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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