Financial Analysis/Management Consulting Case Study

The client.

A private energy/manufacturing conglomerate.

The business issue.

This organization regularly acquires businesses that encompass risks associated with long-tailed liabilities such as asbestos and other toxic torts.

Given this type of potential exposure, the company sought an informed, third-party perspective on likely and potential liabilities associated with these legacy operations and the potential value of pre-negotiated insurance claims or agreements that targeted parties have been using to “offset' against accounting reserves.

The solution.

The Claro Group has conducted fact-finding and probabilistic analyses of potential liabilities and offsetting assets under varying assumptions and scenarios.

We typically conduct these analyses by developing and evaluating decision trees using Monte Carlo analytic techniques. This analysis enables us to produce a range of probabilistic outcomes from which we can draw inferences regarding ultimate liabilities. We then work with the company to interpret likely scenarios.

The results.

This approach enabled the company to:

• Understand the data it has and identify any gaps. This allows for better management of liabilities.
• Understand the full potential risk of liability versus looking at a single accounting number based on a more deterministic analysis.