Firms urged to strengthen internal systems and processes

“To minimise implementation risks, revenue leakage”

RISK ANALYSIS: Ramesh Subramaniam, president, Sri City Pvt Ltd, addressing a session in Chennai on Wednesday. ( From left ) Amit Bansal, Director-Forensic Services ( Infrastructure Sector ), KPMG India and T Chitty Babu, convenor, CII panel onlInfrastructure and Urban development panelurban development. Photo : R. Ravindran

As the size, scale and investments on infrastructure projects get bigger, companies need to strengthen their internal systems and processes to minimise implementation risks and revenue leakage due to measures of misconduct, according to experts at a seminar held here on Wednesday.

Participants at a session on ‘Project Implementation risks in infrastructure-Typical Misconduct Practices,' hosted by the Confederation of Indian Industry (CII), advocated tighter grip across various functions of project implementation to avoid losses that were sometimes not just financial but could mar reputations.

Amit Bansal, Director-Forensic Services (Infrastructure Sector), KPMG India, said inadequate focus on internal processes and systems could prove costly for companies as ticket sizes of projects go up, increasing the complexity and attendant risks.

Companies stood to lose as much from weaknesses in internal controls that leaked revenue through procurement, over-invoicing, fake invoices and manipulation of tender procedures as they did from the conventional project management failures of planning and scheduling, Mr. Bansal said.

Citing case-studies from KPMG-led audits, he pointed out that typical misconduct practices ranged from keeping the scope of a contract vague to enable manipulation mid-way into implementation to pilferage of raw materials passed off as scrap.

In one case of over-invoicing, a company shelled out payment to a contractor on a cost of project basis instead of a cost of works basis resulting in releasing funds disproportionate to the progress of the project, he said.

While advocating that boards and managements take overall responsibility for efficient controls and adherence to a written code of conduct, ultimately “it is all about creating a culture of empowerment and a passion for the work in a team,” Mr. Bansal said.

Ramesh Subramaniam, president, Sri City Pvt. Ltd, stressed the importance of adhering to a detailed master plan while implementing infrastructure projects. A master plan that provided for zoning industrial, commercial and residential establishments within a project area was essential for the “what-will-go-where” allocation.

T. Chitty Babu, convenor, Infrastructure and Urban Development Panel, CII Chennai, said total infrastructure spending in India was expected to increase from the 2005 level of $24 billion to $47 billion in 2010.