EY Consulting Case Study: Assignment Information

EY Consulting Case Study
Assignment Information and Background
Assignment Information
In the context of your Advisory course, you will be part of the Ernst & Young (EY) engage-
ment teams from the different sub-service lines: Performance Improvement (PI) and Risk &
IT.
Bigg-Glowbell (BG), one of the largest international drinks and beverages companies, has
engaged EY to perform a number of assessments of the various functions they currently
have within their organization, at both a group level and within Europe, the Middle East, and
Africa (EMEA) region. They would like to perform these assessments in order to come out
with recommendations that will help in improving these functions. This request follows the
replacement of John Bigg as Chief Financial Officer (CFO) after a steady decline in profit and
market capitalization over the last two years. John’s departure was imminent at the end of
the last financial year, when material adjustments to profit were made during the audit of
the accounts. The announcement resulted in a 20% decline in shareholder value overnight.
The background information is split into three main sections: the engagement information,
an overview of BG, and profiles of key BG and EY characters. As in real life, there is not
always one sample solution for each task. Different approaches and ideas can lead to good
and correct results.
EY Consulting Case Study Event @ WWU Münster page 1 / 38
All rights reserved - Ernst & Young 2020

Bigg-Glowbell Overview
To EY BG Team
From Beverley Cornell, Transaction Advisory Services (TAS)
MLP. 9E. 1A Ext: 1990 Fax: 16500
Dear All,
In advance of you starting the assignment at Bigg-Glowbell, I thought it would be helpful to

provide you with some background on the client company. I will try to provide as much
knowledge as I can in this memo.
Remember that BG is an important client to Ernst & Young, so any work we do has to be of
highest quality.
Company History
As you would know, Bigg-Glowbell is one of the largest drinks and beverages companies in
the world. It is a market-focused company and prides itself on being responsive to custom-
ers’ needs. Its philosophy is: “The customer is king”. BG started as a small, family-owned
company and has grown into a major global corporation. The historical milestones are shown
in the following timeline:
George Bigg III is

appointed CEO - The
Bigg family loses
overall control of the
company to
institutional
8 May 1896: Bigg- shareholders
Glowbell is BG goes public: a
incorporated, based share flotation is
on Arthur Bigg and moderately A few more
Isaac Glowbell’s successful but BG is BG starts acquiring acquisitions and a
Herbal Elixir recipe in dominated by the two other drinks and small amount of
Eureka, Nevada families beverage companies consolidation occur
year
1890
1895 1910
1915 1930
1935 1950
1955 1970
1975 1990
1995 2010
2018
BG expands The Bigg family buys
internationally and out the Glowbells’
opens a facility in shares - George Bigg
Canada II assumes the role of
CEO
BG expands into Herbal Elixir, made BG expands into
other beverages, with rum or whiskey, logistics pubs in
based on local fruit becomes a popular England, restaurants,
recipes drink with the World and hotels
War II troops
Figure 1: BG timeline

As sales growth fails to deliver profit expectations, the new millennium brings increasing
pressure from shareholders. Rumors of hostile takeovers from rivals persist. An article in
the Wall Street Journal suggests that BG could be worth more if it split into smaller organi-
zations.
BG remains a dominant player in the drinks and beverage market. The family retains a share-
holding in the company and until very recently John Bigg was the CFO. John still works for
BG as a “consultant”.
A period of declining profitability and poor share price performance was followed by a high-
profile series of material adjustments to the accounts during the audit by Pricewaterhouse-
Coopers (PwC). As a result, share price declined by 20% overnight. John Bigg was removed
as CFO and replaced by Sarah Goldman. I know Sarah personally as we studied together at
Harvard. She joined BG last month after being the CFO of Turnaround Holdings, where she
led a series of acquisitions and post-merger consolidations during the mid to late ’90s.
Revenue and Profits
Mio € Company Performance

7000
Market cap
6000
5000 Revenue
4000
3000
BG goes public
1928
2000
Profit
1000
0
1890
1895 1910
1915 1930
1935 1950
1955 1970
1975 1990
1995 2010
2018
year
Figure 2: BG company performance until 2018

Bigg-Glowbell global locations
Currently, BG operates in North America (NAR), Asia-Pacific (APAC), Europe, the Middle
East, and Africa (EMEA), and Central America and Latin America (CALA). The company has
ambitious plans to expand into China, India and Eastern European countries such as Slove-
nia, Romania, Russia, and Albania.
Figure 3: BG location map
Bigg-Glowbell Organization, Products and Services
BG organizes itself in a matrix based on the geography and the divisions (Figure 4: Figure
4). The market-facing (geography) component is strong and the countries have a lot of au-
tonomy in what they do.

Figure 4: Division structure
► The organizational structure of the company is not fully aligned to the business struc-
ture seen above. Each region has a regional director and the board structure includes
the regional directors, the Chief Executive Officer (CEO), the Chief Executive Officer
(CFO), the vice presidents of marketing, IT, and HR, and four non-executive directors.
► Finance within the region reports to the Managing Director (MD), the ones with a dotted
line report to the CFO (see organization chart).
Organizational Structure
An example set of organization charts relevant to the engagements we are currently under-
taking for BG is shown below. These charts are not exhaustive or uniformly representative
of how the company organizes itself everywhere.
Group Level
Figure 5: Organizational structure on a group level

Division Level Finance
Figure 6: Finance division structure
► The regional level was introduced recently (2011) in order to transfer power to the re-
gions. The Finance function has done a better job than the other support functions (par-
ticularly sales and marketing) of adapting to the new arrangement This allows some FDs
to report to their MDs instead of to Finance.
► The Packaging and Logistics divisions do not have operations in every country.
► Office of Bookkeeping and Reconciliation (OBKR) has some small “Shared Services” op-
erations in the US, UK, and Norway. In general, these do not perform well and are not
cost-effective. In fact, they cost more than when the consolidation occurred. The com-
pany looked at outsourcing these operations to IBM. However, the negotiations did not
materialize. When the supplier did not guarantee cost savings, no agreement could be
reached on the baseline costs and metrics.

