You received a telephone call at home early in the morning, asking you to check your emails. The following email was waiting for you:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: Public relations crisis
Hi,
This email arrived from the Head of our Middle East office just now. They are a few hours ahead of us, so he rang me at home to make sure that I had seen his message.
We have a few hours before the news article will be published, so I need to make the best use of that time in order to limit the damage to Slide. Your priority is to protect our reputation because I have already woken up the engineers and geologists and they are going to deal with the actual oil spillage.
I am not thinking too clearly, so I need you to provide some initial thoughts on the following:
Should we use our business relationship with Business News to have them withdraw the story? We are a major advertiser and we spend millions with them every month. What are the advantages and disadvantages?
Should we respond with the facts as we know them? All we know for certain is that there have been reports of oil contamination in an area that has countless oil facilities nearby, and so we could deny all responsibility, at least until our experts have had the chance to get there and to investigate.
If we do decide to make a public announcement then we will need to have a plan in place. We need to assemble a team to deal with the press. How should we structure our media response team?
What are the key factors that the Board should consider when communicating with the press? Explain why the factors that you have identified are important.
I realise that it is still very early, but I need your thoughts very quickly.
Thanks
William
The email referred to above can be found by clicking on the Reference Materials button.
A month has passed since you submitted the report requested by William Seaton, Director of Finance on the Board’s proposals.
You have received the following email:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: Shale oil
Hi,
One of the geologists made a presentation to the Board, proposing that we investigate the extraction of shale oil deposits. I have attached the slides that were used as the basis for this presentation.
I need you to work on a response to this document:
Firstly, what risks do you envisage in our entry to the shale oil business?
Secondly, what do you regard as the key factors that we should consider when deciding on proceeding with this
proposal? Please justify your selection.
Thirdly, what factors should we take into account when deciding on which country or countries to commence this
side of the business?
Finally, what are the challenges in creating a team of technical staff to lead our efforts in this area?
William
The presentation slides can be found by clicking on the Reference Materials button.
From: Jan Archibald, Group Chief Financial Officer, Fouce Oil
To: William Seaton, Director of Finance
Subject: Sale of oil fields
Dear 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
The following email has been forwarded to you by William Seaton, Director of Finance:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: Email from CFO of Fouce Oil
Hi
This email arrived last night. I need you to help me to think through the various implications of doing what it suggests before I present it to the Board. I need you to focus on the following issues:
Would this proposal make sense from a strategic point of view?
If we did decide to go ahead, what would be the issues that we would have to consider with respect to informing the stock market?
Could you please email me your thoughts within the next hour? I have to brief the Board later today.
Thanks
William
The email referred to can be found by clicking on the Reference Materials button.
The following email has been forwarded to you by William Seaton, Director of Finance:
From: William Seaton, Director of Finance
To: Finance Manager
Subject: Yesterday’s Board meeting
Hi,
One of my fellow Board members made a brief presentation to the Board. I am attaching the slides that were used in this presentation.
I have to say that I thought that some of the advice being offered to the Board was incorrect, but I would rather make a positive contribution to the discussion and so I said very little.
I need you to email me your thoughts on the following:
Your views on the presentation relating to tax matters
Your views on the briefing relating to the decision making process
Your views on the briefing’s recommendations on driving performance
Finally, an alternative briefing note on driving performance. Ideally, that should be two or three headings, with a
clear explanation for each.
As usual, this is urgent. Many thanks for your help so far with this project.
William
The slides can be found by clicking on the Reference Materials button.
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: Biomass proposal
Hi,
The Board has just heard a presentation by an engineering consultancy concerning a proposal to develop a biomass power station adjacent to our North Forest.
The Board has asked us to put together some thoughts about the merits of this proposal. We would proceed on the basis that we would build the power station and sell the resulting electricity to the national power generator which has a number of coal-fired power stations, each of which is nearing the end of its useful life and the coal has to be shipped in, so we should find it relatively easy to guarantee sales. The power generator has indicated that it would be possible to negotiate a three year contract in the first instance, with the expectation that this would be extended by subsequent three year contracts, subject to price and performance.
We would be responsible for building and operating the power plant and we would also have to pay for 50% of the cost of power lines for connecting to the national electricity grid, with the other 50% being funded by the national power generator.
Please draft a briefing paper that I can present to the Board on the following:
How can we predict whether the share price is likely to increase or decrease if we commit ourselves to this project? You should identify the challenges associated with answering that question and indicate how we might address them.
What are the long-term risks associated with future revenues from the sale of electricity? How might we manage these?
