MANAGING THE RISK OF ENTERPRISE NIGERIA- WHAT JONATHAN AND BUHARI NEED TO KNOW

As the Nigerian elections draw near it is time to look beyond the election itself to governance in the next four years. A May 27^th 2013 article published by This Day Live on its website and titled "Ministerial score card towards May 29^th" examined the performance of the current government of President Goodluck Jonathan by evaluating the performance of his ministries under the ministers, who are responsible for delivering on his transformation agenda.

The writer rated the ministries using a qualitative rating scale; ranging from the best performance of 'Good' through 'Above Average', 'Average but promising', 'Average' to 'Below Average' and 'Poor'. Reproduced below in table form is the rating assessment. I have taken the liberty of assigning numerical scores to his rating scale to enable a quantitative assessment.

S/N	MINISTRY	GOOD	ABOVE AVERAGE	AVERAGE BUT PROMISING	AVERAGE	BELOW AVERAGE	POOR
	Score	6	5	4	3	2	1
1	Aviation	6
2	Defence		5
3	Interior						1
4	Finance		5
5	Transport		5
6	National Plann.				3
7	Petroleum		5
8	Power			4
9	Trade & Inv.		5
10	Environment				3
11	Culture & Tourism				3
12	FCT		5
13	Special Duties	Not Decided	Not Decided	Not Decided	Not Decided	Not Decided	Not Decided
14	Communications & Technology				3
15	Education					2
16	Justice		5
17	Niger Delta					2
18	Labour				3
19	Youth Development					2
20	Foreign Affairs		5
21	Works			4
22	Agriculture		5
23	Information		5
24	Sports			4
25	Lands & Urban				3
26	Police Affairs					2
27	Water Resources				3
28	Health				3
29	Mines & Steel					2
30	Science & Tech					2
	Total = 105	6	50	12	24	12	1

Total Score of 105

Maximum scores obtainable= 180

Scaled score =58.33%

The majority of citizens eyewitness opinions (5 out of 9 commentators as at 28^th Jan 2015) as recorded by commentators on the article on This Day's site was that the assessment was generally fair and comprehensive overall. There were a few disagreements as follows; 2 out of 9 commentators felt that Education deserved a higher score, 1 out of 9 commentators felt that Mines, steel and solid minerals deserved a higher score and 1 out of 9 commentators felt that only Aviation had done well. The general sentiment was that ministers performing below average without substantiated reasons should be dropped from the cabinet.

My questions are the following; if we accept that performance rating of the Jonathan administration was 58.33% as at May 2013, what was the target and on what basis is that measured and evaluated? Are citizens measuring government on the basis of agreed performance contracts and targets? Did the citizenry have some input in the choice of performance measures? Were quality of life indices included in the key performance measures for each ministry? What is the quality of objective setting? Is the evaluation in line with performance indices earlier set? More importantly what is the explanation for variances and MOST importantly what were the identified risk factors and what plans were put in place to manage the risk inherent in achieving our corporate objectives? As we all know, "anything that can prevent you from achieving your objectives is a risk that must be managed".

Reproduced below are the top 15 Key performance indicators as disclosed in the 2012 National Planning Commission (NPC) performance Monitoring Report

For the reason that anything that can prevent you from achieving your objectives is a risk that must be managed, I visited the website of the National Planning Commission to find out how performance and risk are measured and managed. I was particularly interested in the department of Monitoring and Evaluation to see what early warning signals they are monitoring and evaluating to determine when triggers for key Risk Indicators are being pulled.

My first discovery is that no where in the objects clause is the measurement, management, monitoring or evaluation of risk mentioned. I have reproduced the objects clause below.

"Monitoring and Evaluation

The purpose of this department is to improve the availability, quality and dissemination of government performance information for accountability and policy improvement purposes.

