CHAPTER 26 Bim Consultants Inc. JOHN R.S. FRASER Senior Vice President, Internal Audit, and former Chief Risk Officer, Hydro One Networks Inc. Bim Consultants Inc. is a medium-sized consulting firm. It is a corporationwith 30 partners who own most of the shares. It has 10 offices across Canadawith 3,000 staff, and has been in business for 30 years. Senior staff also own shares and participate in an annual bonus scheme. Salaries are generally on the low side, but bonuses in good years can be quite high. The balance sheet is sound (see Exhibit 26.1). The company has always prided itself on its customer focus. “Customers are number one” has been the mantra from the chairman, Mr. Smooth, for many years. Recently, however, revenue has been stagnant, and the younger partners are get- ting restless, wondering if the older partners have lost their edge and whether changes are needed to return to the glory days of large bonuses. At a recent strategic planning meeting of the major partners, the decision was made to continue focusing on customers as number one, but also to explore how to increase revenue from within the existing clientele and to explore what additional services could be provided to enrich the client experience (and revenues). It was agreed that the strength of the firm was in its blue-chip client base and that this high-quality reputation was worth preserving. Some discussions were also held around the idea of selling a minority share of the company at a large multiple, if such a deal was identified. Bim Consultants’ profit and loss and retained earnings are provided in Exhibit 26.2. Earlier this week, the chairman received a call from the president of the Cana- dian subsidiary of a U.S.–owned competitor, Bravado International, saying that Bravado was pulling out of Canada and would consider an offer to sell the sub- sidiary to Bim Consultants Inc. The Bravado subsidiary had 12 offices across Canada and just over 3,500 staff, but had often drawn on its U.S. resources when required for large engagements. 525 www.it-ebooks.info http://www.it-ebooks.info/ 526 Implementing Enterprise Risk Management Exhibit 26.1 Bim Consultants Balance Sheet Bim Consultants Inc. Summary Balance Sheet As of December 31, 2014 2014 2013 Year ended December 31 (Canadian dollars in millions) $ $ Current Assets Cash and Short-Term Investments 12 7 Accounts Receivable 175 168 187 175 Current Liabilities Accounts Payable 34 27 Short-Term Loans 100 110 134 137 Working Capital 53 38 Fixed Assets Leasehold Improvements 196 178 Furniture and Equipment 100 94 Less Accumulated Depreciation & Amortization (153) (128) 143 144 Net Assets 196 181 Share Capital Common Shares 100 100 Retained Earnings 96 81 196 181 The chairman called an executive meeting and pointed out that making such a purchase would double sales, catapult Bim Consulting into the number one posi- tion in major markets in Canada, and provide a strong marketing thrust into pre- vious ...

1. CHAPTER 26
Bim Consultants Inc.
JOHN R.S. FRASER
Senior Vice President, Internal Audit, and former Chief Risk
Officer, Hydro One
Networks Inc.
Bim Consultants Inc. is a medium-sized consulting firm. It is a
corporationwith 30 partners who own most of the shares. It has
10 offices across Canadawith 3,000 staff, and has been in
business for 30 years. Senior staff also own
shares and participate in an annual bonus scheme. Salaries are
generally on the
low side, but bonuses in good years can be quite high. The
balance sheet is sound
(see Exhibit 26.1).
The company has always prided itself on its customer focus.
“Customers are
number one” has been the mantra from the chairman, Mr.
Smooth, for many years.
Recently, however, revenue has been stagnant, and the younger
partners are get-
ting restless, wondering if the older partners have lost their
edge and whether
changes are needed to return to the glory days of large bonuses.
At a recent strategic planning meeting of the major partners, the
decision was
made to continue focusing on customers as number one, but also
to explore how to

