Conflict, What Conflict?

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Conflict, What Conflict?

Every now and then the press report about a “Potential Conflict of Interest” and the world acts as if this is something new. People give jobs to their friends all the time, and if you are a company owner with no shareholders it is up to you how you spend your hard earned profits.  The problem is when an organisation has shareholders or is publicly owned and there is not just an expectation of transparency but a requirement for due diligence.

 

Many organisations have a process whereby senior managers should record their external interests in other potentially conflicting organisations. Equally, there may be a hospitality register, sometime referred to as the “bribes book”. However, I doubt if many organisations ever verify what is recorded in these two registers.  Here are some examples of the anomalies which I have uncovered by using data analytics.  I’ll leave it for you to decide if these are innocent, coincidental or potentially evasive.

 

Case 1: Analysis of a bribes book: One senior finance manager of a publicly owned company declared that he has received a Christmas case of wine from the organisation’s external auditors which he shared with his team.  He estimated that the case was worth about £50.00.  Another finance manager for the same organisation working in a different operational unit made a declaration that “wine had been received at Christmas valued about £50” from the same external auditor.  Now this seems odd for a number of reasons.  Would a senior Audit Partner from the Big4 give one client colleague a case, and a similar manager a single bottle of wine? Did they both receive a case, which one declared and the other didn’t.  A standard case is 12 bottles, so would a senior audit partner of a Big4 really give a major client 12 bottle of wine with an average value of £4.16? 

 

Case 2: Different organisations have an arbitrary value of what a reasonable gift is, usually between £25 and £50. However, if no one checks the register then extravagant gifts can go un-noticed.  Declared: Christmas gift from construction partner: 1 bottle red wine 1996, Domaine George & Christophe Roumier Musigny, value approx. £50.  Any problems with this declaration?

 

Case 3:  Sometime the declarations of outside interests can suffer with being a bit too literal and economic with the truth.  For example, “The company expect you to declare any financial interest in a supplier organisation of greater than 3.0%”.   A senior manager declares he has 2.5% in a privately owned supplier, what he omits to mention is that the rest of his family, wife and three children each have 2.5%.

 

Here are some techniques which will make it much easier to detect such potential collusion.

 

  • Record all potential conflicts of interest in a standard format, such as an excel spreadsheet,

  • Make sure that all relevant data is recorded, keep in mind the following

    • What is the name of the potential conflicted entity?

    • What is your relationship?

    • When did you first become associated with this company

    • Do you receive any direct financial remuneration from this company? etc

  • The Hospitality Register should equally be in spreadsheet form and record the following:

    • Who provided the hospitality?

    • When was it provided?

    • Where did it happen?

    • How much was its monetary value?

    • What was the hospitality?

    • Was this reciprocated and if so how.

 

There are many other data elements which could be collected but a standard format will ensure that it can be systematically analysed and any spikes detected.  For example, why does Fred in procurement always get tickets to Wimbledon? Or why a particular potential/current supplier arranges four times as many corporate hospitality events than the next key supplier?

 

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