46376681-MCS-Project

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

1 Company Profile

Reliance Industries Limited (RIL) is world’s leading and India’s no: 1 Private Ltd. Company.

RIL group is a highly diversified group and is in to multiproduct business like oil / gas

IBS Hyderabad Page 1 of 15


exploration, retail of petro / consumer products and mfg. of petrochemical / refining and textile

products. Also, in to infrastructure and transportation sectors. he Reliance Group, founded by

Dhirubhai H. Ambani (1932-2002), is India's largest private sector enterprise, with businesses in

the energy and materials value chain. Group's annual revenues are in excess of US$ 44 billion.

The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the

largest private sector company in India.

Backward vertical integration has been the cornerstone of the evolution and growth of Reliance.

Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical

integration - in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil

and gas exploration and production - to be fully integrated along the materials and energy value

chain.The Group's activities span exploration and production of oil and gas, petroleum refining

and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles,

retail and special economic zones. Reliance enjoys global leadership in its businesses, 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. Major Group Companies are Reliance Industries

Limited (including main subsidiary Reliance Retail Limited) and Reliance Industrial

Infrastructure Limited


http://www.riil.in/

http://www.riil.in/

http://www.ril.com/


2 Organizational Structure of Reliance

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.Currently, RPL stands amalgamated with RIL.[7]

Reliance Life Sciences is a research-driven, biotechnology-led, life sciences organization that

participates in medical, plant and industrial biotechnology opportunities. Specifically, these

relate to Biopharmaceuticals, Pharmaceuticals, Clinical Research Services, Regenerative

Medicine, Molecular Medicine, Novel Therapeutics, Biofuels, Plant Biotechnology and

Industrial Biotechnology.[8]

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.[9]

Reliance Logistics (P) Limited is a single window solutions provider for transportation,

distribution, warehousing, logistics, and supply chain needs, supported by in house state of

art telematics and telemetry solutions.[11]


RelianceIndustries Limited

Reliance Petroleum

Limited

Reliance Industrial

Infrastructure Limited (RIIL)

Reliance Logistics

Reliance Life

Sciences

Reliance Retail

Limited


Reliance Clinical Research Services (RCRS), a contract research organization (CRO) and

wholly owned subsidiary of Reliance Life Sciences, has been set up to provide clinical

research services to pharmaceutical, biotechnology and medical device companies.[12]

As far as Board structure of RIL is concerned there are 8 Non executive directors and four executive directors, hence RIL is strictly following suggestions given by Kumar mangalam Birla committee regarding corporate governance.

Figure 2 Reliance Board Structure

Figure 3 Reliance Reporting Hierarchy



2.1 Functional structure

Employees within the functional divisions of an organization tend to perform a specialized set of

tasks, for instance the engineering department would be staffed only with production engineers.

This leads to operational efficiencies within that group. However it could also lead to a lack of

communication between the functional groups within an organization, making the organization

slow and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods and

services at large volume and low cost. Coordination and specialization of tasks are centralized in

a functional structure, which makes producing a limited amount of products or services efficient

and predictable. Moreover, efficiencies can further be realized as functional organizations

integrate their activities vertically so that products are sold and distributed quickly and at low

cost. For instance, a small business could start making the components it requires for production

of its products instead of procuring it from an external organization. But not only beneficial for

organization but also for employees faiths. Hence Reliance is Having Highest Operational

efficiency as compared to competitors.

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. Reliance's business success

and competitive position reflect the leadership provided by its founder, Mr. Dhirubhai Ambani

who said, "Growth has no limit at Reliance. I keep revising my vision. Only when you dream it

do you get it." The leadership system defined by Ambani is based on value creation towards both

its customers and stakeholders. The same vision has been taken up and forwarded by his son Mr.

Mukesh Ambani, current Chairman and Managing Director of RIL. Reliance believes that any

business conduct can be ethical only when it rests on the nine core values of Honesty, Integrity,

Respect, Fairness, Purposefulness, Trust, Responsibility, Citizenship and Caring.



The existence of the culture in RIL is driven towards achievement of excellence in systems,

processes, technology and people and also toward the fulfillment of their corporate vision i.e.

"To become a globally competitive enterprise, driven by the market, creating and maintaining a

lead over competition through quality products and establishing itself to be the preferred supplier

of its customers." With the vertical integration of chain from refinery to textiles, RIL has unique

fully integrated structure. Basically it is a process centric organization that maximized synergies

across all interfaces, 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.

