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June 2015
Volume 4
No. 5
June 2015
ISSN2279-3976
Global Management
Accounting Summit
27th 28th & 29th July 2015
1
IFAC President awards Membership to
CMA Sri Lanka
President of International Federation of Accountants (IFAC) Ms. Olivia Kirtley
awards the Membership Certificate to the President of CMA Sri Lanka Prof.
Lakshman R Watawala after CMA was elected to Membership at the Council Meeting
attended by 106 IFAC Council Members held on 7th November 2014 in Rome Italy
in the presence of the CEO IFAC Fayez Choudhery and the Immediate Past President
Warren Allen.
CMA Elects New Governing Council for
2015-2017
L to R: Mr. Adrian Perera, Mr. Ruchira Perera, Mr. Hennayake Bandara, Prof.
Lakshman R. Watawala - President, Mr. Basheer Ismail – Vice President, Mr. Ananda
Jayalath (Representing Governor, Central Bank), Dr. Senaka Kelum(Representing
Head of the Department Accounting- University of Sri Jayewardenepura),Mr.
Lasantha Wickramasinghe (Absent) representing President, Institute of Chartered
Accountants of Sri Lanka)
2
Volume: 4
June 2015
No. 5
Institute of Certified Management Accountants of Sri Lanka
Incorporated by Parliament Act No. 23 of 2009
C E R T IF I E D M A N A G E M E N T A C C O U N T A N T
Publication of the Institute of Certified Management Accountants
of Sri Lanka
No. 29/24, Visaka Road, Colombo - 4.
Tel: 011 2506391, 2507087
e-mail:[email protected]
Web Site: www.cma-srilanka.org
CMA
1
INSTITUTE OF CERTIFIED MANAGEMENT
ACCOUNTANTS OF SRI LANKA
Incorporated by Parliament Act No, 23 of 2009
PATRONS
1. Hon. Ravi Karunanayake
2. Hon. Prof. G.L. Peiris
3. Hon. Bandula Gunawardena
4. H.E. Ms. Shelley Whiting -
-
-
-
Minister of Finance
Member of Parliament
Member of Parliament
Canadian High Commissioner in Sri Lanka
GOVERNING COUNCIL
Prof. Lakshman R Watawala Mr. M.B. Ismail Mr. H.M. Hennayaka Bandara Mr. W.A.A.D. Perera Mr. M.R.A. Perera Mr. L.L. S. Wickremasinghe Mr. R.A.A. Jayalath
Dr. W.G. Senaka Kelum
FCMA, FCA, FCMA(UK), CGMAPresident
FCMA, FCA, FCPM
Vice President FCMA, FCA, FMAAT, B.Com(sp), Dip.in. Acc.Member FCMA, FCMA(UK) CGMA, ,FCCA(UK), MBA (Sri.J)Member FCMA, ACMA(UK),CGMA, B.Sc(Acc.), MBA(PIM),
Member FCA, FMAAT
Member
FCA, B.Com(Hons), MBA(Sri.J), MA(Econ)
Member PhD(Acc.) (Russia), M.Sc.(Economics)( USSR), B.Sc (Acc.) (USSR) Member ADVISORY COUNCIL
Mr. H.D.S. Amarasuriya FCMA, FCA, FCMA(UK), CGMA
Chairman, Sri Lanka Insurance Corporation, Former chairman Singer Sri Lanka
Ms. Joy Thomas MBA, FCMA, C.Dir
President & CEO of CMA Canada
Prof. John O Miller AO, BA, B.Com, PhD, FCPA, FAICD, FCMA
Former Head, Graduate School of Management, Swinburne University of Technology, Australia;
Former Prof. Monash University; Past President, Confederation of Asian and Pacific Accountants (CAPA).
Prof David Hunt MSc, FCA, FCIPD, CPFA, FFA, FMAAT, FCMA, FRSA
President, Institute of Financial Accountants, Former PKF International Partner (Pannell Kerr Forster); Past UK representative on
IFAC Education Committee; Past Chairman of British Isles Accountancy Profession’s Education Committee; Past President AAT (UK)
Mr. A. N. Raman FCMA, FCMA(India), ACA, CPA(Aus.)
Management Consultant; Former Central Council Member, ICWA India; Past President SAFA;and Former Member Financial and
Management Accounting Committee (FMAC) and currently PAIB Committee of the International Federation of Accountants (IFAC)
Prof. P.R. Mather MA, PhD, FCA (E&W), FCPA
Head, School of Accounting La Trobe University, Australia; Former Assoc. Dean (Higher Research Degrees), Faculty of Business and
Economics, Monash University, Australia
Mr. S.E. Satharasinghe FCMA FCA, BSc.
Financial Advisor, Former Chairman Brook Bond.
Mr. F.H. Puvimanasinghe FCMA, FCA
Former Senior Partner Puvimanasinghe and Company.
TECHNICAL ASSISTANCE PROVIDED BY
INITIAL FUNDING BY - -
CMA Canada
Canadian International Development Agency (CIDA)
MANAGEMENT
Director - Education & Examinations
Director Operations
Consultant
Dr. K.D.M.E.S. De Livera
Mrs. Sumudu Pagoda
Mr. L.B. Wattegedara
FCMA, FCMA(UK),CGMA, MBA, LICA, DIPFM
MBA, PAD, Dip HRM, Dip LL, PQHRM
BA (Hons), FCPM, JP (A.I.)
2
Prof. Lakshman.R. Watawala
Leading Practices in Integrated Reporting
05
06
07
08
09
11
12
A New Day for Sustainability
20
Marc J, Epstein and Adriana Rejc Bushovac
Message from the President
Message from the Journal
Committee Chairman
Editorial
CMA Global Management Accounting
Summit - 2015
Programme
CMA Excellence in Integrated Reporting
Awards
FCMA, FCA, FCMA(UK)
Mr. Adrian Perera
MBA(Sri.J),FCMA(UK),CGMA, FCCA(UK),FCMA
Mr. C.A. Sarathchandra
FCMA, FCMA(UK), FCIM(UK),MBA, MSc(J’pura),
Cristiano Busco, Mark L. Frigo, Paolo
Quartrone and Angelo Riccaboni
(This article reproduced from the Strategic Finance
Journal (September 2014) with their kind permission)
(This article reproduced from the Strategic Finance Journal
(July 2014) with their kind permission)
Information Security
30
Mr. K.L.D. Mendis
The Use of Information &
Communication Technology in
Microfinance
36
Mr. Dimuthu Sarathchandra
An Efficiency based approach to
measure return on investment in
Information Technology
39
Mr. S.G.S.D. Jayasekara
43
51
61
Mr. C.A. Sarathchandra
Doing Business Electronically
The Accountants, are they Market
Oriented?
The APT(Advanced Persistent Threats) in a
Nutshell the APT – Overview
Invalid Value! System Needs
Reconfiguration: A suggested valuedriven perspective for IT education for
organizations
Outsourcing Industry in Sri Lanka
Institute News
Profiles of Recent Passed Finalist
List of New Members
Examination Results
67
70
73
75
78
81
FCA, ACMA
MSc in MIS(UK), BSc in B.A(USA), AA in Econ(USA)
BBMgt.(Acc.)sp, MSc, FCA, ACCA, ACMA
FCMA, FCMA(UK), FCIM(UK),MBA, MSc(J’pura),
Mr. Chamindra De Silva
MBA, FCA
Dr. Sameera de Silva
Dr. B.L.D. Seneiratne
B.Sc. Mkt. Mgt. (Sri j), BIT (UCSC), MBA (PIM), PhD
(Canterbury)
Mr. Vidushanka Hewagamage,
MSc IT, AMBCS
The Institute reserves the right to grant permission to reproduce articles. Opinions expressed in articles, and other material published
in Certified Management Accountant are the author’s own and do not necessarily represent the views of the Governing Council.
3
4
Message from the President
Improving ICT governance, despite
high costs involved, significantly
benefits government, business and
civil society. In this there remains
a key role for central government,
as a coordinator and facilitator
in ensuring that it provides an
accountable environment and
leadership in ongoing government
in public management.
Prof. Lakshman R. Watawala
FCMA, FCPM, FCA, FCMA(UK), CGMA
I
t is with great pleasure I extend
this message to the “Certified
Management Accountants” on
the theme “E-Governance in Sri
Lanka”.
"E-governance is a very useful
practice to bring transparency,
and accountability while due
consideration must be accorded
to its inherent challenges such as
administrative, legal, technical and
technological aspects".
ICT governance is crucial for
development generally, because
of the returns it offers for costly
initiatives and the opportunities
for developing countries such as
Sri Lanka to leapfrog development
stages which would otherwise
be slower and impose their own
opportunity costs. ICT governance
has a critical role in it's effects
on governance institutions and
capabilities and in encouraging a
culture of engagement and wider
participation in decision-making.
Government can demonstrate by
example, especially in it's use of
ICT , how it gives reality to it's
desires and claims of progress and
development.
I wish to put on record that our
Institute has achieved many
milestones over the years, notably
the admission as a full member
of the International Federation
of Accountants (IFAC), a global
organization for the development
of accountancy profession. Our
membership to IFAC confers the
due recognition as the National
Professional Management
Accounting Institution in Sri Lanka.
qualifying CPD hours on an annual
basis by attending the summit.
An important aspect of a student’s
progress is to gain access to practical
training. In recognition of this
we have continued signing of
Memorandum of Understanding
with prominent companies to train
our students thus enabling the
best possible exposure to practical
experience.
I thank all who contributed to bring
this journal into a professionally
acceptable accounting journal in Sri
Lanka. I am convinced this journal
will be useful to our members and
other interested readers of business
materials.
Before I conclude, I wish to
congratulate the newly elected
council members for the term
2015-2017 and anticipate their
active support for CMA to achieve
its objectives and be the Leading
Management Accounting body in
Sri Lanka.
The next Global Management
Accounting Summit 2015 will
be held from 27-29 July 2015 on
the theme “Business Resilience
through Integrated Reporting”.
As in the past, I look forward to the
participation of all of our members
at this summit for meaningful
discussions and outcome of
the Summit. It should be noted
that members could accumulate
5
Message from the Chairman
I
Adrian Perera
FCMA, FCMA(UK) CGMA,
FCCA(UK), MBA (Sri.J)
Council Member and Chairman
Journal Committee
t is with great pleasure as
the chairman of the journal
committee that I extend my
sincere appreciation and gratitude
to CMA Journal committee for
coming out with an excellent
product once again. This issue we
focused on the broad topic of E
governance in Sri Lanka which is
an emerging area.
The paper writers have gone
into great length in coming with
excellent papers which is of high
international quality. Over the
years CMA journal has become
an important journal among the
professionals and academics. Our
aim is to bring this to the regional
level as an international professional
journal.
Information technology has become
an integral part of our corporate
and personal life and its influence
is increasing daily and the security
of the systems are being breached
at an alarming rate. The committee
felt it was timely that CMA as the
statutory management accounting
body of Sri Lanka address this issue
and bring it to the member domain.
None of this would have been
possible if not for the support
and blessing of Prof. Lakshman
R Watawala President of CMA,
Mr. .C A Sarathchandra Editor
and Alternate Chairman, Council
Members, Journal Committee
members. Paper writers, and most
importantly staff of CMA.
Journal Committee
Mr. W.A.A.D. Perera - Chairman
Mr. C.A. Sarathchandra - Alternative Chairman & Moderator
Mr. M.R.A. Perera
Mr. W.K.J.P.A. Fernando
Mr. A.M.R.P.M.S. Abeysinghe
Mr. S.L.P.Gunawardena
Mr. K.L.D. Mendis
6
Mr. R.M.A.P.B. Naranpanawa
Mrs. T.L.I. Perera
Mr. L.W.W. Priyankara
Mr. C.N. Rathnayake
Ms. R.A. Suriyagoda
Mr. B.L. Perera
Ms. Shanthi Maheswaran – Secretary
Editorial Note
C.A. Sarathchandra
Editor,
Alternate Chairman to the Journal
Committee
FCMA, FCMA(UK),CGMA, FCIM,
MBA, MSc(J'pura),
PGD (Banking), PhD (Econ)
Former CEO - HDFC Bank, and
Director (Fin) - People’s Bank,
Former Consultant - World Bank
South Asia Office, and USAID.
I
n the Information Era, the
best of times are the worst of
times. Computer hardware
keeps getting faster, cheaper and
more portable. New technologies
such as blogs , wikis and business
analytical systems have captured the
imagination and the expenditure
on corporate IT has bounced back
from the plunge it took in 2001.
Data available shows that amount
spent has more than tripled per
employee from 1988 to 2004 ( HBROctober 2008). One of the biggest
problems companies face is coping
with the abundance of technologies
in the market place. Most managers
feel ill-equipped to navigate the
constantly changing technology
landscape and thus involve
themselves less and less with it.
Major advances in financial knowhow and IT have resulted in a
quantum leap in the ability to create
new financial products. Pay offs
are unbundled and rebundled and
they are priced accordingly. In
the process, risk is deconstructed
into its constituent elements and
recombined in a variety of ways.
The potential embedded leverage
achieved through financial
engineering is much higher than in
the past.
for improving Business Health
Culture Industries in businesses.
Dr. Sameera lucidly present his
case in his article on APT the
next generation cyber emerging
surveillance technologies which are
digital weapons proceeding rapidly
in cyberspace digital cold-wet
utility grid.
Article authored by Mr.Jayasekara
has evaluated the Return on
Formation of on-line contracts,
Investment based on efficiency
recognition of digital signatures ,
offences under computer crime and justifying clearly the investment
made on Information Technology.
law related to money laundering
The use of Information and
and Due Diligence related to
Communication Technology in the
Information Technology has
SME sector and in Microfinance by
facilitated enhanced development
Mr. Dimuthu Sarathchandra has
of e-commerce at a faster rate
clearly explained with pragmatic
in a secured manner. Further
implementation of a good payment information. The information in
and settlement system ( as reflected this article of transfer of modern
in the article authored by the editor) technology, especially ICT, can be
used by the entrepreneurs who
and growth of the economy are
are engaged in the SME sector to
interlinked and they build on each
other to help the nation’s economic develop their businesses above
average. Article on Information
growth.
Security by Mr. Mendis has
The article reproduced from
proposed some interesting
Strategic Finance Journal (SFJ) (July protective measures ensuring the
2014 issue) has explained clearly the confidentiality, accuracy etc. of the
sustainability performance drivers
information.
which help enhance corporate
profits. The article reproduced from The above information shows that
SFJ (September 2014) has discussed the adoption of ever changing ICT
in the operations of businesses
strategies to be used in value
is a sine –qua-non, as otherwise
creation in businesses as practiced
the businesses are not sustainable
leading practices in Integrated
Reporting and also a business model owing to constantly advancing
for Integrated Performance analysis competition in the market.
7
Global Management Accounting Summit
27-29 July 2015
The CMA Global Management Accounting Summit on the theme “Business Resilience through Integrated
Reporting” will be held from 27th to 29th July at Cinnamon Lakeside Hotel. A highlight at the Global Summit
will be the presence of the President of International Federation of Accountants (IFAC) Ms. Olivia Kirtley who
will deliver the Key Note address at the Global Summit at the inauguration ceremony of the Global Summit and
The Technical Sessions. The International Federation of Accountants is the Global Organisation for the accounting
profession and comprises 175 members and associates in 130 countries and jurisdictions representing 2.5 million
accountants in Public Practice, education, government, industry and commerce. Sri Lanka has two members the
Institute of Certified Management Accountants of Sri Lanka, Institute of Chartered Accountants of Sri Lanka and
associate member AAT Sri Lanka.
The Summit will host a range of International and local speakers who are specialists in the field of Integrated
Reporting. CMA will also conduct the “CMA Excellence in Integrated Reporting Awards” to coincide with the
Global Summit. Companies can obtain application forms and send them by 20th June to CMA Head Office. The
Co-Hosts of the Global Summit will be the Management Accounting Bodies of India, Pakistan, Bangladesh and
USA. The supporting organisations are the International Integrated Reporting Council (IIRC) and Global Reporting
Initiative.
Integrated Reporting results in a periodic, concise integrated report about how an organization’s strategy, governance,
performance and prospects in the context of its external environment lead to the creation of value in the short,
medium and long term (visit www.theiirc.org/international-ir-framework). Although providers of financial capital
are the primary intended users, an integrated report should be designed to benefit all stakeholders – including
employees, customers, suppliers, business partners, local communities, regulators and policy makers – interested in
an organizations ability to create value over time. The key objective of integrated reporting is to enhance accountability
and stewardship with respect to the broad base of tangible and intangible capitals and promote understanding and
interdependencies. In December 2013 IIRC released the IR Framework to be used as a guidance for the voluntary
adoption of IR.
The Global Summit will cover a range of topics relating to IR with special emphasis on Integrated Thinking, Integrated
Reporting, Accountants connect with Integrated Thinking and Reporting, Building blocks of IR, Sustainability
reporting migrating to IR, Asian and Country experiences of IR, getting started with IR and company experiences
closing with a panel discussion on business success and value creation through IR.
Experienced speakers on IR include the President of IFAC, a member of the Council of IIRC, Technical consultant
of IIRC, Director GRI, South Asia Country Experts, Business Practitioners, University Professors, Heads of
Professional Accounting bodies adding to the technical inputs at the Global Management Accounting Summit in
Sri Lanka.
The Global Summit will be suitable for Directors, CEO’s, CFO’s, those engaged in the preparation of Annual Reports,
Senior Managers and Executives, Sustainability Managers, Management Accountants, Financial Accountants,
Corporate Planners, Financial Analysts, Auditors, Internal Auditors, Government and State Corporation Finance
Managers and Accountants, University Professors and Lecturers and Economists.
8
6.00 to 8.30 pm
Prof. Lakshman R. Watawala, President, CMA Sri Lanka
9
10
CMA Excellence in Integrated Reporting
Awards - 2015
The Institute of Certified Management Accountants of Sri Lanka (CMA) has organized the CMA Excellence in
Integrated Reporting Awards which will be held to coincide with the Global Management Accounting Summit on
the theme “Business Resilience through Integrated Reporting” from 27-29 July 2015 at Hotel Cinnamon Lakeside,
Colombo.
The main objective of the Excellence in <IR> Awards is to promote Sri Lankan companies both listed and unlisted
and state institutions to undertake integrated reporting and to enhance the quality of corporate reporting in the
country which will be beneficial to investors and stakeholders. The integrated reports are evaluated by using
guidelines applicable in the International <IR> framework issued in December 2013. The evaluation will take into
account not only the accounting and financial information but also non-financial information provided in <IR>.
Integrated reporting is new to Sri Lanka and there are no legislative or other requirements for organizations to
prepare integrated reports. Therefore organizations include the principles of integrated reporting in their annual
reports on a voluntary basis.
The annual reports currently produced by organizations will be reviewed for the purposes of the Award. The
International <IR> Framework will be used as the basis for the mark plan. The <IR> Framework was published in
December 2013 and therefore would have been available to organizations for the whole of 2014. However depending
when the organization’s year end occurs, some organizations will have had more time to prepare their reports.
This is the first year that the Award is being presented and therefore the panel of judges will view the reports
from a perspective of achieving the integrated principles and not on a compliance basis. Furthermore, integrated
reporting will differ from organization to organization depending upon the industry and the material issues faced
by the entity. History shows that implementation of integrated reporting is
a journey and that it takes organizations some years to be able to produce
high quality reports.
The reporting years for the different sectors will be as follows:
- Banking and Insurance Sectors 31st December 2014
- Other Sectors 31st March 2015
Awards will be presented to companies after evaluating their Integrated
Reports for the 10 best integrated reports in addition, trophies will be
presented to the company producing the best report, runner up and third
place.
Certificates of Merit will be awarded to those companies fulfilling the criteria
of Integrated Reporting.
The awards will be presented in Colombo at the inauguration of the Global
Management Accounting Summit on 27th July 2015 in the distinguished
presence of the President of the International Federation of Accountants Ms
Olivia Kirtley.
We have also received support for the awards from South African experts
where the Integrated Reporting has been made mandatory for all listed
companies by SEC regulations. For the Global Summit on Integrated
Reporting support has been received from the International Integrated
Reporting Council (IIRC), Global Reporting Initiative (GRI) and
International Management Accounting Institutes.
We are pleased to invite organizations to apply for the CMA Excellence in Integrated Reporting Awards 2015 and
to send us their Annual Report on or before 5th July 2015 to CMA Head Office.
11
Leading Practices in
Integrated Reporting
I
ntegrated Reporting (IR)
is making the leap from
promising
concept
to
powerful practice. Released
at the end of 2013 by the
International Integrated Reporting
Council (IIRC), a global coalition
of regulators, investors, companies,
standards setters, the accounting
profession, and nongovernmental
organizations (NGOs), the IR
Framework has been robustly tested
and piloted in 25 countries. As we
described in the article “Redefining
Corporate Accountability through
Integrated Reporting” (Strategic
Finance, August 2013) and in our
book Integrated Reporting: Concepts
and Cases that Redefine Corporate
Accountability (Springer, 2013), the
Framework was co-created with
business and investors and provides
an “open” platform for IR to move
toward the mainstream. To shed
light on the way in which IR is
currently being adopted and reflect
on the possible opportunities ahead
for management accountants and
finance professionals, we will explore
some leading examples of integrated
reporting at Lawson, Inc.; Eni; and
SAP.
12
Cristiano Busco,
Mark L. Frigo, Paolo Quattrone, and
Angelo Riccaboni
In Search of Competitiveness and organizations to cooperate globally
Sustainable Growth
to achieve the United Nations
Sustainable Development Goals:
Competitiveness and sustainable a set of objectives, which are to be
growth are fundamental goals that released in 2015, for fighting poverty,
contemporary organizations and promoting sustainable development,
societies are urged to achieve in the and improving global well-being.
short, medium, and long term. The
recent financial crisis and the growing A paradigm shift is required if
disparities across societies have businesses intend to contribute
led many analysts and observers to toward a more sustainable society.
describe the global economic system This change calls for the introduction
as busted and to lump business and of an innovative perspective of
finance among potential causes of integrated management that’s able
social, environmental, and economic to combine multiple dimensions
problems. Can businesses and of
analysis
and
sustain—in
societies succeed in striking a balance practice—the ongoing search for
between the need for competitiveness competitiveness.
and sustainable growth? How can
value be defined, managed, and The combination of Integrated
measured over time? From what and Thinking and Inte - grated Reporting
for whom do businesses create or seems to offer a pragmatic solution
to the existing concerns and
destroy value?
outstanding
needs.
Integrated
These issues recently have fueled the Thinking marks a change in the
macroeconomic and political debate way in which companies envisage,
across the globe with a significant design, and run their business. In
demand for a move beyond Gross parallel, IR provides an opportunity
Domestic Product (GDP) measures. to understand and question
Some people maintain that GDP thebusiness holistically: looking
ignores social costs, environmental beyond the financial representation
impacts, and income inequal - ity. to include an overview of strategies,
Therefore, the world needs a better operations, risks and opportunities,
understanding of what sustainable future
outlook,
governance,
well-being means, how to measure it, and more. The need for such an
and how to achieve it. This movement innovative and integrated vista seems
is gaining momentum in public to offer an interesting opportunity
opinion and is well aligned with the to management accountants and
call for civil society and business finance professionals, who are
called on to leverage their existing
skills and acquire new ones as the
adoption of Integrated Thinking and
Integrated Reporting continues over
time. Next, before focusing on some
of the leading practices in IR, we
offer a snapshot of the IR Framework
released by the IIRC (see www.
theiirc.org for more).
partners,
local
communities,
regulators, and policy makers—
interested in an organization’s
ability to create value over time. The
key objective of IR is to enhance
accountability and stewardship
with respect to the broad base of
tangible and intangible capitals and
promote understanding of their
interdependencies.
The IIRC Integrated Reporting
In December 2013, the IIRC
Framework
released the first version of its IR
Integrated Reporting results in Framework to be used as guidance
a periodic, concise integrated for voluntaryadoption of IR. This
report about how an organization’s Framework is currently inspiring a
strategy, governance, performance, large number of companies across
and prospects—in the context of the globe (Microsoft, PepsiCo,
its external environment—lead to Southwest
Airlines,
Unilever,
the creation of value in the short, Danone, Eni, Coca-Cola, Volvo,
medium, and long term (visit BASF, HSBC, Natura, SAP, and
www.theiirc.org/ international-ir- Repsol, to name a few) as they
framework). Although providers pioneer the adoption of IR across
of financial capital are the primary different industries and regions (see
intended users, an integrated report p. 25 for the current list of pilot
should be designed to benefit all companies). The IR Framework was
stakeholders—including employees, designed to offer a balance between
customers,
suppliers,
business flexibility and prescription. It
provides the fundamental concepts,
guiding principles, and content
elements that should be featured in
an integrated report. Ultimately, the
IR Framework represents an “open
space” to be filled in a meaningful
and reliable way to communicate the
unique value-creation story of the
company.
Representing Value Creation as
Capitals Engages with the Company
Business Model
The fundamental concepts of IR are
represented by the capitals that an
organization uses and affects, as well
as the process of creating value over
time. That value is embodied in the
capitals—sometimes also referred to
as resources and relationships. (The
IR Framework refers to “capitals”
instead of “capital,” so we continue
that use here.) The assessment of an
organization’s ability to create value
depends on an understanding of the
connec -
Companies that Have Piloted the IR Framework
BASIC MATERIALS
AkzoNobel NV, Netherlands
AngloGold Ashanti, South Africa
BASF SE, Germany
Cliffs Natural Resources,
United States of America
Gold Fields, South Africa
MASISA SA, Chile
Solvay, Belgium
Teck Resources, Canada
CONSUMER GOODS
The Clorox Company,
United States of America
The Coca-Cola Company,
United States of America
Danone, France
Industria de Diseño Textil SA
(Inditex), Spain
Marks and Spencer Group plc,
United Kingdom
Natura, Brazil
Sainsbury’s, United Kingdom
Showa Denki Co. Ltd., Japan
Unilever, United Kingdom
BRF S.A, Brazil
PepsiCo, United States of America
CONSUMER SERVICES
Edelman, United States of America
Meliá Hotels International, Spain
New Zealand Post, New Zealand
Slater & Gordon Lawyers, Australia
FINANCIALS
Achmea (formerly Eureko),
Netherlands
AEGON NV, Netherlands
Association of Chartered Certified
Accountants, United Kingdom
bankmecu Limited, Australia
BBVA, Spain
BNDES, Brazil
The Chartered Institute of
Management Accountants,
United Kingdom
CNDCEC, Italy
The Crown Estate, United Kingdom
DBS Bank, Singapore
Deloitte LLP, United Kingdom
Deloitte Netherlands, Netherlands
Deutsche Bank, Germany
Deutsche Börse Group, Germany
Ernst & Young Nederland LLP,
Netherlands
Ernst & Young ShinNihon LLC,
Japan
Generali Group, Italy
Grant Thornton UK LLP,
United Kingdom
Grupo Segurador Banco Do Brasil E
Mapfre, Brazil
HSBC Holdings plc, United Kingdom
Itaú Unibanco, Brazil
Jones Lang LaSalle,
United States of America
KPMG International, Switzerland
National Australia Bank Limited,
Australia
PricewaterhouseCoopers Advisory,
Italy
PriceWaterhouseCoopers N.V.,
Netherlands
Prudential Financial, Inc.,
United States of America
Stockland, Australia
13
Strate, South Africa
Uralsib, Russian Federation
Vancity, Canada
CPA Australia, Australia
Garanti Bank, Turkey
FMO, Netherlands
Singapore Accountancy
Commission, Singapore
HEALTH CARE
NHS London, United Kingdom
Novo Nordisk, Denmark
Takeda Pharmaceutical Company
Limited, Japan
Sanofi, France
INDUSTRIALS
AB Volvo – Volvo Group, Sweden
Atlantia SpA, Italy
BAM Group, Netherlands
CCR SA, Brazil
Diesel & Motor Engineering PLC,
Sri Lanka
Flughafen München GmbH,
Germany
Freund Corporation, Japan
Interserve Plc, United Kingdom
Kirloskar Brothers Limited, India
NV Luchthaven Schiphol,
Netherlands
Port Metro Vancouver, Canada
Randstad Holding NV, Netherlands
Tata Steel, India
Transnet, South Africa
Via Gutenberg, Brazil
Votorantim Industrial, Brazil
Cimsa, Turkey
Bulleh Shah, Pakistan
Coega Development Corporation,
South Africa
Fibria Celulose, Brazil
OIL & GAS
eni SpA, Italy
NIAEP, Russian Federation
Petrobras SA, Brazil
Repsol SA, Spain
ROSATOM, Russian Federation
Rosneft, Russian Federation
Sasol, South Africa
SNAM SpA, Italy
TECHNOLOGY
ARM Holdings plc, United Kingdom
Indra, Spain
Microsoft Corporation,
United States of America
SAP, Germany
TELECOMMUNICATIONS
SK Telecom, South Korea
Telefónica SA, Spain
Vivendi, France
UTILITIES
AES Brazil, Brazil
CLP Holdings Limited, China
CPFL Energia, Brazil
ENAGAS SA, Spain
EnBW Energie Baden-Württemberg
AG, Germany
Enel SpA, Italy
Eskom Holdings SOC Limited,
South Africa
Terna SpA, Italy
Figure 1: The Value-Creation Process
(Source: IIRC IR Framework, 2013, p. 13)
14
tivity between a wide range of
internal and external factors in its
business model. (See Figure 1 for
an overview of the value-creation
process as presented in the IIRC IR
Framework.)
medium, and long term. Since these
capitals and their value change over
time as they are increased, decreased,
or transformed through the activities
and outputs of the organization, it’s
also important to understand how
the outputs affect outcomes, which
As illustrated in the IR Framework,
represent the ultimate results of the
organizations depend on six different
outputs (see Figure 1).
types of capitals, which are stores of
value that, in one form or another, The Ingredients of IR: Content
become inputs to an organization’s Elements and Guiding Principles
business model. They are: financial,
manufactured, intellectual, human, An integrated report is built
social and relationship, and natural. around seven elements that define
The IR Framework doesn’t require its content and communicate the
organizations to adopt them, so organization’s unique value-creation
they should be used as a benchmark story: organizational overview and
to ensure an organization doesn’t external environment, governance,
overlook a capital that it uses or risks and opportunities, strategy and
resource allocation, business model,
affects.
performance, and future outlook
Value is created or destroyed through (see Figure 1). By linking content
the capitals within a company’s across these elements, an integrated
business model, which represents report illustrates the value-creation
the chosen system of inputs, business story from a basic description of the
activities, outputs, and outcomes that business model through the external
aims to create value over the short,
factors affecting the business,
including management’s strategy for
dealing with them and developing
the business. This provides a
foundation from which to discuss
the performance, prospects, and
governance of the business in a way
that focuses on its most important
aspects.
