Answer 1 (a)

To: Judy Lee

From: Micheal Sim
Subject: Leadership issues faced at Cheaper Bookings
Introduction
Greetings Judy!
This email is written to you in response to your previous email which asked me to assess
the strengths and weaknesses of Jack Ma’s leadership style and the issues of corporate
governance.

Personal supervision on all aspects of the business

Jack Tan is portrayed as a “control freak”. It is noted that he carries out personal
supervision of all aspects of the business. This style of leadership will lead to Jack investing
half of his time on supervision and the rest on strategic decision making. Considering his
recent post on social media with regards to the acquisition, this can cause speculation
among stakeholders and they would feel that this was not discussed with them before
hand. This acquisition should not have been posted online, instead should have been
discussed with the board and then carried out further. The best and professional way would
have been to have a press release in relation to the acquisition instead of posting it online.

Additionally, he confessed that he was very stressed with regards to the amount of work
load at work and so far there has been no remedial action to solve this issue. Being stressed
due to work will cause a hindrance to his strategic decisions and his mental health as well. It
would be better off for him to reduce his workload so that he is able to focus on the
strategic decisions mainly.
Autocratic Leadership Style
Jack found the company around 20 years ago and since then he has been the main core of
management and decision-making. This showcases a top-down leadership approach which
can be seen through his success in making the company achieve growth. The board is very
reluctant to make changes in the management style as they are pretty much happy with
how the business is growing. Also, the majority of the non-executive directors are related to
Jack, this seems deliberate from Jack’s side so that he is able to retain control of the
decisions being made over the board. The critical area here was that Jack was able to make
the company grow successfully using his leadership style throughout the years.
Additionally, the way that the decisions are run through the board has also led to quicker
decision making within the company, thus promoting to further growth. The stakeholders
are also aware that Jack is the sole leader of the company and he is good at what he does.
However, it should be noted that while there was success previously, the company is
currently facing slowed growth at 5% which can prompt loss in share price, this is most
probably due to the controversy faced on Jack’s leadership style as he is not able to focus
on all areas of the business due to enhanced workload and if this continues then the
company may fall into a loss in the near future.

(1b)
There seem to be several issues in relation to corporate governance that are being faced at
CB. There issues proved to be beneficial in the past but have now seemingly caused the
growth being affected negatively.

Board Structure
Jack Tan is currently the Chairman and CEO of the company. This should not be the case,
the chairman and CEO should be two separate persons. The roles should be separated and
so should be the duties this is because if Jack is working in both roles then he is basically
assessing his own role as the CEO hence, this is wrong. Furthermore, the board is
responsible for undertaking any strategic decisions and they are also responsible for
electing CEO and other executives on the board. Thus, if Jack remains the chairman then he
can have power to influence the board. Additionally, majority of the board are related to
Jack thus they may have no objective and may support him in whatever decision he makes,
even if it doesn’t prove well for the company.

The roles should be segregated, and the best recommendation would be that the
chairperson should be an independent NED. This will overcome any conflicts of interests
that may be going on. The role of a chairman is to ensure that the board functions
appropriately and he/she should encourage the board to participate in strategic decision-
making of the company, thus it should be ensured that the person appointed as Chairman
can fulfil this role.

Independence of Board
Eight out of five NEDs are directly related to Jack. This gives rises to a familiarity threat.
Furthermore, it should be noted that three directors were voted out of the board and this
decision was dismissed and the directors were reappointed to the board. This showcases
that Jack has influenced the board as he is supporting these NEDs. The majority of changes
to governance require at leat 68% voting rights and this is all obtained by Jack thus rest of
the board will not be capable of making any changes even if they wanted to.
A committee should be established to judge the independence of the NEDs. An audit
committee or a remuneration committee would be best for this work.

