Risk Analysis Meridian VAT

Essay by deirdre565University, Master'sA-, November 2006

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Table of contents

Summery -

A short introduction; Meridian VAT -

External Risks of the Company -

Internal Risks of the Company -

External Risk of the Department -

Internal Risk of the Department -


Meridian VAT Reclaim is the world largest provider of corporate Vat reclaim services, acting on behalf of 17.000 corporate clients worldwide.

We can see that the biggest risk for Meridian is the change of VAT regulations, it wont just affect a financial year, but it will affect the whole future of Meridian and its existence (or not).

Most risks are regarding the department, but they are relatively small. Risks such as delays in public transport and especially air traffic, may cost Meridian on a yearly basis not so much financial distress but it does put more pressure and creates inconvenient situations for the auditors, however something like loosing invoices in the mail can cause loosing an important client.

Communication plays big a role in the internal risks of the company and the department, it is a very sensitive industry with high value information that needs to be transferred in the right way to the right people. Next to the internal information, they also have to be aware of not giving certain information to our clients that could increase their VAT knowledge.

A short introduction:


Meridian VAT Reclaim is the world largest provider of corporate Vat reclaim services, acting on behalf of 17.000 corporate clients worldwide. Meridian VAT reclaims taxes from Europe, South Korea, Canada, Australia and Japan.

The centre of the Meridian operation is the Dublin Processing Centre which:

* Employs around 250 people

* Processes over 2 million invoices annually

* Prepares and submits over 62.000 claims per year

* Deals with over 30 VAT authorities

* Claims $250 in VAT per year on behalf of 17.000 clients.

Meridian's fees depend on the success of the audit. If a VAT refund application is unsuccessful, Meridian does not get paid.

2.7 Structure of the UK audit department

The Audit department is field based, although staff does come into the office on a

regular basis.

* The Audit Retrieval Manager (ARM) is responsible for recruiting and training new staff.

* The ARM makes the necessary travel arrangements and organizes cash floats.

* The Audit Planning Manager is responsible for booking and confirming audits with the clients.

* The field based audit manager is responsible for the running of audits on site.

* Audit team leaders report into the audit managers and are responsible for retrieving AP and other high value invoices from the clients' files. They are also expected to assist in the retrieval of the T&E invoices.

* Retrieval clerks are responsible for the retrieval of T&E invoices, under the supervision their Team Leaders.

External Risk of the Company

Risk: Change in VAT regulations in any country where Meridian reclaims VAT for their clients.

Likelihood of occurrence: Very high. This does occur several times a year all countries change some VAT rules every few years. These changes are mostly unpredictable and suddenly. VAT regulations change very often however mostly it concerns small changes.

The type of damage the risk could bring along: It depends strongly on the type of change a government implements. It also depends on the country, for example, a minor change in the UKVAT regulations could have major impact on the returns of Meridian, this because of the fact that the UK is the most valuable reclaimable country for Meridian. Another example is, a big change in the Hungarian VAT regulations will probably not have much of an effect on Meridian's returns because Hungary is a relative small reclaimable entity for Meridian.

The impact of the risk: I will have to divide the impact of risk into 3 categories.

1. Change in UK - High, to in worse case Fatal impact

2. Change in Netherlands, Germany, France, Belgium, Finland, Denmark and Sweden - Medium impact

3. Change in any other - Low impact

The impact will not only reduce Meridians' revenue, but also their clients' returns. Meridian has to provide excellent service along with providing valuable returns to keep their clients satisfied to maintain its business. Once these high returns do not occur, Meridian is not a valuable option for the client.

Possible counter measurements: Meridian already has staff that is highly trained in the market of VAT. These people are trained to be aware of changes in every country and find the most valuable solutions by finding new requirements for claimable VAT as these changes occur.

Changes in UK laws could be fatal, because UK is the highest earner for VAT reclaims. To have an influence on the tax law, Meridian lobbies with politicians on a regular basis. Meridian is a worldwide corporation with a lot of influence, especially with multinationals as Microsoft, Cisco Systems and BBC standing behind them.

Internal Risk of the Company

Risk: lack of communication between regional offices such as German and London office due to competition between both offices.

Likelihood of occurrence: Low, it is only sometimes that two offices have to share one client in one region. If it does occur, there might not as good as communication between the departments as employees from these different offices do not know each other. There will be only one office that will receive the return from this client and when your department is not receiving this return, you might put less effort in this client then your colleagues from the other office.

Type of damage: Damage will be relatively low. The client will not be affected; it will only affect the work relationship between the departments. The employees will feel the negative relation and it will decrease the good standers of a nice environment to work in. Departments will not look forward to working with people from the other department, due to this competition.

Impact of the risk: The impact is just as the damage relatively low. Departments only work together once every two / three months and changing teams will not know of the struggle between departments until after the audit has been done. The audit will be finished just as normal, it is the sales representatives that refuse to put much effort into something that is not worth their small part of the commission.

Possible counter measurement: Not dividing clients between more then 1 departments. If maintain dividing clients, team meetings between departments twice a year to improve working relations.

External risk of the department

Risk: Delays in air traffic.

