Resource Management Process - Regulatory Management

Process Objectives

Minimise litigation Protect adequately against loss while minimizing costs Comply with regulatory requirements Improve environmental and safety conditions

Critical Success Factors (CSF’s)

    A.   Adequate insurance with appropriate coverage (2)
    B.   Awareness training to educate against violations (1,3)
    C.   Monitor and manage environmental changes (1,4)
    D.   Maintain safe, clean, well-organized facilities (1,3,4)
    C.   Minimise and control use of hazardous materials (4)
    E.   Adequate procedures regarding lawsuit handling (1)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Insurance-related expenses vs prior years; amount of uncovered losses vs additional cost to cover (A)
• Worker complaints; relevant training hours per employee per year (B)
• Dollars spent monitoring environment (C)
• Days without loss -of -work injury; workers’ compensation claims rates; dollars and number of environmental fines (D)
• Measure of toxic products produced or used in production (E)
• Number of new lawsuits and lawsuits settled (by type)

Inputs

Strategic plan Independent research Regulatory experts

Regulatory laws and guidelines ·Historical litigation data

External regulatory environment Training curriculum

Activities

Outputs

Litigation reports Litigation projections / analyses

Regulatory projections / analyses Regulatory reports

Retention agreements

Systems

Budgeting Payable / disbursement

General ledger

Regulatory / legal databases

Classes of Transactions

Routine Insurance expense Premiums payable Legal/regulatory expenses

Non-Routine Lawsuit settlements Regulatory settlements

Accounting Estimates Loss reserves - litigation Loss reserves - regulatory

Risks Which Threaten Objectives

    A.   Regulatory violations resulting in losses (1,2,3,4)
    B.   Settlement expenses (1)
    C.   Insurance rate increases (2,4)
    D.   Negative publicity from environmental issues (1,4)
    E.   Company is not safety/environmentally-conscious (4)
    F.   Contingent liabilities exist but are not known (3,4)

Management Responses Linked to Risks

• Monitor exam reports for violations (A)
• Monitor number of new lawsuits and number settled; review total cost breakdown (indemnity, fees, etc.) (B)
• Monitor insurance rates and rate “market” (C)
• Track company response to issues; monitoring of competitors’ issues (D)
• Establish responsibility for monitoring adherence; establish/monitor relationships with regulators (E)
• Periodic reviews by experts as to conditions; monitor complaints, fines and claims (F)

Other Symptoms of Poor Performance

High or increasing average cost per case High outside counsel costs

Property acquisitions without environmental due diligence Lack of negotiated fees

Uncertainty as to total environmental costs

Performance Improvement Observations

Expert testimony / litigation assistance Alternative dispute resolution Law department review

Tax advice for pollution control investment Quality assessment / compliance audits Risk assessment diagnostic

Litigation management diagnostic Environmental due diligence Environmental benchmarking

Resource Management Process - Property Management

Process Objectives

1. Control capital expenditures
2. Acquire/construct facilities at acceptable technological/reconfiguration levels
3. Optimise capacity
4. Reduce risk of loss and improve safety environment

Critical Success Factors (CSF’s)

    A.   Accurately plan equipment and facilities needs (1,2,3)
    B.   Procedures to follow environmental regulations/safety training (4)
    C.   Establish maintenance procedures (1,4)
    D.   Maintain current disaster recovery plan (DRP) (4)
    E.   Establish proper procurement procedures (1,2)
    F.   Monitor developments in technology/facilities (2,3)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Square feet utilized/divided by total available; square feet and cost per square foot by department (A)
• Ratio of insurance premium costs to coverage; number and cost of environmental fines (B)
• Maintenance costs to total operating costs; equipment write-offs (C)
• Modifications to disaster recovery plan (D)
• Percentage of orders where discounts taken; costs per unit by vendor (E)
• Equipment/technology costs by department (F)

Inputs

Strategic plan Capital budgets Operating budgets

Suppliers Construction plans Economic environment

Demographic information Maintenance schedule Regulations

Activities

Outputs

Make/buy analysis Disaster recovery plans Capital budgets

Machinery and equipment Land and buildings Risk management plan

Supplier contracts Operating information

Systems

Fixed asset Disbursement / payable

Budget Payroll / scheduling

General ledger Space management

Classes of Transactions

Routine Fixed asset additions Insurance expense Depreciation expense Maintenance expense

