Tutor Analysis Pre Seen Nov 13 Mar14

8/13/2019 Tutor Analysis Pre Seen Nov 13 Mar14

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Playing the Games

Adrian Sims and Channa Gunawardana provide some pointers on interpreting the Pre-seen case for

the Strategic level examination of November 2013 and March 2014.

Introduction

With the successful completion of Summer London Olympics in 2012 and when the world is getting

ready for Winter Olympics in Russia, Commonwealth Games in Scotland and Asian Games in South

Korea,all in 2014, it may be the right time, in 2013, for the CIMA Strategic Level candidates to review

financial, enterprise and performance perspective of similar gaming event to be held in 2015 in

Country C. Playing the Games in 2015 may not necessarily be for CIMA strategic level students,

however they need to play a game of three strategic level subjects related to this major sporting

event in 2015.

The Pre-seen case for Strategic level examinations provides a context for the compulsory Question 1

on each of the E3, P3 and F3 papers. The examiner for each of these papers takes one or more

themes from the Pre-seen case and will expand them with additional unseen case material, available

on exam day and orientated towards the syllabus of their particular exam. The total marks for each

Question 1 is 50% of the total exam marks.

For one of the writers of the present article, the rewards and risks of The Games in Country C brings

to mind the public acclaim following the success of the UK in staging the 2012 Olympic Games, the

project management issues that led to late running of the 2010 Commonwealth Games in Delhi, the

concern over corruption around the award of projects for the 2014 Winter Olympics at Sochi, and

the chronic funding crisis and overspending that accompanied the UKs Millennium Dome

development in 2000. The current reports of the exploitation of workers building the stadia in Rio

and Qatar are also potentially relevant.

The Games in Country C are scheduled for October 20151

An effective way to understand this Pre-seen material is to review it using the perspectives of the

three Strategic Level examinations.

, 2 years after the publication of this Pre-

seen material, and GAMESCO, the organising body in Country C, has been in existence for nearly 3

years. The Pre-seen does not indicate how far preparations have advanced. It states that project

management firms have been instructed but, other than the sale of television broadcast rights (page

5), there is no confirmation that the sponsorship or other non-governmental funding are in place nor

any indication of whether the construction works are on schedule. There is a lot of scope for the

examiners to update you on these in their respective sets of unseen material on exam day.

Performance Strategy Perspective (P3)

Use of an appropriate risk management strategy, such as CIMAs Risk Management Cycle can be

quite important for the GAMESCO. They need to appoint a separate Risk Management Team, and

give risk management its due importance within the organisational structure of its Board.

The risks of the event can be identified by many different methods. These include reviewing the

similar sporting events in the word, consultations with different stakeholders, and brainstorming

sessions with the executives of the GAMESCO.

1It is hoped that, unlike FIFI and the Qatar 2022 World Cup, they did not award The Games to Country C

having inexplicably overlooked that its climate is unsuitable at the scheduled time of year.


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The impact of the risk could be in terms of disturbance to the event in 2015, possible delays,

overruns to the budget, not achieving the objectives and many more. Technical consultants with

experience may be needed to assess the likelihood of the event. Its a good idea for GAMESCO to

recruit a project manager from a large sporting event already held or there are professional firms

who possess the skills required.

The risks identified can be classified using any appropriate method, and this will be helpful to take

necessary actions for each category of risk. For example, negative weather conditions in country C in

2015 discouraging participation or before 2015 disturbing ongoing work, natural disaster in the area

where country C is located can be classified as some of the environmental risks. There may be many

Business and Operational Risks which may include, errors in infrastructure designs, an unsuitable

event plan, inappropriate location of different facilities, poor transportation such as having too few

airports in Country C, access being blocked due heavy traffic or the overload of transport and other

facilities during the time of the games. The reference to the medical provisions during the games

may be have been inserted as a reference to this problem. If there are some countries who refuse to

participate in games, due to unreconciled trade or political issues between countries, these can be

classified as Political Risks as can the danger of terrorist attacks.

Risk Appetite needs to be defined and all key stakeholders need to be part of this decision.

Management Control Systems need to be applied to the entire event and there should be key Risk

Response Strategies. Identification of the responsibilities of all stakeholders and ensuring they are

notified and trained, having a proper organisation structure, using network structures with

specialists from different fields, setting up performance indicators, establishment of proper and

frequent assessment of measures, use of feed forward controls are some of the Management

Control Systems that can be used.

Usual accounting controls from P3 would be applicable with special attention on payables, Work In

Progress, cash and payroll. There must be effective controls to ensure contractors work is evaluated

before the payments are made and a strong quality control process is a must throughout the project

development.

GAMESCO needs to ensure that a strong and frequent auditing process is in place to ensure things

are done right, that activities are aligned and that objectives set at the beginning. For an event of

this size, there must be IT support to monitor the project and there is software available in the

market for such purposes. It is noticeable that there is an Information Systems Project Manager

mentioned on page 3. C$6 M is the total cost of the project and hence manually trying to manage

this would not be possible and computer software can help GAMESCO to review how money is being

spent, in what area budgets are overspent, to compare cost of similar items and activities used for

different projects within the games, as well as having project management tools embedded in them.

