1. Managing Risks in Strategic Alliance T. K. Das & Bing-Sheng Teng Yi Pan AmarisaLewisBeverly

2. Aim of Paper How can management effectively deal with the major risks of the management of alliances?

3. Interested Parties Management of various alliances Employees Analysts Potential investors Shareholders

4. Recommendations/Strategies Protection of core resources –“Knowledge” Balance between flexibility & rigidity Choice of partners –Complement or supplement resources –Similar cultures –Learning barriers Influence/control –Contracts, equity ownership, managerial influence

5. Implications for Accountants Reflect economic reality Should such relationships be reported? –Contractual obligations? –Equity ownership? –Managerial control? –Mutual agreements If so, how should they be recorded? E.g. significant influence E.g. control E.g. contractual obligations

6. Implications for Accountants Alliances orientationMgmt IntentValuation Control -Contractual control -Equity control -Managerial control Exercise some control Fair value method Equity method Equity method or consolidation Flexibility -Incremental investment Plan to sell or exercise some control Fair value method Equity method SecuritiesPlan to sell or exercise some control Fair value method Equity method ProductivityPlan to sell or exercise some control Fair value method Equity method

7. Implications for Auditors Appropriate disclosure and recording – GAAP & FASB –Investments –Expenditure –Contractual obligations Consider risks and nature of strategic alliance –Impact on future viability of company –Consider informal partnerships E.g. integrated supply chains Exposure to operational and business risks

8. Discussion & Questions