1. 1
ISSN 2046-1305
MANUFACTURING MANAGEMENT
The International Journal of The Institute of Manufacturing
Volume 2 No. 2 October 2015
The Institute of Manufacturing
PO Box 93 www.instituteofmanufacturing.org.uk
Moreton-in-Marsh
GL56 9WG info@instituteofmanufacturing.org.uk
United Kingdom
The Institute of Manufacturing is a trading name of Industrial Management Specialists (IMS) Ltd. Registered in England No: 990098
Registered Office: Highdown House, 11 Highdown Road, Sydenham, Leamington Spa, Warwickshire, CV31 1XT, England

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THE JOURNAL OF THE INSTITUTE
OF MANUFACTURING
VOLUME 2 NUMBER 2 OCTOBER 2015
CONTENTS
Editorial 2
Message from the President 3
Member Profile: Mr Hon Chi Kwong FIManf 4
Heathrow Expansion 5
Certificate in Negotiation 7
Consultancy – The Secrets of Success 8
Tools of the Trade Series – No 6 by David Benjamin
London Business & Vocational College 9
Maintaining Good Client Relationships in Contemporary Investments 10
by Prof Samuel Lartey
Cost of Quality for Construction Projects: A Fresh Look by Dr Ron Basu 12
Course Options 16
Executive Diploma in Manufacturing 17
The New Regulation on CCTV and Surveillance Camera Technology in the UK 18
by Andreas Nickolaos Akratas
Certified Manufacturing Practitioner 21
Making Quantitative Analysis and Modelling Payoff 22
by Dr Forster Kum-Ankama Sarpong
IMS Professional Diploma in Project Management Development 23
HP-Autonomy Acquisition Scandal by Professor Dr Rabbi Abe Abrahami 24
The Institute of Management Specialists’ Specialised Manager Award 27
Page

3. 24
Editorial
As part of our continuing restructure of the Institute we are introducing a new postal
system and all postal mail should now be addressed to:
THE INSTITUTE OF MANUFACTURING
PO BOX 93
MORETON-IN-MARSH
GL56 9WG
UNITED KINGDOM
We offer our congratulations to Mr Hon Chi
Kwong, Life Fellow of IManf, for his success in
qualifying for the Certified Manufacturing
Practitioner by the writing of his thesis “Lean
Concept and Techniques in Manufacturing”.
Please see Mr Hon’s profile on Page 4 of this
journal.
News of a course in Negotiation was previously
announced and we are pleased to advise that it
has now been completed and is ready for
members to study. The Certificate in Negotiation
is a short course of flexible duration, tutored by
our President, David Benjamin. Candidates must
answer a series of questions as they work through
the course notes and enhance their learning by
selecting one or more books from the suggested
reading list to study, and are finally examined by
the writing of a mini-thesis. Upon successful
completion of the course, graduates will be
entitled to use the designation ‘Certified
Industrial Negotiator’ and the post-nominals
Cert.Neg. (IManf).
We would appreciate articles from members and
readers for the next edition of this E-Journal to be
published in April 2016; please submit articles by
mid-March at the latest for inclusion.
Dr Lynne P Sykes
Executive Administrator
The Institute of Manufacturing
Join our Group
Institute of Manufacturing
http://www.linkedin.com/groups?home=&gid=4902778&trk=anet_ug_hm
2

4. 3
A Message from your President
We are approaching the end
of yet another year and I am
delighted to report that our
Institute is going from
strength to strength. As you
are aware, my aim is to place
our Institute in centre place
on the world stage. All
British professional bodies
are prestigious and are the envy of the world, but
in my view this is simply not enough. We have
the determination to be the very best by offering
our students and members preferential services
which others, as yet, can only seek to achieve.
To date we offer such services as speech writing
and consultancy, and more services are already in
the pipeline, for my vision is not only to offer the
very best but to demand the very best. By so
doing, our Institute can rightly take its place as a
world leader in the field of professional
competence and dedication. Achievement in this
respect is my aim – and achieve we shall! Each
individual member, whether Student or Fellow,
has his part to play. Your Institute can only
achieve with your help. We have joined together
as a group of professionals dedicated to the cause
of furthering our interests and as such it behoves
us to offer our dedication and loyalty to the
furtherance of our cause. In other words, become
involved!
If you feel you could assist perhaps by writing an
article for our journal, or possibly by mentoring a
student or even advertising our professional body
to your colleagues, you would be doing your
Institute a valuable service. As the late President
Kennedy once remarked “Ask not what America
can do for you but what you can do for America”.
The same can be applied to our Institute. Your
Institute is of course there to support you in your
professional career: have you considered how
you might be able to support it? Your comments
and suggestions would be welcomed, for our
strength lies not only in our dedication to the
cause of professionalism but in our members,
whatever their grade. Each individual member
forms an integral part of the backbone of our very
being, and this is something which we must never
forget.
I should like to take this opportunity of
congratulating Mr Hon Chi Kwong upon his
recent examination success in qualifying for the
Certified Manufacturing Practitioner award. Our
Institute offers its members the opportunity to
advance not only in their careers but in their
degree of professional awareness and
competence. Let us therefore work together to
advance the cause of professional dedication: by
so doing we shall become a force to be reckoned
with.
David Benjamin
President
The Institute of Manufacturing
president@instituteofmanufacturing.org.uk
Submit your academic
paper on Management for
publication in the Institute
of Management Specialists
Management E-Library
Authors should write a
summary of their work for
The Management Specialist
E-Journal
info@instituteofmanagementspecialists.org.uk

5. 4
Institute of Manufacturing Member Profile
Mr Hon Chi Kwong FIManf
The Institute of Manufacturing
is delighted to congratulate Mr
Hon Chi Kwong, Life Fellow of
IManf, for his success in
qualifying for the Certified
Manufacturing Practitioner by
the writing of his thesis “Lean
Concept and Techniques in
Manufacturing”. Mr Hon’s
thesis discusses the use of lean in a typical
manufacturing company consisting of molding
process, assembly process and packing process.
Mr Hon has twenty years’ work experience in the
manufacture of injection molded parts, spray
painted parts, toys, electrical appliances,
electronic premium and metal parts. He is
currently QA Manager with Electa Industrial
Company Limited in Hong Kong, and has held
previous positions of QA Engineer, Quality
Manager and Factory Manager.
Mr Hon’s academic qualifications are:
 Diploma in Mechanical Engineering
(Awarded by Kwai Chung Technical Institute
in 1987)
 National Diploma in Engineering (Awarded
by BTEC in 1987)
 Higher Diploma in Manufacturing
Engineering (Awarded by Hong Kong
Polytechnic in 1990)
 Parts 1, 2 and 3 Certificate for
Telecommunication Technician (Awarded by
C&G 1991–1993)
 Certificate for Quality Assurance (Awarded
by C&G in 1994)
 Full Technological Certificate for
Telecommunication Technician (Awarded by
C&G in 1996)
 Bachelor Degree in Business Administration
(Awarded by OLI of Hong Kong in 1996)
 Master Degree in Marketing (Awarded by
University of Leicester in 2000)
 Master Degree in Total Quality Management
(Awarded by Sheffield Hallam University in
2003)
 Executive Diploma in Six Sigma Black Belt
(Awarded by HKU SPACE & SSI in 2010)
He also holds the following professional
qualifications:
 Fellow Member of The Institute of
Manufacturing
 Senior Member of American Society for
Quality
 Vocational Qualification Certificate on
Calibration
 ASQ Certified Quality Engineer
 ASQ Certified Six Sigma Black Belt
 CAQ Certified Quality Manager
 Certified Plastic Engineer
 Member of Chartered Quality Institute
 HKQMA Registered Quality Manager
The Institute of Manufacturing is now listed in the Institutes Directory United Kingdom of the
University Directory (UD) (http://www.university‐directory.eu), together with our courses, the
Associate Diploma in Manufacturing and the and Executive Diploma in Manufacturing.
http://www.university‐directory.eu/United‐Kingdom/The‐Institute‐of‐Manufacturing‐IManf.html
The University Directory is an international online information system available to and involving academic institutions,
allowing academics worldwide the opportunity to seek out Higher Education institutions and their courses or job offers in a
simple and direct way.
Currently the UD lists more than 50,000 academic institutions (universities, institutes, colleges, etc.), about 250,000 job
offers and about 550,000 subjects, courses, programs and degrees. Approximately 25,000 academics visit the UD daily,
viewing circa 100,000 pages.
Since the beginning of the 2011 interested parties have had the opportunity to research courses, degrees, programs and
job vacancies at the UD if the institution has published the relevant details.

