I apologize for the incomplete post earlier – it’s been quite a week personally. Good comments and discussion last week. You raised the key points but let me share my thoughts.
Q1: Who has a ‘great’ OTC process – as expected you shared several company’s excellent OTC process that you’ve experienced. However, most were in the consumer market. There are many companies in Business to Business (B2B) markets as well who have excellent OTC process.
Q2: Which portions of OTC process are most vulnerable – You shared some good examples and reasons. There are vulnerabilities in every portion of the OTC process. I believe however that the highest risks exist where the highest values are involved. That may be the shipping portions of the process for example if you’re shipping high value materials (e.g. precious metals). More frequently these risks exist in the portions of the process dealing with pricing, invoicing and cash collections. It’s always important to understand the business and the details of the business process when analyzing risks.
Q3: Who should ‘own’ OTC Process controls – I firmly believe that an executive or senior level manager should be the ‘owner’ (person ultimately responsible) for the process. That person may not know the details of the process, risks and controls. However, they need to manage the people who do understand the details and have enough experience or knowledge to truly be responsible for the control structure and culture. The CIO or CFO aren’t in my view aren’t best owners for the OTC process (see next comment). Ask me sometime to share with you my experience of being this ‘owner’ for a fairly large company without the position and clout of being an executive or senior manager.
Q4: Competencies of OTC Process Owner – You mentioned some good examples in your answers. In my opinion the key competencies are:
- Focus on the Customer – the customer needs to be the key focus of the process. The process must exist to help / support create value for the customer which in turn brings value to the organization.
- Basic understanding of the process, it’s key risks and controls. In my opinion it’s difficult to manage something you have no basic knowledge of.
- Ability to lead and desire to recognize and make critical decisions (often with limited or conflicting information).
Extra Post: Well’s Fargo Fraud – I agree with the sense of frustration and outrage many of you shared. If I were on the board, I’d be calling for the CEO’s resignation. However, I had an interesting conversation with a person who worked in the banking industry this week who shared how the extent of the fraud could have remained under the radar of senior management. If you’re interested, ask me in class to share what I learned.