The functions are as follows:

Develop and maintain a framework to support the monitoring, evaluation and reporting of government performance at the national and sub-national levels, in line with the national development goals and objectives; Monitor and evaluate government performance at sectoral level (to measure performance of government policies in each sector of the economy), institutional level (to measure performance of government institutions) and program level (to evaluate the effectiveness and impact of public programs); Develop and publish the Nigeria Country Report as the primary medium for the dissemination of performance information; Develop evaluation capacities across government at the federal and state levels to ensure that the quality, results, and

impact of programs and expenditure can be measured at reasonable cost;Collaborate with MDA's to develop results-focused, key performance indicators and clearly defined performance targets upon

which progress will be measured; Develop the data management system for the National M&E system, including data collection tools, identification of data sources, frequency of data collection and data transmission plan;"

I then reviewed the most recent National Planning Commission Performance Monitoring Report available on the website being that for 2012 to see how risk was reported. To my surprise again, in no section of the report was risk management addressed. To their credit, section 4 analysed the key strategic goals and the enabling conditions identifying KPI's but without identifying potential risk events and developing KRI's for them.

Risk management is an essential tool in tackling the uncertainty associated with any enterprise. Entities be they corporate organisations or nation states have always practiced some form of risk management, implicitly or explicitly. Enterprise Nigeria must be practicing some form of risk management, but it is clearly unstructured , not systematic, not holistic, not properly linked to performance and not integrated properly across policies and across Ministries, Departments and Agencies responsible for governance.

Nigerians are known to be very good at planning but not so good at implementation. From my review and analysis it would appear that Nigeria's main problem is a failure to Manage Risk Enterprise-wide and systematically..

MY RECOMMENDATION

Whoever wins this election should improve on the progress already made and the good work already done to date. This improvement should be by incorporating into NPC's object clause the enterprise-wide management of risk for Nigeria. Nigeria should deploy an Enterprise-wide Risk Management (ERM) framework and structure complete with three lines of defence. Ministries and ministers should also inherit Key Risk Indicators (KRI's) in addition to KPI's, which their performance should be measured against. If this is done we will have better achievement of targets and risks adequately mitigated, be they political risks, macro-economic risks, security risks, environmental risks, legal risks, social risks, financial risks, or regulatory risks et cetera,will would be routinely and properly managed preventing unwelcome surprises.

Author

Ijeoma Rita Obu, FCA, FIMC is the Managing Partner of Ijeoma Rita Obu & Co. (Chartered Accountants) and the CEO of Clement Ashley Consulting. For comments questions or enquiries regarding this article please send mail to robu@clementashleyconsulting.org or post a comment on her blog riskmanagementandperformance.blogspot.com

Managing the Risk Within: Employee Fraud Prevention and Detection

Introduction

Fraud costs American businesses, large and small, a ton of money each year. In fact, according to the McGladrey report The Threat Within: Employee Fraud Detection and Prevention, fraud took a huge toll on American businesses, to the tune of nearly $1 trillion dollars, last year. The problem only seems to be worsening with the volatility of the economy. That’s why it’s so important to focus on prevention rather than trying to recover losses after the fact.

In Nigeria where data and statistics are scarce one can safely assume that Nigerian business are losing much more than that. In the last couple of years we have seen departments, units and entire businesses close down due to employee fraud and unethical behaviour. A few cases can illustrate this. A hospital had to close its laboratory because the laboratory technicians were no longer doing the hospitals work but were taking in 'unrecorded' work from other hospitals for a fee that the staff privately pocketed. Patients of the hospital who were used to a 3 day return appointment were now having to wait 3 weeks, meanwhile the lab was always stocked out of required materials previously purchased, and still unused, as far as the records showed.

The hospital could not cope and decided to close the laboratory. It laid off all the workers and now send their work to laboratories abroad.

You may have heard of workers diverting their employers goods in containers, diverting tankers of petroleum products or selling the employers goods worth hundreds of thousands of Naira without issuing official receipts. We have even heard of a case where all the fish in a fish farm mysteriously disappeared just before harvest. The list of such worker related fraudulent behaviour is endless. The Great American Insurance group who provide business crime Insurance coverage in the US, say that “Employee fraud costs companies a surprisingly large percentage of their gross revenues. With some employee fraud schemes spanning years, the results can be devastating to a company's operations and its financial results.”

