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The purpose of this paper is to illustrate how a well-performing company can turn into a loss-making company on account of adverse industry cycle and poor management of risks in the business. The importance of factors like optimal level of leveraging, the ability of the management to deal with external and internal risks, and importance of corporate governance in the process of credit appraisal is understood from this case.

The case relates to the credit appraisal by the banks of a prominent steel company in India. The company, Bhushan Steel Limited, was doing very well. The banks lent aggressively to the company, based on their credit appraisal. However, the company soon turned insolvent on account of poor assessment of risks and deteriorating external factors. While this case may be analysed and studied through the eyes of both the Management and the lenders, the focus is currently on the latter. In a real-world scenario, the challenge for the lender is to sieve through the financial as well as non-financial data and make a valid conclusion on the level of credit worthiness of the borrowing company. This includes the topics of operational efficiency and synergies, commodity price cycles, external credit ratings, operating and financial leverage, regulatory risks and corporate governance.

Post graduate business management programmes – Finance specialisation.

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CSS 1: Accounting and Finance

The learning outcomes of this case are in understanding core concepts of brand management and brand dilution. Assessment of macro-economic risks and proper positioning strategies are the key take-away from this case. The case gives an understanding of how brands are built and positioned, and the pitfalls of poor brand planning and assessment that could lead to brand dilution. The case is useful for highlighting the importance of brand management and the challenges of re-positioning. The discussions would shed light on why it is important to plan and manage spending on marketing for brand building activities, and why brands would suffer when spending is reduced. This case is a teaching case and not a research case. It will help participants assimilate available information in combination with existing academic theories and publications to help develop an accurate assessment and prognosis of the events leading until the point of slicing the case.

Reid & Taylor in 2015 had been reduced to a discounter brand offering extended end-of-season sales when most other competitors have ended their promotions. In the 17 years since its big-budget launch in the Indian market in one of the most memorable brand introductions, Reid & Taylor changed its ambassador twice and repositioned itself thrice. The case would allow participants to delve deeper into aspects of marketing spending, brand management, positioning and advertising effectiveness. The case brings to the fore discussions on marketing, specifically on branding, positioning and its related advertising in the textile sector for a brand that has not been studied in academic literature until the present time. The discussion allows for novelty, involving both forward- and backward-looking assessments and evaluations to help participants better imbibe learnings in brand management and positioning.

The case is suitable for a graduate-level (Master’s level) course in marketing and brand management. This case is suitable for elective courses that discuss positioning and brands.

Teaching notes are available for educators only.

CSS 8: Marketing

In 2011, Sherry Hunt was a vice president and chief underwriter at CitiMortgage headquarters in the United States. For years she had been witnessing fraud, as the company bought billions of dollars in mortgage loans from external lenders that did not meet Citi credit policy and sold them to government-sponsored enterprises (GSEs). This resulted in Citi selling to GSEs such as Fannie Mae and Freddie Mac pools of loans that were considerably defective and thus likely to default. Citi had also approved hundreds of millions of dollars' worth of defective mortgage files for U.S. Federal Housing Administration insurance. After reporting the mortgage defects in regular reports, notifying and working closely with her direct supervisor (who was subsequently asked to leave Citi after alerting the chairman of the board to these issues) to stop the purchase of defective loans, leaving anonymous tips on the FBI's and the Department of Housing and Urban Development's websites, and receiving threats from two of her superiors who demanded that she change the results of her quality control unit's reports, the shy and conflict-avoidant Hunt had to decide who she should tell about the fraud, and how.

The case gives students the opportunity to recommend how Hunt should proceed based on their analysis of the stakeholders involved. To aid instructors, the case includes Kellogg-produced videos of Hunt—the only on-camera interviews she has ever given—explaining what happened after she reported the fraud to Citi HR and, later, the U.S. Department of Justice. Within the case, students are also briefly exposed to legislation and bodies pertinent to whistle-blowing in the United States, including the Dodd-Frank Act, the Sarbanes-Oxley Act, and the SEC Office of the Whistleblower.

This case won the 2014 competition for Outstanding Case on Anti-Corruption, supported by the Principles for Responsible Management Education (PRME), an initiative of the UN Global Compact.