Non-Routine Lease classification Incentives / abatements Gain / loss on sale Interest capitalisation

Accounting Estimates Impairment of long-lived assets Uninsured loss accruals Depreciation methods / lives

Risks Which Threaten Objectives

    A.   Insufficient or excessive capacity (3)
    B.   Uninsured or underinsured losses (1,4)
    C.   Impairment in value of assets (2,3)
    D.   Inability to acquire needed assets on time (2)
    F.    Cash flow not sufficient to fund capital expenditures (2)
    G.   No contingency plans for unexpected events (4)

Management Responses Linked to Risks

• Create and monitor facilities plans; compare costs to operate to outsourcing; compare actual utilisation plan (A)
• Conduct environmental and safety reviews; monitor legal and regulatory initiatives (B,C)
• Monitor maintenance plans/periodic inspection; monitor new developments and technology (D)
• Maintain relationships with suppliers; obtain competitive bids (D)
• Monitor capital budgets; compare costs to operating budgets and industry (E)
• Periodically monitor feasibility of disaster recovery plan (F)

Other Symptoms of Poor Performance

Excessive machinery downtime Capital project overages (costs and time)

Manual systems / workflow Excessive number of suppliers

Excessive workers’ compensation claims Increasing property tax

Performance Improvement Observations

Procurement review Maintenance systems review Improved fixed asset systems

Property tax representation Business incentives consulting Management reporting review

Capacity review Benchmarking study Environmental assessment review

Resource Management Process - Human Resource Management

Process Objectives

• Attract and retain skilled and motivated workforce
• Control employee costs while maintaining morale and productivity
• Comply with regulatory/tax filing requirements
• Adherence to code of conduct

Critical Success Factors (CSF’s)

    A.   Commitment to training and development (1,2)
    B.   Retention of key personnel (1,2)
    C.   Maintain competitive compensation/benefit packages (1,2)
    D,   Optimise employee utilisation and productivity (2)
    E.   Employee commitment to customers (1,4)
    F.   Optimise human resource administration efficiencies (3,4)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Training hours per employee; training dollars per employee (A)
• Employee turnover (B)
• Employee turnover; compensation/benefit levels compared to the industry (C)
• Sales per employee; payroll to sales (D)
• Customer complaint percentage; customer surveys/focus groups (E)
• Human resource employees/total employees; human resource department costs to sales (F)

Inputs

Strategic plan Operating plan Resource requests

Employee regulations Tax regulations Union contracts

Industry statistics and market data Training goals / requests Personnel feedback

Activities

Outputs

Regulatory filings Compensation and benefits policies and administration Personnel files

Tax filings Human resource policies/procedures Training programmes

Performance reviews Payroll and benefits disbursements Staffing and cost data

Systems

Human resource management Compensation and benefits

Tax system Regulatory systems

Cash disbursements / payables systems Employee self-service systems

Classes of Transactions

Routine Payroll and benefit expenses Payroll related accruals Training expenses

Non-Routine Pensions Other post-retirement benefits Post-employment benefits Incentive compensation accruals

Accounting Estimates Self-insured medical Self-insured workers’ compensation Self-insured general liability claims

Risks Which Threaten Objectives

    A.   High level of staff turnover (1,2)
    B.   Poorly motivated staff (2)
    C.   Non-compliance with regulations (tax, labour, etc.) (3,4)
    D.   Lack of personnel with skill sets needed (1)
    E.   Non-competitive compensation packages (1)

Management Responses Linked to Risks

• Conduct employee surveys with follow-up on results; implement growth and opportunity plans for employees (A,B)
• Compare incentive pay to performance; conduct employee surveys with follow up on results; monitor labour relations and establish employee grievance committees (B)
• Regulatory monitoring (C)
• Establish formal hiring criteria; develop and implement effective training programmes (D)
• Compare salary costs to industry norms; compare incentive pay to performance (E)

Other Symptoms of Poor Performance

Poor internal communication Fines and penalties for untimely, inaccurate tax and regulatory filings