Small businesses are even more vulnerable to employee theft because they lack the level of internal control and security that larger businesses often have in place. For these reasons, you need to work now to come up with an effective method for deterring employee fraud and theft.

Problem Statement

In the past we could rely on young people to learn ethics at home, re-enforced by schools and canonized by churches, mosques and religious institutions. This is no longer the case. Little Johnny the son of a reverend pastor and a teacher mother, 'hears' his father preach that stealing is a sin. He then 'sees' the same father dip his hands into the offering bucket. He listens to his mother teach that stealing is wrong but then he sees her bring home exercise books and pencils form the school for his private use at home. Johnny gets to university and his lecturers are not in class because they are busy running their private businesses during school hours. In fact some of his lecturers engage him to run errands for their business when his class should be holding. He obliges so that he can get a pass mark when exams for which they are not being prepared, come up, as they must.

Having passed through these experiences the grown up John graduates and because of his high IQ he passes your recruitment test and is offered a job. John who is about to resume at your company is the same person that switches on his TV set at home to see that some leader; political, corporate, religious or social has just been indicted for committing economic crimes. While the case is still on, he sees this same person receive national awards and traditional titles in recognition of his 'contributions' to his community and nation.

This is the practical lesson in 'ethics' that John has learned.

Previous Options

In many organizations, 'on-boarding' or 'induction' is all about getting the new employee to learn the ropes as fast as possible. The company trusts that their list of do's and don'ts as contained in the staff handbook is sufficient to guide the new employee as far as what is acceptable behaviour to the organisation is concerned. To make assurance doubly sure the new employee is asked to sign a copy of the staff handbook to acknowledge that he has read and understood the contents of the handbook. The company is satisfied that this aspect of his induction has been taken care of and they now concentrate on the 'business' of doing business itself.

Clement Ashley Consulting's Solution

1. Require Employees to Take Vacation
2. Train Managers and Employees to Spot Fraud
3. Implement Internal Control Systems
4. Create a System of Internal Audits
5. Conduct Background Checks on New Employees
6. Invest in Business Crime Insurance e.g. Fidelity bonds
7. Encourage anonymous whistle-blowing
8. Train Employees on Employee Work Ethics and Responsibility

Clement Ashley Consulting recommends that as part of induction, new personnel be taken through a course on 'employee work ethics and employee responsibility' in the context of the organizations operations. Having facilitated this kind of training before, we are sometimes shocked during pre-case quizzes at what employees ignorantly defend as acceptable behaviour, when practical case studies are being handled in workshops and training classes. These practical case studies give the employer the opportunity to work through myths and wrong beliefs and replace wrong values with the right ones.

We believe that this should not be a one-off exercise. At least once every two years all staff should have a refresher on workplace ethics with an emphasis on the discussion of industry specific case studies to reveal any new mendacious thoughts and beliefs, and nip them in the bud.

When training on work ethics for staff is combined with adequate internal controls, segregation of duties, independent audit and examination as well as a well designed reward and compensation scheme that is tied to performance management and appraisals, the company stands to attain competitive advantage over its peers who do not properly address the issue of employee work ethics.

Benefit 1

Using this approach training is focused is on corporate goals and objectives, providing the best possible environment for achieving them.

Benefit 2

Using this approach you will be able to identify any wrong interpretations of what is ethical and hence prevent unethical behaviour

Benefit 3

Using this approach you are able to build a core of ethical staff who can resist a 'renegade thinker'. It is well known fact that collusion can override the best of controls. Wide spread training on ethics for all staff, reduces the risk of collusion.

Benefit 4

Using this approach you are able to reduce operational losses due to employee related unethical activities. Training on employee work ethics pays for itself many times over in reduced operational losses.

Summary

Training your staff on employee work ethics and employee responsibility is something that can give your organisation competitive advantage. As everyone knows when something becomes scarce it becomes a source of value. With widespread corruption and unethical behaviour as the order of the day. Your organisation will reap enormous benefits form having an ethical workforce.