Procurement Organization (EMEA)
Figure 7: Procurement organization structure
► For Drinks and Packaging divisions:
• *The purchasing process is owned by the individual operations.
• Both divisions have the same organization structure.
► For Logistics and IT divisions:
• **The purchasing process is owned by the Finance function and executed by Fi-
nance accountants.
• Both divisions have the same organization structure.
► FTE procurement headcount across EMEA: 15 FTE.

The Drinks Division - "Winning Through Service and Innovation"
The Drinks division manufactures have a wide range of alcoholic and non-alcoholic drinks,
as well as the traditional Herbal Elixir. The division has grown through a combination of or-
ganic growth and acquisition. It owns a small UK based chain of pub/restaurants called ”The
Strange Stork” and a few leisure centers and country hotels acquired from a customer during
financial difficulty.
Product Range
Carbonates
Sold in bottles and in ► Herbal Elixir Classic
cans in three sizes: ► Herbal Elixir Ultra
standard, large and ► Herbal Elixir Citron Twist
family ► Herbal Elixir Tonic (rejuve-
nation for the over-60
population)
► Fruitco Elixir (orange,
lemon, raspberry and
black currant)
Fruit Juices
Sold in bottles, jars ► Concentrates
and cartons (B-pak) ► Freshly Squeezed

Water
Sold in plastic and ► Scunthorpe Spring Car-
glass bottles in bonated (also sold with citron
three sizes: stand- or fruit-twist variants)
ard, large and ► Scunthorpe Springs Still
family
Alcoholic Drinks
Sold in cans and ► Beer “Old Codger” (a product
bottles from the acquisition of Side-
bottom & Sons Yorkshire mi-
crobrewery and pub chain)
► Alcopops (marketed under the
Whizz brand)
Third-Party Products
Sold as part of ► Russian and Polish vodka
joint venture pro- ► New Zealand wine
jects mainly, but ► Cambodian sake
not exclusively, in ► Czech and other Eastern
the US and UK ► European beers
► Australian and Chinese beer

Drinks Operations
Bottling is carried out close to the market and is done by a BG plant where sufficient volumes
exist. In smaller markets, the bottling is outsourced. In overall volumes, BG bottles 80% of
its own products.
All distribution is undertaken by the BG division using a cost-plus approach. Transactions are
billed and settled on a per-shipment basis through the appropriate local OBKR departments.
Joint ventures with third parties are managed and accounted for against a series of call-off
contracts and profit-sharing arrangements negotiated locally by BG’s Marketing division.
The Operations division also owns the procurement process, planning, and manufacturing.
It also acts as an interface with the Logistics division. The function considers itself a pivotal
player in delivering customer service and responding to requests from Marketing. A combi-
nation of BG’s over-complex product range, a desire to be responsive to customers and a
lack of effective demand planning contributes to periodic manufacturing issues. This also
includes long product runs to keep changeovers to a minimum and short product runs to
meet unforeseen customer demand. This creates frequent and conflicting problems.
Typically, some parts of the BG supply chain will have too much inventory while others will
run out. In situations where demand cannot be met, the work is outsourced to third parties.
These third parties are carefully selected based on quality and not on price. The Operations
and Finance functions do not see eye to eye. In the past, George III frequently reprimanded
John Bigg for the obstinacy and intransigence of Finance. There is little visibility regarding
cost, and collecting data for reporting is difficult.
The complexity of the operations leads to issues concerning performance reporting. Essen-
tially, the process operates on a day-to-day basis with little apparent planning and few met-
rics. The master scheduler (Pete Best) informs that they received “loads of complaint, mainly
about shelf life”. He suggests that since they were ISO 9000 certified it was OK because they
wrote them down. He has to fill out a check sheet for the quality manager. Once that is done
he usually bins them.

IT Services (Solve IT) — “Daring To Go Where Technology Leads”
Born out of the SAP and RDS implementations, the IT division employs between 600 and
900 highly skilled graduates who earn top salaries. These graduates are divided equally be-
tween full-time employees and long-term contractors. The division, based in the US, UK, and
Germany, was formally a part of the IT function of BG. Currently, the division operates as a
business services operation and recharges its services to the business with a cost-plus ap-
proach.
Since they are not held accountable for the costs, businesses cannot source the services
from other companies and are not too bothered about it.
In order to increase data availability and decrease the data administration effort, the com-
pany had engaged Accenture to implement a global SAP system in 2006. However, the de-
sign of the system was carried out in isolation and with minimal business input. When finally
the pilot implementation in Holland brought operations to a standstill, sales were lost for an
entire season. The situation was so bad that the company had to share business intelligence
with third-party manufacturers in an attempt to quell customer anger and satisfy orders.
The cost ran into tens of millions.
Following this disastrous experience, BG continued with an SAP implementation but gave
businesses the largest say in how the system was to be set up and implemented. This re-
sulted in different SAP configurations in each of the operating country. BG expanded the IT
division in order to maintain the complex global IT infrastructure and software.

