London 18th March 2013 – FSA imposes £2.4million fine for inadequate risk reporting systems, which led to a failure to keep investors informed ahead of a profit warning which wiped 57% off the company’s share price. (See London Evening Standard: “Watchdog gets tougher as oil-rig firm Lamprell is fined £2.4 million over stock market breach“).
Oil services group Lamprell is not a bank. However, Lamprell could have avoided this fine, if they had implemented the new BCBS principles for effective risk data aggregation and risk reporting practices (BCBS 239), as published in January 2013; principles, which I describe in a previous post as “Data aggregation and reporting principles – applied common sense“
I include below some quotes from the article, and in parentheses, the relevant text from the BCBS 239 principles:
- “The FSA said that monthly reports to the board had been totally inadequate for a company of its size and that such reports were delivered late.”
(Principle 5: Timeliness. Paragraph 44 “A bank’s risk data aggregation capabilities should ensure that it is able to produce aggregate risk information on a timely basis to meet all risk management reporting requirements.”)
- “It also said the takeover of a rival in 2011, which doubled Lamprell’s size, had left the company using too many different reporting systems.”
(Principle 1 Governance. Paragraph 29. A bank’s risk data aggregation capabilities and risk reporting practices should be… Considered as part of any new initiatives, including acquisitions and/or divestitures… When considering a material acquisition, a bank’s due diligence process should assess the risk data aggregation capabilities and risk reporting practices of the acquired entity, as well as the impact on its own risk data aggregation capabilities and risk reporting practices. The impact on risk data aggregation should be considered explicitly by the board and inform the decision to proceed. The bank should establish a timeframe to integrate and align the acquired risk data aggregation capabilities and risk reporting practices within its own framework.)
Tracey McDermott, FSA director of enforcement and financial crime, said: “Lamprell’s systems and controls may have been adequate at an earlier stage, but failed to keep pace with its growth. As a result they were seriously deficient for a listed company of its size and complexity, meaning it was unable to update the market on crucial financial information in a timely manner.”
The moral of the story… ensure your organisation, regardless of your industry, applies the common sense set out in: “Data aggregation and reporting principles (BCBS 239) – applied common sense“.