R "Ray" Wang
R "Ray" WangNews Analysis: Post Satyam Go Forward Strategies
Much has been said about Satyam CEO's recent announcements of financial irregularities. The tragedy is in management and reeks of a failure in oversight and governance by executive muckey mucks, regulators, investment houses, accountants, auditors, investors, and government officials. As the authorities and management team sort out the mess, clients and competitors will need to quickly assess their situation, take action, and move forward. With doubts being cast on India's tech firm reputations, the firms, clients, and government officials will need to carefully consider their actions or risk exacerbating the emerging crisis of confidence. Going forward:
- Indian technology firms must quickly act to prove transparency. While many have speculated that this crisis could be widespread among Indian firms, keep in mind, hiding a $1B is not an easy thing to accomplish. However, such lingering doubts will require each firm to quickly demonstrate how a scenario like this could be discovered and averted. This will require third parties to actually do their job and highlight what controls are in place and what will be provided going forward in order to "certify" a clean bill of health. Firms must put in risk mitigation programs or face significant market pressures.
- Satyam clients should quickly assess their relationship status and exposure. The announcement that an investment bank is assisting Satyam with options puts the firm's independence into question. While overall client service on the ground will be minimally impacted, engage in active dialogue with your account team. It will be important to separate the actions of top management from those servicing your account. There may be opportunities to bring the team members in-house or already discussions by other firms to acquire certain teams. If you're unhappy with the current service, this creates a good opportunity to let the teams go. New prospects will be better off waiting to see the final outcome. If significant exposure to BPO and other hosting services create risk should the company become insolvent, begin discussions with Satyam on how to mitigate exposure.
- Government officials must quickly act to prove regulatory oversight but not create unnecessary burdens. Regulators face tough challenges in finding the right controls to enact. Sarbanes Oxley in the US has become a regulatory nightmare with minimal benefits. Regulation is sorely needed but lessons learned from SarBox and JSOX should be applied to find the right balance.
The bottom line - in today's economy this could happen anywhere so be a bit more vigilant
From Madoff to Peters to Satyam, big business scandals continue to abound in 2008. Call it a loss of business ethics at the top or the by product of an irrational exuberance, we can only expect to uncover more of these going forward. The solution will require clients to call for more transparency and regulators to find the right balance between oversight and burden. Expect risk management programs to flourish in this time of economic recession.
Your POV.
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