Finance — “Our days are numbers”
Table 1: Headcount and payroll data
FTE by Location
Division Department EMEA APAC Americas Function(s)
Drinks Drinks 8457 5207 6361
IT Services IT 468 0 326 General IT and IT consult-
ing
Logistics Distribution 3174 0 2090
Packaging Packaging 2276 1697 1895
Support Functions - HR Payroll 35 24 29

Recruitment 47 23 52
Benefits 17 8 19
Support Functions - Procurement* 15 15 15 Procurement
Finance General Accounting 227 115 184 Quarterly reporting and
and Reporting* consolidations
OBKR 521 0 304 Bookkeeping, reporting,
cash allocation (UK), pay-
ments to suppliers (UK)
Planning and Budge- 32 9 17 Planning and budgeting
ting with little updating and ex-
planations throughout the
year
Tax 24 11 21 Tax planning and report-
ing
Internal Audit 65 41 81 Internal audit
Audit 82 56 85 Other general accounting
functions

Payroll Expense by Division in Thousands (€)
Division Department EMEA APAC Americas
Drinks Drinks 354.331 173.627 246.584
IT Services IT 31.142 0 20.461
Logistics Distribution 132.984 0 81.019
Packaging Packaging 95.360 56.586 73.460
Support Functions - HR Payroll 1.466 800 1.124
Recruitment 1.969 767 2.016
Benefits 712 267 737
Support Functions - Fi- Procurement 1.380 1.280 1.331
nance
General Accounting 20.881 9.815 16.333
and Reporting*
OBKR 47.926 0 2.695
Planning and Budge- 2.944 768 1.509

ting
Tax 2.208 939 1.864
Internal Audit 5.979 3.499 7.190
Audit 7.543 4.779 7.545
*These headcount numbers refer to full-time procurement roles. Most procurement in EMEA is done by line
personnel, so “hidden” procurement headcount is estimated to be up to 60 FTE.

Table 2: Consolidated Balance Sheet (in Mio €)
2019 2018
Assets
Non-current assets
Goodwill 2.001 2.258
Brand intangibles 2.602 2.992
Software intangibles 145 112
Property, plant, and equipment 988 1.002
Investment in associates 232 234
Deferred tax assets 11 12
Trade and other receivables 54 52
Other investments 7 8
6.040 6.670
Current assets
Inventories 822 688
Short-term investments 23 20
Trade and other receivables 1.549 1.111
Tax recoverable 30 28
Cash and cash equivalents 287 297
2.711 2.144
Total Assets 8.751 8.814
Liabilities
Current liabilities
Trade and other payables -1.709 -1.612
Tax payable -277 -167
Short-term borrowings and overdrafts -752 -638
Short-term provisions -91 -80
Obligations under Finance leases -24 -24
-2.853 -2.521
Non-current liabilities
Trade and other payables -44 -34
Borrowings -2.344 -2.299
Retirement benefit obligation -571 -567
Tax payable -170 -173
Deferred tax liabilities -752 -744
Long-term provisions -11 -10
Obligations under Finance leases -52 -50
-3.944 -3.877
Total Liabilities -6.797 -6.398
Net Assets 1.954 2.416
Equity
Share capital 250 250
Share premium account 992 1.025
Other reserves 23 23
Retained earnings 689 118
Equity attributable to equity holders of the parent 1.954 1.416
Minority interest - -
Total Equity 1.954 1.416

Table 3: Consolidated Income Statement (in Mio €)
2019 2018
Continuing Operations
Revenue 5.720 5.899
Trading costs -2.796 -2.772
Selling and distribution costs -1.704 -1.692
Administrative costs -512 -494
1) Restructuring costs -9 -13
2) Amortization and impairment of intangibles -10 -8
3) Non-trading items -16 -38
Profit from Operations 673 882
Exceptional item – software costs -35 -
Profit Before Financing and Taxation 638 882
Investment revenue 24 22
Finance costs -20 -17
Profit Before Taxation 642 887
Taxation -160 -200
Profit from the Period from Continuing Operations 482 687
Discontinued Operations
Profit for the period from discontinued operations - -
Profit for the Period 482 687
Attributable to:
Equity holders of the parent 482 687
Minority interests - -
482 687
Earnings per share
From continuing and discontinued operations
Basic 23,1p 45,8p
Diluted 26,3p 40,5p

Benchmark Data
BG began to buy benchmark data from the American Productivity and Quality Center (APQC)
12 months ago. They stopped it when the business began to resist being shown unflattering
comparisons with competitors and other comparable organizations. This is why only a lim-
ited set of data is available.
Sarah Goldman and Jonathan Stone, EMEA Regional Director, are both big believers in
benchmark data because if used correctly, the data creates an incontrovertible case for
change.
Table 4: Benchmark
Finance
Bottom Quar-
BG Top Quartile Median tile
Finance Costs as % of Revenue 2,02% 0,30% 0,70% 1,50%
101.000
Finance Costs per Finance € 46.404 € 67.469 € 97.565 €
Days Sales Outstanding 75 25 35 45
Days to Close 20 3 7 22
IT
Number of IT FTEs for managing
the business of IT per $1 billion
revenue 12 4,9 6,3 8,8
Total IT budget as a percentage
of revenue 1,50% 9,00% 1,40% 1,70%
Financial Ratios Compared to Competitors

Anheuser- Coca
BG Busch Cola Pepsi
Current Ratio 0,95 0,81 0,95 1,33
Quick Ratio 0,66 0,51 0,76 1,05
Inventory 6,96 13,21 4,48 7,57
ROE 24,67% 49,89% 30,02% 36,64%

Key Personalities
There are a number of key individuals at EY as well as BG you need to know about. Below
you will find information about key contacts including personal overview and background
information that might be useful.
Ernst & Young Contacts
Robert Sandwich — Executive-in-Charge (Advisory)

Robert, an experienced Advisory partner, has a deep understanding of financial transac-
tions. He is known to be thorough and likes to check the details behind findings and the
robustness of conclusions and recommendations before presenting to clients.
Beverley Cornell — Client Service Partner (CSP) for Bigg-Glowbell

Beverly is an experienced CSP who recently has taken on responsibility for BG. Until now,
EY has completed only small amounts of work with BG. Beverley sees this as a great oppor-
tunity to establish a firm-wide relationship with BG and has prepared the ground well for
your team. BG is being considered as a potential priority account for Advisory.
Sam Reynolds — Quality Assurance (QA) Partner for Bigg-Glowbell

Sam is the QA partner on the BG engagement. She has been involved in the initial discussions
with the client and the development of the initial engagement letter. Sam has an eye for
detail and is eager to drive a focus on quality throughout the team.
BG Contacts
Table 5: Contact List