(2)
Briefing Paper
From: Eileen Ma (Internal Auditor at Cheaper Bookings)
To: Head of Internal Audit
Subject: Assessment of control weaknesses and recommendations
Introduction
These briefing papers contain an assessment of control weaknesses that had led to the
supposed financial misstatement issues. The notes also consist of recommendations for the
consequences faced in relation to this issue.
Commission estimates
There is no internal control of checking involved for the estimates that were given by the
department managers that were later collated. All these estimates could supposedly either
be materially overstated or understated as these are probabilities based on forecasts made
by these managers. Furthermore, the underlying assumptions used for the estimates
should be assessed by a senior personnel like a financial controller so that they can be
tested for their accuracy. Additionally, these estimates should have disclosures made
towards them along with assumptions and basis of estimation so that management cannot
purposely overestimate the forecasts to earn bonuses as these bonuses are based on
reported profitability. The bonus issue seems to be a prevailing issue that needs to be
investigated as the bonuses have already been paid out on the basis of forecasts.
Bonus payment
The bonus payments are based on profitability in forecasts. This issue could be solved by
basing the payments on actual results and profitability achieved in that period rather than
on forecasts. There is a risk that the payments of bonus are made for results that will not be
obtained in the future. This does not seem like an ethical practice and there is a chance that
if the results aren’t obtained then employees may refuse to return their bonuses. Controls
should be placed on bonus payments so that these bonuses are only paid to those who
achieve their targets. There is also an additional risk that the managers and financial
controller are working together to manipulate the forecasts so that they all can obtain the
bonus payments given that the financial controller was given a warning that his job will be
gone if he doesn’t achieve the target.
Collation control
There is no control present over the collation of estimates given by the managers. This is a
risk as these estimates could be manipulated by the managers so as to increase profitability
and earn bonuses. This seems to be the case here as the financial controller was given a
final warning to meet profitability targets or he could lose his job. This may have caused the
financial controller to manipulate the results to meet the targets in response to fear of not
losing his job. There should be a stringent investigation over the collation of different
estimates.
Financial controls
Estimates in the ledgers were not in line with the previous years hence, there should be
controls placed so that the estimates are made to be realistic. The estimates were normally
processed and posted onto the system thus, this may have resulted in material
misstatements that may have caused profits to be misstated as well. Controls should be
placed on the accounting system and an authentication system should be placed that
require authorization for inputs cross a certain limit on the system, this will lead to
unrealistic estimated to be investigated by senior personnel and the being approved based
on their approval.
(3 a)
REPORT
To: Board of Directors, Cheaper Bookings
From: Kevin Young, Business Risk Analyst at Cheaper Bookings
Subject: Cost-benefit analysis of new IT system
Introduction
This report consists of an evaluation of the cost-benefit analysis in relation to the new IT
system at Cheaper Bookings. The report also consists of the method of investment
appraisal to be used in relation to the IT system.
Cost-benefit evaluation
It should be noted that the development cost are reducing hence, the inflation impact
should be there in this regard.
Proper research should also be done on the cost of software maintenance and upgrades, it
should be seen whether both costs remain the same or not, and proper research should be
undertaken for this along with the vendors.
It should also be noted that the Training and Implementation costs are also the same,
whereas it should not be. Proper investigation should be undertaken for this.
Increased bookings highlight the impact, whether it is due to a price increase or due to an
increase of customers. This should be investigated further.
Investment Appraisal Techniques
As seen from the summary of costs and benefits, various investment appraisal techniques
can be used to carry out a cost-benefit analysis for the new IT system.
Some investment appraisal techniques are as follows:
• payback period
• internal rate of return
• net present value
• accounting rate of return
• profitability index.

Two very common methodologies for evaluating a project are the internal rate of return
(IRR) and net present value (NPV). However, each approach has its own distinct advantages
and disadvantages. Here, we discuss the differences between the two and the situations
where one method is preferable over the other.
Both IRR and NPV are useful to determine what projects to accept and what profitability a
company can expect.
The internal rate of return estimates the outcome of a project by analyzing cash flow and
reporting an expected percent return.
While the internal rate of return is simple to calculate and understand, it's not useful for
analyzing projects with multiple periods of cash outflow or multiple discount rates.
The net present value estimates the outcome of a project by adding all discounted cash
flows together to report a single positive or negative dollar amount.
Though the net present value method is more flexible, it isn't useful when trying to
compare projects of different sizes or analyze a project's return timeline.
So in the above scenario, the NPV method is much better because it will go to provide with
the absolute number useful for the board.
(4)
Briefing Notes
From: Rose Lin, Finance Team
To: Finance Director
Subject: Potential acquisition of Rides4U
Introduction
These briefing notes consist of a discussion in relation to the potential acquisition of
Rides4u. These notes will mainly discuss the factors to consider before the potential
acquisition.
Rides4u valuation
At first glance is seems as though the company is significantly overvalued. The reported
revenue last year was $412 million, whereas this year it was $909 million which is double
the profit of last year although losses remain the same. This may be the case due to the
company seeking a floatation in the near future hence they may be reporting higher profits
and lower losses this year so that their company is valued higher for the flotation. It may
also be that the actual figures be negative.
Competitor
The company has a competitor that is very significant in terms of market share and
valuation. This competitor may cause the market growth to be limited for local and
international market. The competitor is already operating in 20 counties whereas Rides4u
only operates in Europa, this is a major factor and there is an issue that Rides4u may not be
able to compete with this competitor is it is a huge competitor. This can lead to company
valued in much lower terms in relation to market share and growth prospectus.