Because the intention is to offer
an appropriate balance between
flexibility and prescription, the
IR Framework is principles based
rather than rules based. The idea is
to recognize the wide variation in
individual circumstances of different
organizations yet enable a sufficient
degree of comparability across
organizations to meet the relevant
information needs. For this reason,
the IR Framework doesn’t focus on
rules for measurement, disclosure
of individual matters, or even on
the identification of spe - cific key
performance indicators (KPIs)
Figure 2: Lawson, Inc. Capitals and Business Model
(Source: Lawson, Inc., “Integrated Report 2013,” p. 3).
15
Rather, the Framework is driven by
Integrated Thinking, which will lead
to integrated decision making and
execution toward the creation of
value. The rationale of this approach is
to stimulate the active consideration
by organizations of the relationships
between their various operating and
functional units and the kinds of
capital that they use and have an effect
on. Through the Integrated Thinking
promoted by the IR Framework,
business organizations are stimulated
to focus on the connectivity and
interdependencies among a range of
factors that have a material effect on
their ability to create value over time.
Next, to illustrate and discuss some
of the key features of Integrated
Reporting, we’ll draw on leading
examplesfrom Lawson, Inc.; Eni; and
SAP.
Lawson, Inc.: Connecting Business
and Society
Lawson, Inc. is a convenience-store
franchise chain based in Japan.
The store originated in the United
States inCuyahoga Falls, Ohio, but
today it’s a Japanese company and
is the second-largest conveniencestore chain in the country behind
7-Eleven. In 2013, Lawson, Inc.
produced its first integrated report
that combines its previous Annual
Report and Corporate Citizenship
Report to incorporate financial
and
nonfinancial
information
inone volume. Lawson’s “Integrated
Report 2013” (http://lawson.jp/en/
ir/library/pdf/annual_report/ar_
2013_e.pdf) opens by identifying
the key stakeholders of the company.
Among them are local communities,
which Lawson places at the center of
the corporate philosophy, business
model, and action plan. The onepage message from the CEO further
emphasizes this by highlighting how
the company strives to create value
16
and to respond to the dynamically
diversified needs of the local
communities while existing in
harmony with society.
the company’s business model, and
their impact on the company and
its stakeholders. Eni’s innovative
approach is presented next.
From the start, the report illustrates
how the company’s business model
is tied to possible solutions to the
social and environmental challenges
of the local communities. For
example, key challenges in the local
communitiesinclude issues arising
from changes in society, such as
gender balance, an aging population,
few jobs for young people, escalation
of national medical costs, and
increase in lifestyle-related diseases.
Global environmental changes
include power shortages, climate
change, increasing waste, and longterm depletion of natural resources.
Both the local and global issues are
connected to the multiple actions that
Lawson, Inc. has implemented as part
of its mission to realize a sustainable
business growth in harmony with
society and the environment.
The response to these challenges
characterizes the company’s business
model and approach to value creation
(see Figure 2).
Eni: Mediating across Capitals and
Stakeholders
Figure 2 represents Lawson, Inc.’s
“Corporate Value Creation Cycle.”
This representation, which mirrors
the IIRC Framework in Figure 1,
builds on the capitals as inputs and
outcomes of the cycle. Both “visible”
and “invisible” capitals are included.
According to Lawson, Inc., “Visible
capital is goods and money depicted
in financial statements. Invisible
capital is what is not shown, such
as human capital.” The “Integrated
Report 2013” offers a powerful view
of the company’s business model and
capitals.
Eni, the Italian energy giant,
has moved one step further by
identifying the stocks of capitals,
how they have been used within
Eni is the sixth-largest integrated
energy company in the world
by market value, is active in 90
countries, and has approximately
78,000 employees. Its net sales from
operations are €127 billion. The
company boasts a strong position
in the oil-and-gas value chain
from the hydrocarbon exploration
phase to product marketing.
In 2010, after having issued a
series of environmental and then
sustainability reports, Eni realized
that, although the numbers were
allowing a true and fair review
of the company’s performance,
operations, and management, they
weren’t necessarily relevant to the
stakeholders or able to hint at the
sustainability of the business. Also
not relevant per se was the simple act
of reporting data. What was missing
was a broader process of analysis
and communication that was able
to put performance in context and
to represent the strategic leverages
the company was using to build and
maintain its ability to produce value
in the long term. For this reason, Eni
began the process of integration in
corporate reporting.
At Eni, sustainability isn’t a specific
area of activity. Instead, it represents
a business approach and is a lever
to support long-term value creation
while managing political, operational,
and financial risks. This approach
has been embedded in the company’s
culture since its foundation when
Enrico Mattei, Eni’s first chairman,
pioneered a way to become more
competitive by managing relations
between international oil companies
and producing countries based
on longterm cooperation, on the
transfer of knowledge and skills, and
on mutual development. Eni adopts
Integrated Thinking that starts
from planning and integrated risk
management. Business opportunities
are defined by taking into account
the multiple capitals that could be
leveraged by the operations, and
risks are evaluated con - sid ering
all possible impacts that could be
generated.
Within this context, Eni’s “Annual
Report 2013” is an integrated report
that innovates in terms of contents
byhighlighting the different capitals,
resources, and relationships that
are part of the company’s valuecreationprocess. The main capitals
Eni uses (financial, manufacture,
intellectual, natural, human, social
and relationship) are classified in line
with the indications offered in the
IIRC Framework (see Figure 3). They
represent the stocks and their value,
which is increased or transformed
through Eni’s activities. Each capital
is associated with the main actions
that will create value for the company
and all stakeholders.
For example, for the natural capital,
stocks include oil and gas reserves,
water, biodiversity and ecosystems,
air,and soil (see Figure 3). Eni’s main
actions related to this capital include
investments in new businesses, such
as biorefinery and green chemistry;
investment in technological and
process upgrades; and remediation
activities. Among the results for Eni
are growth of hydrocarbon reserves,
reduction in operational expenses,
mitigation of operational risk,
license to operate, and stakeholders’
recognition. Regarding the impact
on external stakeholders, the report
highlights the reduction of gas
flares, reduction of oil spills and
blowout, preservation of biodiversity,
containment of water consumption,
and energy efficiency.
From the upstream operations to
marketing activities, Eni’s “Annual
Report
2013”
(www.eni.com/
en_IT/
attachments/publications/
rep or ts/rep or ts-2013/Annu a lReport-2013.pdf) attempts to make
the connections that exist between
integrated activities and business
strategies more evident. In particular,
the report identifies a certain number
of KPIs that capture the financial
performance and sustainability
performance as well as the results of
the use of different forms of capitals
(see Figure 4).
Figure 3: Eni’s Main Capitals
(Source: Eni “Annual Report 2013,” p. 5)
17
Figure 4: Eni’s Performance across Capitals (Source: Eni “Annual Report 2013,” pp. 6-7)
Figure 4: Eni’s Performance across Capitals (Source: Eni “Annual Report 2013,” pp. 6-7)
Eni’s goal is to continue refining its
Integrated Thinking and Integrated
Reporting by capturing and
highlighting the connections among
the multiple capitals. This should
lead to a better understanding of
the impact of the heterogeneous
sustainability drivers on the business
objectives and financial results. This
is something that is featured in the
SAP integrated report.
SAP: Connecting the Dots
SAP is a German multinational
software corporation that produces
enterprise resource planning (ERP)
18
applications to manage operations
and customer relations. This year, for
the second time, SAP has published
an integrated report by linking
contents from its traditional Annual
Report and Sustainability Report
into one cohesive document (www.
sapintegratedreport.com/2013/
en). One of the key attributes of the
SAP “Integrated Report 2013” is the
attention drawn to the connections
between financial and nonfinancial
performance of the business. The
purpose of the report is to illustrate
the features of SAP integrated
strategy by offering a holistic picture
of all possible impacts. Notably,
SAP’s four global corporate goals
(objectives) reflect this balanced
view: Two focus on the company
financial performance (revenue and
margin) and two on nonfinancial
performance (customer loyalty and
employee engagement).
measures is essential, but it
isn’t
sufficient.Exploring
the
interdependencies is often the key.
Actions taken in one area affect
another area, and these connections
hold the potential for the company to
increase value creation by responding
more effectively to the business
landscape of today and tomorrow. For
these reasons, the SAP “Integrated
Report 2013” explores thecauseand-effect relationships between the
financial and nonfinancial indicators.
In doing so, IR represents a platform
for connecting the dots across the
company’s business model and offers
a space to explore the company’s
ability to create value over time.
In particular, the report presents a
map of the specific activities SAP
has undertaken to first change
employeebehavior,
subsequently
impact company performance, and
finally influence financial results.
The inclusion of a wider set of Describing such achain is part of a
economic, social, and environmental strategy that should lead to assessing
the consequences of nonfinancial
performance in financial terms.
To create and validate these chains
of cause and effect, SAP turned to
internal and external stakeholders. It
started with those inside SAP, meeting
in small groups that examined the
cascade of impacts from activities
related to each of the nonfinancial
indicators. Next it engaged external
stakeholders, including academics,
financial investors, and peers, to
evaluate the key findings.
SAP’s goal is to estimate the impact
of the nonfinancial drivers of the
business on corporate objectives
and financial results. Understanding
integrated causeand- ffect chains
within the process of value creation
that characterizes the SAP business
model helps the company manage
processes and activities in a more
effective way and, most importantly,
build awareness of the heterogeneous
capitals, resources, and relation- ships
used and affected. Although this
attempt is still in progress, the search
for connectivity and quantification is
already providing tangible results.
Figure 5: Integrated Cause-and-Effect Value Chain for the BHCI at SAP
(Source: SAP “Integrated Report 2013”)
19
Earlier in 2014, while seeking to
design calculations with deeper
cause-and-effect
links
behind
them, SAP introduced two new
nonfinancial performance indi
cators related to innovation and
productivity.
employees and the health of the
SAP organizational culture, which
the company says are interrelated.
The chain in Figure 5 starts with
activities that support health at SAP,
from flexible work arrangements to
leadership development to global
health and innovation awareness
The example presented in Figure
weeks. Each of these strengthens
5 refers to the SAP Business
SAP organizational culture and helps
Health Culture Index (BHCI). This
employees manage stress, achieve
index assesses the health of SAP
work/life balance, feel empowered
in their roles, and perform at their
best. Moving from left to right, the
diagram shows the impact of these
activities. Flexibility, for example,
enhances stress resilience and work/
life balance, which leads to greater
employee engagement. Supported by
specific analysis, the report suggests
that a company culture with engaged
employees enhances SAP employer
Figure 6: Strategy and Business Model—
Integrated Performance Analysis for the BHCI
(see www.sapintegratedreport.com/2013/index.php?id=354&L=1)
ranking, helping the company attract
top talent, which spurs innovation
and ultimately boosts revenues. In
parallel, leadership development
leads to a stronger work culture,
which increases productivity as well
as employee retention, resulting in a
higher operating margin.
20
The “Integrated Report 2013” offers
readers and users the opportunity
to learn about and question SAP
works in progress with Integrated
Reporting. By visiting www.
sapintegratedreport.com/2013/
index.php? id=354&L=1, you can
learn about SAP key performance
indicators and see the connections
among them. The report offers
readers the opportunity to explore
the chains that enable intangibles to
become tangible. When you click on
one of the boxes, arrows appear and
point to other boxes that are their
connections (see Figure 6 regarding
the Business Health Culture Index).
This way, users have the potential to
learn and challenge the assumptions
underpinning the links among the
KPIs and corporate objectives (boxes
with an asterisk in Figure 6 are
corporate objectives). Significantly,
the website calls
for participation: “What do we
know about the relations between
our financial and nonfinancial
indicators? Challenging ourselves
to go beyond our assumptions, we
looked into the connections and
came up with the illustration below.
We know that we do not have all
the answers yet, so we invite your
feedback as we continue to work on
improving our performance.”
Opportunities for Management
Accountants within IR
The journey of Integrated Thinking
and Integrated Reporting starts at
the core of any organization: its
business model. Resources, activities,
output, and outcomes represent the
foundation of any business. Strategy
formulation,
action
planning,
governance, and risk management
put the company’s model for value
creation in motion. As seen from
the examples of Lawson, Inc.; Eni;
and SAP, the need to master the
connections across the multiple
drivers of the value chain puts
management accountants at the
forefront of value creation. No one
knows the business model better than
management accountants because
they have a holistic and unique
perspective of a company’s strengths
and weaknesses. For these reasons,
they will find themselves at the heart
of the drive to Integrated Reporting,
leveraging their Integrated Thinking.
Accountants and controllers need
to be prepared for that drive—they
need to be ready and equipped to
take advantage of the opportunities
to lead that will definitely flourish in
this space.
on Integrated Thinking, and
management accountants have
the opportunity to lead these new
practices, acting as designers and
leaders of a space where companies
are continuously searching for
a pragmatic balance between
competitiveness and sustainable
growth in practice. They can be
designers
because
Integrated
Thinking and Integrated Reporting
represent
an
open
platform
that requires imagining and
understanding the business model
rather than rigid compliance with
standards. They can also act as leaders
because this process needs direction
since it requires mediating the
connections and trade-offs between
the different drivers of value creation.
These opportunities are available, and
it’s up to management accountants
and finance professionals to take
advantage of them. SF
Once more, Integrated Reporting
is making the leap from promising
concept to powerful practice
throughoutthe
world.
Add
Cristiano Busco, Ph.D., is professor of accounting and integrated reporting at University of Roehampton Business School in London, U.K. Previously, he has held positions at the National University of Ireland
in Galway, Babson College, the Manchester Business School (U.K.), University of Southern California, and the University of Siena, Italy. You can reach Cristiano at [email protected]
Mark L. Frigo, CMA, CPA, Ph.D., is director of the Center for Strategy, Execution and Valuation and the Strategic Risk Management Lab in the Kellstadt Graduate School of Business and Ledger & Quill
Foundation Distinguished Professor of Strategy and Leadership in the Driehaus College of Business at DePaul University in Chicago, Ill. He also is an advisor to executive teams and boards in the areas of
innovation strategy and strategic risk management. You can reach Mark at (312) 362-8784 or [email protected]
Paolo Quattrone, Ph.D., is professor and chair of accounting, governance, and social innovation at the University of Edinburgh Business School. Before joining Edinburgh, he was professor of accounting and
management control at IE Business School, Madrid; reader in accounting at the Saïd Business School; and official student (i.e., fellow) of Christ Church at the University of Oxford. You can reach Paolo at
[email protected]
Angelo Riccaboni, Ph.D., is the rector of the University of Siena and professor of management control systems. He was visiting scholar at USC (Los Angeles), INSEAD, LSE, University of Wales at Bangor (U.K.),
Columbia Business School, and DePaul University. Angelo is a member of the Leadership Council of the UN Sustainable Development Solutions Network and chair of Med Solutions, the UN SDSN Regional
Center for the Mediterranean. You can reach Angelo at [email protected]
(This article reproduced from the Strategic Finance Journal (September 2014) with their kind permission)
21
A New Day for
Sustainability
T
he world of
sustainability is
changing dramatically,
and management
accountants need to be
Marc J. Epstein
and
Adriana Rejc Buhovac
independent inspections and to
help pay for fire safety upgrades and
some other building improvements.
Even though the companies
rated highest in sustainability
prepared.
performance generally evaluate
On April 24, 2013, the catastrophic
labor standards and examine
collapse of the Rana Plaza building
environmental performance, few
on the outskirts of Dhaka,
look at the safety standards of the
Bangladesh, killed more than
buildings their suppliers lease. Yet
1,100 garment workers who were
sustainability issues have become
producing apparel for some of
more complex. For example,
the world’s largest retailers. The
consumers want to know why
deadliest disaster in the history of
facilities such as the Rana Plaza
the garment industry triggered a
building are used to produce
chain of actions that may result in a their garments. Multinational
major shift in corporate liability in
corporations that are using
terms of
such suppliers but are failing to
supervise and manage their safety
global supply chain safety. Until
appropriately can experience
then, retailers used factory
disruption, consumer displeasure,
inspections and audits to claim their
and harm to their brand, as well
global supply chains were safe and in
as additional out-of-pocket costs
line with their business codes. Now
related to facilities they don’t own
they may also become accountable
or lease, such as mandatory repairs
for building safety where their
and renovations. The Rana Plaza
contractors have factories. The
catastrophe has forced companies
world’s largest apparel companies,
to rethink their social and financial
including Hennes & Mauritz
liabilities.
(H&M), Marks and Spencer, Inditex
(the parent of Zara), and others have What should companies do as part
already signed a far-reaching
of this process?
and legally binding safety
agreement. The plan requires
retailers to have rigorous
22
Financial professionals in particular
are increasingly being asked to
assist in measuring and improving
performance for external reporting
and for improved management
decision making, so they need to be
fully aware of the latest information
about sustainability practices.
The Corporate Sustainability
Model
For organizations, a sustainability
framework or model of social,
environmental, and economic
performance offers a powerful
opportunity to create enduring
value for multiple stakeholders.
At the same time, it challenges
managers to understand the
complex interrelationships between
social, environmental, economic,
and financial performance. We have
developed a model or framework
to aid ompanies in identifying,
measuring, and integrating social,
environmental, and economic
impacts into corporate strategy
and into management decisions to
manage those impacts successfully
and increase profitability. It explains
how various inputs and processes
affect sustainability performance
and stakeholder reactions and
drive long-term corporate financial
performance.
Our Corporate Sustainability Model
(Figure 1)
Figure 1: The Corporate Sustainability Model
describes the inputs to corporate
sustainability performance, the
actions (processes) that managers
can take to affect that performance,
and the consequences of those
actions on corporate environmental,
social, economic (outputs), and
financial performance (outcomes).
social, environmental, and economic
fabric of society, such as supporting
minority groups, decreasing noise
levels in the community, or creating
local jobs.
In addition to having an effect on
society, these activities often affect
corporate financial performance.
This typically occurs through
Inputs include the broader
various positive and negative
external context, the internal
stakeholder reactions such as
context, the business context, and
additional purchases but also
human and financial resources.
consumer protests, employee loyalty
Though the inputs sometimes
or resistance, and government
act as constraints to improved
regulations. By understanding
corporate sustainability, managers
how sustainability performance
have significant ability through
impacts stakeholders’ actions
leadership and the formulation
and how stakeholders’ actions
and implementation of various
processes—including sustainability impact organizational revenue
and cost streams, the “business
strategy, structure, actions, and
case” for sustainability becomes
systems—to affect corporate
much clearer. A clear business case
sustainability performance. The
can lead to improved resource
output of these processes is the
sustainability performance—that is, allocation decisions, more resources
the effect of corporate activity on the for sustainability programs, and
improved sustainability and
corporate financial performance.
Also, it’s easier to integrate the
information into day-to-day
operational decisions.
Linking Sustainability
Performance Drivers
It’s important to identify and
communicate the causal links
between drivers within each of
the model’s four elements (inputs,
process, outputs, and outcomes)
as well as between drivers in
different elements throughout
the organization to guide the
formulation and implementation of
sustainability strategies. The causal
linkage model of drivers, sometimes
called a strategy map, helps ensure
that all necessary actions are taken
to achieve success, that unnecessary
actions aren’t taken, and that all
employees understand their critical
roles (see Figure 2).
23
Figure 2: Causality of Sustainability
Performance Drivers
ultimately may lead to lower costs,
increased revenues, and increased
profit (financial outcomes) for the
company.
Companies also may consider
sustainability performance an
outcome and, in this case, would see
improved community relations as a
distinctly separate successful result.
Many companies have determined
boundary conditions that set limits
on poor sustainability behavior
regardless of the financial payoff.
For example, The Home Depot sets
boundary standards on conditions
at its suppliers’ factories and notifies
the suppliers about them. The
company never knowingly chooses
to deal with a supplier that employs
child labor. When The HomeDepot
found that its key supplier of tarps
was violating these boundary
standards, it cancelled further orders
from this supplier and found other
sources. In doing this, the company
accepted large financial losses,
both in costs and revenue, because
alternative suppliers couldn’t deliver
the quality and volume of the
original supplier.
A clear understanding of the
causal relationships underlying the
primary drivers of value is one of
the most important determinants
of the model’s effectiveness. For
example, Figure 2 illustrates
that in a particular regulatory
environment or industry (input),
a company may choose to develop
a sustainability strategy, improve
technology, and increase product
inspections (process). These
actions should result in improved
sustainabilityperformance (output),
such as improved product safety
24
All four elements of the Corporate
Sustainability Model connect in a
chain of cause and effect. In other
words, one category of measurement
and improved employee satisfaction. drives performance in the next. To
Improved productsafety may lead to closely monitor these cause-andinternational awards, and employee effect relationships, metrics must be
satisfaction may lead to increased
developed.
volunteer activities, which will help
improve community relations. These Sustainability Performance Metrics
outputs may improve the company’s Specific and appropriate
sustainability ratings. Good
performance measures that
sustainability performance drives
reflect the sustainability strategy
improved stakeholder reactions
are essential for monitoring key
(output), such as reduced lawsuits,
performance drivers (inputs and
fines, and penalties; reduced
processes) and assessing whether
employee turnover; improved
the implementation of the sustain
reputation; and increased consumer - ability strategy is achieving its
purchases. These improvements
stated objectives (outputs) and
thus contributing to the longterm success of thecorporation
(outcomes). Without appropriate
metrics, companies often waste
resources on projects or don’t invest
when they should because they can’t
effectively evaluate the potential
payoffs of sustainability initiatives.
Every component of the Corporate
Sustainability Model should
be associated with specific
performance indicators. Impacts
related to sustainability strategies
can be translated into indicators
of company performance in
quantitative or financial terms.
The inputs, processes, and outputs
will be measured by evaluating
various dimensions of strategies,
processes, leadership, and other
elements and then will be reported
quantitatively. They will be linked
and converted into monetary terms
as the evaluation of the impacts
is summarized in the outcomes
of sustainability performance and
financial performance. For example,
when packaging is reduced, both
financial and environmental costs
are reduced, and these can be
measured in monetary terms. Table
1 provides examples of measures
for inputs, processes, outputs, and
outcomes.
Both leading and lagging indicators
should be included as part of the
metrics. Lagging indicators, like
most financial measures, record the
effects or results of prior actions.
Nonfinancial indicators like product
quality and customer satisfaction are
included because they are presumed
to be predictors of future financial
performance and, thus, leading
indicators. Investments in fire
safety upgrades are an example of a
leading indicator of the percentage
of suppliers certified. The rate of
work-related injury (sustainability
performance element) is a lagging measure of health and safety program
efficiency (sustainability action element) and a leading indicator of em ployee satisfaction (stakeholder reaction element).
Costs and benefits associated with sustainability strat - egy must be
measured and incorporated into management decisions. As mentioned
earlier, corporate financial
Table 1: The Corporate Sustainability Model:
Examples of Metrics for Sustainability
INPUTS PERFORMANCE MEASURES
Broader context • Existence of nondiscrimination laws
• Percentage of local vs. global standards
Internal context • Social audit average score
• Number of corporate code of conduct
violations
Business context • Average scores of competitors’ social
audits
• Percentage of competitors’ production
locations in locations with high political
and social risks
Human and financial resources • Funds committed for research and
development (R&D) on effective energy
conservation efforts
• Cost of social training per employee
PROCESSES PERFORMANCE MEASURES
Leadership • Average time of top management’s
meetings devoted to labor issues
• Number of sustainability-related criteria
for CEO/board evaluation
Sustainability strategy Sustainability structure • Planned percentage or number of
suppliers certified for sustainability
standards
• Planned increase in the number of
facilities with screening procedures
against the use of child labor
• Number of senior managers with social
and environmental responsibilities
• Percentage compliance with industry
standards of corporate governance
Sustainability systems, programs,
and actions • Number of safety improvement projects
• Number of facilities with social/
environmental performance evaluation
systems in place
25
OUTPUTS Social/environmental
performance
PERFORMANCE MEASURES
Companies should also include
other impacts, such as projected
• Percentage of suppliers certified/audited costs for compliance with legislation
for sustainability compliance
that’s on the horizon but not yet
• Average frequency of audits
enacted. Though these costs may not
• Noise levels in community
affect current financial performance,
• Number of supplier violations
companies must make current
decisions with these future costs in
Stakeholder reactions • Number of consumer complaints
mind. For example, some local and
• Results of surveys of stakeholders
national governments set minimum
regarding satisfaction with disclosures
requirements for labor practices. The
and meeting their informational needs
2013 Accord on Fire and Building
• Customer satisfaction survey scores
Safety in Bangladesh im - poses
• Percentage of favorable vs. unfavorable
independent safety inspections at
press mentions
factories and public reporting of
the results of these inspections to
OUTCOMES PERFORMANCE MEASURES
all signatories. Such regulations
Long-term corporate financial
attach market implications to the
performance • Income from sales of cause-related
social, environmental, and economic
marketing affiliations
• Increased sales from improved reputation impacts and make the cost of these
impacts clearer.
• Social/environmental costs as a
percentage of sales
Managing Sustainability
• Cost of fines and penalties
Challenges and Risks
performance can be an outcome
of sustainability performance.
Benefits often come from positive
and improved relations with
regulators and other stakeholders.
For example, regulators may
ease the permitting process for
companies that have consistently
demonstrated a strong sustainability
performance record, thus reducing
the time and investment required
to bring new products and services
to market. Better access to capital is
another benefit when the financial
community pays greater attention to
social, environmental, and economic
performance and gives preference to
companies with favorable records.
On the other hand, investor
reactions to negative sustain -ability
events increase as more investors
understand what these events mean
for a company. For example, the
2010 explosion at Massey Energy’s
26
mine in Montcoal, W.Va., that killed
29 miners caused a major stock price
reaction to poor safety, and Massey’s
financial performance deteriorated
rapidly.
Good sustainability actions also
can lead to cost reductions through
improved efficiency and may create
a positive reaction from customers
who benefit from these savings
or product improvements or who
value the social,environmental,
and economic contribution. They
may contribute positively to a
company’s reputation for excellent
sustainability performance and
to shareholder value. And they
may send a positive message to
financial analysts and investors
about the company’s manufacturing
performance. These actions
can impact both sustainability
performance and financial
performance simultaneously.
With the variety and intensity of
global risks increasing rapidly,
a common challenge is how to
integrate sustainability issues such
as global supply chain safety, child
labor practices, and environmental
pollution into management
decisions. Some businesses are
prone to social, environmental,
and economic risks because of
the location of their facilities,
their product and customer
characteristics, the nature of their
employment relationships, or
industry characteristics. Well-known
examples include the notorious
social, environmental, or political
risks associated with industries such
as apparel, footwear, toys, mining,
and chemicals. Hewlett-Packard
(HP), for example, is one of the
6,000 issuers directly affected by the
Securities & Exchange Commission’s
(SEC) Conflict Minerals Rule
requiring U.S. public companies to
trace the conflict minerals (gold,
tantalum, tin, and tungsten) in their
supply chains. HP estimates that
about 1,000 suppliers ultimately
provide a product to HP that
may contain one of the conflict
minerals originating at mines run
by warlords. Each supplier is asked
to do its part in the due diligence
process required by the rule.
Conducting a risk analysis is one
method that will help organizations
measure inputs and develop
processes tomitigate any negative
effects that taking a risk might have
on the company. After identifying
all possible social, environmental,
economic, and political issues that
could affect the organization, a
company must calculate the benefits
and the potential costs associated
with each issue, including reputation
costs, to assess its potential impact.
This enables managers to integrate
the project- or company-related
social, environmental, economic
(sus- tainability), and political risks
into return on investment (ROI)
calculations.
The Role of Management Accountants
in Implementing Sustainability
Management accountants play a critical role in implementing
sustainability. With their knowledge and expertise they can design
measurement systems and tools and provide information for decision
making and reporting of sustainability performance. In addition, they
can provide guidance and training in how to use measurement systems
and make informed decisions.
Nike’s Considered Index, for example, is an evaluation system for
footwear and apparel that enables the product-creation teams to easily
compare materials and make informed, sustainable choices during the
design phase. The Considered Index measures the product’s predicted
environmental impacts (including energy use, GHG (greenhouse gas)
emissions, water use, land use, waste and chemical use) and consolidates
that information with the major manufacturing environmental impacts
(waste and solvents) into a decision-making tool. Nike provides the
product creation teams with extensive training in how to use the
Considered Index and on the importance of focusing on the sustainability
of materials.
PUMA, one of the world’s leading sport-lifestyle companies, has
developed an important approach to value and reports the environmental
externalities caused by the corporation and its entire supply chain.
Called E P&L (Environmental Profit and Loss), it measures and values
both reductions in ecosystem capac - ity and increases in environmental
impacts that occur as a result of PUMA’s operational and supply chain
activities. E P&L sets out in monetary terms the changes in human
welfare that result from PUMA’s environmental impacts. The impact on
climate change, for instance, was measured by tons of GHG emissions,
and these were monetized through an estimate of the so-called “Social
Cost of Carbon (SCC) to PUMA” 2010 operational and supply chain
emissions. Estimates of the SCC look to value the damage resulting from
current and future climate change (such as reduced crop yields, damage
to infrastructure, or increased incidents of extreme weather) attributable
to each ton of carbon dioxide equivalent (CO2e),
Rio Tinto, a leading international
mining group headquartered in
the U.K., developed a screening
process to understand the social,
environmental, and economic
implications of its new investments
so it can optimize benefits and
reduce negative impacts for local
communities and for regional and
national economies. Identifying
potential risks and opportunities
as well as evaluating social impact
assessment is part of this screening
process. For example, Rio Tinto
integrates closure planning
throughout an asset’s life cycle
from the earliest stages of project
development. This planning work
includes seeking sustainable and
beneficial uses for the land when an
operation eventually closes and aims
to minimize financial, social, and
environmental risks after closure.
Being proactive about supplier
systems can also help companies
face difficult challenges. Benefits
of socially, environmentally, and
economically sensitive purchasing
systems include easier compliance
with regulations, reduced risks of
accidents, reduced liability, lower
health and safety costs, improved
image, and more. Companies have
developed several methods of
instituting sustainable purchasing
initiatives into their systems,
including written policies and
communication, questionnaires to
screen new suppliers or evaluate
existing suppliers, audits to ensure
that minimum standards are
met, meetings with suppliers to
communicate expectations to them
and share information, training and
technical assistance to help suppliers
develop sustainability management
systems, and collaborative
research and development to help
develop more innovative socially,
environmentally, and economically
friendly products.