• Analyze stakeholders' motivations to prepare counter-arguments to the resistance one might encounter when reporting unethical behavior

• Write a script for who to tell, how, and why

• Discuss how incentive structures, management, and culture play roles in promoting or hindering ethical behavior in organizations

• Identify behaviors that help a whistle-blower be effective

• Gain experience resolving ethical dilemmas in which two values may conflict, such as professional duty and personal ethics

Analyze stakeholders' motivations to prepare counter-arguments to the resistance one might encounter when reporting unethical behavior

Write a script for who to tell, how, and why

Discuss how incentive structures, management, and culture play roles in promoting or hindering ethical behavior in organizations

Identify behaviors that help a whistle-blower be effective

Gain experience resolving ethical dilemmas in which two values may conflict, such as professional duty and personal ethics

The case study will help to learn about the importance of pre-sanction precautionary measures before lending to self-help groups (SHGs), to learn about the potential lapses and errors while sanctioning SHG finance and to learn about the importance of bank’s guidelines and compliance before sanctioning loans.

This case study details the tenure of Seema in a rural branch of Safe Bank of India located in Haryana which she joined as a manager in the year 2016. She overachieved the target given by the district collector office, and going by the tide, she kept her reliance on the references provided by non-government organization (NGO) without complying the bank’s instructions. She committed errors while sanctioning the loans, which led towards the upsurge of non-performing assets of the branch. Later on, after investigation it was discovered that she did not follow fundamental bank’s instructions. In wake of those lapses and errors, how she could have avoided those lapses and secure the public money? What were the most important documents while granting agriculture finance and what due diligence she should have taken? How did she treat calls from the government departments? Was she right in trusting the suggestions of the NGO?

This case study caters to students of various streams, namely, management, business administration and law, and can be targeted at both undergraduate and postgraduate students. It could be suitable for several types of courses and students. Furthermore, this case study can also be targeted for various training programmes for bank employees and employees of various lending institutions engaged in agriculture finance and credit linkage programmes.

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CSS 1: Accounting and finance.

By reading and understanding this case study, students are expected to: 1.Able to understand and review the impact of unethical practices from accounting perspective; 2.Able to make an analysis of how one unethical act triggers a series of forced unethical acts (ripple effect); 3.Identify the unfair practices as well as be proactive in preventing unfair practices in the business day to day affairs; 4.Able to relate the function of various ratios (current ratio, quick ration, debt to asset ratio, debt to equity ratio etc.) and its impact on the business performance; and 5.Able to apply various lean quality tools, doing the root cause analysis in identifying and solving problems.

T.M. Exports (TME) was an India-based privately owned and operated enterprise. The company had a brilliant employee named Sanjay, who was a 12-year veteran. TME’s Business Intelligence (BI) department at TME head office, Kanpur, India, ostensibly learned on April 8, 2019, from the rumors about a brand-new vehicle dished out to Sanjay by his friend who made fortune worth of millions from certain transactions. To add fuel to the fire, another incident surfaced concerning a warehouse keeper, Mohit, who was also involved in embezzlement in one of the sales offices. On May 16, 2019, BI reported these two incidents to the internal auditor who launched an internal investigation to get to root of this case. Consequently, the company owner, Tariq Mahmood got himself caught up in a dilemma to fire both Sanjay and Mohit only or restructure the organization for better transparency and integrative approach in future. Moreover, the newly appointed Chief Executive Officer had the dilemma of keeping high safety stock to maximize service level or keeping conservative safety stock and rely on-spot market-buying if demand spiked. He decided and instructed all the warehouses to keep higher inventories to meet the forecasted demand, considering unexpected spikes in demand witnessed historically. Thus, increase in inventory caused panic in the sales department as demand was sluggish. He, therefore, offered high discounted prices to liquidate the stock. This study integrated the theories of accounting/financial ratio metrics, accounts reconciliation, business ethics and lean tools. It was demonstrated in this case that the irregularities in sales accounting and their inability of reconciliation had a serious impact on business performance. The concept of total reward was also invoked to understand the disruptive and unscrupulous practices.

