Management Control Systems at Reliance Industries Limited Essay

Reliance Industries Limited (RIL) is world’s leading and India’s no: 1 Private Ltd. Company. RIL group is a highly diversified group and is in to multiproduct business like oil / gas exploration, retail of petro / consumer products and mfg. of petrochemical / refining and textile products. Also, in to infrastructure and transportation sectors. he Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India’s largest private sector enterprise, with businesses in the energy and materials value chain. Group’s annual revenues are in excess of US$ 44 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India. Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration – in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production – to be fully integrated along the materials and energy value chain. The Group’s activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail and special economic zones. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. Major Group Companies are Reliance Industries Limited (including main subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure Limited  Organizational Structure of Reliance Figure [ 1 ] Reliance Major Subsidiaries * Reliance Petroleum Limited (RPL) was a subsidiary of Reliance Industries Limited (RIL) and was created to exploit the emerging opportunities, creating value in the refining sector worldwide. Currently, RPL stands amalgamated with RIL. [7] * Reliance Life Sciences is a research-driven, biotechnology-led, life sciences organization that participates in medical, plant and industrial biotechnology opportunities. Specifically, these relate to Biopharmaceuticals, Pharmaceuticals, Clinical Research Services, Regenerative Medicine, Molecular Medicine, Novel Therapeutics, Biofuels, Plant Biotechnology and Industrial Biotechnology. [8] * Reliance Industrial Infrastructure Limited (RIIL) is engaged in the business of setting up / operating Industrial Infrastructure that also involves leasing and providing services connected with computer software and data processing. 9] * Reliance Logistics (P) Limited is a single window solutions provider for transportation, distribution, warehousing, logistics, and supply chain needs, supported by in house state of art telematics and telemetry solutions. [11] * Reliance Clinical Research Services (RCRS), a contract research organization (CRO) and wholly owned subsidiary of Reliance Life Sciences, has been set up to provide clinical research services to pharmaceutical, biotechnology and medical device companies. As far as Board structure of RIL is concerned there are 8 Non executive directors and four executive directors, hence RIL is strictly following suggestions given by Kumar mangalam Birla committee regarding corporate governance. Figure [ 2 ] Reliance Board Structure Figure [ 3 ] Reliance Reporting Hierarchy Functional structure Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with production engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible. As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost. For instance, a small business could start making the components it requires for production of its products instead of procuring it from an external organization. But not only beneficial for organization but also for employees faiths. Hence Reliance is Having Highest Operational efficiency as compared to competitors. Management Style And Culture At Reliance Industries Limited Reliance Industries Limited (RIL) has emerged as India’s largest private-sector enterprise and carved out a distinct place for itself in global Fortune 500 companies. Reliance’s business success and competitive position reflect the leadership provided by its founder, Mr.  Dhirubhai Ambani who said, â€Å"Growth has no limit at Reliance. I keep revising my vision. Only when you dream it do you get it. † The leadership system defined by Ambani is based on value creation towards both its customers and stakeholders. The same vision has been taken up and forwarded by his son Mr. Mukesh Ambani, current Chairman and Managing Director of RIL. Reliance believes that any business conduct can be ethical only when it rests on the nine core values of Honesty, Integrity, Respect, Fairness, Purposefulness, Trust, Responsibility, Citizenship and Caring. The existence of the culture in RIL is driven towards achievement of excellence in systems, processes, technology and people and also toward the fulfillment of their corporate vision i. e. â€Å"To become a globally competitive enterprise, driven by the market, creating and maintaining a lead over competition through quality products and establishing itself to be the preferred supplier of its customers. † With the vertical integration of chain from refinery to textiles, RIL has unique fully integrated structure. Basically it is a process centric organization that maximized synergies across all interfaces, leverage core competencies of various disciplines to maximize value from current assets and create growth opportunities while allowing people to develop and contribute to their full capabilities. When we talk about the organization culture, specifically RIL focuses on high performance work culture which fosters innovation, entrepreneurship, inclusiveness, teamwork and continuous improvements. Among all RIL basically focuses on innovation and has a innovative council for promoting the same. The company believes hat it is the innovation in thinking and execution that has made RIL reach where it is today. The firm belief of innovation being the