6. 5
Heathrow expansion to create 95,000 new UK manufacturing jobs
Posted in The Manufacturer on 7 Oct 2015 by Victoria Fitzgerald
Government plans for the
Northern Powerhouse will
be boosted by up to 26,400
new manufacturing jobs if
Heathrow is allowed to expand, according to
new research out today.
With the Conservative Party Conference
currently underway in Manchester, Heathrow is
calling on Government to make a decision for all
of Britain by giving the green light to the
airport’s new plans for expansion and creating
almost 95,000 new manufacturing jobs across the
country.
Heathrow highlights:
 Industry unite with Heathrow in calling on
Government to deliver almost 95,000 new
manufacturing jobs for Britain
 85% will be generated outside London and
the South East
 New research reveals Northern Powerhouse
has most to gain from Heathrow expansion,
benefiting from up to 1 in 4 of the new
manufacturing jobs created
The research, undertaken by consultancy Quod,
shows that up to 1 in 4 (28%) of the new
manufacturing jobs generated by Heathrow
expansion would be based in the Northern
Powerhouse.
More broadly, 85% will be created outside
London and the South East.
In keeping with the geographical spread of new
jobs anticipated in the manufacturing sector, 60%
of the total economic benefit predicted by the
Airports Commission as a result of expanding
Heathrow will be generated outside of London
and the South East.
The manufacturing sector would be one of the
greatest benefactors of new jobs fuelled by a third
runway at Heathrow, accounting for more than
50% of the 179,800 total predicted by the
Airports Commission.
As a trade-intensive industry, the sector is
expected to benefit significantly from new and
improved trade links, as well as from the ripple
effect of Heathrow related growth across other
sectors. Additionally, manufacturing is a key part
of the aviation supply chain, and is likely to
benefit directly as the sector increases
purchasing.
Table 1: Distribution of additional UK manufacturing jobs generated by Heathrow expansion in 2050, Quod October 2015
Range of net additional jobs
in manufacturing in 2050
Proportion of total net
additional manufacturing
jobs in 2050 (%)
Northern Powerhouse 26,200 – 26,400 28%
Midlands 21,300 – 21,600 23% – 23%
London and South East England 13,300 – 14,100 14% – 15%
The South West 8,700 – 10,600 9% – 11%
The East of England 8,400 – 8,700 9%
Scotland 5,600 – 6,900 6% – 7%
Wales 5,600 – 6,000 6%
Northern Ireland 3,000 – 3,400 3% – 4%
TOTAL 94,900 100%

7. 6
An expanded Heathrow is claimed to be a
significant boost for the industry, which is
responsible for over half of all British exports.
Last week, figures released by the Office for
National Statistics (ONS) revealed that
manufacturing output in the UK remains 5.5%
below its level on the eve of the 2008 economic
recession.
Recent research by BIS and the Government
Office for Science predicts that manufacturing in
2050 will look very different from today, and will
be virtually unrecognisable from that of 30 years
ago.
Rolls-Royce’s new
Heathrow Service
Centre
It identifies the following key characteristics of
future manufacturing:
 Manufacturing will be more responsive and
closer to customers – including a greater
reliance on global markets. Patterns of global
trade and investment will determine the
relative importance of the countries to which
the UK exports and from which it imports;
 High-tech is likely to remain an area of UK
advantage – currently at 4.7%, the UK’s share
of global high technology manufacturing
exports is relatively strong. Current high-tech
sectoral strengths include pharmaceuticals,
aerospace, chemicals, and the automotive
sector;
 There will be a greater reliance on higher-
skilled workers as the sector moves away
from elementary, process and heavy
manufacturing and towards smaller more
complex models.
CEO of Heathrow Airport, John Holland-Kaye
commented: “Expanding Heathrow will
supercharge Government plans for the Northern
Powerhouse.
“Today, airlines operating from the UK’s hub are
forced to make a false choice between developing
new routes to cities like Chengdu and Mexico
City and maintaining domestic services.
“That means exporters in areas like Merseyside,
Humberside and Teesside are locked out of
Heathrow, Britain’s biggest port by value. Every
day we delay is a day we’re restricting the growth
of British business.
“It is time for Government to heed the unanimous
and unambiguous recommendation of the
Airports Commission. It’s time to expand
Heathrow for the whole of the UK.”
Terry Scuoler, CEO of EEF, added: “Heathrow is
a global freight hub and a crucial gateway for
Britain’s manufacturing exporters, making its
expansion the right choice for industry and the
country.
“With the opportunity for growth and new jobs
identified in this report, it reaffirms that it is
important for the Government to make a clear
choice and to press ahead with delivering this
much-needed improvement to our national
infrastructure.”
See more at:
http://www.themanufacturer.com/articles/heathro
w-expansion-to-create-95000-new-uk-
manufacturing-jobs/#sthash.tj0cPQB0.dpuf

8. 7
The Institute of Manufacturing
www.instituteofmanufacturing.org.uk
Certificate in Negotiation
Tutored by David Benjamin, President of The Institute of Manufacturing, drawing on his own
experiences of negotiation and arbitration over many years, concentrating on the practical aspects of
the skilled negotiator. Upon successful completion of the course, graduates will be entitled to use the
designation ‘Certified Industrial Negotiator’ and the post-nominals Cert.Neg. (IManf).
Method of Study: Distance Learning
Expected Duration: 6 months
Fee: GBP 50 for Members of IManf; GBP 120 for Non-Members (Course Materials included)
Course Contents:
Negotiation: the definition and purpose of effective discourse; Types of negotiation in industry and commerce;
The trade union movement: early history and political influence;
The shop steward: duties and representation in industry; The decline of the trade union in modern times;
The closed shop and its consequences; A critical analysis of your opponent;
Preparatory considerations prior to negotiation; The effective skills and their purpose;
Professionalism and dedication to the cause; The professional techniques of negotiation
Respect and courtesy during the negotiating process; Evaluation of strengths and weaknesses;
Knowledge, skill and experience; The meeting; Introduction of personalities involved; Strategic assessments;
Observation and assessment of the major issues; The importance of being a good and patient listener;
How to use the strength of your opponent against him/her; How to raise an effective issue;
How to avoid a potentially unpleasant issue; Sociological and educational reforms in industry;
The consequences of industrial action; The health and safety of employees;
Progression: corporate opportunities for advancement; The art of maintaining a contented workforce;
Involvement: the art of ensuring that a workforce member never feels underestimated;
The importance of teamwork
Contact: president@instituteofmanufacturing.org.uk