2. increase revenue from within the existing clientele and to
explore what additional
services could be provided to enrich the client experience (and
revenues). It was
agreed that the strength of the firm was in its blue-chip client
base and that this
high-quality reputation was worth preserving. Some discussions
were also held
around the idea of selling a minority share of the company at a
large multiple, if
such a deal was identified. Bim Consultants’ profit and loss and
retained earnings
are provided in Exhibit 26.2.
Earlier this week, the chairman received a call from the
president of the Cana-
dian subsidiary of a U.S.–owned competitor, Bravado
International, saying that
Bravado was pulling out of Canada and would consider an offer
to sell the sub-
sidiary to Bim Consultants Inc. The Bravado subsidiary had 12
offices across
Canada and just over 3,500 staff, but had often drawn on its
U.S. resources when
required for large engagements.
525
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526 Implementing Enterprise Risk Management
Exhibit 26.1 Bim Consultants Balance Sheet

3. Bim Consultants Inc.
Summary Balance Sheet
As of December 31, 2014
2014 2013
Year ended December 31 (Canadian dollars in millions) $ $
Current Assets
Cash and Short-Term Investments 12 7
Accounts Receivable 175 168
187 175
Current Liabilities
Accounts Payable 34 27
Short-Term Loans 100 110
134 137
Working Capital 53 38
Fixed Assets
Leasehold Improvements 196 178
Furniture and Equipment 100 94
Less Accumulated Depreciation & Amortization (153) (128)
143 144
Net Assets 196 181
Share Capital
Common Shares 100 100
Retained Earnings 96 81

4. 196 181
The chairman called an executive meeting and pointed out that
making such a
purchase would double sales, catapult Bim Consulting into the
number one posi-
tion in major markets in Canada, and provide a strong marketing
thrust into pre-
viously untapped midtier markets. Based primarily on the
persuasiveness of the
chairman, the executive committee approved proceeding with
the negotiations.
The president of the Bravado subsidiary cautioned Mr. Smooth
that it was
imperative not to have word of the negotiations leak out, as this
could lead to a
loss of key staff and possibly clients. Accordingly, he urged Mr.
Smooth not to do
the normal due diligence in the subsidiary’s offices but to
review the necessary
records and meet with select senior executives of Bravado at an
off-site location.
This process seemed to work well, and the Bravado executives
were well prepared
and very likable. All the information checked out, and the way
seemed clear to do
a deal.
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BIM CONSULTANTS INC. 527

5. Exhibit 26.2 Bim Consultants Profit and Loss and Retained
Earnings
Bim Consultants Inc.
Summary Profit and Loss and Retained Earnings
For the Year Ended December 31, 2014
2014 2013
Year ended December 31 (Canadian dollars in
millions)
$ $
Revenue 300 290
Expenses
Salaries 220 207
Other 20 18
Net Profit before Income Tax 60 65
Income Tax Provision 27 29
Net Income after Tax 33 36
Retained Earnings—Beginning of Year 81 65
114 101
Dividends 18 20
Retained Earnings—End of Year 96 81
QUESTIONS
1. What is your assessment of the situation?
2. What advice would you provide to the board of Bim
Consultants?
3. What pitfalls should they be concerned with?

6. ABOUT THE CONTRIBUTOR
John R.S. Fraser is the Senior Vice President, Internal Audit,
and former Chief Risk
Officer of Hydro One Networks Inc., one of North America’s
largest electricity
transmission and distribution companies. He is a Fellow of the
Ontario Institute of
Chartered Accountants, a Fellow of the Association of
Chartered Certified Accoun-
tants (UK), a Certified Internal Auditor, and a Certified
Information Systems Audi-
tor. He has more than 30 years’ experience in the risk and
control field, mostly in
the financial services sector, including areas such as finance,
fraud, derivatives,
safety, environment, computers, and operations. In addition to
this book, he also
served as editor on Enterprise Risk Management: Today’s
Leading Research and Best
Practices for Tomorrow’s Executives (John Wiley & Sons,
2010).
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CHAPTER 27
Nerds Galore

