Free Strategic Case Study Exam CIMAPRO19-CS3-1 Exam Practice Test

The following email has just arrived: From: William Seaton, Director of Finance To: Finance ManagerSubject: News articleHi,

From: Jan Archibald, Group Chief Financial Officer, Fouce Oil To: William Seaton, Director of FinanceSubject: Sale of oil fieldsDear William,As you know, the Board of Fouce Oil is keen that you should operate in an autonomous manner. However, we believe that it is our duty to ask you to reconsider a key issue in Slide’s approach to doing business.Over the years you have been very successful indeed in finding significant oil fields and bringing those to production. We have been gratified to observe your efforts in doing so and we believe that all shareholders have benefitted from the wealth that you have created.The Board of Fouce Oil believes that the time has come for Slide to stop giving the fruits of its labour away to other companies. We believe that Slide should retain any successful oil wells and start to earn revenues from the sale of the oil itself rather than the sale of the oil wells. We believe that the stock market would respond favourably to such a development, to the mutual benefit of all.Best Wishes Jan

William Seaton, the Director of Finance stopped you in the corridor a week after the Head Geologist’s announcement that reserves had been overstated:“We informed the stock exchange that our reserves had been downgraded and our share price has taken a solid hit. We need to work towards making sure that this is never repeated.The Board is actively considering some changes that we hope will improve our forecasting system. I am not convinced that the suggestions will work. Frankly, if we could predict the future with certainty then I would have us stop looking for oil and start selling forecasts.I would like you to work through the proposals that have been put forward and to recommend on their adoption, with changes if you think it necessary. The issues that we are most seriously considering are:A suggestion that Big Data could be used to monitor oil prices. Do you think this would be a sensible way to proceed?A suggestion that we should update our reserves information on the company website in real time. Do you think that would be an effective communication strategy?Finally, we have considered a number of issues surrounding the motivation and inspiration of our geologists. Two quite distinct schemes have been proposed. Firstly, some Board members believe that our geologists should be rewarded in relation to the accuracy of their forecasts. Bonuses will be paid on the basis of correct initial evaluation of wells. The bonus will increase if a well that was initially identified as commercially viable goes into production and will decrease if a well that was classified as viable is reclassified as unproductive.Secondly, other members of the Board believe that there should be a greater degree of accountability on the part of geologists. The incorrect classification of a well’s potential could be treated as a disciplinary matter. Please provide a detailed analysis of EACH of those suggestions.”

Three weeks have passed since you were informed that the relocation would definitely proceed. You have received the following email from William Seaton, Director of Finance:From: William Seaton, Director of Finance To: Finance ManagerSubject: Detailed issues associated with the relocationHi,Congratulations, you are now officially in charge of the transition team! I am confident that you will do an excellent job and that it will be an opportunity to enhance your career.I realise that the transition team is expected to reduce the pressure on the Board, but I have been asked to keep an eye on things and to ensure that your team has everything that it needs. I won’t interfere, but I will stay in touch.There are a few matters that I think you should address as a matter of urgency.Firstly, we need to have plans in place to ensure that our information systems are ready.What changes will we have to make in order to best align the information system with the company’s needs? I am not asking about hardware issues or the physical relocation, but the changes to the information system itself.Secondly, how might we make use of the data in our own records and external sources to ensure that the new Head Office is managed as efficiently as possible? Remember that the present Head Office is a large and complex operation in its own right and it costs a significant amount to run.Thirdly, our relocation will create a number of challenges for our corporate treasury team. I need you to identify the key challenges and suggest how they might be dealt with.Finally, I would like you to identify the criteria against which the success or failure of your team will be judged once the transition is complete. I need your recommendations to be relevant and measurable.William

Memorandum of Understanding between Fouce Oil and Slide

The Director of Finance, William Seaton, has stopped you in the corridor:“Your report was really helpful, but the Board is still considering the implications of that email from Jan Archibald at Fouce Oil. I need to make a more detailed report to the Board and I would like you to draft it for me.I know that we have owned and operated oil wells in the past, but that has always been with the intention of finding a buyer who is prepared to pay a realistic price. We have chosen never to think about the implications of keeping wells.I need a report from you that covers the following issues:The key political risks of retaining our interest in these oil wells, with particular emphasis on high consequence, highlikelihood risks.A suitable response to each of your political risks.An overview of how changes in the global economy and the demand for oil could affect the decision to proceed.The challenges associated with putting together a management team to take charge of the production side of thisproposed new strategy.I realise that this is a lot to ask of you, but I need you to move quickly because of the interest from our biggest shareholder.”

Press clipping from today’s Financial News:

From: Martin Wills, Head GeologistTo: William Seaton, Director of Finance Subject: ReservesHi William,I have reviewed the situation with respect to our “probable” or “2P” reserves, as disclosed in our latest annual report. I am sorry to say that we have to downgrade our figures with respect to reserves. I am recommending that all extraction activities cease for the foreseeable future on the North Atlantic and South Atlantic fields and that the proved reserves be downgraded from proved to probable.I have to stress that this is not attributable to any past error on the part of the geologists. The world oil price has been depressed and the discovery of large deposits of shale oil in the USA suggests that the oil price will not recover for some time. That means that some oil wells that were commercially viable this time last year are no longer worth processing.The oil remains under the rock and I have no doubt that we will restore operations in the long term. We are by no means the only oil company to have been forced to take this action.The one piece of good news is that the financial statements for the year ended 31 December 2014 have already been published. My understanding is that we do not have to withdraw them, so unless you put an advertisement in the press, we can carry on quietly trying to sort this mess out.I have my best people working on ways to extract oil from our wells more efficiently, so we may be able to increase production over the next year or so.Martin

You have received the following email from Peter Sorchi, CEO:

Six months have passed since you first heard of the possibility that Slide might relocate its Head Office to the Middle East.You have been called into William Seaton, the Director of Finance’s office:“After lots of deliberation, the Board has reached a final decision on the Head Office move. It has been decided that we will relocate to the Middle East.I need you to draft a report on the following matters:First of all, we need a strategy for the choice of country to which we are going to relocate. I need you to think about the strategic decisions that will have to be taken so that we obtain the best possible value from the relocation.Secondly, we have to think about the change management issues with respect to Slide’s senior managers. We have a good team of senior managers and Board members and we wish to see them relocate with the company. I need your thoughts on this.Thirdly, there will be significant change issues for the other staff members. We cannot justify moving all of them to the Middle East, but we will be relying on them to ensure an orderly transition from the current Head Office to the new one. They will be busy for several months, then most will be made redundant. The rest will be offered new jobs with Slide because we will need a scaled down administrative presence in Kayland. Again, I need your suggestions for this.Finally, we need to put together a transition team to deal with the many administrative issues that the move will create. I need you to suggest a clear job description for the transition team that explains the main operational tasks required, so that the directors can be left free to focus on the strategic management.”