Global Team
George Bigg CEO
John Bigg Former CFO
Sarah Goldman CFO
Herald Jerrand Group Finanical Accountant
Geoffrey Eccles Group Chief Information Officer (CIO)
Pavel Jaworski (PJ) Group Vice President (VP), Marketing
Eleanor Fitzgerald Group VP, Human Capital
Olivia Merchant Group Director, Strategy & Business Development
Ruby Cutman Group Special Projects

Regional/Country Personnel
Jonathan Stone EMEA Regional Director
Chris Johnson EMEA Finance Director
Sarah Wotherspoon EMEA Sales & Marketing Director
Bob McTavish EMEA Operations Director
Eddie Stobbert EMEA Supply Chain Director
Paul Chapman EMEA IT Director
Divya Gudka NAR - Divisional Controller Packaging
Dennis Bittle UK & Ireland – Manager Transactional Processing
Group Level
George Arthur Bigg III — CEO

Personal overview — George is a charismatic individual who enjoys socializing with key cli-
ents. George believes BG’s reputation and relationship with its customers is its most im-
portant asset. He often intervenes directly in resolving client issues over quality of product
or service level. He is an avid golfer who conducts most of his business out of the office and
rarely keeps notes.
Background information — At 73, George does not have the appetite or energy for seismic
change. He is planning to retire and sell his shares. However, the recent drop in share price
has thwarted his plans. He is nonetheless a rational individual and has a strong commercial
instinct. A compelling case for change could persuade him to take a more progressive view.
John Bigg — former CFO and a current “consultant” to BG

Personal overview — John Bigg does not possess leadership skills and vision. The consensus
is that family connections and influence gained him a place on the board as CFO.
Background information — At the board level, John often was outmaneuvered by the power-
ful regional MDs and the VP of marketing and was largely ignored by the CEO. The regional
MDs also employed regional Finance directors who, in turn, had country controllers report-
ing to them. Isolated from his own department, John focused on the development of the
accounting policy and his role with numerous Institute of Charted Accountants in England
and Wales (ICAEW) committees.
Sarah Goldman — CFO

Personal overview — In her mid to late 30s, Sarah is widely viewed as a tough and ambitious
leader. She has a reputation of turning around midsize companies and is highly respected in
the investor community. BG, however, is a challenge on a different scale to anything she has
dealt with before.

Background information — Sarah has the following mandate from the CEO and the investor
community:
► Produce credible, timely financial results with no more surprises

► Focus the business on bottom-line profit and shareholder value
► Create a Finance function that leads by example on value, efficiency, and quality. After
her meeting with Robert Sandwich, she wrote a note to herself and stuck it above her
desk. It reads: “When dealing with the John Bigg legacy, we will align Finance around:
• Value creation
• Value protection
• Value for money”
Herald Jerrand — Group Financial Accountant

Background information — Herald is responsible for consolidating and publishing financial
and supporting nonfinancial information at the group level. He is also responsible for the
Sarbanes-Oxley compliance. He chairs the quarterly due diligence process in which the re-
gional controllers assert that, to their knowledge, there are no material weaknesses in either
their financial controls or consolidation submissions. He also employs a head office consoli-
dation team of 50 qualified accountants with strong spreadsheet and investigative skills.
Herald has three priorities:
► Achieve greater transparency and control over the Business Unit (BU) submissions to
the quarter-end
► Follow through on errors caught in the post-close validation and build quality in at the
source
► Create a single chart of accounts and standards around the record-to-close process
Herald does not have the resources or the business commitment to deliver on any of these
priorities.
Geoffrey Eccles — Group CIO

Personal overview — Geoffrey graduated with a third-class honors degree in computer sci-
ence.
Background information — Geoffrey was responsible for Project Universe, the common SAP
project that was, in its early phase, subcontracted to Accenture. The IT department acted as
a single point of contact with Accenture during the system’s design. Geoffrey argued that

the users would never agree on a common way of working, and technology was a tool to
enforce standardization and efficiency.
Geoffrey often boasts that a single management report is hardly prepared without some
input from his team. In order to offset costs, the IT contractors are sold externally during
off-peak periods and Geoffrey is developing the initialization of a consulting practice.
Pavel Jaworski (PJ) — Group VP, Marketing

Personal overview — The combination of PJ’s management and analytical skills, his insights
into the market, and the former communist block’s adoption of capitalist lifestyles led to
rapid sales growth and the establishment of BG drinks as the No. 1 position in most coun-
tries. After the sudden death of the group vice president of marketing, PJ was appointed to
the board within three years of joining the company. George III often mentions that PJ is the
son he never had!
Background information — PJ firmly believes in analysis and market research. He has created
the Marketing Analytics Unit (MAU), consisting of some of the finest young minds in the
business. In addition to market analysis, the MAU estimates product profitability and plans
and budgets for marketing campaigns, promotions and product innovation programs. PJ in-
sists that the local Finance functions reconcile annually back to his figures, which are used
as the basis for board-level discussions on sales and marketing.
Eleanor Fitzgerald — Group VP, Human Capital

Personal overview — Eleanor is a charming and personable character with a deep and sincere
interest in people. Eleanor is a family friend of the Bigg family.
Background information — Eleanor is responsible for:
► The BU HR departments, which run recruitment, payroll, learning and development, and
performance management and reward
► Talent management and succession planning
► Organization design
► Diversity and inclusion programs
► The employee feedback survey
Eleanor is increasingly concerned about the people issues across the business and has five
main areas of concern:
► The recent poor scores on the employee survey, particularly regarding trust in leader-
ship, business direction, and confusion about accountability among the BG leadership

► The lack of alignment at the board level
► The age of the workforce
► Difficulties in recruiting people with the right skills
► Multiple change initiatives have left staff cynical and uncooperative about any further
business change.
Olivia Merchant — Group Director, Strategy and Business Development