9. 7
Consultancy – the Secrets of Success
by
David Benjamin CompIManf, FAEA, FFPBTM, FSSM
Tools of the Trade Series – No 6
As a management consultant,
much is expected of you. Client
expects you not only to identify
and solve existing problems but
to conduct yourself as a
dedicated professional at all
times. To put it simply, he is
paying you a considerable fee
for your services and, as such, is entitled to
expect the very best. Not only are you expected
to eradicate problems – you are expected to
ensure to the very best of your ability that such
problems do not recur. It is a proven fact that
many consultants new to the profession are
lacking in three major fields, Knowledge, Skills
and Experience. Whilst a university degree is
useful – one cannot deny that – the fact of the
matter is that without the necessary experience an
assignment is often doomed to failure. That is
precisely why a new consultant should spend at
least five years working alongside and assisting a
professional consultant. In the consultancy
profession a degree does not guarantee success:
theory is all well and good, but knowledge of the
practicalities of the profession is absolutely
essential. Without such knowledge the
assignment would be doomed to failure. Client
expects much of you, and expects you to justify
your fee by a display of nothing less than
dedicated professionalism.
A company may decide to call in a consultant for
a variety of reasons. Some companies will seek
your advice whilst others will be encountering
serious problems which you are expected to
solve. That is precisely what you are paid to do,
and that is exactly what you must do! In the
majority of cases, the executives of a potential
client company will be looking at the problem
from a fixed perspective: in other words they
know the iceberg is there but are only able to see
the small section which is above the surface.
Furthermore it is a fact that many members of
senior management are unaware of what exactly
happens in their organisation. Like it or not, this
is a fact which has been proven many times over
the years. Your job is not only to see the tip of
the iceberg but to dive down and examine that
part which others either cannot – or in some cases
prefer not – to see. Always remember the old
adage which states ‘the labourer is worthy of his
hire’. Likewise the consultant must prove himself
worthy of his fee. It is of the utmost importance
that you are able to uphold the professional
standards expected of you.
The following hints, acquired by virtually a
lifetime’s experience, will assist you greatly.
Believe in your capabilities at all times. There is
no room for doubt in this profession. Always act
in a dedicated professional manner: never ever
forget that you are a professional doing a
professional’s job. Interact with Client: by so
doing his confidence and faith in your
capabilities will become apparent. Always insist
that you have free range: restrictions of whatever
nature cannot be permitted. Show respect to those
with whom you are dealing, be it a managing
director or an operative on the factory floor; this
will inspire confidence. Always consider the
human element: an employee at whatever level is
a human being, not an automaton. In my long
experience, many executives – and some
personnel managers – seem incapable of
understanding the importance of this. And such
people wonder why they have serious labour
problems! Study your assignment very carefully
indeed: there is no room for mistakes, as even the
simplest of errors could prejudice the success of
an assignment. Indeed, in the hands of
inexperienced consultants this has actually
happened.
Every consultancy project is complex. This is
precisely why Client has instructed you, because
he has come across something which he himself
cannot handle, therefore every project must be
treated with the utmost care, consideration and
expertise – and only practical experience can
provide the level of expertise demanded. No two
8

10. 9
assignments are ever alike: several years ago
someone attempted to divide them into
classifications and failed miserably. Never ever
be afraid to use unorthodox methods if they are
called for – and in many cases they are!
Undercover infiltration is one such method which
has been used with great success over the years.
This is one of the reasons why you must insist
upon having free range, for if you do not, your
assignment could well be doomed to fail. There
can be absolutely no restrictions if you wish to
undertake an assignment and bring it to a
successful conclusion. Believe both in yourself
and your capabilities as a professional: this will
be ably demonstrated in your body language –
and others will believe in you too. Actions speak
louder than words – so act! That is what Client is
paying you to do, isn’t it? Take whatever steps
you deem necessary: Client expects you to do
this: he wants to see action, remember?
Finally, if you have the courage of your
convictions backed up by a considerable degree
of KSE, you will succeed. Dismiss all doubts
from your mind, for he who doubts is lost, and
that is something which must never happen.
Uphold your professional standards at all times,
bear in mind the suggestions I have laid down
and you will succeed.
LONDON BUSINESS & VOCATIONAL COLLEGE
(Formerly Tutorial College of Commerce)
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
The College was founded in 1979. It offers various levels of Business Management courses to qualify
for entrance to membership of several professional bodies, including:
 Institute of Professional Financial Managers (IPFM)
 The Association of Multi‐Skills (AMS)
 European Institute of Financial Directors (EIFD)
 The Institute of Management Specialists (IMS)
 Faculty of Professional Business and Technical Management (FPBTM)
 The Academy of Executives & Administrators (AEA)
 Chartered Institute of Sales and Marketing (CISAM)
The College also offers various vocational courses in Early Childhood Studies including, The Society of
Nursery Nursing Practitioners professional examinations, exemptions and membership.
Further information may be obtained from:
The Registrar
London Business & Vocational College
40 Archdale Road
East Dulwich, London SE22 9HJ
T/F: +44(0)208 693 0555 M: +44 (0)7983 25 46 95
E: info@lbvc.org.uk info@snnp.org.uk
About the Author: David Benjamin is a retired industrial security management consultant and contractor and has
acted as a consultant in the field of human resources management over many years. He is an approved examiner
for a professional body and has published several papers on the subject of positivity and self-belief. Additionally
he is a skilled negotiator and has considerable experience of resolving problems in industry with professionalism
and amicability. He has been honoured by the Commonwealth of Kentucky for services rendered.

11. 10
Maintaining Good Client Relationships in Contemporary Investments
by
Prof. Samuel Lartey
sammylaatey@yahoo.com
Good relationships have
always been important, but in a
situation in which the banks
are changing and consolidating
their operating structures, it
may be more difficult to
establish and maintain a good
relationship based on your
generic reports. Today, the one-to-one
relationship of the past between the financial
aspirations of the individual or the owner of a
business and a bank may no longer be entirely
appropriate or easy to achieve through reports by
word of mouth but rather more on the cash flows
and financial statements of the clients. Therefore,
a planned approach to relationships with the bank
has to do with understanding cash flows and
maintaining a good financial report.
The most common communication tool between
these actors is the financial statement. A financial
statement (or financial report) is a formal record
of the financial activities and position of a
business, person, or other entity. Relevant
financial information is presented in a structured
manner and in a form easy to understand. They
typically include basic financial statements, in the
form of cash flows and usually accompanied by a
management discussion and analysis.
1. A balance sheet, also referred to as a
statement of financial position, reports on a
company’s assets, liabilities, and ownership
equity at a given point in time.
2. An income statement, also known as a
statement of comprehensive income,
statement of revenue & expense, P&L or
profit and loss report, reports on a company’s
income, expenses, and profits over a period of
time. A profit and loss statement provides
information on the operation of the enterprise.
These include sales and the various expenses
incurred during the stated period.
3. A statement of changes in equity, also known
as equity statement or statement of retained
earnings, reports on the changes in equity of
the company during the stated period.
4. A statement of cash flows reports on a
company’s cash flow activities, particularly
its operating, investing and financing
activities.
In some Small Medium including Large
Enterprises (SMILEs), these statements may be
complex and may include an extensive set of
footnotes to the financial statements and
management discussion and analysis. The notes
typically describe each item on the balance sheet,
income statement and cash flow statement in
further detail.
The objective of financial statements is to
provide information about the financial position,
performance and changes in financial position of
an entity that is useful to a wide range of users in
making economic decisions. Financial statements
should be understandable, relevant, reliable and
comparable. Reported assets, liabilities, equity,
income and expenses are directly related to an
organization’s financial position.
Financial reports are intended to be
understandable by readers who have a fair
knowledge of business and economic activities
and accounting and who are willing to study the
information diligently. Financial statements may
be used by users for different purposes some of
which include:
 Owners and managers require financial
statements to make important business
decisions that affect its continued operations.
Financial analysis is then performed on these
statements to provide management with a
more detailed understanding of the figures.
These statements are also used as part of
management’s annual report to the
stockholders.

12. 11
 Employees also need these reports in making
collective bargaining agreements (CBA) with
the management, in the case of labour unions
or for individuals in discussing their
compensation, promotion and rankings.
 Prospective investors make use of financial
statements to assess the viability of investing
in a business. Financial analyses are often
used by investors and are prepared by
professionals (financial analysts), thus
providing them with the basis for making
investment decisions.
 Financial institutions (banks and other
investment companies) use them to decide
whether to grant a company with fresh
working capital or extend debt securities to
finance expansion and other significant
expenditures.
 Personal financial statements may be required
from persons applying for a personal loan or
financial aid. Typically, a personal financial
statement consists of a single form for
reporting personally held assets and liabilities
(debts), or personal sources of income and
expenses, or both. The form to be filled out is
determined by the organization supplying the
loan or aid.
The Institute of Manufacturing
Reciprocal Membership Organisations
United Kingdom
Institute of Management Specialists
Faculty of Professional Business and Technical Management
Academy of Executives & Administrators
Academy of Multi‐Skills
Institute of Professional Financial Managers
Society of British Business
Republic of South Africa
Design, Technology and Management Society International
Nigeria
Chartered Institute of Cost and Management Accountants *
Note
* Members will need to demonstrate a minimum of two years’ experience in cost accounting
About the Author: Prof. Samuel Lartey is a business philosopher. He is an expert in Financial Information and
Computer Management Systems. Samuel is familiar with multi-million country-wide financial projects. He is a
Motivational Speaker and a Teacher. He holds a Doctor of Letters (D.Litt.) in Financial Information and
Computer Management Systems, a PhD in Financial Management, an MBA in Management Information
Systems, and a B.A. in Social Science.
You can contact him on sammylaatey@gmail.com or on samuell@carayoluc.edu.gh for mentoring and speaking
engagements.