This case has been particularly focused on undergraduate and postgraduate early-stage-level students pursuing business or commerce program, particularly those specializing in accounting (sales accounting) and human resource management courses.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.

The subject areas for this case are auditing, fraud and investigations. It is also relevant for teaching aspects of corporate governance.

This case consolidates techniques and methodologies of special investigations and demonstrates weaknesses in governance and internal controls. It is appropriate for final year undergraduate students and graduate students who have attended classes on basics of accounting and financial reporting.

The case is about institutional governance and the effects of ineptness at different levels of an organization that resulted in TAS. 133 billion being “improperly” paid out to 22 firms in the financial year 2005/2006.The case is structured to focus at the dilemma of the Director of Finance as an individual who featured in the latter stages of an extensive fraud where old unclaimable debts were revived and were being claimed and paid to fictitious assignees involving a number of Central Bank officials. However, the case seeks to interrogate issues related to financial records and controls in which the position of Director of Finance had more relevance.

Working on this case should result in enabling students to acquire expertise necessary for forensic accounting. It should also enable students to learn to gain an understanding of the practice of investigative and forensic accounting as well as an understanding of the interrelationships of the parties involved in forensic investigations.

Teaching note.

Mr Qazi was sitting in his office in the Multan branch, reviewing his past month’s key performance indicators when he got a call from his Town Operations Supervisor, Mr Ahmed, based in Bahawalpur. Ahmed was recently promoted and transferred to Bahawalpur, from Multan branch. He informed Qazi about the huge inventory variances, which were not earlier reported by the previous Town Operations Supervisor, Mr Sagheer. Qazi was informed that differences were around 2.37% of total sales vs the allowable company limit of Zero inventory variance. Qazi was worried about whether to report these differences to higher management or not. He was very well aware that reporting might even cost him his job, and that of Sagheer too. He could not see any solution to the recovery of the inventory or cash against the same. Should Qazi take a risk and let go of Sagheer? Should he report the differences?

1. Demonstrate the fraud and integrity-related issues. Why and how happened? 2. Analyzed the role of organizational policies in the decision of blow the whistle. 3. Identify the behaviors that helped a whistle-blower. 4. Assess the ethical dilemmas in which professional duties may conflict with personal ethics. 5. Propose organizational policies to encourage whistle-blowing and to discourage the fraud or integrity-related issues.

Teaching Notes are available for educators only.

CSS 9: Operations and logistics.

BBA.

After reading the case, the students shall be able to explain the concept of insider trading and differentiate between illegal insider trading and legal insider trading, business ethics, financial institutions, financial markets and accounting; to interpret the legal framework for prevention of insider trading; to identify the role and significance of the market regulator, Securities and Exchange Board of India (SEBI), in detecting financial crimes such as insider trading; to demonstrate the association between information, stock trading and stock prices within the framework of efficient markets; and to appraise the ethical dilemma in a family-owned firm, where the family members of the promoter group are alleged to have indulged in a financial crime.

The case revolves around allegations of insider trading against the promoter and the promoter group of the family owned and controlled firm, Lux Industries Limited. On January 24, 2022, the SEBI, the regulator of securities markets in India, accused Udit Todi, the Executive Director of Lux Industries Limited, of engaging in insider trading through a chain of 14 connected parties. Udit Todi was also the son of the Managing Director, Pradip Kumar Todi, and the nephew of the Executive Chairman, Ashok Kumar Todi. In its interim order, SEBI alleged a breach of insider trading regulations by a group of 14 connected entities that had built up long positions starting from May 21, 2021, before the quarterly financial results (Q4) and the annual results of the financial year (FY) 2021 in the equity shares of Lux Industries Limited, with its registered office in Kolkata, India, were announced. Subsequently, they squared off the long positions to make a profit of ₹29.43m. To restore the confidence of the investors, the Executive Chairman, Ashok Kumar Todi, needed to review the matter expeditiously and impartially. Taking into consideration the family ties of the accused, it was not going to be an easy task, yet, it had to be done. The case highlights the role of the regulator, SEBI, in unearthing financial frauds such as insider trading in an emerging market such as India.