Personal overview — Olivia is a London School of Economics (LSE)-trained, highly strategic
thinker. She joined BG from Unilever, where she was responsible for impressive growth in
the “Healthy Living” category.
Background information — Olivia has invested in understanding the company situation, mar-
ket conditions, forecasts, etc. Her view is that the future of BG is in diversification of prod-
ucts, channels, and markets. She believes that BG would be best served by investing now for
better long-term results.
The most immediate challenge presented to Olivia relates to the history of business trans-
actions that have been made by BG and subsequently failed to deliver benefits. Olivia is keen
to understand the nature of these previous acquisitions and resolve the key issues that pre-
vented a successful integration prior to pursuing her development strategies.
Ruby Cutman — Group Special Projects

Personal overview — Ruby Cutman is an experienced, hard-hitting program delivery expert
who has been brought on board by the CEO with a mandate to shake up the way the organi-
zation manages its portfolio of change programs.
Background information — A series of strategic projects during the last couple of years has
failed spectacularly with no real benefit or return on investment to BG. Ruby has reached
the conclusion that the level of program management expertise and maturity in the organi-
zation is extremely low. There is very little understanding of benefits management, change,
or accountability for the lack of results. Ruby is very concerned about these findings and is
in the process of setting up a workgroup to establish exactly what is needed to improve the
situation and turn it around.

At Bigg-Glowbell regional/country level
Jonathan Stone — EMEA Regional Director

Personal overview — Jonathan, 38 years old, has been with Bigg-Glowbell for 18 months. He
is a Master of Business Administration (MBA) Graduate from Harvard Business School spe-
cializing in strategic management and supply chain. He transformed a decentralized organi-
zation into a fully centralized one.
With his rich experience and a broad background in procurement, Jonathan is considered an
expert in the areas of strategic sourcing, process standardization and optimization, and
spend management.
Background information — At BG, Jonathan’s emphasis is on strong cross-functional relation-

ships, communication, knowledge-sharing, and close contact with employees. Since he as-
sumed his position at BG, Jonathan has tried to introduce a more open, integrative, and
communicative approach to the company.
At the board level, Jonathan quickly gained acceptance due to his excellent reputation and
charismatic personality. There are high expectations of him being able to increase profita-
bility in the EMEA region, primarily by reducing operating costs while maintaining the high
level of growth in Eastern Europe. He is very much aware that his success at BG is dependent
on this happening in the next two years.
Chris Johnson — Finance Director EMEA

Personal overview — Chris Johnson has come up through the ranks in BG over the past 20
years and has built a strong network of country Finance controllers. As powerful regional
head, Chris has often led the other regional FDs in taking a stand against John Bigg and his
numerous iterations of the global accounting policy.
Chris is also part of Jonathan’s central Regional Coordination Team and therefore feels un-
der more pressure than ever before at BG. Despite his resentment of Jonathan Stone, Chris
is highly aware of the need to improve performance and improve cash flow. He is doing his
best to find the budget needed to grow the organization while keeping control of limited cash
reserves.
Sarah Wotherspoon — Director of Sales and Marketing EMEA

Personal overview — Sarah joined BG 10 years ago following an extremely successful career
at a major European advertising agency. She has spent most of her time with BG managing
the UK sales and marketing team.

Background information — Sarah has been in her central role for 12 months. After spending
time to understand the problems she is grappling with, she is now focused on the coordina-
tion of the countries’ sales and marketing activities through three main projects:
► Customer KPIs: measuring and understanding profitability per customer, sales effec-
tiveness, and marketing spend ROI
► Customer Strategy and Segmentation: divesting or improving the profitability of under-
performing accounts; introducing differentiated service levels; targeting and acquiring
more profitable market segments
► Customer Experience: increasing customer satisfaction and loyalty by improving per-
ceptions of BG and the efficiency of how they are serviced
Bob McTavish — Director of Operations (Production and Distribution), EMEA

Personal overview — Bob is an engineering graduate from the University of Edinburgh. He is
passionate about precision and quality. The recent failures in quality management concern
him.
Background information — Bob is mainly concerned that the growing product range and fre-
quent changes to specifications and planned volumes are affecting quality. To compensate
for this, he has increased the level of supervision at key locations and created a Global Qual-
ity team, which investigates quality issues and audits production standards.
Bob has found it difficult relating what he knows about the business to his cost center re-
ports. The accruals, recharges and head-office cost allocations in particular mean nothing
to him. Bob’s biggest worry is that he will be asked to explain the numbers at a management
meeting. So far, that has not happened and he has been spared the embarrassment.
Eddie Stobbert — Director, Supply Chain EMEA

Personal overview — Eddie is young and ambitious. He has been with BG for more than six
years. He is a seasoned procurement professional with strategic sourcing expertise and is
extremely well respected in the UK supply chain market.
Eddie is renowned within the BG organization for his excellent people and cross-functional
engagement skills. His performance is greatly appreciated and supported by most of the
EMEA leadership team, with the exception of Bob McTavish.

Background information — Eddie strongly believes that BG’s performance around demand
planning and inventory levels could be much better. His attempts to persuade BG’s opera-
tions managers to move away from a policy of hoarding inventory to a more streamlined,
“just-in-time” approach have not been successful.
Eddie is convinced that the lack of clarity around demand management is the principal cause
of the frequent stock-outs, which in-turn affects BG’s customers. He is also concerned about
the ineffective supply chain performance metrics, particularly around core manufacturing
process efficiency. Given the increasing financial pressures from shareholders, Eddie is in-
clined to adopt a tough customer/supplier approach to relationships. He has strong views on
how procurement can help to drive cost savings.
Paul Chapman — Director, IT EMEA

