Can you trust your controls?

Shares in the camera giant Olympus fell as much as 30% on Tuesday after the company admitted to hiding losses on securities investments for decades.

This is not an isolated event, think of the recent problems with losses incurred by various Banks. However it highlights how vital it is that Senior Management 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.

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 their 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.

Tapping the barometer

Very often the best indicators are the least sophisticated. The UK economy remains in a very fragile state – the clearest evidence of this can be seen as you walk down any High Street.

The rising number and popularity of charity shops tell underscore that many families are struggling whilst at the same time the latest results from Marks and Spencer the favourite chain for the over 40’s reporting a decline in pre-tax profits of 8% for the 6 months to October 1^st compared to the same period last year. The company cited the “current challenging conditions”.

In previous years, many retailers factored in Christmas buying spree as part of their overall strategy but this year as consumers struggle with debt and job insecurity it is hard to imagine this consumer excess.

As the knock on effect percolate back down the chain many businesses will suffer. External factors by definition are difficult to handle but at the same time in-house disciplines can at least provide some insulation.

Cash-flow will be very difficult to manage over the next 2 months so as always strict governance of Debtor and inventory control will provide some measure of comfort.   

Good time to be holding folding

There is no shortage of ammunition for the gloom merchants at present. However, these current market conditions underscore the old adage that “cash is king”.

During times of global financial upheaval, e.g. during the Great Depression of the 1930’s there are opportunities for those individuals and companies who find themselves in the enviable position of being positioned to operate in a cash-starved market.

There will be opportunities to acquire shares at very attractive levels whilst failing companies will be up for grabs at drastically reduced prices with the prospects for consolidation or spinning their assets for more cash.

 It sounds like a pretty simple model, but then, so are many of the best ideas.  

Are you looking to gain a presence in the UK market?

One of the most valuable commodities available to any organisation is local knowledge.

How many times has a venture ended badly owing to a basic failure to understand and deal with local market conditions?

The UK is a mature and sophisticated market and though offering different challenges to operating in a 3rd World destination there are still obstacles in trying to establish a presence.

Operating overheads present a crucial challenge and this is where we can assist you to achieve a cost-effective solution to marketing your products in the UK.

Take a look at our website www.glbconsulting.co.uk

 Alternatively check out our video link http://youtu.be/ruUtQnlJ

Could your company benefit from fresh input?

I have an extensive business background in sales and business development. In addition to working at senior/ main board level in the UK I also have worked in both North/South America and the Far East.

Currently I am working as an independent business consultant and have handled a variety of assignments on both a short and long term basis.

At the same time I would be interested in discussing a “hands” on managerial role where I could more fully utilise my business background and contacts. I would be particularly interested in hearing from companies wishing to diversify or looking to turnaround failing business units.

If you are looking to strengthen your management team then I would invite you to look at my profile at http://uk.linkedin.com/in/gordonblackburn or alternatively email me at gordon.blackburn1@btinternet.com and I will send you a copy of my current CV.

Taking accepted commercial advantage - or Red Flag warning?

Not so long ago the standard response from recalcitrant Debtors was “the cheque is in the post”. It traditionally bought some time as generally Suppliers met this response with a weary resignation.

Times have moved on and the latest mantra is “its set up for next week’s computer payment run”.

Basically the name of the game is the same, namely to achieve a payment extension effectively squeezing the Supplier’s margin.

Obviously it is a difficult balancing act between keeping the customer happy and managing your own company’s cash-flow.

Now more than ever it is vital to keep full control of Debtors.

Whilst delays in payment can damage bottom line, the worst scenario is that neglecting to monitor a failing company could result in a total write off.

Fasten your seatbelts - further turbulence ahead

Yesterday’s GDP figures for the UK showed that the economy grew by 0.5% in the third quarter of 2011. In itself a modest figure but acknowledged by some as showing some growth which is better than no growth.

However as we have seen many times in the recent past the real market driver was outside influences. Reports of a referendum to be held in Greece over the terms of the recently agreed bail-out was enough to spook markets again and across Europe shares nosedived as the spectre of a Greek default re-emerged together with the subsequent knock-on effects throughout the Euro zone.

In times like these it is impossible to insulate your company from these buffetings. The Banks stand in the forefront of this onslaught and their problems are well documented. As they look to shore up their own balance sheets their attitude towards funding and risk in general will be increasingly strict.

Expect a closer scrutiny of your monthly management reports and anticipate those “hard to field” questions which are bound to follow.

It may well be that difficult decisions need to be taken but it will be far better that the management of the company implement remedial action before somebody from the outside is appointed to do it.