27
To do business with L’Oréal, for
example, suppliers’ operations
must meet the same standards as
L’Oréal’s own sites. As a signatory
of the United Nations Global
Compact, L’Oréal expects its
suppliers to adhere to the basic
conventions of the International
Labour Organization (ILO) and
to local legislation, especially in
matters concerning minimum wage,
working time, and occupational
health and safety. L’Oréal pays for
social audits carried out on its behalf
by independent external companies
on the suppliers’ premises, thus
making close monitoring of their
adherence possible. Audits also
are carried out systematically on
subcontractors, wherever in the
world they may be based, as well
as on suppliers of raw materials,
packaging, and point-of-sale
advertising. L’Oréal also sources
responsibly by standardizing its
point-of-sale and promotional
displays, removing or replacing
Polyvinyl Chloride (PVC) where
possible, and using sustainably
sourced paper and cardboard.
Profiting from Sustainability
Opportunities
standards, or consumer protests.
This requires more innovation
and entrepreneurship from
Our Corporate Sustainability Model leaders in sustainability and more
describes the inputs and processes
sensitivity to sustainability issues by
(drivers of success) and the outputs innovation and R&D, business unit,
and outcomes (payoffs and measures andfunctional leaders.
of success) of investments in
sustainability and provides a way to For example, Nike, the leading
analyze the social, environmental,
designer, marketer, and distributor
and economic impacts of corporate of athletic products and clothing,
products, services, processes, and
created predictive tools for designers
other activities. By paying more
(Considered Index®) that help them
attention to the inputs and processes focus on environmental issues
of sustainability, companies
rather than rely on measuring
can see how both financial and
tools at the end of the innovation
sustainability performance can
process. This use of environmentally
be improved. Companies can
preferred materials is a “win” for
use the model to mitigate risks
the environment, but that use also
and prevent disasters such as the
increases the costs (“lose” for the
Rana Plaza in Bangladesh, and
company). Yet by innovatively
they also can use it to think about
reducing waste, Nike also reduces
opportunities for innovation to
costs (“win-win”). By using
improve both sustainability and
innovation, Nike tries to balance
financial performance. Some
the costs and increase long-term
companies have already recognized financial performance. This can
the significant value that can be
be done because there’s a keen
added in business decisions by the
awareness of anticipated stake identification and measurement of
holder reactions at Nike, in both
social, environmental, and economic the near and long term, which the
impacts. Sustainability initiatives can company has incorporated into
result in financial payoffs, such as
its sustain - ability strategy and
In 2010, L’Oréal assessed working
reduced operating costs (including
organizational culture. The CEO
conditions and labor standards at
and other company leaders engage
more than 560 supplier sites through lower litigation costs), increased
revenues, lower administrative
in sustainability implementation by
its social audit program.
costs, lower capital costs, and stock
providing support and guidance.
Also, the high volume of purchases
market premiums. Customer-related
L’Oréal makes gives it considerable
payoffs include increased customer Similarly, when P&G (Procter &
Gamble), one of the world’s leading
economic and social leverage.
satisfaction, product innovation,
consumer products companies,
This allowed the group to launch
increased market share, improved
designs a technology system, it also
its Solidarity Sourcing program
reputation, and new market
in 2010. Neither a sponsorship
opportunities. Other payoffs include has to deliver service at a low cost
program nor a charity, it makes
operational and organizational ones, and be environmentally friendly.
it possible to open up the
such as process innovation, reduced Innovation is a critical driver of
purchasing process to suppliers
cycle times, increased learning, and these processes. This includes, for
that have better access to major
example, the Global Asset Recovery
employee satisfaction.
customers and those that employ
Purchases (GARP) program, which
But companies can become leaders
persons generally excluded from
looks specifically at finding value
in corporate sustainability only by
employment (handicapped or
in waste (“winwin”). A desktop
creating proactive strategies that
socially disadvantaged persons,
application allows the GARP team
create opportunities and increased
people in rural communities, and
and site waste managers to extract
so on). This approach is followed by profits rather than using reactive
and visualize the data through
strategies that only respond to
existing L’Oréal suppliers in their
simple graphs and charts, helping
government regulations industry
own purchasing policies.
28
them identify sites and processes
that generate the most waste (and
with the greatest opportunity to
reduce disposal costs). With this
application, plant managers have the
information they need to justify the
allocation of resources to work on
specific waste projects that would
improve the environmental and
economic performance of their site.
capacity availability, and quality.
These decisions help determine a
company’s competitive stance and
long-term positioning. Corporations
commonly use techniques such as
discounted cash flow (DCF) analysis
to evaluate general investment proj
- ects. Such techniques incorporate
both the time value of money and
the need to earn competitive returns
on capital investments. But they
For example, scrap finished product often don’t use DCF analysis in
and product components from
sustainability projects. One of the
beauty care plants in China are
primary reasons is the difficulty
being repurposed into leather care
associated with the evaluation of
products, and mascara by-product is social, environmental, and economic
used for tire shine.
costs and benefits.
other environmental impacts for
which it is responsible. They should
determine the goods and services
that are potentially available with
these assets since many have a
significant market value, and then
specify the potential value of these
environmental assets.
Identifying the full range of an
investment’s sustainability impacts
is an important step toward better
management decision making.
Once identified, the impact of these
costs on the company’s activities,
processes, products, and services
can be analyzed using available
tools. A number of companies, such
Another inventive example is Apple’s The role of management accountants as Sony Ericsson and Bristol- Myers
data center in North Carolina that
Squibb, have begun the transition to
here is critical. Analyses of risks,
employs an innovative cooling
costs, and benefits related to social, improved social and environmental
system that reuses water 35 times,
cost accounting in two ways: by
environmental, and economic
resulting in a 20% reduction in
clarifying their understanding of
investment decisions are more
overall water consumption. The
internal social and environmental
complex because of the nature and
data center also uses a rainwatercosts through activity-based costing
timing of social, environmental,
supplied system for onsite landscape and economic costs and benefits.
(ABC) and by placing a value on
irrigation, further reducing overall
significant external costs through
Future risks and benefits, such as a
water consumption.By installing
life-cycle costing (LCC) or other
changing climate of sustainability
sophisticated irrigation systems that awareness, changing technologies,
approaches. Baxter International, for
monitor local weather conditions
changing costs of technology, future example, has chosen to use full cost
and soil moisture, Apple is able
accounting to include a broader set
government regulations, long time
to adjust its landscape irrigation
horizons, and potential stakeholder of external costs along with future
schedule and avoid unnecessary
costs into management decision
pressures, increase the complexity
watering, resulting in a 40%
making.
of the capital investment decisionreduction in landscape watering.
making process. Incorporating cost
Until sustainability programs are
Often it’s the ability to identify and
management information derived
manage risks that others can’t that
using full social and environmental analyzed and examined with the
same rigor as other programs,
leads to innovation and market
cost accounting or a life-cycle
executives will continue to struggle
success.
assessment can help managers
to justify these investments and
The Critical Role of Financial and identify and quantify impacts
make appropriate management
related to both current and future
Accounting Experts
decisions. Only through the
operations and current and future
identification, measurement, and
Few business decisions impact a
risks. To improve decision making,
management of sustainability
company’s long-term capabilities
managers should identify and
impacts can social, environmental,
and operational strategies as much
inventory their natural resources
as capitalinvestment decisions
and environmental assets, including economic, and financial
because they influence innovation,
all the land and water owned by the performance be improved and value
created. SF
productivity, costs, revenues,
organization and the pollution or
Note: This article is based on and draws from the 2014 book by Marc J. Epstein and Adriana Rejc Buhovac: Making Sustainability Work: Best Practices in Managing and Measuring Corporate Social,
Environmental, and Economic Impacts—Second Edition, published by Greenleaf Publishing Limited, Sheffield, England, and Berrett-Koehler Publishers, Inc., San Francisco, Calif., 2014.
Marc J. Epstein, Ph.D., is Distinguished Research Professor of Management at Jones Graduate School of Business at Rice University in Houston, Texas. He is also a member of IMA®. You can reach Marc at
[email protected]
Adriana Rejc Buhovac, Ph.D., is an associate professor of management on the Faculty of Economics at the University of Ljubljana in Slovenia. You can reach Adriana at [email protected]
(This article reproduced from the Strategic Finance Journal (July 2014) with their kind permission)
29
Information
Security
K.L.D.Mendis
T
Technological Revolution
he world has seen
vast advancements
taking place in new
technologies and
the pace of change
is on acceleration. Technological
Revolutions taken place at different
times have immensely contributed
to transform every conceivable
fact of human lives. It is a process
that dates back to prehistoric
times and continues to impact
human existence. Industrial
Revolution that took place in 18th
and 19th Centuries marks one of
the important milestones in this
process.
FCA, ACMA
Director/Chief Executive Officer
Tritel Services (Pvt) Ltfd
Importance of Data, Information
& Knowledge
Firstly it is necessary to distinguish
between information and data as
data management and information
management have become essential
functions in managing business
today.
Data
Data refers to plain facts and
statistics. Businesses collect data
on a wide range of facts both
internal and external to business to
measure and record various business
activities.
Raw data or unprocessed data refers
to collection of numbers and facts
and could be presented in forms
Technological Revolution could be
broadly referred to as the sum total such as tabular, graphs, charts etc.
Data plays an important role in
of striking, dramatic and sweeping
generating information necessary
changes brought about by the
for business decision making. Data
introduction of new technologies
with a diversity of impact on human needs to be processed to generate
information which is vital for
lives. Following the industrial
informed decision making.
revolution which started in Great
Britain in 18th Century, the most
Processing of data is a tiered process
striking juncture of the evolutionary where processing takes place in
process of Technological Revolution stages. Processed data of one stage
is the Information Revolution which forms the data for the succeeding
followed the Digital Revolution
stage until final stage is reached
that started in 1950 with the
where data is transformed in to
introduction of first electronic
processed meaningful information
computers.
that forms the basis of knowledge.
30
Information
If data is the least level of
abstraction, information is the next
level. There could be multiple stages
of abstraction when it comes to
information as information at one
particular stage may serve as the
data for the stage that immediately
succeeds in processing.
Information refers to processed
data with specific characteristics.
Thus information is date which
is accurate, timely, and specific
and organized for an intended
purpose and presented in a context
to confer meaning and relevance
which enables enhancement of
understanding and reduction of
uncertainty.
Importance of Data & Information
Management
Data and information could be
considered as valuable economic
resources that any organization
possesses. Data management
thus assumes part and parcel of
important business functions as
success or otherwise of an entity
depends to great extent on the
efficient utilisation of its resources
Functioning of a business entity
entails exchanging of information
among various interconnected
segments of operation as well
as personnel at different levels
of hierarchy. Thus collecting,
processing, exchanging, analyzing,
and reviewing of information
subjected to varying degrees of
processing to suit a whole gamut
of requirements arising from wide
variety of users consume significant
amount of organisational time.
Therefore information serves to
a great extent as the rationale on
which inter-personnel and interdivisional relationships are defined.
In essence information serves as the
underlying cause that meaningfully
keeps human and other resources
of an organization interlocked in
the course of operations to achieve
business goals.
Information management therefore
is pivotal for organizational success,
as success of a business depends
on achievement of goals which
is determined by sound decision
making mainly enabled by timely
availability of accurate & useful
information.
In this context it is obvious that
Data Management, which could be
defined as “A discipline that focuses
on proper generation, storage and
retrieval of data” is inseparably
linked to and forms an integral part
of Information Management.
competitors in order to achieve
strategic goals would be very useful
In this situation information
in devising an effective strategy to
could no longer be treated as a
beat competition. Thus information
source of competitive edge but
on competition, products, skills,
an indispensable necessity to face
customer behavior, as well as cost
competition. Businesses have
factors, margins etc would become
realized that what they spend on
Information Technology is no longer very relevant. Therefore timely
availability of right information
an expense, but an integral part of
could certainly be the differentiator
its capital investment. Investment
in achieving strategic aims.
in Information Technology offers
returns if it is managed strategically
Importance of Information
to further organisational goals.
Resource Management IRM)
Business organisations have
Information Resource Management
over the years developed and
(IRM) defines how and organization
mastered strategies to maximize
could accomplish business goals
the potential of material, human
using different information
and financial resources with a
resources in order to define its
view to realizing organizational
objectives. In this endeavour,
short term strategies. Information
information plays an indispensable
Resource Management includes the
role and impacts all aspects of
management of all kinds of data,
any organization encompassing,
numbers, texts, images and sounds
marketing, distribution, finance,
available in making the proper
human resource management, and
strategy at a certain moment. In this
office automation and operation
regard managers are responsible for
management. For example
the provisions of timely, accurate
information on what should be the
and appropriate information
best strategy to beat the competition
concerning the business to aid
or what skills would offer edge over
effective decision making.
pace of incessant change.
Information – a strategic resource
Information is part and parcel of the
economic resources belong to any
organization. Information too has
value although it may not be easily
quantifiable.
Information is crucially important
to business strategy as competition
is getting stronger by the day
and business environment could
witness new competitors emerging
every now and then. Moreover,
customer expectations have become
dynamic in this globalised business
environment and subject to rapid
The IRM wheel
31
What is depicted in the figure
above is how information impacts
marketing, distribution, production,
operations management,
management economics, finance,
public policy, industry dynamics,
office automation, human resource
management in an organisation.
Information and communication
technology system in an
organisaiton provides a continuous
flow of information across a whole
gamut of functional areas which
the organization is required to use
in forming its corporate strategy.
Management of business activities
and operation and decision making
would have therefore to be in line
with the agreed strategy. Hence
more and more information and its
optimal use is of great importance
for decision makers to ensure
effective and well informed process
of decision making for the better of
the organisation.
Accurate, timely and relevant
information enables sound business
decisions to be made, which in turn
ensure less risks and higher better
results. For this reason information
could be considered an important
resource which should be managed
appropriately in order to enhance
the chances of success of a given
business entity.
Benefits of having a Sound System
of Information Technology
ICT revolution and rapidly
advancing technology are making
the world smaller and smaller by
the day. Today people are living in
a global village and vast advances
made by ICT technology has made
anything from any part of the world
accessible in split second time
at the press of button, possible.
Businesses in this context have
32
become globalised and are operating
in dynamic and highly competitive
environment as never before, where
for management to be effective it
is important to keep tabs on up to
minute developments in a whole
gamut internal as well as external
factors impacting sustainability
and growth of business. This way
management is able to keep track
of day to day or even minute by
minute changes taking place in the
environment which is changing
very fast in order to efficiently
and effectively respond to quick
changes. This could be achieved
by developing efficient and helpful
short term strategies to grapple with
oncoming issues and challenges.
In essence all such planning and
execution of optimal strategies
could be possible only if an efficient
system of Information Resource
management is in place to provide
accurate, relevant and up to minute
information as and when needed.
As a consequence, prices of
the products/ services could be
substantially reduced permitting
achievement of higher sales and
improved profits. Enhancement of
sales necessitates higher volumes of
production which would result in
economies of scale permitting leaner
cost structure and better profits.
By and large this shows that,
assimilation of information by
different layers of management leads
to effectiveness and better results in
design and execution of competitive
business strategy to achieve strategic
aims.
Following are some of the important
aspects concerning information and
its use in an organization:
• Different companies have a wide
variety of needs with regard to
what information to be used
for management purposes as
information impacts different
companies in different ways.
Hence management should
determine what information
is required and take proper
measures to assimilate them
using appropriate technology
Very often short term and tactical
strategies are designed to increase
profits by jacking up sales to achieve
short term financial targets. In
order to increase revenue measures
are needed to increase production
and address all other requirements
• It is vital that coordination
needed to boost it. In this regard
and control of information is
an efficient system of IRM would
established
ensure timely provision of crucial
information to enable well informed • Organisation should be educated
decisions to be made then and there.
on the critical importance
Moreover, automation of business
of information in forming
operations would enable elimination
competitive strategies
of delays and mistakes associated
with manual work whilst helping
• Decisions about building
to reduce unnecessary manpower
or buying of appropriate
costs. Whilst elimination of manual
information technologies
work may facilitate achievement
should be precisely made and
of deadlines it would also lead to
information about them should
reduction in overall cost structure
be collected
making products more and more
competitive.
• Different approaches should be
taken in using information in
different moments according to
the needs of the company
Information and strategic
management
The proper use of right information
is critical for existence and success
in competition. Integration of
telecommunications, data processing
and office automation has enabled
the companies to achieve better
competitive results. Perceiving,
development and application of
IT capabilities and their control
and coordination are factors
which identify the effective use of
information. Information derives
value from the results of its use. It
is an exclusively important resource
nowadays since entrepreneurial
success is directly related to efficient
use of right information. Availability
of critical information at the
moment opportune moment could
make a real difference. For example,
buying or selling some product at
the right price at the right time may
result in enormous financial gains,
only if right information is available
to make the correct decision.
Every organization must have
strategic goals. In order to achieve
strategic aims it is necessary for
any organisation to chart a course
of action which would guide it in
a strategic direction. This process
requires strategic management
to keep track of "where the
organization is heading?, and "if it
is going where it should be going?
Consideration of these questions
is essential, given the complexities,
challenges and uncertainties found
in the business environment.
The process of strategic management
involves: Where does the
organization stand relative to set
goals? Given the external trends,
where does the organization want
to be within a set time horizon?
What specific actions must be
implemented to achieve the goals
strategic goals?
Information plays an indispensable
role in this process. As an integral
part of the strategic planning
process information is gathered
in formulating a business
plan defining specific action
areas with deserving scales of
priority and target timeframes for
implementation with appropriate
allocation of resources to ensure
that organization could forge
ahead in the desired direction.
Explicit attention must be focused
on on-going developments, future
potential, risks and challenges and
changing nature and scope of the
industry, together with in house
competencies.
Using the information, situational
analyses like SWOT analysis
(Strengths, Weaknesses,
Opportunities and Threats), and a
portfolio analysis could be carried
out to determine the best mix of
business, products and services
whilst appraising internal strengths,
weaknesses as well as external
opportunities and threats that would
have to be strategically managed.
This would enable formulation of an
optimal strategy defined at different
levels of hierarchy, from corporate,
business to functional based on
information and its interpretation.
Information, as one of the key
drivers of Knowledge-basedEconomy
Knowledge Based Economy is the
term coined to conceptualise the
latest stage of development in the
global economic restructuring in
the context of the rapid trend of
globalization. Continual process
of transformation of the global
economic model over centuries has
witnessed radical changes taking
from the primitive days of hunting
to agriculture and industrialisation.
In the evolving Neo Global
Economic Order OECDs countries
are increasingly moving towards
knowledge based economic model
where knowledge is increasingly
recognized as the driver of
productivity and economic growth.
In this context greater emphasis
as never before is placed on
information, technology and
learning as factors driving economic
performance.
In the knowledge based economic
model, knowledge is considered
as the primary economic resource
which derives economic value.
Information Technology wields
enormous influence across the
board covering all economic
activity. Application of Information
Technology Networks throughout
the economic institutions and
processes leads to acceleration of
globalization.
Information Society
Transition of the Industrial
Economic Model to Knowledge
Based Economic Model leads to
formation of the Post-Industrial
Society termed as Information
Society. Creation, Distribution,
Integration, Manipulation
information using continually
advancing Information Technology
in economic, social, political, as
33
well as cultural activities practically
encompassing every conceivable
aspect of human involvement would
be the dominant characteristic
of the Information Society. Thus
Information society would drive
economic growth by creatively and
strategically using information
through advanced Information
Technology to gain competitive
advantage in global commerce in
the context of accelerated pace of
globalization.
Information Security
sites in Iran, including a uraniumenrichment plant. This worm was
an unprecedentedly masterful and
malicious and compromised the
programmable logic controllers
which led to destruction of
centrifuges. (Iran has not confirmed
reports that Stuxnet destroyed
some of its centrifuges.) Moreover,
another targeted attack against
a public corporation led to a
mammoth loss of US $ 66 Million as
a consequence.
This does not mean that Malware
attacks are going to be successful
Information is the single most
all the time. A well prepared quick
critically important economic
response measures could effectively
resource in the evolving information minimize impact and avoid harmful
society throughout the world,
damage.
which is the counterpart of the Neo
With a view to preparing an effective
Global Economic Order, where
“Industrialised Economic Model” is defense against malware attacks,
organisations must understand how
in transition to “knowledge Based
attacks could progress and design
Economic Model”.
and implement effective counter
In this context integrity, accuracy
security strategies and determine
and dependability of Information
who will handle which action
cannot be over emphasized. This
to safeguard systems. It is also
makes Information Security ‘Sine
important that defense actions are
Qua Non”.
practiced and refined on an ongoing basis.
Understanding the Gravity of
Attacks
Some of the well known malware
incidents have revealed how costly
and damaging cyber attacks could
be. Leading computer security firms
spend days and nights battling the
most insidious digital weapons ever,
capable of crippling water supplies,
power plants, banks, and the very
infrastructure that once seemed
invulnerable to attack.
Recognition of such threats
exploded in June 2010 with the
discovery of Stuxnet, a 500-kilobyte
computer worm that infected the
software of at least 14 industrial
34
activity are kept for forensic analysis
if necessary. Also taking backups on
a regular basis is helpful to ensure
that damaged systems could be
restored to a normal working state.
Sufficient safeguards against cyber
attacks would significantly reduce
the possibility of cyber attacks
succeeding to cause harm. Hence
it is always important to plan
for major incidents and prepare
accordingly in order to reduce
potential tgreats to business thereby
reducing harm and accompanying
losses whilst minimizing recovery
time.
Preparing for incidents
Organizations anticipate cyber
threats and prepare accordingly.
In practice, such attacks are rare.
However, by keeping abreast of latest
attacks and attacker techniques,
organizations can verify whether
their systems are capable of
detecting and defending against
such threats.
Preparation process should ensure
that when an attack occurs, it is
rapidly detected. Organizations
should capture and record all
Protecting against attacks
incidents minor or otherwise so
that the attacks that require speedy
Most malware attacks could be
responses are quickly identified
prevented by implementing basic
and escalated. To make this
information security measures.
Department of Defense of Australia action effective, it is important to
determine the escalation criterion
has found that implementing four
and mechanism by which a detected
mitigation strategies was adequate
incident will activate a timely
to prevent 85% of the attacks.
British Government has advised that response plan.
focusing on 10 key areas is sufficient
to counter most of the cyber threats. The first step involves assessment
of the situation to be followed by
actions to prevent the attack from
In preparing to defend against
spreading to affect more systems
attacks an organization should
and to prevent occurrence of further
ensure that network traffic and
harm. Systems that have been
systems are scanned for malware
infected will need to be isolated
and logs of system and network
to contain the attack. Systems as
yet uninfected may need to be
temporarily disabled to prevent the
attack from spreading internally,
and network access may have to be
curtailed
Following are the Phases of
response in an incidence of cyber
attack.
•
•
•
•
•
Preparation
Detection
Response’
Recovery
Review
In case of an attack, above actions
would impact many users of
systems and it is important that
consideration be given to the need
to main communication with staff to
ensure that they are kept up to date
on the progress of remedial actions.
Also important is to carry out
forensic analysis to ascertain if data
has been compromised and how
attackers penetrated the systems.
Areas of vulnerability exploited
by the attackers would have to be
identified quickly in order to take
defensive measures to prevent
further attacks. Detail of forensic
analysis would have to be preserved
for future reference and also in
identifying the attackers.
Each incident should be
subsequently reviewed to
identify procedural loopholes
and areas where systems worked
as expected and planned. This
would demonstrate areas where
existing practices are lacking
and improvements are necessary.
Restoration phase should be used
a future guide to learn from the
system weaknesses and inadequacies
of defense mechanisms in order to
improve the security posture of the
organisation.
Restoration of systems back to
pre-infection state stakes place
during recovery phase. Availability
of backups of the affected systems
would greatly facilitate speedy
restoration.
35
The Use of Information and
Communication Technology in
Microfinance
Dimuthu Sarathchandra
MSc in MIS(UK), BSc in B.A(USA), AA in
Econ(USA) Project Coordinator
Alliance Finance Co. PLC
History and Evolution of
Microfinance
T
he term microfinance
refers to the provision
of a broad range of
financial services such
as deposits, loans,
payment services, money transfers,
and insurance to the poor and low
income households and micro
enterprises. (ADB, 2000)
specific microfinance institutions (MFIs), co-operative societies, local and
international non-governmental organizations (NGOs), commercial banks,
development banks, finance companies and leasing companies.
MFI Type
No of outlets
LSBs
RDBs (6)
215 branches
SANASA Bank (1) 36 branches
LCBs and Registered Finance Companies1,200
Samrudhi Bank Societies
1,038 societies
Cooperatives1,684
Sri Lanka’s Microfinance (MF)
CRBs and Women Development cooperatives 3,794
origins dates back to early 1900s
SANASA/TCCS
active societies
when the British Government
passed legislation to set up thrift and MFIs (NGOs/companies)2,500
credit co-operative societies (TCCS). Total 10,467
The operations of TCSS were to
Source: South Asia Micro-entrepreneurs Network
find the inputs and distribute the
products, while these societies were http://www.samn.eu/index.php?q=microfinance-srilanka
dominated by landlords and village
headmen.
Information and communication
new inventions. However as the
technology (ICT) in Micro Finance times evolved the computers and
After the independence in 1948, the
Information Technology became
government concentrated largely
Since the inception of the Micro
increasingly accessible to every part
on agriculture credit, particularly
Finance concept the involvement of of the world. While ICT has enabled
for paddy cultivation. The credit
Information and Communication
businesses to streamline their
facilities were granted mainly
Technology (ICT) had been
businesses to become more efficient
through the two state banks, the
minimal till the recent times. When and profitable.
Bank of Ceylon and Peoples Bank
the Information Age came to the
on a subsidized rate and loans were
fore in the late 1980s with the
The involvement of ICT to
written off in many instances due to
social introduction of the internet
Microfinance has taken longer than
political pressures.
and computers, the use of such
other industries, understandably
technology was centered towards the with the lower IT literacy among the
Currently, there is a wide range of
more wealthy countries, individuals customer base and the reluctance
institutions which are involved in
and businesses due to the high
and inability to spend high amounts
providing microfinance services to
price involved in accessing those
Microfinance Institutions (MFIs).
low income groups. These include
36
However with the Microfinance
industry maturing ICT has also
become a driving force among
the Microfinance Institutions.
As the industry matures, MFIs
face an increasingly competitive
environment forcing them to
balance the dual goals of outreach
and sustainability. Interestingly, ICT
may be both the instigator of this
new environment and the potential
solution to MFI survivability.
There has been an explosive
interest over the past five years
in promoting the potential of
information and communication
technology solutions to augment the
delivery of microfinance services
to low -income clients. The key
promise of such technologies is
believed to lie in their potential
to reduce transaction costs for
the client and provider. Even the
best performing microfinance
institutions (MFIs), many of which
are in India, have operating costs/
asset ratios of >10%, compared to
the 5% corresponding ratio for
commercial banks (Ivatury,2006).
Any possibility of bringing this ratio
down through greater efficiencies in
delivery and operations is therefore
very attractive to microfinance
providers. At the same time, there
is an underlying assumption that
by lowering delivery costs, such
interventions will result in lower
interest rates and larger scale
outreach of financial services to
poor clients, thereby improving
development outcomes.
In general, the potential of
information and communication
technologies (ICT) to be useful to
the financial sector it can be divided
into three broad areas:
(A) Enabling the provider’s back
- end information system, Several
integrated modules used by the
headquarter to:
• manage the portfolio
• print compulsory documentation
for clients
• print letters of request for
payment
• manage credit risk
• print different types of reports
useful for management of MFIs
• general ledger - accounting,
income statement and balance
sheet
• generate and send compulsory
data in accordance with Central
Bank Regulations (money
laundering, periodical
information, transparency, fiscal
communications)
(B) Enabling the front-end
information delivery channel from/
to customers. Online application
interface used by loan officers to:
financial reporting and portfolio
risk assessment, most MFIs already
have or are looking to have back-end
Management Information Systems
(MIS), oftentimes as simple as a
single PC set up at the Head Office
for small MFIs, or a PC at each
branch with a server at the Head
Office for larger MFIs.
Benefits of Technology towards
Microfinance
In the Indian context, the study of
Mishra & Chowbwy (2009), had
found that the adoption of ICT
in microfinance encourages an
increment on their fund returns,
productively of employees and
productivity of branches as a whole.
Furthermore, technology has been
helpful to microfinance employees
in providing better client satisfaction
through improved performance in
providing quick transactions.
In Sri Lanka too technology has
played a vital role in improving
the standards in the Microfinance
• upload customer documentation industry. Apart from the above
mentioned benefits, Sri Lanka MFIs
• print the credit proposal
are poised to get a new regulatory
and supervisory framework in
• create a business plan
order to help them assess the
• access the banking credit
creditworthiness of their potential
information system
client and ultimately enabling them
to better manage delinquency and
• manage the credit dossier and
send it to the credit committee for non-payment issues.
approval
Moreover in Nigeria, O’Flynn
• calculate the credit score
(2008), had stated that means
of electronic payment had
• print the loan agreement
been increasingly helpful in
(C) Enabling the currency in which tackling issues relating to cash
financial transactions between
administration and fraud. The
customer and provider are made, i.e. cashless payment increases payment
allowing for electronic transfers of
security thereby reducing the need
cash/value.
to carry large quantities of cash
and promotes efficient, secure
When it comes to point A above,
given the unambiguous benefit from and convenient transactions.
Further these cashless transactions
the consolidation of customer data
provide means to engage unbanked
at the back - end for aggregated
• record customer data (name,
mobile, address, etc.)
37
population in to national finance
system. Apart from these benefits
implementing IT systems in MFIs
have inherent benefits which are
common to every business such as:
in procedures; risk of technology
failure; diversity of geography and
language; high costs of technology
to MFIs; lack of commitment of
management with MFIs and the lack
of awareness of importance of ICT.
On the other hand, as per a
survey conducted by European
Microfinance Network (2013),
majority of participants (81%) had
indicated that lack of funding was
the main constraint Microfinance
institutions face in implementing
ICT in MFIs. Inability to define
requirements adequately and fear
• Providing better information
of making poor decisions and
for decision making. –Reports
can be produced which will help not been sure of benefits of ICT
management monitor and control implementation had followed
the business, for example the aged as other main constraints while
debtors analysis will show which qualified personnel, ability to
connect between systems and
customer accounts are overdue,
trial balance, budget and variance security were seen as other reasons.
analysis, etc.
Conclusion
• Improved Accuracy – There is
Although many scholars are
less room for errors as only one
confident that the introduction
accounting entry is needed for
each transaction rather than two of technology would improve the
Microfinance industry operations,
(or three) for a manual system.
many regulators remain skeptical
• Staff motivation – The system
that the cost of supplying these
will require staff to be trained to
technologies would not be adequate
use new skills, which can make
to encounter their outstanding
them feel more motivated.
• Improved quality and efficiency
of the business. By keeping a
company's internal business
processes running smoothly, it
leads to better outputs that may
benefit the company, such as in
customer service.
