Tag Archives: McGladrey

Middle market companies need to do more to respond to global corruption risks

RSM member firms have seen a steady increase in providing compliance and risk services since the onset of the 2007 global financial crisis. McGladrey, the RSM member firm in the US, has published a survey in conjunction with The Institute of Internal Auditors Research Foundation, examining the extent and nature of the risks faced by many middle-market companies transacting business internationally and the mechanisms they have in place (or not, as the case may be) to mitigate those risks.

Middle-market companies are more global than ever in their operations, and face exposure to increasing numbers of risks through their third party business relationships, including arrangements with multi-national vendors, service providers, distributors, sales and customs agents, freight forwarders and other intermediaries. The results of the study, conducted with 120 C-suite leaders of these businesses, are revealing and concerning. For example, 27 per cent of businesses never test the effectiveness of their global corruption law policy, and less than a third do so only on an annual basis. An alarming 40 per cent of respondents categorised their businesses’ response to corruption law compliance as ‘non-existent’ or ‘minimal’. In an era when many countries are strengthening their anti-bribery and corruption laws, and widening the scope of their prosecutions, this is an area where many businesses need to focus greater resources.

Download the full report – www.mcgladrey.com

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Bridging the gap between management and boards

I read with interest a recent white paper written by The National Association of Corporate Directors and our US member firm, McGladrey, which delves into some of the gaps between what management communicates and what boards need to know. The report is quite detailed, and makes for fascinating reading. The report highlights that quite often management has a vested interest in withholding information, or distorting it, which means that boards may be making decisions without being in full possession of the information they need.

One of the key points to come out of the report is the dominant consideration given to financial data, often at the expense of non-financial information. Many directors are concerned that they are missing information which is vital to a holistic understanding of the business and its risks. Non-financial information may help to fill in that knowledge deficit, but too often this information does not find its way to the board. The example of how compensation committees often fail to pass non-financial metrics to the board is particularly relevant given the current furore over executive pay. A balanced pay package should include non-financial goals, yet if boards are deprived of that information, it can be difficult for them to focus on every business critical area when determining executive rewards.

Access to the right kind of information can mean the difference between success and failure. In the wake of the financial crisis, in which audit committees have been criticised for failing to act as an early warning system, this report is both timely and insightful. The information ‘gap’ between management and board may never be entirely bridged – and indeed information overload can be just as problematic as too little data – but more effective communication will be necessary to improve decision-making.

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Welcoming the first of our guest bloggers…

It is a real pleasure to welcome the first of our guest bloggers from around the RSM network. Opening up the blog to our experts will gather us some useful insights into the global business environment as well as the markets we operate. This week I am delighted to feature post from Mike Kirley, Chief Operating Officer and International Strategy Leader at McGladrey, the US member firm of RSM.

US off to a bright start in 2012

A manufacturing resurgence, decreasing unemployment, companies investing in growth again — some strong rays of sunshine have begun to show through what has been a cloudy business environment in the U.S. for the last few years. Optimism is increasing across many segments, particularly among the dynamic middle-market companies McGladrey serves. These growing, mid-sized organizations fuel a diverse and healthy U.S. and global economy.

McGladrey’s winter 2012 Manufacturing and Distribution Monitor, a rare slice of data that gives insights into privately owned manufacturers, showed that the number of executives optimistic about the U.S. economy is 146 percent greater than it was in fall 2011. Confidence in the global economy also increased significantly — a critical data point since many participants have international operations. Most importantly, the number of participants who said their companies are thriving and growing averaged 45 percent throughout 2011. This is nearly twice the level of the previous year’s survey and comparable to pre-recessionary numbers. It’s too soon to say whether the U.S. manufacturing renaissance will become reality; however, we are encouraged by these insights from our research.

Manufacturing is not the only sector showing increased optimism. As one of the nation’s leading firms serving private equity groups, McGladrey saw an increase of 40 percent in our transaction support services practice last year, a key indicator of overall growth in private equity. In addition, IPO activity is heating up again. We were recently engaged by one large private equity firm to begin the process of preparing 48 of its portfolio companies for the IPO journey. It will be interesting to see if the JOBS Act further increases IPO activity within our client base.

We’re also witnessing companies freeing up cash they were previously holding to invest in other areas like technology and operational improvement projects that were shelved during the recession. Particularly in the middle-market, companies are looking for guidance on getting more out of their technology as they replace older systems with world-class solutions. They are also seeking opportunities to drive down costs with a focus on right-sizing relative to revenue growth vs. the across the board cuts we have been seeing. Finally, they’re looking to improve in areas such as financial processes and supply chain to be more competitive.

Even so, we don’t anticipate clear skies just yet. The U.S. housing market continues to be soft in many parts of the country, it’s a presidential election year, energy costs are rising again, and tax cuts that affect many mid-sized businesses are set to expire on 31 December, 2012. In addition, middle-market companies are facing increasing regulation domestically and abroad. Any one of these things could greatly impact their strategies and ability to invest in growth.

This is where McGladrey and our RSM International colleagues come in. Through our deep understanding of our clients’ unique situations, their industries and the general economic and regulatory environment in which they operate, we are able to help them make confident business decisions to drive their future success both here at home and around the world. No matter what the forecast.

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Nurturing a good corporate culture to manage risk

John Brackett from the RSM member firm in the USA, McGladrey & Pullen LLP, has written an insightful article about the need to address corporate culture when creating strong guardrails for governance and enterprise risk management (ERM). John is the ERM practice leader in the USA and has worked with companies all across the globe, including Fortune 500 and large privately held organisations.

John argues that good corporate culture creates a framework for employee behaviour which is critical to maintaining a strong corporate governance environment.

“Controls can be overridden, overlooked or ignored. Culture creates the guardrails that make undesirable behaviour unacceptable.”

He outlines some questions that can help businesses assess their corporate culture:
1. Does your company have a formal written statement on culture and governance vision that is clearly communicated to all employees?
2. Do employees know they can report objectionable behaviour and are they rewarded for doing so?
3. Does the board have and maintain the appropriate tone at the top and is it helping to create and support the desired corporate culture?
4. Is the company’s corporate culture formally assessed on a routine basis and is it measured to ensure cultural strategy is adjusted and continuous improvement is embraced?
5. Is accountability established so individual decisions and performance is assessed and risk management is integrated into every job description?

Take a look at this fascinating article here.

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