Business Assurance Summit

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Business Assurance Summit
Assocham New Delhi
S D Saxena Director (Finance) BSNL India
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• "I will give you a talisman. Whenever you are in
  doubt, or when the self becomes too much with
  you, apply the following test.
• Recall the face of the poorest and the weakest
  man (woman) whom you may have seen, and ask
  yourself, if the step you contemplate is going to
  be of any use to him.
• Will he gain anything by it?
• Will it restore him to a control over his own
  life and destiny?
• In other words, will it lead to swaraj freedom
  for the hungry and spiritually starving
  millions?Then you will find your doubts and your
  self melt away.
• One of the last notes left behind by Mahatma
  Gandhi in 1948, expressing his deepest social
  thought.

The Guiding Light
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Wish-List of a Common Man

• Food
• Shelter
• Clothes
• Employment/Occupation
• Education
• Road/Transport
• Communications
• Electricity
• Medical Facilities
• Entertainment
• Social Security

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• Human society needs infrastructure to satisfy
  their needs of self actualization not economic
  growth alone.
• The objective of any assurance endeavor should
  be based on human dignity and social equality
• The systemic machinery of modern society, i.e.
  the government has to undertake performance
  assurance with an eye on meeting the needs of all
  members in an equitable manner.

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• The vast disparity in human society in terms of
  resource distribution proves that we do not have
  systems of performance assurance for our selves.
• At corporate level management assurance should
  mean adherence to morals of equality and
  distribution.
• Corporate citizens have a longevity that lasts
  multiple generations of human beings, thus
  corporate decisions must comply with assurances
  of continued sustenance of dignified human life.

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Management Assurance

• Longevity of business
• Insure against all foreseeable Risk.
• They need to assure that Management,
  administrative, and financial system controls
  have been developed to ensure the following
• -All programs and operations achieve their
  intended results efficiently and effectively.
• -Resources are used in accordance with the
  organisation's mission.
• -All programs and resources are protected from
  waste, fraud, and mismanagement.
• -Laws and regulations are followed.
• -Reliable, complete, and timely data are
  maintained and used for decision-making at all
  levels.

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Risk Management

• The risk mgmt is about seeking the upside while
  managing the downside. It is linked closely with
  achieving compnays objectives. It involves
  identification and treatment of risk reducing the
  probability of failure.
• Risk mgmt should be aligned to business strategy
  in such a way that the organization sees the risk
  as opportunity to be grasped as much as hazard.
• We always try to manage (or some time avoid)
  external risk classified as Business or
  operational risk/ financial risk/environmental
  risk/reputation risk/ economic and political risk
  etc. through various methods like Portfolio mgmt,
  insurance, derivatives and hedging etc. or taking
  remedial steps but with change in business
  environment and networking and computerisation
  internal risks pose bigger problems.

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• When management fails to make proper system to
  rein in an employee or manager from unauthorised
  action the existence of whole organisation is
  threatened.
• In Barings Bank One Nick Leeson, who was in
  charge of both dealing desk as well as back
  office without proper internal control, caused
  the Britains Oldest bank to collapse in matter
  of days.
• Similarly in WorldCom, its founder Bernie Ebbers
  was charged with conspiracy to commit securities
  fraud and filing misleading data with Securities
  and Exchange Commission. The company had misled
  investors, public, Govt. and society over 10
  years and overstated profits by USD75 billion.
• It is not just external risks, but internal risk
  are more damaging and systems needs to developed
  and implemented to control the things before hand.

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Punctured Profits

• In context of Telecom, fraud and bad debt are
  growing problems for fixed and wireless providers
  worldwide, representing over 55 billion in
  annual losses. Combined they can total up to 12
  of gross revenues split between
• Early life bad debt,
• Ongoing credit losses,
• Technical and subscription fraud,
• Roaming fraud

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Fraud Management

• In normal terms, it consists of
• Fraud prevention (Anti fraud culture/Risk
  Awareness/whistle blowing/Sound internal control
  system)
• Identifying fraud (Thru Regular Checks/ warning
  signals/whistle blower)
• Responding to Fraud (Disciplinary Action/ Civil
  litigation/ Criminal prosecution)
• But the most important and damaging is
  management fraud through deliberate distortion of
  procedures to shift profit between years/
  capitalisation of expenses/under
  provisioning/over valuation of inventory etc.
  with short term goal, which are against interest
  of the corporate or some of its stakeholders
  particularly government and society at large.
• Only self regulation by top mgmt can stop this
  type of fraud.
• In Dec.2003 Italian Dairy food group Parmalat,
  with 36000 employees in 30 countries went into
  bankruptcy protection with UD8-10 Billion in
  vanished assets. Because 38 of Parmalat assets
  were supposedly held in a Bank account in Cayman
  Island, but no such account ever existed.

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• Higher the position one gets, more the
  responsibility one has to shoulder.
• As per Agency theory of management control, the
  manager (agent) acts in the best interest of
  organisation (the principal), while in
  stakeholder theory, the management looks beyond
  shareholders to those groups who influence or are
  influenced by the activities of company.
• It is concerned with how the power of different
  stakeholders viz. employees, customers,
  suppliers, Govt. and community, with their
  competing interests are managed by the
  organisation.
• Many times the management acts neither in
  companys interest nor in stakeholders bigger
  interest but purely for self interest, there
  should be adequate control mechanism in place and
  that assurance from management is needed to
  convince the Lender, investor and society at
  large.

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Service Level assurance

• A company/ Organisation in public utility
  services like Power/Water/ Railways/
  Telecom/Health Services etc. needs to give some
  assurance regarding quality of services they
  offer to general public, like one given by
  Transmission Corporation of Andhra Pradesh.
• Timeliness/ Max. permissible delay in providing
  new services
• Continuous or routine supply of services
• Maximum permissible waiting time for restoration
  in case of failure
• Justified Charges/Pricing
• Efficiency level in services
• Maximum permissible error level
• System reliability and maintenance standards
• Customer support
• Public Grievance Redressal
• Guaranteed Standards of overall Performance

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• Failure comes only when we forget our ideals and
  objectives and principles.
• -Nehru

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Thank you
sdsaxena_at_bsnl.in 91 11 23714141