Free AI web copilot to create summaries, insights and extended knowledge, download it at here

Abstract

ining buildings, housekeeping, etc.Over a few years, Carillion accumulated a significant amount of debt, which eventually resulted in it announcing its bankruptcy. The problem? It came as a surprise. Their auditors had signed off on their accounts, without warning of such imminent financial risk. The UK authorities concluded that the auditors had in fact breached the rules in performing their audit.There have been many other examples of such rulings globally — in the US, Brazil, South Africa, as a few examples.Today, audits are still a regulatory requirement, and despite some significant breaches in trust, we do still place our trust in the audit system. Our governments and financial watchdogs are working to find more fail-safe mechanisms to improve the system in place.Most times, it does good. Any time it is ‘evil’, I would say well, but it is a necessary one.<h2 id="2ed3">Player 2: Financial banking</h2>Another industry we have recently also been losing faith in are our banks and financial institutions.The 2008 financial crisis has thrown a wrench in the transparency, fluidity, and flow of our financial markets. It has taught us [at least for a little while] to remember that human intelligence can work to fuel human greed, and how the combination might lead us down a path of complex financial tools and mechanisms, playing and capitalizing on the public’s weaknesses and relative lack of knowledge, bound to send us in the wrong direction every decade or so.So in a series of bankruptcies, record fines, and financial turmoil, we saw another industry take the hit. Since then, in a very similar manner to our sentiment towards auditors, the securities commissions have been working to fill in the gaps that resulted in the 2008 crisis.After all, banks, mortgages, loans, and stocks are evolving, they are at an inflection point to choose the right path.All these institutions who fall into this global financial village have also mostly done well. And, in the times they do not, once we dust off the debris and measure the collateral damage, the system and the institutions remain. For we know,

Options

when they are not as good, they are still also a necessary evil.<h2 id="f7da">Player 3: Management consultants</h2>Then we come to the consulting firms.For possibly the first time, a consulting firm has been fined due to the advice they have given. This is monumental.Auditors have been fined because they were called negligent — they had rules which they breached.Financial institutions have been fined for hiding the true nature of financial instruments — once again, for breaking the rules.McKinsey & Co. Consulting has been fined for giving advice to a company, which resulted in the company making their own decision to take such advice, and subsequently selling more opioids, feeding the market with OxyContin, and contributing to a deadly pandemic.McKinsey simply gave advice — bad advice in this case.McKinsey had knowledge of the impact of OxyContin, and of the opioid matter at hand in the US, and with that knowledge continued to help Purdue Pharma take advantage of such issue and ‘turbocharge’ their sales.This is troubling.I come from and work in the consulting and advisory space, and I feel an immense weight of the responsibility because we consultants and trusted advisors have to the public. We are the experts; we are the advisors; we are paid to put our minds to the best use.I can’t claim to consult is an essential cog in the market — it is not an audit, it is not a bank; it is an optional luxury and value-add which companies are able to take advantage of if they can afford to do so. And, done right, can be an immense accelerator of success and growth.Not being essential, though, can put our existence at risk when we do wrong.Today, this consulting company paid the hefty price of $573.9 million for its actions. If we as the consulting community do not take this warning sign seriously, and set our standards and internal governance to avoid going down this path again, we might no longer be allowed to exist — we cannot claim we are a necessary evil. In this case, we were certainly an unnecessary one.</article></body>

Necessary Evil? Let’s Talk About Unnecessary Evil

How consulting services helped fuel an opioid epidemic

A few days ago, McKinsey & Co., a major consulting company, agreed to pay nearly $600 million to 47 states, to settle charges claiming that the work it did for a pharmaceutical firm, had a hand in contributing to the US opioid pandemic. In short, the pharmaceutical company hired McKinsey to assist in boosting its sales of the OxyContin opioid — which it succeeded in doing.

We have heard of many fines and allegations of wrongdoing to similar players in the markets over the past few years.

Is this any different? Is this just another wrongdoing by another giant player in the game of financial markets?

I don’t think so. I think this is different. This is an unnecessary evil.