• Cost savings – Computerized
accounting programs reduce staff
time doing accounts and reduce
audit expenses as records are
neat, up-to-date and accurate.
capital deficiency issues.
However as Frankiewicz (2003)
illustrates, the development of
information technology has been
proven as a strategic tool for
microfinance, if it is properly and
consistently executed. The use of
ICT would allow more efficient and
effective collection, processing and
use of recipient data enabling MFIs
to offer new products and better
customer service, and integrate
MFIs with other elements of the
financial sector.
Hence the key to reaping the benefits
of technology in the MF industry
remains in choosing the right
technology at a right cost and using
it to deter the current operational
problems in Microfinance such as
managing their credit delivery and
repayment, and gathering client
data.
References
Asian Development Bank., 2000, Towards an ADB Microfinance Development Strategy, ADB.
Ahmad, A., 2005. Management Information Systems (MIS) for Microfinance Research Paper, The First
Micro Bank Ltd.
Concerns restricting the
implementation of Technology in
MFIs
CGAP Microfinance Gateway, 2013. Technology FAQs. Retrieved 20th February 2015 from www.
microfinancefatewat.org/p/site/m/template.rc/1.11.48240/1.26.9192/
As the study by Ahmad (2013)
points out, there are various issues
which surround slow progress
of ICT in Microfinance industry.
Which include insufficient
organizational and human capacity;
unavailability of suitable applications
and vendors; diversity in business
processes and frequent changes
Frankiewicz, C., 2003. Information technology as a strategic tool for microfinance in Africa. In the
Proceedings of the AfriCap Seminar, Nairobi.
38
European Microfinance Network., 2013. The Use of Technology in Microfinance. European
Microfinance Network.
Ivatury, G. 2006. Using Technology to Build Inclusive Financial Systems. Focus Note No. 32,
Consultative Group to Assist the Poor (CGAP), Washington D.C.
Mishra, B.L. and M. Chowbwy, 2009. Impact assessment of technology adoption in microfinance in
India. Working Paper, Centre for Microfinance Research, Bankers Institute of Rural Development,
Chandragupt Institute of Management, Patna.
O’Flynn, M., 2008. ePayment: Powering West Africa. 19. Card Technology Today, pp: 10-11.
South Asia Micro-entrepreneurs Network, 2015. Retrieved 28th February 2015 from
http://www.samn.eu/index.php?q=microfinance-srilanka
An Efficiency based
approach to measure return
on investment in Information
technology
S G S D Jayasekara
Abstract
Evaluation of return on investment
in information technology is a long
discussed inconclusive topic because
returns are very difficult to measure
and inherently intangible. Therefore,
conventional investment appraisal
techniques are not suitable to evaluate
investment in information technology.
However, information technology may
improve the overall performance of
organizations as a result of streamlining
of operations reducing overall costs
and improving the quality. This paper
investigates whether the investment
in information technology improves
the efficiency of financial institutions
that have invested substantial amount
of assets in information technology.
Efficiency of major financial
institutions in Sri Lanka was evaluated
using Data Envelopment Analysis
under the assumption of constant
return to scale for five-year period from
2009 to 2013 and scores were compared
with the investment in information
technology as a proportion of total
fixed assets. The results revealed that
licensed commercial banks, which have
invested higher proportion of fixed
assets in information technology, were
more efficient over the other financial
institutions.
Key words: Financial Institutions,
Return on investment in information
technology,
Data
Envelopment
Analysis, Efficiency, Sri Lanka
I
FCA, FCCA, ACMA, BBM, MSc, MBA
Director- Finance, Defence Headquarters Complex Project
Akuregoda, Battaramulla, Sri Lanka
E-mail : [email protected]
1. Introduction
argue that inability of measuring
intangible benefits of IT has caused
nformation Technology
the equivocal results. Improvement
(IT) is an essential business
of quality, variety, timeliness and
infrastructure of the
customisation are some of intangible
current complex business
benefits, which are very difficult to
environment. However,
be appropriately measured (Im et
return on investment in information al., 2001). Therefore, conventional
technology (ROIT) has become
performance measures are not
a complex inconclusive topic as a
suitable to measure the performance
result of the difficulty of measuring of investment in IT. IT infrastructure
investment related cash inflows
performs a supporting role in many
which are intangible in nature and
business models of which direct
indicated through the improved
influence on the performance is
efficiency of organisations.
very difficult to quantify. In reality,
Therefore, evaluation of investments various supporting factors influence
in IT is very difficult since there are the performance of businesses.
no direct methods to justify ROIT.
One supporting factor or even a
Investment in IT may streamline
combination does not necessarily
operations reducing overall costs.
provide a conclusive picture of
Many previous studies on the
the performance of a business.
value of investment in IT have
These measurement issues make it
not provided conclusive results
extremely difficult to establish the
indicating how the investment
causality between investment in IT
in IT provides pay- off. Im et
and firm level output performance.
al., (2001) argue that studies
relating to investment in IT and
2. Efficiency and investment in IT
organisational performance have
Major objectives of this study are to
been equivocal. Brynjolfsson & Hit
(2003) states that the contradictory investigate whether investment in IT
improves the efficiency of licensed
perspectives have been attributed
financial institutions (LFIs) in Sri
primarily to the inadequacies of
Lanka and to propose an efficiency
productivity measurement as well
based approach to measure ROIT.
as time lags due to learning effect
IT is a very useful tool, which is
of IT or a time consuming period
used to improve productivity of
of complementary changes in
organisations. However, improper
organizations. Some researchers
39
or incorrect use can lead for problems or complications than solutions. Therefore, companies have to evaluate
expected performance benefits of proposed investment in order to justify investment. Improvement of overall
productivity, which is generated through labour productivity, as a result of uniformity of operations is considered
as a key indicator of justifying investment in IT. Linking the performance of companies with investment in IT is
still a major concern of evaluation. In general practice, LFIs have invested substantial amount of their assets in IT
infrastructure over the other organisations in Sri Lanka. Therefore, changes in performance through improvement
of efficiency arisen as a result of investment in IT can be easily evaluated through LFIs. Average IT investment in
IT as a percentage of total value of fixed assets of major LFIs is shown at table 1.
Table 1: Average investment in IT of major licensed financial institutions
Industry
Investment in IT as a percentage of total
value of fixed assets1
(%)
Licensed Commercial Banks ( As at 31.12.2013)
27.00 - 47.00
Licensed Specialized Banks (As at 31.12.2013)
18.00 - 29.00
Licensed Finance Companies(As at 31.03.2014)
12.00 - 26.00
Source: Compiled by the author using annual reports of LFIs
The above information reveals
that investment in IT of LFIs
is substantial in relation to the
total value of fixed assets. Such
investments have facilitated online
real time transactions allowing
for faster processing of data,
easier retrieval of information
reducing interaction of physical
employees and in return generating
opportunities to improve efficiency
through the reduction of cost and
time. Therefore, this study evaluates
whether the investment in IT has
improved the efficiency of LFIs.
The efficiency of LFIs measures the
relative ability of utilizing resources
in an efficient manner in generating
outputs. IT infrastructure may
facilitate the process of utilising
resources to generate improved
output. Therefore, efficiency is a
better measure to capture the quality
of LFIs and their functions in an
economy. The efficiency can be
used to evaluate and compare the
performance of an LFI in relation
to the performance of another
LFI, particularly with compared
to a best practice. Efficiency
measures provide a numerical
40
efficiency value, which facilitates
ranking LFIs against each other,
and an LFI is considered efficient
when it uses a right proportion of
appropriate amount of inputs in the
intermediation process.
3. Methodology
There are different approaches
to measure the efficiency of
financial institutions. The history
of efficiency measurement begins
with Farrell (1957) who defined a
simple measure of firm efficiency,
which could account for multiple
inputs. Since then, at least four
different approaches have evolved
to analyse the efficiency of financial
institutions. These approaches
differ in assumptions placed on
the probability distributions of the
X-efficiency (deviations from the
efficient frontier) differences and
unrelated random errors. These
are: (i) the econometric frontier
approach; (ii) the thick frontier
approach; (iii) the distributionfree approach; and (iv) the data
envelopment analysis.
The econometric frontier approach
assumes a two-component error
structure such that the inefficiencies
follow an asymmetric half-normal
distribution and the random errors
are normally distributed (Ferrier
and Lovell, 1990; Bauer et al., 1993;
Esho and Sharpe, 1996; Bonin
et al., 2005). The thick frontier
approach posits that deviations from
predicted costs within the lowest
average-cost quartile of financial
institutions are the result of random
error, whilst differences between
the highest and lowest average-cost
quartile reflect inefficiencies plus
exogenous differences in output
quantities and input prices (Berger
and Humphrey, 1991; Bauer et
al., 1993). The supporters of the
distribution-free approach argue
that efficiency differences are stable
over time, whilst random errors
average out over time (Bauer et al.,
1993; Berger, 1993). Finally, the
Data Envelopment Analysis (DEA)
assumes that all deviations from
the estimated frontier represent
inefficiency (Elysiani and Mehdian,
1990; Miller and Noulas, 1996;
Drake and Weyman-Jones, 1996;
Sufian et al., 2010; Chan, 2011;
Jayasekara.2014 & 2015).
Today, DEA has become a widely
used measure of efficiency.
The literature suggests two
approaches, production approach
and intermediation approach, to
identify input and output variables
in order to measure efficiency.
Production approach considers
financial institutions as producers
of services for their account
holders (Benston, 1965). Berger
and Humphrey (1997) suggest that
the production approach is more
appropriate for measuring branch
efficiency, as branches are mainly
engaged in processing documents
and mobilising deposits for account
holders. Intermediation approach
considers financial institutions
as mere intermediaries between
depositors (savers) and borrowers.
Therefore, efficiency is measured
considering loans/ investments as
outputs and deposits/ labour and
capital as inputs at the intermediary
process. This study will use the
intermediation approach to
define inputs and outputs. Three
input variables and three output
variables were selected to provide
a parsimonious model to evaluate
the efficiency of LFIs. All variables
are measured in terms of millions
of Sri Lankan Rupees (LKR). LFIs
in Sri Lanka, Licensed Commercial
Banks (LCBs), Licensed Specialised
Banks (LCBs) and Licensed Finance
Companies (LFCs), are modelled as
multi-product firms, which produce
three outputs by employing three
inputs. Accordingly, total loans (y1),
interest income (y2), non-interest
income (y3) are outputs, which are
generated by employing Deposits
(x1), interest expense (x2) and fixed
assets (x3). Efficiency scores of LFIs
are measured in terms of constant
return to scale as follows (Cooper et
al., 2000).
Efficiency of FIo ( θ) = Virtual output
Virtual input
= u1y1o+ u2y2o+ u3y3o
v1x1o+ v1x1o+v3x3o
4. Results
The efficiency scores of LFIs, which
are summarised at table 2, were
measured on annual basis. The
results show a decreasing trend of
mean technical efficiency of LCBs
and LFCs during the period. Mean
technical efficiency of LSBs has
fluctuated during the period. The
highest mean technical efficiency of
LCBs was 96.44% in 2011 and it has
gradually decreased to 92.81% by
2013. Most notable observation in
respect of LCBs is that the variation
of efficiencies among LCBs was low
in contrast to LSBs and LFCs. The
highest mean technical efficiency
of LSBs was 88.41% in 2011 and
it has reached to 87.55% by 2013.
However, both LCBs and LSBs
were technically efficient over the
LFCs during the period of study.
Overall, higher efficiency scores of
licensed banks can be interpreted as
generated by higher proportion of
investment in IT over LFCs. Further,
decreasing trend of efficiency scores
shows the short-term maturity of
investment in IT due to innovations.
Therefore, LFIs require to invest
modern IT infrastructures to
improve efficiency.
Table 2: Average Technical efficiency of licensed financial institutions
Category of Financial Institutions
20092010201120122013
Licensed Commercial Banka 0.95740.96150.96440.94830.9281
Licensed Specialised Banks
0.86590.88490.88410.82550.8755
Licensed Finance Companies 0.75550.68400.66780.64640.6392
Source: Compiled by the author
Efficiency scores of LCBs shows stable results. However, efficiency scores
of LSBs and LFCs show a greater volatility over the period of study. LCBs
have invested higher proportion of fixed assets in IT, which has resulted
in higher stable efficiency scores over the other financial institutions
Movement of standard deviation of efficiency scores are shown at table 3.
Table 3: Standard Deviation of Average Technical efficiency of financial
institutions
Category of Financial Institutions
20092010201120122013
Licensed Commercial Banka 0.05700.04510.03520.05960.0668
Licensed Specialised Banks
0.21360.18040.17090.20510.1734
Licensed Finance Companies 0.23520.23810.26600.23800.2563
Source: Compiled by the author
The results indicate that the investment in IT reflects in the performance
of financial institutions. LCBs operate in large scale over the other LFIs.
Therefore, Investment in IT has improved efficiency of LCBs mixing
with competitive advantages arisen as a result of size, economies of scale,
41
geographical distribution of branch
network, capital structure, and
high-quality staff of LCBs over
the other LFIs. However, other
financial institutions do not have
such advantages in short -run and
as a result of that they have become
inefficient at the competition.
Assuming that the efficiency of LFIs
is mainly due to the investment
in information technology, the
following process is proposed to
measure ROIT.
Example: ABC Company
identifying cash inflows related to
the investment in IT. Therefore,
ROA t0 =2.5, ROAt1 =2.65,
this study evaluated whether the
Efficiency =0.8564, adjusted profit
investment in IT has improved
before tax= Rs.80.0 mn, investment the efficiency of LFIs using data
in information technology Rs.100.0 envelopment analysis with three
mn
inputs and three outputs for
the period from 2009 to 2013.
Step 1: Basic Return on Investment in
IT
= (ROA t1 – ROAt0) x Efficiency The efficiency scores of LFIs
were compared with the average
Score
investment in IT as a proportion
= (2.65-2.5) X0.8564
of the value of total fixed assets.
= 12.85% -------- (A)
The results revealed that the LCBs
Step 2: Gross return on investment in
, which have invested higher
IT
= (Profits before tax +
Step 1: Basic Return on Investment in
proportion of fixed assets in
IT
= (ROA t1 – ROAt0) x Efficiency Depreciation and other noninformation technology, were more
cash adjustments)x (A) ------ (B)
Score ----- (A)
efficient over the other financial
= 80.0 X12.85%
institutions. These results indicate
= 10.28
Step 2: Gross return on investment in
that efficiency is associated with
IT
= (Profits before tax +
Return
on
investment
in
IT
investment in IT. Most notable
Depreciation and other non=
(B÷
IT
investment)
X
100
observation of the study was that
cash adjustments) x(A) --------
(B)
= (10.28/100) X 100
average efficiency scores of LCBs
Return on investment in IT = (B÷ =10.28%
and LFCs were decreasing while
IT investment) X 100
mean technical efficiency scores
ROA t0 = Return on assets prior to 5. Conclusion
of LSBs were fluctuating during
the investment in IT
the period. Decreasing trend of
Return on investment in
ROAt1 = Return on assets after the information technology is a long
efficiency scores shows the shortinvestment in IT
term maturity of investment in IT
discussed matter and still it is
inconclusive since other investment due to innovations in IT industry.
Therefore, LFIs require investing
appraisal methods are not suitable
in IT in line with the development
to evaluate returns on investment
of modern IT infrastructures to
in IT due to inherent difficulty of
improve the overall efficiency.
References
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for Regulatory Analysis of Financial Institutions: A Comparison of Frontier
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Journal of Political Economy, 72
Berger, A.N. (1993), Distribution-free estimates of efficiency in the US banking industry and
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Economics and Statistics, November, 1-27.
Chan S.G. (2011), Technical Efficiency of Commercial Banks in China: Decomposition in to
Pure Technical and Scale Efficiency, International Journal of China Studies,2 (1),
27 -38 Cooper, W.W.,Seiford,L.M., and Tone,K.(2000), Data Envelopment Analysis, Kluwer
Academic
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Drake, L. and Weyman-Jones, T.G. (1996), Productive and allocative inefficiencies in UK
building societies: A comparison of non-parametric and stochastic frontier
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The Manchester School, 64, 22–37.
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Elyasiani, E. and Mehdian, S. (1990), Efficiency in the commercial banking industry: A
production frontier approach, Applied Economics, 22, 539–551.
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1990, The Economic Record, 72, 246–259.
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Linear Programming Evidence, Journal of Econometrics 46 (1-2), 229-445.
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Journal
of Banking and Finance, 20, 495-509.
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Determinants of Bank Efficiency: Empirical Evidence from the Thai Banking
Sector, Journal of Applied Economic Research, 4, 427 – 461.
Doing Business
Electronically
C.A. Sarathchandra
1. Concept of E-commerce
E
lectronic Commerce
((E-Commerce) could be
identified by the medium
through which the transactions are
involved in. Electronic transactions
are carried out in an electronic
medium such as the Internet
while the traditional commercial
transactions takes place in a paper
based medium.
1.1 Legal structure of a binding
contract:
The explanation of on-line contract
formation is to be commenced with
the legal concepts of “ Offer and
Acceptance “. Under English law
which applies to Sri Lanka, with
regard to commercial transactions,
the following elements must be
present in order to create a legally
binding contract:
World over , electronic commerce is ² An offer – an expression of
making rapid strides due to evolving
willingness to enter into a
communication technology.
contract on certain terms ,
Penetration of internet commerce
made with the intention that a
is increasing in most countries.
contract will exist once the offer
Electronic commerce is an extension
is accepted.
of the traditional commercial
² An acceptance – the unqualified
transactions which uses internet
assent to the terms of an offer.
both as a medium for receiving
instructions and also delivering
² Consideration – the value each
services. The entire world, hence,
party gives the other
tend to maintain documentation
electronically due to it’s involvement ² An intention to create a legally
of low cost and less storage space for
binding relations .
storing.
Formation of on - line contracts
The validity of an electronic
is particularly based upon trust:
document, authentication,
validity of contract entered into
² Authenticity – with origin /
electronically are important legal
source of communication, sender
questions having a bearing on
, genuineness.
electronic commerce. There is also
² Integrity - Accuracy and
the question of adequacy of law
completeness of communication
to deal with situations which are
and
technology driven data corruption
because of technological failure,
infrastructure failure, hacking etc.
Managing Director - Winall Investments (Pvt) Ltd.
DBA (UK), FCMA(UK), MCIM(UK), FCMA(SL), MSc.
(J'pura), MBA(USA), PG Dip. In Banking(SL), PG Dip.
Economic Dev.(SL)
² Non- repudiation – prevent the
sender from denying that he sent
the communication.
Sale of Goods Ordinance of 1896
requires a contract of sale to be in
writing and Prevention of frauds
Ordinance of 1840 requires
documents to be in writing and
signed.
However, these above two
requirements have been dispensed
with , for electronic transactions
by section 4 and section 11 of
Electronic Transactions Act No. 19
of 2006.
Digital signatures operates under
a (PKI)- public key infrastructure
being most secure form. Public –
Key Cryptography is a method of
encryption that does not require the
messages receiver to have received
the key in a separate transmission.
Encryption is a way of coding
information in a file or e-mail
message so that it is intercepted
by a third party as it travels over a
network it cannot be read.
Under the electronic Transactions
Act No.19 of 2006( section 11 ),
law recognizes expression of an
offer and acceptance in electronic
form and such expression cannot
be the sole ground to deny validity
43
or enforceability of contracts (Sunil
D. B. Abeyratne, Introduction to
Information and Communication
Technology Law, 2008 ).
Under E-Commerce parties can
enter into contracts from different
parts in the world even without
meeting or having a conversation
with each other.
1.2 On-line Transactions:
Buyers or consumers prefer to
enter into on-line purchasing with
the development of Internet and
considering it’s convenience and low
cost. When e-advertisers advertise
their goods and services on websites
, the question arises whether it is
an offer or an invitation to make an
offer
and signed by the parties to the
contract.
It is necessary to bear in mind
that the writing and signature
requirements are authentication
methods so as to ensure that
contracting parties fulfill their
contractual obligations. ( Jayantha
Fernando, Member – CINTEC
Internet Committee & CINTEC
Committee on Law and Computers
, Legal Developments in Cyber Law,
1999 ).
1.3 Legal Acceptability and
recognition of e-commerce
transactions:
Construction of works;
Consulting;
Engineering; licensing;
Investment;
Financing;
Banking;
Insurance
Joint venture and other forms of
industrial or business corporation;
Carriaqe of goods or passengers by
air, sea, rail or road.
(Sunil D.Abeyratne, Introduction to
Information and Communication
Technology Law, 2008 ).
As most of the e-business
transactions
involve payments , the
In order to ensure legal acceptability
transfer of funds in respect of such
and adoption of recognition of an
transactions are routed through
electronic transaction member
banks equipped with electronic
countries of the United Nations
Display of goods in a super market
Commission on International Trade processing facilities. The processes
shelf is merely an invitation to treat made a Resolution in December
by which e-banking operate is
and not an offer to sell.
briefly described below:
1996 in General Assembly which
guided to enact the UNCITRAL
When buying goods from a super
2. Internet Banking
Model Law on Electronic Commerce
market under an on-line transaction
General Assembly :
2.1 Introduction
the customer offers to purchase
. Acceptance of the payment
This Law applies to any kind of
The internet is a global network
and delivering the goods by the
information in the form of a data
of interconnected computers
supermarket employee creates a
message, except in the following
transferring data between one
valid contract under normal law of
situations:
another. The internet is the
contracts. (Fisher v. Beell,1961 )
infrastructure and is defined by
The term “commercial “ should
reference to the way that data is sent
The extent to which businesses and be given a wide interpretation so
from one computer to another.
other sectors would continue to use as to cover matters arising from
electronic means for completing
all relationships of a commercial
Both electronic banking and
transactions will depend largely on
nature , whether contractual or
electronic commerce are inter
the degree of trust, confidence and
not. Relationships of a commercial
connected that common elements
certainty such electronic means
nature include, but are not limited
given above for commercial
would create in the global e-business to, the following transactions:
transactions apply equally well
environment.
for both electronic banking and
Any trade transaction for the supply
commercial operations.
In several jurisdictions , including
or exchange of goods or services;
Sri lanka, existing statutory
On-line banking is rapidly emerging
provisions impose barriers to
Distribution agreement;
as the most strategic channel in the
electronic forms of contracting
Commercial representation or
effort by banks to increase customer
, especially with regard to
agency;
satisfaction , loyalty and profitability.
enforceability, by requiring that
Factoring;
Excelling in servicing customers
contracts be constituted in writing
Leasing;
through this channel is essential to
44
maintaining a competitive edge .
The prime customers fully expect
to be able to conduct their banking
relationships on-line. The bottom
line objectives of banks for growing
business through better on-line
experiences could be enumerated as
follows:
sense. The term internet and the
www though commonly used
interchangeably are fundamentally
different. World Wide Web (www)
is the hyper media document
presentation system that can be
accessed over the internet using
software called a web browser.
² Increase customer loyalty by
providing an excellent on-line
user experience
²
²
²
²
The possibilities are becoming
endless in providing an efficient
as well as latest delivery service in
Banking and the introduction of
Differentiate from the market
internet banking in keeping in line
Taking informed and timely
with the customers ever changing
decisions through the
needs. It is no hidden fact that it
information that is available to
has certainly made the world a
the right people, at the right time smaller place to live and inculcated
in right format.
the much talked about concept
of “Global Village”. The banking
Leverage the on-line channel to
sector has taken great advantages
better understand the customers
in this regard in delivering an
and meet their financial needs.
extra ordinary service to it’s much
valued customers. The future for
Build the Bank’s brand by
creating an on-line environment internet is quite bright taking into
that reflects the bank’s standards consideration of our economy being
and commitment to customer
an economy on the development
satisfaction.
track.
The www (world wide web) is a
collection of text and multimedia
files and other network services
interconnected via a system of
hypertext documents ( the “http”
which appears in the web browser
is short for “hypertext transfer
protocol “). Thus the internet is
the infrastructure , the www is the
application or content which sits on
top of that infrastructure.
E-commerce is the practice of
buying and selling products and
services over the internet, using
technologies such as the Web,
EDI (Electronic Data Interchange
), e-mail, EFT (Electronic Fund
Transfer through banks) etc. The
birth of internet and www has
revolutionized our lives in every
2.2 Mobile Banking (M-Banking):
Mobile banking depends on the
architectural components such
as data repository, application
development environment and
network. The data repository
stores lots of customer information
, to facilitate the processing of
financial transactions. The data
repository maintains information
to authenticate customer in each
transaction. The dependence
of customer care and assurance
comes from storing of transaction
and consumer data , and the
reconciliation of financial
transactions depends upon
the application development
environment.
The application development
environment (ADE) in banks
facilitates the banking customer
with menus and commands and
this connects to the third parties
in supporting value added services
such as bill payments etc.. The ADE
fosters the intelligence delivered
to both server side or client side
customers handset. The financial
switch acts as the interface to
the bank’s core banking system.
Instructions collected by ADE
through the mobile network
operator (MNO) interface, and
using data from the data repository,
are translated through the financial
switch into a transaction format
that bank can use.(Prof Venugopal
Lyengar, SMS Spoofing, Article i n
Banking Frontiers, 2008 January,
Volume 6 No. 9).
Along with the growth of
Information and Communication
Technology and the related
e-banking facilities , the use of
electronic banking ( e-banking )
facilities such as credit and debit
cards , internet banking and phone
banking, has emerged in Sri Lanka
in last decade.
As depicted in Table below internet
banking which accounts for about
5%of total retail payments in 2009,
has surfaced as the most prominent
electronic payment system. The use
of phone banking is 0.1 percent
. The shares of credit cards and
debit cards are 1.3 percent and
0.2 –percent, respectively. Thus the
use of e-banking is still at an early
stage in Sri Lanka. Bank cheques
continue to remain as the main noncash payment mode accounting for
nearly 90% of the total value of noncash payments in the country.
45
Table 1: Modes of non-cash payments in Sri Lanka from 2001 to 2009
Composition of Values of Non-Cash Payment Systems (%)
Payment System
2005
2007
Main cheque clearing system
94.3
90.3
Rupee Draft Clearing System
0.2
0.0
Sri Lanka Interbank Payment System
2.4
3.7
Credit Cards
1.2
1.4
Debit Cards
0.0
0.1
Internet Banking
1.4
4.2
Phone Banking
0.1
0.0
Postal Instruments
0.3
0.2
Total
100
100
2009
87.7
0.0
5.6
1.3
0.2
4.9
0.1
0.2
100
² Worldwide connectivity
² Easy access to transaction data ,
both recent and historical, and
² “ Direct customer control of
international movement of
funds without intermediation
of financial institutions in
customer’s jurisdiction”
2.4 Advantages of Internet
banking:
There are many advantages of
internet banking. It is convenient, it
Currently many banks offer
2.3 The use Electronic Banking in
is not bound by operational timings,
PC banking systems that allow
Sri Lanka:
there are no geographical barriers
customers to obtain account
balances and credit card statements , and service can be offered at a
E-banking refers to the process of
greatly reduced cost.
services that allows a bank customer pay bills and transfer funds between
to perform financial transactions via accounts. Internet banking ,
Through internet banking , one can
sometimes
called
on-line
banking
electronic media without necessarily
check his transactions at any time
, is an outgrowth of PC banking .
requiring a visit to a brick- and –
of the day and as many times as
Internet banking uses the Internet
he wants to. Where in traditional
mortar banking institution. such as
as the delivery channel by which
banking method , one gets only
an ATM, debit card, direct deposit,
to conduct banking activity, for
quarterly or monthly statements
direct payment or some other form
example, transferring funds, paying
from the bank. If the fund transfer
of funds transfer. These services
bills, viewing and checking account
has to be made outstation under
offer customers a great deal of
balances , paying loan instalments,
traditional method( where the bank
convenience and save time when
and purchasing financial
does not have a branch) , the bank
managing financial matters, and
instruments and Certificate of
would demand outstation charges.
also lower costs by way of reduced
Deposits etc.
Whereas with the help of on-line
service charges.
banking ,it will be absolutely free for
An internet banking customer
the customer.
The following terms all refers to
accesses his or her accounts
one form or another of electronic
from a browser – software that
In Sri Lanka on-line internet (
banking :Personal computer (PC),
runs internet banking programs
virtual ) banking facilities include
Internet banking, Virtual banking,
resident on the bank’s World Wide
stop payment of cheques, check
On-line banking ,Home banking
Web server, not on the user’s PC
status, bill payments, balance
and phone banking .
Network . Banks providing Internet
inquiry, inward remittances and
banking services and products are
fund transfers. The use of mobile
On-line banking enables customers also known as virtual, cyber, net,
telephones is rapidly growing in
to execute bank transactions
interactive or web banks.
Sri Lanka. Country’s computer
from a PC via a modem. In most
literary rate also has risen to about
According to industry analysts,
PC banking ventures , the bank
40 percent by now and is a high
electronic banking provides only a
offers the customer a proprietary
variety of attractive possibilities for rate among developing countries.
financial software program that
As shown in Table 2 , nearly 70
remote account access, including:
allows the customer to perform
percent of the households have some
financial transactions from his/her
² Availability of inquiry and
knowledge about Automatic Teller
home computer.
transaction services around the
Machines (ATM), and 37 percent of
clock
them have knowledge about internet
Source : Central Bank of Sri Lanka
46
banking. Knowledge about phone banking is limited to about 17 percent of the households and SMS banking to
about 12 percent of them. The widespread e-banking literacy across different income groups reflects the potential
to boost the mobile banking in the country. The country’s widespread banking network and ICT infrastructure
provide considerable potential to foster e-banking at a faster rate , benefitting the bottom of the pyramid .Banks
need to expand mobile banking and similar financial instruments to isolated rural and urban areas where
customers have to spend a lot of time and money to visit a bank branch located in a distant place.
Table 2: Awareness and Use of Electronic Banking in Sri Lanka
(percentages of household members who are above 16 years of age,
n=2, 133)
Item
Internet Banking
ATM machines
Phone Banking
SMS banking
Cyber Banking
e-remittances
Mobile Cash
Have Knowledge
Moderate
Non-poor
39.8
73.9
18.8
14.45
4.53
20.24
15.71
Poor
29.27
60.6
10.88
5.63
1.13
24.77
9.01
Ultra Poor
33.67
47.9
15.31
4.08
35.71
2.04
All
36.9
69.39
16.69
11.77
3.47
22.08
13.41
Source: Household Survey on E-Money conducted by Prof. Sirimevan
Colombage,2008/2009.
