Presentation done explaining the importance of

1. Strategic Investment and Compliance Understanding the decision calculus of Compliance 1 John Nicholas | Corporate Finance Creating Lasting Wealth

2. Presentation Objectives Understanding that fraud and anti-corruption compliance is an “Investment Decision” with substantial decision tradeoffs Understanding that the tradeoff between “Risk Reduction” and “Investment Required” is dynamic That achieving “success” is an ongoing Board imperative as it involves “acceptable risk” within the Corporate Governance Framework 2 John Nicholas | Corporate Finance Creating Lasting Wealth

3. Stating the Problem 3 John Nicholas | Corporate Finance Any Compliance Programme comes at a substantial investment in manpower and resources that impacts directly to “bottom line”. Without understanding this investment, no organisation will be able to manage the cost successful – this creates the basis for “unmanageable cost creep” Hypothesis: We can only manage costs if we understand the “end risk objective” Creating Lasting Wealth

4. 4 John Nicholas | Corporate Finance The Strategic Trade Off – Investment vs Risk There is a level of risk which we need to accept – no amount of investment will eliminate the exposure Finding the “sweet spot” is the desired objective – any additional investment made brings limited incremental investment Creating Lasting Wealth

5. Risk Investment Trade-Off 5 John Nicholas | Corporate Finance Creating Lasting Wealth

6. 6 John Nicholas | Corporate Finance Strategic Value: Profit vs. Risk Creating Lasting Wealth

7. Cost Structure of Compliance 7 John Nicholas | Corporate Finance Creating Lasting Wealth

8. 8 John Nicholas | Corporate Finance Strategic Cost Issues Economies of Scale Impact of Size Creating Lasting Wealth

9. 9 John Nicholas | Corporate Finance Strategic Cost Issue Learning Cost Dynamics Creating Lasting Wealth

10. 10 John Nicholas | Corporate Finance Determining the NPV Value Key Dimension Variables: Compliance Costs Compliance Failure Costs Expenditure cashflow timing This is the notional benefit of investing in this specific compliance programme Creating Lasting Wealth

11. Different NPV Scenarios 11 John Nicholas | Corporate Finance Creating Lasting Wealth

12. Questions that need to be asked at Board Level Do we understand what are the risks of “compliance failure”? Do we understand the “investment decision framework” and the importance of NPV? Do we understand what is the minimum investment required to meet the “bare minimum compliance” requirement? 12 John Nicholas | Corporate Finance Creating Lasting Wealth

13. 13 John Nicholas | Corporate Finance Questions that need to be asked at Board Level - continued Do we have the adequate high level skills in the organisation to manage Complianceoptimally? What is the optimal investment to match our risk strategy on Compliance Do we have the means to monitor the costs and benefits of the Compliance Programme Creating Lasting Wealth

14. 14 John Nicholas | Corporate Finance Questions that need to be asked at Board Level Questions that need to be asked at Board Level - continued Do we take advantage of the learning curve benefits? Do we look at Compliance as a strategic imperative? Do we reevaluate the risk – investment equation on an annual basis? Creating Lasting Wealth

15. 15 John Nicholas | Corporate Finance Case Study Global Flow Technologies: Compliance with SOX and Foreign Corruption Practices Act Ongoing assessment has saved over US$1.0m a year Continually risk assessment is critical Employ proven methodologies and software within the overall COSOS framework Get all manages to understand risk and get them to think “future profit” can be affected by down side Creating Lasting Wealth

16. Question and Answers 16 Failure is not fatal, but failure to change might be. - John Woode John Nicholas | Corporate Finance Failure is not fatal, but failure to change might be - John Woode Creating Lasting Wealth