KPJ Healthcare Berhad - Internal Analysis free essay sample

1. Shortage of qualified staff Some of the staff is still under training but they provide service such as nurses. This maybe will damage the reputation of the hospital among its competitors. Currently, there are critical needs for experienced nurses in the operating room, critical care, and neonatal care arenas. Also some of their doctors they are fresh graduated and need some professional training. KPJ to ensure all their staff nurse have finished their training first to deliver quality work more efficient. It thus able to attract customers trust for the service they offer. In addition, doctors also need at least have the experience more than five years before deploying as one of the KPJ 2. High cost of operations The running cost of health care industry may be high compare to the income. This has happen in a lot of organization before which has resulted in organization collapse. Managing productivity of their physicians. ensured that nursing and paramedical teams get to play a more active reduce expences. 3.Weak operating cash flows Any business needs good income to continue in their business, KPJ has many branches around Malaysia but some of the branches they have weak income and this maybe will force the company to close these branches. 1. Goods Examining the data from the sales staff on the regular basis 2. Information KPJ must have visibility of their product shipments 3. Fund Doing customer credit check Offering term discount Asking customer to pay by cash or credit card Charging late fees 4. Corporate governance risk KPJ Healthcare Berhad does engage in related-party transaction with companies under the Johor Corp umbrella since they are ultimately owned by the state of Johor. They may have used any advance national agenda to detriment of minority stakeholders. Oversight of risk management is a clear duty of the board Aware of risk management and incentive system 1. Shortage of qualified staff The world has entered a critical period for human resources for health. The scarcity of qualified health personnel, including nurses, is being highlighted as one of the biggest obstacles to achieving health system effectiveness. Nurses are the main professional component of the ‘front line’ staff in most health systems, and their contribution is recognized as essential to meeting development goals and delivering safe and effective care. Shortage of qualified staff nurse will decrease quality of patient care. Staff shortages caused by nursing turnover are associated with significant decreases in the general quality of patient care, increases in the length of patient stays within hospitals. Some of the staff is still under training but they provide service such as nurses. This maybe will damage the reputation of the hospital among its competitors. Also some of their doctors they are fresh graduated and need some professional training. Currently, there are critical needs for experienced nurses in the operating room, critical care, and neonatal care arenas. To overcome these issues, KPJ to ensure all employees have finished their training first to deliver quality work more efficient. It thus able to attract customers trust for the service they offer. Other than that, hospitals are reintroducing intensive training programs for nurses in these specialties. This helps to retain nurses who are looking for a transfer opportunity as well as to recruit new staff. It also builds a career development path for staff. These training programs are not inexpensive and nursing leaders must be prepared to justify the required budget. Given the cost of temporary staff, this should be a logical solution for the organizations leadership to endorse. In addition, doctors also need at least have the experience more than five years before deploying as one of the KPJ. 2. High cost of operations The running cost of health care industry may be high compare to the income. This has happen in a lot of organization before which has resulted in organization collapse. Factor: Increased use of health care, especially expensive new medical technologies, by all age groups. General Price inflation. Inflation in the prices of medical services beyond general price inflation. Aging of the population. The recommendation for these issues is KPJ must manage to keep such costs quite low by managing productivity of their physicians. They have also ensured that nursing and paramedical teams get to play a more active role in care delivery, thus reducing the need for physicians, especially in routine interventions. Some of the hospitals have also managed to reduce expenses on energy through smart design. While repairs and maintenance again, through smart negotiation on warranty period and terms of maintenance with the vendors at the time of equipment procurement. 3. Weak operating cash flows Any business needs good income to continue in their business, KPJ has many branches around Malaysia but some of the branches they have weak income and this maybe will force the company to close these branches. Cash is the fuel that drives business, and many financial analysts consider the condition of a companys cash flow to be one of the most important indicators of that businesss financial health. After all, a well-managed flow of cash like a strong heart is usually indicative of a healthy business, while poorly managed cash flow, or a weak heart, can cause problems that affect the entire business. In 2012, cash reserves at KPJ Healthcare Bhd fell by 50. 53m. However, the company earned 201. 01m from its operations for a Cash Flow Margin of 9. 59%. In addition the company generated 156. 09m cash from financing while 407. 