Table 3: Awareness and Use of Electronic Banking in Sri Lanka (
percentages of household members who are above 16 years of age, n=2,
133)
Item
Internet Banking
ATM machines
Phone Banking
SMS banking
Cyber Banking
e-remittances
Mobile Cash
Using
Moderate
Non-poor
3.60
28.23
1.4
0.27
0.27
1.6
0.33
Poor
2.44
11.44
-
Ultra Poor
7.14
-
All
3.14
23.07
0.98
0.19
0.19
1.13
0.23
Source: Household Survey on E-Money conducted by Prof. Sirimevan
Colombage, 2008/2009.
CEO at ICTA is on the
understanding that it is high time
to look at ICT in Sri Lanka from a
new perspective as technology has
evolved in the past decade and the
growth of technology is also taking
place very rapidly. The country
too needs to be in line with that
rapid pace .ICTA-CEO states that
the e-Sri Lanka program aimed
at taking ICT to every citizen of
the country is successful and that
the business process outsourcing
sector is on it’s way to becoming
a major foreign exchange earner
of US Dollar 5 billion. However
ICTA-CEO states enormous strides
need to be taken in building further
capacity for the state and private
sector owned enterprises as well
as to educate citizen in general in
computer literacy. To explore this
potential capacity towards the
objective of national level, the e-Sri
Lanka program has to be equipped
with necessary ICT applications
and other relevant technologies and
it is clearly evident that the private
sector should be the driver of such
growth.(Daily Mirror, February 10th,
2015)
47
3. Electronic Fund
Transfer System (EFTS) :
3.1 Introduction
An EFTS is a computer system
complete with the associated
terminals and communication
links. Electronic Fund Transfer
(EFT ), uses computer and
electronic technology as a substitute
for cheques and other paper
transactions. EFTs are initiated
through devices such as cards and
codes that one uses to gain access to
one’s account.
² Personal Computer Banking:
It allows one to conduct
many banking transactions
electronically via personal
computer. For instance one
may use his computer to view
his account balance , request
transfers between accounts, and
pay bills electronically.
² It can be easily controlled by
those authorized to do so and
3.2 Cryptographic Payment
Systems:
“Settlement” refers to the process
whereby the financial institutions
resolve their mutual liabilities.
² It is secure from unauthorized
alteration.
As a payment device smart cards are
either disposable or rechargeable.
As an “electronic purse “it is similar
to a pre-paid credit card but it also
stores other information to identify
² Point of Sale Transfers: It
the owner. Digital cash (coins )are
allows a person to pay for retail
purchases with an EFT (or debit ” issued” by a “financial institution”
to a customer /user who then uses
card) The EFTPOS (Electronic
the digital cash by way of electronic
Funds Transfer/ Point of Sale )
System has taken over THE ATM messages to pay for goods or
CONCEPT A STEP FURTHER. services through the Internet.
An “ Electronic Fund Transfer “ is
In some instances this card also
any transfer of funds other than a
3.3 Electronic Clearing, Settlement
may be an ATM card. This is
transaction originated by cheque ,
and Netting:
similar to using a credit card ,
draft or similar paper instrument
but with an important exception: An understanding of these terms are
, which is initiated via electronic
the money for the purchase is
important in considering electronic
terminal , telephone, internet, or
transferred
immediatelyfrom
payment systems.
magnetic tape for the purpose of
one
bank
account
to
the
stores
ordering , instructing or authorizing
:Clearing “ is both an accounting
account. An increasing number
a financial institution to debit or
process
and a formal acceptance of
of merchants are accepting this
credit an account.
the transferred liability.
type of payment.
EFT offers several services the
customers may find practical.
² ATMs are electronic terminals
that allows banking almost any
time
² Direct Deposit: It lets persons
to authorize specific deposits
on a regular basis. Persons may
preauthorize direct withdrawals
so that recurring bills such
as insurance premium, loan
instalment and utility bills are
paid automatically.
Crytography refers to conversion of
data into a secret code for security
purpose and the technique involves
concealing data by representing
each character or group of
characters by others.
Currently most businesses are
effected on the internet through
home computers. Internet
payments mechanism can meet
the commercial demand for
² Pay by Phone Systems: It lets the inexpensive low value payments.
customer to telephone their bank
The “smart card “ - a plastic card
with instructions to pay certain
with
an embedded microprocessor,
bills by transfer of funds between
is a device that can hold substantial
accounts. However, one must
amounts of information with the
have an agreement in advance
following features.
with the bank to make such
transfers.
48
“Netting “ refers to replacing a series
of obligations between two parties
with a single obligation
That is calculated by summing up
all obligations owed by each party to
the other and deducting the smaller
from the larger. For example , the
banker’s right of combination of a
customer’s bank account is a form
of netting flowing from the bankercustomer relationship.
Until April 2002 , the cheque and
inter bank payment systems were
owned and operated by the Central
Bank of Sri Lanka (CBSL) through
the Sri Lanka Automated Cheque
Clearing House (SLACH). The CBSL
now has outsourced this function
to Lanka Clear (pvt)Ltd. which is
now managed jointly by CBSL and
the Commercial Banks. In 2009 first
quarter , the daily average volume
of cheques processed through SLIPS
amounted to 2,113,606.
scheme facilitates fund transfers,
transactions in order to ensure
payments for goods and services and
a reliable and safe mechanism
variety of other services through
for efficient settlement of
electronic cash. Further the adoption
transactions.
of Sri Lanka Accounting Standards
² 4.2 Lanka Secure System:
(LKAS )32, 39 and Sri Lanka
Financial Reporting Standards
Lanka Clear clears cheques and
The Scripless Securities
(SLFRS )section 7 facilitate financial
interbank transfers and sends net
Settlement System (SSSS) and
balances for settlement in the books reporting of banks to be on par
the Central Depository System
with international standards while
of the CBSL.
(CDS) for Truncation (CIT)
improving the quality of disclosures.
System: government securities ,
3.3 SLIPS – Sri Lanka Inter Bank
collectively known as the Lanka
Payment System:
3.5 Electronic Payment Cards:
Secure. The corporate and
SLIPS is used as an off-line system
The CBSL has issued three license
individual customer accounts
funds transfer of small amounts
s up to July 2012 for service
maintained by the Lanka Secure
between banks’ customers or
providers under the Payment
stood at 78,520 at the end
between a bank and it’s customer.
Cards Regulation No.1 of 2009 to
September 2012 compared to
Under this SLIPS system both types
engage in payment card business.
75,871 accounts maintained as at
of payments – debit payments
while the CBSL monitored the
end September 2011. The value of
and direct credit payments. SLIPS
compliance of service providers
transfers of government securities
mechanism can be explained as
with
the
guidelines
issued
by
the
during the first three quarters
follows.
CBSL during this period. The total
of 2012 amounted to Rs.29,231
Contributory banks provide
number of credit cards in use as at
billion(face value).
payment instructions electronically. end June 2012 was 910,008 which
² 4.3 Cheque Imaging and
These information will be
was an increase of 5.5 per cent
received until 3.30 p.m. everyday.
Truncation System(CIT)
when compared with December
Information relevant to transactions 2011. Credit Card transactions in
The CIT system introduced in
received by Lanka Clear Co. will
terms of volume and value stood
2006 by CBSL with the objective
forward to those banks intended
at 9,642,572 and Rs.53,015 million
to receive such funds. Then the
of increasing the efficiency of
respectively , at end June 2012. In
account maintained by each bank
cheque clearing by reducing the
will be debited/credited with the net order to strengthen the security of
island wide cheque realization
amount before 5 p.m. electronically, the electronic payment cards, the
time to one day (T+1 ), continued
CBSL mandated financial acquirers
on the same day. The Settlement
to perform well to ensure a secure
to implement Terminal Line
process of these transactions will
and efficient retail payment
be effected at 8.30 a.m. on following Encryption technology for the Point
system. The total volume and
day under Real Time Gross
of Sales terminals.
value of cheques cleared during
Settlement System (RTGSS).
the first nine months of 2012 were
4. Ectronic Payment
35,633,156 and Rs.4.9 trillion
In 2003/2004 Sri Lanka became
Settlement System in Sri
the first country in the SARC
respectively.
Lanka:
region , to operate RTGS/SSSS
² 4.5 Sri Lanka Interbank
along with SWIFT- Society for
² 4.1 Lanka Settle System
Payment System (SLIPS ):
Worldwide Interbank Financial
Telecommunication.
The CBSL continued the
SLIPS which clears preoperations of the Lanka
3.4 E-money Systems:
authorized low value payments
Settle System , which is the
through an offline mechanism
systematically important
A mobile phone based e-money
has been enhanced in 2010 to an
electronic payment and
scheme was introduced in June
online mechanism to facilitate
settlement system for high value
2012.operated under the Service
high transaction volumes with
time critical interbank payments
Providers of Payment Cards
T+0 settlement for transactions.
and government securities
Regulation No.1 of 2009.This
49
The volume and value of
transactions settled through
the SLIPS were 10,559,196 and
Rs.398 billion respectively, during
the first nine months of 2012.
5. Law Related to
Electronic Transactions
in Sri Lanka
5.1 Evidence (Special Provisions)
Act No.14 of 1995.
An Act to provide for the
Admissibility of Audio Visual
Recordings and of Information
contained in statements produced
by computers .
5.2 Information and
Communication Technology Act,
No.27 of 2003.
An Act to provide for the
establishment of the National
Committee on Information and
Communication Technology of
Sri Lanka ; to provide for the
setting out of a National Policy of
Information and Communication
50
Technology and for the preparation
of an action plan ; to provide for
the appointment of a task force for
Information and Communication
Technology ; to provide for the
establishment of the Information
and Communication Technology
Agency of Sri Lanka charged with
the implementation of the National
Policy in both public and private
sectors; and to provide for matters
connected therewith or incidental
thereto.
5.3 Electronic Transactions Act,
No.19 of 2006.
An Act to recognize and facilitate
the formation of contracts , the
creation and enhance of data
messages , Electronic documents,
Electronic records and other
Communications in Electronic form
in Sri Lanka; and to provide for
the appointment of a Certification
Authority and Accreditation of
Certification Service providers; and
to provide for matters connected
therewith or incidental thereto.
5.4 Computer Crime Act, No.24 of
2007.
An Act to provide for Identification
of computer crimes and to provide
the procedure for the investigation
and prevention of such crimes; and
to provide for matters connected
therewith and incidental thereto.
5.6 Interconnection Rules
of 2003 under Sri Lanka
Telecommunications Act
Rules made by the
Telecommunication Regulatory
Commission of Sri Lanka , under
section 68 of the Sri Lanka
Telecommunications Act, No.25 of
1991 as amended by Act , No.27 of
1996, and approved by the Minister
of Mass Communication.
The Accountants, are
They Market Oriented?
Chamindra De Silva
T
Introduction
factor in a strategically relevant
manner. Such knowledge need to
he dream of every
be well understood particularly
CEO is to build a
by all decision makers and more
truly market oriented
importantly by all functional
enterprise. It is now
managers as they have a natural
widely accepted this is tendency to be pre-occupied
not purely the domain only of the
with their respective functional
marketing people in a company,
disciplines and gravitate towards
but a shared obligation that cuts
one’s functional specialization.
across all functions, each level and
Often accountants are blamed as
for that matter every employee in an being preoccupied with a mindorganizational hierarchy including
set of excessive control orientation.
those in outsourced activities.
Such is the importance of market
This paper attempts to discuss the
orientation, yet we find this is a
concept of market orientation in
concept that’s often perceived and
a strategically relevant manner
misconstrued not only by those
and such knowledge is considered
in service functions like Finance
invaluable for an emerging
but also by Marketing people
professional aspiring for positions of
themselves.
leadership, whichever professional
discipline they may belong to.
In the present day competitive
environment we all know how
Structural foundations of
important for us to create an
Profitability
organization that is customer
We Accountants know, perhaps
friendly and service oriented. But
more than anyone else in an
such realization is only a fraction
organization, how to calculate
of the repertoire of competencies
profitability and also the mechanics
to make an organization a
of so called creative accounting
customer focused, market oriented
practices in deriving profits under
enterprise. It’s much more than
being customer friendly and looking trying and changing circumstances.
But more importantly an
in to customer conveniences and
Accountant, as he matures and grow
efficiency in service. The problem
up in the hierarchy must also be
lies in us not comprehending the
quite familiar with the fundamental
all inclusive nature of this success
MBA, FCA(SL)
Chief Financial Officer of Alliance Finance Plc and an
independent director of Malwatte Valley Plantations Plc.
drivers of profitability that lies at the
heart of profit creating capabilities.
Such knowledge will certainly
make us more strategic and less
functionally biased and undoubtedly
more integrative with other
functional areas.
Rodger Best (1997) concludes that
the numerous strategic factors
(figure 1) that affect the profitability
of an organization examined and
systematically decomposed,
they can be grouped under three
fundamental forces:
Market Attractiveness – The size,
growth and competitive intensity of
a market.
Competitive Advantage – The
Strength of a business’s competitive
advantage.
Market Orientation – The degree
to which a business is market and
customer focused
Best’s categorization of the
fundamental forces that drive
business profitability provides us
an excellent foundation to examine
the concept of market orientation
in a strategically relevant manner.
Simply the message is that market
orientation occupies a ‘front
row’ status of importance along
with ‘market attractiveness’ and
51
Students in Strategy and Marketing
are advised to carefully study
numerous examples of simultaneous
application of Low-Cost and
Differentiation mostly traceable
to modern lean manufacturing
techniques.
(Source: Best, J Rodger (1997), Market- Based Management, Prentice Hall, New Jersey)
‘competitive advantage’, both of
which according to Prof. Michael
Porter’s positioning school of
strategic thought occupy a central
position amongst factors that
determine a company’s strategic
success.
Market Attractiveness and
Competitive Advantage
According to Porter, profitability
of a business, first and foremost is
determined by the attractiveness
of the industry in which the firm
operates. Along with size and
growth potential, attractiveness of a
market/industry is largely the result
of the intensity of the competitive
rivalry in that industry. His all
famous ‘five forces’ model is his
prescription to analyze and assess
the degree of the collective intensity
that stem from the operation of
these forces in an industry. It is
also necessary to bear in mind the
meaning of industry on a broader
front, as comprising all firms that
market products which are close
substitutes for each other.
52
Extending his success formula for
striving for superior performance
amidst inevitable competition,
Porter asserts that it is necessary
that a firm builds a distinctive and
a defensible position of competitive
advantage within the industry
that it has chosen to operate.
The ‘generic strategy’ concept of
Porter that has assumed almost
a biblical status when discussing
strategy since it’s introduction at
the beginning of 1980s, offers ‘low
cost ’and ‘differentiation’ as two
alternative routes to achieving
competitive advantage for a firm
in a given industry. There have
been many subsequent critique of
such a simplistic prescription for
generalizing the strategy formula in
the complex world of contemporary
business. Moreover there are
numerous examples of successful
combination of low-cost and
differentiation, which according to
Porter’s view were considered as
mutually exclusive strategic options
as these routes required different
sets of skills, competency profiles
and firm level specializations.
The concept of ‘Value Chain’, yet
another powerful and a well-known
model popularized by Michael
Porter (1985) in his seminal
publication ‘Competitive Advantage”
is central to the understanding the
dynamics of competitive advantage
of an organization. Actually,
value-chain complements the idea
of generic strategy by offering
a prescription in the form of an
analytical framework to disaggregate
it’s different functions. This
dissection will offer a more deeper
understanding to the strategist as
to how value is created and added
during the course of the logical flow
of different activities within a given
firm. Porter advises that to gain
competitive advantage a firm should
actively disaggregate it’s functions
and activities within a framework
of value creation /addition and
evaluate the opportunities for
cost optimization/reduction and
value creation through uniqueness
(compared to competition) as
applicable under the strategic option
pursued by the firm. Value Chain
framework makes a more explicit
picture of the different ‘primary’
and ‘secondary’ activities that a firm
carries out in generating the chosen
mix of customer value and invites
the strategist’s attention whether the
firm can perform these activities
better than competition or cheaper.
Hence value chain is an invaluable
analytical tool in strategic analysis
and formulation.
Market Orientation
with the strategic positioning that
the company has opted for and
Prof. George S. Day a prolific author will create a high level of customer
on market driven strategy defines
satisfaction.
a market- driven organization
as one that has superior ability
-A Strategic orientation -according
to understand, attract and keep
to Day, being market driven is
valuable customers and consistently about having the discipline to make
win in the market place.
strategic choices and implement
them consistently and thoroughly.
The philosophy of a marketIt is not about being all things to all
driven firm as described by Day
people, once again underscoring
(1999) incorporates the following
the importance of strategic value of
perspectives
creative segmentation. As strategy
Guru Prof. Michael Porter strategy
- A Competitor Orientationis not only deciding what a company
by putting “superior” in to this
should do but also consciously
definition we are
making a decision as to what a
company should not do in terms of
its market offerings.
Elements of Successful Market
Driven Organizations
We will now examine how marketdriven organizations
achieve their superior ability to
understand, attract and retain valuable customers and consistently
win in their markets.
As explained by Day in his book
‘The Market Driven Organization’
the reality lies in the artful
combination of the following
elements as depicted in Figure 2
reminded the importance of
being simultaneously competitor
Figure 2–The elements of Market orientation
oriented also along with customer
orientation, in our quest to win
in the competitive market place
where a firm need to outperform
competitive rivals.
- A Profit Orientation- importance
of profit orientation that was even
acknowledged by legendary Peter
Drucker, when he mentioned that
the purpose of a business is to attract
and satisfy customers at a profit.
-Intimate knowledge of the market
and Customer orientation - as we
know all successful and progressive
organizations increasingly practice
market segmentation, targeting
and positioning popularly known
as STP strategies that will guide a
firm to identify the most profitable
configuration of customer profiles
that best suit their internal
capabilities. It is important for a
market- driven firm to carefully
segment its markets to identify
and target the valuable segments
that will enable the firm to take
profitable positions consonant with
their distinctive competencies.
Thereafter the company will proceed
to develop a competitively superior
‘Value Proposition’ commensurate
(Source : Day S. George (1999) The Market Driven Organization, The Free Press, NY (Page 6)
(Source : Day S. George (1999) The Market Driven Organization, The Free Press, NY (Page 6)
A market oriented culture
An externally oriented culture that embraces deep routed beliefs, values
and norms that guide and shape behavior patterns emphasizing superior
customer value and quest for new advantages. The profound and powerful
influence of organizational culture that usually stems from the very top is
well experienced by all individuals and groups working in organizations in
the form of norms of desired as well as inappropriate behaviors. According
to Day in market- driven firms, market orientation is so pervasive that
it is woven in to the fabric of the organization naturally implying that
such values are deeply embraced at all levels and most importantly at the
very top. Collective experience of an airline’s customers encompass their
53
interactions with ticketing agents,
luggage handlers, ticket takers and
also with cabin staff. A market
oriented firm will carefully manage
and strive to exceed customer
expectations at such points of
customer experience and contact.
Nevertheless the implementation
of such organizational wide
pervasiveness of a customer oriented
culture is easily said than practiced.
For example whether the front-line
people actually deliver superior
customer value may depend on the
ability of the company to provide
them with intensive training,
right tools, proper conditions and
even right incentives. In more
practical terms culture of a firm are
largely influenced by the behavior
patterns of the very top of an
organization. As Day points out if
top management prefers to spend
time with security analysts rather
than make visits to distributors
and customers, they have spent a
strong signal that reinforces the
culture. Simply walking the talk has
a profound influence in shaping a
strong market oriented culture than
mere lip service of being customer
oriented from glass cubicles.
-In market sensing- ability to
continuously sense, understand and
act on events and trends in their
markets. E.g. by exploiting good
information processing skills
Integrating Culture, Capabilities
and Configuration -3Cs of Market
Orientation
Sustainable shareholder value is
created by providing competitively
superior value propositions to a
- In market relating –creating and
company’s target market segments,
maintaining relationships with
and exceedingly satisfying
customers
these groups of customers .The
-in aligning strategy to the market
organizational capabilities are the
by anticipating market changes
vehicles that direct and deliver such
value propositions and the whole
The Role of Configuration
process is reinforced and regulated
by the boundaries of market
As described by Day (1999),
oriented behavior patterns of all
this element perhaps is the most
organizational members functioning
significant of his framework that
within a strong and deep routed
encompass the various elements of
market orientation of a business. It is value system that govern such
norms of behavior. It is hence clear
the integrative element in the form
that combination of culture and a
of a nested relationship between
host of capabilities together makes
culture and capabilities described
a formidable combination within
earlier now combined with a host
an appropriate market oriented
of other capabilities, structure and
organizational configuration to
processes. By configuration we
produce customer value that lead
mean the collective competence of
to superior customer satisfaction.
an organization to come up with
Indeed they have a symbiotic
a competitively superior value
relationship and harmoniously
proposition for a company’s market
produce superior results in
segment in which it has chosen
successful organizations.
to operate. After all what brings
The supermarket industry in Sri
about competitive success is the
Lanka witnessed the importance of superiority of the value proposition A Superior Value Proposition-The
market oriented culture in obtaining
heart of Strategy
and hence the configuration will
competitive superiority when
have to align all the items that help Deshpande and Farley (1998)
Cargills supermarkets redefined
to produce that value proposition
define market orientation as “The
customer centricity and pushed
set of cross-functional processes
the market leader Keels to a distant such as a market oriented culture,
market
sensing,
relating
and
follower.
and activities directed at creating
strategic thinking capabilities,
and satisfying customers through
The Role of Capabilities
customer-centric processes,
continuous needs-assessment”.
control and reward systems and
As Narver and Slater (1998), two
Every organization has bundles
information processing capabilities professors credited extensive
of resources and when they are
within a cross functionally
research in to market orientation
appropriately exploited we can
integrated
and
a
flexible
create capabilities and the degree
points out creating superior
organizational structure as well as
to which they can do so differ
value for customers is the heart
other organizational capabilities and of marketing and superior value
with different organizations. As
assets such as corporate and brand creation is therefore what strategy
Day (1999) points out market
image.
driven organizations have superior
should be all about.
capabilities
54
People don’t buy goods and services,
in fact they buy benefits and the
buying decision revolves around
‘Value’.
Let us examine what we mean by
Product quality, Service quality and
also the Price more analytically to
understand the QSP dynamics and
the significance of customer value
Customers decide between
that captures their relationship as
alternatives offered to them on the
a compelling decision parameter
basis of customer value.
of a potential customer in the
buying decision. Figure 3 depict
Coustomer Value = (Perceived Benefits) the constituent components of
(Perceived costs)
‘Quality’ and ‘Service’ the two main
pillars behind customer satisfying
The familiar expression QSP
capability of a company’s offering to
(Quality, Service, Price) also
its target customers.
captures this logic that customers
expect a particular product Quality
Branding: At times an Accountant
and an appropriate level of Service
who is not fully conversant with the
for which they are prepared to pay a
company’s total value proposition
particular Price.
that encompasses an element of
emotional satisfaction to a particular
customer segment as an intended
benefit, may hesitate incurring
and sanctioning brand building
expenditure. To be strategically
effective all organizational members
need to understand the dynamics
of a company’s value propositions
to it’s different customer segments
and relate their roles respective
contributions that will support
efficient delivery of such value
propositions
Figure 3 –Generic Components of Customer Value
case of the famous Virgin Airlines.
A case in point-VAA-Virgin Atlantic
The legendary Richard Branson
Airways example
known for his dynamic personality
oozing with confidence, flair for
The profound influence of the
publicity and a business sense
founder in shaping organizational
interwoven with consumerism is
culture and more importantly it’s
impact in imbuing a market oriented clearly associated with his business
enterprises under the Brand ‘Virgin’
culture is amply exemplified in the
where customers associate with
quality, fun, innovation and low
prices. In other words we may state
that the value proposition of Virgin
Airlines revolve around –low prices,
fun/entertainment, innovative, and
service quality.
It’s understandable that an airline’s
primary function is carrying
55
passengers, if we narrowly define
this business with an emphasis
of product orientation, as its
business mission. However if we
are to adopt a more expanded
and a market oriented definition
we may see ourselves as being
in the entertainment and leisure
business that gives rise to seamless
opportunities to create customer
value and offering customers
with superior value propositions
revolving around a set of customer
values that can create competitive
advantage. Virgin achieved such
distinctiveness with many service
innovations to its credit such as
individual video screen for every
seat, on-board beauty therapists
or tailors on some flights and
some specialized services for
upper-class passengers. At the
same time economy class being
undoubtedly the largest market
potential segment, Virgin sought to
provide the best ‘value for money’
by targeting price sensitive leisure
travelers who sought comfort.
Figure 04
CONFIGURING AROUND CAPABILITIES
spacious seating arrangements
which of course will be a valued
quality attribute of a wide range of
customer segments. It is imperative
that all these elements work in
harmony which otherwise would
mean the economics of the air line
will be disturbed. Hence we could
easily see the strategic importance
of such congruence as well as the
strategic and operational leadership
challenges in implementing strategy
revolving around customer value.
All organizational leaders need to
ensure each employee, irrespective
of the functional discipline or level
of the organizational hierarchy,
carefully understand their roles
in terms of the company’s value
proposition for different segments.
Marketing Orientation in practice
– A recipe for implementation and
making Accountants more market
oriented
Operative Dimensions of Market
orientation:
Finally, we will now look at the
manner in which an organization
will make these concepts
operationalize to achieve the desired
end of a high degree of market
orientation. Three major behavioral
(Source : Day S. George (1999) The Market Driven Organization, The Free Press, NY (Page 6) components that underscore market
orientation in an organization
The Figure 4 explains how the three principal elements of market
highlighted by Narver and Slater
orientation interactively combines and reinforce each other to produce
(1990) are as follows:
a distinctive and a valuable strategic position for the Virgin Atlantic.
The most distinctive feature is the strong market oriented culture that
Customer Orientation-The
emanated from the dynamic leadership of the founder, Richard Branson.
continuous understanding of the
Innovation, high level of service delivery and relatively low prices that
needs of both the current and the
place the different customer segments and their values at the very centre
potential target customers and the
of the organization are important attributes of this externally oriented
use of that knowledge to create
market driven culture. Capabilities have to support the achievement of
customer value.
such service delivery, innovation and low relative costs that can reflect
Competitor orientation-The
low air-fares. Configuration align and integrates all gamet of items need
continuous understanding of the
to produce and sustain the superior value proposition as depicted in the
capabilities and strategies of the
Figure 4. Collective contribution of the various elements are evident from
principal current and potential
the diagram such as how superior customer value results in high load
alternative satisfiers of the target
factors that helps offset adverse revenue effects of lower fares and more
56
customers and the use of such
knowledge in creating superior
customer value
Inter-functional co-ordination-The
co-ordination of all functions in the
business in utilizing customer and
other market information to create
superior value for customers
Discussion of the operative
dimensions of market orientation:
In general a market orientation
consists of a deep routed value
system in a company where all
employees are steadfastly committed
to the continuous creation of
superior value for a company’s
chosen set of customers. Hence,
target customer value propositions
for customer segments targeted by
a company, as already mentioned
in this article, are at the heart of the
company’s strategy and tactics. It
is the central theme that binds all
organizational members in their
diverse set of activities day to day as
well as in the long term.
capabilities of document processing
to improve their loan approval
process by cutting down document
transmission time to head office
for decision making; ‘Time’ being
a key attribute of customer service,
an integral component of customer
value. Such developments and
emerging trends in technology
need to be continually tracked by
the competing organizations if
they want to keep pace with their
industry competitiveness.
The third element namely, the
inter-functional coordination in
the writers experience is the most
difficult practical dimension to
realize in an organization’s quest
to become a market oriented
enterprise. This is where most
organizational members find
themselves guilty of not walking
their talk of ‘customer is always our
priority’. This is a result of complex
interplay of many structural and
behavioral factors ranging from
customary functional bias and
boundary rigidity to personal
At the same time a market
convenience and security from
oriented organization also needs
taking risks of deviating from
to regularly look over its shoulder
procedures. The best remedy to
to understand what are the
promote effective inter-functional
capabilities of their competitors,
coordination that is workable
particularly those in the same
in a company is to make it truly
strategic group, as well as their
a process centric organization.
strategies and tactics apart from
Deshpandey and Farley (1997)’s
the mere key result areas of their
performances. Strategic thinkers and definition of market orientation
as “The set of cross functional
top managers need to consciously
processes and activities directed at
develop such competitive
creating and satisfying customers
intelligence capabilities as such
through continuous needs
superior competitive competencies
assessment” is a shining example
can result in superior customer
of the importance of process
value offerings that will challenge
orientation as an integral part of
the customer value offerings in
achieving the goal of marketing
an organization. One Financial
orientation.
organization with an extensive
branch network used emerging IT
Process orientation in practice:
In its simplest and practical terms
process orientation is where the
organizational members take trouble
to understand the experience and
interfaces a customer goes through
in obtaining and paying for the
value package, the reason for the
customer to select that organization
amongst many competing firms. In
other words trying to understand
exactly what a customer experiences
with your company from inception
to conclusion, in the eyes of the
customer of course (Figure 5). Often
being more concerned with one’s
functional requirements, plans,
controls, profitability, availability
of time and for a host of reasons
most of us, to different degrees,
are guilty of not taking trouble to
precisely to understand the way we
create value, from the customers
perspective. Hence it is a top
managerial imperative to inculcate
the value of understanding our total
value delivery package in the eyes
of a customer. With reference to
the diagram in figure 5, as we may
observe, when a patient is admitted
to a hospital the prime concerns of
that consumer may be structured
under certain core processes
commencing from
the ‘patient admitting
process’
and ending with an
‘invoicing process’ that
encapsulates the total
experiences of the customer.
He will certainly be quite
indifferent to how different
functions of that organization
operates and the concerns of these
different functions such as Finance
and Operations. In fact why should
be?
57
Figure 05
value. Yet the problem is that their
primary focus is more towards the
correct functioning of systems and
not customer value management.
We all work in organizations that
have been built around system
orientation in mind and hence the
contemporary challenge is to bring
about process gravitation in such
system oriented organizations.
This is easily said than done but is
increasingly becoming an imperative
amidst growing competitive
intensity in many industries.
