Monitor Group’s Bankruptcy: Risk Management and Services Procurement Matter

Yesterday on Spend Matters PRO, we published a research brief exploring the intersections of supply risk management, professional services and supply chain risk management: Monitor Group Goes Bankrupt: Why Services Procurement and Risk Management Best Practices Matter. For those tasked with monitoring supply risk within their organization, Monitor's bankruptcy filing provides an ideal justification for making the right set of investments in information, technology and capabilities to proactively monitor supply risk for virtual goods (consulting, banking, accounting, legal, marketing, etc.) If you're interested in our perspective on the topic, we encourage you to reach out to our team to inquire about a Spend Matters PRO free trial (contact information is at the end of this post).

One of the "tells" that something may have been remiss with Monitor's internal risk controls (and potential value system) goes back to their work advising the late terrorist sponsor, Moammar Kadafi:

In the case of Monitor, the firm's principals had engaged in advising the late Libyan Leader Moammar Kadafi with strategic council over a number of years without registering with the proper authorities. Moreover, depending on one's perspective, such activity may be circumspect enough upon its revelation for Monitor clients to reconsider doing business with the firm (which undoubtedly happened in the aftermath of the saga). In other cases, the early awareness of clear illegal activity or scandals (e.g., the Satyam Computer Services accounting activity in 2009) can make the difference of switching to an alterative provider early enough to ensure capacity and a safe transition or potential supply disruptions.

As we explore in our PRO research, there are a number of ways to proactively and automatically monitor for such activities across an entire set of services vendors. Yet Monitor's bankruptcy raises a number of additional points, including:

  • What level of visibility into master services agreements (MSAs), statements of work (SOW) and related project and engagement-based documentation does procurement have across consulting and professional services spending in general to assess exposure in bankruptcies such as this?
  • Should "too elite to fail" be a greater concern in the professional services firms we work with be a greater concern than "too big to fail"? What potential hubris does elitism among top professional services firms in a given category invite? (we feature a guest contribution later today on this topic)
  • Should we even be concerned with the personal value system (or a lack of firm-wide standards/controls) of those providers we do business with? Does this matter?
  • How can applying strategic sourcing principals help to reduce supply risk in the case of professional services and even in truly "partnership" spend categories such as management consulting?
  • Is talent risk/flight in certain types of professional services firms we engage with more pronounced than it is in other types of providers?
  • Will the buy-out of the assets like Monitor by a global professional services and consulting giant like Deloitte help reduce supply risk or potentially raise new risk elements – or both?
  • Should we be concerned with the risk controls/exposure of other strategy and boutique consulting firms? Could a "trigger" event at a firm like BCG, Bain, or McKinsey ultimately lead to a similar bankruptcy fate? What might such a trigger look like? As an example, McKinsey had its own brush when former Director Rajat Gupta was accused and then convicted of insider trading...

Stay tuned as our investigation into the procurement and supply risk implications of Monitor's bankruptcy filing continues throughout the day. For a trial to Spend Matters PRO to read our full analysis, please contact Sheena Moore (smoore (at) azulpartners (dot) com)

- Jason Busch

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