EDUQUAL DIPLOMA IN BUSINESS MANAGEMENT (BM - SCQF LEVEL 11)

CONCORD BUSINESS COLLEGE

ASSIGNMENT 3

NAME: BENJAMIN HAYFORD ADU

Table of Contents
Executive Summary3

Task 14

Resource Allocation in Organizations4

Financial Statement Analysis6

Evaluating organizations’ tangible and intangible resources7

Task 211

Investment Appraisal11

Application of Investment Appraisal technique13

Risk Management for international organizations19

References22
Executive Summary
The successful operation of companies in the 21st century has a lot to do with the manner in which its finances are managed and
controlled. It is a well-established fact, that human resources are the most valuable assets in organizations; however, an organization
without a strong financial base probably has more problems including the cumbersome task of managing its workforce and meeting
the demands of production. This assignment highlights on the resources available in organizations and how imperative they are to the
production cycle and investors. It also emphasizes on sources of finance and financial investment sources that companies can rely on
to expand their operation across international borders as well as the tax and legal implications such expansions can come with. Risk
management has also been discussed as another important aspect of managing an organization.
Task 1

Resource Allocation in Organizations

The value of resources can be a subjective matter for discussion considering among other things that, what may be a resource to a
particular company may be a liability to another. Information and Knowledge as a resource is what would perfectly describe the
assertions above because, either could be input or output depending on which organization it is and the process chain that exist there
for their production activities. The three main resources a modern organization may not be able to survive without are Financial,
human and Physical (operational) resources.

Financial resources refer to the liquid and fixed assets that are injected into the company for and during its formation to meet the needs
of purchases and acquisitions that will be needed for the effective running of the organization. Financial resources may be sourced
from local or international banks, shareholders, and creditors (suppliers) among others, but it is important for instance to consider the
interest rates of the banks should it be necessary to source for either short-, medium- or long-term loans from them for the business
operations. From the internal perspective, having a solid financial backbone in the organization can facilitate production and meet
customer needs at a profit. It increases morale amongst the employees because the needed equipment and tools for work will be
available alongside the prompt payment of salaries and other benefits for workers. Externally, suppliers get their payments on time
and for that matter, the supply chain is always kept fluid without shortages of supplies (raw materials) due to lack of cash flow.
Companies that do well financially are also attractive to shareholders and get new stakeholders to purchase their shares on the stock
market. Poor financial management in organizations will therefore lead to poor morale and low productivity as well as being
unattractive on the stock market.

Human Resources are the second resource base in organizations that cannot be undermined. The people (employees) are the needed
internal agents who will coordinate the other resources to be financial and physical (operational) resources for the enhancement of the
production cycle. The human resources in this regard may also be external agents like the promoters who were engaged in setting up
the business because prior to incorporation, certain business activities are carried out which may be ratified by the organization as an
approved activity for which the organization will be responsible in terms of the profits or liabilities that may arise from such
transactions. Having a well-motivated workforce boosts corporate image and ultimately gets the return of higher productivity whilst an
organization with poor labour relations is often faced with industrial strikes and lockouts leading to massive losses in revenue.

The third most important resource as described above is the physical resource which may also be termed as operational resources
because they are the tangible facilities that the business cannot operate without such as the machines, buildings, heavy-duty equipment
etc. physical resources often needs maintenance and the best form of maintenance in the 21st century is routine or preventive
maintenance which simply means daily and continuous checking and monitoring of physical resources to prevent possible break
downs that could cause shut downs leading to financial losses to the organization. It is essential for organizations to have a good stock
of spare parts in its warehouses to keep production on-going whenever the need arises to change some parts of the physical resources
(assets) especially those that are critical to operations such as pumps, breakers, screws, bolts and nuts alongside impellers in the
production plant.

Strategically, one important tool that can be used to plan the allocation and effective utilization of resources is the gap analysis. The
gap analysis is a model used to determine the current position of an organization, where it aims to be and the resources, it will need to
get to its desired destination. The questions, ‘where are we now?’, ‘where do we want to be?’, ‘how will we get there?’ will have to
be answered after conducting an audit to determine the existing gaps. After this audit has been done, Management then decides to
meet and consider the available resources and those that will be needed to begin the process of filling in the identified gaps separating
the organization from its current state to the desired state. Management then identifies the required resources to be mobilized and
allocated to the needed sections for this goal to be achieved.
At AngloGold Ashanti Limited, a company incorporated under the laws of Ghana as a gold mining company, the financial, human and
physical resources are highly important assets that management places high premium on. The company is listed on the South African
and Ghanaian stock exchanges as a public company that trades in Gold. One of their values is mining in safe conditions which has led
to the jargon, ‘if it is not safe, we will not mine. This comes from their occupational health and safety policy implying the importance
of the employees to the organization for which they invest heavily in annual training and development programs.

