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Management Control Systems at Reliance Industries Limited
Submitted by Jayant Kumar Agarawal Kapil Gupte Pranav Bhide Rohit Marwal Nikunj Doshi
IBS HYDERABAD BATCH OF 2011
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to be fully integrated along the materials and energy value chain. Also. Major Group Companies are Reliance Industries Limited (including main subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure Limited IBS Hyderabad Page 2 of 15 . The flagship company. petrochemicals. Ambani (1932-2002). Reliance Industries Limited. in to infrastructure and transportation sectors. is a Fortune Global 500 company and is the largest private sector company in India. with businesses in the energy and materials value chain. retail of petro / consumer products and mfg. Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. of petrochemical / refining and textile products. Group's annual revenues are in excess of US$ 44 billion. fibre intermediates. he Reliance Group. plastics. Reliance enjoys global leadership in its businesses. Starting with textiles in the late seventies. RIL group is a highly diversified group and is in to multiproduct business like oil / gas exploration. plastics and chemicals). petroleum refining and marketing.The Group's activities span exploration and production of oil and gas. retail and special economic zones. is India's largest private sector enterprise.in polyester. Reliance pursued a strategy of backward vertical integration . fibre intermediates. founded by Dhirubhai H. 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. textiles. petroleum refining and oil and gas exploration and production . petrochemicals (polyester.Management Control Systems at Reliance Industries Limited 1 Company Profile Reliance Industries Limited (RIL) is world’s leading and India’s no: 1 Private Ltd. Company.
Pharmaceuticals.Currently.Management Control Systems at Reliance Industries Limited 2 Organizational Structure of Reliance RelianceIndustries Limited Reliance Petroleum Limited Reliance Logistics Reliance Life Sciences Reliance Retail Limited Reliance Industrial Infrastructure Limited (RIIL) 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. life sciences organization that participates in medical. Reliance Logistics (P) Limited is a single window solutions provider for transportation. Novel Therapeutics. logistics. supported by in house state of art telematics and telemetry solutions. Biofuels. 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. biotechnology-led. Clinical Research Services. plant and industrial biotechnology opportunities. warehousing. RPL stands amalgamated with RIL. and supply chain needs. IBS Hyderabad Page 3 of 15 . Regenerative Medicine. Specifically. Reliance Life Sciences is a research-driven. Molecular Medicine. these relate to Biopharmaceuticals. distribution. Plant Biotechnology and Industrial Biotechnology.
Figure 2 Reliance Board Structure Figure 3 Reliance Reporting Hierarchy IBS Hyderabad Page 4 of 15 . hence RIL is strictly following suggestions given by Kumar mangalam Birla committee regarding corporate governance.Management Control Systems at Reliance Industries Limited Reliance Clinical Research Services (RCRS). As far as Board structure of RIL is concerned there are 8 Non executive directors and four executive directors. a contract research organization (CRO) and wholly owned subsidiary of Reliance Life Sciences. biotechnology and medical device companies. has been set up to provide clinical research services to pharmaceutical.
Only when you dream it do you get it. Fairness. Dhirubhai Ambani who said. 3 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. current Chairman and Managing Director of RIL. Responsibility.1 Functional structure Employees within the functional divisions of an organization tend to perform a specialized set of tasks. I keep revising my vision. a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. "Growth has no limit at Reliance. As a whole. making the organization slow and inflexible. Citizenship and Caring. But not only beneficial for organization but also for employees faiths. This leads to operational efficiencies within that group. Coordination and specialization of tasks are centralized in a functional structure. Integrity. The same vision has been taken up and forwarded by his son Mr. For instance. Reliance's business success and competitive position reflect the leadership provided by its founder. which makes producing a limited amount of products or services efficient and predictable." The leadership system defined by Ambani is based on value creation towards both its customers and stakeholders. Mr. Respect.Management Control Systems at Reliance Industries Limited 2. Hence Reliance is Having Highest Operational efficiency as compared to competitors. Mukesh Ambani. Moreover. Purposefulness. efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost. Reliance believes that any business conduct can be ethical only when it rests on the nine core values of Honesty. However it could also lead to a lack of communication between the functional groups within an organization. IBS Hyderabad Page 5 of 15 . a small business could start making the components it requires for production of its products instead of procuring it from an external organization. for instance the engineering department would be staffed only with production engineers. Trust.
