classify and explain the products and services under appropriate categories identified by the matrix. Support your answer with Ashridge Portfolio Display Matrix.

b) Since its inception, BOGML has grown organically and has gone through different stages of development in response to the challenges of growth and changes in both its internal and external environments. The company is currently under pressure to continue evolving.

Required:

i) Identify and describe the first two phases of growth applicable to BOGML based on Greiner’s Growth Model. In your explanation, include the type of crisis the company faced at each phase.

ii) The board has proposed appointing Regional Managers who will be responsible for the sales performance of the company’s filling and gas stations in their regions. If this proposal is implemented, it will move the company to the next phase in Greiner’s Growth Model. Identify and explain what this next phase is, and describe the potential crisis that may arise at this stage.

C 

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SCS – Nov 2024 – L3 – Q2b – Integration/Responsiveness Matrix and Cost Reduction

Advising BOGML’s MD on the best international strategies under the IR Matrix to achieve cost reduction in expansion.

The Board of BOGML has approved the Managing Director’s proposal to expand operations into Tanzania and South Africa by 2026. A key strategic focus of the company has been cost reduction, due to the narrow profit margins prevalent in the industry.

Required:
Using the Integration/Responsiveness (IR) Matrix, advise Dr. Ayimadu Baffour on the two most suitable international strategies/choices that have a low requirement for local responsiveness but can effectively support his cost reduction objectives. Clearly identify and explain the two strategies within the IR Matrix that prioritize cost reduction.

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SCS – Nov 2024 – L3 – Q2a – Approaches to Risk Management

Discusses risk management approaches to address identified risks in BOGML.

Approaches to risk management in BOGML – Advice to the board of directors

The following are the risk management approaches that the board of BOGML can adopt to manage the following risks identified in the company:

Risk A

  • Description: Low probability but high impact, e.g., pandemics, natural disasters.
  • Approach: Risk Transfer or Risk Sharing
  • Since this risk has a low likelihood of occurring but can result in severe financial losses, the company should consider transferring this risk or sharing risk. This can be done through the company taking full or partial (i.e. sharing of risk) insurance policies specifically designed for catastrophic events, such as business interruption insurance, pandemic insurance, or property insurance that covers natural disasters. Since the impact will be high when the risk occurs, the company can take insurance to pass on the high impact on the company to the insurance company which has to compensate BOGML in the event that the risk does occur.
  • The risk could also be shared through BOGML forming partnerships and collaborating with other OMCs to undertake investment in their oil stations.
  • The company should also develop a disaster recovery and business continuity plan to manage potential impacts effectively.

Risk B

  • Description: High likelihood but low financial impact, e.g., labor turnover and software downtime due to internet instability.

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SCS – Nov 2024 – L3 – Q1b – Digital Challenges in Accounting

Discuss the challenges of digital transformation in accounting, covering cybersecurity, compliance, and ethical concerns.

In the contemporary business landscape, the integration of digital technologies presents multifaceted challenges for accounting professionals, particularly in the areas of digital transition, cybersecurity, regulatory compliance, and ethical decision-making. Explain each of these challenges.

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SCS – May 2021 – L3 – Q8 – Capital structure

Explain the objectives of transfer pricing in SBL and the potential conflict between entity goal congruence and divisional autonomy.

Divisional managers are concerned about SBL’s objective of transfer pricing. As a Business Advisor, explain to the divisional managers the transfer pricing objective of SBL, as it is often in conflict with “entity goal congruence” and “division autonomy.” (10 marks)

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SCS – May 2021 – L3 – Q7 – Controlling risk

Explain the process of risk management that should be adopted by SBL's board in line with ISO 31000.

Debora Dede Boateng is having sleepless nights due to the level of SBL’s risk in relation to ongoing investment. She had a discussion with Bismark, which centered on the “International Organization for Standardisation’s ISO 31000.”

Required:
Explain the process of risk management that you will recommend that should be adopted by SBL’s board in line with ISO 31000. (10 marks)

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SCS – May 2021 – L3 – Q6 – Professional practice and codes of ethics

Explain the key concepts of good governance that SBL should adhere to in order to improve corporate governance practices.

James Mensah and Edwin Mensah are concerned that SBL is not strictly adhering to concepts of good governance. They want to see SBL as a well-governed company.