Personal overview — Starting as a trainee programmer in 1981, Paul has come up through
the ranks at BG. By the late ’90s, he was responsible for much of the common IT infrastruc-
ture implemented across Europe. One example of Paul’s vast knowledge of BG applications
was his management of the data migration in 2007.
Background information — Since the failure of Project Universe, Paul has focused on sup-
porting each region with a local SAP installation. His teams are in high demand across Europe
and there is a significant backlog of requests for further local development.
Divya Gudka — Divisional Controller Packaging Products, NAR

Personal overview — Divya is a hands-on accountant who knows everything there is to know
about the Packaging Products division in NAR. She has a reputation for working late and
making things happen. Her staff lives in fear of her but respects her immense knowledge and
expertise.
Background information — Divya has retained high status with both Marketing and Opera-
tions. Her ability to fix things is legendary. She acts as both the local controller and manages
the basic BU bookkeeping functions (OBKR). She manages about 300 people. Divya attends
all the local management meetings and somehow finds the time to submit the quarterly re-
sults to Herald Jerrand more or less on time.
Dennis Bittle — Manager, Transaction Processing, UK and Ireland Drinks Business Unit
Background information — Dennis runs the OBKR in a converted warehouse outside the town
of Cardiff in Swansea. The primary responsibility of the department is to pay suppliers and
allocate cash received from clients.

Procurement, which sits within divisional operations at another location, is responsible for
the maintenance of the supplier master file details. There is little face-to-face contact be-
tween the OBKR and Procurement.

Task Description - Case Study
Case 1 – Shared Service Center (SSC)

After the new CFO of Bigg-Glowbell, Sarah Goldman, took over from John Bigg, she discov-
ered that the cost of the division Support Functions – Finances increases steadily despite
decreasing revenues. This includes the sub-lines Planning and Budgeting, Tax, Internal Audit,
and Other.
To strengthen BG´s market position and due to potential cost savings, Sarah is considering
launching a SSC. She wants to settle the SSC in the most attractive region of BG´s markets
(EMEA, APAC, Americas). In the upcoming board meeting she wants to present her idea
based on a meaningful and comprehensible analysis of the existing data. Sarah commissions
you and your team for this important project.
Activity 1.1 – Definition, Goals, and General Influence Factors for Selecting an SSC
Location
Please prepare a short presentation that includes answers to the following questions:
► What is Shared Services?

► Which objectives do we pursue by setting up a Shared Service Center?
► Which general influence factors do we have to consider for selection of a SSC loca-
tion?
[Hint: Discuss in teams, be prepared to argue your thoughts using a presentation]
Activity 1.2 – Benchmarking Total Costs of Finance
The board has specified a clear objective target and claims reduction of total costs for the
Finance function down to 20 Mio. €.
► Is this objective realistic and achievable?

► What potential cost reductions can be achieved in comparison to the top quartile of
the peer group?

► What potential cost reductions can be achieved in comparison to the top quartile of
Finance functions with SSC?
► Compare the Finance function with the median of the peer group.
Activity 1.3 – SSC Region
BG management board committed the SSC as part of the Europe region. A further request
of the board is that 10% of the employees of each region are not included in the SSC and
have to remain in the regions.
During the analysis, the EY-team identified four locations. Create a calculation of the labor
costs for each region for the possible location of SSC. Make a decision based on this calcu-
lation.
[Hint: Use additional information provided]
Additional Information
Benchmarks - finance costs as % of revenue

1.55%
1.30%
1.10%
0.70% 0.75%
0.30%
without SSC - Peergroup - Peergroup with without SSC - Peergroup - top Peergroup
median median SSC - median top quartil quartil include SSC -
top quartil
Figure 8: Benchmarks

120 €
100 €
80 €
60 € 116 €
40 €
20 €
20 €
0€
quartil peergroup
finance costs median
finance costs Bigg

finance costs top
finance costs top
finance costs (target)

finance costs top
quartil (no SSC)
quartil (SSC)
Glowbell
peergroup
(no SSC)
(SSC)
Figure 9: Presentation model for cost comparison
Table 6: Possible SSC locations

Regions of SSC-shortlist
Country region
Northern Ireland Belfast
Hungary Budapest
Slovakia Bratislava
Czech Republic Brno

Belfast
Brno
Bratislava
Budapest
Figure 10: Possible SSC locations
Table 7: Data from EY data collection tool

Regions of SSC-hortlist
Region Average labor costs

(per month)
Belfast 1.812,5 €
Budapest 1.218,0 €
Bratislava 1.036,8 €
Brno 1.377,5 €

Case 2 – Stakeholder Map
In every project environment, the cooperation with different stakeholders is a critical factor
of success. The general objective is to understand the different goals and motivation of
stakeholders and provide information targeted towards each of them to reduce resistance
and enhance the willingness of cooperation.
BG engages Ernst & Young with the assessment of a financial SSC. Suggest a form and layout
for a communication plan. Subsequently, you are commissioned with the analysis and
presentation of Bigg-Glowbell’s key stakeholders.
Activity 2.1 – Stakeholder Analysis Definition
Please prepare a short presentation that includes answers to the following questions:
► What is a stakeholder?
► Who are key stakeholders and what is their role within the project organization?
► Create an approach to assess project environment and stakeholder communication.
Activity 2.2 – Stakeholder Map
Identify BG’s key stakeholders. On slides, create a stakeholder map for the project of imple-
menting a SSC.
Activity 2.3 – Level of Influence
To which degree of influence can the identified stakeholders exert in implementing and sus-
taining the change and their level of support for change?
Activity 2.4 – Communication Plan
Suggest a form and layout for a stakeholder communication plan. Use this layout to create
a communication plan for the identified stakeholders. Think of techniques to involve and
inform the key stakeholders throughout the project phase.