13. 12
Cost of Quality for Construction Projects: A Fresh Look
by
Dr Ron Basu
The Concept of COQ
The concept of ‘the cost of quality’ is not new. In
fact Juran first discussed the cost of quality
analysis as far back as 1951. However it is
Feigenbaum who should be credited with the
definition of the cost of quality when he
identified the four cost categories in 1956. These
can be classified as Prevention Costs, Appraisal
Costs, Internal Failure Costs and External Failure
Costs. Both concept and categories have been
followed basically in the same format ever since.
Prevention Costs and Appraisal Costs are often
defined using one of three terms: as the Cost of
Control, the Cost of Conformance or the Cost of
Good Quality. Regardless of the label used, this
refers to the outlay of setting up and managing a
quality management team with clearly defined
processes. Similarly, Internal Failure Costs and
External Failure Costs are also combined to be
known as the Cost of Failure, the Cost of Non-
conformance or the Cost of Poor Quality. These
are the expenses of defects and reworks arising
from poor quality management.
Thus the basic theory is quite simple; however,
the challenge lies in defining and measuring each
of the sub-components leading to the four major
cost categories. As they say, the devil is in the
detail. It is a bit like having a baby – easy and
pleasing to conceive but rather more painful to
deliver!
Traditional and Modern Views
The traditional view is that as the Cost of Control
increases the Cost of Failure decreases until it
reaches a point beyond which the total cost of
quality increases. In other words, from this point
the cost of improving quality becomes larger than
the derived benefits. This is sometimes called the
‘optimum point’ of quality effort (see Figure 1).
Figure 1. Traditional cost of quality
However with the application of Total Quality
Management (TQM) and Six Sigma processes,
the traditional view outlined above becomes
challenged. Some precision manufacturing
operations (and even service operations such as
air transport) can accept zero-defect or Six Sigma
standards. Furthermore, the traditional model
implies that the Cost of Control is high in
proportion to the Cost of Failure. Increased
quality is not achieved by more inspectors but
instead by a culture of quality assurance
underpinned by initial training. As time
progresses they may incur some charges for
additional training for improved processes;
however this will not be at the same rate as for
the early stage of a quality programme.

14. 13
If we incorporate corrections from the total
quality culture then the time-honoured Cost of
Quality model would change to the representation
as shown in Figure 2. It is true that there may not
be enough data to validate the optimum point of
the Total Quality Cost. However, the significant
savings generated by project-based Six Sigma or
Lean Sigma programmes supports the
fundamental argument. This is quite simply that a
diminishing total cost of quality is achieved by
following a sustainable continuous quality
improvement programme (Basu, 2011).
Figure 2. Present cost of quality
COQ in the Construction Industry
Now we can reason that activities related to COQ
are showing favourable results in both the
manufacturing and service industries thanks to
holistic quality programmes. However the picture
is very different in the field of project
management. A most significant gap in the
project management body of knowledge is the
cost of quality (Basu, 2014). The application of
Six Sigma in major projects is also limited (Basu,
2012). Nonetheless, one project sector in which
the potential of COQ is beginning to be
recognised is construction (Love et al 2003).
While we appreciate the role of quality in
construction projects, we do need to understand
much more how we can define and measure the
dimensions of the cost of quality. In particular it
is vital to gauge the external costs of failure due
to poor quality delivery during design and
construction. In turn, these external expenses then
affect the operational performance and outlay of
assets post-handover.
Anecdotal evidence suggests that construction
project insurance accounted for 1.5% of project
costs. If we conclude that this is caused by a
failure in quality then the figure we are looking at
amounts to as much as 1.5% of £120 billion (i.e.
£1,800 million) annually in the UK alone, an
astronomical sum. More reassuringly, there are
further nuggets of wisdom to be gleaned that will
help us to ameliorate this sort of situation. In
order to find them, we need to define and
measure by empirical research the key metrics of
COQ as applied to construction projects.
The COQ Metrics
As a start, let us attempt to apply Feigenbaum’s
four categories of COQ with some typical
examples of the metrics of each category for
construction projects. We would develop Table 1
as an outline, as shown below:

15. 14
Table 1: Cost of Quality in Construction Projects
Cost of Control Cost of Failure
Prevention Costs Appraisal Costs Internal Failure Costs External Failure Costs
Examples of Metrics
- Quality
Management
Systems and
Procedures
- Quality Related
Information System
- ISO Certification
- Etc.
Examples of Metrics
- Quality
Management Staff
- Quality Audits
- Quality Training
- Review Meetings
- Etc.
Examples of Metrics
- Non-conformance
- Non-conformance
resolution and
rework
- Certificates of
conformance
- Etc.
Examples of Metrics
- Insurance claims
- Maintenance
- Asset availability
- Etc.
The above metrics in each category are shown as
examples only and these are extended depending
on the nature of the projects and quality
specifications. Cost of Control is usually easily
measurable at the early stage of the project life
cycle. Major construction projects have started
measuring and monitoring Internal Failure Costs
during the design and construction phases of the
project (Basu et al, 2009). However a key area
that remains neglected is the assessment of
External Failure Costs which occurs after the
project handover. It is a crucial omission since
arguably this is the aspect needing most attention.
The costs after the handover are likely to provide
clients, designers and contractors with data in
order to focus their efforts to improve the biggest
contributors to the cost of quality.
The Way Forward
In order to make the ‘painful’ delivery process a
success let me suggest some fundamental
principles of quality and performance
management. These include:
- Each metric should relate clearly to one of the
specific four categories
- The metrics must follow the rigour in
objectives, the rigour in measurement and
rigour in use
- Each metric is unique without any duplication
or overlapping in the area of measurement
- Each metric should be clearly described with
a definition, formula (if applicable), worked
example and purpose
- The metrics should be tested in a pilot study
before implementation
- Metrics in each category should lead to root
cause analysis by identifying whether it is
design related, process related or people
related
References
Basu, R. (2014), ‘Managing Quality in Projects:
An empirical study’, International Journal of
Project Management, Vol. 52, No 1, pp 178-187.
Basu, R (2012), Managing Quality in Projects,
Farnham, Gower Publishing.
Basu, R. (2011), FIT SIGMA: A Lean Approach
to Building Sustainable Quality Beyond Six
Sigma, Chichester, John Wiley & Sons.
Basu, R., Little, C. and Millard, C. (2009), ‘Case
Study: A Fresh Approach of the Balanced
Scorecard in the Heathrow Terminal 5 Project’,
Managing Business Excellence, Vol.15, No.4, pp
22-33.
Feigenbaum, A. V. (1956) “Total Quality
Control”, Harvard Business Review, Volume 34,
No.6, pp 93-101.
Juran, J.M., Quality Control Handbook. 1st ed.
1951, New York, NY: McGraw-Hill.
Love, P.E.D. and Irani, Z., (2003), ‘A project
management cost of quality information system
for the construction industry’, Information &
Management, Volume 40, pp 649-661.

