There is a growing trend in companies to camouflage poor performance with
deliberate misreporting and suspect off-balance sheet shenanigans.
This practice is increasing, think of the recent problems with losses incurred
by various Banks. It underscores the need for senior management to set clear
defined operational and reporting procedures.
In many companies the Directors simply do not have the understanding of
the mechanics or the day to day activities of the business which they purport
to run. This was graphically illustrated by the recent testimonies of senior
bankers to the House of Commons Select Committee looking into banking failures.
In trading environments it is not uncommon that totally unrealistic profit
targets have been passed from Board level to trading departments. No cognisance
having been given to the disproportionate risks which need to be taken to
achieve these targets.
Some of the most spectacular financial flame outs have followed a period
of ostensibly highly successful trading. In the desire to recognise these
“profits” no thought were given as to how they were being made. In such times
it would be well to take note of the old adage that is something looks to be
too good it usually is!
If your company is bucking the trend in these difficult times it may well
be that you are implementing a winning formula.
However history tells us that it is often a prudent course of action to
look under a few stones – just in case.
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