Fraud scandals and potential fraud are nothing new in the corporate world . Year after year, we see countless cases coming to light. The question is:
How can investors and creditors reduce the chances of finding themselves involved in scandals?
When I remember the last confusion with accounting classifications and an alleged scheme to inflate profits that I found myself involved in as an investor was in 2008. At the time, I was invested in Sadia, a traditional company in the animal protein sector. At that time, my investment selection methodology did not involve any direct (or indirect) concern regarding the analysis of the likelihood of a company manipulating accounting data . My selection was motivated by the fact that I consume the brand's products and like the advertisements, such as the one for Sadia's Qually margarine, in which a family was having breakfast in a charming image of a united and happy family. What extra analysis could be required of a company with this type of appeal?
What happened was that I and thousands of other investors were warned overnight that the company's treasury was operating heavily with derivatives in order to generate good non-operating income. And when the subprime crisis hit hard, the company suffered severe financial losses. The punishment was to shamefully merge with a smaller competitor: Perdigão , which gave rise to what is today BRF .
Why did I suffer financial losses?
Looking at my story, it is clear to note that my total lack of concern regarding the possibility of possible accounting manipulation is the starting point. Since then, all my analyzes have been based on the criterion of checking whether what we are seeing really exists, and if it does, how likely is it that it is a mirage; this is step number 1. It took me basically 15 years to improve and refine the basic techniques so that my fraud radar could function properly. The pain of losing not only the money invested , but also of losing other people's money , made me search for answers.
A word about the Americanas case
In the case of Americanas , we see that a relatively new technique such as Forfait (or scado risk) , which was not adequately regulated by the CPCs or supervised by the CVM, caused the company to test the limit of creditors , which could have lasted indefinitely until the limit being discovered, as was the case. What intrigues me most is that the banks , which supposedly have the most technical credit analysts on the market , saw nothing and did nothing. There are only two hypotheses for what happened: either the credit analysts (a dozen of them) didn't see it, or the second and more likely one is that the superiors, even knowing the problem, granted the credit given the good reputation and size of the Americanas company . . Added to this is the fact that other banks are granting credit to the company , which increases the pressure on the executive in charge, who has to listen: If bank x is releasing credit, why aren't we?
The consequence of all this is that thousands of investors leave the financial market never to return, following the path of immobilizing capital in physical assets, with the main argument: at least in real estate, I know I won't lose. This penalizes a series of other companies that need resources from partners to promote their businesses , making Brazil lag behind other safer financial havens , such as the United States.