16. 15
Project managers appear to accept the ‘iron triangle’ of cost, budget and quality but
in reality focus more on being on time and budget. Quality in projects is often paid
mere lip service and relegated to tick-box compliance. This lack of clarity and focus
on quality is often the source of project failures.
Ron Basu’s Managing Quality in Projects shines the spotlight on this aspect of
project management that can often be overshadowed by the pressure to deliver on
time and on budget. His investigation focuses initially on defining the dimensions
of quality in project management and identifying sources of measurement for
project excellence. Thereafter he expands his focus to discuss which tools can be
effectively used in the quest for achieving and sustaining project excellence; and
which processes are important in assessing the project maturity. The text also
explores how the successes of operational excellence concepts, such as supply chain management, Lean
Thinking and Six Sigma may be gainfully deployed in enhancing project quality and excellence. Finally a
structured implantation plan guides those directly involved in project delivery, including suppliers, in how
to ‘make it happen’.
A shared understanding and implementation of project quality by key project stakeholders will go a long
way to ensuring a stable platform for delivering successful projects with longer lasting outcomes. It is also
a fundamental building block in any organization’s strategy for improving consistency and achieving
sustainable performance. On that basis, Ron Basu’s book is a must-have reference and guide for all project
organizations.
Dr Ron Basu is the founder of the consulting company, Performance Excellence Limited and a Visiting
Professor at SKEMA Business School in France and a Visiting Fellow at Henley Business School, UK.
Ron is the author or co-author of ten management books including Managing Project Supply Chains
(2011).
The unique url for Managing Quality in Projects is:
http://www.gowerpublishing.com/isbn/9781409484622
IManf members are entitled to a 25% discount on this and any other title on the Gower website. To
obtain this discount, together with the current cost of the publication, please visit their website
www.gowerpublishing.com and quote this promotional code – G12Goo25 – when ordering.
For any other information, please contact Susan White by either post, telephone or e‐mail:
Gower Marketing, Gower Publishing Limited, Wey Court East,
Union Road, Farnham, GU9 7PT
Telephone: 01252 736600
E‐mail: swhite@gowerpublishing.com

17. 16
Course Options
The Institute of Manufacturing has endorsed the
following programs. The full list with links to the
programs can be found on the Recognised
Courses page of the IManf website:
http://www.instituteofmanufacturing.org.uk/reco
gcourses.html.
Glyndwr University
Aeronautical and Mechanical Manufacturing
BEng (Hons). Develop a full understanding of
engineering design concepts and the engineering
design process. The first part of the course will
introduce you to the fundamentals of mechanical
and electrical science, the mechanics of solids
and machines and computer-aided design. Then
you’ll develop more advanced knowledge,
looking at aerodynamics, engineering dynamics,
design and computer-based manufacturing.
Honing your business skills is a key focus
throughout the course. This is a three year full-
time course which develops a full understanding
of engineering design, manufacturing and
management. There is also a one-year level-6 full
or part-time route, designed for students who
have completed a foundation degree in
mechanical manufacturing or with equivalent
qualifications.
University of Greenwich
Mechanical and Manufacturing Engineering,
MSc. This MSc programme provides its students
with an opportunity to extend the technical
knowledge acquired on an undergraduate degree
programme in mechanical or manufacturing
engineering. Though not a specialist Master’s
degree, the programme provides a broad subject-
specific curriculum that provides an opportunity
for students to tailor the programme to meet their
personal needs, with specialism pursued through
a major project. Many of these projects reflect the
key research interests of the Department, such as
manufacturing, bulk materials handling and
instrumentation. However, projects can be
selected from across the discipline from a list
provided by the Department. Many projects are
derived from our industrial links, and a number
are proposed by students, reflecting their personal
interests or experience.
Heriot-Watt University
Chemical Engineering BEng (Hons) and MEng.
The BEng programme forms the core for our
advanced MEng programmes allowing us to offer
flexibility to students. Programmes share the
same first two years, with the more chemistry
oriented MEng programmes specialising in
chemistry topics in third year. Our programmes
aim to provide students with a sound
understanding of chemical engineering
fundamentals to become professional chartered
engineers. In addition to a grounding in science,
mathematics and engineering, our students
acquire practical abilities that are highly sought
after by industry.
Robotics, Autonomous and Interactive SystemsBEng
(Hons) and MEng. Robotic and autonomous
systems are playing an increasingly important
part in society. Although applied to hazardous
environments, such as space and subsea
exploration, these systems are now used in areas
such as autonomous vehicle guidance, driver
assistance, health care, remote surgery, industrial
manufacturing, and domestic assistance. You will
study in a multi-disciplinary domain that brings
together electronics, computer software, and
mechanics. In the first three Levels, you will be
given a grounding in all three disciplines, which
includes opportunities to build integrated
systems. In Levels 4 and 5, you can either
continue a broad based curriculum, or specialise
in particular aspects of contemporary robotics.
Lancaster University
Natural Sciences BSc (Hons) and Natural
Sciences (with study in North America) BSc
(Hons). Unlike traditional science degrees,
Natural Sciences at Lancaster will allow you to
pick from a wide choice of scientific areas and
study two or more science subjects throughout
your degree course. This is a challenging
programme as you will be taught to the same
depth of understanding as single honours students
in each subject. Although primarily a science
degree, it is possible to study up to one quarter of
your degree in a non-science subject.

18. 17
Executive Diploma in Manufacturing
www.instituteofmanufacturing.org.uk
The Executive Diploma in Manufacturing is designed to educate working manufacturing managers
at a post graduate level. It has been designed to develop the core knowledge a senior
manufacturing manager needs to know.
This program will enable students to enrol into MBA programs with several universities:
Aldersgate College http://www.aldersgate.edu.ph/, listed on the International Association of
Universities UNESCO endorsed World Higher Education Database as a Philippines University, will
accept the work students do for their IManf Executive Diploma as the core work for their
Professional MBA.
Abbey College Pre Masters Program http://abbeycollegeinlondon.co.uk/index.php/courses/pre‐
masters, graduates of the IManf Executive Diploma with a minimum of 5 years verifiable
management experience can enrol into this program which is recognised for entry into 7–8 UK
universities’ MBA programs.
St Clements Private Swiss University http://scusuisse.ch/ProgMBA.htm.
The programme consists of 7 core subjects and 4 x 5000 word mini thesis projects.
MODULE 1: Core Subjects
1. How to develop the best strategy: the value of an enterprise
2. Innovation: the thought behind the product
3. Human Resources: the role of the HR manager in a modern manufacturing environment
4. Financial and Cost Management
5. Risk, Operations and Project Management
6. Sales and Marketing
7. Computerisation and Robotics
MODULE 2: Mini Thesis Projects
All students must write 4 mini thesis projects of a minimum of 5000 words for each. These theses
are intended to ensure that the student has understood the core subjects and can apply the
knowledge gained on a practical basis.
1. Workforce skills: the value of knowledge, skills and experience
2. Expedition and improvement of the manufacturing process
3. The art of good communication and leadership skills at all levels
4. The art of best practice and benchmarking
5. The successful management of a manufacturing supply chain
6. The Health & Safety at Work Act, with particular emphasis on the safe working of
machinery
7. Workforce skills and negotiation
8. Logistics management
9. The importance of accurate cost accounting
10. Component sourcing
Cost £1,500 (Special discounted price of £1,200 for Institute of Manufacturing Members)
Email: info@instituteofmanufacturing.org.uk

