It is now three days since the start of the oil spillage crisis.

You have received the following email from William Seaton, Director of Finance:

From: William Seaton, Director of Finance

To: Finance Manager

Subject: Crisis management issues

Hi,

A quick update on the latest developments.

We have brought Block Associates in to lead the operations on dealing with the oil spill. It has assigned one of its leading consultants to take charge of this for us. We have paid Block Associates an annual retainer for many years, but we have never actually had to call on its services because we have been able to contain any environmental problems using our own resources.

Using Block Associates is going to be expensive. It insists on being free to bring in whatever equipment and personnel are required to resolve matters and to charge that on the basis of cost plus 25%. Our annual retainer is simply the cost of ensuring that it will respond on this basis if required.

We have had some murmurings of discontent already because our own engineers and geologists have made significant progress in identifying the cause of the spillage and they believe that they are capable of bringing it to a successful conclusion. They have suggested that it would be both quicker and cheaper to leave them in charge, while retaining the option to bring in Block Associates at a later date if they fail.

Firstly, what factors should we take into account in deciding whether to leave our own experts in charge of this operation rather than using Block Associates?

Secondly, how should we manage our relationship with Block Associates if we decide that it should be used?

Thirdly, two things: The Board is concerned that Slide's engineers and geologists have already become disillusioned by the decision to consider calling in Block Associates. We cannot afford to lose their commitment or to see them decide to leave Slide in the longer term. I need you to provide me with some ideas as to how we can motivate them to give their best performance for the duration of this crisis AND to inspire them to remain in Slide's employment after the crisis has been resolved.

William

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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.

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Twelve hours have passed since you received the telephone call concerning the oil spillage.

You receive the following telephone call from William Seaton, Director of Finance:

''The press has got a hold of the story about the oil leak. Our share price has taken a major hit. Indeed, Slide's market capitalisation has fallen by a third since the stock exchange opened for business. There is a lot of loose talk in the press about the knock-on effect of this crisis for Slide. It has not escaped anybody's notice that there are news teams showing injured wildlife. There is also a great deal of footage being broadcast on the other sites around the world where we are revitalising oil wells using the same technology that was in use at AZ40.

Our experts have only just arrived at the spillage site. While they were on the corporate jet they emailed their initial thoughts, based on their understanding of what went wrong. Our engineers anticipate a major operation to block the leak by pumping cement into the bore hole at a low pressure. This will be expensive, but the cost will be less than one tenth of the reduction in our market capitalisation.

I need an email from you:

Firstly, I need a clear explanation of the key risks that Slide now faces because of this crisis. I am only interested in those with a high risk and high consequence and I need you to justify those classifications because the Board will need to prioritise its responses.

Secondly, two related issues: I need you to explain why Slide's share price has fallen to such an extent AND to recommend, with reasons, whether we should release our costings of the repair scheme at this time.

It goes without saying that I need this urgently.''

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You have received the following email from Marcus Svenson, Finance Director:

From: Marcus Svenson, Finance Director

To: Senior Finance Manager

Subject: Investment opportunity

Hi,

The Board is considering an investment opportunity to buy a forest in Bravador, a country in South Americ

a. This will be a major expansion and will also enable us to diversify into new lines. For example, the forest contains lots of hardwood varieties that we could sell to companies in the double glazing industry or to furniture manufacturers. I downloaded the attached extract from an online encyclopaedia for your information.

The forest that we are planning to buy has not been used for commercial purposes until now. The land belonged to the Government for many years and it has been left to grow naturally. The Government is now keen to sell the land and has agreed that it may be used for commercial forestry purposes.

This investment will enable us to increase our output of softwoods by up to 20% per year, in addition to enabling us to enter the hardwood market.

I need two things from you. I need you to recommend a suitable approach to managing our relationship with the Bravadorian Government. I also need you to identify and explain the political risks that will remain even if we succeed in creating a sound relationship with the Government.

Marcus

Reference Material:

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Two months have passed since the threatened disruption of the building work on the biomass power station. The threat has been resolved and work is again under way on the development.

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

From: Peter Sorchi, Chief Executive Officer

To: Senior Finance Manager

Subject: Wildlife survey

Hi,

I tried to obtain some trustworthy advice from your boss this afternoon, but have come away feeling quite unsure that we are on the same wavelength.

As you know, the law in Marland is very clear concerning the protection of rare species of wildlife. Before building work commences on our new power station the Government will send a survey team to check for the presence of protected species. The attached article shows how sensitive an issue this can be.

As part of our corporate social responsibility, every one of Wodd's forestry teams has a small team of wildlife officers, whose job is to survey the forest and to identify all natural habitats. Trees can grow undisturbed for many years in a commercial forest before they are harvested and so natural habitats can become well established. Our wildlife surveys enable us to limit the harm done when trees are felled.

One of Wodd's wildlife officers in the North Forest has submitted a report on the sighting of a rare species of bat in the area that will be cleared for the power station. The report states that these creatures tend to be difficult to observe because they only come out very late at night and tend to roost in dense forest. This could, potentially, delay the start of work for six months while the bats are captured and relocated. Relocating the bats will also be expensive.

The Finance Director's advice was to ask the wildlife officer to change the report, stating that the original version was submitted in error and that the sighting occurred in a completely different part of the forest, well away from the planned construction site. There is only a small possibility that the Government inspectors will find the bats during their own inspection. In the event that they do then Wodd can claim that it was unaware of the bats' presence.

This whole exchange raises a number of issues for me.

Should we spend shareholder money on protecting wildlife in our forests?

What are the implications for our internal control system of the Finance Director asking for this report to be changed?

What are the difficulties in motivating our wildlife officers and how might we overcome these?

The Chairman is always complaining about how the executive directors are too aggressive when it comes to making a profit. How might I address that concern?

I would appreciate your response on each of the above issues.

Peter

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