Your business – your responsibility
11 July 2019
Brexit and the resulting delay has undeniably left the UK economy “in a stale state,” and it’s likely to remain that way until at least October while the lack of clarity continues. Recent news that the construction sector crashed to its worst month in more than a decade this June adds fuel to the fire that Brexit is to blame.
But is it to blame for all bad business decisions?
Of course not. There is a whole underworld in the business sector that we tend to gloss over beneath the curtain of the Brexit wave. While we agree that Brexit is putting strains on businesses in a variety of ways, it is also helping to uncover and expose well-hidden and deeply imbedded internal business issues.
The infamous scandal surrounding Patisserie Valerie was just one example of internal failings investigated by the Serious Fraud Office. Britain’s biggest auditors are now taking their share of the blame, notably PWC, who was in charge of performing the Patisserie Valerie audit. This has led to many calls for a serious clampdown on the four biggest auditors, and restructuring plans are well underway to separate the audit divisions from the rest of the core business.
Other issues that are being uncovered and dealt with quickly as a result of Brexit are wide ranging and not simply limited to one sector – any business could be affected.
Here are some of the most high profile issues recently identified.
- – Serco had to fish out nearly £23 million to avoid being prosecuted for fraud.
- – British Airways is facing an unprecedented £183 million fine for failing to protect the “fundamental privacy rights” of half a million of its passengers whose data was hacked last year.
- – Fashion chain Superdry collapsed with a possible sales revival of two years or more.
- – House of Fraser crashed as a result of sales to foreign investors, poor structure, lack of communication, vision and planning.
- – Debenhams held on until after House of Fraser sale went public.
- – The government had a “pervasive” influence over the strategy taken by a scandal-hit restructuring division of Royal Bank of Scotland that mistreated thousands of businesses, according to documents revealed in a legal claim against the bank.
- – Google was paid more than £20 million to promote high-risk mini bonds for London Capital & Finance, the collapsed investment firm at the centre of a fraud investigation.
- – The former finance chief of Autonomy has been granted bail while he appeals against his conviction in the US for accounting fraud.
- – The Theranos scandal involved the former CEO of a company once valued at $9 billion facing criminal charges stemming from allegations of a scheme to defraud investors.
Each of the businesses named above incorporated a multitude of sins behind the perfect front they presented to society. Understanding and following the fundamental rules is vital, and will put businesses in the best position to minimise their exposure to these risks.
So how can you protect your business? Here are some suggestions…
The Vision and Company Message
Vitally important in all businesses is the message you send out from the top – communicate this effectively, with passion! It is vital that everyone within the business acts in accordance with this message to avoid losing its authenticity and believability. Superdry’s game of blame turned it into one of the victims, alienating its customers in the process.
Planning & Structure
Proper planning prevents poor performance, and it is planning – or the lack of planning – that often leads companies and people within those companies to become desperate, then become ‘creative’ to cover up issues, leading to many frauds and misrepresentations. Having the right structure to enable your team to thrive will ensure the business follows suit.
Looking back, it would be interesting to see what would had happened if the bosses of House of Fraser had acted sooner by identifying warning signs such as shifts in economy and customer trends, and putting planning in place to mitigate the risks.
We live in a world where distractions are more apparent than ever. Lack of appropriate action is often a downfall of many businesses, as the temptation to wait and see what happens can cost businesses as they either miss the boat, miss a deadline, or fall far behind.
Many families would still be visiting Toys R Us if the company had not relied on its past glory, appreciated the impact of the emerging on-line rivals and acted accordingly to reduce the levels of complacency.
Compliance and Control
As highlighted in cases of Google and BA, an often-overlooked factor is the control function. In line with the most recent GDPR rulings, it is more important than ever to have full compliance and high levels of internal controls to safeguard against systematic failings and lack of accountability.
A lot of these cases demonstrate too much of a trusting attitude, and not enough – or insufficient – questioning. Scepticism should be part of any party with an element of control; those at the top of the structure and mid-management alike have to show an element of scepticism towards controls in place, and the conduct of those in charge. An auditor’s job is to apply the right level of scepticism, be unbiased and communicate their concerns to the management. We are now seeing more and more evidence of this once highly regarded profession under huge scrutiny itself.
We have talked about several high profile – and, in some cases, high scale risks, and these are prevalent in any business. So have a look into your own business and see where your risk areas lie. And don’t use Brexit as an ‘excuse’ for any of the above fundamentals not being in place.
It is possible that with forward planning and due diligence in place, the future of many ill-managed companies will experience a very different future.
Remember: Your business is your responsibility.