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Responsibilities of depositors in the crisis

B.C. Sarukkali, Chartered Accountant

Whatever window dressings are made and whatever is in the press, it is an obvious truth that number of financial establishments in Sri Lanka are now facing to a liquidity crisis. Global economic recession and the current psychic condition among the investors triggered by the recent discovery of frauds and mismanagement over the root cases of this sad situation.

It is very sad to mention that not only the Finance companies which experienced malpractices and mismanaged by its higher officers but also the other majority Finance companies which were properly managed and not experienced any fraud were also affected by this scenario.

The objective of this article is to explain how both the customers as responsible citizens and the finance companies as a significant part of financial market in the country should act in this crisis situation.

Unless both parties behave with mutual understanding, the collapsing of a significant portion of financial system in the country is unavoidable. If this unrest situation continues, there is a significant probability of loosing the trust and confidence of the depositors towards not only the finance companies but also the other financial institutes.

The lost confidence over the Financial system will keep the depositors away from the financial system, and this will take the Sri Lankan economy to old age that may have prevailed in the early 20th Century, which will be a greater set back as far as the entire economy is concerned.

Hence if the depositor’s impatience continues, collapsing the finance companies by incurring heavy losses to the customers as well as the other stakeholders is unavoidable.

In simple, if each of the depositors is selfish enough to take out the brick they contributed to build the house of a finance company, the so called house will collapse at the end by destroying all the depositors and the other stakeholders.

Hence to protect the finance companies while being protected the depositors rights and responsibilities can be elaborated, under two headings, i.e, a) Prior to select the Finance company for the investment b) After the deposit is made.

a) Prior to select the Finance Company for the investment.

Supervision of Central Bank of Sri Lanka Approved Banks, Approved Finance Companies and Registered Leasing Companies come under the supervision and purview of Central Bank of Sri Lanka. Hence it is advisable for depositors to select such an institution as their financial partner.

The investors may take into consideration the other corporate governance practices to be adhered to by the Finance Company as prerequisites for a registration under a government regulatory body.

Registration under the Securities and Exchange Commission (SEC) being a quoted public company poses a number of Corporate Governance requirements such as having an audit committee, publishing financial statements periodically.

The companies are required to prepare its financial statements in accordance with Sri Lanka Accounting Standards, requirements under Companies Act and other best accounting practices. Further, it is a statutory requirement to get these financial statements audited by an approved auditor.

Hence, it should be known that the audited financial statements are more reliable than non-audited financial statements, the auditor being a party independent from the company.

Company’s invest ment avenues

The depositors must be aware of the manner that the company invests. Leasing, Credit, Real Estate and Property Development are few of the more popular investment avenues of Finance Companies. Well diversified portfolio consists of such products can earn a fairly a higher return while minimizing the risk.

If the company is headed by a professionally qualified, well experienced board of directors and operated through a competent team of senior management, it is a positive sign for depositors. Hence, it is advisable for depositors to be aware of the professional qualifications, and level of experience. of the senior management. Finance function of the company should essentially be headed by a professionally qualified personality in my view.

Higher rates of return attract depositors. However, such higher rate of returns always carries inevitably a higher risk as well.

The depositors must understand the simple fact that, to offer a higher rate of return, the company must also earn a return which can cover up the return offered plus a fair margin to cover up both the company’s overhead costs and a profit margin too.

Accordingly, the depositors should evaluate, whether there are investment opportunities within legal and ethical boundaries in a crisis situation like this. The investors should be vigilant on the period that the investment company is in the business and its prestige.

After the deposit is made

Depositor’s responsibility does not end as soon as the investor selects a Finance Company, but continues with that decision. Few such responsibilities are listed below.

The depositor should be on alert whether the Finance Company prepare and present the financial statements annually.

If the institution has registered under SEC, the depositors should be vigilant as to whether the Finance Company publish the financial statements on quarterly basis in at least two national newspapers.