Case 3 – Return on Capital Employed (ROCE)
After Beverley Cornell’s (EY TAS) last meeting with the new CFO Sarah Goldmann, she iden-
tified several initial challenges for Sarah’s new role:
Sarah should come up with an analysis of the situation. She also needs to review the business
strategy and understand the business model along with the risks and controls. In addition,
Sarah has to ensure that the information provided is in line with the drivers and she needs
to tell the CEO what his priorities should be and why.
The main concern in solving these issues is that the transparency of the business model and
the process landscape is very complex so that a quick review is almost impossible. Therefore,
she should try to identify and analyze the key business drivers in major functional areas and
their impact on financial figures. The product range should be an appropriate first step to
provide Sarah an understanding of those key business drivers while the Return on Capital
Employed (ROCE) should give a first impression of Bigg-Glowbell’s general situation. A closer
look at the figures of the several product lines also provides informative input.
Sarah already has some information regarding the group controlling. Usually, eighty percent
of the assets are assigned to the purchase and production functions of the drinks division.
The product range of BG includes carbonates, fruit juices, mineral water, alcoholic drinks,
and third-party products. Herbal Elixir is part of the Carbonates sector and is the basis upon
which BG was built on (some of the group's higher management even says that it is the only
product which could be seen as the major corporate identity). Carbonates generate 15% of
the group's profit and 30% of the capital is bound in this sector. The Third-party products
generate the same profit, but only need one sixth of the capital as compared to Carbonates
(in percent). Surprisingly for Sarah, mineral water and alcoholic drinks create the same
profit. However, alcoholic drinks tie up 5% more capital then mineral water. The Capital Em-
ployed of the Fruit juices division is the same as that of carbonates but profits generated are
5% lower.
Some quick wins can be identified by comparing the ROCE of the sectors and the costs of
capital. Also, some benefits can be found by using the Weighted Average Cost of Capital
(WACC = share of equity in total value * equity rate + debt rate * cost of debt * (1 – tax rate)).
The current cost of equity is 11%, the cost of debt is 8% and the corporate tax rate is 20%. If
this is successful, Sarah might involve EY in major organizational changes that could be ini-
tiated taking into consideration departmental structure and leadership responsibilities.

Activity 3.1 – Division’s ROCE
Calculate the Return on Capital Employed (ROCE) for the drinks division of Bigg-Glowbell for
the financial years 2018 and 2019 (Sector‘s ROCE = Profit : (Capital Employed*80%)).
[Hint: The Earnings Before Interest and Tax (EBIT) should reflect the operating profit that is
generated by the drinks division of BG]
Activity 3.2 Sector's ROCE and division's WACC
Due to lack of time, you are only able to calculate the ROCE of three divisions. Which ones
would you choose and why? Compare the obtained values to the cost of capital. In groups
discuss what the resulting spreads reveal. How can the spread be interpreted?
Activity 3.3 Risk Drivers
Identify possible risk drivers. Make reasonable proposals how to react on negative spreads.
[Hint: Draw the issue in a simple chart. Use Profit (ROCE) and Capital Employed as axis la-
beling]
Activity 3.4 Year-on-Year changes of ROCE
Take the drinks division's ROCE of 2018 into account. Why is it advisable not only to consider
this year's ROCE to compare it to the cost of capital but also considering last year's ROCE?
Discuss how misguidance can be avoided in this way?
[Hint: Assume unchanged WACC]

Case 4 – Business Process and Internal Control System (ICS) Analysis
By combining the knowledge of financial, strategic, operational, and compliance risks with
the deep internal controls experience, Beverly Cornell (EY TAS) wants to help the new CFO,
Sarah Goldmann, to assess the internal controls. She additionally plans to develop a risk-
focused internal control program that will help her to enhance the process and control effi-
ciencies and address the companies reporting and regulatory compliance needs. After Bev-
erly’s last meeting with Sarah, she has the following understanding of the main financial
processes of Bigg-Glowbell:
Purchase to Pay
Procurement resides within Operations. The process is characterized by a large number of

suppliers with many different terms and conditions that is very difficult to overview. There
have been issues in the past as inappropriate or unauthorized vendors have been used to
procure goods/services. This is mainly because the system access right restrictions in order
to add or change the vendor master file are not in place.
A Purchasing strategy and code of conduct policy have been developed. However, this has
not been clearly communicated and implemented in the company. As a consequence, there
have been delivery and production delays in the past. Product categories have been estab-
lished for certain types of purchases; but are not consistent. Furthermore, multiple vendor
masters exist. Although some locations within the region have a consolidated database, it is
not reliable and up to date. Majority of transactions follow a manual and paper based requi-
sition process.
Operational discipline is poor: most of supplier invoices are validated and processed manu-
ally. Receipts are not consistently captured in the system and significant delays in logging
receipts in the system occur. Approvals are granted manually and not tracked using a sys-
tem. Therefore, supporting documentation is dispersed and not easily accessible. In addi-
tion, access to payment generating functions and creditor statements is restricted to appro-
priate persons.
Goods received are patchy: 30% of orders are not registered nor have an incorrectly rec-
orded Goods Received Note (GRN) at the time of the month-end-close. Sometimes there are
serious delays of submitting documents to the Finance department which leads to a delay in
payment to creditors.

There are stock accounting issues with an apparent void of 4.3 million € in the last financial
year. There are also significant write-offs due to obsolete stock (product past its shelf life).
Order to Cash
The process is characterized by a high amount of customers and complex terms and condi-
tions, including volume discounts, loyalty rebates, and cash incentives to pubs. Standardized
terms and conditions are not defined and a strategic customer management system as well
as clear policies and processes for pricing and discount approvals are not in place. Decision
making rights for pricing discounts are designed to respond to customer with speed and to
build relationship with customers. Subsequently, defined price lists do not exist.
Credit memos have been processed without authorized approval and fictitious postings of
cash receipts that have been made to the general ledger are noted. Sales representatives
are working on a commission basis. Formal credit checks for new customers are only con-
ducted when the client is in news due to unwanted reasons such as bankruptcy. Furthermore,
each organization manages credit checks independently.
Most orders are on credit, but some customers operate cash on delivery. Twelve percent of
invoices raised have credit notes. The most popular credit notes are due to incorrect pricing
(10%) or breakages/returns (9%).
The customer set-up process is performed manually. Customer responsibilities are not de-
fined within the company as several employees are in charge of the same customer with only
limited customer information sharing. Usually, orders have to be forwarded in a written
form, but some orders are taken by phone without further documentation. A detailed inven-
tory tracking within all facilities is not in place.
The number of customer complaining about wrong deliveries or incorrect charges is increas-
ing. Daily Sales Outstanding (DSO) is running at 75 days. Invoice procedures and approval
policies exist and are followed. However, these have not been systematically implemented.
The main invoicing process involves paper invoices. Also, the credit function resides within
Sales.
Record to Report
The Record to Report process has been fraught with issues. In practice, standard accounting
policies, processes, and procedures are inconsistent and not documented. There also were
problems noted when PwC had audited these processes in the past.