80m was spent on investing. Its important to note that a cash flow crisis is usually a symptom of a broader supply chain sickness. Treating this illness requires the attention of the logistics manager, the purchasing department, operations, the tech guys and even the CEO. And while working with a bank to open a line of credit or amending an existing financial instrument can certainly help, the only real way to address a cash flow problem is to take a holistic, long-term view of the issue. Fixing a cash flow problem requires companies to examine and improve the three key flows of commerce: goods, information and funds. KPJ must follow the goods. The faster a seller moves goods to a buyer, the faster the buyer will pay for those goods, and that impacts cash flow. Therefore, businesses must ask themselves how they can better improve the speed at which their goods exchange hands. And this goes well beyond the actual transportation of the goods. Rather, it requires an examination of the entire processfrom sales all the way through invoicing. Its vitally important for a companys decision to be plugged into the sales process, examining the data from the sales staff on a regular basis. How much was sold yesterday, how much will be sold today, and what about tomorrow? The more accurate this information, the tighter the inventory. And the tighter the inventory, the better the cash flow. After all, every item thats sitting on a warehouse shelf represents inaccessible capital. Turning that inventory into sales begins to unleash that capital. If the inventory isnt moving, they not moving cash. On the flip side,KPJ have to be prepared to quickly replace sold or outdated inventory. For the recommendation for this problem, the next vital key to good cash flow is information, and for that, KPJ must have visibility of their product shipments. Once the goods leave the dock en route to your buyers, how much visibility do you have regarding the progress each shipment is making? Do KPJ have a tracking number for every package? Did KPJ share the tracking number with the others? Are KPJ aware that a package was delayed due to weather? While all these questions primarily reside in the operations side of the house, they can also have a major impact on customer service, which in turn can impact cash flow. After all, a customer who feels well treated is more inclined to pay on time. In addition to tracking the shipments, using the information KPJ have about each shipments status and delivery time enables them to put invoices into the hands of their buyers as soon as possible. Once the goods are delivered, they will receive confirmation that the orders been delivered and upon receiving that confirmation, they automatically trigger an invoice. All this information helps to build solid, long-term relationships with your customers while improving cash flow. Next recommendation is speed the funds. This is the area where business owners usually look for a quick solution. Doing customer credit checks. Perform credit checks on all new and non-cash customers. This process can immediately reduce bad debt, since KPJ will stop offering credit to customers who havent proved they deserve it. Offering term discounts. To encourage customers to pay on time, consider offering term discounts. For example, if the invoice terms are net 30/2/10, customer payment is expected in 30 days; however, KPJ can offer the customer a 2 percent discount if payment is made in 10 days. Asking customers to pay by cash or credit card. Rather than sell on term payments, sell on cash or credit card payments. Once they got the cash in hand, deposit the funds immediately. Charging late fees. Indicate on the invoice when payment is due, and specify the penalty interest for late payment. These solutions have been and will remain key ingredients in helping to cure cash flow ailments. But theyre not the only funds-related prescriptions. Consider these options: C. O. D. (Collect on Delivery). C. O. D. delivers cost savings and processing efficiencies that improve cash flow. Credit insurance. Todays business environment pretty much mandates that small companies go global. But conducting business with trading partners overseas can be risky. Credit insurance can help mitigate the risks by protecting the value of your receivables. By guarding your bottom line against nonpaymentor even slow paymentof invoices, you can breathe easier about your decision to conduct cross-border trade. And credit insurance can be used on a case-by-case basisfor example, with new customers whose payment histories youre unfamiliar with. Once youve established a more solid relationship with them, you can then stop charging them for the credit insurance. To be successful at cash flow management is to make sure all three flows of commerce that is goods, information and funds are working together to accelerate the movement of money through their supply chain.. 4. Corporate governance risk Corporate governance is the system of principles, policies, procedures, and clearly defined responsibilities and accountabilities. The objectives of a corporate governance system are to eliminate or mitigate conflicts of interest among stakeholders, particularly between managers and shareholders, and to ensure that the assets of the company are used efficiently and productively and in the best interests of the investors and other stakeholders. KPJ Healthcare Berhad does engage in related-party transaction with companies under the Johor Corp umbrella since they are ultimately owned by the state of Johor. They may have used any advance national agenda to detriment of minority stakeholders. The risk of weak corporate governance can look at accounting risk that effect the company’s financial statement recognition and related disclosures are incomplete, misleading, or materially misstated. Other than that, it also has liability risk that effect the risk that management will enter into excessive obligations that destroy the value of shareholders’ equity. In strategic policy risk, the risk that managers may enter into transactions or incur other business risks that are self-serving and may not be in the best long-term interest of shareholders. Companies with strong governance had greater investment performance. Companies with strong shareholders’ rights outperformed those with weak protections. The failure of a company to establish an effective system of corporate governance represents a major operational risk to the company and its investors. Companies committed to corporate governance often provide a statement of corporate governance policies. Weak corporate governance systems give rise to risks including accounting risk, asset risk, liability risk, and strategic policy risk. Hence to overcome this weakness, KPJ should oversight of risk management of the board. Internal controls were an important current theme but risk management issues were nevertheless emerging and were partially taken into account. The board should fulfill certain key functions including reviewing and guiding corporate strategy, major plans of action, and risk