If a “wrong doing” in your organisation came to light, would it be a road-bump, in which management would quickly figure where things had gone wrong and put corrective action into place straight away, drawing lessons for the better running of the organisation in the future? 

Or a road to ruin, where in the short term management may turn a blind eye, not question operations, then go on the defensive and the blame game when the can of worms gets opened?  Can the Board and senior management really admit to “not knowing”. Or can it be agreed that they have the crucial role in influencing and driving the “way things are done”  i.e, the “right way”.

In July Macmillan Publishers, more generally known for their contribution to education and science, were painted in a new light as “corrupt” and were ordered to pay £11.3 (US17M) for unlawful conduct related to education divisions in east and west Africa.  They also face an ongoing  ban on bidding for projects from the World Bank.  On the basis of an admission of bribery related to a multi-million Bank funded education programme in Sudan, there were subsequent investigations by the UK’s Serious Fraud Office (SFO) around operations in Rwanda, Uganda and Zimbabwe, which led to the payout.  

It had been Macmillan itself that referred the case to the SFO in order to conduct an examination of operations, on the back of an initial report from the Bank.    Macmillan’s cooperation has led the World Bank to cut the Macmillan ban from 8 to 6 years.  It is anticipated that this may be further reduced to 3 years, in light of evidence that the company is doing all it can to ensure good practice and acceptance of their  “deep regrets”  regarding the incident.

Risk assessment was key in this case and has led Macmillan to closing ongoing and prospective tenders in its education division in east and west Africa.  Such risk assessment in companies should be a must do, not only because its good for the long term running of the business but also in light of the law – the UK Bribery Act adding to the global legislation that finance professional must have front of mind. 

Not all firms come through such situations in this way (albeit with a bill for $17M)and Macmillan’s senior management and Board’s approach in  engaging, learning and adjusting operations accordingly is a lesson for all.  A recent report on risk by Cass Business School on behalf of Airmic -  Roads to Ruin - studies the events that brought seven of the case study companies to the point of bankruptcy and cites eleven corporate examples of Chairs and CEOs taking the public walk of shame i.e.losing office (a rarity I think – and something that should be more common! Still can't figure the point of "being responsible", taking the financial rewards and than not taking responsiblity and paying the price....I always lost my pocket money when I was naughty)

Not surprisingly  the key conclusions relate back to the Board and overall governance,  leadership and ethos of the organisation – the very “gap” highlighted in the recent UK News of the World scandal.  

Risks include:

- The Board’s lack of essential skills and being "risk blind"
- Leadership issues, the ethos, culture and beliefs of the organisation and how these norms are communicated and role modeled. 
- Inappropriate incentives.  
- Complexity – the unknown unknowns as well as unknown knowns. 

The report highlights the challenges in capturing and addressing risk, not least in the risks emerging from the ethos, culture and strategy of the company itself and the activities and behavior of the leaders.   The environment should be one that staff can speak up and for the finance professional playing out independence and objectivity. 

Yet again we have played out in real life key lessons on how the ethics and values of an organisation are central to staying on the road to success and sustainability.