Local accounting units regard that the group accounting policy is advisory rather than man-
datory. Currently multiple close calendars and cut-offs are in place, which are monitored
locally. Roles and responsibilities are assigned, but confusion and overlap exists.
When group policy is followed even within the same accounting unit, it is frequently inter-
preted and applied in a variety of ways. The ability to report in both US General Accepted
Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) is poor
and leads to significant audit overruns. Last year, there were two material adjustments dur-
ing the audit on the stock account and the capital expenditure (CAPEX) account. In the latter
case it was found that maintenance costs had been incorrectly classified as capital expendi-
ture to the tune of 20 million €. This led to a 20% drop in share price and led to John Bigg´s
downfall.
Sub-ledger data is reformatted and manually entered. Journal entries are not correctly cal-
culated and not always submitted on time. Data from sub-systems and external sources is
not accurately and completely transmitted to and recorded in the General Ledger on a timely
basis. Consolidation process is manual and complex with high degree of adjustments and
reconciliations.
As the reporting process relies on fragmented systems with redundant and inconsistent data
and extensive Excel-based reporting, the staff often works late into the night in order to
perform manual adjustments and reconciliations such as the elimination of inter-company
variances. The quarterly management report can be up to 145 pages of financials at the
regional level and mainly addresses actual performance against budget.
Planning & Budgeting
The Planning & Budgeting process is regarded as a routine financial ritual and is done for
reasons that are no longer apparent. The business as a whole does not understand the plan-
ning and budgeting process. Responsibility for target setting and achievement are partly
defined, but not clearly communicated. A common understanding of company vision and
performance management processes is missing.
Budgets and forecasts are not prepared in regular cycles and templates tend change fre-
quently. The output provides little or no benefit to the organization as planning is rudimen-
tary and reporting is limited to external financial statements. Metrics and Driver selection is
unfocused with little correlation between drivers and financial performance.

There also is a lack of standard technology and definitions of data. This leads to inability in
comparing and integrating the planning and budgeting process as well as with the business
performance reporting. The process is spreadsheet-based and time-consuming. On an aver-
age, the accuracy of forecasting is 15%. There are few re-forecasts during the course of the
financial year. This is usually explained by reference to customers changing their buying
patterns following a hot or cold spell of weather. So there is little point trying to forecast
accurately. No attempts are being made to improve accuracy of the management reporting
process.
Activity 4.1 – Business Process and Internal Control System (ICS)
Based on the described situation, identify the main risks within one of the four core business
processes. Suggest a redesign of the selected core process. Which controls should be imple-
mented to mitigate the identified risks?
Activity 4.2 – Presentation Preparation
Record your suggestions on slides and be prepared to present your suggestions to the group.
[Hint: Use a Flow Chart and a Risk Control Matrix]

Case Study Finance Transformation
Acronyms
APAC Asia-Pacific
APQC American Productivity and Quality Center
BG Bigg-Glowbell
BU Business Unit
CALA Central America and Latin America
CEO Chief Executive Officer
CFO Chief Financial Officer
CIO Chief Information Officer
CSP Client Service Partner
DSO Daily Sales Outstanding
EBIT Earnings Before Interest and Tax
EMEA Europe, the Middle East, and Africa
EY Ernst & Young
FD Financial Director
FTE Full-Time Equivalent
GAAP General Accepted Accounting Principles
GRN Goods Received Note
HR Human Resources
ICAEW Institute of Charted Accountants in England and Wales

IFRS International Financial Reporting Standards
IT Information Technology
LSE London School of Economics
MAU Marketing Analytics Unit
MBA Master of Business Administration
MD Managing Director
NAR North America Region
OBKR Office of Bookkeeping and Reconciliation
PI Performance Improvement
PwC PricewaterhouseCoopers
QA Quality Assurance
ROCE Return on Capital Employed
SSC Shared Service Center
TAS Transaction Advisory Services
VP Vice President
WACC Weighted Average Cost of Capital

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Assignment Information and Background

EY Consulting Case Study Event @ WWU Münster page 1 / 38

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From Beverley Cornell, Transaction Advisory Services (TAS)

MLP. 9E. 1A Ext: 1990 Fax: 16500

In advance of you starting the assignment at Bigg-Glowbell, I thought it would be helpful to

George Bigg III is

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Revenue and Profits

Mio € Company Performance

Figure 2: BG company performance until 2018

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Figure 3: BG location map

Bigg-Glowbell Organization, Products and Services

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Figure 5: Organizational structure on a group level

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Figure 6: Finance division structure

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Figure 7: Procurement organization structure

► For Drinks and Packaging divisions:

• *The purchasing process is owned by the individual operations.

• Both divisions have the same organization structure.

► For Logistics and IT divisions:

• Both divisions have the same organization structure.

► FTE procurement headcount across EMEA: 15 FTE.

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Table 1: Headcount and payroll data

Support Functions - HR Payroll 35 24 29

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Planning and Budge- 2.944 768 1.509

Internal Audit 5.979 3.499 7.190

Audit 7.543 4.779 7.545

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Financial Ratios Compared to Competitors

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Ernst & Young Contacts