Page 7 - CIMA OCS Workbook May 2019 - Day 1 Tasks

CIMA MAY 2019 – OPERATIONAL CASE STUDY

1.4 Internal Audit

Internal audit is an independent activity, established by management to examine and evaluate
the organisation’s risk management processes and systems of control, and to make
recommendations for the achievement of company objectives.

VitaMine does not have an independent internal audit function however given the current size of
the company it is unlikely to be necessary at this time. This situation should be monitored and
reviewed as the company grows.

As you (in your role as Finance Director) currently have such a wide span of control, also being
responsible for Information Technology (IT) and Human Resources (HR), I believe your suggestion
to review the set-up of the Finance Function is a good idea to enable the company to fulfil its
growth potential.

2. Organisational structure

VitaMine currently has a functional structure, broken down into tasks such as production, sales
and finance.

Current - Functional Structure

Functional organisations group together employees that undertake similar tasks into
departments. This type of structure is often found in organisations that have outgrown the
entrepreneurial structure, which is typical of small businesses in the early stages of their
development. It is most appropriate for small organisations which have relatively few products or
locations and which exist in a relatively stable environment.

Advantages

The functional structure allows for economies of scale to be built in to the business reducing costs
by standardising procedures. It can allow specialisation on business functions, allowing specialist
managers to focus on their core area of expertise and as a result of this specialisation it allows for
career progression for lower levels of employees.

Disadvantages

This structure can lead to functional heads empire building especially where resources are in short
supply and subject to functional competition. This can lead to conflict between functions and as a
result of this can result in slow decision making where decisions must be cross functional, for
example the choice of our materials involving both our production and finance department or
new product development decisions involving both our production and sale department. It also
does not cope well with diversification in the business as this moves management out of their
comfort zone.

Applying concept to VitaMine

A functional approach may be the most appropriate structure for VitaMine for service areas of the
business such as finance, sales and production but it if we were to continue with this structure
there is also scope to have further functions such as dedicated IT and HR functions.

60 KAPLAN PUBLISHING