High level of absenteeism Inconsistent employee management

Low productivity High level of customer complaints

Performance Improvement Observations

Incentive compensation consulting Managed health care studies

Claims systems reviews Retirement plan reviews

Human resource department re-engineering Human resource benchmarking

Resource Management Process - Information Management

Process Objectives

Provide integrated data processing systems which produce relevant information Timely and accurate information processing and reporting Control the cost of collecting, processing and distributing information Use technology as a competitive advantage in the business

Critical Success Factors (CSF’s)

     A.   Systems provide timely and accurate information (2)
     B.   Purchase and maintain systems at lowest possible cost (3)
     C.   Involve users with acquisition, development and maintenance decisions (4)
     D.   Develop integrated systems that provide cross-functionality and commonality among applications (1)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Information processing cycle time; user information survey results; response time for on-line request (A)
• Information technology costs are percentage of total costs; cost of information technology operations vs outsourcing services (B)
• Number of user complaints/requests for change (C)
• Number of different software packages from different vendors; number of custom programmes vs purchased software (D

Inputs

Strategic plan  Information technology strategy Technology opportunities / constraints

Trade and research materials User groups requests and feedbacks Capital and operating budgets

Regulatory requirements Resource requirements

Activities

Outputs

User training Project status reports User systems and reports

Systems implementation plans Disaster recovery plan Information technology procedures and standards

System development methodology Property Vendor contracts

Systems

General ledger and subsystems Management reporting systems

Tax and regulatory systems Payroll and human resources systems

Core business systems All company software All company databases All company hardware

Classes of Transactions

Routine Information technology related costs Capitalisation of information systems costs

Non-Routine Recurring depreciation

Accounting Estimates Depreciable lives Software development costs

Risks Which Threaten Objectives

     A.   The data processing systems do not provide useful information or lack adequate capacity (1,2,3,4)
     B.   Multiple software packages from different vendors prevent effective integration (1)
     C.   Inadequate training of information technology personnel (2,4)
     D.   Proper priorities not given to projects (2)
     E.   Catastrophes prevent the system from operating as intended (2)
     F.   The system lacks reliability, integrity and/or responsiveness (1,2)
     G.   Selection of a system not compatible with the Company’s needs (1,3)

Management Responses Linked to Risks

• Use of a technology steering committee (including users) to monitor utilization and adequacy of system; system development life cycle methodology that includes users (A,C)
• Review software and hardware purchases to ensure they will support integration (B)
• Information technology costs are compared to industry norm (G)
• Cost justification analysis at project level (D)
• Establish a disaster recovery plan; establish back-up and record retention procedures (E)
• Review of system performance statistics (F)
• Proper planning and assessment of the Company’s IT needs (G

Other Symptoms of Poor Performance

Slow response to information requests Users do not feel involved in development process Many manual processes and/or paper reports No chargebacks to departments for use

System is “down” frequently Systems are too old to support integration High level of information management operating costs Re-keying performed

Limited use of PC-based applications Users maintain own databases (not integrated) Personnel are unproductive due to lack of skills

Performance Improvement Observations

Contingency planning Technology benchmarking

Information technology strategy Package solutions / enterprise package solutions

Information security analysis Outsourcing analysis

Resource Management Process - Finance and Treasury Management

Description

The description of this process is defined within the objectives

Process Objectives

1. Timely, accurate budgets and financial reports
2. Relevant, timely and accurate information to management
3. Maximise cash flow/investment earnings
4. Provide low cost/reduced cycle time and increased accuracy for processing activities
5. Optimise the entity’s capital structure
6. Optimise tax structure to minimise overall taxes
7. Comply with financing agreements/covenants and minimise financing costs

Critical Success Factors (CSF’s)

     A.   Timely, relevant, accurate financial information (1,2)
     B.   Relationships with financing sources (5,7)
     C.      Efficient operations/qualified personnel (1,2,3,4,5,6)
     D.   Matching of cash requirements with forecasts (3,4)
     E.   Compliance with tax and loan regulations (7)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Cycle time for monthly close, “customer” satisfaction levels; information systems costs as % of sales; variances between initial close and final amounts; suspense account analysis (A)
• Number/quality of financing sources (B)
• Cost per vendor invoice processed; debtor/creditor days in sales/cost of sales; employee turnover rates; finance department headcounter and costs as % of respective totals (C)
• Yield on investments; effective interest rate on borrowings (D)
• Amendments to tax returns required; effective tax rate; default notices on covenants (E)