19. 17
The New Regulation on CCTV and Surveillance Camera Technology in the UK
by
Andreas Nickolaos Akratas, B.Sc. (Hons), M.A., F.I.M.S, F.I.Manf., F.Prof.B.T.M., F.I.P.F.M., F.C.A.M.
The Minister of State and
Crime Prevention announced
on September 13, 2012,
provisions within the
Protection of Freedoms Act
2012. These provisions
concern the regulation of
surveillance camera systems
and, more precisely, the
implementation of a regulatory framework which
includes a code of practice and a surveillance
camera commissioner (Home Office, 2012a).
At the beginning of 2012, the UK Home Office
reported the establishment of the National CCTV
Strategy Board, which is a new Government
Oversight Body “which enables the current
National CCTV Strategy Board to become more
delivery focused,” while the CCTV Regulator
“will be responsible for raising public awareness,
defining standards and establish a means to deal
with complaints for the public about CCTV”
(Controlware Communications Systems, 2013).
A period of statutory consultation in relation to
the preparation of the code of practice started on
February 3, 2012, and concluded on March 21,
2013 (Home Office, 2013a). On June 4, 2013, a
written ministerial statement laid in the House of
Lords concerning the regulatory framework for
surveillance camera systems and the code of
practice proposed (Home Office, 2013b).
On the one hand, the current Protection of
Freedoms Act 2012 is enriched with a code of
practice concerning guidance for system
operators. This code of practice is ensured to be
in accordance with the Data Protection Act 1990
and the Regulation of Investigator Powers Act
2000. The code will be implemented on a
voluntary basis from relevant authorities who are
specified in the Section 33(5) of the Protection of
Freedoms Act 2012 (Home Office, 2012a).
On the other hand, the new regulation of CCTV
and other Surveillance Camera Technology
defines in Section 34(2) of the Protection of
Freedoms Act 2012 the functions of the
commissioner. These functions include the
following: a) review of the operation of the code
of practice, b) provide the Government with
suggestions regarding the effectiveness of this
code and any potential changes, c) design of a
three-year business plan aiming at presenting
how the functions will be accomplished, d) come
to an agreement with both the Information
Commissioner and the Chief Surveillance
Commissioner over matters for the operation of
gateways, and e) establish an advisory team that
has the sufficient skills to support the
commissioner in his duties (Home Office,
2012a).
Undoubtedly, the surveillance camera technology
– CCTV is very effective in tackling crime, given
the fact that any activity in the public space is
appropriate and transparent. Moreover, the
effectiveness of the surveillance camera
technology lies in its advantage to provide
images and information with regard to an evident
occurred, which facilitates the investigation of
criminal acts (Home Office, 2012b).
It is argued that CCTV can contribute to the
reduction of crimes committed and to strengthen
people’s feeling of security (Hempel and Töpfer,
2002, p. 22; Waples et al., 2009, p. 208). As a
result, the public confidence in general and
people’s confidence in the use and the
effectiveness of CCTV and surveillance
technology is ensured and increased (Home
Office, 2012b). Indeed, CCTV is an effective
tool, since it can provide a way of checking
whether people are complying with specific
processes, and whether their behaviour is
consistent with certain policies (Gill, 2006, p.
440). In addition, the CCTV system prevents a
potential ‘opportunist’ to enter an area without
having authority, as it uses many protective
measures. This is compatible with the principle of
‘defence in depth’ (Manunta, 1998, p. 32).
18

20. 19
Apart from crime prevention, CCTV and, in
general, the surveillance system can help police
to arrest offenders and crime processors in the
decision-making process. Furthermore, it is
supported that through the images that CCTV
cameras capture, unwitting victims can be helped
and supported, thus CCTV cameras can serve as
a means of immortalizing facts (Morgan, 2013).
Finally, it should be mentioned that the new
regulations are associated with both the use and
disposal of forensic data as fingerprints, DNA
and biometrics, and CCTV surveillance
technology (Reeve, 2012).
However, there is an opposite point of view.
Despite the fact that CCTV has drawn the
attention to its main benefit, namely crime
reduction, there are some criticisms regarding its
effectiveness. For example, it is supported that
CCTV in general cannot be regarded as effective,
since CCTV technology varies (in size, usage,
and incident of crime); hence, the total outcome
also varies. Apart from this, CCTV cameras
monitor specific areas, while crimes may occur in
others; thus crime prevention and reduction
cannot be fully achieved in all areas of crime
offences (Parliamentary Office of Science and
Technology, 2002).
Again the above point of view is subject to
criticism. In a relatively recent study examined
the spatial displacement of the crimes that
occurred and reached the conclusion that the
increase of certain types of crime cannot be
attributed only to displacement which stems from
the implementation of CCTV in the wider area of
the displacement (Waples et al. 2009, p. 216).
What should be mentioned is that the Act does
not apply to the cameras that are privately owned
and operate, for example, in pubs, shops, and
other quasi-public spaces. On the contrary, the
legislation concerns cameras and surveillance
systems operating only in areas focusing on the
police and local authorities. However, the
problem with the CCTV is related to domestic
and smaller systems (Reeve, 2012).
In addition, the Camera Commissioner will be
responsible for the creation of a framework
relating only to the two per cent of publicly
owned cameras, whereas it does not include all
the publicly owned cameras, as it should (Reeve,
2012). Given the fact that there are 1.85 million
cameras in the UK, from which 1.70 are privately
owned and only 33,433 are publicly owned and
from them 115,000 are cameras on public
transportation, it could be easily concluded that
there is a lack in this issue that the new regulation
does not take into account (Politics.co.uk, 2013).
Another issue raised with regard to the
disadvantages of the new regulation about CCTV
cameras and surveillance technology is the
intrusive nature of this technology in the private
lives of people, bringing about legal aspects of
surveillance. As a result, the issue of invasion of
privacy is a real fact, or even a threat, that the
new regulation cannot solve (Politics.co.uk,
2013). This can be justified from the statement
that “the activities being referred to are those
which form part of a much more organized, if
simultaneously, conversely irregular, large
network of formal technologically-enhanced, yet
altogether subtler, surveillance of everyday
living” (Morgan, 2013, p. 4).
The intrusive nature of CCTV cameras and
surveillance technology and its negative impact
on the private lives of people rest in the social
interaction theory. This theory was developed in
order to create a framework for the right to
privacy. The reason for which one places so
much emphasis on the individual’s privacy is that
privacy is important for the facilitation of social
interaction (Hughes, 2012, p. 807). Privacy is a
state of human experience, related to both
anonymity and intimacy, where people operate
through certain barriers in order to have this
experience. Social interaction, which is based on
this theory, states that privacy can be fulfilled
through specific behavioural mechanisms, which
defile the limits of oneself (Hughes, 2012, p.
809). As such, it can be argued that if these limits
and boundaries are not defined by the individuals,
this constitutes a violation of privacy. Within this
context, CCTV cameras and surveillance
technology can lead to a breach of individuality

21. 19
and privacy, since they set the limits within
which the individuals are able and allowed to live
their experiences.
Nevertheless, the new regulation was generally
positively accepted. Specifically, the Government
launched a report about the responses to the
consultation during the period 07.02.2013–
21.03.2013. The responses show that the majority
of the 127 respondents would support the
implementation of this code of practice and
believe that this code of practice: a) clearly
outlines the scope of surveillance camera use
while the meaning of ‘surveillance by consent’,
b) ensures greater transparency on the part of
systems operators, c) contributes towards the
protection of the right to respect for both family
and private life, d) helps in the increase of the
effectiveness of a surveillance camera system in
meeting its stated purpose, and e) makes clear the
obligations and the implications for various
groups of operators. Moreover, the majority
believes that the 12 guiding principles that have
been reported in the draft code are relevant to the
regulation concerning the surveillance camera
system (Home Office, 2013c).
Altogether, while the new regulation under the
Protection of Freedoms Act 2012 seeks to protect
civil liberties and contributes towards the
prevention and reduction of crime, the
disadvantage of this regulation concerns the
invasion in the private lives of people. What
remains to be proved is whether the issue of
individuals’ privacy should and will be taken into
account through the implementation of new
provisions in the Protection of Freedoms Act
2012.
References
Controlware Communications Systems, 2013.
UK CCTV Regulation [online]. Available at:
<http://www.controlware.co.uk/en/knowledge-
base/security-articles/uk-cctv-regulation.html>
[Accessed 10 June 2013].
Gill, M., 2006. CCTV: ‘Is it effective?’ in Gill,
M. (Ed.), The Handbook of Security 438-460,
Basingstoke: Palgrave.
Hempel, L. and Töpfer, E., 2002. Inception
Report, Working Paper No.1. Centre for
Technology and Society Technical University
Berlin [pdf]. Available at:
<http://www.ideels.uni-bremen.de/ue_wp1.pdf>
[Accessed 10 June 2013].
Home Office 2013a. Regulation of CCTV and
other surveillance camera technology, Minister:
James Brokenshire MP [online]. Available at:
<https://www.gov.uk/government/speeches/regul
ation-of-cctv-and-other-surveillance-camera-
technology> [Accessed 11 June 2013].
Home Office 2013b. Written statement to
Parliament. Regulation of CCTV and other
surveillance camera technology, Minister: Lord
Taylor of Holbeach CBE [online]. Available at:
<https://www.gov.uk/government/speeches/regul
ation-of-cctv-and-other-surveillance-camera-
technology--2> [Accessed 11 June 2013].
Home Office 2013c. Surveillance Camera Code
of Practice. Protection of Freedoms Act 2012 –
Government response to statutory consultation
over the Surveillance Camera Code of Practice
[pdf]. Available at:
<https://www.gov.uk/government/uploads/system
/uploads/attachment_data/file/206693/surveillanc
e-camera-code-of-practice-responses-revised-
web.pdf> [Accessed 11 June 2013].
Hughes, K., 2012. A Behavioural Understanding
of Privacy and its Implications for Privacy Law.
The Modern Law Review, 75(5) pp.806-836.
Manunta, G., 1998. Security: An Introduction.
Shrivenham: Granfield University.
Morgan, H.M., 2013. Regulating CCTV?: We
Can’t Solve Problems by Using the Same Kind of
Thinking We Used When We Created Them.
Critical Criminology, 21(1) pp.15-30.
Parliamentary Office of Science and Technology,
2002. Postnote: CCTV, April 2002 Number 175
[pdf]. Available at:
<http://www.parliament.uk/documents/post/pn17
5.pdf> [Accessed 10 June 2013].
20