This vital change initiative of
making our organizations more
process oriented and customer
centric can range from exhaustive
business process reengineering
Process orientation and the
those involved will be assessed on
(BPR) consulting assignments
Accountant-Process/System
parameters that revolve around the
to internally constructed and
dilemma
agreed targeted performances.
motivated cross functional change
The Accountants are increasingly
On the other hand we teams. As we know, business
process reengineering is about
criticized for being less customer
may describe a process as “a set of
centric and process oriented. There organized work steps that transform attempting to ‘fundamentally
rethink and a radically redesign’ of
are many reasons that underlie such an input to a higher value output”.
the way we do things in creating
dysfunctional behavioral tendencies. Essentially to be cognizant of the
customer value. Perhaps it will
Traditionally Accountants are more difference between a system and a
bent towards ‘system compliance’
process is quite important amongst be more satisfying to attempt the
as opposed to ‘process orientation’.
key organizational members striving latter option supported by expert
guidance and right recognition and
Accountants are increasingly
for enhanced market orientation.
even rewards attached to successful
taught and trained in importance
The writer has experienced many
change accomplishments. The
of systems. “A system is a set of
instances of failure to appreciate
Accountant’s challenge in these
interdependent parts that operate in the difference between a ‘system’
endeavors is to first get in to a
harmony towards accomplishment
and a ‘process’ leading confusion
process oriented thinking mode
of some specific objectives”. There
as many decision makers tend to
leaving the more accustomed system
must be interconnectedness,
treat both interchangeably and
thinking mode for a while. Once
interrelationships, co-ordination and often the term process to mean a
the right processes are in place the
objectives in such systems. in case of system. Lack of such realization
accountant is obliged to revisit the
a typical inventory control system,
leads to much uncertainty and
system requirements, particularly
‘minimizing cost of inventory’
confusion. The core processes of a
from a control perspective and
is an important objective that is
company are those that create and
achieved through co-ordination
manage customer value creation and come up with required changes that
will not compromise vital control
between marketing, stores and
management and are the bedrock
parameters. It is a fine balancing
accounting function that authorizes of customer satisfaction variables.
act that need to be embarked
procurement before orders
Traditionally and historically
with the customer and the way he
can be placed. All such system
organizations are organized and
perceives the effectiveness of our
components need to function in
structured to facilitate functioning
value creation process in mind.
harmony to achieve desired system
of systems which in the process
Accountants are obliged to carefully
objectives and the performance of
also expected to create customer
58
Functional Organization
build control parameters that will
least compromise components
of customer value. These are the
contemporary challenges of the
modern Accountant to preserve
his or her position as an important
and a valued member of the process
centric organization. An effective
Accountant can no longer confine
to cubicle centric, overly system
and compliance conscious behavior
pattern and will be required to
cultivate customer empathy and
walk around to feel the customer
pulses and continually revisit
the system requirements in the
light of changing customer value
variables. The acme of the skills of
a contemporary accountant is to
walk the fine line of balance between
process efficiency and adequacy of
system controls.
satisfying a targeted set of customers
by all organizational members
and processes rallying round this
noble purpose. As pointed out
by legendary Peter Drucker as far
back in the early fifties, the primary
obligation of a business is to create
and satisfy customers. This is such a
powerful unifying theme in modern
organizations that now increasingly
embed such values in to their deep
routed cultures by even occupying
priorities amongst board room
agenda.
Strategic role and flavor that
marketing brings about is the
second important contribution of
marketing to an organizational
agenda. Strategies of successful
organizations are built grounded on
market driven visionary thinking.
As Derek Abell (1980) advocates the
Discussion and Summary
starting point of business planning
is the definition of a business
The role of marketing in an
that essentially commences with
organization may be viewed as
‘what customer needs’ we aim to
consisting of at least three major
satisfy. In practical terms Abell’s
perspectives. First and foremost,
methodology (Figure 6) for building
marketing brings about some basic
an organizational mission around
reason for a company to exist in
three components namely, what
a society and such centrality is
customer needs, for which segments
expressed in the form of the popular and by which technology provides
marketing concept: An orientation
us with an excellent framework for
that a business is not a ‘ goods
commencing our strategic planning
producing process’ but essentially a ‘ initiative. Segmentation, Targeting
customer satisfying process through and Positioning, popularly known
value creation’ and at the forefront
as STP strategies is the area of
of a business’s profit making
marketing knowledge and practice
capability is customer satisfaction.
that is often an integral part of most
Profit is ideally the outcome of
strategic plans.
(What) Customer needs
(Whom) Customer
Segments
(How) Alternate
Technologies
(Adapted from Abell, F Derek
(1980) Defining The Business: The
Starting Point of Strategic Planning,
Prentice Hall, N.J)
On a more implementation
focus marketing mix consisting
of Product (including branding)
Price, Promotion and Place
(distribution) are the familiar
marketing inputs that constitute the
tactical foundation of organizational
strategy and are mostly the widely
practiced and visible activities
of the marketing function of the
commercial organizations.
Given the above discussed
three major perspectives and
role of marketing in an overall
organizational context, it is
relevant to observe that marketing
orientation is a fundamental
foundation of a modern commercial
organization. We have also
discussed marketing orientation as a
principal driver of profitability and
what embraces such orientation.
The drivers of such an orientation
were discussed under ‘customer
orientation’, ‘competitor orientation’,
‘inter-functional co-ordination’
and of course the all important
‘profit orientation’. To be valued
as a progressive and an effective
business partner, the Accountants
no doubt will have to figure out their
respective contributions towards
each such component in market
orientation as well as effectively
integrate with all aspects of a
company’s marketing function and
it is the responsibility of the Chief
Financial Officers in commercial
organizations to inculcate such value
attributes in the members in his
or her functional area, the Finance
function. The emergence of hugely
59
popular Balanced Score Card (BSC) in the 1990’s is an important strategy
implementation tool that emphasizes the importance of process orientation
by logically linking the sustainable profit creating capability as a function
of customer satisfaction that will result through crafting of customer
centric processes as value delivery vehicles. The concept of Balanced
Score Card and it’s powerful logic is an expression of the importance of
process oriented thinking that will guide an organizational members to
rally around key themes of strategic importance cutting across functional
activities. No doubt adoption of this methodology and thinking grounded
in terms of balanced scorecard logic will lead to more meaningful strategy
implementation and promote better market orientation and functional
integration.
References
1. Best, J Rodger (1997), Market- Based Management, Prentice Hall, New Jersey)
2. Day S.George (1999) The Market Driven Organization, The Free Press, NY
3. Narver,C John and Slater F Stanley (1998) “Creating a Market Orientation”, Journal of
2(3)
Market Focused management,
4. Deshpande, R and J.U.Farley (1998) “Measuring Market Orientation: Generalization and Synthesis”, Journal of Market
Focused management, 2(3)
5. Abell, F Derek (1980) Defining The Business: The Starting Point of Strategic Planning, Prentice Hall, N.J
60
The APT
(Advanced Persistent Threats) in
a Nutshell The APT - Overview
Dr. Sameera de Alwis
T
CEO/Snr. InfoSec/Cyber Defense, Digital Forensics and Cyber Consultant. Hacklmpact International INC?LLC,
Tel-Aviv Israel and Colombo - Sri lanka,
Snr. Computer, Cyber and Digital Forensics Consultant and Senior Lecturer. CID (Criminal Investigation Department),
Department of Police, Colombo - Sri Lanka.
and functioning orchestration.
The nationstate are the utmost
antagonistic perpetrators for the
APT(s). Over the bygone years,
the news media have unveiled
numerous statistics of efficacious
“Knock… Knock… Knock… wake APT(s) outbreaks focused in
up Neo - Follow the White Rabbit... contradiction of high-profile targets.
(Notion reserved from the motion
APT is not a vector of outbreak
picture entitled “The Matrix””. The
and/or playbook of strategies. It is a
APT is an utmost vital interrogation collective crusade and assailants are
these days in the digital world or
not ordained by a formulation factor
cyber interstellar of contemporary
or restricted to cyber- outbreaks
information era. The APT routinely or cyber intelligence. Enticement
has unconventional digital outbreak and inducement, physical or logical
competences and it does not mean
surveillance, confidence playoffs or
hi-tech proficiencies always, then
whatsoever goes. There is no defined
again well strategic, systematized
formula for APT(s); approaches,
and occasionally hybrid executed
tactics and technologies variation.
just like a top-secret US undercover Then again rudimentary stratagems
operation 9/11 was avant-garde. In
of deception and evasion are robust
addition to aforesaid supplementary athwart time.
information and crossway point, the
It is a mammoth intimidation
persistent outbreaks are to uphold
and stern seizure (null-security
conversant and uninterrupted
upshot) to the Electronic Business
access to information and cyber
(e-business), Electronic Commerce
empowered networked systems.
(e-commerce), Mobile Commerce
An APT, in business terminology,
(m-commerce), Mobile Business
is a refined, beset outbreak against
(m-business), Electronic Banking
a computing system encompassing
(ebanking), Mobile Banking
an augment valued resource or
(m-banking) and Information/
supervisory of a physical system
Digital Security as such vital online
(also termed as Data Leak or
business as well as high-tech
Data Loss). APT(s) every so
allied arenas in the global digital
often necessitate formidable
domain. Also it is austerely hit back
system resources, proficiency,
he “ADVANCED
PERSISTENT
THREATS” also
known as the “APT”…
what does it preordain?
and inexorably confronted to the
Business Continuity (BCP/BCM
– Business Continuity Planning/
Business Continuity Management),
Cloud Computing, Digital Forensics
including Computer Forensics or
Cyber
Forensics using most frequently
advanced Anti-Forensic Techniques,
Computer/Cybercrime Law
Suites, Business Recovery/Incident
Recovery (DR – Disaster Recovery),
Incident Response, National
Security Grid of Governments,
Military, Aviation, Bank/Financial,
Intelligence, Telecom, Internet
etc. compromises over its quake
cutting-edge outbreak capabilities
to internal/external functions and
conserve the control of those in the
systematic routines.
Who are the parties behindhand the
scene of APT?
1. The State Sponsored APT
2.
(SSAPT)
The Criminal APT (CAPT)
Those are the bi-responsive (hybrid)
interim declarations for the
aforementioned significant decisive
query.
The rigorous motivation of
SSAPT is emphasized on the
numerous authoritative (top
61
surreptitious) global military
and intelligence organizations
such as Air, Space, Land, and
Sea as well as predominantly
cyberspace dominance. It is an
asymmetric digital warfare with
most intelligence agencies to
launch their digital surveillance
and the motivation is behind
the APT is mostly an inordinate
digital defense necessitates or
decent offensive (illicit) routines/
invasive pathology also referenced.
It is now on the intelligence,
reconnaissance and surveillance in
the business perspective and it is
attacking the intellectual property
comprehensively.
Command-and-Control
(C2 or C&C) - A stealth backdoor
(agent/zombie) is installed on the
compromised PC(s) that opens it to
remote control.
The CAPT motivation is
emphasized on the data means
money (monetary) and how do
they generate excessive amount
of money? By diversifying and
automating outbreaks such as
unlawful hacker-net, cavernous
Dark-Nets, illicit Bitcoin networks,
anonymous proxy hacker nets
counting cloistered TOR (The Onion
Router) based cyber terrorists
nets in the cyber world acquire
remunerated by the infection;
dominant hacker amasses total
data. The CAPT will only convert
supplementary effective operation
and it characterizes a significant
intimidation to national security.
4.
Data Exfiltration - The
invader exfiltrates the internal
resources to external hosted sites
under the assailants’ administration
and rheostat. Transitional hosts
inside the association may serve to
accumulate the targeted internal
data, which is frequently extremely
compressed and highly encrypted
for concealment.
Subsequent acknowledged APT(s)
frequently unfold in a collective
series of stages from the initial
infection of APT(s):
1.
Social Engineering
- Workforces of the targeted
association receive spearphishing
e-mail, every so often via
compromised companion
establishments or social networks.
Opening the e-mail attachment or
clicking on an embedded
62
URL/link causes the operative’s
computer to turn out to be infected.
Assailant occasionally customs
the Reverse Social Engineering
strategies as well against their
designated targets.
2.
3.
Lateral Movement Given an adhesion in the targeted
association, the assailant customs
stolen credentials, escalated
and elevated system privileges,
or exploitation of software
vulnerabilities counting system
software to access supplementary
internal computer systems hosting
in elevation-value resources.
At the present time retro, the global
high-tech prolific authoritative
establishments are failed to
safe-guard their systems (digital
guardianship) due to APT attacks
even though they installed most
high and affluent technologies
HSM (Hardware Security Module),
LAN/WAN Hardware Encrypt
(Encryptor) technologies, DLP
(Data Loss Prevention) systems,
Firewalls or Ingress/Egress Filtering
and ACL technologies counting
NGFW (Next Gen Firewalls
with Application Intelligence
(API (Application Programming
Interface) based App-ID, User-ID,
Content-ID and SP3 Architecture
– Layer 7 Firewalls), Manhunt
and Intrusion Detection Systems
(IDS), Mantrap devices such as IPS
(Intrusion Prevention Systems),
XPS (Extrusion Prevention
Systems), Digital Decoy/Lure
Network Appliances such as High
or Low Interaction Honeypots
and Honey-Nets, UTM (Unified
Threat Management), SWG (Secure
Web Gateways), Network Policy/
ACL based systems such as NAC
(Network Access Control) and
NAP (Network Access Protection),
RFID or smart access devices such
as Smart-Card or Biometric Access
Devices, Multifactor Time Based
Authentication Systems, Syslog
Systems, Integrity Checkers, EndPoint and Anti-Malware Protection
Systems, Spam/Phishing Prevention,
Content Control and URL Filtering
Solutions, Backup and Patch
Management Solutions, PKI (Public
Key Infrastructure) and VPN
(Virtual Private Network) Solutions,
Sandbox and Sheepdip Tactics,
Network Monitoring (Digital
Watch-Guard and Watchdog)
Systems and Enterprise Network
Monitoring Hops (NOC - Network
Operational
Center) or SOC (Secure Operational
Center) Solutions, Automated
Vulnerability Management
Solutions, Dongle (Hardkey) based
Software Protections, Scrambling/
Obfuscation Tactics for Software,
Application Defense Audits and
Penetration Testing, HA (High
Availability) Systems with Heartbeat
Load Balancers based on Round
Robin and QoS (Quality of Service),
SDL (Security Development
Lifecycle), Software QA/QC
Life Cycle counting Selenium
Automation, Stress
Testing (Fuzzing) and
supplementary Software
Performance (Burn Test/
Benchmark) and Security
Testing, HIPS (Host Intrusion
Prevention Systems), Virtualization
Technologies and Hypervisors,
GSM/Wireless Access Technologies,
DDoS/Zero-Day Prevention
Technologies, Corporate System
Audits and Security Policies and
Global Standards Compliances such
as ISO. Also in such manner, the
even though they compliance with
6 atomic elements of information
security (Confidentiality, Integrity,
Availability, Possession, Authenticity
and Utility), their business systems
turn into the victims of the APT
assailants.
WORLD’S MOST RENOWNED
DATUM ASSORTMENT OF APT
The Operation Aurora outbreaks
against the Google and a loads of
supplementary global businesses
in 2009 and 2010 seemingly
intended to tamper with critical
software source code. They
provoked Google Inc. to withdraw
its functioning integration from
landmass of Peoples Republic
of China, whose government it
discovered as the instigator. The
Stuxnet (First PLC rootkit and it is
a truly weaponized malware), lively
functioned throughout late 2009,
was a sophisticated computer worm
with an arsenal of quadruple zeroday outbreaks. It beset industrial
SCADA (Supervisory Control
and Data Acquisition Systems)
hardware platform for uranium
enrichment in the landmass of Iran,
purportedly with triumph at the
Natanz nuclear facility. Also SCADA
based a number of Electrical Smart
Grids in major metropolises in
the world relentlessly affected
due to numerous custom made
advanced SCADA Exploits and
Shellcodes. Afterward of this
instance, the physical (computer
system hardware) impairment
from cyber-built outbreak is no
longer a transcribed philosophy. In
2011, RSA Laboratory, the security
division of EMC, proclaimed a
digital breach focused against its
widely used RSA SecurID twofactor authentication hybrid tokens.
The corporation accredited the
outbreak to an anonymous nationstate whose pivotal objective was
U.S. military defense contractors.
Afterwards, the PoS (Point of Sales)/
ATM (Automated Teller Machines)
as well as Cloud (Big Data Mining
and Compute Cloud) based complex
malware variants rapidly propagated
inside the global cyber grid within
the context of past few years. The
victims of APT(s) are miscellaneous
and numerous, nevertheless.
Establishments spanning more
than thirty diversify business
classes are identified to have been
beset, counting non-profits, sports
agencies, telecommunication, news
media titans, and the power/energy,
electronics industry and many
more triumph at the endless digital
encounter. APTs undeniably endure
anonymous; hitherto others have
gone concealed.
haphazard data sets in an attempt
to identify APT1’s central frame:
the system of hops, distribution
sockets/points or relays, and the
Command and Control (C2) servers
that positioned amid APT1’s victims
and core C2 servers positioned
ultramarine territories in different
geographical locations. To form such
infrastructure, APT1 selected and
exploited specific establishments to
obfuscate communications while
lingering in plain contextual sight.
By coalescing key unclassified
vital information, the researchers
efficaciously defined an enormous,
anonymous malicious network
used to steal critical information.
From the time when Mandiant
publicized these information
concerning China’s alleged cyber
espionage unit, APT1, there has
been augmented media courtesy and
rapid hype on cyber competences
in the transnational arena. Even if
the particulars of cyber missions
are concealed under veils of
clandestineness, the footprints left
behind throughout and afterward
execution are progressively
outward in numerous fragments of
unclassified data.
ADVANCED PERSISTENT
THREAT 1 (APT1)
SUPPLEMENTARY SUMPTUOUS
VIEWPOINT
The Mandiant (in 2013) tracked
and disclosed APT1; one of Chinese
alleged cyber espionage prolific
assemblages of APT1 set-ups.
APT1 is a solitary association of
operators (lone wolf cluster) that has
directed a cyber-espionage crusade
against an extensive arrays of APT1
victims from the time when at least
2006. From the interpretations and
exclusive vantage point of retorting,
it is one of the utmost prolific cyber
espionage clusters in terms of the
steep magnitude of information
embezzled. Mandiant investigates
To comprehend the connotation
of the APT in a vibrant modus,
we contemplate it is truly valuable
to reinforce certain number of
explanation around APT(s). The
solitary approach to do that is to
splinter the term of APT into its
integral components as such “{A}”,
“{P}” and “{T}”.
ADVANCED
Cyber security whizzes explained,
it is not connote simply that the
code consumed in APT outbreaks
is sophisticated in landscape, then
63
again that the adversaries and
their approaches are incredibly
advanced. With addition to that,
without a doubt ample amount of
contemporary malware used in
these outbreaks overlaps or shares
computer software program with
prevailing roots of commodity
malware that is in comprehensive
covert transmission. Assumed to
the sophistication manifest at the
high end of that arcade, note that
contemporary high-tech forensic
analysis (malware forensic over
the cyber domain) of evasion
practices built into the cutting-edge
generation of the DGA (Domain
Generation Algorithms) or MCS
(Malware Cluster System) with
Self-Melting Bots/Zombies or
AIWHS (Artificial Intelligence
Weapon-Head Sensor) based
malware in hygiene network grid or
TDL3/TDL4 Rootkit or Firmware
Rootkit or RSPA (Reversing
Search Poisoning Attack) based
Polymorphic Shellcodes/Exploits or
Bootkit as hybrid version types as
numerous instances, as well as the
comparative affordability of custom
made (undetectable routine FUD
(Fully Un-Detected) Stealth and
Crypted based executable malware
binary payload) unconventional
malware from coders for employ, it
would be problematic to argue in
extensive manner that there custom
made malicious codes embedded in
APT(s) are confidently sophisticated
than the commodity malware.
Observing at the particulars of
publicly revealed APT outbreaks
like Titan Rain, BlackShades, RAT
(Remote Administration Tools
based Trojan Horses (Ex.
GhostNet, CyberGhost, XtremeRat,
DarkComet Legacy, LokiRAT,
Paradox RAT, Cybergate, Spy-iNet,
Omegle Spreader etc.), Operation
64
Aurora, Red-headed Botnet, Tiger,
Web-Sorrow, Cythosia, Pony,
Umbra, Vertex Net, Andromeda,
custom made Zeus Botnet (FUD
iterations based Bot-Armies)/
Anonymous LOIC or HOIC (Low
Orbit Ion Canon/High Orbit Ion
Canon) with Stealth TCP Host
Boosters/Booters (Ex. Rage, Jays,
JeeJee, Knoflict, KyleFYI, Ligion,
Tyler, Wormf00d, Atomic, GBooter
XBL, NetWeave, Slowloris, Seizure,
TDS etc.) embedded DDoS
(Distributed Denial of Service)/
RDoS (Reflected Denial of Service)
like Traffic
Tornado/Twister or Bogus/Error
RAW TCP Mass Traffic Flooding/
Storm enabled austerely innovative
malware (Ex. DaRKDDoSeR,
AnonDDOS, Optima 10Darkness
etc.), Serious attack vectors such
as The Red-Headed-League, The
Speckled-Band, The Blue-Carbuncle
and Bohemian-Scandal Outbreak
are the most multifaceted, vivacious
and eminent in the world of APT,
Exploit Kits/System PWN Toolkits
and Shellcode Kits (Ex. Blackhole,
Bleeding Life, winAUTOPWN,
Crimeware Pack, Ice Pack Platinum,
Luiz Eleonore Exp, Firepack,
Infector, Mpack, Multisploit, 0x88,
Phoenix, Unique Pack, Roblox
etc.) Mass Online Game Bots
(Ex. Evil Warcraft/Minecraft,
Xeno, WarCrawler Premium,
HearthCrawler etc.) based APT(s)
counting their numerous distros/
variants and the newly publicized
outbreaks on mostly American
(Blue-Chip/Fortune 100-500)
companies, the term “Advanced”
enhanced put on to the planning
and execution of the outbreak as
well as the resources accessible to
the invader than to the malicious/
malcode software used.
In specific manner the legacy
opponent’s reconnoitering of its
victim, the forming of sophisticated
and trustworthy Social Engineering
(Ex. Spear or Desktop Phishing,
Spamming, Social Media/Network
Based Attacks etc.) outbreaks that
permit them to bypass or evade
local defenses, the systematic,
cautious and stealthy landscape of
their engagements and approaches
ensuing to gaining access every
contribute to the term of an
advanced intimidation. Less
discriminating adversaries might
aim widespread and stress-free to
exploit the potential vulnerabilities
such as those instigated in versions
of the Microsoft Windows or in
collective software such as
Adobe’s Acrobat (PDF) Reader
or famous Web Browsers or they
might use Instant Messengers (IM),
Email clients, Social Media Apps
on Mobile Devices and the web as
outbreak vectors. Then again, when
remote outbreaks via Email, Social
Media Apps, Instant Messengers or
the web are used, they are almost
certainly fixed with a beleaguered
(also known as Spear Phishing) or
Social Engineering outbreak against
great value aims (also known as
whaling) afterward the significant
online reconnaissance.
The Social Networks and the web
nowadays formed such Open Source
and free intelligence/information
gathering, cyber spying (espionage)
stress-free and dominant. The
APT(s) might also force a remote
exploit of an Operating System, Web
Browser or application software
vulnerability to setback a traction
on a target host or the network. On
the supplementary hand, they might
just as effortlessly be familiarized by
a trusted insider or interloper with
genuine credentials which are at that
point leveraged in future phases of
the outbreak. With an illimitable
subterranean of impending
commercial aims and most revenue
interested hackers even sometimes
sophisticated ones are implausible
to disburse the identical amount of
dynamism on a solitary target.
PERSISTENT
As for the supplementary
exceptional characteristic of APT(s)
their persistence on one occasion
again. The impression behindhand
this is to annotation a qualitative
variance with less discriminating
outbreaks and adversaries. Through
persistence, we annotate the
focused and persistent landscape
of APT(s). The APT adversaries
distinguish, frequently in countless
detail of what information or at
least what forms of information
they are after before their outbreak
instigates and are distinct minded
in their chase of it throughout
that outbreak. The catastrophe
of whichever solitary business
venture is improbably to terminate
a mission. Somewhat adaptive
persistent opponents will have
explored a number of outbreaks
to be tried in simultaneously or
in sequence to accomplish their
objective. Added supplementary
insights in to the aforesaid, if
pointing high level constables
fails the cutting-edge adversaries
will go next minor power, then
transfer toward their anticipated
target(s). Also to provision to the
aforementioned statements, if the
remote compromise is implausible,
APT(s) might cogitate swapping an
insider or implanting one of their
own inside the target association.
compare APT(s) with the malware.
As annotated to aforementioned,
although APT(s) might well use
software Exploits, Rootkits, Worms,
Viruses, BOT(s), Trojan Horses or
supplementary malware as share
or propagation their outbreaks,
the APT(s) are adversaries not
merely the software tools/utilities.
On the supplementary hand, it
is worth observing the tangible
that the APT(s) every so often
depend on malware and malicious
codes, that there are distinctions
value noting among the varieties
(flavors/variants) of malware used
in APT outbreaks and in non-APT
outbreaks. At the extremely higher
level of explanation state that we
have faith in that the distinctions
among APT allied malware
and what we name commodity
malware are typically a substance of
gradations rather than unambiguous
differences. Topography wise
reinforced to the aforesaid
particulars, the tools used by APT(s)
are identical or similar to non-APT
allied malware. In fact they might
scrounge code from the commodity
threats, then again APT(s) privilege
(escalation) perseverance in excess
of propagation.
The remote access to aim hosts, the
networks and the sensitive data they
enclose is the decisive objective of
every variants/distros of malware.
On the supplementary hand cyber
security connoisseurs explored
where commodity intimidations
are probably to be lurid and messy,
the APT(s) will be muted and
deliberated reaping or mining data
on infected and compromised
hosts prudently before moving on,
horizontally to the additional targets
THREATS
in their attack grid. Also targeted
aforesaid minutiae to boost-up
The term threat has engendered
ample misperception leading certain their explanations by stating the
preliminary compromise might
inside the security community to
come by approach of vulnerabilities
in collective computer/internet
software in both cases, then again
commodity intimidations will be
add-on likely to custom publicly
disclosed software application bugs
(vulnerabilities) and exploit the
patch vacuity.
The APT(s) will be more probably to
rely on confidentially researched and
formerly anonymous (undisclosed)
vulnerabilities or custom made
(private) exploits explicit to the
selected network and system
mostly over the cyber space or
maybe occasionally by penetration
(compromising) of explicit physical
securities (nontechnical attacks).
By way of the dimensions or
magnitudes of conversation about
APT(s) upsurges and misperception
about just what establish an APT has
augmented in fraction. In numerous
occurrences, we have perceived the
term of APT used interchangeably
with the malware or for precise
intimidations such as Botnet(s). In
supplementary cases, vendors have
pursued to confine the APT(s) to
government backed outbreaks on
military/intelligence and regime
agencies. That is a thoughtprovoking
argument then again one that is
spherical; APT(s) are eminent by
their emphasis on government
computer networks for the reason
that government bodies were the
first individuals to start conversation
about the APT(s). We contemplate
it is sensible then, to strengthen
several characterization around the
APT(s).
COUNTERMEASURES TO
COMBAT APT
The world revealed the substantial
volume of APT’s outbreak
concomitant information counting
APT set-ups (architectures,
65
blueprints and outbreak profiling
models as well as outbreak vectors),
Command-and-Control, and
modus operandi (utilities, tools,
tactics, and procedures). At the
contemporary time retro, there are
voluminous transnational high-tech
information security, computer and
cyber security research institutions/
firms are piloting numerous
serious high-tech researches on
APT outbreaks. In accordance to
their thoroughgoing analyses and
revelations on APT outbreaks, the
subsequent form of summarized
factors and research arenas can be
contested with APT outbreaks in a
decent manner with the efficacious
and satisfactory aspect ratio.
Discovery of Malicious Flux Grids
via Enormous Gauged Passive
DNS Traffic Analysis, Detecting
Logic Vulnerabilities and Deobfuscating Embedded Malware
using Probable-Plaintext Outbreaks,
Unrestrainedly Automated Malware
Clustering Validity Analysis, Hybrid
Adaptive Intrusion Prevention for
Stealth Malware, Multidimensional
Aggregation for Enormous Gauge
Traffic
Monitoring and Traffic Snooping
Decoy Services, Abetted Detection
of Vulnerabilities Extrapolation
using Machine Learning, The
Multiple Classifier System for
Accurate Payload Constructed
Anomaly Detection, Construction of
Dynamic Reputation Architectures
Remarkable cavernous high-tech
for DNS, Tera-Gauge Raw Data
research arenas are; Mining APT
Mining for
and Botnet Sink Holes and Sinkhole Malware Detection, Anonymously
Routing Architecting on Enterprise De-anonymizing and Disabling the
Networks, AI (Artificial Intelligence) Anonymous Covert Channel Attacks
based (Anomaly) Intrusion
and Self-systematized Collaboration
Detection and Dissecting Malware
of Distributed IDS Sensors etc.
Patterns, Rapid, Robust and Scalable
Code/Parameter Reuse Detection in CONCLUSION
Binary Malicious Code, Automatic
The perpendicular scale and period
Logic Trigger Analysis of Malware
of persistent outbreaks against such
Behavior using Machine Learning,
Enormous Gauge Cavernous Syslog an eclectic set of diligences from an
exceptionally identified group based
Analysis for Monitoring/Detecting
in the whole world leaves diminutive
Suspicious Activities in Enterprise
Network, Full Binary File Analysis/ doubt about the organization
behindhand the APT(s). To combat
Detection (Comprehensive Packet
Reassembling), Rapid Bug Bounties APT threat effectively, without
inaugurating a dense linking to
and Pwn-to-Own Contests,
Algorithmic Cyber Surveillance and the APT groups in the global
cyber domain, there will always
Geo-Location Tracking, Heuristic
be scope for bystanders to dismiss
and Bloodhound based Searching
APT movements as awkwardly,
Out Malicious Input Patterns in
exclusively criminal in nature, or
Network Streams for Automatic
outlying to patronizing national
Repair Validation with ECC
security and worldwide economic
(Error Checking and Correction),
trepidations.
Boost up the Scalability of Botnet
Detection by means of Adaptive
I would precisely vow that the
Traffic Sampling, Security Data
APT(s) are the next generation
Drift Tracking as a Cloud Service,
cyber emerging surveillance
Decoy Document Deployment
(Cyveillance) technologies based
for Operative Masquerade Attack
mammoth canon powered digital
Detection, Content and Resource
weapon proceeding rapidly in
Agnostic Malware Defense, Initial
cyberspace, digital cold-war
66
utility grid which can entirely
wipe out nation’s digital assets/
information base off-of-the-grid
(Dataveillance) or optimum digital
warfare tool can generate a nuclear
winter effect on whichever of the
global business venture/governing
institution or military/intelligence
or supplementary law enforcement/
government organization
throughout the global cyber
domain. The APT(s) are reflects the
Déjàvu (factually it is the meaning
of “previously perceived” and it
is the phenomenon of devouring
the robust consciousness that a life
occurrence or life experience at
the twinkling being experienced
has been experienced in the
bygone event, whether it has truly
transpired or not) effect on their
outbreaks vectors. At the end, the
subsequent triad philosophies are
being evidenced by the interlopers…
-
-
-
Nothing is Impossible
Don’t Hate The Hacker,
Hate The Code
We Always Get What
We Want
This editorial is preordained as an
exercise in flexible philosophical
thinking pattern and an
attentiveness against constricted
APT characterization. Perchance
the stratagems and strategies I
designated will even appear in
forthcoming APT(s) or if they
are not already in practice at the
moment. For an ironic, intense
compendium of ingenious
deceptions, I demanded to a
legendary motion picture: The
Matrix.
