Question

Situations where validity conflicts with timeliness

Answer 1

There may be various situations where validity of data may be in conflict with the timeliness.

Some examples are :

1. The Management needs to finalize the sales forecast for Budgeting of next year and the report of forecast sales by vertical, by region and by customer are needed by 12 Noon. The forecast to be finalized by the end of the day.

The sales team has the forecast data by customers but the details of split by vertical and regions are not finalized and some inputs are pending from regional teams which are expected by another two days. Here the validity of the data cannot be 100% acceptable and if we wait for the fine tuning of the data , we shall not meet timeliness.

2. Another situation is that the Board of Directors need to present the Financial statements for the approbal of shareholders in AGM tomoroow, but there is a sudden development where a claim for hazardous product casusing damage to a customer has been accepted by Court and the amount of damage is to be pronounced after two days,. The verdict was unexpected , no contingent liability was considered , now a provision needs to be taken as the amount of damage may be quite significant. In such a situation there is less validity of the financial statements without the confirmed liability amount and for getting the confirmed loability , the timeliness is affected as the AGM is due tomorrow.

3. Another situation : The Management needs to decide on a Capital Project Investment by today as the Capital Budget for the Group needs finalization by today. There is one high potential investment in a new grrenfield project , however, the project evaluation report could not be finalized as there is some risk due to potential environmental damage and the actions required to mitigate the damage. The full implications of the damage and the required fund for remedial action is tentative, not yet finalized as the study of environmental impavt will take some time. In such case the validity of project report is doubtful and if we wait for fully validated analysis, the timeliness will be compromised.