differentiator for future and the source of competitive advantage shows the importance that is given to it. RIL in the early 1990s did suffer from low employee participation in improvement activities and low customer satisfaction. The introduction of various quality improvement tools in the facilities like the Total Quality Management( TQM), Kaizen Activities and customer focus approach led to the improvement in quality, productivity improvement and customer satisfaction in the organization. RIL realizing the importance of human and intellectual capital for business success, has given more importance to the use of its human potential and the creation of Learning organization to help in continued success in future. RIL in its importance to the health and safety also has also initiated Safety, Health and Workplace Environment Program (CASHe) – which is an initiative to promote healthy workplace and reducing health and safety risk has been instrumental in creating a culture of implementing health, safety and environment project on a priority basis. This program has also been able to improve the performance of the company on the occupational health and safety front. The Health and Safety Principles that were put forward in this regards to articulate the stakeholders expectation along with the existing values of the company underpin both the corporate culture and cooperation across the company. The growing importance of Corporate Governance by RIL shows its priority towards a transparent and accountable organization thus being able to meet the needs of all the concerned stakeholders. The publication of annual corporate governance report is one important aspect showing its growing inclination towards it and its aim to have fair and equitable treatment of its employees, shareholders, customers and investors. They aim to provide timely and balanced disclosure of all material information concerned towards stakeholders. Moreover they aim to have a sound system of risk management and internal control. The existence of code for board of directors and board committees, code of business conduct and ethics for director/management personnel signifies the existence of the culture driving the whole organization towards effective corporate governance. RIL has a long and strong tradition of supporting the larger communities that it connects with – from education, health, drinking water, large-scale development of employable skills, to assistance during natural calamities such as earthquakes and cyclones. The Reliance Foundation would address social development imperatives of India, specifically quality, formal and vocational education, affordable high-quality health care, meaningful rural development and urban renewal, and protection and promotion of India’s priceless heritage of arts and culture. Management in simple words are characteristic ways of making decisions and relating to subordinates. Different management styles and employed by different organizations depending on the prevailing culture, the nature of the business, the nature of the task and the personality and skills of the leaders. RIL is an organization which is operation in multiple facets. They have multiple manufacturing facilities at multiple locations where by dealing in different product ranges. The supreme authority of the company is Board of Directors. But they have given much more independence to the individual units at different level to take decisions at their level. There is a good mix of corporate level strategy (taking RIL as a whole which is set up by the BOD) as well as appropriate business level and operational strategies at each segment as well as business units to accomplish the corporate level strategy. Every unit which is a part of RIL has its own hierarchy, headed by the CEO or the President, but a more of a democratic style of leadership is seen. Since they promote innovation and value their human capital they promote participative environment at different levels of management to be able to make a better and informed decision. Empowering the employees in RIL is relevant. However the level of decisions and intensity of problems are defined whereby decisions can be taken at particular level of management. Management Control Systems Internal Controls RIL has a comprehensive system of internal controls to safeguard the Company’s assets against loss from unauthorised use and ensure proper authorisation of financial transactions. The Company has an exhaustive budgetary control system to monitor all expenditures against approved budgets on an ongoing basis. The Company’s accounting process is based on uniform accounting guideline that sets out accounting policies and significant processes and deadlines on a company wide basis. There are inding directives for internal reconciliations and other accounting operations. The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the reliability of financial controls, and compliance with laws and regulations. RIL has well established policy towards maintaining the highest standards of health, safety and environmental norms while maintaining operational integrity. This policy is strictly adhered to all RIL manufacturing facilities. The Company has an internal audit function, which is empowered to examine the adequacy and compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process. The management duly considers and takes appropriate action on the recommendations made by the statutory auditors, internal auditors and the independent Audit Committee of the Board of Directors. Internal Checks and Balances.