22. 19
Politics.co.uk, 2013. CCTV [online]. Available at
<http://www.politics.co.uk/reference/cctv>
[Accessed 10 June 2013].
Reeve, T., 2012. CCTV cameras regulated as
Protection of Freedoms Act 2012 receives Royal
assent [online]. Available at:
<http://www.securitynewsdesk.com/2012/05/04/c
ctv-cameras-regulated-as-protection-of-freedoms-
act-2012-receives-royal-assent/> [Accessed 10
June 2013].
Waples, S., Gill, M. and Fisher, P., 2009. Does
CCTV displace crime? Criminology and
Criminal Justice, 9(2) pp.207-224.
One of Andreas’ papers, To What Extent Can
Busineses’ Security Measures Respond
Effectively to Terrorist Attacks, has been
published in the Management E-Library of The
Institute of Management Specialists:
http://www.instituteofmanagementspecialists.org.
uk/elibrary.html
About the Author: Andreas Nickolaos Akratas is a Senior Security Consultant from Athens, Greece. He holds a
B.Sc (Hons) degree in Criminology (Portsmouth) and a MA degree in Restorative Justice (Hull). He also holds a
Postgraduate Certificate in Security Management (Buckinghamshire New University) and the Edexcel
Professional Diplomas in Security Management and Private Investigation. Andreas is a Lifetime Fellow Member
of IMS, I.Manf, FPBTM, IPFM and CAM. E-mail: andreasakratas@gmail.com
Certified Manufacturing Practitioner (CMP)
Requirements:
- 10 years practical experience
- 5 years if you possess a suitable Diploma
level qualification
- 3 years if you possess a suitable Bachelor
level qualification
- 2 years if you possess a suitable Master’s level qualification
Applicants need to write and submit a 2,000 word dissertation on either:
a) the manufacture of an item of which you have experience
or
b) how a subject area from your Diploma, Bachelor’s Degree or Master’s Degree has
helped you in your work as a Manufacturing Practitioner.
Please contact the Institute for an Application Form
info@instituteofmanufacturing.org.uk
21

23. 22
Making Quantitative Analysis and Modelling Payoff
by
Dr. Forster Kum-Ankama Sarpong
A quantitative analyst or, in
financial jargon, a quant is a
person who specializes in
the application of
mathematical and statistical
methods such as numerical
or quantitative techniques to
financial, investment and
risk management problems. Although the original
quantitative analysts were “sell side quants” from
market maker firms, concerned with derivatives
pricing and risk management, the meaning of the
term has expanded over time to include those
individuals involved in almost any application of
mathematics in finance, including the buy side.
Examples include statistical arbitrage,
quantitative investment management, algorithmic
trading, and electronic market making.
Quantitative modelling is important for research
in the financial, investment and risk management
sector. Market competition and recent progress in
data collection and data storage techniques have
increased the importance of quantitative
modelling. Modelling has become an important
part of research and development across many
fields of study, having evolved from a tool to a
discipline in less than two decades.
There is the need to give an overview of
quantitative analysis methods and models, as
quantitative modelling enables banks and
investment companies to devise their own
specific risk models. It facilitates them to model
changing economic and regulatory landscapes
quickly and economically. Recently, quantitative
modelling has received a lot of attention in the
financial sector. Modelling framework and
software tools enhance the performance of
business.
Quantitative models provide diagramming
techniques to document business process for
growth. Most people are not experts in predicting
the outcomes of the systems governed by
quantitative modelling.
In financial operations, quantitative models work
to determine prices, manage risk, and identify
profitable opportunities. Historically this was a
distinct activity from trading but the boundary
between a desk quantitative analyst and a
quantitative trader is increasingly blurred, and it
is now difficult to enter trading as a profession
without at least some quantitative analysis
education. In the field of algorithmic trading it
has reached the point where there is little
meaningful difference. Front office work favours
a higher speed to quality ratio, with a greater
emphasis on solutions to specific problems than
detailed modeling.
Quantitative analysis is used extensively by asset
and investment managers. They rely almost
exclusively on quantitative strategies while others
use a mix of quantitative and fundamental
methods. Major firms invest large sums in an
attempt to produce standard methods of
evaluating prices and risk.
Quantitative analysis has grown in importance in
recent years, as the credit crisis exposed holes in
the mechanisms used to ensure that positions
were correctly hedged, though in no bank does
the pay in risk approach that in front office. A
core technique is value at risk, and this is backed
up with various forms of stress test (financial),
economic capital analysis and direct analysis of
the positions and models used by various bank’s
divisions.
In the aftermath of the financial crisis, there
surfaced the recognition that quantitative
valuation methods were generally too narrow in
their approach. An agreed upon fix adopted by
numerous financial institutions has been to
improve collaboration.
Because of their backgrounds, quantitative
analysts draw from three forms of mathematics:
statistics and probability, calculus centered
around partial differential equations, and
econometrics. Some on the buy side may use