GAMESCO needs to review what would be the behaviour of exchange rates between C$ and other

major currencies of the sport-loving travellers for events of this nature. These rates may be one of

the main determinants of the number of spectators in 2015. Corporate Treasury can be an important

function as some suppliers may quote their prices in USD, , or in and not in C$.

It may be important for the candidates to create a detailed list of possible risks and then generate

ideas on how to manage them on the exam day. Below is a brief attempt.

The operating risks that we noticed included


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the need to maintain perimeter and crowd security at the Park and in the Athletes Village. Thisproblem is exacerbated by the large number of contractors used for tasks ranging from

construction and security to laundry and cleaning

the potential for injury of athletes and the crowd and some potential issues over the ability ofthe local hospital to cope with this (page 5)

crowd safety where the marshals are mainly volunteers (page 4) handling of hazardous substances. Page 3 refers to the need to clear land of pollutants risks to information systems. It is noticeable that GAMESCO has retained project responsibility

for this (page 3) and as we have said above, it should be the main factor that co-ordinates all the

other projects

Potential controls here would include training, staff selection, adequate supervision, video

monitoring of crowd movements and of the sporting events, physical security measures at perimeter

and within the stadiums.

Commercial and project risks include

reliance on contractors who may default or prove unsuitable for the task. The reference at thetop of page 4 to the engagement of a highly reputable security services contractor recalls the

reliance of the London 2012 Organising Committee on such a firm that, very late in the day,

confessed that it could not provide sufficient staff to meet the escalating security requirement

and thus obliged the Government to deploy Army personnel

slippage in timescales of projects. The Pre-seen indicates the complexity of the project from siteclearance through construction and provision and utilities through to commissioning. Seemingly

within a five year time frame (2010 to 2015)

commercial risks from lack of sponsorship, cost overruns, and poor ticket sales

information systems risks has already been mentioned above

Reputation and litigation risks include

the potential for actual or alleged bribery in matters such as the awarding of contracts and theallocation of tickets for sale

litigation for injury of athletes, members of the public, or wrongful accusations of drug useamongst athletes

litigation from sponsors, franchisees and others if failures by GAMESCO lead to the failure of theGames and the loss of potential earnings

Financial Strategy Perspective (F3)

Candidates are taught that shareholder wealth maximization is the primary objective of a firm. This

is not applicable for GAMESCO in the case study, although it will still apply to corporate sponsors,

contractors and so on.

GAMESCO is a not-for-profit organisation (NPO). As far as objectives are concerned, there are many

non-financial objectives and only financial objective that can be seen is to ensure expenses stay

within the budget. The three key decisions of financial management are dividend policy, financing

and investment. Dividend decisions seem irrelevant and investment decisions seem all pre-planned

and there may be less flexibility available. Financing would be the most challenging decision of the

project.


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Recommending strategic financial objectives for an organisation and evaluating the extent of their

attainment is part of the F3 learning outcomes and we may recommend budgeting process as a key

financial objective, and non-financial objectives can be developed based on the mission statement of

the Games Coordinating Committee (Page 2)

The F3 examiner can set a question from modelling and forecasting cash flows and financialstatements based on expected values for economic variable and business variable by asking

candidates to revise the Budget provided in the pre-seen, based on new factors that affect the

interest of the world in sports events and changes in the cost. The question could be further

expanded to include a sensitivity analysis to the above forecast based on changes in variables. There

can be many factors that happen during the 2013/14 exam period that would have an impact on the

event in 2015. These include civil unrest, security concerns of the general public, game fixing and

usage of drugs which may reduce the interest in sports, etc.

Working capital management practices would be mainly applicable to ensure the committee keeps

enough cash in hand for the running expenses.

At the first sight, candidates may feel that some theories of F3 may not be relevant to the case. This

assumes that the examiner sets a question from the viewpoint of GAMESCO. The examiner could ask

you to advise a contractor or sponsor; in that situation you may still need NPV and so on.

If the examiner requires she could even engineer a question on cost of capital for GAMESCO.

Suppose the unseen material describes the situation of a revised budget done up to year end 2014,

showing a potential shortfall of funds. The unseen material might further state that the government

has reluctantly agreed to provide some additional funding but that GAMECO is required to obtain

debt financing for the balance.

Enterprise Strategy Perspective (E3)

One feature of this pre-seen is stakeholder engagement and corporate social responsibility.

Given the nature of the event it is crucial for GAMESCO to have analysed its external environment

using models like the PEST, indicating where GAMESCO is overall placed in the macroeconomic

environment of Country C. The SWOT analysis too would be an important model to consider for

GAMESCO since it considers the internal Strengths and Weaknesses of GAMESCO as well.