Management Control Systems at Reliance Industries Limited The existence of the culture in RIL is driven towards achievement of excellence in systems. The company believes that it is the innovation in thinking and execution that has made RIL reach where it is today. productivity improvement and customer satisfaction in the organization. The firm belief of innovation being the differentiator for future and the source of competitive advantage shows the importance that is given to it. Kaizen Activities and customer focus approach led to the improvement in quality. entrepreneurship. technology and people and also toward the fulfillment of their corporate vision i. specifically RIL focuses on high performance work culture which fosters innovation.e. inclusiveness. RIL in its importance to the health and safety also has also initiated Safety. 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. RIL has unique fully integrated structure. This program has also been able to improve the performance of the company on the occupational health and safety front." With the vertical integration of chain from refinery to textiles. RIL in the early 1990s did suffer from low employee participation in improvement activities and low customer satisfaction. Among all RIL basically focuses on innovation and has a innovative council for promoting the same. "To become a globally competitive enterprise. driven by the market. teamwork and continuous improvements. creating and maintaining a lead over competition through quality products and establishing itself to be the preferred supplier of its customers. processes. RIL realizing the importance of human and intellectual capital for business success. When we talk about the organization culture. 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. Basically it is a process centric organization that maximized synergies across all interfaces. IBS Hyderabad Page 6 of 15 . has given more importance to the use of its human potential and the creation of Learning organization to help in continued success in future. safety and environment project on a priority basis. The introduction of various quality improvement tools in the facilities like the Total Quality Management( TQM). 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.
but a more of a democratic style of leadership is seen. Management in simple words are characteristic ways of making decisions and relating to subordinates. Every unit which is a part of RIL has its own hierarchy. meaningful rural development and urban renewal. The existence of code for board of directors and board committees. health. customers and investors. specifically quality. shareholders. But they have given much more independence to the individual units at different level to take decisions at their level. the nature of the business. The supreme authority of the company is Board of Directors. code of business conduct and ethics for director/management personnel signifies the existence of the culture driving the whole organization towards effective corporate governance. The Reliance Foundation would address social development imperatives of India. large-scale development of employable skills. 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. RIL has a long and strong tradition of supporting the larger communities that it connects with from education. drinking water. They aim to provide timely and balanced disclosure of all material information concerned towards stakeholders. 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. Moreover they aim to have a sound system of risk management and internal control. formal and vocational education. Different management styles and employed by different organizations depending on the prevailing culture. affordable high-quality health care. the nature of the task and the personality and skills of the leaders. They have multiple manufacturing facilities at multiple locations where by dealing in different product ranges. and protection and promotion of India's priceless heritage of arts and culture. Since they promote innovation and value their IBS Hyderabad Page 7 of 15 . to assistance during natural calamities such as earthquakes and cyclones. RIL is an organization which is operation in multiple facets.Management Control Systems at Reliance Industries Limited 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. headed by the CEO or the President.
which is empowered to examine the adequacy and compliance with policies. plans and statutory requirements. 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. However the level of decisions and intensity of problems are defined whereby decisions can be taken at particular level of management. facilitate accurate and timely compilation of financial statements and IBS Hyderabad Page 8 of 15 . The Company has an exhaustive budgetary control system to monitor all expenditures against approved budgets on an ongoing basis.1 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. This policy is strictly adhered to all RIL manufacturing facilities. the reliability of financial controls. The Company has an internal audit function.2 Internal Checks and Balances.Management Control Systems at Reliance Industries Limited human capital they promote participative environment at different levels of management to be able to make a better and informed decision. 4. RIL has well established policy towards maintaining the highest standards of health. It is also responsible for assessing and improving the effectiveness of risk management. At the heart of our processes is the wide use of technology that ensures robustness and integrity of financial reporting. The management duly considers and takes appropriate action on the recommendations made by the statutory auditors. control and governance process. 4 Management Control Systems 4. and compliance with laws and regulations. Reliance deploys a robust system of internal controls to allow optimal use and protection of assets. safety and environmental norms while maintaining operational integrity. Empowering the employees in RIL is relevant. internal auditors and the independent Audit Committee of the Board of Directors. The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations. There are binding directives for internal reconciliations and other accounting operations.