The financial resources are high obviously due to the commodity they trade in, and coupled with their great management style; both
local and international banks are ever ready to support them financially in any way possible. About five years ago, the Obuasi mine of
the company closed down for maintenance and restructuring but it is now operational processing gold of high-quality meeting
international standards. The maintenance team is made up of experts from across the globe and local technicians who have the
requisite skills to perform the routine maintenance duties as expected of them. This leads to the high availability of the gold processing
plant for their production.

Financial Statement Analysis

The financial statement of a company tells how well or bad it is doing in terms of its operations and stakeholders especially investors
rely strongly on such financial documents to conclude on their decisions whether or not a company is worth investing in. In Ghana, the
Registrar General’s department is an office where all companies are mandated to file their annual returns so it is a credible source
where stakeholders can request for and have access to such vital information about corporate entities. Another source of financial
statement is the balance sheet of a company. The balance sheet is a statement which describes the assets, liabilities and capital of a
company providing further details on expenditures and income over a period usually the preceding year. The gold business went belly
up for about four years but lately, it is booming with the world market seeing a surge in its prices. In fact, the boom urged investors to
revamp the AngloGold Ashanti operations in Obuasi and it has since been operating efficiently and doing well financially as evident
in its profit and loss accounts. The cost of operation as compared to revenue being generated from sales determines the profitability of
the venture. One tool used to evaluate the financial strength of an organization is using financial ratios analysis. This analysis helps
clarify the status of a company’s state of operations and liquidity, profitability, and leverage ratios are its common forms. The liquidity
ratios tell how well a company can settle its debts and an example is a current ratio which describes how much of a company’s assets
can be converted into cash within a twelve months period to offset its liabilities. The higher the current ratio of a company, the more
viable it is for investors to buy in. the profitability ratio informs stakeholders how good a company is at making money using the profit
margin ratios after the sale of the company’s products. Finally, the leverage ratio tells how much debt the company relies on to keep
its operations ongoing using the debt ratio to analyze how much of the company’s assets are being financed through debts.

As it stands, AngloGold Ashanti is making huge profits due to the high demand for gold on the global market with an ounce selling at
$1,700.00 cost of operations in Ghana in terms of labour and other raw materials is not too expensive so having a favorable
government and fiscal policies backing the gold operations of the company in terms of the tax holidays and reliefs makes it a highly
profitable business in the country. The current operational and labour cost of the organization is within the range of $950.00 which
implies that the company is making in excess of over $500.00 net profit for every ounce of gold sold.

Evaluating organizations’ tangible and intangible resources

According to Mintzberg & Lampel (2003) organization’s resources can be grouped into two namely; tangible and intangible resources.
The tangible resources are those that have physical properties and can be felt and seen such as land, cars, machinery, furniture,
buildings, etc. The intangible resources on the other hand are those valuable resources of the organization that usually have no
physical existence and therefore cannot be seen. Intangible resources do have commercial value and they include trademarks,
copyright, goodwill, and patent. Financial management software and Human resource information systems will all be classified as
intangible resources that enable organizational management to be effective and efficient. How well an organization is able to protect
its patent and register its products for copy right protection can go a long way to produce financial benefits that otherwise could have
been lost due to imitation on the market without sources. Global chain companies like Burger King and KFC have goodwill and
patent rights that have been highly valuable intangible resources to them over the years. It is reasons such as these that influence other
private business owners to acquire the rights and patent to sell their products using the brand in other countries.

To assess the performance of an organization, its key resources need to be monitored and evaluated to create the enablement for the
identification of the areas that are exceptionally well, fairly okay, and nonperforming variables that need to be dealt with. In terms of
the financial resource, the profit margin and net revenue can be used to determine their viability. When the cost of operations is far
less than the cost of sales, then the organization could be said to be making good profits. The debt-to-equity ratios also determine how
well the financial position of the company is. The cash flow statement can also be used to analyze the state of a company’s finances in
determining the inflow and outflow of money through the company’s account. This can be a significant measure of identifying the
cost centers of the organization, knowing which areas are consuming more of the operational budgets for a management decision on
where the focus should be to save money and maximize productivity.