It is not adequate to merely see whether financial statements have been audited. Instead, the nature of the auditor’s report should be seen as an important concern for evaluating the financial statements. The Auditor may have added certain qualifications to his opinion; moreover even the growing concern uncertainties might have been highlighted and may be the auditor has disclaimed the opinion.

Depositors can place a higher level of confidence over the audit report as the auditor has an indirect responsibility towards the general public who make a decision by depending on the auditors report.

Avoiding premature withdrawals

Depositors should avoid premature withdrawals as much as possible, except under special circumstances at least until the crisis is overcome. On the other hand, the Finance Company should also fulfil their duties to protect the trust on financial system and customer confidence. According to my opinion, the mutual understanding between the depositors and financial institutions is essential in this crisis situation.

University of Melbourne ranked among top

The University of Melbourne has ranked in the Top 100 in the world - and topped Australian universities - in a major international ranking of scientific papers.

The rigorous 2008 Performance Ranking of Scientific Papers for World Universities puts Melbourne at No. 58 in the world (up from 64 in 2007) and No. 5 in the Asia Pacific. The ranking, by the Higher Education Evaluation & Accreditation Council of Taiwan (HEEACT), evaluates and ranks the scientific paper performance of the world’s top 500 universities. HEEACT ranking claim the emphasis on current research makes it fairer than some traditional indicators, such as a university’s reputation or the number of Nobel Laureates, which tend to favour universities with longer histories or universities in developed countries.

In Australia, Melbourne ranks ahead of the University of Sydney (83), University of Queensland (101), Australian National University (146), University of New South Wales (148) and Monash University (176). The University of Melbourne is also the only Australian university in the Top 30 in all five discipline areas surveyed by the Times Higher Education (THE) 2008 World University Rankings. The world ranking for Arts at Melbourne is 16; Social Sciences 19; Life Sciences & Biomedicine 26; Natural Sciences 27; and Engineering & IT, 28.

Melbourne’s two biggest Melbourne Model faculties - Arts and Science - moved up in the 2008 ranking. Arts went from 17 to 16 and Science from 33 to 27.

The World Rankings also showed University of Melbourne graduates are highly sought-after and the University is well-regarded by academic peers around the world.

Melbourne is ranked No. 9 in the world by major global and national employers across both the public and private sectors, and No. 21 in the world by its academic peers in a THE survey of more than 6300 academics around the world. Academics cannot vote for their own university.

Melbourne is No. 38 overall in the 2008 THE ranking. Earlier this year it ranked 73, up from 79 in 2007, in the academically-based Shanghai Jiao Tong University rankings.

Professor Davis - The Vice Chancellor said that it is very difficult for Australian universities to compete in these rankings with well-resourced UK, US and Japanese universities. “It is therefore good to see that Australian universities continue to punch above their weight in these volatile rankings where the universities at the top of the list enjoy significantly better funding than Australian universities.

The introduction of the Melbourne Model in 2008 set the University of Melbourne apart from other Australian universities. The University’s New Generation undergraduate courses - Arts, Biomedicine, Commerce, Environments, Music and Science - are the cornerstone of the University’s Melbourne Model.

Rajaratnam wins Zonta award

JWT Colombo’s Vice President and Executive Creative Director Ms Chandini Rajaratnam was awarded the ‘Zonta Woman of Achievement 2009’ for advertising. The award was made at an elegant evening function attended by a large and distinguished gathering. She was one of 20 influential women who were decorated for their contribution in their respective fields.

Though she hails from the creative realm, she is known to strike a rare balance between distinctive creative and honed strategy, and has contributed towards the planning and sustaining of a range of multi national and indigenous brands in her career spanning 21 years.

On winning the award she had this to say “Women are often labelled with the pre-conceived notion of being irrational, emotional and unpredictable. In an equal opportunity workplace we have to prove this is not so by making people judge and respect you by what you deliver and not by your gender”, said Rajaratnam. She says a woman’s greatest asset is the ability to multi-task.

