merchanting metals update several related issues have resulted in an increase in the level of operating
risk for the merchanting metals business .
complexities surrounding the operation of the off balance sheet facility
( " obsf " ) which commenced two weeks before the year end .
the uncertainty generated by the revocation of aa ' s signoff for the facility
late in the year end audit .
the discovery of a number of ' bugs ' within the as 400 merchanting code ,
arising from the release of obsf designed functionality , which compounded the
operational burden of supporting the obsf .
the requirement to amend the operational process and obsf it code as a result
of the current renegotiation of the obsf with barclays ( and aa ) .
the senior it developer for merchanting has resigned and been sent on
gardening leave .
the corporate requirement to lower working capital usage for the merchanting
business irrespective of the above parochial business issues .
various mitigating actions have been and will be taken to provide focus , gain
comfort over control levels and to provide assurance to senior management as
to the accuracy of the ql dpr and business balance sheet .
the implementation for sap for the merchanting business has been delayed and
effectively decoupled from the higher risk ( higher benefit ) brokerage
implementation - benefit is to provide sole focus on obsf for it merchanting
developers .
the ar / ap sap data quality reviews for both businesses are continuing so as
to provide a detailed analysis as at end ql .
middle office have instigated a new daily working capital report process
tracking cash settlement / funding data to working capital components for all
metals businesses .
an enhanced position signoff process will be implemented prior to end ql
covering gross tonnage , spread positions and summarised analyses for brand
and locations . the necessary report functionality should be available within
the as 400 , however contingencies have been initiated to build tactical
vba / excel reports outside of the as 400 but using as 400 data downloads .
user requests for additional as 400 functionality and reports have been
aggressively prioritised and a code freeze will commence prior to the end of
ql following the delivery of three reports determined as minimum requirements
for the support of obsf .
a resubstantiation of the full ql dpr will be completed by the risk control
staff reconciling the full trial balances between ql open and ql close
a full internal balance sheet review will be completed within the ql audit
timetable which incorporates
a full circularisation of inventory balances , and matching to source
documentation within enron
inspection of certain of the above inventory balances , by third party
inspectors , where there is an expectation that circularisation replies will
not be received on a timely basis
substantive checks back to source contract documentation for the forward
priced and unpriced positions report ( spot checking the key position report
signed off by the traders )
full reconciliation and recalculation of obsf option premium values
full reconciliation of contracts within the obsf to barclays documentation (
thereby substantiating existence of stock that we have option to purchase )
and to as 400 barclays account
a risk based debtors review - matching to source documentation , where
applicable , and any subsequent post quarter end cash movements
a full substantiation of creditors to internal ( contract commitments ) or
external documentation ( invoices / request for payment )
a full reconciliation of intercompany accounts
a full substantive reconciliation of cash and funding accounts
i intend to provide weekly updates on the status of the above actions during
april
if you have any questions please call me on x 34703
regards
mike
merchanting metals update
several related issues have resulted in an increase in the level of operating
risk for the merchanting metals business .
complexities surrounding the operation of the off balance sheet facility
( " obsf " ) which commenced two weeks before the year end .
the uncertainty generated by the revocation of aa ' s signoff for the facility
late in the year end audit .
the discovery of a number of ' bugs ' within the as 400 merchanting code ,
arising from the release of obsf designed functionality , which compounded the
operational burden of supporting the obsf .
the requirement to amend the operational process and obsf it code as a result
of the current renegotiation of the obsf with barclays ( and aa ) .
the senior it developer for merchanting has resigned and been sent on
gardening leave .
the corporate requirement to lower working capital usage for the merchanting
business irrespective of the above parochial business issues .
various mitigating actions have been and will be taken to provide focus , gain
comfort over control levels and to provide assurance to senior management as
to the accuracy of the ql dpr and business balance sheet .
the implementation for sap for the merchanting business has been delayed and
effectively decoupled from the higher risk ( higher benefit ) brokerage
implementation - benefit is to provide sole focus on obsf for it merchanting
developers .
the ar / ap sap data quality reviews for both businesses are continuing so as
to provide a detailed analysis as at end ql .
middle office have instigated a new daily working capital report process
tracking cash settlement / funding data to working capital components for all
metals businesses .
an enhanced position signoff process will be implemented prior to end ql
covering gross tonnage , spread positions and summarised analyses for brand
and locations . the necessary report functionality should be available within
the as 400 , however contingencies have been initiated to build tactical
vba / excel reports outside of the as 400 but using as 400 data downloads .
user requests for additional as 400 functionality and reports have been
aggressively prioritised and a code freeze will commence prior to the end of
ql following the delivery of three reports determined as minimum requirements
for the support of obsf .
a resubstantiation of the full ql dpr will be completed by the risk control
staff reconciling the full trial balances between ql open and ql close
a full internal balance sheet review will be completed within the ql audit
timetable which incorporates
a full circularisation of inventory balances , and matching to source
documentation within enron
inspection of certain of the above inventory balances , by third party
inspectors , where there is an expectation that circularisation replies will
not be received on a timely basis
substantive checks back to source contract documentation for the forward
priced and unpriced positions report ( spot checking the key position report
signed off by the traders )
full reconciliation and recalculation of obsf option premium values
full reconciliation of contracts within the obsf to barclays documentation (
thereby substantiating existence of stock that we have option to purchase )
and to as 400 barclays account
a risk based debtors review - matching to source documentation , where
applicable , and any subsequent post quarter end cash movements
a full substantiation of creditors to internal ( contract commitments ) or
external documentation ( invoices / request for payment )
a full reconciliation of intercompany accounts
a full substantive reconciliation of cash and funding accounts
i intend to provide weekly updates on the status of the above actions during
april
if you have any questions please call me on x 34703
regards
mike