What is Business Risk? It is a term that explains the difference between the expectation of return on investment and actual realization. In CAPITAL BUDGETING, several alternatives of investments are examined before taking an investment decision and only then the Managing Director of the firm along with financial executives gear up for investing in a project that is sound and feasible. Even then the project may not become viable owing to the fluctuations in the economic environment. Money Manipulation So, the million dollar question arises, whether to invest and if invested, will it fetch me profit? See, you cannot have the cake and eat it too. Risk factor prevails in all kinds of environment and we try to over react in a business arena since it involves huge investments. But remember, MONEY WILL MULTIPLY IF YOU MANIPULATE IT WITH CARE. Business firms commit large sums of money each year for capital expenditure. It is therefore essential that a careful FINANCIAL APPRAISAL of each and every project which involves large investments is carried out before acceptance or execution of the project. These capital budgeting decisions generally fall under the consideration of highest level of management.  Factors of risk to be considered before investing: Time value of money Pay back period Rate of return on investment(ROI) Uncertainties in the market Cost of debt Cost of equity Cost of retained earnings Factors to be monitored after investing: Maximising profit after taxes Maximizing earnings per share Maintaining the share prices Issue of dividends Ensuring management control Financial structuring Cost of capital refers to the opportunity cost of the funds to the firm I. e., the return on investment to the firm had it invested these funds elsewhere. Servicing the debt and Danger of Insolvency While making the decisions regarding investment and financing, the Finance Manager seeks to achieve the right balance between risk and return. If the firm borrows heavily to finance its operations, then the surplus generated out of operations should be sufficient to “SERVICE THE DEBT” in the form of interest and principal payments. The surplus would be greatly reduced to the owners as there would be heavy Debt Servicing. If things do not work out as planned, the situation becomes worse, as the firm will not be in a position to meet its obligations and is even exposed to the “DANGER OF INSOLVENCY“. Working Capital Management Considering all these factors, we have to come to the conclusion that FINANCIAL MANAGEMENT is like the BACKBONE of a business firm and WORKING CAPITAL MANAGEMENT will be the blood flow infused into the body. Risks are inherent in a business environment whose management is quite possible with the right kind of farsightedness and planning. Luck does not favor anybody who is poor in planning and lack hard...

Definitions of Human Resource Management:  1. “A series of integrated decisions that govern employer-employee relations. Their quality contributes to the ability of organisations and employees to achieve their objectives.” (Milkovich & Boudreau, 1997). 2. “Concerned with the people dimension to management. Since every organisation comprises people, acquiring their services, developing their skills, motivating them to higher levels of performance and ensuring that they continue at the same level of commitment to the organisation are essential to achieving organisational goal. This is true, regardless of the type of organisation: viz. government, business, education, health, recreation, or social action.” (Decenzo & Robbins, 1989). 3.”The planning, organising directing and controlling of the procurement, development, compensation, integration, and maintenance of human resource to the end those individual, organisational, and social objectives are accomplished.” (Flippo, 1984). 4. “The organisation function that focuses on the effective management, direction, and utilisation of people; both the people who manage produce and market and sell the products and services of an organisation and those who support organisational activities. It deals with the human element in the organisation, people as individuals and groups, their recruitment, selection, assignment, motivation, empowerment, compensation, utilisation, services, training, development, promotion, termination and retirement.”(Tracey,1994 ) Knowledge Workers Human resource management is therefore understood as the all significant art and science of managing people in an organisation. Increasing research output in behavioral sciences, new trends in managing ‘knowledge workers’ and advances in training methodology and practices have led to substantial expansion of the scope of human resource management function in recent years. HRM is not just an arena of personnel administration anymore but rather a central and pervasive general management function involving specialised staff as assistants to main line managers. Managing employee relationships is the role of the Human Resource department Human Resource Management is a process of valuing and developing people at work, this includes: Recruitment and selection Employee communication and engagement (participation) to increase employee retention Training and development  Leadership WHAT IS YOUR GREATEST WEAKNESS Labour turnover & staff retention Labour turnover refers to the proportion of a workforce that leave during a period of time (usually one year) Labour turnover =  number of staff leaving during the period x 100 average number of staff Staff retention refers to the ability of a firm to keep its workers. The disadvantages of having a large proportion of staff leaving each year include: The cost of recruiting replacement workers The cost of training the new workers  Loss of productivity whilst replacements are found  Loss of experienced workers  Negative impact on reputation WHAT IS YOUR GREATEST STRENGTH Methods to control turnover: 1. Financial methods of motivation Bonuses Profit share Fringe benefits 2. Non financial methods of motivation Employee engagement and empowerment Training and development Promotion opportunities 3. Improved Human Resource Management procedures  Four Fundamental Principles of HRM: Human Resource is the organisation’s most important asset; Personnel policies should be directed towards achievement of ENTERPRISE goals and strategic plans; Corporate culture exerts a major influence on achievement of excellence and must therefore be    strengthened with consideration of employee welfare. Whilst integration of corporate resources is an important aim of HRM, it must also be recognised that all organisations are ‘pluralist societies’ in which people have differing interests and concerns, which they defend and at the same time function collectively as a cohesive group. →Evolution of...