Managing the Risk of Headhunting

Introduction

Eighty percent (80%) of business success is tied to people. Recruiting the right people, motivating the right people, training the right people, retaining the right people while releasing the wrong ones is the key to your success. Many business under-perform because they do not know to do this or they can’t do it well. Anything that can prevent us from achieving our objectives, is a risk that must be managed. Therefore if we want to hire the right people we must manage the risk of getting it wrong.

Problem Statement

Identifying the right talent is always a concern. Some employers figure- 'why try to reinvent the wheel'. If some other company is getting it right, then why don't we just identify the person responsible for success and get him or her to join our team

Previous Options

Current practice in most business organizations is that when they think this way, they turn to their HR manager or their HR consultant and ask them to head hunt a certain person occupying a target position in a target company. Many employers think that getting the person responsible for success at company 'X' will translate into success at company 'Y'.

This is not always the case. Let's look at a sample scenario to explain why. Company 'Y' identifies company 'X' as having the kind of market share and sales performance that they would like for themselves. They identify the Head of Sales and Marketing in company 'X' and decide that if they can just get to recruit him/her. He/she would in no distant time work his/her magic on their numbers. What they failed to realize is that the CEO of company 'X' is an excellent networker who is always passing qualified leads to his sales team. Eighty percent of qualified leads come from the CEO, in addition the head of sales and marketing has a couple of fantastic 'closers' on his team this duo have a conversion rate of close to 90%. Company 'Y' does not have this same ideal situation.

The new Head of Sales and Marketing resumes at company 'Y' his strength is in managing a sales process. He duplicates the exact same sales process he used at company 'X' but with dramatically different results.

Clement Ashley Consulting's Solution

Clement Ashley Consulting recommends a recruitment approach that takes account of the problems identified above. We recognize that in reality the success you see may be as a result of a myriad of factors, some inimitable; the structure, the processes, the people, the life cycle of the organisation, the synergy of a team etc etc.

This means that we cannot assume that because the Head of Sales and Marketing recorded success at company 'X' he will automatically record success at company 'Y'. We still need to investigate his performance and validate his results. A head hunting approach does not give us the opportunity to do this. The target always feels like the 'beautiful bride' ask him to take a test or survey and responds 'do I have to do that, you know I am a performer that is why you approached me'. The target gives you the run around, always playing hard to get. The meeting is less of an interview and more of a salary negotiation from his point of view. What you hear is “ I am very happy where I am, and if you want to get me to leave, you need to make me an offer I cannot resist” As a result you end up paying a salary three or more times what you would have paid if you allowed him to compete for the position.

Please read Bernard Marr's Linkedin article “Who's Been Paid $109 Million For NOT Performing At Their Job?” to learn how Yahoo Inc paid a whopping sum of $109 million for 15 months of non performance when they headhunted De Castro of Google. Please follow this link to read.Headhunting at Yahoo

Our approach begins with understanding in great detail who exactly the man or woman for the job is. We recommend that you elicit a very detailed job description for each position and then make a very detailed and thorough man specification for each job description Armed with this you are now in a position to write a compelling copy for an advert that is geared to attract only the people who are actually qualified and discourage speculative job seekers. Having attracted the right targets, you should now put them through a thorough testing process to validate their IQ, work skills, job knowledge, emotional stability and personality fit for the job. If you have any headhunting target in mind encourage them to apply in response to the advert. If your advert copy is well written, chances are they would already have applied if they saw the advert. Let him compete with other applicants. This gives you an opportunity to independently validate his claimed successes. It also gives you an opportunity to hold him accountable for results in order to earn whatever salary is finally agreed. As you know competition always brings prices down. The same goes for salaries.

Benefit 1

Using this approach you greatly reduce the run around you get from headhunt targets.