GAMESCO is a not for profit organisation (NPO); as a not for profit organisation (NPO) the decision

process will be different from that of a profit-seeking organisation. This was a requirement in the

May 2013 examination. Candidates should be able to contrast the strategic decision making process

in an NPO with that of a profit-seeking organisation, its potential slowness, its requirement forparticipation, and the role of finance as a constraint rather than a goal. This is emphasised on page 3

which details the organisational structure of GAMESCO. The Board has a Chair, a CEO, 11 Directors, 2

political appointees, and a 25 representatives from the sporting events. 40 people in all. A separate

stadium may be needed to hold the Board Meetings! Presumably they are all volunteers because the

Budget on page 6 makes no reference to administration costs.

The size of this Board has implications for decision making and the management of risk. Trying to

schedule a meeting, let alone to gain consensus on issues amongst Board members, will be very

difficult. There is the risk that management will be indecisive and ineffective. Given the number of

functions on the Board, and the high reliance on project managers and subcontractors, there is the

real risk that things will be overlooked because everyone thought someone else was dealing with it.


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The expectations of stakeholders are mentioned in the mission of GAMESCO. It is possible that

questions may be set on stakeholder mapping and requiring advice to GAMESCO on how to evaluate

the interests and power of the various stakeholders in the games ranging from the GCC and the

national government of Country C, though the various corporate sponsors, to general public and

local population.

One interesting question would be to suggest KPIs that can monitor how satisfied each stakeholder

group might be with the conduct of the Games. The Balanced Scorecard might be a framework of

use in developing the relevant KPIs and use them to monitor the event.

The benefits to stakeholders are described in terms of a boost to the national and local economy,

environmental improvement and restoration, provision of jobs for local people, encouragement of

improvements to health and fitness, and the benefits to local people of the legacy accommodation,

health care facilities, and parks and gardens.

The pre-seen does not mention the potential disruption to local stakeholders during the

construction work and during the event itself. In the case of the 2008 and 2016 Olympic Games

concerns have been expressed over forced evictions of households to make room for Olympic parks.

Read with this background the reference, on page 5 of the pre-seen, to athletes accommodation

replacing much sub-standard accommodation in which many local people are currently housed

takes on a more sinister aspect. The London 2012 Olympics caused significant pressure on public

transport services to the extent that many businesses needed to develop contingency plans for

skeleton staffing.

Also there will be sensitive issues to face over the use of public money for this event, the

appropriate allocation of tickets between the public and corporate sponsors, and how the assets will

be distributed at the end of the games. GAMESCO will be able to use the Cyert and March

stakeholder conflict management approaches of satisfycing, sequential attention, and side paymentsto satisfy the differing stakeholders.

The CSR aspects of this pre-seen are communicated in the mission of the GCC. This seems to

reinforce the need for a Stakeholder Engagement approach to CSR (Johnson and Scholes) but it also

raises the potential for conflicts. For example the GCC wishes to promote healthy lifestyles amongst

young people yet on page 3 we read that GAMESCO is leasing space to fast-food outlets, ice cream

parlours [and] sweet stores. GAMESCO also has a Shaper of Society (or philanthropic) agenda. It

wants to make people healthy.

Previous E3 examinations have featured questions on the valuation of franchises based on potential

income. This raises the possibility of similar requirements around the awarding of sponsorship andcommercial leases for The Games, but the decisions will need to remain faithful to the mission of

GCC and GAMESCO.

The value of the Games logo as a branding, and where it may be used appropriately, could be the

subject for questions. The 2012 Olympics logo was not widely liked and it prompted several

unfortunate interpretations ranging from the political to pornographic. GAMESCO is investing in

logoed merchandise (page 5) and this could be the subject of an E3 question using expected values.

The very poor sales of 2012 Olympics merchandise led to the financial collapse of at least one toy

maker under the weight of surplus inventory.

Past E3 examinations have also featured project appraisal questions, often using NPV. GAMESCO is

unlikely to use NPV because it does not have long term shareholder value objective. Instead it will


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seek least-cost approaches that satisfy the needs of the Games and also the subsequent social use of

the assets. Inevitably these sorts of questions require candidates to state and evaluate both financial

and non-financial considerations before coming to a recommendation.

Finally, the E3 examiner is entitled to examine carried forward knowledge from previous Enterprise

Pillar papers and has shown a willingness to do so. Project Management is covered in the E2Enterprise Management syllabus. Candidates should revise the project management lifecycle and

some of the techniques at each stage, including network analysis (critical path analysis), and the

actions that can be taken to bring a project back on target.

Another area of carried forward knowledge that would be needed to be revised is your Human

Resource Management knowledge. Currently GAMESCOs staffing structure can be classified using

the Shamrock Organization organisation structure, which is likely to face several issues like the

motivational problem among the employees.

We encourage candidates to do some research about the industry (When we you type how to plan

a major sporting event? to a search engine it gave 246 M results) however excessive work to learn

the industry is not useful. There will be three unseen materials written by the examiners, for your

exam in November (and a further three for the March exam). What is more important is to get ready

for such possible unseen materials. Its important for you to practice them and get them marked by

a tutor.

All the very best for your exams.

Adrian Sims is a freelance lecturer and author specialising in Enterprise Pillar subjects and T4.

Channa Gunawardana writes and lectures in P3, E3 and F3 for Strategypass.com

Tutor Analysis Pre Seen Nov 13 Mar14

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