METHODS OF DECISION MAKING A. Marginal income or Cost analysis: This method is used to compare additional revenues arising from additional costs. Break even point is that point in which the cost equals revenue and it can be defined as a no loss, no gain situation. Profit can be enjoyed by a firm only when the revenue exceeds cost that is after crossing the break even point. A manager must have all the necessary data pertaining to total cost and its various components in order to arrive at a decision. B. Cost-effective analysis: This tries to find out the cheapest way in reaching the objective or shall we say the greatest value for expenditure. Mass production facilitates in factorizing the economies of scale where the objective is oriented towards output and sustained availability of the product year round. C. Experience: The mistakes committed become great lessons in due course of time generally and this holds good for managers involved in making crucial decisions. It ensures right decisions to be taken in similar situations. But one has to remember that decisions are inclined to make an impact on future events. So, it is up to the manager to take the right kind of decisions using his intuitions as well as experience. The late chairman of SIMPSONS GROUP, Anantharamakrishnan was very intuitive and under his leadership the organization touched new heights and diversified its activities like never before. Note: Anantharamakrishnan is remembered for his successful business practices, efficient management of the labour unions and for triggering the growth of the automobile industry of Chennai which has earned the city the epithet “Detroit of India”. As a result he himself came to be remembered as the “Henry Ford of South India.” Courtesy: Wikipedia D. Experimentation: Why people go for test-marketing? Because when the factors are intangible, you have to try out every alternative only through experiments or trail and error. Market surveys and questionnaires are useful tools when it comes to launching of a new product in the target market. E. Research and analysis: This involves the application of tools and techniques of operations research  to the process of decision making based on mathematical functions. Risk-analysis and Decision-trees are the other methods used that illustrate decision points, chance events, and probability of each course of action. TYPES OF DECISIONS: · Routine and Strategic: Routine- regular decisions involving day to day affairs of the firm- leave procedures, work atmosphere. Strategic decisions are central to the firm’s operations- price fixing, product elimination etc. · Individual and Group decisions: Managers at the top level are inclined to take individual decisions and some important inter-departmental decisions may be taken up by members of the respective groups. · Programmed and Non-programmed decisions: Decision taken by the low-level personnel which are regular and repetitive in nature are programmed-late attendance, medical compensation etc., Non-repetitive and unusual decisions like mergers and acquisitions, collaboration agreements belong to the non-programmed category. · Simple and Complex decisions: Where the problem is simple but the outcome has a high degree of certainty are called mechanistic or routine decisions. Where the problem is simple but the outcome has a low degree of certainty are judgmental in nature. Where the problem is complex and the outcome has a high degree of certainty are analytical and where the problem is complex but the outcome has low degree of certainty are adaptive decisions. MAKING EFFECTIVE DECISIONS: · Timing of decisions: A new product only if introduced into the market at the right time will be a success for which the manager should select the appropriate time for taking the decisions. · Effective communication: The decisions taken should be communicated down the line for effective implementation. · Top management support: The support of top management is indispensable for effective decision-making since it...

