Think you’re having a bad day? Consider the CEOs and CFOs of the nation’s biggest banks that have been caught up in the robo-signing scandal. They may be personally liable for staggering sums if judges agree that they violated Sarbanes-Oxley and a few other federal regulations by allowing the robo-signing to take place. Their shareholders could be hurt badly, too.
Robo-signing, that funny-at-first moniker, refers to the back-office mess and legal woes created when employees in the mortgage servicing departments signed heaps of foreclosure affidavits without actually checking the information. According to American Banker, a trade newspaper, the three largest loan servicers could be saddled with $13 billion in so-called repurchase losses. One analyst mentioned a range of $55 billion to $120 billion in repurchase losses. At this stage, the exposures are hard to define. But if things go badly for these banks, the repurchase losses will be small compared to the economic punch they could take if buyers of subprime mortgage securities prevail in court.
When Bank of America released its earnings on October 19, it signaled to shareholders that Bank of America would fight hard to protect their money from angry mobs (and their lawyers). Bank of America, which inherited the problem in an acquisition, along with Wells Fargo, Ally Financial, GMAC Mortgage, and several others, may be caught up in intense and expensive courtroom battles for some time.
But what if you were one of the executives who signed off on Sarbanes-Oxley? Or a board member who has confirmed formally to the SEC that business risks are managed competently at the company you ostensibly supervise? Theoretically, you could be bankrupted and/or go to jail. And loads of people who are boiling mad at the sorry shape of the U.S. economy will be quick to jeer as you do the “perp walk.”
Analytical Yield 1
Source: APQC Open Standards Benchmarking, www.apqc.org
We know that CFOs in the U.S. are hoarding cash and refusing to invest in facilities and new hires until demand picks up again. All that cash is being spent on share repurchases, dividends, feeble “tuck in” acquisitions, and even pension obligations. Might it be wise to spend a bit on financial management processes and talent that are poorly managed and poorly directed, as the data suggests? At what point does an underperforming process become an unacceptable weakness, even without clear exposures to legal risks? More on underperforming financial processes in future posts. ###
Jail Time for Sloppy Processes?
The way things usually go, though, I don’t see exactly that scenario unfolding. And I’ll leave it to the banking industry experts to opine further on the fates of the big banks. But this whole affair does make me wonder: What if corporate executives could be jailed or fined for allowing sloppy business processes to exist? What if it was a corporate sin, with punishments meted out to managers, to look the other way at, say, an underperforming financial process?
Looking into our metrics database at APQC, I came across an example in (no kidding) 3 minutes. The shameful evidence is found in the chart below, and it suggests that, at some firms coach outlet, there is criminal-like behavior going on in the controller’s office. In the first bar on the left we see that, among a group of 259 large organizations across all industries, the bottom performers take 120 days to prepare the annual budget while the fastest do it in 35 days. The other bars depict the consumer packaged goods and the industrial products sectors, respectively. In the worst of the two sectors shown here, consumer packaged goods, the bottom performers in this benchmark take 150 days to prepare the budget. That’s more than half of the business year!
没有评论:
发表评论