Marcus
Reference Material:
You have received the following email from Marcus Svenson, Finance Director:
From: Marcus Svenson, Finance Director
To: Senior Finance Manager
Subject: News reports
Hi,
I have sent you a link to a news site on the internet. Things are getting complicated in Bravador.
Every Board member has been asked to attend a brainstorming session this afternoon, before the CEO flies out to Bravador this evening. We will be considering the following four matters:
Is it acceptable for us to develop this forest, given the commitment that we have made with respect to indigenous peoples’ rights? They have been quoted at the end of the news article.
Is it fair for the environmental protestors to complain that our operations are unsustainable?
Would it be unethical to offer to build a village, with a proper school and medical clinic, for the tribe and to offer them work in our forestry operations?
Is it really a good idea for the CEO to fly to Bravador just to appear on the television news in his boots and overalls?
Please email me your thoughts on each of these matters before I leave for the meeting this afternoon.
Marcus
You are sitting in your office when you hear Marcus Svenson, the Finance Director, speaking on the telephone. You can hear only Marcus’ side of the conversation:
"Hello, I would like to speak to Sally Walker please. It is Marcus Svenson here. (pause)
Hi Sally, you contacted me six months ago to discuss a job opportunity that you thought I’d be suitable for. I said that I didn’t wish to pursue it at that time because I was committed to Wodd. Things have changed since then and I would like to be considered for a finance directorship in another company. (pause)
Yes, I’m still with Wodd. (pause)
Yes, I realise that there was an unfortunate story in the business press about the problems that the weak USD is causing us, but there was very little that I could do to prevent that. (pause)
I am sorry to hear that. I had hoped to move on." (sound of telephone hanging up and door opening)
Marcus discovers that you are sitting at your desk and realises that you would have heard his side of the call.
"Please don’t tell anybody what you heard. Would you regard it as unethical to respect my privacy?
I suspect that the CEO knows that I am thinking of leaving. He commented on the need for Board members to be loyal to Wodd at the last Board meeting. But don’t you agree that the shareholders can better protect themselves against currency fluctuations than the directors?
The crazy thing is that I suspect that the Chairman will dismiss me next month. If that happens, I get a year’s salary as a severance package. That will really annoy the shareholders. How can I justify accepting the severance package if I am effectively being dismissed for failing to manage Wodd’s finances properly?
I need to explain at the next Board meeting why it would have been difficult to evaluate the risk of the USD weakening. According to an article I read, it has been picked up as a serious problem for us. How would you advise me to explain that?"
Reference Material:
Save North Forest!
North Forest is located in an area of outstanding natural beauty that also includes a number of small towns and villages. Many local residents moved into the area after retiring and were attracted by the opportunity to breathe fresh air and be surrounded by beautiful views. In doing so, we have brought wealth into a local economy that was struggling because there was little employment to encourage younger people born in the area to stay.
Wodd plans to destroy North Forest in order to fuel a power station that will, in itself, spoil the view as well as polluting the atmosphere.
Globally, vast areas of forests are cleared every year for commercial exploitation. This creates untold risks for the planet because trees are responsible for giving us breathable air.
Local residents are working together with Green Marland, Marland’s largest environmental campaigner, to draw attention to the damage that Wodd is threatening to inflict on this area.
We ask you to write to the Government planning department to ask it to refuse to issue a permit for this development. We also ask you to sign our online petition and to consider joining us in peaceful and non-violent direct action against the bulldozers in the event that our efforts to block the granting of a Government permit should fail.
Peter Sorchi, Wodd’s Chief Executive has stopped you in the corridor:
"We signed a memorandum of understanding with the Bravadorian Government last night. Effectively, we are now the new owners of a forest in a new continent for us. It has already made it onto the business pages in the press.
Once the formalities are completed, we will be entering into new commercial territory. Our surveyors have looked at the first area that we intend to develop and there is a lot more hardwood than we first expected. That is good news in a way because it can be sold at a premium, but we don’t have any experience of selling hardwood and we are hardly going to pulp it for MDF or paper. I need you to identify the changes that we will have to make and to recommend how best to manage them.
The funding arrangements are still being worked out. Bravador’s banks are not in a position to fund a transaction of this size and none of the other banks that we have approached are prepared to lend to us. We will need to raise additional equity. I realise that we would normally make a rights issue, but I think that it would be simpler and cheaper to suspend the dividend for a year, which would cover most of the purchase price in itself. Please advise me on the advantages and disadvantages of doing that.
It would be ideal if you could let me have a briefing paper on both of these matters urgently."
Reference Material:
