This blog documents my MBA student life at Ryerson University, Canada (2010-2012). It was an attempt to demystify the MBA experience, help understand MBA topics & encourage MBA wannabes. I have a Pre-MBA blog about B-School application process (and a few other blogs) as well. I used to blog actively in the past and interact with readers regularly, but life got very busy after my MBA. Good luck. Take care. Cheers! Gerry.
Saturday, March 3, 2012
Recommendation for a Comprehensive Business Smell Test Model / Fraud Detection in order to detect the Bull Shit in businesses.
(P.S: This blog post may seem a bit naive; May not sound very technical at this moment. But remember, I have yet to take my advanced Finance course, LOL. And I have not completed all my MBA courses yet. Hopefully, in 6 months, I shall sound a lot more intelligent with my analysis and blog posts :)
I am a guy who keeps having thoughts flowing into my mind all the time. The thinking hat always on. When I do have a thought, I do a search engine check and see whether there is something already out there - related to what I am thinking about.
I thought of the words "Comprehensive Business Smell Test Model for Fraud Detection & Business Forensics" today. In my opinion, Business Smell Test should involve a Comprehensive methodology involving ALL departments to detect the B.S. in any organization. - Smell the Bull Shit that is going on. Identify it and weed it out.
Of course, we have Forensic accounting - to detect fraud after the event. That term is already popular. But the term - Business Forensics ---> A comprehensive model / package is not popular (After all, who will bell the cat? Who has the guts to challenge existing CEOs & Board of Directors. Which Management would like to lose control and be dissected / scrutinized. Of course, there are external auditors. But how good are they? How strict are they? How effective are they, in detecting the B.S.?).
But there should be more done to do the prevention and the detection - a universal model accepted by all business, with better conditions on GAAP / IFRS / Sarbanes Oxley and an even more comprehensive model, apart from just these - rather than energy spent on the post mortem and the forensics, AFTER the event. After all, a stitch in time, saves nine. In fact, each company should come out with its own version. Executives should need to take tests and certify from time to time that they are fit to lead, rather than just be entitled to rule.
Not every business is run perfectly. If they did, we would never have business problems, we would not have a recession, we would not need consultants, there would be no complaints or legal battles. Businesses are loaded with a lot of B.S. And this is due to many reasons:
Here is a video about some ways to do Financial Analysis to detect trouble in a company:
And here is a video about Earnings Management ---> Cooking the books. How companies can be involved in fraud by manipulating the financial statements (hiding the Bull Shit; which is why I used the words "Smell Test" ---> to smell the bull shit :)
Cheers!
Gerry Som.
I am a guy who keeps having thoughts flowing into my mind all the time. The thinking hat always on. When I do have a thought, I do a search engine check and see whether there is something already out there - related to what I am thinking about.
I thought of the words "Comprehensive Business Smell Test Model for Fraud Detection & Business Forensics" today. In my opinion, Business Smell Test should involve a Comprehensive methodology involving ALL departments to detect the B.S. in any organization. - Smell the Bull Shit that is going on. Identify it and weed it out.
Of course, we have Forensic accounting - to detect fraud after the event. That term is already popular. But the term - Business Forensics ---> A comprehensive model / package is not popular (After all, who will bell the cat? Who has the guts to challenge existing CEOs & Board of Directors. Which Management would like to lose control and be dissected / scrutinized. Of course, there are external auditors. But how good are they? How strict are they? How effective are they, in detecting the B.S.?).
But there should be more done to do the prevention and the detection - a universal model accepted by all business, with better conditions on GAAP / IFRS / Sarbanes Oxley and an even more comprehensive model, apart from just these - rather than energy spent on the post mortem and the forensics, AFTER the event. After all, a stitch in time, saves nine. In fact, each company should come out with its own version. Executives should need to take tests and certify from time to time that they are fit to lead, rather than just be entitled to rule.
Not every business is run perfectly. If they did, we would never have business problems, we would not have a recession, we would not need consultants, there would be no complaints or legal battles. Businesses are loaded with a lot of B.S. And this is due to many reasons:
- Ignorance
- Red tapism
- Favouritism / Nepotism
- Lack of merit based promotions / corporate structuring
- Dependence on networks and loyalty, rather than ability and competence
- Overconfidence
- Arrogance
- Too much dependence and pride on the past glory
- Lack of foresight
- Greed
- Bribery
- Dominance of a few, rather than a collective decision making / consensus
- Corruption
- Trying to get ahead using unfair means / unfair advantage
- Trying to kill the competition using unfair means
- Blatant copying of ideas / stealing of techlonogy
- Too many Silos within businesses
- Ganging up - Old boys clubs
- Fear of losing control
- lack of free flow of information
- Manipulation of numbers
- Accounting fraud to get better bonuses
- Artificially trying to inflate stock prices / make gains
- Incorrect / inflated vlauations
- Insider information favouring a few
- Racism
- Nationalism / Patriotism & International (perceived or real) threats
- And so on..
Here is a video about some ways to do Financial Analysis to detect trouble in a company:
And here is a video about Earnings Management ---> Cooking the books. How companies can be involved in fraud by manipulating the financial statements (hiding the Bull Shit; which is why I used the words "Smell Test" ---> to smell the bull shit :)
Cheers!
Gerry Som.
SILICON VALLEY Riches to Rags stories (Millionaire on paper to a Pauper, hit by the recession).
From the link: http://www.huffingtonpost.com/2012/03/01/silicon-valley-poverty-homeless_n_1302348.html?ref=canada-business&ir=Canada%20Business
It is always heartening to read about people becoming successful by effort, dedication, persistence and genius. It makes all of us aspire to do the same. At the same time, it is devastating (and can even serve as a wake up call) when we hear of people going from the top to the bottom.
Personally, as an immigrant in Canada, I have see the highest of highs and the lowest of lows. Right now, I sit somewhere in the middle, LOL. But the highs were gorgeous and heavenly - undescribable feling and the lows were not fun. But that is life and there are lessons to be learnt from every event of life. These situations build character and resilience. They make you a tougher person. As they say, "Gold has to burn in fire to get rid of the impurities - and when gold passes out of the fire, it is an even better version of itself"
When you have the free time, do read the story of the woman in Silicon Valley at the link above - she, who was once a MILLIONAIRE (on paper, at least) lost everything in the recession and came down to the street - hit the ground with a thud.
These are lessons we learn from life. (But on a personal note, one has to constantly be re-inventing oneself. Constantly keep adapting to changing circumstances. As someone said "it is not the strongest or the fittest that survive, but the most adaptable!")
- Gerry Som.
It is always heartening to read about people becoming successful by effort, dedication, persistence and genius. It makes all of us aspire to do the same. At the same time, it is devastating (and can even serve as a wake up call) when we hear of people going from the top to the bottom.
Personally, as an immigrant in Canada, I have see the highest of highs and the lowest of lows. Right now, I sit somewhere in the middle, LOL. But the highs were gorgeous and heavenly - undescribable feling and the lows were not fun. But that is life and there are lessons to be learnt from every event of life. These situations build character and resilience. They make you a tougher person. As they say, "Gold has to burn in fire to get rid of the impurities - and when gold passes out of the fire, it is an even better version of itself"
When you have the free time, do read the story of the woman in Silicon Valley at the link above - she, who was once a MILLIONAIRE (on paper, at least) lost everything in the recession and came down to the street - hit the ground with a thud.
These are lessons we learn from life. (But on a personal note, one has to constantly be re-inventing oneself. Constantly keep adapting to changing circumstances. As someone said "it is not the strongest or the fittest that survive, but the most adaptable!")
- Gerry Som.
TOP DOG, FIRST MOVER & SUSTAINABLE COMPETITIVE ADVANTAGE --->Ad by Motley Fool regarding picking hot shot winner stocks.
Not sure if you have had to see an ad by the Motley Fool when it suddently appears on your screen. It was an interesting pitch. Good piece of marketing. I was wondering what the catch is, right? Coz no one does anything for free, in this world - no one! There is always some returns in mind. Even those who do charity for others do so to get a "feel good" sensation in their brains - that they are helping others get a better life. As we learnt in Economics, "There are no free lunches - somebody, somewhere, somehow, has to pay the cost!"
And sure enough, there was a catch at the end ---> "Buy our monthly subcription! For $100+ or so..." No, thank you, Sir! I am a poor MBA student. Ain't got no money to blow away!
The pitch was about the rising prominence of cell phones and spectrums. And why people should be investing in cell phone spectrums. And that Motley Fool has the name of a winner stock.
But what got me interested was some business terms they used : "Top Dog" & "First Mover" - to identify good companies worth investing in. Here is THEIR definition (mind you, this is NOT the textbook definition that I studied in my Strategy classes :):
TOP DOG - A Top Dog is a company that dominates its industry
FIRST MOVER - A First Mover is a company with a technology or product so revolutionary that it disrupts an existing industry and creates an entirely new one.
The ad then goes on to list a few characteristics of good companies for investing - by going AGAINST conventional wisdom of Wall Street or Main Street, sometimes. And they are:
Cheers!
Gerry Som.
Blogger @ www.gerry.in
And sure enough, there was a catch at the end ---> "Buy our monthly subcription! For $100+ or so..." No, thank you, Sir! I am a poor MBA student. Ain't got no money to blow away!
The pitch was about the rising prominence of cell phones and spectrums. And why people should be investing in cell phone spectrums. And that Motley Fool has the name of a winner stock.
But what got me interested was some business terms they used : "Top Dog" & "First Mover" - to identify good companies worth investing in. Here is THEIR definition (mind you, this is NOT the textbook definition that I studied in my Strategy classes :):
TOP DOG - A Top Dog is a company that dominates its industry
FIRST MOVER - A First Mover is a company with a technology or product so revolutionary that it disrupts an existing industry and creates an entirely new one.
The ad then goes on to list a few characteristics of good companies for investing - by going AGAINST conventional wisdom of Wall Street or Main Street, sometimes. And they are:
- "A sustainable competitive advantage that can be exploited for years to come (like exclusive rights to highly in-demand cellular transmission sites all around the world)"
- “Strong past price appreciation (like 5,000%+ gains in under a decade).
- “Excellent management of the business (like a long-standing CEO who top-notch equity analysts and the Harvard Business Review alike have called out as being one of the best in the world).
- “Strong consumer appeal (like being the top behind-the-scenes provider to one of the world’s most in-demand industries).
- “Documented proof that the financial media thinks it’s ‘overvalued’.
Cheers!
Gerry Som.
Blogger @ www.gerry.in
Canada is a younger version of the United States of America (USA) or USA is the older version of Canada.
From the link: http://www.huffingtonpost.ca/2012/03/02/iceland-canadian-dollar_n_1316613.html?ref=canada-business#s295474&title=Canadas_new_plastic
It is amazing how you find precious gems in the rarest of places. And how do you find these gems? By doing a LOT of reading and always keeping an eye open for these gems :) I absolutely dig / love sentences below:
“The average person (in Iceland) looks at it this way:
This is an extract from an article which suggests that Iceland is considering adopting the Canadian currency since it is stable.
It is amazing how you find precious gems in the rarest of places. And how do you find these gems? By doing a LOT of reading and always keeping an eye open for these gems :) I absolutely dig / love sentences below:
“The average person (in Iceland) looks at it this way:
- Canada is a younger version of the U.S.
- Canada has more natural resources than the U.S.
- Canada is less developed than the U.S
- Canada has more land than than USA
- Canada has lots of water &
- Canada thinks about the Arctic.”
This is an extract from an article which suggests that Iceland is considering adopting the Canadian currency since it is stable.
Business Definition ---> Bait & Switch
From the link: http://business.yourdictionary.com/bait-and-switch
The unethical and illegal practice of a business promoting an item at an especially attractive price with the intention of convincing customers to buy something else that offers the business more profit.
The business is likely to begin a bait and switch by telling customers who want to buy the promoted item that it is of inferior quality or is sold out and no longer available.
Another link: http://en.wikipedia.org/wiki/Bait-and-switch
Bait-and-switch is a form of fraud, most commonly used in retail sales but also applicable to other contexts. First, customers are "baited" by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are "switched" to a costlier product.
The goal of the bait-and-switch is to persuade buyers to purchase the substitute goods as a means of avoiding disappointment over not getting the bait, or as a way to recover sunk costs expended to try to obtain the bait. It suggests that the seller will not show the original product or service advertised but instead will demonstrate a more expensive product or a similar product with a higher margin.
Non-retail use of bait & switch tactic:
Employers are known to use bait-and-switch tactics by advertising a job opening in a way that gives a misleading impression of likely working conditions or compensation packages.
Bait-and-switch tactics are frequently used in airline and air travel advertising.[1]
Hotels widely use the form of bait-and-switch tactics known as 'resort fees'. They first attract customers by advertising the lower price (which appears on all promotional materials and rate comparison engines), and charge customers the mandatory "resort fee" when they arrive for check-in. [2]
Software companies that initially offer software products or services for free (often under a "Beta" moniker) and at a later point make parts or all of the functionality available only in a paid product without communicating that intention from the start are said to employ bait-and-switch tactics.
Online dating sites have been known to post fake profiles as a way of enticing people to join; in some cases, employees of the site's parent company send messages via a sockpuppet in order to encourage non-paying users to upgrade so they can message back.
Telecommunications companies often offer services at an introductory price that consumers may find reasonable, then after the introductory period escalate the price as much as 100% depending on the service. Some telecommunication companies also include a contract period in which the consumer is forced to pay the escalated price.
Colleges and Universities often use front-loading of grants to reduce the out-of-pocket cost during the first year, replacing grants with loans in subsequent years.
Real Estate Brokers and Agents often advertise themselves as buyer agents without disclosing that they may not be able to provide that service if they work for a brokerage that lists homes and represents home sellers.
The unethical and illegal practice of a business promoting an item at an especially attractive price with the intention of convincing customers to buy something else that offers the business more profit.
The business is likely to begin a bait and switch by telling customers who want to buy the promoted item that it is of inferior quality or is sold out and no longer available.
Another link: http://en.wikipedia.org/wiki/Bait-and-switch
Bait-and-switch is a form of fraud, most commonly used in retail sales but also applicable to other contexts. First, customers are "baited" by advertising for a product or service at a low price; second, the customers discover that the advertised good is not available and are "switched" to a costlier product.
The goal of the bait-and-switch is to persuade buyers to purchase the substitute goods as a means of avoiding disappointment over not getting the bait, or as a way to recover sunk costs expended to try to obtain the bait. It suggests that the seller will not show the original product or service advertised but instead will demonstrate a more expensive product or a similar product with a higher margin.
Non-retail use of bait & switch tactic:
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