When we talk about the organization culture, specifically RIL focuses on high performance work

culture which fosters innovation, entrepreneurship, inclusiveness, teamwork and continuous

improvements. Among all RIL basically focuses on innovation and has a innovative council for

promoting the same. The company believes that it is the innovation in thinking and execution

that has made RIL reach where it is today. The firm belief of innovation being the differentiator

for future and the source of competitive advantage shows the importance that is given to it. RIL

in the early 1990s did suffer from low employee participation in improvement activities and low

customer satisfaction. The introduction of various quality improvement tools in the facilities like

the Total Quality Management( TQM), Kaizen Activities and customer focus approach led to the

improvement in quality, productivity improvement and customer satisfaction in the organization.

RIL realizing the importance of human and intellectual capital for business success, has given

more importance to the use of its human potential and the creation of Learning organization to

help in continued success in future.

RIL in its importance to the health and safety also has also initiated Safety, 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, safety and environment project on a priority basis. This program has also

been able to improve the performance of the company on the occupational health and safety

front. 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.



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. 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, shareholders, customers and investors. They aim to provide timely and balanced

disclosure of all material information concerned towards stakeholders. Moreover they aim to

have a sound system of risk management and internal control. The existence of code for board of

directors and board committees, code of business conduct and ethics for director/management

personnel signifies the existence of the culture driving the whole organization towards effective

corporate governance.

RIL has a long and strong tradition of supporting the larger communities that it connects with -

from education, health, drinking water, large-scale development of employable skills, to

assistance during natural calamities such as earthquakes and cyclones. The Reliance Foundation

would address social development imperatives of India, specifically quality, formal and

vocational education, affordable high-quality health care, meaningful rural development and

urban renewal, and protection and promotion of India's priceless heritage of arts and culture.

Management in simple words are characteristic ways of making decisions and relating to

subordinates. Different management styles and employed by different organizations depending

on the prevailing culture, the nature of the business, the nature of the task and the personality and

skills of the leaders.

RIL is an organization which is operation in multiple facets. They have multiple manufacturing

facilities at multiple locations where by dealing in different product ranges. The supreme

authority of the company is Board of Directors. But they have given much more independence to

the individual units at different level to take decisions at their level. 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.

Every unit which is a part of RIL has its own hierarchy, headed by the CEO or the President, but

a more of a democratic style of leadership is seen. Since they promote innovation and value their



human capital they promote participative environment at different levels of management to be

able to make a better and informed decision. Empowering the employees in RIL is relevant.

However the level of decisions and intensity of problems are defined whereby decisions can be

taken at particular level of management.

4 Management Control Systems

4.1 Internal ControlsRIL 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. The

Company has an exhaustive budgetary control system to monitor all expenditures against

approved budgets on an ongoing basis.

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. There are

binding directives for internal reconciliations and other accounting operations. The Company

maintains a system of internal controls designed to provide a high degree of assurance regarding

the effectiveness and efficiency of operations, the reliability of financial controls, and

compliance with laws and regulations. RIL has well established policy towards maintaining the

highest standards of health, safety and environmental norms while maintaining operational

integrity. This policy is strictly adhered to all RIL manufacturing facilities.

The Company has an internal audit function, which is empowered to examine the adequacy and

compliance with policies, plans and statutory requirements. It is also responsible for assessing

and improving the effectiveness of risk management, control and governance process.

The management duly considers and takes appropriate action on the recommendations made by

the statutory auditors, internal auditors and the independent Audit Committee of the Board of

Directors.

4.2 Internal Checks and Balances. At the heart of our processes is the wide use of technology that ensures robustness and integrity

of financial reporting. Reliance deploys a robust system of internal controls to allow optimal use

and protection of assets, facilitate accurate and timely compilation of financial statements and



management reports and ensure compliance with statutory laws, regulations and company

policies.

4.3 Audit committee

Powers of the Audit Committee:

1. To investigate any activity within its terms of reference.

2. To seek information from any employee.

3. To obtain outside legal or other professional advice.

4. To secure attendance of outsiders with relevant expertise, if it considers necessary

The role of the Audit Committee includes:

1. Oversight of the Company’s financial reporting process and the disclosure of its financial

information to ensure that the financial statements are correct, sufficient and credible.

2. Recommending to the Board, the appointment, reappointment and, if required, the

replacement or removal of Statutory Auditors and fixation of audit fees.

3. Approval of payment to Statutory Auditors for any other services rendered by the

Statutory Auditors.

4. Reviewing with the management, the annual financial statements before submission to

the Board for approval, 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- section (2AA) of Section 217 of

the Companies Act, 1956.

Changes, if any, in accounting policies and practices and reasons for the same.



Major accounting entries involving estimates based on the exercise of judgement

by the management.

Significant adjustments made in the financial statements arising out of audit

findings.