Likelihood of occurrence: Medium. Approximately 40% of the clients have to be reached by plane. Delays occur often especially on popular travel days, which are usually days that we travel on, Sunday and Friday.

Type of damage: Waste of time, normally a delay is one or two hours, but sometimes it may take up to more hours or even a day when eventually a cancellation of the flight takes place. Time is Money.

Impact of the risk: Time is money. Meridian will have to pay extra working ours to compensate the auditors for the delays. It has usually no affect on the client unless the flight is completely cancelled which is very rarely.

Possible counter measurement: Very hard to avoid this problem. Meridian could make it more comfortable for their auditors by having memberships for airport lounges.

Risk: Invoices getting lost in mail

Likelihood of occurrence: It is very rare for this to occur. Invoices are always sent by registered carrier to avoid loosing the invoices in the mail. We let our contact sign a small contract that states that he has received from us (the auditors) a number of boxes to sent by a registered carrier, it can happen that we order the carrier ourselves and stay at the sight of the clients until we have handed the invoices to our carrier.

Type of damage: Big Financial, Service and Trust Damage. It is one week of labor for several auditors that still have to be paid, accommodation, transport and wages without any revenue in return. The service that Meridian claims to provide is not met this week because we have lost their important invoices, this damages the trust and it is likely that the company will end the collaboration with Meridian.

Impact of the Risk: High impact, next to the fact that there have made a lot of costs that did not deliver any revenue, we might have lost an important client. Depending on the type of client and their annual returns for Meridian, Meridian management will have to convince the client to maintain business partners with meridian and try to resolve the trust damage that has taken place.

Possible counter measurement: Auditors always have to arrange carrier services themselves, this way they can decide which carrier to use and they know that the invoices are in hand of the right carrier. Take invoices with you when travel back to London, Auditors can carry the invoices themselves on the plane or train when traveling back to London if the number of invoices are not to many. Let the client ALWAYS sign the contract that they have to take care of the delivery in London and state that they have received the Invoices from the auditors when they have finished the audit.

Internal Risks of the Department

Risk: Seasonal workers, they are not as professional and trained as permanent staff.

Likelihood of occurrence: Often. Every year before deadline in the spring, Meridian hires a lot of seasonal workers, because deadlines have to be met and those deadlines will not be met with just the permanent staff.

Type of damage: Reputation of Meridian can be damaged by not professional Meridian staff at clients sites.

Impact of the risk: High. If a seasonal employee misbehaves, this can have a huge impact on the working relationship between the client and meridian. I might even occur that a client decided to not make use of any of Meridians services anymore.

Possible counter measurement: Decrease the number of seasonal workers by providing them jobs in the office when it is a quite season for VAT reclaims, and make them permanent workers. A different option is more strict recruitment. By selecting employees more careful you can decrease the risk of having non-professional behaving employees in the company.

Risk: Audit department is seldom in office.

Likelihood of occurrence: Always. You will only come to the office when you have a client in London, then you will come to the office at Friday afternoon, after finishing the client.

Type of damage: Minimal contact between audit management and auditors, this creates a gap and a distance between the two levels in the department.

Impact of the risk: It has a hardly any impact on Meridian as a company and it has a low impact on the audit department. The work will be done anyways, but It would be better for the working environment to work more closely together and to know who you are talking to when you call one of the managers.

Possible counter measurement: When planning clients in London, make sure that the planning allows the auditors to have time to spend the afternoon in the office on Friday.

Risk: Bad communication between auditor and office.

Likelihood of the occurrence: Medium. A team leader is responsible for the communication between the team and the office, a team leader has already built up a good reputation before being promoted to team leader and it is not common for a team leader to slack in communication if they would like to remain in the team leading position that they are.

Type of damage: When the auditing team leader does not provide complete important information to the audit planner, planning will be done incorrectly for the next audit. Impact of the risk: When the audit is planned incorrect, it will create a very sudden change in the schedule, on Monday the current team leader will have to make decisions in how the rest of the week. It gives a negative vibe to the client because the client expects Meridian to make a thought through plan when he has the auditors on his sight. It leaves an unprofessional image to the client.

Possible counter measurements: Next to the selection of who is becoming teamleader, give special trainings for the "to be team leaders'. If it occurs more then once that wrong information is delivered to the planning department because of mistakes of the team leader, they will have to take a step back and become a normal auditor again, this way you put more pressure on the team leader to perform better.

Risk: Neglecting confidential information, the VAT chart

Likelihood of occurrence: Very Low, team leaders have to make sure that other staff protects company information well, such as the VAT chart.

Type of damage: High. If this kind of information is found by our client, the client will not need Meridian anymore to reclaim their foreign VAT because they have all the rules and exceptions in that VAT chart. Impact of the risk: The impact could very big depending on the company of which it happens. If it would happen in one of the shared service centers, they could loose huge amounts of cash.

This information is the whole thrive of the company and when this information would become available for just everybody, Meridian might as well immediately close its business. Therefore it is very important that staff members realize what kind of powerful and valuable information they poses and not let anybody outside Meridian become familiar with this information.

Possible counter measurements: Make sure team leaders keep instructing the auditors to be careful with the VAT chart, by rather taking it with them when going to lunch or lock the temporary office they are using.