Satyam: Time to Panic?

[Randy Parks]

All of us are watching the Satyam saga unfold with trepidation.   Our exchanges with Satyam leadership have been fascinating.  They are desperate to restore the confidence of their clients and the advisory community, but almost helpless to do so until the company's financials are restated and long-term plans can be executed.   The steady stream of revelations about the scope of the fraud doesn't help matters.  On the opposite side of the fence, clients seem paralyzed.  They are concerned about their increased risks, but are not yet ready to pull the plug (with a ffew publicly-announced exceptions).     Our view has been that panic isn't the right response, but that contingency planning certainly is.   Securing code, data, operating manuals and other key resources ought to be done already.   Depending on the risk exposure, starting back-up contract negotiations might be important.  Preparing to advise senior management and the board on risks and related mitigation plans is critical.   Analyzing contract rights available in the event of further deterioration or a change of control (which seems likely) is just good advance planning.  Doing none of that -- or just hoping for a good outcome -- is career limiting.

Is it time to panic?

[msmensik]

Thanks, Randy, for posting this note.  I cannot disagree with your action items, but I really do hope we drop the "panic" word.  No one does their best thinking in a panic.  Plus, I think the situation needs quite the opposite: proper perspective and calm.  Bernie Madoff's fraud was about 50 time that of Raju's.  The CFO of Patni said, quite correctly I think: "We don't want to paint one brush on the [entire] industry..."  Or on an entire company that has been a well performing, I think.  But the situation does need serious thinking by the 1/3rd or so of Fortune 500 that has relationship, and there are lessons to be learned for the rest of us. But not panic.

[slepeak]

Randy - agree with your points.  Now is not the time to panic around financial blow-up, or terrorist attacks for that matter.  Our advice for organizations doing business in India and/or with Indian service providers - or anywhere globally - is not to significantly alter global sourcing strategies based on any one or two individual disruptive events.  Buyers should monitor the situation closely to determine if ongoing activities significantly impact sourcing efforts and operations.  Meanwhile, buyers should also undertake an immediate and thorough review of all existing global sourcing contracts and arrangements. 

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