Postgraduate programs in management, Executive education programs.

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CSS 1: Accounting and Finance

“Jessica’s dilemma: honesty or loyalty” is the true story of a Staff Accountant, Jessica, who discovered embezzlement by the controller, Michael. Jessica worked at a US subsidiary of a multinational organization. One of the company’s vendors contacted Jessica regarding unpaid invoices. Following up on the inquiry, Jessica found suspicious manual journal entries in the general ledger. When she questioned her boss, Michael, about her findings, he first denied the situation, then blamed another employee, and ultimately tried to intimidate Jessica so that she would not press the issue. Jessica’s investigation led to the discovery that Michael had been embezzling money from the company. To complicate matters, Jessica and her husband had a close relationship with Michael and his wife outside the office. Jessica had to make a choice between being loyal to a family friend and being honest and loyal toward her employer.

The authors obtained the information for this case from the staff accountant and her husband via a series of interviews. The information was verified via publicly available news articles on the presented case. Additionally, legal documents, which were publicly available, were also used for information. The name of the company and the names of the individuals in the case were changed to protect the identities and privacy of the involved parties.

An instructor can use this case in business ethics, introductory management, human resource law or accounting courses targeting undergraduate or introductory MBA students. This case is best used in the beginning of the suggested courses, as the instructor introduces ethical dilemmas, ethical frameworks, and stakeholder theory. The case is designed so that students do not need a background in business or business ethics to be able to successfully complete the case analysis. Additionally, the case provides a platform to discuss the differences in an ethical vs an unethical manager and how to respond to such a situation.

Many employees are afraid to report ethical wrongdoing to upper management, or to engage in ethical dissent. When upper management is receptive to reports of wrongdoing, ethical dissent within the organization to upper-level management has more organizational benefits than when the issue is shared with coworkers or external agencies. This is because upper management has the power to make a difference in the situation and may be able to keep the situation within the organization to eliminate possible reputation problems for the organization. The presented case can be utilized to discuss the importance of feeling safe in an organization as it pertains to reporting wrongdoing within the organization and how organizational culture and leadership can enhance or diminish that feeling.

The case study is designed to help students understand how the “growth at all costs” attitude can lead to compromised corporate governance in a start-up leading to disastrous implications for all the stakeholders. This case study aims to make students understand the components of the fraud triangle, the impact of financial fraud on various stakeholders, the role of venture capitalist (VC) investors and the importance of good corporate governance in start-ups. The case study presents an excellent opportunity for students to discuss the consequences of ignoring good governance in the pursuit of growth in a start-up. After analyzing the case study, the students shall be able to explain the concept of the fraud triangle and to be able to identify the motivation, opportunity and rationalization of financial irregularities in a start-up; analyze the impact of financial irregularities on various stakeholders; comprehend the business model of VCs and evaluate its influence on VC-funded start-ups; and appraise the importance of good corporate governance in start-ups.

The case study revolves around the confession of financial irregularities made by one of the cofounders of GoMechanic, a start-up headquartered in Gurugram, India. On January 18, 2023, Amit Bhasin confessed to financial irregularities in the company’s financial statements, leading to laying off 70% of the workforce of the company. GoMechanic had earlier raised close to US$62m [1] from maverick global investors including Sequoia Capital, Tiger Global, Orios Venture Partners and Chiratae Ventures, and was negotiating to raise Series D financing from the Japanese multinational SoftBank with aspirations to be a unicorn (start-up with a valuation of over $1bn). The confession led to a debate about the consequences of the “growth at all cost” culture being followed by start-ups as well as VCs. GoMechanic was not an isolated instance of a lack of governance in the start-ups. The confession had consequences not only for the GoMechanic but for the entire start-up ecosystem of India, which was the third largest in the world. Bhasin stated that the founders take full responsibility for the situation, and they were working on a plan which was most viable under the circumstances. However, it was not going to be easy to regain the confidence of the investors.

The case study is best suited for senior undergraduate- and graduate-level business school students and in executive education programs in courses such as corporate governance and ethics, private equity and entrepreneurial finance.

Teaching notes are available for educators only.

CSS 1: Accounting and finance