Player 1: Financial auditors

I started and spent a significant part of my career in audit.

Tough as it may have been at times, we always knew and prided ourselves in knowing that what we did was important to the financial markets, it was the public’s last defence to uphold the integrity of the balance sheet.

Over the last few years, we have seen a clear change in sentiment towards such markets, and the trust the public has in them.

Audit firms were one of the first players to be questioned for the sufficiency and competence of their work, putting them under the microscope, looking into whether any negligence was seen in the work they were paid to do: protecting investors, potential investors, and simply every-day humans using and trusting the financial system.

Examples like the failure of major organizations such as Carillion have been clear agents in pushing the sentiment in this direction. For background, Carillion was a major construction and facilities management company in the UK. It employed over 40,000 employees globally. It managed facilities, supplying schools with food, maintaining buildings, housekeeping, etc.

Over a few years, Carillion accumulated a significant amount of debt, which eventually resulted in it announcing its bankruptcy. The problem? It came as a surprise. Their auditors had signed off on their accounts, without warning of such imminent financial risk. The UK authorities concluded that the auditors had in fact breached the rules in performing their audit.

There have been many other examples of such rulings globally — in the US, Brazil, South Africa, as a few examples.

Today, audits are still a regulatory requirement, and despite some significant breaches in trust, we do still place our trust in the audit system. Our governments and financial watchdogs are working to find more fail-safe mechanisms to improve the system in place.

Most times, it does good. Any time it is ‘evil’, I would say well, but it is a necessary one.

Player 2: Financial banking

Another industry we have recently also been losing faith in are our banks and financial institutions.

The 2008 financial crisis has thrown a wrench in the transparency, fluidity, and flow of our financial markets. It has taught us [at least for a little while] to remember that human intelligence can work to fuel human greed, and how the combination might lead us down a path of complex financial tools and mechanisms, playing and capitalizing on the public’s weaknesses and relative lack of knowledge, bound to send us in the wrong direction every decade or so.

So in a series of bankruptcies, record fines, and financial turmoil, we saw another industry take the hit. Since then, in a very similar manner to our sentiment towards auditors, the securities commissions have been working to fill in the gaps that resulted in the 2008 crisis.

After all, banks, mortgages, loans, and stocks are evolving, they are at an inflection point to choose the right path.

All these institutions who fall into this global financial village have also mostly done well. And, in the times they do not, once we dust off the debris and measure the collateral damage, the system and the institutions remain. For we know, when they are not as good, they are still also a necessary evil.

Player 3: Management consultants

Then we come to the consulting firms.

For possibly the first time, a consulting firm has been fined due to the advice they have given. This is monumental.

Auditors have been fined because they were called negligent — they had rules which they breached.

Financial institutions have been fined for hiding the true nature of financial instruments — once again, for breaking the rules.

McKinsey & Co. Consulting has been fined for giving advice to a company, which resulted in the company making their own decision to take such advice, and subsequently selling more opioids, feeding the market with OxyContin, and contributing to a deadly pandemic.

McKinsey simply gave advice — bad advice in this case.

McKinsey had knowledge of the impact of OxyContin, and of the opioid matter at hand in the US, and with that knowledge continued to help Purdue Pharma take advantage of such issue and ‘turbocharge’ their sales.

This is troubling.

I come from and work in the consulting and advisory space, and I feel an immense weight of the responsibility because we consultants and trusted advisors have to the public. We are the experts; we are the advisors; we are paid to put our minds to the best use.

I can’t claim to consult is an essential cog in the market — it is not an audit, it is not a bank; it is an optional luxury and value-add which companies are able to take advantage of if they can afford to do so. And, done right, can be an immense accelerator of success and growth.

Not being essential, though, can put our existence at risk when we do wrong.

Today, this consulting company paid the hefty price of $573.9 million for its actions. If we as the consulting community do not take this warning sign seriously, and set our standards and internal governance to avoid going down this path again, we might no longer be allowed to exist — we cannot claim we are a necessary evil. In this case, we were certainly an unnecessary one.