7. ROB QUAIL, BASc
Director, Enterprise Risk Management, Hydro One Networks
Inc.
Nerds Galore (NG) is a Canadian service company with 1,000
employeesworking out of offices in 12 Canadian cities; the head
office is in Edmon-ton, Alberta. NG provides full-service
information technology (IT) sup-
port to small and medium-sized Canadian businesses, including
help desk, on-site
troubleshooting, security, network setup and support, backup
services, wireless
networks, hardware and software procurement, and website
design and hosting
solutions.
Nerds Galore was formed in 2000 in the garage of its founder,
Jeeves Stobes.
NG has enjoyed strong growth in its segment and has an
excellent reputation with
its customers. In the beginning, NG focused on a particular
customer subsegment,
small start-up businesses, especially on low-tech businesses
such as boutique ser-
vices. Lately its strategy has shifted more to midsize customers
(which have deeper
pockets and less chance of going broke) with more sophisticated
technology needs.
Recently there have been problems for NG.
There has been steady decline in customer satisfaction, as
shown in
Exhibit 27.1.
Following a thorough investigation and follow-up with many of
NG’s key cus-

8. tomers, the Executive Team has concluded that the main cause
of this has been high
internal staff turnover, leading to gaps in customer services and
service continuity.
Indeed, staff retention has been an issue, as shown in Exhibit
27.2.
To continue to provide strong customer service, it is critical
that team mem-
bers are competent in the latest technology, and yet turnover has
approached 20
percent in three recent years. This is a particular problem for
NG because of its
high focus on customer service; new staff receive extensive and
costly training in
NG’s customer service and cross-selling approaches. The
company’s pay package
is competitive but not at the very top; instead NG uses its
reputation for excellent
customer relationship and staff development to attract motivated
staff. Note that
it’s well known that one of NG’s competitors was recently
raided by a large sys-
tems integration firm and lost most of its network management
technical staff in
a single quarter. NG has been having a particularly difficult
time retaining staff
in the larger urban centers and other technology hubs in Canada
where there are
more competitors and the competitors generally pay more.
Despite the fact that customer satisfaction has been declining,
the Execu-
tive Team did note that revenue numbers have not suffered; in

9. fact, they have
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530 Implementing Enterprise Risk Management
96
94
92
90
88
%
v
er
y
sa
tis
fie
d
2008 2009 2010 2011 2012 2013
86

10. 84
82
80
Exhibit 27.1 Nerds Galore Customer Satisfaction
continued to climb year over year, as shown in Exhibit 27.3. It
was concluded that
this lack of a drop in revenues is due to two factors:
1. Many current customers have multiyear contracts with Nerds
Galore.
2. Very small businesses that have made up the bulk of NG’s
customer base
are generally tolerant of minor service hitches and less focused
on optimal
technology performance.
Recently, the company suffered a major shock when one of its
employees was
killed in a head-on car crash while rushing to a customer site
during a snowstorm
in Rimouski, Quebec. The employee who was killed was a well-
known and much
admired member of the team, and many staff thought at the time
that NG’s Exec-
utive Team didn’t respond properly to this event. In fact, the
Globe and Mail ran a
story on workplace tragedy and its impact on morale and used
Nerds Galore as a
case study on how not to manage sudden trauma, and, while the
company’s cus-

11. tomers didn’t seem to notice, NG did experience a sudden jump
in staff departures
and some difficulty in recruiting replacements.
Also, there is a sense that staff efficiency is not what it should
be; in partic-
ular, scheduling technicians for on-site technical work has been
a problem. Small
business customers tend to have diverse and unique technology
needs, and finding
specialists who can work in multiple areas such as network
support and voice over
25
20
15
10
5%
o
f e
m
pl
oy
ee
s
2008 2009 2010 2011 2012 2013
0

12. Exhibit 27.2 Nerds Galore Employee Turnover
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NERDS GALORE 531
100
10
20
30
40
Revenues
Net Income
50
60
70
80
90
$C
D
N
20
04
20
05

13. 20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
0
Exhibit 27.3 Nerds Galore Financial Performance
Internet Protocol (VoIP) while working with a single customer
is difficult; most of
the propeller-heads (as NG affectionately terms its technicians)
are specialists in a
few areas, and the company has found that its specialists are
spending a lot of time
behind the wheel traveling from site to site dealing with point
solutions to individ-