if it considers necessary The role of the Audit Committee includes: 1. 3.3 Audit committee Powers of the Audit Committee: 1. IBS Hyderabad Page 9 of 15 . Reviewing with the management. To obtain outside legal or other professional advice.Management Control Systems at Reliance Industries Limited management reports and ensure compliance with statutory laws. in accounting policies and practices and reasons for the same. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct. 2. 2. 1956. Changes. To secure attendance of outsiders with relevant expertise. To seek information from any employee. To investigate any activity within its terms of reference. Approval of payment to Statutory Auditors for any other services rendered by the Statutory Auditors. Recommending to the Board. the appointment. 4. with particular reference to: Matters required to be included in the Directors’ Responsibility Statement to be included in the Directors’ Report in terms of sub. 4. sufficient and credible. reappointment and. the annual financial statements before submission to the Board for approval. if required. 3. regulations and company policies. 4.section (2AA) of Section 217 of the Companies Act. the replacement or removal of Statutory Auditors and fixation of audit fees. if any.
adequacy of internal control systems. about the nature and scope of audit as well as post audit discussion to ascertain any area of concern. 7. Discussion with Internal Auditors any significant findings and follow up thereon. 10. reporting structure. Disclosure of related party transactions. 6. shareholders (in case of nonpayment of declared dividends) and creditors. including the structure of the internal audit department. coverage and frequency of internal audit. staffing and seniority of the official heading the department. 8.Management Control Systems at Reliance Industries Limited Major accounting entries involving estimates based on the exercise of judgement by the management. debentureholders. Reviewing with the management. To look into the reasons for substantial defaults. Reviewing with the management. the quarterly financial statements before submission to the Board for approval. the performance of Statutory and Internal Auditors. Significant adjustments made in the financial statements arising out of audit findings. IBS Hyderabad Page 10 of 15 . Reviewing the adequacy of internal audit function. Discussion with Statutory Auditors before the audit commences. 9. Compliance with listing and other legal requirements relating to financial statements. 11. in the payment to the depositors. 5. Reviewing the findings of any internal investigations by the Internal Auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. if any. if any. Qualifications in draft audit report.
and The appointment. 14. Carrying out such other functions as may be specifically referred to the Committee by the Board of Directors and / or other Committees of Directors of the Company. there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchases of inventory and fixed assets and for the sale of goods and services. 13.) Recommendation In our opinion and according to the information and explanations given to us. During the course of our audit. 15. To review the functioning of the Whistle Blower Mechanism. Internal audit reports relating to internal control weaknesses. submitted by management. we have not observed any continuing failure to correct major weaknesses in internal control system. Management letters / letters of internal control weaknesses issued by the Statutory Auditors. Reviewing the financial statements and in particular the investments made by the unlisted subsidiaries of Company. Statement of significant related party transactions (as defined by the Audit Committee).Management Control Systems at Reliance Industries Limited 12. To review the following information : The management discussion and analysis of financial condition and results of operations. IBS Hyderabad Page 11 of 15 . 16. Review of uses / application of funds raised through an issue (public issue. rights issue. removal and terms of remuneration of Internal Auditors. preferential issue. etc.
