FM Analysis
ence
its potential and its positive impact on the financial side of the deal. They use IT ADVISORY’s IT Due Diligence Methodology (ITDD) - a structured approach to investigate the effectiveness with which an entity has managed its IT investments and capabilities, and identify potential vulnerabilities.
If you are able to do so, please detail any significant clients/cases undertaken by your firm in the past year.
Q
In the past year KPMG have delivered a number of IT Due Diligence projects in Russia and Ukraine. The scope of services was based on standard Contractor’s Due Diligence framework. Depending on the industry and client needs, we adjusted our approach to ensure the most important topics are in focused of our analysis.
In particular, for a large FMCG Company, the key focus was on the ERP system capability to support estimated volume of transactions and provide required level of transparency and visibility of company operations without significant investments in the IT environment.
We also had cases in the insurance industry. As IT may be an enabler of the core business of an insurance company, it was important to assess appropriately system readiness for planned growth of the business. In particular, the question was whether the systems are flexible and scalable enough to support increased volume of transactions, planned number of system users and extended product portfolio. Another concern was about license availability for key applications – we have been asked to
conduct a license check and assess a risk of penalties or extra costs to cover gap between number of licenses available and system users.
I am proud to say that our IT Due Diligence reports provided answers for these questions in addition to the standard content, and our clients were happy with quality and completeness of our observations and recommendations.
Q
What are the common challenges faced by your clients?
The main prerequisites and goals of a merger are to be defined at the initial transaction phase. Depending on the business goals, this could be:
• Obtaining synergy – businesses integration through IT assets
• Optimizing operations – reduction of future IT costs
• Business growth – IT applications and infrastructure scalability
• Market leadership – use of IT best practices
• Competitive advantages – competitive advantages gained with the help of IT
Typically, possible obstacles and value destroyers are originating from:
• Run-away projects;
• Unplanned IT operating costs caused by the lack of licenses or poor contract management with IT service providers;
• Incompatible information systems;
• Obligation to replace obsolete or non- compliant systems with the technical target architecture;
• IT systems not able to support business growth;
• Loss of business continuity in case of separation from the parent company.
We analyze the state of IT based on the goals of the merger to identify such value destroyers and determine their potential significance for the deal closure.
Q
Have there been any legislative changes recently (12 – 24 months)?
If not, what changes would you like to see happen?
Implementation of the Law of the Russian Federation “On Personal Data” No. 152-FZ with additions and amendments required significant changes in IT systems and processes, and this is still an open issue for many Russian companies. Given the associated risks, we always pay a lot of attention to this specific topic.
Contact:
German Sukonnikov
GSukonnikov@kpmg.ru
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