In terms of human resource performance evaluation, it is essential to set targets for the personnel on an individual basis and also as
teams to be achieved in line with production. When targets are sets, then outputs can be bench marked against the expected outputs to
determine whether or not progress is being made. Some of the Human Resource metrics are quantifying attrition rates and budgetary
allocations made to training new employees as a result of labour turnover which otherwise could be used as investment to further
production.

This tells management why employees should be treated well to lower the rates of their exodus from the company. Yeung and
Brenman (1997) have argued that there is a significant connection between an organization’s human resource management practices
and its performance and Ditmer (2002) has also emphasized that for an organization to gain that required competitive edge, human
resource management practices must be business driven rather than being human resource driven.

The management of people at AngloGold Ashanti limited focuses on the business goals and how they can derive the motivation and
satisfaction from employees to achieving them through the initiation and implementation of best management practices such as
employee training, communication, labour relations and reward systems that are competitive in the industry. This accounts for a
reason why the company has not recorded any strike action for over ten years. Their occupational health and safety policies and
practices are also solid with evidence of international standards being practiced. Same has resulted in low occupational injuries and
health related issues.

Costing and Pricing Management

The pricing strategies of most organizations have changed over time with respect to the allocation of direct and indirect cost
components of the production process. The classical mode of cost application to labour and machine have gradually been phased out
because it had a disadvantage of excluding certain cost component related to technology and automation for instance.

In simple terms, there are some parts of the production process that is on automation these days but the technology being used for it
could either be licensed and for that matter needs to be paid for; a cost that must be incorporated into the overall pricing strategy of the
organization. The anomalies and negativities associated with the traditional costing and pricing strategies resulted in use of activity
based costing technique which takes into account the series of events that occur in the production cycle considering all relevant units
and factoring their cost components into the final pricing strategy.

Having an activity based costing system in any organization is ultimately essential because among other things, it helps improve the
business processes by critiquing which activities add value to the production process and which ones need to be re-considered by for
instance, giving a clear picture of the process flow diagram in the organization. Activity based costing also helps in budgeting within
the organization by enabling top management to identify cost drivers and having realistic scenarios of how much of funds need to be
apportioned to a particular cost driver within the production cycle.

Benchmarking is another strategy that can be used by organizations in their costing strategy. With this approach, the past performance
say in the preceding year would be taken into account or using the activities of competitors as a bench mark to inform management on
the kind of costing strategy the company could use. On disadvantage however with bench marking is that, the circumstances that led
to a huge profit margin in a particular year may be entirely different in the existing or ensuing year. A typical example is the
challenges Covid-19 has posed to organizations leading to lay-offs, and reduction in business production for several companies.

Also, the structures of one company may differ from another thus, using a competitors’ system to benchmark ones company may be
business jeopardy due to the diverse nature of their structures of operations. Where it matters, management has to adopt activity based
management to reduce or increase its product costing to manage the profit margins with respect to the market variations.

Cost Management in organizations is an important element because costs determine profitability and losses in the production cycle.
Where the cost of production is high, profit margins will be lower and companies gain more profits when they are able to minimize
operational costs through the value chain. In this regard, the primary and secondary activities in the value chain need to be scrutinized
to do away with wastages. For instance, in the logistics management, products have to be bought in bulk and transported over long
haul rather than buying in pieces and transporting over long distances. Managers these days are inclined to the use of cost volume
profit analysis due to its ability to among other things, provide the analysis of financial effect of decisions made by management.

Costing is an essential element in the production cycles of every company the sells products and because of its ability to determine the
profitability or otherwise of companies, issues concerning budgeting, cost drivers and efficiency in management need to be considered
a priority in management to keep the business running at profitable margins.
Task 2

Investment Appraisal
An investment appraisal is the analysis of how profitable a business entity can with respect to an asset in terms of its value, price and
whether or not it fits into the business strategy. In simple terms, companies conduct an assessment of the assets they purchase for their
production activities in respect of the life span of the asset and how beneficial it will be to the company in terms of the products these
assets will be used for and the income same will generate for the company over its life span taking into account, depreciation factors.
Investment appraisals are done rigorously when organizations are merging or expanding their business to other countries. The tax
regimes of the new countries have to be understood in relation to their asset acquisition because the cost of customs and excise duties
alone can make the purchase of an asset overseas an unworthy venture compared to the selling prices on the local market.

There are several reasons why investment appraisals are conducted and they include; the maximization of shareholder wealth by
ensuring that the investments being made are in sync with the corporate objectives and strategy. In addition, an appraisal is ultimately
imperative for the use of investors’ money to the purchase of items of equipment for the company regardless of how critical such
equipment may be. So long as money is being spent, there is the need for due diligence in terms of availability, quality, alternative
products etc. Considering the fact that the risks associated with making investment decisions, it is a remarkable step to take in
ensuring that future cash flow values will be higher than the investments made.