Compliance with listing and other legal requirements relating to financial

statements.

Disclosure of related party transactions.

Qualifications in draft audit report.

5. Reviewing with the management, the quarterly financial statements before submission to

the Board for approval.

6. Reviewing with the management, the performance of Statutory and Internal Auditors,

adequacy of internal control systems.

7. Reviewing the adequacy of internal audit function, if any, including the structure of the

internal audit department, staffing and seniority of the official heading the department,

reporting structure, coverage and frequency of internal audit.

8. Discussion with Internal Auditors any significant findings and follow up thereon.

9. 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.

10. Discussion with Statutory Auditors before the audit commences, about the nature and

scope of audit as well as post audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial defaults, if any, in the payment to the depositors,

debentureholders, shareholders (in case of nonpayment of declared dividends) and

creditors.



12. To review the functioning of the Whistle Blower Mechanism.

13. 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.

14. To review the following information :

The management discussion and analysis of financial condition and results of

operations;

Statement of significant related party transactions (as defined by the Audit

Committee), submitted by management;

Management letters / letters of internal control weaknesses issued by the Statutory

Auditors;

Internal audit reports relating to internal control weaknesses; and

The appointment, removal and terms of remuneration of Internal Auditors.

15. Reviewing the financial statements and in particular the investments made by the unlisted

subsidiaries of Company.

16. Review of uses / application of funds raised through an issue (public issue, rights issue,

preferential issue, etc.)

Recommendation

In our opinion and according to the information and explanations given to us, 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.

During the course of our audit, we have not observed any continuing failure to correct major

weaknesses in internal control system.



5 Rewards and RecognitionMany types of rewards and recognition have been given by Reliance to its employees, such as

cash bonuses and stock awards, and a wide variety of company-paid perks, like car allowances,

paid parking, and gift certificates. Other types of rewards and recognition may be less tangible,

but still very effective. These "non-monetary" rewards include formal and informal

acknowledgement, assignment of more enjoyable job duties, opportunities for training, and an

increased role in decision-making.

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, and is one

of its fundamental competitive strengths. To enable consistent growth, 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.

RIL's talent base, as on March 31, 2010, stands at 23,365 with the average employee age of 41

years. 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. The entrepreneurial spirit has been a hallmark

of the organization. The Company continues to nurture this as it grows exponentially

Breakup of professional workforce

Ph.D- 2%

MBAs- 9%

Engineers- 83%

CA/ ICWAs- 6%

Age Profile

Upto 25 years- 5%

26 - 35 years -44%

36 - 45 years -34%

46 - 55 years -15%

56 + years -2%



Reliance offers world of opportunities to employees by giving them more freedom and

responsibility to chart their own course within the company. The company offers comprehensive

world-class training and development resources. Networking, coaching and mentoring provide

additional opportunities for people to grow personally and professionally throughout their

careers.

Reliance’s appraisal and reward system is aimed at increasing employee involvement in the

goals and objectives of the organization, and encouraging individuals to go beyond their scope of

work, undertake voluntary projects that enable them to learn, and contribute innovative ideas in

meeting the targets of the company.

The company has moved to a Key Result Area oriented performance appraisal system and will

soon move to performance linked incentive scheme, wherein the employees will share the risk

and the rewards of company’s performance, business performance, team performance and their

individual performance.

As an ongoing exercise, RIL has continued to look at, identify, create and execute seamlessly,

initiatives which enhance productivity and efficiency. Towards this end, the Company has put

into place a central shared services organization for HR, wherein Global Best Practices for HR

Shared Services are integrated. The objective of this centre, apart from leveraging on the

economies of scale, 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.

RIL continues to invest in people through various Learning & Development initiatives, which

has seen 3,092,403 man hours of Learning & Development activities at manufacturing divisions.

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. The Company has continued to invest in this area through newer and state-of-the-art

modules both in the Technical and Management domains.



6 Communication and coordination Coordination and communication is central to the very existence of organizations. 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. For this it has initiated a sharper and more

focused dialogue with key stakeholders, which involved shareholders, customers, suppliers,

employees, regulatory authorities, local community, trade unions, NGOs and contractors. Acting

upon the feedback, it has restructured the processes to address their concerns better and design

programmes that would enhance their quality of life.

The Board of Directors determines strategic business imperatives and mentors the achievement

of reliance corporate goals. It executes its role in corporate governance through regular reviews

of Reliance’s financial performance and critical business issues. The quarterly and yearly

financial results are sent to the Stock Exchanges immediately after the Board approves the same.

These results are also published in various magazines, 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



Employees

Feedback mechanism- '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- '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


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