We often find that potential clients have difficulty in fully understanding the potential extent of the risks they face, and the value that can accrue from proactive management. Our war stories are all real life events experienced by our team, and demonstrate both the types of issues that might exist within other organisations as well as the benefits derived from our intervention.
Financial probity
The client’s situation
A decentralised multi site manufacturing business;
Reliance on external auditors to highlight anomalies;, but recognised that their threshold for materiality was too large for potential issues to be identified;
Client felt there would be benefit gained from greater oversight.
Our support
We developed performance analytics to stratify manufacturing sites for review;
Our reviews covered both financial and operational matters;
Issues identified were discussed and actions agreed with local management and summarised to Group management.
Outcome:
Engineering stores needed reorganisation, with a revised methodology for controlling receipts, usage, and parts redundancy;
Group Accounting Policies were not well defined, resulting in different treatments across the various sites;
The potential existed for significant manipulation of site profitability and payment of enhanced bonuses,
Property related matters
The client’s situation:
The CEO of a large multi site supply chain business believed that problems within the Group were not being made known to the senior management team, and that more junior management were “frightened” to raise contentious issues.
Our support
We developed a governance certification process that provided an opportunity for issues to be raised and which also provided bottom up feeds into the corporate risk register.
Outcome:
Iterations over a 3 year period identified a number of significant issues upon which remedial action was taken to resolve the issue and ensure it did not recur.
Following implementation, morale within the senior management levels improved as problems were resolved without blame being apportioned to hard working and dedicated team members.
Document leakage
The client’s situation:
The 5 year strategic plan belonging to company A was received by one of its major competitors. We were asked to lead the internal investigation and determine how this had occurred.
Group executive directors thought they knew the source, and we were asked to prove it.
Our support:
Working with the internal Loss Prevention team, we ascertained the extent of the leak, how the leak occurred, and the responsible person – who was not on the Board’s “list of suspects”.
Having proved that there were 3 leaked copies (not 1), we recovered 2 further copies from other competitors and obtained assurances that these had not been circulated within their organisations or read.
We ensured that appropriate action was taken by both local management and HR,
Outcome:
The employee was dismissed, pension rights terminated, and the matter reported to the Police, in accordance with company policy.
Processes surrounding the publication and storage of confidential documents were strengthened.
Post Acquisition Review
The client’s situation:
Following an agreed multi million pound acquisition, we were asked to undertake a review of stock valuations and provide assurance that the terms of the agreement had been complied with.
Our support:
We visited the acquired company and reviewed the stock take process and associated records. We reviewed the actual stock held (raw materials, work in progress / finished goods, packaging, promotional stocks).
We communicated our findings and gained agreement with the previous owner.
Outcome:
The stock valuation was reduced by over £100k, relating to cut-off issues, out of date finished stocks, and redundant packaging. Residual promotional stocks from a completed promotion prior to acquisition were also adjusted.
The best thing since sliced bread (or not)
The client’s situation:
A private company introduced an in-house generated spreadsheet based investment appraisal model.
The presentation of profitability, balance sheet, cash flow and key performance ratios looked impressive. Indeed, the results looked consistently good, and gained the full support of the Board.
A casual discussion over the risks of spreadsheet based decisions led us to undertake a review of the application.
Our support:
The politics surrounding the model required careful management as it was loved and respected – as was the in-house developer.
We reviewed the model and assessed the structure for computation errors, deviation from accounting policies & standards, and robustness.
We checked our understanding with the appropriate finance manager before reporting to the Group CFO.
Outcome:
While the output looked professional, there were material errors in all 3 financial statements rendering the model useless as a basis of sound financial decision making.
We worked with the Finance team to correct the errors and thereby ensure the future integrity of the model.
Are you concerned about issues? MPSL can help your organisation to confront and beat issues before they damage your operations and reputation. Our team of experts can also guide you out of a crisis.
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