stands at 23. To enable consistent growth. and a wide variety of company-paid perks.365 with the average employee age of 41 years. and gift certificates. opportunities for training. The Company continues to nurture this as it grows exponentially Breakup of professional workforce Ph. as on March 31. Reliance believes “Growth is Life” – for Reliance and for all Reliance people. A large in-house pool of intellectual capital is the driving force behind Reliance’s accelerated growth.83% CA/ ICWAs. Reliance puts a great deal of effort behind creating a workplace where every Reliance employee can reach their full potential and achieve maximum personal fulfillment.D.2% MBAs.45 years -34% 46 . paid parking. 2010.Management Control Systems at Reliance Industries Limited 5 Rewards and Recognition Many types of rewards and recognition have been given by Reliance to its employees.6% Age Profile Upto 25 years. These "non-monetary" rewards include formal and informal acknowledgement. but still very effective. such as cash bonuses and stock awards.5% 26 . The aim is to lower the average employee age and invigorate the youth to take the organization forward over the next few decades as indeed the current leaders have done over the last 30 years by starting early in their 20s and 30s.55 years -15% 56 + years -2% Page 12 of 15 IBS Hyderabad . Other types of rewards and recognition may be less tangible. assignment of more enjoyable job duties. and an increased role in decision-making. RIL's talent base.35 years -44% 36 . and is one of its fundamental competitive strengths. The entrepreneurial spirit has been a hallmark of the organization. like car allowances.9% Engineers.
and encouraging individuals to go beyond their scope of work. and contribute innovative ideas in meeting the targets of the company. undertake voluntary projects that enable them to learn.Management Control Systems at Reliance Industries Limited Reliance offers world of opportunities to employees by giving them more freedom and responsibility to chart their own course within the company. The objective of this centre. Networking. IBS Hyderabad Page 13 of 15 .403 man hours of Learning & Development activities at manufacturing divisions.092. The company offers comprehensive world-class training and development resources. E-learning as a medium is much sought after by the employees for upgrading skills and competencies since people can learn when needed at their own convenience and from where they may be. RIL continues to invest in people through various Learning & Development initiatives. The company has moved to a Key Result Area oriented performance appraisal system and will soon move to performance linked incentive scheme. Reliance’s appraisal and reward system is aimed at increasing employee involvement in the goals and objectives of the organization. is to provide a world class experience to the employees on all the matters that they have to deal with on a day-to-day basis including all transactions. create and execute seamlessly. team performance and their individual performance. coaching and mentoring provide additional opportunities for people to grow personally and professionally throughout their careers. The Company has continued to invest in this area through newer and state-of-the-art modules both in the Technical and Management domains. the Company has put into place a central shared services organization for HR. RIL has continued to look at. which has seen 3. Towards this end. identify. apart from leveraging on the economies of scale. wherein the employees will share the risk and the rewards of company’s performance. business performance. wherein Global Best Practices for HR Shared Services are integrated. initiatives which enhance productivity and efficiency. As an ongoing exercise.
newspapers etc In order to provide better communication and coordination Reliance organizes different meetings for the following: Shareholders – Annual General Meetings (AGMs) Shareholders’ grievance meetings One-to-one meeting Open forum Customers Market Research External Customer Satisfaction Survey IBS Hyderabad Page 14 of 15 . trade unions. It executes its role in corporate governance through regular reviews of Reliance’s financial performance and critical business issues. Specific management communication within the organization is necessary for coordination Reliance focuses on building life-long relationships with its stakeholders and believes it is important to understand their concerns and perception. Acting upon the feedback. employees. These results are also published in various magazines. which involved shareholders. For this it has initiated a sharper and more focused dialogue with key stakeholders. suppliers. The Board of Directors determines strategic business imperatives and mentors the achievement of reliance corporate goals. The quarterly and yearly financial results are sent to the Stock Exchanges immediately after the Board approves the same. NGOs and contractors.Management Control Systems at Reliance Industries Limited 6 Communication and coordination Coordination and communication is central to the very existence of organizations. local community. customers. it has restructured the processes to address their concerns better and design programmes that would enhance their quality of life. regulatory authorities.
'Employees Suggestion Scheme' Awards for 'best Case studies' for Internal Learning.'QUEST'. 'Peer Group Sharing' HSE Committees 'Toolbox Talks' Self Development Modules ILNA (Individual Learning Needs Assessment) Career progression / job rotation / role diversification Business Dialogue.Management Control Systems at Reliance Industries Limited Employees Feedback mechanism.'shop floor communication meet' In-house newsletters Suppliers Separate Contractors' Cell Monthly Contractors' Safety Meetings Regulatory Authorities Maintaining and updating all records Support to local authorities in times of crisis Supporting neighboring industries through local associations IBS Hyderabad Page 15 of 15 .