The InConsult team would like to wish you  a very Happy Christmas and a prosperous new year.

As 2004 draws to a close, more prominent organizations and industries are under the microscope over various business deals.   AMCOR is under investigation for 'cartel conduct' and ASIC is investigating insurance broker remuneration practices.  

The message is clear, risk managers and senior management must not only understand their business, but also question the drivers of business performance.  In AMCOR's case, at a time when the rest of the organisation was performing below expectations, the packaging unit continued to perform strongly. 

Did the Board and Managing Director know about the cartel?  Should they have gone to the ACCC?  Doing so would have been ethically correct, but it may have had a detrimental impact on their performance.  What would you have done?

Enjoy this issue of InTouch. 

Tony Harb

Director, InConsult

• A survey by CPA Australia has found most investors and analysts did not believe they had adequate means to hold boards accountable, although CLERP9 was part of the regulatory environment.  Results showed a lack of confidence in the appointment and removal of directors and greater confidence in non-executive directors. Investors still want boards to be more accountable.

• Packaging group AMCOR has accepted the resignations of its managing director after the head of its Australasian unit admitted breaching competition laws.  AMCOR confirmed an internal investigation had revealed that officers and employees appeared to have engaged in "cartel conduct" in its corrugated box business.

•  The impact of non compliance to Sarbanes-Oxley could be catastrophic for some organisation.  According to Standard & Poor's Ratings Services, "In addition to the potential consequences of the control deficiencies themselves, delays in financial reporting triggered by Section 404 may amplify market uncertainties that could undermine a company's financial prospects."

• APRA has warned banks facing a slowdown in the home-lending market not to expand into the corporate lending market without having adequate risk frameworks in place.  The APRA chairman predicted that commercial lending would be the next battleground for banks as they held to "profit ambitions" developed during the home lending boom. 

• Four executives of China Aviation Oil (Singapore) have surrendered their passports to Singapore authorities investigating a $US550 million ($707million) loss posted by the oil trading company, which supplies a third of China's jet fuel.  Singapore's police, central bank and stock exchange are investigating CAO, which posted the city's biggest derivatives-trading loss since Barings collapsed in 1995, after a trader ran up $US1.5billion of losses.

• ASIC's report into unauthorised foreign insurers (unlicensed insurers who carry on business outside Australia) revealed that several breaches of the law occurred between January 2002 and June 2003, mainly relating to registration, disclosure and dispute resolution.  ASIC said that during the period of its investigation, 8 brokers had placed about $145 million in premiums on behalf of 9 unauthorised general insurers.

•  Promina has became Australia's second-largest aviation insurer after it purchased Marsh subsidiary Aviation Office of Australia. This acquisition follows Promina's purchase of New Zealand company AutoSure earlier this year, and is in line with its diversification strategy of buying smaller specialised insurers.

• ASIC has announced a widening of its probe into the remuneration of brokers by insurers after recent scandals in the US brought the insurance industry to its knees.  AIG's head has predicted that ASIC will uncover some wrongdoing but it will not be widespread.

Corporate Governance, Compliance

and Enterprise Risk Management 

...Made Simple

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