Union Assurance awarded ‘superbrand’

Union Assurance PLC recorded steady progress during the year, despite the general trend being one of consolidation and contracting bottom lines.

Having espoused the tenets of transparency, accountability and governance as business fundamentals, UAPLC stands among its insurance counterparts as a benchmarked leader.

The many local and international accolades the company has received in the recent past for their annual reporting processes, HRM practices, brand strength, business practices etc. stand testament to this fact.

In addition, at a time that most of corporate Sri Lanka is speaking of challenges ahead, John Keells Holdings, one of the largest conglomerates in Sri Lanka has infused a further capital investment of Rs. 1 billion into Union Assurance, signalling that the company is not only financially stable but has significant long term potential as well.

Dirk Pereira, Deputy CEO of Union Assurance stated that the company reported a year on year growth in turnover and profitability. Pereira explains that turnover from life and general businesses increased by 21 per cent from Rs. 4.6 billion in 2007 to Rs. 5.6 billion in 2008.

Consolidated profit before tax increased by 40 per cent and profit after tax increased by 35 per cent from Rs. 254 million in 2007 to Rs. 342 million in 2008.

Based on these results, the Board of Directors has recommended a first and final dividend of Rs. 3.25 per share, to be ratified at the AGM scheduled for March 31st.

General Manager Marketing and Distribution Rukman Weeraratne, once more emphasises that the current environment highlights more than ever the importance of transparency, good governance and a strong balance sheet for organisations involved in the financial services industry.

“There are ample opportunities for such companies to thrive,” he says. “For UA, the outlook for the life insurance industry is positive, considering the relative under penetration, rapidly ageing population (which requires pension and healthcare solutions) and overall improvement in income and living standards.”

His positive take on the entire macro picture is that UA will continue to thrive, given the company’s distribution network of 52 strategically located branches, sophisticated technology enabling accessibility, continuous investment in training and development, professional sales and underwriting team and strong brand.

But Niranjan Nagendra, General Manager Corporate, cautions that general insurance is likely to continue to be price competitive with corporate entities affected.

ICSA Convocation 2009

The Institute of Chartered Secretaries and Administrators(ICSA) UK, held its 2009 Convocation at the Trans Asia Hotel recently where 27 Graduates, 16 Associates and 04 Fellows were awarded their Degree Certificates by the Chief Guest, CEO of ICSA, UK Roger Dickinson, in the presence of President of the ICSA Sri Lanka Prof. M.T.A. Furkhan. In the picture are the fellows, associates, graduates and the prize winners with the Chief Guest and the President of ICSA.

Delmege distributor for Milgro

Delmege Marketing (Pvt) Ltd, a member of the Delmege Forsyth Group of Companies, has been appointed as the national distributor for Milgro milk powder.

The Delmege Group is one of Sri Lanka’s oldest business establishments having been founded in 1850 and has been in the distribution business for several decades.

The Milgro brand is owned by Pacific Inter-Link (PIL) of Malaysia which is a diversified business house whose activities include trading, manufacturing, shipping, marketing of FMCG products, etc and currently services over 50 global markets.

According to the CEO of Delmege Marketing, Dinesh Nalliah, the milk powder used for the Milgro brand is sourced exclusively from New Zealand. “Milgro Creamy Full Cream milk powder is available in 4 pack references whilst Milgro Instant Full cream milk powder too is available in 4 pack references. All manufacturing facilities of PIL have been awarded the highest international quality certifications such as ISO and HACCP”.

He went on to say that Milgro’s milk packing plant is fully automated with the product being untouched by human hands. “This plant too is ISO and HACCP certified and has in-house testing facilities, including micro biology tests.”

Country Manager Sri Lanka of PIL, Chrishantha Fernando stressed the fact that the milk powder was sourced strictly in line with laid down specifications and imported only from New Zealand, with the product currently being exported to over 25 countries. “Milgro entered Sri Lanka six years ago with a clear vision and a long term commitment to the market. The brand created a new segment `Instant’ and now has 8 SKUs in two product forms namely instant and regular”.

