Operational Audits are an increasingly important area. This thread relates to why they exist and how they benefit companies. An Operational Audit is a means of reassessing an existing company with a view to finding its weaknesses and then helping it become more lean, profitable and efficient. If the company is markedly distressed, an Operational Audit is likely to lead to an Operational Turnaround. At this point, interim management may be required (discussed later).

The Painful Truth of Operating in China

Why do Operational Audits exist? Regardless of the format of the company - be it a JV, a WOFE, an FIE or any other blasted acronym - a disproportionate number of companies face problems and resulting profit losses. Many of these problems can be ascribed to a lack of talented employees, but a great deal of problems derive from management issues. However, few entities and their CEOs wish to admit that they might have problems until the last moment when it is too late. When the threat of liquidation appears on the horizon, the first place one finds the manager is most likely in a law firm, attempting to wind up the company.

Operational Audits exist to prevent further losses by targeting a list of factors, from working out whether employees are being paid the right amounts, to supply chain management. They then assess where improvements can be made.

Triggering factors for an Operational Audit - Changes

Leadership Changes in management are arguably one of the best times for an operational audit. An assessment will provide up-to-date and impartial information, thereby helping new management/personnel learn the strengths and weaknesses of the company. But more importantly, an Operational Audit can provide an opportunity for changes in strategy or direction at a critical time.