1. Controls Over Inventory
Enron Metals Integration
See also
Off Balance Sheet Financing
SAP
Conclusion
review serves as a floor to control concerns over inventory
see also program of initiatives to be managed by Paul Wallace

2. Objective Work has been performed to ensure that:
controls imbedded within the inventory management process are adequate
control weaknesses inherent to the existing process have been addressed to prevent the risk of stock (and related financial) loss arising
a workplan exists to enhance controls and efficiencies around inventory management

3. Four Fold Approach Review of Controls Status of Co-ordination Function
Review of Henry Bath Warehouse Stocks
Systems “Feasibility Study”

4. Review of Controls +ative experienced staff
good internal communication
manual compensating controls
-ative
independent stock takes not routinely performed
formal stock circularisations on ad-hoc basis
secondary cost accruals not accounted for correctly
system enhancements required
dependency on key logistics staff
Good Internal Communication
on business processes
on market environment
Manual Compensating Controls
focus on “contract files”
accountability focused on metal/counterparty/contract rather than “task based”
multiple review/authorisations required to approve payments

5. Status of Co-ordination Function
“Roles and Responsibilities” model defined and implemented
Segregation of Commercial/Non-Commercial “logistics”, accountabilities agreed and implemented
Resource requirements defined including;
additional heads
systems development

6. Review of Henry Bath Warehouse Stocks
formal agreements with the LME and LIFFE
obligations to HM Customs and Excise and ISO Standards
“Chinese Walls” between Henry Bath and trading businesses are in place, as required
extensive independent reviews regularly performed - no significant issues noted
Remote Offices group have established a program of continuous review/ownership
Therefore, overall assessment of operational risk for Henry Bath Warehousing activities is deemed to be lower than for other proprietary stock balances...

7. System Feasibility Study
Recommendation that Global Markets Inventory Management System (“Q”) is not appropriate for Enron Metals, as:
system over-specified for metals
significant resource and planning required for full scale implementation
Tactical development of existing system/ processes will deliver required functionality within a more acceptable timeframe

8. Conclusion
Risk of stock (and related financial) loss arising from operational errors appears adequately mitigated
Business process and systems enhancements are required to further mitigate operational risk
Assessment of operational risk for Henry Bath Warehouse stocks is considered lower than for other inventory balances

9. Next Steps
Off-Balance Sheet Financing “operational” plan defined and being implemented to ensure 31/12 delivery - top priority for Middle Office
A medium term “workplan” has been defined capturing all the issues identified in the course of this review - and accountability established