In January 2018, a British construction and facilities management services company entered into what became the largest ever trading liquidation in the UK. The insolvency resulted in project cancellations and delays in the UK and overseas, thousands of job losses, financial losses to joint venture partners and lenders as well as circa 30,000 suppliers of the service company, some of whom themselves were pushed into insolvency. The liquidation also impacted 27,000 pensioners and may cost UK taxpayers up to £180m.
As of May 2020, the services company’s auditors are facing a £250M lawsuit for alleged negligence in their audits. The claim is being brought about by liquidators working for the UK Government against the services company’s auditors at the time of the collapse.
Why such an unprecedented level of claim? Normally, independently verified facts such as a signed off financial statement provide the highest level of assurance for those in either the supply chain or the demand chain and any organisation undertaking a risk assessment would place a high degree of store in the fact that, in this case, the service providers accounts were – on the face of it – sound.
Bearing in mind the UK economic growth in 2018 was circa 1.3% – a modest but improving picture – and bearing in mind as a result of the Covid-19 pandemic the UK and the rest of the world faces a recession of the kind unseen since the Great Depression, it might be pertinent to re-evaluate the financial and other risks in your supply chain. Given the audit failings highlighted in the case outlined here, it may also be worth giving consideration to risk indicators other than just the – until now – comfort blanket of audit findings.
At Peru Consulting we have developed one of the most sophisticated approaches to Supply Chain Risk Assessment available in the marketplace. By allying our advanced risk assessment playbook with the decades of experience our advisors bring, organisations can rapidly take a fresh look at the inherent risks in their supply chain to enable them to put the right mitigation strategies in place.