Commercial sense today

 

 

The more I see the environment slipping into an increasing fraud risk prone & hazardous regime the more it becomes obvious to me that the role the commercial function gains increasing significance. It is increasingly  becoming important to have

 

1.       A competent commercial manager

2.       A competent internal auditor

3.       An independent director on the board who has sound commercial sense.

 

Take some recent cases.

 

1.       Large Indian natural resource company

·         Outsources a considerable part of business to petty contactors with an average ticket size of Rs. 50 crores per annum has a shelf life of their mid-management executives of not more than two years.

 

·         The company feels that it is not necessary for them to hold on to their own managers as they have strong processes and anyway the managers will leave. So there is a constant churn of managers

 

·         The new joinee wants to show performance in the short term and over the last five years

 

·         I observe that whenever a new manager joins he pushes the contractor to reduce the contract value by 10 to 15% in the next renewal. So there is a continuous reshuffle of contractors.

 

·         So there is a constant shuffle of managers and contractors

 

·         One contractor has been around for the last seven years and how do you think he is able to continue when the contract value gets reduced for the same amount of work every three years with inflation at 20%. Obviously there is a  hit in quality or process or product.

 

2.       Auto major

·         In another case the company is growing so fast but is unable to keep up to its delivery schedule.

 

·         The wait period is seen by the commercial manager as a sign of the company’s  progress rather than missed opportunities

 

 

 

 

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Naraya Hrudayalaya Hospital Group (NHPL) UPDATE ( Source: Business World - 5 MARCH 2012) - Part 1 of 2 : Statistics

       NHPL Hybrid model :  mass-market player

 

1.       Turnover: Rs 750 cr this yr (expected) vs Rs 476 cr last year

 

2.       Beds: present 5,700 & projected in 2020 is 30,000

 

3.       Weaker section: 5% patients are free & 27% are subsidised

 

4.       Hospitals: 2011 - 1 hospital; 2011- 14 hospitals; 2013 – 21 hospitals ( including 1 each in Cayman islands & Malaysia)

 

5.       US market: 250-300 bedded geriatric hospital  at Cayman Islands ( 1 hr from USA)

 

6.       12% of cardiac surgeries in India:  25 lakh cardiac surgeries reqd in India, 90,000 performed; NHPL 10,000

 

7.       Multiple specialities: Moving from single to multiple super speciality ( 10,000 cardiac surgeries, 15,000 other surgeries). Highest amount of bone marrow transplants in India

8.       India health care market: Some projections of India healthcare market size (current: Rs 2.5 lakh cr; 2015: Rs 5 lakh cr; 2020: Rs 12 lakh cr)

9.       Retail: Dentistry clinics : Current : 32 clinics; 2013 : 130)

10.   Patient cost 60 % lower than other brands: Cardiac surgery package : Rs 75,000 (only 3-4 days post surgery stay)

11.   Procurement optimisation : Cost of surgical gloves Rs 4.50 (compared to Rs 9.50)

12.   Pay-per use charges with equipment mfgs.

Next mail on NHPL Best practices

Note : This is only an informative anlaysis. Pls do you own research before taking any decision

Practicing Risk Management

 

January 15, 2012

Neither our cricket team nor the oil policy is able to manage risks…….. what about corporates ?

 

Companies introduced Enterprise Risk Management (ERM) a few years ago. MANY managers are  filling formats as advised by the consultants, instead of focussing on managing risks. It is time to do stock taking and have a policy to train them as Risk practioners. Enclosed is a presentation in this regard.

 

Current Account Deficit

January 4, 2012

For those Indian businesses with excessive imports, exports, FE denominated loans the coming days are appearing tough……..

 

Signs of India’s growing vulnerability to external shocks are clear as per RBI. The Current Account Deficit (CAD) is increasing, while on the other hand the exports and remittances are  unlikely  to salvage the situation, as they did last financial year; exports because external demand will collapse, especially if the euro zone crisis is not contained, and remittances because they may be too small in absolute numbers to make up the shortfall. (recommended reading : enclosed two articles)

 

What could the US rating cut mean

1. Probably an additional yearly interest payment of $100 billion by US Govt.

2. Some apprehensions of what could be next in store for foreign lenders holding $ 4.55 Trillion US Treasury bonds. (China's holding at $1.159 trillion at end of May, 2011)

It costs Rs 1 lac per day in the ICU of Corporate hospitals in Delhi

1.      Being admitted in the ICU for around 55 days resulted in a  bill of Rs 45 lacs (no surgical procedures, only cost of facilities, doctors fee, medicines). There is hence an opportunity for an innovative insurance solution whereby the  middle class gets coverage to cover current costs.

 

2.       Hospitals then of course want to have more critical care beds. But the problem is also elsewhere. If it costs on an average  Rs 1 lac per day in the ICU they should be making sizable profits, while on the contrary many of the newer  Corporate hospitals are running in losses. Not only is there a mismatch currently between value the hospital are delivering vs. billing but also between hospital costs vs billings. What if one of them finds a model which also aligns costs with value and costs with billing? Hence there is an opportunity for Hospital Admn.

 

3.       Hospital Admn at Corporate hospitals have access to the best facilities, viz. Surgeons, Doctors & health workers, Infrastructure, finance, marketing & best management advise. So  why cannot they fix it? And how to fix it?

Work ethics in Bollywood

With Ashwarya Rai Bachhan expecting  the debate is on whether there should be a no-pregnancy clause in film signing agreements with actresses.