Required:
As a Business Development Advisor, explain to the board what “concepts of good governance” is. (10 marks)

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SCS – May 2021 – L3 – Q5 – Strategy Implementation

Summarize Bismark’s consultancy work in the specified format to present to SBL’s board.

Bismark’s four months consultancy service contract was running out of time with so much yet to be done. He then contracted you as a Consultancy Business Support Advisor to summarize his work to enable him to meet with the Directors of SBL. He provided you with the following format to use to ensure that all issues reviewed are covered:
i. Title page
ii. Table of contents
iii. Introduction
iv. Executive Summary
v. Body of the report
• Business environment analysis
• Industry background
• Competitor analysis
• Market analysis
• Operations analysis
• Management summary
• Financial performance
vi. Conclusions and recommendations
(20 marks)

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SCS – May 2020 – L3 – Q8 – Identifying and assessing risk

Provide a recommendation on whether Customer Focused Ltd should accept Look and Like Ltd’s proposal, with supporting reasons.

Customer Focused Ltd has received a proposal from a potential supplier, Look and Like
Ltd, to provide fresh produce (Exhibit 2a) and is considering whether to accept. Kpakpo
Armah has written a note (Exhibit 2b) about Look and Like Ltd.
Required:
Using the information available, including information you feel relevant from your answer
to Section A:

Provide a recommendation, with reasons, as to whether the proposed contract should be accepted.

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SCS – May 2020 – L3 – Q7 – Ethics and Social Responsibility

Identify and explain the ethical issues for Customer Focused Ltd in accepting Look and Like Ltd's proposed contract using an ethical decision model.

Customer Focused Ltd has received a proposal from a potential supplier, Look and Like
Ltd, to provide fresh produce (Exhibit 2a) and is considering whether to accept. Kpakpo
Armah has written a note (Exhibit 2b) about Look and Like Ltd.
Required:
Using the information available, including information you feel relevant from your answer
to Section A:

Explain any ethical issues for Customer Focused Ltd in accepting the proposed contract. Use an ethical decision model to support your explanation.

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SCS – May 2020 – L3 – Q6 – International Financial Management

Explain a suitable foreign currency risk hedging method for Customer Focused Ltd in relation to the Look and Like Ltd contract.

Customer Focused Ltd has received a proposal from a potential supplier, Look and Like
Ltd, to provide fresh produce (Exhibit 2a) and is considering whether to accept. Kpakpo
Armah has written a note (Exhibit 2b) about Look and Like Ltd.
Required:
Using the information available, including information you feel relevant from your answer
to Section A:

Describe an appropriate foreign currency risk management hedging method for the risk the company might face in the future as described in Exhibit 2b.

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SCS – May 2021 – L3 – Q4b – Strategy implementation

Identify and present the four perspectives of the Balanced Scorecard and outcome measures relevant to SBL’s performance using case information.

In a table format with the heading “Perspective” and “Outcome measures,” identify the Balanced Scorecard FOUR (4) aspects of performance using the information provided from the SBL case study. (12 marks)

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SCS – May 2020 – L3 – Q5 – Strategy implementation

Identify and explain the specific risks faced by Customer Focused Ltd in the proposed contract with Look and Like Ltd.

Customer Focused Ltd has received a proposal from a potential supplier, Look and Like
Ltd, to provide fresh produce (Exhibit 2a) and is considering whether to accept. Kpakpo
Armah has written a note (Exhibit 2b) about Look and Like Ltd.
Required:
Using the information available, including information you feel relevant from your answer
to Section A:

Identify and explain the specific risks faced by Customer Focused Ltd in the proposed contract.

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SCS – May 2021 – L3 – Q4a – Strategy implementation

Explain the relevance of the Balanced Scorecard in measuring SBL’s performance as a Critical Success Factor.

The board is concerned that currently there is no formalized method to evaluate the strategic performance of SBL. At a board meeting to brainstorm, Bismark suggested the use of a Balanced Scorecard but his only concern was that it applies to the service industry. Debora Dede Boateng disagrees.

Required:
a) Explain to the board why the Balanced Scorecard can be used or otherwise as a Critical Success Factor (CSF) when measuring the performance of SBL. (8 marks)

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