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Auditing – at the dawn of opportunity

Part 2: New tools and techniques

Significantly, top management is driving the BIPs, pursuing proven tools for whittling down and preventing avoidable costs. Auditors need to learn and apply them in order to become assessors. To effectively assess management processes, other tools must be acquired and skillfully applied. Here are but two:

• Value assessing. Not to be confused with compliance auditing popularly dressed up as “value-added auditing,” it delivers a superior service, a real contribution to business results, not bureaucracy.

• Value Indexing™, a new tool, is emerging, which should finally assist organizations to truly track the extent to which suppliers (and internal activities) improve their value for money, VFM, performance.

It is in that learning and application that the individual chooses the road to professional advancement and success.

The needs of particular economic sectors

Apart from the general challenge of globalization confronting business, there are many economic sectors in which opportunity knocks for professional assessment activity.

Education: global competitiveness, national prosperity and security, in fine, depend on the quality of the education system – at all levels. Numerous, well-informed commentators in America’s serious journals and media continue to express concern that America is slipping behind others. The entire education system needs a BIP of enormous proportions – now. It offers a huge opportunity for us to use value assessment skills, revealing how that vital sector could improve.

Energy: The days of cheap oil and energy are gone. As global demand grows, the law of supply and demand will prevail. Adroit deployment of forward energy contracts (hedging) confers no effective permanent policy, only a temporary respite on input costs whose long-term trend is upwards. Organizations lacking energy management or planning will be competitively crippled. Though other nations might enjoy lower labor costs, a more energy efficient nation can reduce its process costs by way of response. Confronting this reality and issues of global warming is unavoidable for any organization.

Specialized energy assessors can contribute by assisting firms with an urgently needed revamp of their energy policies and practices: and by constantly value assessing energy usage. They will possess particular skills and knowledge including: energy metrics, conservation, carbon trading programs, and how to cost and introduce new, alternative energy sources. And, they will be involved in the design of new buildings and workplaces.

Capital plant and construction:

Apart from the construction of new, energy efficient buildings, consider the following:

• Addressing America’s (if not the world’s) energy issues will revitalize power engineering and construction. A huge raft of capital projects will be floated as new capacity is built and aged, inefficient plants are replaced. Installations ranging from wind farms to waste recovery plants, distributed generation installations, solar panels and hydrogen fuel cells will be built.

• America’s nuclear industry will experience a renaissance as new, safer (pebble-bed) types of reactor are constructed.

• America must reengineer and renew its creaking power grid. The massive August 2003 blackout demonstrated how vulnerable is the economy to power loss, however induced. Power supply is the organization’s jugular vein: uninterruptible power supplies are needed.

• A glaring shortage of petrochemical refining and processing capacity needs rectification. And, increasing use of natural gas will require a larger associated infrastructure.

• Recently, the rust has been coming off of America’s rust belt and basic goods exports are rising. As global economic expansion continues its explosive demand for basic materials, one might also expect new mills, foundries and smelters to be built, replacing aging, less efficient ones and increasing the nation’s capacity.

In aggregate the capital investment for those improvements will amount to hundreds of billions of dollars requiring sound assessments to prevent cost overruns, late completion and waste. Each sector will need dedicated assessors unwilling to compromise over matters of project management, quality, safety and the environment.

Environmental protection: This is another fertile ground for specialist auditors. Quality programs are steadily increasing their attention on recycling and control of byproducts. That trend will continue. To be of use, though, assessors must become cognizant of material and process technologies and associated issues. Otherwise they cannot be constructively involved or make a contribution beyond trivial bureaucratic checks.

Demographics and services

Retiring baby boomers will demand new and better services from business and all levels of government. In being the 1960s generation of protest, unlikely to tolerate sub-standard, inefficient or bad service, they are accustomed to making their voice heard, taking action if necessary: a stentorian “voice of the customer” can be expected.

Only foolish organizations would presuppose a captive market of boomers. Tapping into their considerable spending power necessitates immediately pursuing substantial BIPs: complacent organizations will be crippled by global competition. Boomers will significantly affect organizations and professional assessors ought to be energized by the consequent need for their services. Here, now, are a few examples.

Health care: The quality, not the quantity, of health care available in America and the VFM it provides as experienced by the patient, will be the prime concern. By surfing the web, boomers will find what they want, where it is and whether or not it offers a VFM proposition. Internationally, health care is a fast growing sector that will become enormous.

Many nations already offer excellent, world-class services at a fraction of current American prices. Their teaching hospitals, medical research facilities, schools and certification schemes lack for nothing: India is an example. Legions of Indian-trained doctors work in America. Back home, their peers also offer excellent services costing, for cataract operations, $50-$300 and, for a “Jaipur Foot”, $30. In America, they can cost $2000 and $1500 respectively.

In 2003, 150000 international “medical tourists” flocked to India: 1 million to Thailand, many for major procedures, demonstrating those nations’ comparative advantage. America’s boomers will surely follow, recounting to others their satisfaction, turning a trickle into a flood of patients seeking offshore treatment. Insurers and health care schemes eventually comprehending what is available internationally, will probably amend their policies and willingly reimburse overseas health care providers, as it would make sound business sense. Even the frequency and cost of lawsuits may also plummet when offshore health providers do the job.

To respond and prosper, America’s health care industry must improve its VFM proposition, and bring its egregious excesses and inefficiencies under control. Professional assessors, it is time to step-up and show how.

Financial services: All types require urgent improvement. Apart from issues of transparency, protection, probity and prudence demand attention. Preventing identity theft, estimated by some as at 7 million USA cases per year and rising, and fraud are serious challenges. The nation’s (and boomers’) financial assets and savings warrant better processes and safeguards than exist at present. Quality in the financial service sectors needs constant review, development and assessment. And these, too, are not necessarily the preserve of American domestic companies: already, emerging nations are prospering by delivering cost-effective, quality products. Step forwards the financially savvy assessor: you are needed.

Information technology: is central for running organizations. IT industry and departments must improve the quality of their products, services and management processes to thwart the (foul) objectives of hackers, viruses, spy ware, phishing, scammers, pornographers and identity thieves. Specially trained assessors are needed in greater numbers to help in keeping IT design and operation ahead of miscreants. If American IT companies cannot or will not do this, foreign entities can, and will, take the lead.

Cutting edge technology: Money is pouring into research and development of arcane technologies. The outcome of stem cell research, of work on the human genome, of bioengineering, of nanotechnology and space can only be guessed. But, when arriving as commercial applications each will involve new processes compelling the development of innovative quality programs for supplying the associated products and services into the marketplace. Assessors will play a key role in assuring safety, efficacy and cost-effective management processes.


Part 3: Dawn of change



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