14. ual technical problems. NG’s founder and CEO, Jeeves Stobes,
freely admits that
the company’s own internal technology has not really kept pace
with the growth of
the company. NG lacks a customer/account management
program and relies on
whiteboards and e-mail managed by the company’s small core
of four senior work
schedulers (long-service employees who work out of a war room
in Edmonton and
know the company’s customers and staff well) to schedule
employees to customer
sites. In addition, while the company has placed a premium on
developing staff,
this has been through informal mentoring and apprenticeships
rather than formal
development based on identified customer needs, and this
approach has been dif-
ficult to sustain given the scrambles created by sudden staff
departures.
As shown in Exhibit 27.4, CEO Stobes has set targets of 15
percent revenue
growth year over year (which is close to recent rates of growth)
and a net income
target of 15 percent of annual revenues, which will be a stretch
(recent years have
yielded margins of 8 to 10 percent). Stobes has set a target of
95 percent customer
satisfaction going forward.
Exhibit 27.4 Strategic Targets
Actual Targets
2013 2014 2015 2016 2017 2018

15. Revenues ($M) (target is 15%
year-over-year growth) 100 115 132 152 175 201
Net Income ($M) (target is 15% of
revenues) 10 17 20 23 26 30
Customer Satisfaction (% “very satisfied”)
(target is 95%) 83 95 95 95 95 95
Staff levels 1,000 1,100 1,200 1,300 1,400 1,500
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532 Implementing Enterprise Risk Management
Gil Bates, NG’s vice president of human resources (HR),
recently recruited
from the competitor Propell-O-Rama, is concerned about not
only the employee
turnover rates but HR management in general. He has come
forward with a five-
point strategy for improved HR management, but has
encountered stiff resistance
from the rest of the Executive Team. The strategy is:
1. Attract the best talent. Do this by offering a positive and
flexible work envi-
ronment with flexible hours and a work-at-home culture.
2. Retain good people. Do this by offering employee recognition
programs, pro-
viding multiskilling/cross-training (which will have the added

16. benefit of
greater customer satisfaction), and ensuring that compensation
stays at or
near the 75th percentile of competitors or comparators.
3. Manage talent. Put in place a formal talent management
program so that
high-potential employees are identified, developed, and
mentored.
4. Optimize the use of people. Do this by purchasing and
implementing a
fully integrated customer management and workforce
management tool,
to allow greater scheduling and tracking of employee effort on
customer
accounts.
5. Rely on outsourcers to handle overflow of business requests
that have highly
volatile work volumes, or in areas where retaining internal
capability and
know-how is prohibitively expensive.
At a management discussion, it was agreed that the Executive
Team would
meet for a risk workshop to explore the following HR-related
risks and to help the
exectives evaluate the situation and decide on whether to invest
in Bates’s strategy:
� Inability to recruit people with needed skills
� Loss of staff with key internal knowledge
� Uncompetitive labor productivity
� Increased departures of skilled technical staff
� Loss of key business know-how

17. QUESTIONS
1. This is a relatively brief case study, yet the problems faced
are quite complex. In your
workshop, how did you handle uncertainty in the information
you have been given and
how does this translate into real-world workshops where not all
the answers can neces-
sarily be given at the table?
2. What were some of the risk sources that emerged repeatedly
in evaluating the risks?
How is this helpful?
3. How would this risk assessment aid in the decision on
whether or not to proceed with
the new HR strategy?
ABOUT THE CONTRIBUTOR
Rob Quail, BASc, is Director of Enterprise Risk Management at
Hydro One Net-
works Inc. Rob has had a leadership role in enterprise risk
management (ERM)
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NERDS GALORE 533
at Hydro One since 2000, and developed much of Hydro One’s
pioneering ERM
methodology. He has successfully applied ERM techniques to a
diverse range of

18. business problems and decisions, including annual business and
investment plan-
ning; major transformational, infrastructure, customer, and
technology projects, as
well as acquisitions, partnerships, divestitures, downsizing, and
outsourcing. Rob
was a contributing author to Enterprise Risk Management:
Today’s Leading Research
and Best Practices for Tomorrow’s Executives, edited by John
Fraser and Betty J.
Simkins (John Wiley & Sons, 2010), and is guest lecturer for
the Schulich School of
Business Masters Certificate in Business Performance and Risk
Management pro-
gram at York University, Toronto. He is a popular speaker at
risk management
conferences, and performs as a musician in clubs in the Toronto
area in his spare
time. He is an industrial engineering graduate of the University
of Toronto.
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