I truly and intensely aware of the
risk factor of this article poses for
me. I courageously expect whichever
reprisal aftermath from the readers
as well as an onslaught of criticism.
“Every Beginning Has an End – The
Matrix”
Invalid Value! System Needs Reconfiguration:
A suggested value-driven perspective for
IT education for organizations
Dr. B.L.D. Seneviratne
Department of Interdisciplinary Studies,
Faculty of Information Technology, University of Moratuwa, Sri Lanka
[email protected]
Abstract
social and economic actors
interacting though institutions and
The conventional functional oriented approach to the Information Technology technology…” (Lusch et al., 2010, p.
education/training of an organization leaves many drawbacks including the
20). Organizations with values that
disconnection of learners from the organizational value creation and delivery are not properly delivered or not
process. Thus, the present article intends to suggest an alternative valueup to what is promised are prone to
driven education/training for organizations mainly to align users of IT with
destruction (see Urde, 2009).
the value creation process and make them a part of the value-network of the
organization.
In present day organizations,
Information Technology has
become the glue that binds all
1. Introduction
short article intends to bring a
the elements together and with
new perspective to the role of
the outside (Melville, Kraemer,
very organization
Information Technology (IT) and
& Gurbaxani, 2004). Especially
engages in a value
the way organizations should look
considering information as one
creation and delivery
forward to educate various parties
of the most valuable resources in
process (Lusch, Vargo,
involved in the value delivery
an organization (Trauth, 1989),
& Tanniru, 2010).
process to increase its corporate
technology enables the efficient
Thus, understanding the exact
value in the value-network.
and effective means of capturing,
core customer benefit served
organizing, and disseminating
to their customer is becoming
2. Need for Value Orientation
this resource to relevant elements/
paramount in the present day
parties in the organization and
The
“value”
in
a
business
is
defined
competitive business environment
outside. Further, the conventional
from
different
perspectives.
For
(see Conner, 1991; Lusch et al.,
way of defining IT as the platform
instance, from an organizational
2010; Slater, 1997), despite the lack
to facilitate decision making is
cultural
perspective,
business
coreof such value integration with the
fading away as the systems now have
value
is
referred
to
as
“a
small
set
internal business processes as well
become robust in handling most
of
timeless
guiding
principles
that
as reflecting to the outside world
of the routine processes without
require no external justification”
(Urde, 2009). Regardless of an
human input or intervention.
(Collins
&
Porras,
1998,
p.
organization’s profit orientation,
Hence, it is becoming the stronghold
222),
while
more
a
pronounced
understanding its exact role in
of processes that generate value.
definition
can
be
drawn
from
the
the value-delivery network is
However, the question of whether
marketing perspective, especially
an essential characteristic for its
IT is treated as Information
with
regards
to
the
value-network
survival. However, it can be seen
and Technology separately still
which
signifies
the
value
creation
in the present day organizational
remains at least in the Sri Lankan
and
delivery
though
interaction.
context that IT education/training
organizational setting.
Value-network is defined as “…
largely exhibits a functional
sensing
and
responding
spatial
orientation, neglecting the most
It is apparent that workers (service
and temporal structure of largely
important process of creation
providers) consider a job that is
loosely coupled value proposing
and delivery of value. Thus, this
E
67
assigned to them and perform
only that job, disconnecting from
the business value network. This is
where “Information” can be seen as
mere information that happens to
generate through some interactions
without these parties knowing the
“value” of it within the entire valuenetwork. Hence, it is misaligned.
Technology, on the other hand, also
suffers a similar consequence. In the
present day context, computers have
become an essential component of
an office or in other locations (e.g. a
checkout counter or a warehouse),
performing only a few operations
assigned to that location, leaving the
technology mostly underutilized.
One could argue that it depends
on the type and the scale of the
organization and the nature of its
business. Yet, it depends mainly
on the utilization of technology
in terms of performing an activity
without giving much emphasis on
information available as well as
generated in such areas and the
extent to which the information is
utilized through technology to add
more value.
In other words, organizations
should look at using Information
Technology in an organization from
the value generation and delivery
perspective to align its IT education
or training with the organization’s
value. Hence, they should consider
asking;
1) What information is
available in a particular
node of the organization?
2) What information is
generated in it?
3) What value is generated/
delivered through this node?
4) How can technology be
infused with that node
to capture, organize,
and deliver informationgenerated-value to the other
68
nodes/entities?
In the functional paradigm,
providing IT education involves
3. Value Driven Approach
conventional workshop like
environments giving emphasis
The focus of this article is not
on certain aspects of a system
education in general or educating IT
and how the efficiency can be
professionals, but rather the manner
enhanced or cost can be minimized
in which IT education should be
especially from the accounting
provided in an organization to
perspective. Although, efficiency
enhance its business value regardless
can be improved though automation
of its scale.
and profit can be improved by
eliminating additional overheads
As it was mentioned previously,
associated with conventional
the importance of paying attention
systems, such an orthodox approach
to the value-network of the
organization should be emphasized. adds minimum “value” to a valueIf information is vital and becoming network leaving a potential of
being a value-driven organization
an increasingly important resource
aside. Further, the employees tend
in an organization, providing IT
education of an organization should to become slaves of the system and
be treated with similar significance. restrict their activities to what the
system allows them to perform, and
Hence, it should too be done in a
strategic manner, in such a way that consequently, serving the system
the IT education/training is aligned gets more priority over serving the
customer (internal/external), which
with the business value creation
I prefer to call “subject to the system
process. The Figure 1 proposes a
syndrome.”
way to link IT education with core
business value.
Figure-1- Proposed Perspective for Value-Driven IT Education
In contrast, IT education should
be driven by the organization’s
value-creation process, which in
turn is strongly associated with the
interactions of both its micro and
macro factors. Hence, IT education
must be indirectly associated with
the values delivered to each of
these parties /factors (see Figure
1). An organization creates values
for these parties and they in turn
communicate what is expected of
the organization in the long run.
This primary business value(s)
subsequently determine the value to
be delivered in each node/element.
Information is passed to such a node
and it will accumulate information
that needs to be passed on to the
other nodes for the same value
driven purposes. Thus, IT education
should be pivoted on such value(s),
rather than the features/functions
of IT. This understanding would
be essential when IT provides a
strong platform of integration. The
learners would then be fully aware
of the “value” of available as well as
generated information in respective
nodes they involve in and the use
of technology in the process of
enhancing it.
Further, IT education should be
provided in such a way that the
employees or anyone who uses IT
becomes drivers of it to deliver
what they are expected of; the
“value”. For this, an organization
should first need to understand
the associated value generated by
each element of the organization.
For this, the System Thinking (e.g.
von Bertalanffy, 1973) towards the
organization, which considers it
as a collection of interconnected
nodes (processes and/or elements),
will be relatively important. In
other words, an organization itself
is an interactively integrated value
delivery system and each node/
element in it becomes a contributor
of the entire process. This view
further would enable organizations
to understand each node with the
four questions suggested previously.
Only with this understanding, an
organization is able to consider the
instructional design, delivery, and
assessment of proper value-driven
IT education and training.
The alignment between the
value and IT education in the
organization would bring many
pros on to the table. 1) People will
have better understanding about
the information available to them
through the system (referred to
the organization as a system, not
information systems) and how such
information be better utilized to
add more value to the value that
is already generated though the
system. Thus paying attention to
the use of such information in the
system and ways and means to add
more value should be facilitated by
the technology. Hence the users of
IT must be educated from the value
network standpoint in contrast to
the information systems (IS) or
functional perspective. 2) They
will have better appreciation of
the information generated in that
particular node which is relevant
to that node, at the micro level; to
the organization at institutional
level; and society as well as natural
environment, at the macro level.
Next should be the emphasis on
exploring ways to educate to use
IT to effectively capture, organize,
and deploy the information
throughout the value network of
the organization, and beyond, to
enhance the total generated value.
3) Users will not become slaves
of the information systems that
they are expected to operate with,
which more or less defines the
activities of that node, but rather
become the users of technology
in any manner necessary to add
value. 4) Further, adoption of new
technology can be facilitated. Unlike
the conventional way of educating
users with the system features and
respective uses, the learners as well
as educators in a new paradigm of
thinking will have an emphasized
value-network of the organization.
Hence, new technologies can be
easily communicated as the tools
to facilitate the value generation
and delivery having associated the
features with actual processes of the
value-network.
4. Conclusion
It was intended to briefly present
the novel and value driven
approach to provide IT education
in an organizational setting. The
conventional method of functional
oriented IT education leaves many
drawbacks including the learners
being disconnected from the most
important process of value creation
and delivery. Thus the proposed
perspective suggests to align the
IT education in an organization
considering the “values” generated
by the business and the value
addition done by each node/element
of the organization to the cause.
Thus, the model tries to capture
the micro and macro factors in the
organization that value is created for
and delivered to and uses such a way
of thinking as the basis to shape the
IT education in order to infuse all
the employees of an organization to
the value-network.
References
Collins, J. C., & Porras, J. (1998). Built to Last. London: Random House.
Conner, K. R. (1991). A Historical Comparison of Resource-Based Theory and Five Schools of Thought Within
Industrial Organization Economics: Do We Have a New Theory of the Firm? Journal of Management,
17(1), 121-154.
Lusch, R. F., Vargo, S. L., & Tanniru, M. (2010). Service, value networks and learning. Journal of the Academy of
Marketing Science, 38(1), 19-31.
Melville, N., Kraemer, K., & Gurbaxani, V. (2004). Review: Information Technology and Organizational
Performance: An Integrative Model of IT Business Value. MIS Quarterly, 28(2), 283-322.
Slater, S. F. (1997). Developing a customer value-based theory of the firm. Journal of the Academy of Marketing
Science, 25(2), 162-167.
Trauth, E. M. (1989). The evolution of information resource management. Information & Management, 16(5),
257-268.
Urde, M. (2009). Uncovering the corporate brand’s core values. Management Decision, 47(4), 616-638.
von Bertalanffy, L. (1973). General System Theory: Foundations, Development, Applications: Penguin.
69
OUTSOURCING INDUSTRY IN SRI LANKA
A JOURNEY FROM GOOD TO GREAT!
Mr. Vidushanka Hewagamage,
MSc IT, AMBCS, is the General Manager of MediGain Pvt. Ltd
[email protected]
ABSTRACT
Outsourcing, in simple, means purchasing the services of an external vendor to perform an internal business process.
China and India are the giant vendors in the outsourcing industry for products and services respectively. Since mid1990’s, outsourcing of professional services shows an exponential growth. Within the last 15 years, Sri Lanka has
become a significant competitor in the outsourcing industry as a service provider. According to SLASSCOM, the
trade association for the outsourcing industry in Sri Lanka, the industry has doubled the workforce and tripled the
revenue within the last 5 years. The industry has brought the rest of the world closer to Sri Lanka in terms of the
latest technologies, the working culture, the infrastructure and the knowledge base. Business Process Outsourcing
industry is now transforming into Business Process Management industry. The services have evolved from Call
Centers, Data Entry services, to managing complex business processes such as Revenue Cycle Management, Legal
Process Management etc. Even though the industry is stable in Sri Lanka, it lacks the awareness to the public.
SLASSCOM and ICTA (Information and Communication Technology Agency of Sri Lanka) are working hand
in hand, with the help of the current outsourcing companies in Sri Lanka, in order to create that awareness from
School level.
O
INDUSTRY BACKGROUND
“
utsourcing” means
purchasing the
services of an
external vendor/
service provider
to perform an internal business
process, for financial or expertise
gains. Off-shoring is a term used
when the work is outsourced to
a different country to obtain the
benefit of various time-zones,
in addition to the financial and
expertise gains which follow.
and India are major outsourcing
destinations which fulfill industrial
requirements i.e. vehicle spare parts,
machinery, electronic equipment
etc.
attention of the western world as a
preferred business destination.
In early 2000’s the Sri Lankan
entrepreneurs introduced the
same concept to Sri Lankan
Outsourcing of professional services business culture. First-hand
started to expand across the world
interaction with the western
since mid-1990. The recession
society, modern infrastructure,
of year 2008 provoked the need
computerized working environment,
to outsource business processes.
unconventional working culture
Even the companies which did not
and significantly high salaries
prefer outsourcing due to emotional attracted the Sri Lankan youth.
reasons, such as the strong will
The investors were positive about
to retain jobs inside the country,
the concept because all the above
were compelled to give priority to
could be dispersed to the Sri Lankan
Outsourcing of production lines
financial stability of the business,
economy without compromising on
has been a popular practice for
which made sense to Outsource.
the profitability of the business. The
years in different forms in the
industry helped Sri Lanka to go a
recent business history. The US
In the late 1990’s, India experienced few years forward, in a shorter time.
and the countries in the EU started a boom in its outsourcing industry. The conventional business models
outsourcing its apparel requirements India firmly established its name
got upgraded with world-class
in mid-1980 which has been a
in the global market as a viable
business practices.
consistent practice to date. China
financial solution and received the
70
POTENTIAL AND
OPPORTUNITIES
Within a short time span of 15 years,
Sri Lanka is now recognized as a
strategic destination for business.
Post-war Sri Lanka is one of the top
5 new emerging economies in the
world (www.coface.com). Tholons
(www.tholons.com) recognizes
Colombo within its Top 20 cities
for outsourcing year after year since
2012, and National Outsourcing
Association of UK (www.noa.
co.uk) recognizes Sri Lanka as
the Best Outsourcing Destination
year after year since 2013. A. T.
Kearney Global Services Locations
Index 2014 (www.atkearney.com)
recognizes Sri Lanka within its Top
20 Best Destinations for Business.
According to SLASSCOM (www.
slasscom.lk), in the last 5 years, the
workforce doubled to 63,000 from
34,000. The number of companies
increased to 300 from 200. Exports
increased to $300 million, from $100
million.
Outsourcing industry is one of the
top 10 export revenue generators for
the Sri Lankan economy. As of 2013,
per year export revenue distribution
is;
•
•
•
•
•
•
•
Revenue from foreign employment: $6.4bil
Apparel: $4.2bil
Tourism: $1.8bil
Tea: $1.6bil
Gem and Jewelry: $600mil
Outsourcing: $300mil
Spices Exports: $100mil
Sources:
www.foreignemploymin.gov.lk
www.sltda.lk
www.srilankabusiness.com
www.pureceylontea.com
The industry expects the export
revenue from outsourcing to exceed
$1bil by 2016.
CONTEMPORARY ISSUES
soft skills and on-the-job training.
With the extensive training provided
Business process outsourcing
by the outsourcing companies,
industry in Sri Lanka is now
potential employees can get into a
transforming into business
world-class career path. Above the
process management segment.
average salaries will help them invest
The difference is, going from
in their higher studies. In other
managing part of a business
words, this industry has provided
process to managing a full business
a second chance for everyone,
spectrum. The services have
evolved from call center, data entry whether one wants to start from
the scratch, or one wants to use the
services to managing complex
educational qualifications and start
business processes such as legal
the career from a suitable position.
process management, revenue
By the time a full time student
cycle management (US healthcare
gets out of the university with a
industry) etc.
promising job opportunity at hand,
This transformation has upgraded
an employee in an outsourcing
the industry standards immensely.
company will also complete their
A few years ago, English language
higher studies with a few years
proficiency and basic computer
of working experience and an
literacy gave the young job hunters a established career.
promising entrance to the industry.
Now, the industry requires potential Prior to the beginning of the 21st
employees who can grow into
century, it took some time for new
managing outsourced processes. The technologies and better practices to
greatest advantage for the potential arrive in Sri Lanka, while the rest
employees in the outsourcing
of the world moves forward. The
industry is that the companies invest outsourcing industry has brought
a significant share of operational
the rest of world closer to Sri Lanka.
cost in Training of staff. Companies The employees of the outsourcing
spend thousands of Dollars for
industry get exposed to the latest
training of each individual that
technologies real time, as soon as
walks into the company. Companies they are introduced in the rest of the
invest in building the leaders in the
world.
company internally.
Most of the outsourcing companies
A minority of the students who sit
have tight ties with their customers
for GCE A/L gets selected to go to
and branch offices in other countries
the local universities for full time
higher studies and another minority which provides opportunities for
who can afford to spend money will the employees to travel abroad very
often.
either go abroad or get into private
universities for further studies.
There is a significant number of
students who are capable, but miss
their opportunities for further
studies. The industry opens its arms
to any category of the potential
employees regardless of their present
educational background, as long
as their attitude, capability and
potential would fill that gap. And
then, the companies will invest in
the employee’s higher education,
For someone who is working for a
complex process such as revenue
cycle management or legal process
management, the longer you
perform in the company your value
increases drastically. The growth
within the company is unstoppable
due to the complexity of the
process which requires continuous
training and development through
experience.
71
CHALLENGES
Conventional Thinking
Conventional thinking regarding
professions is the biggest challenge
for the growth of the industry. The
competition to become a Doctor, an
Engineer or a Lawyer is what every
child grows with. This reflects the
reluctance from the parents and
the school teachers to promote the
Outsourcing industry for students.
Being a voluntary career counselor
for the past many years, more
often than not, I meet teachers
who participate the industry career
guidance programs with some sort
of a reluctance. Once I met a teacher
who had participated the program
with just one child from the whole
school. What he revealed was that
the teachers in his school believe
that the industry is taking away
the children from their dreams to
pursue conventional professions
such as to be Doctors, Lawyers and
Engineers, hence they object such
career guidance programs. This has
limited the knowledge pool of the
country to its main cities such as
Colombo, Kandy and Galle.
• Companies provide one
or two ways transport, or
a separate allowance for
transport:
People generally spend
over 10% of their salaries if
they use a private transport
vendor or a private vehicle
for traveling to office. If it is
public transport, of course
there is a saving, but with
some additional hassle. The
most of the BPOs give at
least one way transport to
door step in air conditioned
vehicles. If the price of this
service was evaluated, and
take it as a saving in money,
annually employees would
save a significant amount of
money, sometimes over an
amount of few months of
salary. It would help anyone if
an additional month of salary
is in their bank account at the
end of the year.
•
Night Shift
Working in the night shift is seen as
an inconvenience by someone who
has not experienced it, however,
having done that for over the
past decade, I have enjoyed the
night shift vs. the day shift for the
following reasons.
• Less wastage on travel time:
Usually it takes me 15
minutes to reach office from
home during the night shift
whereas if it was a day shift,
it would have at least taken
an hour. I saved almost 1 ½
hours every day travelling
up and down. If I consider
my BPO career in the past
decade, I have saved nearly
4,000 hours for myself by just
avoiding traffic.
72
•
• Time for family and for
personal activities:
There is plenty of time to
spend with the family, hit
the gym during the off-peak
hours, go shopping and
marketing etc.
I must note that the outsourcing
industry is not the only industry
that the night shift is part and
parcel. Pilots, Doctors, Engineers
and Lawyers work on spontaneous
shifts in order to perform their
duties. Air Ports, Hospitals, Hotels,
Telecommunication companies and
large scale constructions always
require 24 hour service delivery. Key
cities don’t sleep anymore, and are
full of life around the clock.
This industry needs to create more
awareness to the public. Currently
SLASSCOM, the trade association
for the outsourcing industry and
ICTA, the government institution
for the ICT industry, do carry out
Companies provide meals or projects to create more awareness
in outstations. Unfortunately, the
meal allowances:
conventional mindset of the Sri
When working the night
Lankan education system and the
shift, it is inconvenient to buy society, holds back the majority of
food from outside or to bring the people from taking chances in
food from home. To mitigate new opportunities. The efforts put
the hassle, outsourcing
in by SLASSCOM and ICTA are
companies often provide
promising, and seems to bring in
meals or meal allowances.
gradual results.
When your transport and
meal requirements are taken In essence, Sri Lanka has found
care of by the Company, your a Gem that is rare which is full
of potential and opportunities.
salary is left for you for your
Investors, Businessmen,
personal utilization.
Professionals, Parents, School
Time for studies:
teachers and the Government
must make the best out of this
There is plenty of time in
opportunity at hand. Sri Lanka
the day time for studies, visit consists of abundance of resources
the lecturers and visit the
including high caliber of potential
library. I joined the industry
people. It is not wise not to grab the
when I was 20 years old, and opportunities when they are already
all my higher studies took
knocking on the door. This industry
place while I was a full time
will continue help the economy and
employee at an outsourcing
the people of the country to evolve
company.
from good to great.
1. Governing Council – 2015-2017
After the incorporation of CMA by an Act of Parliament No. 23 of 2009 the second election to the council was held on the
20th April 2015. The new Act provided for a President, Vice President, three council members to be elected and three to
be nominated by designated institutions from the Central Bank of Sri Lanka, Department of Accounting University of Sri
Jayawardenapura and the Institute of Chartered Accountants of Sri Lanka.
The details of Governing Council for the term of 2015-2017 as follows.
-
-
-
-
-
-
-
-
Prof. Lakshman R. Watawala
Mr. M.B. Ismail
Mr. H.M. Hennayake Bandara
Mr. W.A.A.D. Perera,
Mr. M.R.A. Perera
Dr. W.G. Senaka Kelum
Mr. R.A.A. Jayalath
Mr. L. S. S. Wickremasinghe
-
-
-
-
-
-
-
-
President
Vice President
Member
Member
Member
Member
Member
Member
2. Membership of IFAC
CMA Sri Lanka was admitted as a member of the International Federation of Accountants (IFAC) at the IFAC Council Meeting
on the 7th November 2014 attended by 106 IFAC Council Members in Rome, Italy.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the
profession and contributing to the development of strong international economies. It is comprised of over 175 members and
associates in 130 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education,
government service, industry, and commerce.
For a full list of IFAC members, see the membership section of IFAC website.
3. Conference & Seminars
(i) CMA Global Management Accounting Summit - 27 -29 July 2015
CMA will host the CMA Global Management Accounting Summit 2015 from 27 -29 July 2015 on the theme “Business
Resilience through Integrated Reporting” at the King Court, Hotel Cinnamon Lakeside, Colombo.
Presentations at this Summit will be made by IFAC President Ms. Olivia Kirtley, speakers from Management Accounting Bodies
of IMA(USA), India, Pakistan and Bangladesh and will comprise of top local business personalities as well as foreign speakers
of repute.
(ii) Seminars
In keeping with CMA’s commitment to Continuing Professional Development of its members and to educate the public on
current financial trends the following well attended seminars were held from August 2014 to February 2015.
- Adopting Environmental Management Accounting Guidelines – conducted by Mr. Nuwan Gunarathne of Department of
Accounting, University of Sri Jayewardenepura.
- Budget Highlights 2015- Tax Proposals & Impact on Business
- Learn Derivatives and Hedge Accounting - training sessions for members conducted by Ernst & Young.
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-Commemoration of SAARC Charter Day - The Role of SAARC in Regional Global and Economic Co-operation - A seminar
was organized on the SAARC Charter Day to raise the awareness about SAARC and its activities, thereby enhancing South
Asian Identity and Solidarity within the Region and beyond.
- Interim Budget Highlights 2015 & Impact on Business
4. Annual General Meeting 2014
The fourteenth Annual General Meeting was held on the 29th August 2014 at the Longdon Room, Hotel Taj Samudra.
The Annual Report for 2014 and the audited accounts for the same period was unanimously adopted.
5. Graduation Ceremony – 2014
The Graduation Ceremony was held on the 22nd December 2014 at the Hotel Galadari.
This occasion was graced by Chief Guest Prof. Ananda Jayewardene, Vice Chancellor of University of Moratuwa, and the Guest
of Honor was Mr. D. Jeevanadan, Additional Secretary of Ministry of Cooperatives and Internal Trade.
The awards were made to students passing Foundation Level, Operational Level, and Managerial Level, Strategic Level and
Integrated Case Study at the November 2013 and May 2014 examinations.
Awards were also given to AMA holders, Prize winners, Associate & Fellow members. The coveted Founder President Prof.
Lakshman R. Watawala Gold Medal for Best Overall Performance in the November 2013 examinations was awarded to
Sandunika Wattearachchi.
Speechcraft Program
The Toast Masters Speech Craft Program was launched on the 5th February 2015 at the CMA Head Office for the benefit of its
Members, Passed Finalists and Students to improve the confidence and employability of CMA professionals in association with
The Colombo Toastmasters Club.
The first batch who successfully completed the program received their certificates at the Award Ceremony held on the 16th May
2015.
Passed Finalists Meeting
The passed finalists meeting was held on the 25th April 2015 at the Global Towers, Colombo to felicitate those who had passed
the November 2014 final case study paper and completed the examination.
The students were informed the importance of the Role of CMA, IFAC and SAFA, Job Opportunities within Public & Private
Sector for CMA Professionals, Two I’s for Successful Career – Initiate & Innovation, Ethics, Corporate Governance & Disciplinary
Code, Opportunities for Accountants in the BPO Industry Post Qualifying Career Path for Management Accountants.
It was also detailed to the passed finalists the importance of Continuing Professional Development (CPD) for them to pursue
the advancement of the profession of Management Accountancy and to update the knowledge to meet the global trends..
A fully fledged Management Accountant should in addition to the theoretical knowledge, completing the three years of practical
training and apply for associate membership which entitles them to the designation ACMA was explained to students.
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Profiles of Recent Passed Finalists
ALIYAR IRFAN
Asst. Audit Manager
Jayasinghe & Company (Chartered Accountants)
I am a graduate of BSc Estate Management and Valuation at University of Sri Jayewardenepura with first class and gold
medal for Batch Top, Associate certified member of CMA with Prizes, Member of AAT and a Passed Finalist of Institute
of Chartered Accountants of Sri lanka with Prize.
To keep pace with dynamic change environment I strongly believed that it’s not sufficient to be financially qualified but
also professionally trained in business management, capable of advising on business strategy.
CMA achieved me with vital role of management accounting in business worldwide risk management. I enjoyed CMA which led me to
bestow with colours of Merit and Subjects Prizes.
By becoming a CMA member I have the privilege of using the Certified Management Accountant (ACMA) of Sri Lanka designation and be
a part of global network of Management Accountants.
Raju Thiyaneswara
Senior Internal Auditor
Berendina Development Services (GTE) Ltd
Berendina Micro Finance institute (GTE) Ltd
I am an Associate member of ICMA-Srilanka, member of AAT Srilanka & Associate member of CPM Srilanka. Presently
I am reading for ACCA-UK Final examination.
My career aspiration was to be an Accountant & Soon after I dropped out from school; I was evaluating which course to
take. Then I got to know about CMA & started doing CMA because it was very cost effective & improves less hassles
when compared to other professional courses.
I acquired a vast knowledge & benefited by studying the CMA’s competitive study program throughout & today here I am
a complete financial professional & CMA opened the door to become a fully-fledged financial professional.
I am counting over 4 years of hands on experience in external & internal auditing in one of big four companies while I was studying for CMA
examinations & a one year hands on experience in working capital management in a manufacturing public quoted company.
After I got the membership of CMA, I was promoted as a senior Internal Auditor at the current working place.
As an Internal Auditor my main responsibilities are (saying precisely) to identify the loop holes, Frauds & risks involved in the business
processes & suggest recommendations to directors to mitigate such & implement process improvements. I also provide a consulting service,
advising board of directors on how to improve systems and processes.
CMA study program led me to think out of the box & write reports to board level & I am very happy to be a product of CMA-Sri Lanka.
I want to thank CMA institute & it’s founder from bottom of my heart for making me a complete finance professional.
Sinduja Kanagasundaram
Assistant Management Accountant
Greenfield Bio Plantation Private Limited
I am at present working at Greenfield Bio Plantation Private Limited, as an Assistant Management Accountant. I am an
Associate member of Certified Management Accountants of Sri Lanka and Certified Professional Managers. Being an
associate member has enhanced my career in a very big way.
Not only it helps students in studies but also includes activities which give the strength to converse without hindrance.
CMA has enhanced my trading skills that I needed to have to strengthen my career in the industry.
CMA has helped me in managing functions that are critical to business performance. It supports organizational management and strategic
development. CMA has helped me achieve both my organisational and personal goals.
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NASOORDEEN MOHAMED MANAZ (ACMA – 1379)
Assistant Manager – Finance & Tax
BPO Connect (Pvt) Ltd
I am very honoured to state I’m an Associate Member of CMA Sri Lanka since 2014.
I was planning to follow a recognized professional Management Accounting course which would provide me the maximum
benefit with the most cost effectiveness and the best recognition in the field. Fortunately I found CMA is the best National
Professional Management Accounting body in Sri Lanka to start in my professional ladder, which shares knowledge on
every single aspect of Finance/Management/Taxation/Costing/etc…
I followed CMA with a big hope to sustain in this highly competitive market as a professionally qualified accountant and it was easier for
me to apply the theories I have learned from CMA to practical scenario.
While following CMA, I started my career as a Junior Finance Executive at BPO Connect (Pvt) Ltd which is an Australian Outsourcing
Company for finance and accounting with a branch network in Sri Lanka/India/China/Vietnam. I have a good recognition in this company, as
I’m the first employee for tax division in Sri Lanka branch and I apply my expert knowledge which I harvested from CMA .This has helped
me to get promoted as an Assistant Manager- Finance & Tax division in the company.
I take this opportunity to convey my sincere gratitude to CMA – National Professional Management Accounting body in Sri Lanka for the
service they provide to the Nation.
W.H.Wijesekara
Accountant
Commercial Development Company PLC
I am an Associate Member of the Institute of Certified Management Accountants of Sri Lanka.
Currently, I work as the Accountant of Commercial Development Company PLC (CDC PLC), a subsidiary of
Commercial Bank of Ceylon PLC bearing the total responsibility of finance. Prior to joining the CDC PLC, I worked
as a Senior Assistant Accountant of another subsidiary company of the Bank namely ONEzero Company Ltd wherein
I gained substantial experience in my career by holding the responsibility of an Accountant. In addition, my experience
includes working as an Accounts Assistant, Finance Executive and Credit Control Executive in industries such as tourism, telecommunication
and engineering. Altogether my experience covers more than 12 years in the field of accountancy and finance out of which 8 years as an
Accountant.
In 2002, I started my career as an Accounts Assistant at NKar Travels and Tours (Pvt) Ltd, and later selected to gain my professional
qualification with CMA. Today, I am indeed happy to look back my decision in selecting CMA as my professional qualification. I would
not have achieved this position if not for the CMA qualification and would recommend anyone who seeks to be a professional Management
Accountant to select CMA as their professional qualification. CMA indeed is a comprehensive course providing every skill needed to
perform any management role perfectly. I am now very much confident that I can take any challenge in my role as an Accountant as I am
equipped with technical and practical skills gained from the CMA course.
