A World Bank financial report on... piracy

21/03/2015 AWorldBankfinancialreporton…piracyManagementAccounting data:text/html;charset=utf8,%3Cdiv%20class%3D%22postinfo%22%20style%3D%22paddingbottom%3A%205px%3B%20fontsize%3A%2012px%3B%… 1/1 AWorldBankfinancialreporton…piracy ByJoãoonNovember11,2013at9:00am PostedIn:Uncategorized Buyourbookhere. You’vereadinourtextbookthatmanagementaccountingisusefulfor organizationsofallsorts.Well,thankstotheWorldBank,wenowhave anamazing(albeitdisturbing)viewoverthe“businessmodel”ofpirates whichhijackshipsofftheHornofAfrica(seealsoanarticleof theEconomist). TheWorldBankanalysestheillicitfinancialflowsthroughthemany participantsinthiscriminalactivity.Theestimatesarenotenoughto createamanagementaccountingreportdetailingtherevenues(the ransom)andcoststructureofthis“business”,buttheydoprovidesome insights. Forexample,piratefinancierscollectfrom30to50%oftotalransom. “TheLowLevelPirates,‘TheFootSoldiers’,typicallyreceiveastandard feeofUS$30,000to75,000pership,whichonlyamountsto0.01%– 0.025%ofanaverageransompayment”.Then,thelocalcommunity providesanumberofgoodsandservicestothepirates.Thefullreportincludesmoredetailed figures. Ofcourse,weallwishedthatsuchapplicationofmanagementaccountingtechniqueswasnever made,ifthatmeantthattheunderlyingactivitydidnotexist.Butsinceitdoes,wemaywellstudyit fromanacademicperspectivetohighlighttheimportanceofafinancialviewofanybusiness–even piracy.Moreimportantly,andonapracticalside,ifauthoritiesareabletodisruptthefinancialflows and/ortheprofitabilityofthisactivity,thentheunderlyingmotivationwilldwindleandthecriminal activitywillbereduced.Asketchofthefinancialsiscertainlyanimportanttoolinthefightagainstthis appallingprobleminthe21stcentury.