policy to ensuring the integrity of the corporation’s accounting and reporting systems. That appropriate systems of control are in place, in particular systems of risk management, financial and operational control. A function of the board to be monitoring the effectiveness of the company’s management practices and making changes as needed. Monitoring of governance by the board also includes continuous review of the internal structure of the company to ensure that there are clear lines of accountability for management throughout the organization. It is not just accountability but also the process by which information is passed to the top. The board will also need to ensure that there is appropriate oversight by senior management. The chairman is responsible for leadership of the board, ensuring its effectiveness in all aspects of its role and setting its agenda. The Chairman is also responsible for ensuring that the directors receive accurate, timely and clear information. The Chairman should ensure effective communications with shareholders. The Chairman should also facilitate the effective contribution of non-executive directors in particular and ensure constructive relations between executive and non-executive directors. Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and the shareholders. Where board decisions may affect different shareholders groups differently, the board should treat all shareholders fairly. Second, KPJ should aware of risk management and incentive systems. An important feature of the crisis has been the realization that in a number of companies there appeared to be disconnect between strategy and risk management on the one hand, and incentives on the other. By incentives is meant not just remuneration but also other aspects such as promotion. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders and should facilitate effective monitoring. Question 4: The examination of strategic capabilities and strategic decision 1. Strategic Capabilities a) Leadership Commitment to Competence As a service provider, the Group is committed to improve the skills and competencies of its management, medical consultants and employees through various training programmers, seminars, workshops and quality initiatives. The Group has made it mandatory for each staff to undergo at least 30 hours of training per year as part of the indicator in the Key Performance Indicators with the objective of encouraging knowledge management and initiatives. Training on work related areas such as customer services, ? re safety and corporate culture are done either internally or through external moderators. The Group also organizes the KPJ Medical Conference, Medical Workshop and Nursing Convention yearly for the medical consultants, nurses and allied health staff to deliberate and discuss medical and clinical issues related to their practices to promote patient safety, best practices as well as standardization of practices. New and creative ideas are encouraged through suggestion schemes and Innovative Circle Committee competitions, held yearly, whereby the winner of this event will represent KPJ at the higher level of competition at JCorp, the ultimate holding corporation. b) Cultural Support Integrity And Ethical Values The Management is committed to enforce ethical behaviour in employees and medical consultants. At the annual staff assembly or Pedoman (Perhimpunan, Dialog dan Anugerah Tahunan Anggota Pekerja) in the hospitals, new staff takes an oath and sign a Service Pledge declaration form. All employees and medical consultants are reminded during the Pedoman of the five Core Values adopted by the Group, which are Safety, Courtesy, Integrity, Professionalism and Continuous Improvement. Employees are also encouraged to report directly to the Managing Director of any misconduct or unethical behaviour committed by any staff of the Group through the Borang Peradaban declaration. Kpj strives to cultivate safety and quality in work culture The Group has implemented the policy on Code of Ethics and Business Conduct to emphasize the commitment of the Group towards ethical values. All hospitals and companies within the Group have been requested to sign an integrity pledge with their suppliers, contractors and other related third parties. c) Structural Fit Board Responsibility The primary responsibility of the Board is to ensure the adequacy and integrity of the Groups internal controls system which cover ? nancial operational and compliance controls management. The principal objective of the internal controls system is to manage business risks effectively, enhance the value of shareholders investments and safeguards assets of the Group. The role of Managing Director and Management is to assist in the design and implementation of the Boards policies on internal control system. Since internal controls are designed to manage and reduce risks rather than eliminate them, therefore such internal controls can provide only reasonable assurance to Management and the Board of Directors regarding the achievement of company objectives through:- Effectiveness and efficiency of operations Reliability of ? nancial reporting Compliance with applicable laws and regulations The Board still relies on the COSO Internal Control Framework to ensure an appropriate and sound system of internal controls, which encompasses ? ve interrelated components i. e. the Control Environment, Risk Assessment Framework, Control Activities, Information and Communication and Continuous Monitoring process. d) Communication KPJ has successfully implemented the KPJ Clinical Information System (KCIS) in KPJ Penang Specialist Hospital, KPJ Johor Specialist Hospital, Puteri Specialist Hospital, KPJTawakkal Specialist Hospital, KPJAmpangPuteri Specialist Hospital and KPJDamansara Specialist Hospital. New modules introduced include the Medical Care Solution for patient management, Nursing Care Solution catering for nursing care plan and management, Pharmacy with interface to a drug database decision support system and also Picture Archiving and Communications System for the imaging department and medical records. Ultimately all hospitals within the Group would be implementing KPJ Clinical Information System. By implementing and utilizing this system, all patient information can be shared throughout the Group and facilitates patient transfer from one hospital to another.