Influence at Rides4u
There will be certain people who has influence at Rides4u , like the CEO or chairman or
private investors. Either of these influential people will hold a significant part of the
company and will have the power to influence the decision-making at the company. There
is a possibility that this does not settle well with Jack as he is a person who likes to be in
control of all aspects of the company hence there is a significant chance of a culture clash
and synergy mismatch.
Future over-optimism
Rides4u seems very invested into the future of self driving cars and cost reduction in
association with no drivers. This can make it very difficult for them to retain staff and can
lead to a high staff turnover as the employees will be very reluctant to join a company that
has prospects of eventual layoffs. There is also a possibility that the ambitious plans on self
driving cars does not work out. Furthermore, considering that Rides4u is much smaller in
comparison to their competitor, it is very odd that they would want to even compete with
such a big competitor for making self driving cars. There is a possibility that they may face
losses if they go too deep into such technological advancements.
Letter of intent
Ensure that your letter of intent of Europa company is non-binding, except for binding “no
shop” provisions. A letter of intent helps identify key business points and demonstrates
financing sources and ensures that the deal is kept real. Make sure that it is a non binding
commitment to complete the purchase without customary buyer protections found in a
final purchase and sale agreement. There should be a binding commitment by the seller to
not use your offer to shop for a better deal.
(3 b)
Slide 1:

Significant risks arising from the new system

• Unrealistic Expectations
• Adopting Off-the-Shelf Software
• Inadequate Resources for Implementation and Testing
• Poor change management

Slide 1: Speaker Notes

Unrealistic Expectations
If expectations don’t align with what the software can actually deliver, Europa co. will
struggle to meet these goals. Such misalignments can turn out to be costly mistakes.
Adopting Off-the-Shelf Software
The vendor may also provide only generic support that’s inadequate for your specific
business needs. Many software don’t offer a simple upgrade path from one version to
another. Finally, the software may lack a feature request process and product
enhancements such as plugins or add-ons to extend its functionality for your specific use
cases.
Inadequate Resources for Implementation and Testing
One reason for software implementation failure is that organizations depend on the vendor
for end-to-end implementation and testing. While the vendor’s job is to implement the
software and customize it to your specifications, only you know your business best, and you
must have the right resources in place to manage its implementation, testing, and go-live.
Poor Change Management
For successful software implementation that delivers on its goals, you must manage the
people-side of the change. Prepare staff with proper training, onboarding, and guidance to
help them adapt to the new system and modify their behavior accordingly.

Slide 2:

Recommendations for risks arising from the new system

• Implementation timeline
• Confirm vendor support
• Identify resources
• Staff management

Slide 2: Speaker Notes

Implementation timeline
Define the implementation timeline and critical milestones to keep the project on track.
Finally, identify the must-have deliverables that the vendor must provide to assure that
stakeholder expectations will be met.
Confirm vendor support
Confirm that the vendor will support the product for the entire period you plan to use it.
Company should Inquire about premium support or support per your specific service level
agreements
Identify resources
Europa company should identify dedicated resources to work with the vendor on
implementation and pre-deployment testing within the project timeframe. Involve the
relevant stakeholders and process owners throughout the implementation lifecycle to
assure you get the solution you expect and need.
Staff management
For successful software implementation that delivers on its goals, you must manage the
people-side of the change. Prepare staff with proper training, onboarding, and guidance to
help them adapt to the new system and modify their behavior accordingly.
If possible, Europa company should identify a few testers and “evangelists” from the end-
user group to test the product and drive its adoption after deployment. This will also help
the team identify administrative or business process changes that will be necessary to
facilitate the success of the new software.