Benefit 2

Using this approach you will not get hood winked by successes for which the candidate is not solely responsible and therefore cannot replicate

Benefit 3

Using this approach you are able to negotiate a competitive salary and hold the candidate accountable for results and not pay three times what the candidate is worth for success claimed elsewhere.

Benefit 4

Using this approach you do not limit yourself to what you think is available but create an open playing field that enables you discover other potential talent at a reasonable price.

Implementation

Implementation involves designing recruitment policies and procedures that standardize these best practice methodologies .It involves recognizing what personalities suit what jobs and identifying the right tests to administer. It involves understanding performance measures for each job position. It involves advertising for all positions; headhunting just becomes one approach of sourcing applicants to apply.

Summary

Hiring the right staff is the best thing you can do for your organisation. Jack Welch says 'Get the right people in the right jobs – it is more important than developing a strategy' The eighty-twenty rule recognizes that eighty percent of business success is tied to people but only twenty percent of organizations get it right. You can be part of that top twenty percent.

Technorati S9969AXG6QNZ 

Risk Based Internal Auditing - The New Approach

Introduction

The Institute of Internal Auditors defines Internal auditing as an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. (2013).

Problem Statement

If you entered the Internal Audit profession twenty or thirty years ago you would not recognize the above definition of internal auditing. The fact is that Internal Auditing has changed significantly over the last decade. Much of those changes have been driven by new regulation and regulatory demands, new technology, new professional standards, globalization  new ways of working especially the need for collaboration as well as a more proactive, dynamic and risk based approach to auditing. The fact is that many career auditors need to re-tool, re-think and re-train to carry out their new expanded responsibilities effectively.

Previous Options

In the old traditional, conventional approach to auditing. Internal auditing was a compliance based activity. The traditional internal auditor armed with his checklists, standard audit tests and annual audit plan felt capable of providing assurance to management that internal controls were working effectively and that all assets had been safe-guarded. With the role of the internal auditor being redefined in line with the introductory definition above, more is needed for the Internal auditor to be able to help his organisation accomplish its operational objectives while improving the effectiveness of of risk management, control, and governance processes, by his objective independent consulting activity.

Clement Ashley Consulting's Solution

Clement Ashley Consulting recommends a Risk Based Internal audit approach that has a business focus rather than an audit focus. The Risk based approach should have a process forcus rather than a transaction focus, it should focus on improvement of risk identification rather than compliance for compliance sake. The risk based approach to internal auditing should use open questioning techniques rather than the traditional closed questioning. The mindest of the risk based internal auditor should be one of change facilitation to improve performance rather than policy adherence.The risk based internal auditor should see himself as a consultant rather than a policeman, if he holds himself accountable for performance improvement results, he will be seen as adding value and not as a cost center  this in turn will enhance his ability to move into other management positions. The risk based internal auditor should be more interested in the future than the past and therefore be more proactive and less reactive. The risk based internal auditor should focus on solutions rather than problems and hence major on performance rather than conformance.

Benefit 1

A risk based audit approach maximizes the use of scarce internal audit resources.

Benefit 2

Using the risk based approach you will have the ability to identify new and emerging risks that can affect achievement of your organisations goals and objectives.

Benefit 3

A risk based approach will force a prior implementation of enterprise risk management, which will directly improve organisational performance.

Benefit 4

The risk based approach to internal audit has the benefit of not only highlighting risks that are not properly controlled but also those that are over-controlled and thereby consuming scare organisational resources.

Summary

As Mike Thomas CIA says 'the risk-based auditing approach encompasses the attributes of business knowledge, macro-risk assessment, strategic audit planning, and detailed risk assessment necessary to effectively and efficiently deploy audit resources. If performed correctly, this approach will allow the internal auditor to focus on the areas of risk proportionate to the potential exposure to the company. The cycle of continually assessing risk, efficiently planning audit activities, and effectively performing, delivering, and reporting audit activities can result in overall lower risk to the organization at reduced cost'.

Author

Ijeoma Rita Obu is the managing Consultant of Clement Ashley Consulting and can be reached at  robu@clementashleyconsulting.org