I reiterate that ICMA, the leading management accounting institution in Sri Lanka was of immense help for me to achieve this position.
Therefore, I extend my utmost gratitude to the Institute of Certified Management Accountants of Sri Lanka for making me a successful,
competent Management Accountant.
Prasanna Rajasinghe
ERP Executive
Rhino Roofing Products Ltd
I am a BSc Management (Special) graduate of University of Sri Jayewardenepura and an associate member of CMA – Sri
Lanka.
I have experience in both finance and IT (ERP) fields. I started my career as Accounts Executive after my university
graduation. I also have obtained experience as Accountant from several commercial organizations while completing my
CMA exams. Then I moved to IT (ERP) sector and I have worked at an IT firm as a functional consultant - ERP.
As an ERP Executive currently I am involving with business processes, financial accounting and Management Accounting related areas.
Therefore knowledge I have gained from CMA was very useful for my continuous development of the current employment. When implement
an ERP for particular organization professionals need knowledge with business process, financial/management accounting. As per my
experience CMA is the ideal professional management accounting body which fulfil these requirements for the Sri Lankan youth.
76
SURANGI DARSHANI JAYASIRIWARDENA
Audit Manager
B.A.C.K.Balasuriya & Co
(Chartered Accountants)
I am a graduate of University of Colombo B.B.A. in Accounting (Sp.) with a second class upper division. I am also a
passed finalist of Institute of Certified Management Accountants of Sri Lanka, member of Association of Accounting
Technicians of Sri Lanka and currently following strategic II level of Institute of Chartered Accountants of Sri Lanka.
My Career objective is to become a professionally expert extrovert, through continuously improving the self-knowledge, gaining experiences,
while becoming an efficient team player and help the company to achieve its objectives by applying the knowledge and skills that I have
acquired through my academic and professional formal education.
CMA is one of the leading Accounting professional bodies in Sri Lanka. I selected CMA to improve my knowledge regarding the Management
Accounting subjects and to add value to my professional career path.
Jayanga Jayawickrama
Senior Finance Officer
Astron Ltd
I am an associate member of CMA - Sri Lanka and passed finalist of AAT – Sri Lanka.
I started CMA – Sri Lanka examinations with exemptions after completing all the stages of AAT- Sri Lanka
examinations. I am previleged to be an associate member of CMA – Sri Lanka. CMA - Sri Lanka is commited towards
the enhancement of overall knowledge & expertise in students and members not only with related to management
accountancy but also to make them potential & competitive professionals.
Completion of CMA examinations and becoming a member of it, opened a new avanue in my career which was the
promotion as a senior finance officer in Astron Ltd, which is a leading local phamaceutical & health care products manufacturing company.
The knowledge & skills gained through CMA Sri Lanka, helped me a lot in my day today work and being a member, it makes me a
competent employee.
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New Members
Fellow
Cooray M.D.J.
Financial Controller
MIT Cargo (Pvt) Ltd
Fernando A.A.J.
Senior Lecturer
University of Sri Jayewardenepura
Mitra S.
Senior Vice President (Finance)
Lanka IOC PLC
Dissanayake B.A.J.A.
Head of Finance
Harcros Chemicals (Pvt) Ltd
Kaushallya J.M.P.S.
Manager - Finance
National Development Bank
Senanayake D.S.D.
Group Financial Controller
Akbar Brothers Ltd
Associate
Abeyrathna A.R.P.
Staff Assistant
Bank of Ceylon
Akram A.M.R.M.
Amarasinghe R.A.P.B.M.
Accountant
Airport Aviation Services (Sri Lanka) Ltd
Amarathunga A.D.N.P.
Project Manager
KPMG
Anushangan R.
Arawwawala L.D.A.M.
Business Analyst
SJMS Associates
Arshad M.H.C.M.
Asst. Accountant
Western Airducts Lanka (Pvt) Ltd
Ashraff M.I.A.
Senior Auditor
Crowe Horwath International
Balasooriya B.M.S.P.
Management Assistant
Central Bank of Sri Lanka
Bandara R.M.N.D.
Accountant
Maga Engineering (Pvt) Ltd
Bentotage S.P.
Asst. Accountant
Diesel and Motor Engineering PLC
Bothejue J.W.M.J.
Lead Associate
WNS Global Services (Pvt) Ltd
Chandrasiri M.D.
Asst. Accountant
Orchid Pharmaceuticals Ltd
Chowdhary R.K.
Vice President (Finance)
Lanka IOC PLC
Jayasiriwardena S.D.
Audit Manager
B.A.C.K. Balasuriya & Co.
De Silva P.L.D.S.M.
Asst. Manager - Audit & Assurance
Kreston MNS & Co.
Jayasuriya J.S.K.
Senior Accountant
Sri Lanka Telecom PLC
78
Deshapriya K.G.J.N.
Deputy Commissioner
Department of Inland Revenue
Jayawickrama K.J.M.
Finance Officer
Astron Ltd
Dharmadasa K.D.W.L.
Joseph C.A.
AccountantAccountant
Richard Pieris Tyre Company Limited
Universal Building Materials Merchant Co. Ltd
Dias Desinghe K.
Senior Business Systems Analyst
IFS R&D International (Pvt) Ltd
Kakulandara R.S.
Branch Manager
Nations Trust Bank
Dilusha E.G.L.
Accounts Assistant
Regnis Lanka PLC
Kumara W.A.P.
Asst. Manager - Finance
Citizens Development Business Finance PLC
Dimuthu E.P.G.
Senior Executive Group Internal Audit
People's Leasing & Finance PLC
Kumarasinghe K.A.J.
Asst. Manager - Finance
Sri Lankan Catering Ltd
Elangkumaran P.
Lecturer Gr.II in Accounting
Advanced Technological Institute
Larif M.Z.
Finance Accountant
Eurokitchens Trading & Contracting (Pvt) Ltd
Fernando W.P.M.M.S.D.
Lasantha S.A.R.
AccountantLecturer
Astron Limited
University of Kelaniya
Goonetilake M.D.D.T.
Senior Business Systems Analyst
IRS R&D Ltd
Madhuranga A.G.D.M.K.
Accountant
Peraj Mining (Pvt) Ltd
Hennayake H.M.L.P.B.
Compliance Officer
Richard Pieris Securities (Pvt) Ltd
Madhushanka P.H.A.
Asst. Manager - Audit
KPMG
Indika K.L.U.
Manager - Finance
MCSL Financial Services Ltd
Mayooran S.
Finance & Grants Advisor
Management System International (MSI)
Irfan A.
Audit Supervisor
Jayasinghe & Co.
Nowshad M.M.
Asst. Accountant
Nolimit
Irshad M.N.M.
Asst. Accountant
Neptune Papers (Pvt) Ltd
Nufail M.B.M.
Team Leader Business Excellence
Dr. Sulaiman Al Habib Medical Group
Jayamaha J.H.U.K.
Senior Associate
PricewaterhouseCoopers
Peiris J.M.R.P.S.
Factory Accountant
Brandix Appreal Solutions
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Perera H.L.I.P.
Accountant
Metropolitan Office (Pvt) Ltd
Thushara S.C.
Senior Lecturer
University of Kelaniya
Priyantha P.V.B.T.
Manager - Finance
Authenticities (Pvt) Ltd
Wickremaratne A.N.K.
Accountant
Probus Middle East Ltd
Pushpakumara W.N.D.
Senior Manager - Finance
Asian Alliance Insurance PLC
Wijesekara W.H.
Accountant
Commercial Development Company PLC
Rajasinghe R.H.A.P.
Financial Consultant - ERP
Providence Global (Pvt) Ltd
Rasika P.L.M.
The Group Accountant
The Standard Capital PLC
Ratnayake R.M.D.R.
Asst. Accountant
PricewaterhouseCoopers (Pvt) Ltd
Rukmal M.D.L.
Accountant
Amaya Leisure PLC
Sanjeewa J.A.A.
Asst. Manager
PricewaterhouseCoopers
Sasitharan V.
Accountant
Vogue Tex (Pvt) Ltd
Shanthini H.D.M.
Accounts Executive
Lanka Broadband Networks Ltd
Sinduja K.
Asst. Management Accountant
Greenfield Bio Plantations (Pvt) Ltd
Singhaghosha K.V.T.N.
Superintendent of Audit
Auditor General's Department of Sri Lanka
Sutharshan S.N.C.V.
Head of Finance & Admin.
Danish Refugee Council
Tennakoon M.R.P.
Asst. Accountant
Transnational Group of Companies
Thiyaneswara R.
Senior Internal Auditor
Berendina Development Services (Guarantee) Ltd
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Institute of Certified Management Accountants of Sri Lanka
Pass List of November 2014 Examination
The Institute of Certified Management Accountants of Sri Lanka held its examination for the Foundation Level,
Operational Level, Managerial Level, Strategic Level & Integrative Case Study in November 2014. The examination
papers were moderated by CMA Canada and the examination was conducted with the assistance of the Department
of Examinations, Sri Lanka.
Foundation Level
ABESEKARA, A.M.C.L.
ABEYRATHNE, H.M.A.W.S.
AHAMED, M.
AHMED, M.R.F.
ALGEWATTA, S.A.
ALUTHGEDARA, M.N.
AMARASEKARA, D.S.D.Z.
AMARASEKARA, J.K.M.K.R.
AMARASINGHE, A M P C.
AMARASINGHE, A.A.Y.N.
AMARATHUNGA, A.A.R.M.
AMJAD, B.A.M.
ANANDA, S.P.T.J.
ANN SAGANA, F.
ANOJAN, S.
ANTHIA, S.
ANURADHI, L.H.I.
AREEJ, M.A.B.M.
ASRAS, J.M.
ATAPATHTHU, A.M.D.S.
ATHEEF, M.F.A.
ATHUKORALA, K.U.
BALASOORIYA, J.B.D.H.K.
BANDARA, B.G.A.D.
BANDARA, B.K.M.A.K.S.T.
BANDARA, R.M.M.
CHAMODI, P.V.D.
CHANDEERA, K.K.Y.
CHANDRASENA, S.G.A.C.
CHARAKA, K A W.
CHATHURANGA, W.M.D.
COORAY, B.T.G.
COORAY, M.L.N.
COORAY, M.P.M.R.
COORAY, M.T.S.T.
CORERA, H.N.G.
DAMBULUWANA, D.A.N.N.
DE ALWIS, R.A.H.T.
DE COSTA, S.P.
DE SILVA, A.W.P.T.U.
DE SILVA, D.C.J.
DE SILVA, R T E M.
DE SILVA, T.S.D.
DECKKER, H.C.
DHANANJAYA, D.D.G.
DHARMARATNE, K.A.S.B.A.
DHARMASENA, S C.
DHAYAN, B.
DILANI, K.Y.
DILINI, W.G.I.
DILRUKSHI, H D K A.
DILRUKSHI, K.A.R.
DILRUKSHI, M.S.
DISSANAYAKE, J.A.
DODAMKUMBURA, S.S.
DULAJ SANJEEWA, N.A.
EDIRISINGHE, R D A C.
EDIRIWEERA, D.N.
ELANGO, T.
ERANGA, P.L.I.
ERANGI, K.D.D.
FARHAN, M.F.O.M.
FAZMIN, M.F.
FERNANDO, D.J.
FERNANDO, E.F.C.M.N.
FERNANDO, G.K.D.
FERNANDO, J.H.S.N.
FERNANDO, K.S.K.
FERNANDO, K.W.D.S.
FERNANDO, L A U.
FERNANDO, M.G.
FERNANDO, M.H.N.
FERNANDO, T.R.D.
FERNANDO, W W M S.
FERNANDO, W.I.S.S.
FERNANDO, W.W.C.
FONSEKA, H P A.
GAMAGE, T.N.
GHOUSE, M.R.
GOONEWARDENA, W.K.P.S.S.R.
GUNARATHNE, W.D.D.B.
GUNAWARDANA, L.A.D.M.M.
GUNAWARDANA, P.D.I.D.
HAFEEL, M.H.M.
HAMY, M.H.H.H.
HANSIMA, M D A.
HAROSHANATH, S.
HARSHA, S.
HARSHANI, D.A.S.
HARSHANI, W.D.L.
HERATH, S.S.I.D.
HESHANI, T A B.
HETTIARACHCHI, A D.
HEWA WICKRAMAGE, H.W.A.M.
HEWAGE, S.S.
HUSSAIN, H.D.F.
IFAS AHAMED, M.F.
INDRAJITH, G.M.T.
INDUNIL, W.
IRFAN, M.I.M.
ISMAIL, F M.
JANUSHIGA, T.
JAYAMAL, P.M.L.C.
JAYASOORIYA, J.A.S.T.
JAYASUNDARA, J.M.K.D.
JAYASURIYA, D.A.P.
JAYATHILAKA, H.P.P.M.
JAYATHUNGA, B.W.A.P.
JAYAWEERA, V.D.
JAYAWICKRAMA, K.S.S.
JEEWANTHA, M.G.G.N.
JEEWANTHA, W.A.C.
JERONICA, B.J.
JEYA ANANTH, A.
JOMAHANDIGE, P.
KALHARI, R.C.
KARAWITA, M.T.
81
KARUNARATHNE, N.D.I.N.
KARUNARATNE, V.M.B.
KAUSHALYA MADHUSHANI, R.M.
KAUSHALYA, S.H.D.
KEERTHTHAN, S.
KIRUBASHAKTHY, M.
KOTTAGE, S.L.
KULASOORIYA, H.W.R.H.
KUMARASINGHE, K.A.L.M.
KUMARASIRI, W.T.D.
KUMARI, A.A.G.W.
KUMARI, H.S.U.
KURUPPU, I.V.
LAWRENCE, K.A.
LIYANAGE, L.S.K.
LOGINI, M.
MADHUSHANI, A.B.Y.
MADHUSHIKA, R.K.S.
MADUSHANI, K.P.S.N.
MADUSHANI, T.H.C.
MADUSHANKA, K.W.M.M.U.G.G.
MADUSHANKA, W.V.K.
MADUSHIKA, B.V.Y.
MADUSHIKA, H.W.T.
MADUWANTHA, S R G P.
MAHALINGAM, D.J.
MAHILRAJ, S.S.
MANOJ, E.A.A.
MATHAVASUNDERAM, B.
MENDIS, H.S.S.
MILAKSHA, S.
MOHAMED THASNEEM, M.R.
MOHAMMED, M.I.I.
MUDALIGE, R.B.
NADEESHA SHIROMALI, H.A.
NAFLAN, M.R.M.
NALEER, M N M.
NANAYAKKARA, H.T.
NANAYAKKARA, K.A.D.S.W.
NAZEER, N.N.M.
NIRMALI, W.K.R.
NIROSHAN, W.A.I.M.
NISANSALA, D.W.M.
NISANSALA, V.G.M.
NUSAIR, A.H.M.
PATHIRAGE, P.D.V.M.V.
PATHIRANA, P.P.D.A.I.
PATHIRANAGE, G.G.K.
PEMANATH, W.T.M.
PERERA, AKDS.
PERERA, G.D.G.
PERERA, H T J A.
PERERA, K.L.M.P.
PERERA, M.S.H.
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PERERA, P.A.D.T.
PERERA, P.I.K.
PERERA, S.A.J.N.
PIYUMI MAHESHIKA, G.D.
PIYUMIKA, W.G.G.
PRAMODHI, U.L.U.
PRASAD, P.A.R.
PRASANGIKA, A.K.M.R.
PRIYAN, P.A.D.D.A.
PUSHPA KUMARA, K.M.G.N.
RAJAPAKSHA, R.M.M.C.
RAJAPAKSHA, R.M.M.P.
RANASINGHE, R.A.A.K.
RANASINGHE, R.A.D.H.M.
RANAWANSHA, K M S.
RATHIGA, R.
RATHNAYAKA, R M I S.
RATHNAYAKA, R.P.
RATHNAYAKE, E G P K.
RATNAYAKA, C L.
RIMSATH, A.K.M.
RISWAN, M.R.M.
RIZFAN MOHAMED, K.G.M.A.
RODRIGO, B.K.D.H.
RUCHIRANGA, K.I.G.P.
RUKSHAN, M J.
SACHINTHA, M.S.N.
SAFEER, A.R.M.
SAGARIKA, W D R.
SAMARANAYAKE, D.L.M.
SAMARASEKARA, J.K.S.P.
SAMPATH, J.M.D.U.
SAMPATH, M C N.
SANDAMALI, P.K.D.
SANDAMALI, P.K.W.
SANDARUWAN, K.D.K.
SANDEEPA, B.L.D.D.
SANJIKA, U.D.N.
SASIKUMAR, S.
SASIREKA, V.
SATCHU, T.
SENANAYAKE, G.E.
SERASUNGHE, S.J.A.S.V.
SEWWANDI, M.B.
SHAFAN, N.M.
SHAFNA, M.I.F.
SHALINI, H.L.A.
SILVA, C.M.H.
SILVA, C.S.R.
SILVA, D.D.N.
SILVA, D.S.C.
SILVA, J.R.L.
SILVA, M A C S.
SILVA, S K S.
SILVA, S.G.M.
SIRIWARDHANA, S.M.T.N.
SOMASIRI, A.C.
SOYSA, W M N S.
SUBASINGHE, J S A K R.
SUGANYA, V.
SWRNAMALI, G.G.M.
TENNAKOON, T.M.T.B.
THARAKA, M.D.G.
THARAKA, R.M.K.
THAWALAMA GAMAGE, C.P.K.
THILAKARATHNA BANDARA, I.G.
THILAKARATHNA, W A D D P.
THILAKARATHNE, D.M.
THINUSHAN, V.
THURSHALA, S.
UBESEKARA, W G T S K.
VAAS, M.J.L.
VARNIKA, E.
VIDANAPATHIRANA, N.D.
VIDURANGA, K.A.D.K.P.
VIJEE, N.
VIRAJINI MADHUSHANI BANDARA, L.D.
WALIMUNIGE, S.J.
WARAGODA, W.K.T.C.
WARNAKULASOORIYA, C.
WATHSALA, J.S.V.
WEERASEKARA, W.B.M.I.I.T.
WEERASINGHE, H.P.Y.L.
WEERASINGHE, N.
WEERASOORIYA, W H K R.
WELAGEDARA, A.N.
WERAKKODY, W.S.
WIJEKOON, W.M.C.D.
WIJERATHNA, H P T S.
WIJESINGHE, A C.
WIJESINGHE, E.K.A.S.
WIJESINGHE, E.K.L.M.
YAHEYA, T.A.A.
YASARATHNE, K.H.V.P.
ZAAM, M.Z.M.
Operational Level
AAKILA, R.F.
AADHILA, R.F.
ABESINGHE, A.M.D.S.
ABEYSOORIYA, S.M.
ACHINTHAKA, N.B.A.N.
ANJALEE, H.N.M.U.
ARSHAD, B.F.M.
ASSEN, G.S.
ATHUKORALA, D.C.
ATTHANAYAKA, A.B.P.N.
BUULTJENS, S.D.
CHAMIKA, E.P.N.
CHATHUMINI, W.S.
COORAY, B.T.G.
DE ALWIS, H.D.G.A.
DE SILVA, D.C.J.
DE SILVA, M.L.D.
DE SILVA, S.D.P.D.
DELIP JANAKA, L.
DIAS, P.A.J.A.
DISSANAYAKA, M.D.S.B.
DISSANAYAKA, M.W.
DISSANAYAKE, E.P.P.M.
DULANJAYA, N.G.P.
EDIRISINGHE, E.D.M.B.
EKANAYAKE, N.L.T.
FAZIL, M.F.M.
FERNANDO, W.A.B.
GUNASEKARA, D.J.R.A.
GUNASEKARA, W.L.R.A.D.A.W.
HARIDHARSHANI, S.
HETTIGE, A.S.R.
HIDELLEARACHCHI, A.M.
JARANIYA, J.M.
JAYAMANNA, P.C.
JAYARATNE, P.D.A.
JAYASINGHE, K.A.S.S.
JAYATHILAKA, J.M.C.N.
JAYAWARDANA, A.A.R.P.
KARIYAWASAM, S.P.L.
KASTHOORI, I.
KAUSHALYA, D.S.C.
KETHEESH, S.
KEVITIYAGALA, I.G.
KUMARASINGHA, K.P.A.D.
KUMARI, K.P.H.
KURUPPU, I.V.
LAKSHANI, P.P.
LIYANAGE, A.K.
MADHUSHANI, S.A.I.
MADHUVANTHI, I.D.B.
MADUBASHINI, H L R.
MADUSHANI, N.
MAHESHIKA, M.N.
MANAMPERI, M.M.T.D.
MAYURI, M.
MOHAMED, A R R.
MUBARAK, M.M.H.
NEELAKANTHA, K.K.C.
NISHAN, D.D.I.
OMATHTHAGE, P.
OUTSCHOORN, J.W.
PATHIRAGE, T.D.
PAVITHRAMALA, K.T.M.
PEIRIS, H.N.U.
PERERA, M.C.T.
PERERA, M.K.N.T.
PERERA, N U.
PERERA, R.L.D.
PERERA, W A P.
POORNIMA, K.M.
PUSHPAMENAN, R.
RAJA KARUNANAYAKE, R.K.M.H.T.
RAJEEVAN, S.
RANASINGHE, D.C.
RANASINGHE, N.W.D.C.M.
RANAWEERA, R.A.P.T.
RANAWEERA, R.K.R.S.
RIYAS MOHAMED, J.A.
RODRIGO, V.N.P.A.
RUSDHY, M.M.M.
SAGARIKA, W D R.
SAHEETH, S M.
SANJEEWA PUSHPA KUMARA, Y.A.
SENARATHNE, M.M.C.M.
SENAVIRATHNA, D.R.
SENEVIRATHNA, K.L.D.D.S.
SEWWANDI, L.K.T.
SILVA, D.S.C.
SILVA, M.W.T.M.P.
SINAZ, M.F.M.
SOMASIRI, K.V.D.I.U.
SUBASENA, E.S.I.
THANUJA, A.
THEVAKUMAR, Y.
UDATIYAWALA, W.S.
WASALA, W.A.U.A.
WATHSALA, R.K.
WELDT, C.S.V.
WIJESENA, T.A.J.R.
WIJESINGHE, D.A.N.
YASANGA, Y.A.D.H.
ZAAMA, M.M.
ZAROOK, M.K.S.
DILRUKSHI, N.A.C.S.
DISSANAYAKE, M.B.A.M.
FAHD, M.F.M.
FERNANDO, W.B.N.S.
GUNASENA, L.A.M.B.K.
GUNATHILAKE, H.M.I.K.G.
GUNATILAKA, W.D.K.K.W.
HABAKKALA, J.A.K.
HETTIGE, A.S.R.
JAYALATHGE, N.S.
JAYASUNDARA, J.M.G.N.P.
JAYATUNGE, T.N.
JIFFRY, M.J.
KETHEESH, S.
KUMARA, L.W.U.P.
KUMARA, R.N.C.
KUMARA, S.R.P.S.
KUMARA, W.D.D.P.S.
KUMARAPPERUMA, S.P.
KURUKULASURIYA, C.A.
Managerial Level
ABAYAGUNAWARDANA, W.H.S.
AMARARATHNA, A.A.A.S.
ANUTHTHARA, D.L.I.
ATTANAYAKE, A.A.C.D.
DARMADASA, T.A.J.S.
DASANAYAKE, R.N.
DHARMABANDU, W.S.
DHARMAPALA, N.D.R.
DHARSAN, S.
DHEVAGUNANESAN, A.S.
83
LASANTHI, K.A.D.A.
MADHUWANTHI, P.L.
NAHEEM, F.M.
OUTSCHOORN, J.W.
PANGOLLA, P.G.D.P.
PEIRIS, P.R.D.
PRASANNA, S.A.D.D.
PRIYADARSHANI, G.K.N.
PUSHPAKUMARA, E.N.
PUSHPAKUMARA, K.D.S.
RAJAH, M.N.P.
RAJEEVAN, S.
RAMACHANDRAN, J.
RATNAYAKE, R.M.C.J.
RODRIGO, P.R.M.
RUPASINGHE, I.U.P.
SADARI, H.L.D.
SAMARATHUNGA, S.M.D.N.D.
SAMPATH, K.I.U.
SHEHAN, H.J.K.
SULAKSHINI, P.G.C.
THANUJAN, Y.
WEERASEKARA, S.A.D.P.
WIJEGUNATHILAKE, E.L.R.S.T.
WIJEKOON, K.H.M.M.M.
WIJENAYAKA, B A C.
WIJETHILAKA, E.D.D.
WIJETHILAKA, E.T.S.
ZAHRA, M.M.F.
ZAHRAN, A.S.M.
Strategic Level
AMARASENA, R.M.G.V.N.
ASANGA, P.P.D.N.
BOTHEJU, W.D.P.
DE ALWIS, W.U.C.
DE MEL, W.P.L.
DE SILVA, O.K.R.
EKANAYAKE, W.E.M.P.
FERNANDO, M.D.R.
FERNANDO, M.P.K.
FERNANDO, W.D.D.
FERNANDOPULLE, S.
GAMAGE, S.H.N.
GANEGODA, A.E.
HEWAGE, S.N.
HUSSAIN, M.A.M.
JAYARATHNA, L.C.H.
JAYASINGHE, S.N.
KULATHUNGA, A.S.T.P.
LIYANAGE, T.J.
MADHUSANKA, J.A.K.
MADHUSHIKA, P.H.H.
MADHUWANTHI, P.L.
MARIKKAR, M.H.N.
MOHAMED RASHAD, M.J.
MORAES, M.K.
NILMINI, A.C.
NIROSHANI, S.U.
PATHIRANA, C.T.N.
PEIRIS, K.H.Y.J.
PRIYANGIKA, B.L.D.
PUJITHA, J.
RAMANAYAKE, A.
RANJANA, M.K.P.
RUWANTHI, A.P.
SAMARASINGHE, K.
SANJEEWA, T.K.C.
SARATHSIRI, S.D.
SENERATH, K.D.W.
SENEVIRATHNE, E.M.V.B.
SILVA, M.M.S.R.
SUBASINGHE, H.S.
THUSHINTHAA, N.
WADDENIYA, W.S.S.
WATHSALA, G.V.S.
WICKRAMA ARACHCHI, W.A.A.
WICKRAMASINGHE, L.K.S.K.
WIJETHILAKA, E.D.D.
WIJETHILAKA, E.T.S.
Completed CMA Final Exam
ALIMAN, M.I.
BANDARA, M.P.D.U.
CHANDRIKA, D.A.U.
DILIP, K.
EFROY, V.
FERNANDO, G.S.S.M.P.
GANEGODA, A.E.
GUNARATHNA, Y.D.P.E.
HENDAVITHARANA, M.P.
HETTIARACHCHI, M.S.
HUSSAIN, M.A.M.
JAYASINGHE, G.C.
84
JAYASOORIYA, K.A.D.P.
JAYASURIYA, J.S.K.
JAYAWARDENA, K.B.
JAYAWARDENA, M.L.A.P.W.
KUMARA, U.L.S.
KUMARA, W.A.P.
KUMARAGE, A.P.
MADHUSANKA, H.A.I.
MARIKKAR, M.H.N.
MUNLIR, M.J.M.
NAALEEM, F.R.
NILMINI, A.C.
NUWARAPAKSHA, N.P.S.R.
RIMZAN, A.T.M.
RODRIGO, P.R.M.
SANJEEWA, T.K.C.
SARATHCHANDRA, M.H.L.A.
SELVENTHIRAN, T.
THIRUVARUDCHELVAN, T.
UDAGAMA, T.M.C.H.
VISWANATHAN, A.
VITHARANA, H.R.
WICKRAMASINGHE, G.D.B.R.
Workshop on Adopting EMA
CMA President Prof. Lakshman R. Watawala, Mr. Nuwan Gunarathne(University of Sri Jayewardenepura) and workshop participants.
Speechcraft Program & Award Ceremony
Seated L to R: Mr. Hussain Moosajee (CTMC)
Mr. Mohamed Zawahir(CTMC), Mr. Ruchira
Perera(CM,CMA), Mr. Basheer Ismail(VP,CMA),
Mr. Sarmaa Mahalingam (President, CTMC),
Prof. Lakshman R. Watawala (President, CMA),
Mr. Dian Abeywardene (Course Director, CTMC),
Mr. Hennayake Bandara(CM,CMA) Mr. Reffai
Rauf(CTMC) Mr. Niranjan De Silva CTMC) Mr.
Lasantha Wickremasinghe(CM,CMA) & Mr.
Sharm de Alwis (CTMC)
Standing: Participants & Representatives of CMA
& CTMC.
CMA Awards Training Partnership Certificates to the Employers
Dialog Axiata PLC
The President of CMA Sri Lanka Prof.
Lakshman R.Watawala presents the
accredited training Partner certificate to Mr.
Lasantha Theverapperuma – Head of Business Telecommunications and Senior General
Manager of Dialog Axiata PLC.
Emerald International (PVT) LTD
Fentons Limited
The President of CMA Sri Lanka Prof. Lakshman R.Watawala
presents the accredited training Partner certificate to Mr. Nirosh
De Silva – Head of Human Resources and Administration of
Emerald International (PVT) LTD.
The President of CMA Sri Lanka Prof.
Lakshman R.Watawala presents the accredited training Partner certificate to Mr. Ruan
Abhayaratna Head of HR of Fentons.
Ceylon Electricity Board
The President of CMA Sri Lanka Prof.
Lakshman R.Watawala presents the accredited training Partner certificate to Mr. P.K.
Kulathunga – Additional Finance Manager
of CEB.
Tokyo Cement Group
The President of CMA Sri Lanka Prof. Lakshman R.Watawala
presents the accredited training Partner certificate to Mr. Susil
Fernando – Senior Accountant of Tokyo Cement Group.
Amana Takaful
The President of CMA Sri Lanka Prof.
Lakshman R.Watawala presents the accredited
training Partner certificate to Mr. M. Farhan
Jabir - Head of Human Resources of Amana
Takaful.
Sunshine Holdings PLC
The President of CMA Sri Lanka Prof. Lakshman R.Watawala
presents the accredited training Partner certificate to Mr. Sinthaka
Ruwan – Chief Financial Officer of Sunshine Holdings PLC.
85
86
Institute of Certified Management Accountants of Sri Lanka
29 / 24, Visaka Lane, Colombo 04, Sri Lanka.
Tel : +94 (0) 112 506 391, 2 507 087, 4 641 701 Fax : +94 (0) 112 507 087
E-mail : [email protected]
Web : www.cma-srilanka.org
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