He said that the product was readily accepted by both adults as well as children and now that the product had come under the Delmege mantle, both the trade and consumers will be served better.

With the appointment as the national distributor for Milgro, Delmege will be further strengthening its fast moving consumer goods (FMCG) business.

Minister visits Akbar Bros factories

Minister of Export Development and International Trade - Professor G.L. Peiris recently visited the Akbar Brothers Tea Bagging and Tea Packeting plants located at Kelaniya and Wattala.

The Minister was accompanied by Anil Coswatte-Chairman, Export Development Board and other Government officials. The Minister spent considerable time inspecting all the processing and the manufacturing units and evinced keen interest in the operations.

He also held discussions on the marketing strategies and the challenges faced by the tea export sector in the current global recession.He was shown around the factories by Asgi Akbarally - Director, Akbar Brothers and the staff of the Company.Akbar Brothers are the largest exporters of value added tea products from Sri Lanka.

In the year 2008 the Group exported 21 million kilograms of packeted teas and 4 million kilograms of tea bags.

The volume of tea exports including bulk - blended teas made by the Group in 2008 totalled 42 million kilograms.

TNT gets new home

TNT Express, one of the world’s leading Air Express Delivery Companies moved into their new office at No. 435, Galle Road, Colombo 03 recently.

TNT was founded in Australia in 1946 by Ken Thomas with a fleet of one single truck. In the following years, they have grown to having over 43

aircraft and 26,000 ground vehicles.

TNT provides businesses and consumers worldwide with an extensive range of services for their mail and express delivery needs. Headquartered in the

Netherlands, TNT offers efficient network infrastructures in Europe and

Asia and is expanding operations worldwide to maximise its network

performance. TNT serves more than 200 countries and employs more than 163,000 people. Over 2008, TNT reported 11.1 billion in revenues and an operating income of 982 million.

TNT has been represented in Sri Lanka by Ace International Express for the past 3 decades. Ace International Express is a member of The Aitken Spence Group of Companies and also represents Spring Global Mail , the world’s largest private B2B mailing solutions provider as well as Ace Xpress, a leading domestic delivery company that has been in operation for the past 20 years.

HSBC obtains environment certification

HSBC Premier Centre was certified compliant with ISO 14001:2004 one of the world’s most stringent Environmental Management Systems (EMS) on March 5, 2009 and was declared open as the first Green Office within HSBC’s local network. This certification makes HSBC the first financial organisation in the country to be accredited with this standard, setting the stage for better use of energy and resources to help the Bank sustain its environment policy.

The ISO 14001:2004 certification by SGS Lanka (Pvt) Limited,(fully owned subsidiary of SGS S.A. Geneva, Switzerland) provides guidance on how to manage the environmental aspects of your business activities more effectively while taking into consideration environmental protection, pollution prevention and socio-economic needs.

This rigorous audit scrutinises the company’s efforts in establishing an environmental policy, determining environmental aspects and impacts of products, activities and services, planning environmental objectives and measurable targets, implementation and operation of programs to meet objectives and targets, checking and corrective action and management review.

AAP seminar

A seminar/workshop themed A New Profile for Administrative Professionals for Managers/Executives/Senior Secretaries/ Administrative professionals will be held on March 28 from 8.30am ƒ?”5pm at the Cinnamon Grand.

Organised by the Academy for Administrative Professionals(AAP) the Chief Guest on the occasion is the country Managing Director for Chevron Sri Lanka Kishu Gomes. T. Sayandhan will speak on managing time to deal with interruptions and time wasters. Dr T. Sabesan will speak on secrets to looking A fabulous.

Ms Eromal Ranaweera and Ms Priyanthi Dias will speak on tips to retain freshness. Alan Robertson will speak on management and organizational skills.

Opportunities in North, East

The above seminar will be held on Thursday March 26 from 2.00 p.m to 5.00 p.m at the National Chamber of Commerce Auditorium at 450, D. R. Wijewardene Mawatha, Colombo - 10.