Inputs

Strategic plan Functional budgets Process budgets

Financial resources Debt / lease agreements Economic environment

Capital budgets “Customer” requirements Market data

Activities

Outputs

Budgets / forecasts Internal reports External financials

Investments statistics Investment management

Process performance measurement Disbursements

Systems

Cash management Tax compliance Disbursement / payable

Payroll / human resources Investment management Financial reporting

Billing / accounts receivable General ledger Budgeting

Classes of Transactions

Routine Cash receipts / disbursements Daily financing Cash management

Non-Routine Debt issuance Debt retirement Accrued interest

Accounting Estimates Tax  accruals Tax provision

Risks Which Threaten Objectives

   A.   Inaccurate financial/management information (1,2,4)
   B.   Debt agreement/covenant violations (7)
   C.   Excessive exposure (interest, tax, counterparty) (5,6)
   D.   Mis-matched investments/debt (3,5)
   E.   Excessive tax exposure/non-optimal structure (5,6)
   F.   Changes in  market conditions (5,7)
   G.   External pressure to obtain results (2,7)Management Responses Linked to Risks

Management Responses Linked to Risks

• Strong financial information systems; controls over reconciliations/suspense accounts, internal audit (A)
• Monitoring of covenants (B)
• Exposure reviews with “expert” assistance (C)
• Treasury management system; strong cash forecasting system (D)
• Tax exposure review vs external environment; “expert” assistance in tax structure review (E)
• Infrastructure to track and react to market changes (F)
• Review of accounting policies; audit committee oversight (G)

Other Symptoms of Poor Performance

Cash crises High transaction costs High effective tax rates Lack of action following internal / external audit recommendations

Inaccessible information Manual systems/workflow Too many/few controls

Reports done outside financial systems Decentralised sales/use tax administration

Performance Improvement Observations

Change management Performance measurement Work process simplification Tax minimisation Management reporting review

Internal audit review Activity-based management study Electronic data interchange Treasury review Sales tax planning Global reporting

Benchmarking study Foreign sales corporation review Activity value analysis Payroll tax planning Unemployment tax planning

Core Business Process-Serve Customers

Description

Providing exceptional after sales Customers Service experience

Process Objectives

1. Expedite resolution of customer problems
2. Improve feedback quality and timeliness to allow product and process improvements
3. Reduce time to reimburse customer claims
4. Reduce time to repair/service product

Critical Success Factors (CSF’s)

    A.  Train and empower employees to resolve issues to customer satisfaction (1,3,4)
    B.  Provide access to all parties needed to resolve issues (1,3,4)
    C.  Maintain on-line, in-depth database of problems and resolutions (1,2,3,4)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Time from initial customer contact to response (A,B,C)
• Time from initial customer contact to time reported to applicable parties (B)
• Number of repeat customer complaints; results of customer satisfaction surveys (A,B,C)

Inputs

Product specifications Marketing plan

User documentation Customer database

Claims and warranty database and policies Support databases

Activities

Outputs

Updated claims and warranty database

Feedback reports to applicable processes

Updated customer database

Systems

Customer database Customer support system

Product specification system Shipping and receivables system

Claims and warranty databases Resource scheduling system

Classes of Transactions

Routine Customer returns/claims Sale of service agreements

Non-Routine Product recalls

Accounting Estimates Determination of warranty liability Product recall liability estimates

Risks Which Threaten Objectives

      A.   Databases/systems that do not allow in-depth and timely knowledge and resolution (1,2,3)
      B.   Employees not properly trained and empowered (1,3,4)
      C.   Claims are not fed back to process owners in a timely manner (2)

Management Responses Linked to Risks

• Monitor resolution times and follow up slow responses (A)
• Use of high-performance work groups, formal policies and procedures (B)
• Regular review of unresolved or open claims (A,C)

Other Symptoms of Poor Performance

Unprofitable service contract business High warranty costs compared to budget and industry norms

High number of abandoned calls

Complaint system not linked to payment

Performance Improvement Observations

Benchmarking Call response analysis

Data warehousing Automated data transfer system

Accounting methods review