Friday, October 31, 2008

case studies for business process fraud analysis

After doing a training on business processes for 4 days, I realized that the case study was most insightful. Factoring receivables opens up the same can of worms as CDO's. Lets look at the point of similarity, both of them essentially sell future cash flows at todays prices. Just as asset prices can be inflated or loans foreclosed, how can Accounts Receivable be manipulated?
1. Channel stuffing
2. Changing the credit terms
More ideas from readers?
The other important thing I gleaned from the training was keeping your vendor and customer files clean and excel pivot table definitely helps :>

Sunday, October 12, 2008

Economy on steroids(Tax payers money)

The infusion of liquidity by monetary policy is pushing up the price of gold and pulling down the price of oil.
Some interesting conjectures:
1. Gold is a not a luxury/vebelen good based on current trend where the demand has tapered off as price has increased.
2. Commodity prices are cooling off in effect equating liquidity pressures to cooling-off of demand side. By the same logic, easing liquidity should lead to easier lending thereby enabling capital expenditure.
I have been reading a lot on behavioural economics and Moral Hazard pops up everywhere, AIG management has gone on a vacation after bailout. Infusion of public equity(Tax payers money for bailout) into private sector will lead to inefficient allocation of capital. Regulation is a more efficient framework if Regulators listens to leading lights like Nassim Taleb who had criticised VAR methodology in the book fooled by Randomness . Can regulators listen to hedge fund managers like David Einhorn, however diligent they may be?
Risk taking =f(utility, weighing) , Tversky and Kahneman, 1992, suggest that individuals are risk seekers for small-probability gains and large-probability losses, and risk averse for large-probability gains and small-probability losses. The only issue here is whether the traders are cognizant of the large-probability losses!

Friday, October 03, 2008

wikinomics audiocast

Listening to the wikinomics audiocast has opened my eyes to a trend which I used to view as insignificant. Listening to the audiocast was mindblowing enabling me to see myraid opportunities in the web 2.0 space . I see it as an opportunity to build consulting eminence. The example is of a Gold prospecting company which uploaded its geological data to public competition into a 40MB file and thereby increased revenue from $30 million to $9 Billion. Respondents used non traditional techniques from mathematics and operations research to search for new drilling prospects. The prize money has had a reinforcing behaviour on respondents and enabled multi-discipliniary approach.
The advantage of investing time in web 2.0 is to study how collaborative system interacts with the traditional control assurance behaviour of enterprises to bring forth new blueprints of more efficient people and business processes.