B. Techniques of investment appraisal

The payback method is the first technique which most organizations use in making their investment appraisals although there is no one
prescribed method that is a fit for all situations. With the payback method, measures how long it will take the organization to pay back
its investments with reference to the expected revenues of the ensuing years. This method is most suitable for companies that have a
set period where management can predict the availability of cash flow estimates.
One of its advantages is that it’s simple to use and easy to understand as well as its usage for quick assessment about the viability of a
particular investment in the organization. That said, the payback method however, is noted for the disregard of the total returns over
the life span of a project. This method is most suitable for short term projects but may not be same for long term projects. It also looks
at paying back the investment but not necessarily its profitability.

The second most relied upon technique is the return on capital employed (ROCE), considers the worth and value created from the
investment made. It is calculated by taking the project returns over the capital employed. It gives the return generated by investment
by comparing the accounting profit to the required capital outlay of the investment. This is often the organizations cost of capital such
as the interest rate charged for a loan from a bank.

This method focuses more on the profitability or viability of the investment and it is also simple to use. It can easily be used to
compare different investment options. It however ignores the time value of money because it takes many years to generate the needed
returns. The level of risk involved also needs to be assessed separately such as the subjectivity of calculating the depreciation rate of
an asset. The net present value is another technique used to make such assessment and it is the difference between the present value of
cash inflows and the present value of cash outflows.

It is a remarkable technique used in the budgeting of capital intensive projects as well as investment planning to assess the profitability
of a project or asset an organization was to invest in. Having a positive net present value means the project is worth investing in.

Finally, the internal rate of return is also techniques used to appraise investments in organizations. The internal rate of return (IRR) is
a metric used in capital budgeting to estimate the profitability of potential investments. The internal rate of return is a discount
rate that makes the NPV of all cash flows from a particular project equal to zero. IRR calculations rely on the same formula as NPV
does.
Application of Investment Appraisal technique

CURRENCY CONVERSIONS
EXPECTED REVENUE EXPECTED
COUNTRY ESTIMATED YRS (10%) (GBP) EXPENSES(GBP) APPROVAL FEE(GBP)
- -
USA 0 555,080 210,000 22,000
- -
1 504,618 190,909 20,000
- -
2 458,744 173,554 18,182
- -
3 417,040 157,776 16,529
4 - -
 379,127 143,433 15,026
- -
5 344,661 130,393 13,660
- -
6 313,328 118,540 12,418
- -
7 284,844 107,763 11,289
- -
8 258,949 97,967 10,263
- -
9 235,408 89,060 9,330
-
10 214,007 80,964
 - -
2. FRANCE 0 404,558 190,000 25,000
- -
1 367,780 172,727 22,727
- -
2 334,346 157,025 20,661
- -
3 303,951 142,750 18,783
- -
4 276,319 129,773 17,075
- -
5 251,199 117,975 15,523
- -
6 228,363 107,250 14,112
- -
7 207,602 97,500 12,829
- -
8 188,730 88,636 11,663
- -
9 171,572 80,579 10,602
-
10 155,975 73,253
3.SWITZERLANDD
- -
0 320,175 200,000 30,000
- -
1 291,068 181,818 27,273
- -
2 264,607 165,289 24,793
- -
3 240,552 150,263 22,539
- -
4 218,684 136,603 20,490
- -
5 198,804 124,184 18,628
- -
6 180,730 112,895 16,934
- -
7 164,300 102,632 15,395
- -
8 149,364 93,301 13,995
9 - -
 135,785 84,820 12,723
-
10 123,441 77,109 -

Using the Net Present value approach to determine the viability of the foreign investment for ABC company Limited in the various
countries, the breakdown is as presented above. Having an investment in USA will ultimately increase the shareholder value and
should be given the priority. The investments in Switzerland and France are equally worthy to make because from the figures, it is
economically viable.
NET PRESENT VALUE (NPV) APPROACH

COUNTRY OF OPERATION NPV

USA GBP 1,701,609

FRANCE GBP 1,124,394

SWITZERLAND GBP 367,527

Risk Management for international organizations
In the 21st century era, risk management is a formidable part of organizational management hence leadership is engaging consultants
and experts in the management of risk to help companies identify and draft risk matrixes that can impact on their respective
organizations. Risk in organizational management refers to an occurrence, act or omission that can have adverse effect on a
company’s production, reputation or revenue generation. It is absolutely essential for international or multinational companies to have
a comprehensive risk matrix that covers political, economic, regulatory, fiscal and socio-cultural risk.

