Livent Case Study
Jan 28th, 2018
Addressed to Livent, inc.
To the Board of Livent,
After reviewing Livent inc’s status, I am concerned over a few areas of operations and hope this advice can help the company improve.
First, I will identify some weaknesses in internal and external control mechanisms. Internally, there is a lot of concern around Drabinsky and his financial background. His previous cinema project involved borrowing a large amount of money that he was unable to return and eventually shut down his business. This is a red flag, seeing how much they expanded instead of building a better financial model. The internal investigation that followed found irregularities in the account records. I advise to take caution in the financial model that Drabinsky implements, and to have second eyes on all accounting records to ensure the correct principles are being applied.
The second red flag is something I advise to be taken incredibly seriously and to address today. Drabinsky’s verbal abuse towards subordinates needs to end immediately, as this behavior can cause account practices to be avoided to ensure his happiness. With Drabinsky’s history in unusual accounting practices, I strongly advise he no longer oversees financial policy inside the company.
The third red flag is the point Webster brought up about the accounting staff being reluctant to discuss accounting matters. Transparency is key to a successful business and keeping matters behind doors can lead to disaster.
Externally, there are concerns about the press release that was released to the public relaying “significant financial irregularities.” The public should not be left in the dark in these matters, and should not have had to wait for a press release from someone else.