A global strategy to corner the risk market


Laurie Schultz has done her time in Canada’s software industry. The newly appointed CEO of 25-year-old risk management and auditing software company ACL has helped companies like Sage and Intuit build their market share. Now with privately held ACL, Ms. Schultz intends to spread the Vancouver-based company’s international presence and find its own niche in the risk-management category. She recently spoke with the Financial Post’s Dan Ovsey about her vision and strategy for the company, why it won’t hurt to make it a little un-Canadian and the invisible threats and opportunities ACL has uncovered for its clients. Following is an edited transcript of their conversation.

Q: You say you started your career in telecom. How did you develop the strategic business capability to excel in management?

A: I didn’t really choose technology as my career. I fell into it, frankly, with more of a functional starting point. My first job in telecom was as a project manager and from there the rest was really around customer experience. I evolved into more general management, which compelled me to learn other functions — whether support or R&D or marketing or sales — and I’m mostly focused now on change management and if there’s one common theme to the technology companies I’ve been part of, I’ve tended to land in businesses that are fairly mature; that are number one in their specific category but that are perhaps in need of a bit of reinvention — the ability to re-learn what it took to become number one in the first place.

Q: ACL has seen some significant growth since you took on your role a year ago. To what do you attribute that growth?

A: There’s many answers to that. I wasn’t here 25 years ago, but I will comment that — and I’ve seen this with other businesses — ACL did something correctly right out of the gate, which was that it built relationships with influencers. The educational sector and universities — we’ve got hundreds of universities around the world that are heavy advocates for ACL and we have very strong relationships with accounting firms. The power of influencers and recommenders — not just in ACL but other software businesses I’ve worked in — is a tremendous advantage, and one that’s hard for competitors to bump. So, that’s been a very big part of the formula.

If I fast-forward 25 years to look at our last fiscal year, we’re now global and we’ve got good diversification on our portfolio. We’ve seen markets like our Asia-Pacific-Japan segment grow substantially over the last couple of quarters. Markets like Latin America have consistently been double-digits for us. It’s been important for us to have that global footprint because parts of the globe that are less mature and growing help offset risks in places like Europe where, of course, there’s an economic crisis in play.

Q: That’s interesting because — generally speaking — Canadian companies haven’t been known to be very ambitious about their global pursuits.

A: I actually said this to someone the other day — Canadians are not nice. We’re sorry, but we’re not nice. I actually think we tend to be fairly understated and as we consider ACL looking forward to the next 25 years, I think it’s going to be very important that we become less Canadian and far more aggressive. We need to be hunters. We need to be disruptive in the category — and I don’t mean that from a risk management perspective, but just in terms of software in general — embracing things like the cloud. We’ve got this incredible track record but I think it’s going to be essential for us to get even more aggressive and competitive looking forward.

Q: When you consider threats like intellectual property theft and the movement of organizational operations to overseas locations, what do you see as your key growth markets in the coming years?

A: Let me talk about growth from three perspectives — geography, technology adoption and types of risk. Geographically, we focus on four segments — Asia-Pacific, Latin America, Europe and North America. Maybe it’s intuitive to hear that we’ve got pretty strong penetration today in North America — 89% of the Fortune 500, for example. In contrast, in markets like Asia-Pacific, there’s a substantial number of auditors… less than 5% are using purpose-built software to manage their risk process, so technology adoption in our risk management/audit space tends to be a lot lower in geographies like Asia-Pacific-Japan than in North America. For ACL, being a Canadian company based in Vancouver, we need to figure out how to effectively build a footprint in markets like that by having custom solutions in Chinese, for example, or Korean, Japanese, and having a local reseller channel that’s in that market and that has the recommenders and relationships locked in. For us, getting good in marke

The second angle is technology. There’s a proliferation of technology today. The amount of data available and the number of people that have access to data significantly impact the risk-management profession. They can’t possibly do their job through manual processes alone. Consider it fighting fire with fire or fighting technology with technology. It’s going to be imminently important that the risk-management profession increase its adoption of technology so that they can interrogate this massive volume of data and really isolate the risks that matter.

The third thing is the types of risk. I think people tend to start thinking about it in terms of the accounting scandals we saw 10 years ago and the FCPA. A lot of the original catalysts for this risk function are still prominent and important. But we’re seeing the types of risks evolve more into the mainstream business — so more operational types of risks where true value could be added. Twenty-five per cent of our customers today are using our technology more to assess risks in their core operations. For example, we have a large municipality in the U.S. and we used our technology to learn there are 80 people on payroll that didn’t exist. We’ve seen clients unveil millions of dollars worth of duplicate payments. So, the technology can be used far more broadly than the traditional financial or accounting fraud scenarios. It can be used to help unveil new sources of revenue and operating inefficiencies.

Q: What are the most common operational risks you encounter among your customers?

A: The one that seems to come up first is around duplicate payments or over-payments. We have a client in the healthcare industry that uncovered $17-million in duplicate payments in the first year they used ACL. Similarly, we have a school board in California that found $2.1 million in over-payments to contractors. Payments tend to be a starting point and then you get into the second-most common suspect, which is credit cards. It might sound like nickeling and diming, but you can use our technology to look at how employees are spending on their (corporate) credit cards. We’ve seen crazy examples — everything from putting personal gas or clothing on the corporate credit card to somebody buying cattle for their ranch. It’s amazing the kinds of things we learn. We’ve seen employees running up hundreds of thousands of dollars of abuse on corporate credit cards. We’ve got a Canadian crown corporation that discovered $4-million in excessive overtime and a substantial pattern of absent

Q: When you arrived at the company, what was the one thing you wanted to change that you felt wasn’t been done very well?

A: Mobilize the voice of our employees and channel partners. I don’t mean to be touchy feely in that comment. I will say, sometimes when you’ve been in a category for as long as ACL has, and you’re the first thing and creating all the rules, you tend to forget the early days. I think we got into a pattern in behaviour where we have been on a treadmill. It was urgent for me to get in front of employees and ask them what was working and what wasn’t working and likewise to get in front of our reseller channel around the world and ask the same questions. And then, together, short list it all out and identify the one or two things that we needed to change to get us back on track. Above all else, the biggest change we’ve made in the last year has been cultural. It’s just been re-mobilizing the voice of employees and finding ways for them to see their opinions manifest themselves in what we’re doing and where we’re spending our time.

(Source: Financial Post)

Monday, October 1, 2012 In: Hot Topics Comments (None)

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