PwC to return to Noble by year-end to review implementation progress
Singapore
NOBLE Group will be taking on board all of PricewaterhouseCooper's (PwC) recommendations to improve its mark-to-market valuation processes, and will engage the auditor again by the end of the year to review its progress on these.
PwC, which was commissioned by a Noble independent board committee to look at the governance framework, valuation methodology and policies of its mark-to-market contracts, had concluded that Noble's approach is "more sophisticated" than that of many non-financial companies, segregates duties between teams that provide key inputs into the model, and takes into account all factors a potential buyer of the contracts would.
Still, it recommended that Noble takes steps to improve the transparency, comparabilty and consistency over the valuation of the contracts, and to formalise policies and practices further. These include strengthening the role of compliance or internal audit to enhance policy adherence, and formalise procedures for back-testing and stress-testing of the portfolio.
One of the key things Noble will be doing in the next few months will be to better embed the internal audit team within its business processes, said its CEO Yusuf Alireza. "We went into the process knowing we are not perfect. You never get to the conclusion of risk management - you should always be constantly challenging your firm to get better and better and better."
At the Investor Day, the head of its four-person Mark to Market Committee Paul Brough also explained the process of the PwC review. The group had initially shortlisted KPMG and PwC, and after putting out a tender, decided to go with the latter.
Mr Brough, an independent non-executive director appointed in May, said that while Noble had hoped to release the review findings with its second-quarter results, the priority was for PwC to have sufficient time to complete a thorough work. In the end, PwC was able to meet the targeted deadline. The team of 7-8 was given "unrestricted access" to every Noble employee, and pored over more than 2,500 pages of documents over six weeks.
Explaining the scope of the review, Noble's Asia Pacific chief financial officer Paul Jackaman said that an independent evaluation of each and every single contract by Noble would have taken "way too long", and would require deep market expertise. Noble's management was not involved in the work except in responding to questions, added Mr Jackaman, who joined Noble in December last year from Macquarie Bank.
In concluding his presentation, Mr Brough said: "I believe that to any fair-minded observer, (the assurance and management reports from the PwC review) clearly show that any accusations of bad faith and conscious deception are misplaced and unjustified."
While accounting standards such as those for the valuation of long term contracts would "invariably" leave room for scepticism, "I would ask that you give credence to the work and reputation of PwC, and to me as an independent non-executive director who joined the Noble Group just three months ago". Mr Brough was a senior partner of KPMG in Hong Kong before retiring in 2012.
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