They have killed for less

Recently we have been asked by a multinational to audit for contract compliancy issues one of their biggest contracts in order to reduce their financial exposure. And when I mean big we are talking big numbers. When I started working in the field of procurement, I was impressed by the total amount of money involved. As a starting consultant my father told me to count from 1 to 100 and try to have a thorough understanding of each number, which I did. As a result I can always see the relativeness of big numbers.

The only challenge you have,  is find for each denominator a divisor. In this case, I thought it was a good idea to compare it the auditable spend to the GNP (Gross Nation Production) as the company, we were about to audit, is state owned. The math was simple: auditable spend divided by GNP. The effect of the outcome was more complex: as the math showed over 10% of the GNP. In some audits we have findings up to 10% which result into actual financial recoveries.

Professionals working in the industry know that these kind of contracts usually relate to raw materials, which was the case here. Unfortunately most raw materials are sourced in area’s which could be described as “less political stable”. Flying in an audit team, which performs its work at the supplier site, is not something you do without taking the right security measures. Imagine what happens if the message reaches the “president”: “Some auditors have discovered….we may need to pay back …”. They have killed for less.

In the jungleIn Europe we do not leave in three blinded cars which all take a different way to our hotel. Obviously I will not point out all the security measures we take but they are considerable. Apart from the security measures, the way we perform our audit work is equal to the way we audit in the western world. We will never share commercial confidential information from suppliers with our clients and we will never look at a contract with a one dimensional view. On the other hand we will dive as deep into the details as is required and we will never stop due to the “circumstances”. Facts are friendly and it is our job to find and show these facts.

We perform these audits around the globe.  We do these audits on site of the supplier. We have a strong believe that by performing these audits on site we gain insight in the work performed and have better understanding of the contract and where the financial exposure could be. As a result we realize cost reduction through monetary recoveries & future savings but also tighten contract language & improve understanding of contractual obligations.