24. 23
machine learning. The majority of quantitative
analysts have received little formal education in
mainstream economics, and often apply a
mindset drawn from the physical sciences.
Physicists tend to have significantly less focus on
statistical techniques, and thus lean on
approaches based upon partial differential
equations, and solutions to these based upon
numerical analysis.
A typical problem for a statistically oriented
quantitative analyst would be to develop a model
for deciding which stocks are relatively
expensive and which stocks are relatively cheap.
The model might include a company’s book
value to price ratio, its trailing earnings to price
ratio, and other accounting factors. An
investment manager might implement this
analysis by buying the underpriced stocks, selling
the overpriced stocks, or both.
Statistically oriented quantitative analysts tend to
have more of a reliance on statistics and
econometrics, and less of a reliance on
sophisticated numerical techniques and object-
oriented programming. These quantitative
analysts tend to be of the psychology that enjoys
trying to find the best approach to modeling data,
and can accept that there is no right answer until
time has passed and we can retrospectively see
how the model performed.
About the Author: Dr. Forster Kum-Ankama Sarpong started managing financial and realty projects and teams in
2001. He is the CEO of Design Resources Estates, All Ghana Microfinance and a lecturer in Finance and
Quantitative Models. (T): 024 4321960 (E): fosarpong@yahoo.com
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25. 24
HP-Autonomy Acquisition Scandal
by
Professor Dr Rabbi Abe Abrahami, DFAMS, CompIMS, Bluewater Academic Institute
Introduction and Summary
Hewlett-Packard stunned Wall Street by alleging
a massive accounting scandal at its
British software unit Autonomy and taking an
$8.8 billion write-down. This is the latest in a
string of reversals that renewed questions about
the competence of the storied company’s board
and senior managers.
HP said it discovered “serious accounting
improprieties” and “a wilful effort by Autonomy
to mislead shareholders” after a whistle-blower
came forward following the May ouster of former
Autonomy CEO Mike Lynch.
The news sent the company’s shares plunging
12% to a 10-year low of $11.71. HP, which for
decades was synonymous with technical
excellence and innovation as one of the bedrock
companies of Silicon Valley, now has a market
value of roughly $20 billion, down from
$155 billion in April of 2000.
CEO Meg Whitman took the helm at HP a little
over a year ago when her predecessor, Leo
Apotheker, was fired after less than a year on the
job. Apotheker’s one big strategic move during
his brief tenure was the $11 billion acquisition of
Autonomy, intended to hasten HP’s
transformation into Software and Service
Company but which was criticised by many
analysts as overpriced.
“Most of the board was here and voted for this
deal, and we feel terribly about that,” Whitman
said on a call with analysts.
The announcement came just three months after
the company took a write-down of almost
$11 billion on its EDS services division.
HP has for years relied on deal-making, acquiring
businesses ranging from EDS to Compaq to
Palm, but has largely failed to articulate a clear
strategy or establish a strong position in growth
businesses like computer services or mobile
computing.
“To put it bluntly ... this story has been an
unmitigated train wreck, and it seems every time
management speaks to the Street, there is new
negative incremental information forthcoming,”
said ISI Group analyst Brian Marshall.
SEC’S Involvement
HP said it had referred the alleged accounting
wrongdoing at Autonomy to the US Securities
and Exchange Commission’s enforcement
division and the UK’s Serious Fraud Office for
civil and criminal investigation. HP also said it
would take legal action to recoup “what we can
for our shareholders”.
Both agencies declined to comment.
Lynch, in an interview with Reuters, “flatly
rejected” HP’s allegations and said he was
“shocked” but confident he would be absolved of
any misdeeds. The Irish-born executive said he
had not been notified by HP about the allegation
before it was made public, nor had he been
contacted by any authorities.
Whitman said the investigation of Autonomy’s
finances – both external and internal – will take
multiple years as it wends its way through the
courts in both countries.
She defended the board’s handling of the
acquisition and blamed HP’s auditors for failing
to detect the problems.
“The board relied on audited financials, audited
by Deloitte. Not Brand X accounting firm, but
Deloitte,” she said, adding that KPMG was hired
to audit Deloitte.
“Neither of them saw what we now see after
someone came forward to point us in the right
direction,” Whitman said.

26. 25
A person familiar with the situation told Reuters
that the Federal Bureau of Investigation was
probing the HP-Autonomy allegations in court
with the Securities and Exchange Commission,
although the inquiry was at an early stage.
HP and Autonomy were not available to
comment on the FBI probe, and the FBI declined
to comment.
The alleged accounting issues also put a spotlight
on the investment banks and law firms involved
in the acquisition.
Autonomy was represented by Frank Quattrone,
an investment banker who was the target of
widespread criticism – and criminal prosecution –
for his activities during the first dot-com boom.
After one trial ended in a hung jury and a second
ended in a guilty verdict that was overturned on
appeal, the charges were ultimately dropped.
HP’s lead adviser was Perella Weinberg, a
boutique investment bank with little experience
in big tech deals. Its attorneys included the blue-
chip firms Gibson, Dunn & Crutcher; Freshfields
Bruckhaus Deringer; Drinker Biddle & Reath;
and Skadden, Arps, Slate, Meagher & Flom,
which advised the board.
Autonomy’s Inflated Profit
HP disclosed the Autonomy allegations in
conjunction with its fourth-quarter earnings,
which showed a 6.7% decline in revenues as well
as a $6.85 billion loss.
It took $8.8 billion in charges in the quarter, with
over $5 billion tied to the problems at Autonomy.
The rest of the charge related to the “recent
trading value of HP stock and headwinds against
anticipated synergies and marketplace
performance,” HP said without elaborating.
HP had embarked on its own internal
investigation, including a forensic review of
Autonomy’s historical results by
PricewaterhouseCoopers and HP general counsel
John Schultz.
It accuses Autonomy’s former management of
inflating revenue and gross margins to mislead
potential buyers. It said Autonomy executives
mischaracterised revenue from low-end hardware
sales as software sales and booked some
licensing deals with partners as revenue, even
though no customer bought products.
It said Autonomy claimed its gross margins were
in the 40% to 45% range while realistically they
were in the 28% to 30% range.
Moreover, Autonomy always represented itself as
a software firm but 10% to 15% of its revenue
came from money-losing sales of low-end
hardware, HP said.
The company also claimed that Autonomy was
booking licensing revenue upfront before deals
closed.
As early as 2009, hedge fund manager Jim
Chanos had identified Autonomy as a shorting
opportunity, according to a source familiar with
his views.
Chief among his concerns, according to the
source, was that Autonomy was claiming a 40%
market share against the likes of Microsoft,
International Business Machines and EMC in the
field of e-discovery.
Autonomy’s stated margins of around 50% did
not seem to translate proportionately into cash
flow; and it was reporting double-digit organic
growth in software licence revenue while rivals
battled shrinking sales, the person said.
During a presentation entitled ‘Faking Reported
Income 101’ at the Santangel’s Investor Forum in
New York, hedge fund manager John Hempton
of Sydney, Australia-based Bronte Capital
highlighted items on Autonomy’s balance sheet
that raised his concerns.
“Is it odd that in a software company you have
receivables of 4.5 months? Or that deferred
revenue is under half receivables?” asked
Hempton, who has a short position on HP.

27. 25
Latest Twist
According to the Guardian Newspaper:
Hewlett-Packard is being sued by MicroTech, a
small software reseller it named in a $5bn fraud
claim against the founders of the British software
group Autonomy.
MicroTech’s suit says the company is owed
$16.5m by HP for Autonomy software that was
never properly delivered. It is the latest twist in
the battle between HP and the Autonomy
founder, Mike Lynch, and his finance director,
Sushovan Hussain.
The British executives are fighting accusations by
HP that they used “improper” transactions with
small software resellers, including MicroTech, to
artificially boost their company’s revenues.
The claims relate to two separate transactions, in
which MicroTech signed contracts with
Autonomy to buy its software for eventual use by
two end customers, the Vatican Library and HP
itself.
In the event, neither the Vatican nor HP bought
Autonomy software from MicroTech or from
Autonomy.
However, HP alleges that MicroTech was in fact
paid, with profits, for its purchases of software
intended for the Vatican and HP. Its lawyers
claim the payments were made using a series of
reciprocal deals in which Autonomy bought
software and services from MicroTech for a
marginally higher value than the software it had
agreed to sell to the smaller firm.
Summary and Conclusion
Mergers & Acquisitions (M & A), in this case, an
acquisition only, are very tricky indeed and even
several audits and consultant reports can and do
miss vital information, as has been evident in this
case. An accounting audit is insufficient, as
numbers do not tell the whole story.
The following due diligence checks are typically required, briefly:
 Quantitative audit of the numbers
 Qualitative audit of the numbers
 Profit vs. expenses and overheads
 Gearing or Leverage (ratio of debt to assets)
 Return on equity ratio (net income/shareholders equity)
 Return on assets ratio (net income/total assets value)
 Dividend to profit ratio
 Other financial ratios
 Acid test ratio:
 Sampling of critical business data and transaction analysis
 Vendor supply and pricing analysis
 Sales ratios analysis
 Profit margin analysis
 Stock turnover analysis
 Company’s IT and security analysis
 Company’s operations analysis
 Business procedures analysis
Note: Professor Dr Abrahami delivers accredited-certified training courses in Solvency II, Sarbanes Oxley,
MiFID, IFRS, HIPAA, GLBA, FATCA, Fraud Act, Dodd–Frank Act, Basel III, Bribery Act, Governance,
Risk & Compliance (GRC), Anti-Money Laundering and similar topics. These accredited-certified
26

28. 27
professional training courses, lead to a recognized qualification and membership of The Institute of
Management Specialists (IMS).
These professional training courses are a MUST, and will help you to avoid multi-million dollar penalties,
avoid prison and losing your job and livelihood.
Professor Dr Abrahami is the Principal of Abrahami Compliance Associates and Dean of Cambridge
Institute of Technology and University of Kilmurry.
He may be contacted on: abebluewater@gmail.com
www.AbrahamiCompliance.org
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