PwC Public Sector Research Centre published these days a study on “Social Private Partnerships”. Using profit to deliver social benefits is a concept that the private sector has already embraced through its considerable investment in corporate social responsibility programmes. Maximising profit should enable social enterprise to deliver a higher level of ‘mission benefits’. Therefore, PwC considers that the time is ripe to recognise the coming together of the two related sectors, and to adopt a more assertive approach to partnerships between social enterprises and private firms in the provision of public services.
Working together, and sharing experience and resources, may indeed become a necessary means of achieving the traditional aims of both sectors whilst better harnessing public spending for the wider public good. However, it is important not to exaggerate or confuse the role of the third sector and social enterprise. Much of the third sector will remain dependant on giving. Only 2% of total public spending is on third sector delivery and a high proportion of social enterprises are micro-businesses. Even so, the sector receives widespread support and is popular with Government and service users. Moreover, if the goal is to create a mixed economy of providers then there will need to be more social enterprise involvement, especially in areas where private providers or public providers are dominant.
The economic downturn will act as a brake on the rate of growth and constrict access to conventional funding, but may also open up new opportunities as the government seeks to fast-track spending in key areas like health, education, housing and transport while also delivering on social outcomes, such as limiting inequality.
Advancement in outcome-based commissioning (whereby social or local added-value, like volunteering or mentoring are factored into the procurement process) and the introduction of full cost recovery should be real plusses.
You may proclaim your values anytime but during crisis you have to prove them. I admire Scotland which, three years ago, became the first part of the UK to outlaw smoking in public places and resisted to the lobby addressed by the tobacco industry against the regulation.
Recently, Scotland’s devolved government announced an initiative to set a minimum price for alcohol. Of course, Scotch Whisky Association claimed that such a measure would have damaging consequences on local alcohol export trade.
Before making an opinion, let’s see the reasons this initiative even started. Dr. Harry Burns, Scotland’s chief medical officer, said alcohol misuse claimed many hundreds of lives in Scotland every year – twice as many as 15 years ago. Moreover, Nicola Sturgeon, health secretary, said the scale of Scotland’s alcohol misuse problem was shocking: 42,500 alcohol-related hospital discharges; 1,500 deaths per year; soaring rates of liver cirrhosis; the eighth highest consumption in the world and a GBP 2.25bn annual cost in extra services and lost productivity.
Governments, like companies, have their own set of values. If they say their goal is to protect the citizens’ health, they should do so, even in crisis. Actually, especially during crisis because this is the time you really prove your commitment.
Likewise, any company can say, for instance, “we value people”. It is the crisis that makes the difference between those only saying it and those who really mean it.
Ever since the financial crisis started to spread around the world, organisations heavily focused on business efficiency – reducing costs, improving operations and making the best use of assets.
Nowadays, of a more stringent nature than before, many companies realised that they should know how their costs compare to other companies on the market, how operations could maintain efficiency and what opportunities there are to maintain profit.
Here are a few tips on how companies could manage operations during crisis:
Assess the pros and cons for your business and consider outsourcing if this lets you focus on your core business efficiency;
Reduce costs through the use of shared service centres;
Eliminate the activities that do not add value to company business;
Optimise the supply chain (if applicable) to reduce the procurement cost as well as the cost of supply to customers;
Analyse the benefits and risks of your optimizing decisions, in both internal processes and external relationships with customers and suppliers.
If you haven’t done it already within your own company culture, now is the perfect time for organisational redesign and working capital reduction. Moreover, as a „lesson learned”, consider maintaining a culture of continuous cost containment, even after the financial crises fades away, rather than damaging the business through periodic cost-cutting intercession.
As a result of the actions above, you may gain a clear picture of your company’s cost drivers and address cost efficient and sustainable improvements. Your focus on people and cultural issues, as well as on processes, structures and technology, could ensure that performance is managed during crisis.
The collapse of Northern Rock proves that profitability is no defence against liquidity risk: the company made profits in the quarter before it disappeared. Following a significant fall in market liquidity, Northern Rock was unable to meet its payment obligations.
Only a few voices raised liquidity risk issues until now and, even if the regulators did monitor banks’ liquidity management, they rarely raised serious challenges. During this financial crisis, risks tended to repeatedly transform from one type to another and companies face the challenge of placing greater emphasis on developing an integrated view of risk management across all types of risk.
The new economic perspectives bring significant challenges: while funding can still be found, it is only available for short periods and at high costs. Therefore, this is a good time for any company to perform a liquidity stress test such as the following 3 steps approach:
1) Identify liquidity risk drivers:
erosion in value of liquid assets,
additional collateral requirements,
evaporation of funding,
withdrawal of deposits (if the case);
2) Design stress scenarios (and probabilities):
emerging markets crisis,
systemic shock in main centres of business,
country / industry specific scenarios;
3) Model stress tests:
quantify liquidity outflows in all scenarios for each risk driver,
identify cash inflows to mitigate liquidity shortfalls identified,
determine net liquidity position under each scenario.
Times of crisis are perfect opportunities to refocus on fundamentals: you can show that you truly understand your businesses and its potential risks with an integrated risk management perspective.
CEOs around the world are retrenching, indeed many claim to be entering “survival mode.” PwC’s 12th Annual Global CEO survey shows how the financial crisis shattered short-term confidence.
The percentage of CEOs who were ‘very confident’ about their one-year revenue growth prospects dropped to 21%, the lowest level in six years. Uncertainty about the future is still running high and confidence no doubt continued to deteriorate after PwC completed the survey in early December.
You may compare yourself to the CEOs in this issue or download the most relevant nuggets of Survey data by industry, country or business issue from: http://www.pwc.com/ceosurvey/
“The impact of Sarbanes-Oxley Act on Romanian companies” is an article written for the “Financial Audit” Journal in July 2008. The article evaluates the benefits of the Sarbanes-Oxley Act for shareholders by studying the lobbying behaviour of investors and corporate insiders to affect the final implemented rules under the Act.
All over the world, regulatory pressures have overshadowed the risk management function for the past few years and we may see a high impact on Romanian companies as well. SOX compliance brings high regulation costs as well as competitive benefits such as improved ability to prevent, quickly detect, correct, and escalate critical risk issues, reduced cost of risk management by improved sharing of risk information and integration of existing risk management functions.
However, SOX compliance not only refers to financial side of corporations, but also to the IT departments considering the corporations’ electronic records and access rights. The lack of controls over spreadsheets has been a contributing factor in financial reporting errors at a number of companies. In this article, you may find examples to highlight the importance of understanding how spreadsheets are used in a company’s financial reporting process and evaluating the controls over spreadsheets as part of the company’s overall Section 404 process.