1. P5 : Advanced Performance Management

2. B1: External Influences on Organisational Performance B1. Changing business environment B2. Impact of external factors on strategy & performance Designed to give you knowledge and application of:

3.  Assess the continuing effectiveness of traditional management accounting techniques within a rapid changing business environment. [3]  Evaluate how risk and uncertainty play an important role in long-term strategic planning and decision – making that relies upon forecasts of exogenous variables. [3] Changing Business Environment Learning Outcomes

4. Evaluate how risk and uncertainty play an especially important role in long term strategic planning and decision-making that relies upon forecasts of exogenous variables Risk Risk assessment: part and parcel of strategic planning & decision making PESTEL Risk management: to minimise risk Understood via calculable probabilities Not identical Uncertainty & risk Closely associated Exogenous variable In long-term: difficult to assess impact of the exogenous variable Factor in the system whose value is independent of the states of other variables in the system Involves completely unknown factors Can be reduced by gathering more and more relevant information Indefiniteness about the occurrence of an event or outcome Uncertainty

5. Tools for assessing / managing business risk Payback period Quantitative / statistical methods Scenario analysis Sensitivity analysis Statistical decision rules Decision rules include maximax, maximin,& minimax regret criteria Constructing possible scenarios & looking for options that perform reasonably well with minimum risk Identifying main source of uncertainty Only projects which have payback period not exceeding a certain period are allowed Assessing of risks by taking overall uncertainties into account

6. Continuing effectiveness of traditional management accounting techniques within a rapidly changing business environment Traditional management is considered to be obsolete Organisation’s existing cost systems may hinder rather than help the introduction of the required changes therefore Change in business environment Change in composition of costs Change in information needs Change in  Manufacturing technology  Information technology  Engineering technology Overhead costs assume greater proportion of total manufacturing costs Requires change in the information system to be able to help for control & performance measurement

7. Emphasis on non-financial performance measures  Quality  Reliability  Lead times  Flexibility  Customer satisfaction Changing business environment Use of computer aided manufacturing technique (CAM) Use of just-in-time manufacturing technique (JIT)

8. RECAP  Assess the continuing effectiveness of traditional management accounting techniques within a rapid changing business environment. [3]  Evaluate how risk and uncertainty play an important role in long-term strategic planning and decision – making that relies upon forecasts of exogenous variables. [3]