Before embarking on the subject let us find out what delegation is and how the process occurs in an organization. What is Delegation: A manager or a superior cannot think of doing all the jobs by himself. It becomes therefore necessary to delegate some of the jobs to his subordinates to ease the pressure and assign the required authority to carry on with those tasks. This downward pushing of authority is called delegation of authority. Art of Delegation Delegation takes place when one person gives another person the right to perform work on his behalf and in his name. It is the process of entrusting part of the work by the superior to his subordinates. How to Master the Art of Delegation? PROCESS OF DELEGATION 1. Step one is Assigning Responsibility: The superior directs the subordinate to perform a task with due assistance and training. 2. Step two is Granting Authority: To accomplish the task some authority has to be given to the subordinate to procure the essential resources from the organization like materials, equipment, labor etc., 3. Step three is Creating Accountability: The subordinate is expected to accomplish the task within the stipulated time period and report to the manager regarding the acquisition, use and replacement of resources. ADVANTAGES OF DELEGATION   It reduces the work pressure of the manager  Leads to better decisions  Speeds up decision making  It improves the morale of the employees  Creates a feeling of mutual trust between the superior and subordinates  Helps to create a formal organization structure BARRIERS TO EFFECTIVE DELEGATION  Fear of being exposed: Some superiors fear that their weaknesses might be exposed Difficulty in briefing the actual requirement- depends on the quick wit of the employees Lack of confidence in subordinates Fear of loss of power“I am OK you are OK “ attitude of the managers PRINCIPLES OF DELEGATION OF AUTHORITY Principle of Delegation by Results Expected: The authority assigned to the subordinates should be sufficient enough to ensure their ability to accomplish the results expected.Principle of Absoluteness of Responsibility: One has to understand that responsibility can never be delegated and that the superiors are responsible for the activities of their employees and the performance of the employees has to be absolute towards their superior’s expectations.Principle of Parity for Authority and Responsibility: There should be a perfect balance between assigned authority and responsibility. One cannot be held responsible for a task where he has limited authority and too much of authority with too little responsibility can prove to be dangerous.Principle of Unity of Command: If there is a single superior to listen to, conflicts will be greatly reduced and it will be easy for the subordinate to have a personal rapport with the superior.Authority Level Principle: A manager who has the authority to make certain decisions must necessarily use his discretion and should not try to overlook or pass it on to the top management.Principle of Functional Definition: The objectives, tasks, responsibility and authority must be clearly stated to the individuals involved to facilitate improved performance to accomplish enterprise objectives. Managers fail because of poor delegation. Their personal attitude comes to the forefront which makes things quite difficult. Lack of receptiveness: Some managers are not open to ideas and suggestions from the other endWillingness to let go: A superior must have the willingness to delegate authority for positions which he had left long ago.Willingness to trust subordinates: A trustful attitude makes the proceedings smoothWillingness to establish and use broad controls: The superior must establish some standards to which the objectives or tasks can be compared to and control mechanisms must be installed for evaluation purposes. Feedback from subordinates is the most important criterion that determines the effective functioning of the organization. HOW TO MAKE DELEGATION EFFECTIVE? Right person for the right jobGive sufficient authorityFree flow of informationEstablish proper controlsReward the subordinatesMake the nature and scope of the tasks clearMake the subordinate understand...

What is Budget Planning and Why is it Important? Quantification of Objectives in the form of Budgets Effective and efficient management of a business enterprise is facilitated, when a firm charts its course of action in advance. The management function also includes decision-making supported by various managerial techniques and tools that integrate the activities of the employees of the organization. One such technique is having a budget planned that which is essential for a healthy future. The systematic approach to profit planning is budgeting. The prime concern of budgeting is to make profits by regulating the flow of funds and allocating the controlling function to various responsibility centers. Don’t know how to start budget planning ? Do you need to know how to make a budget ? This infographic will provide personal budget categories you can use to help you categorize expenses for budgeting purpose. This may or will save you time, money, and effort. Getting Your Budget Approved What is a Budget? A budget is a comprehensive and coordinated financial plan, charted for a specific period of time in the future, but well in advance. It facilitates to compare the actuals with the standards established and review or revise the plans accordingly in case of any deviations or variances. A budget is a plan that is concerned not only about the resources of a firm, but also its operations. It involves the control and manipulation of relevant variables-controllable and non-controllable, and reduces the impact of uncertainty. Economic Constraints in Developing Countries Problems of unemployment, inflation and crude oil prices touching a dangerous high, these countries can offer only piecemeal measures to sustain the momentum of economic growth. Pic Courtesy: Avail Talking about organizations going for the master budget at the start of the year, it comprises budgets for various segments of the enterprise and it forms the primary step in budget planning. Master Budget The budget for a segment or department will not have much significance unless it is a part of the total budget-the master budget. If the budgets for various segments are not prepared jointly and in harmony with each other, the master budget will lose much of its importance and may even prove to be harmful in realizing the firm’s expectations. A budget is always expressed in financial terms, either in rupees, dollars or pounds, for operational purposes. Say, in a production budget, you talk about units of raw material and finished product. In a labor budget, you talk about men and labor hours. So there must be a common denominator, which can express all these variable quantities in a common language for the comprehensive budget to be meaningful. This purpose is solved by money, which undoubtedly serves as the common denominator. Budget Mechanism A budget is a mechanism to plan for the firm’s operations and activities. It allocates resources as well as responsibilities to different operational centers like, revenue, cost, profit and investment centres. Time dimension must also be added to a budget. For example, a production target of ten thousand units or a profit target of ten million dollars has no meaning unless and until it is related to a specific time period, in which these targets have to be met. A firm may have its long-range and broad objectives, such as maximum sales, maximum profits, customer satisfaction, social responsibilities, etc., But, to achieve these qualitative objectives, a firm has to quantify the same in the form of short-term objectives or goals with a time period precisely specified. A budget is basically a control technique which also facilitates to measure the performance of individuals on the basis of which, corrective action can be taken. The crux...