Political risk is associated with how the ruling government of a country of operation can facilitate the growth or failure of the
business’ operations. There have been instances in the past where companies originating from hostile countries were banned from
operation simply because of a change in foreign policy. This phenomenon is still happening in the modern era where companies from
India with operations in Pakistan have suffered huge losses due to the political tensions between the two countries. Similar
occurrences affected American businesses operating in China when the recent tariff hikes came into existence due to high taxes on
Chinese goods been exported into America. In a country like Ghana, companies that have a significant amount of its shares being held
by Ghanaian citizens enjoy certain tax reliefs compared to companies being owned fully by foreigners. These are some of the issues
that need to be considered by multinational companies in respect of political risk management as well as where to raise funds for the
organizations’ operations; whether from a local or foreign bank considering the lending rates of either option. Companies can mitigate
these risks by donating towards government project such as the Covid-19 fund the government of Ghana is using to raise funds in its
fight against spread of the virus.

The second risk that needs to be considered critically is the economic risk of the country of operation. Inflation is a major player in
this kind of risk analysis as it determines how much of foreign currency (usually US Dollars) will be needed to make purchases from
the international market.
In countries like Zimbabwe where the inflation rates has been awful for over a decade now a company that imports machinery for
operations will require thousands of local currency to obtain one (1) US Dollar which will also affect the return on investment due to
the instability of the local currency. The size of a country’s economy coupled with its investment friendliness does affect the level of
foreign investment it can attract.

Regulatory risks are the impact changes in statutory and legal framework for particular operations or business sector can have on a
particular organization. Unexpected changes in minimum wage of labour can affect the budgetary allocations of a company where
companies may be required to pay more for their labour. Another form of this may be the drastic change in the ban of certain
chemicals in producing certain items into the market. Let assume a company imports thousands of tons of alum for their water
purification business over a period of one year but three months after the import, the regulatory body Environmental Protection
Agency (EPA) of Ghana releases a new process backed by an Act of Parliament for water purification, banning the use of alum. Its
ramification will be a huge loss for the water purification company due to the regulatory body’s directive. Sometimes, these risks will
not surface due to the release of new directives but also, the implementation of existing laws governing the industry. This risk can be
dealt with by companies relying on experts in the field of operations such as legal advisors and experienced personnel who have been
in the practice for long. Companies can also engage in the best production practices that will be environmentally sensitive and with
strict adherence to regulatory requirements.

Finally, socio-cultural risks which mainly depend on the taste and preferences of the people in the country of operation needs to be
addressed. The way a group of people live, in terms of their clothes, food, accommodation choices, religion etc. have an impact on
their preference for what the wear and eat as well. For instance, establishing a ham production company in an Arab country or Jewish
community will not suffice due to their religion which abhors the consumption of such products. If we consider the dress preference of
the population for instance, it will be highly competitive for an organization to produce local fabrics in Nigeria, where a larger portion
of the population patronize more of local fabrics for their clothes which they use for official and traditional functions as well. In the
Nigerian Senate for instance, hardly will any law maker be seen wearing a foreign made suit, however, almost all of them are noted in
their local African print as a reflection of their culture. These are some of the risks international organizations need to consider before
making the decision to start operations in other countries.

To conclude, companies ought to put strong financial management systems in place to protect the interest of shareholders and other
stakeholders as well as the brand they carry in actualizing the vision they have. Risk management has become a significant part of 21st
century corporate governance and has become a formidable part of the International Standard Organization (ISO) 9001:2015
requirement where certified companies are supposed to identify the risks and opportunities that pertain to their areas of operations.
References
1. Mintzberg & Lampel (2003)
2. Yeung, A.K. and Berman, B. (1997) Adding Value through Human Resources: Reorienting Human Resources Measurement to
drive Business Performance: Human Resource Management, 36 (3), 321-335.
3. Dittmer, P.R (2002) Dimensions of the Hospitality Industry. (3rd Ed). New York: John Wiley and Sons.
4. https://www.apm.org.uk/resources/what-is-project-management/what-is-investment-appraisal-and-project-
funding/#:~:text=Investment%20appraisal%20is%20the%20analysis,of%20affordability%20and%20strategic%20fit.
5. https://www.investopedia.com/terms/n/npv.asp#:~:text=Net%20present%20value%20(NPV)%20is,a%20projected%20investm
ent%20or%20project.