Page 3 - MCOM MODEL ANSWER 2

P a g e | 3

A. Executive summary

1. Introduction

This report is an update on the initial report we presented to the MCOM Board in March 2016 in
which we reviewed the opportunities, threats, weaknesses and ethical dilemmas facing the
group and provided our advice. We have now appraised the strategic developments including

ethical issues affecting the group since then: and today, we would like to report back on our
findings and recommendations.

2. Prioritisation & key recommendations

The updated SWOT Analysis is attached (Appendix 1) and remains the basis on which we have

prioritised the main issues before you, mostly based on their impact on the business.

1st Priority: Group Legal and Negotiation Strategy
The Nakolia fine situation remains the most dire threat to our business and as a result, there is

an urgent need (a Lankot judge has given us till October 18th, 4 days left) to decide on 4
settlement options: (1) pay in full and continue with litigation (2) negotiate and inject cash up
front (3) negotiate and stagger payments but list on the Nakolian Stock Exchange (NSE) and (4)

pull out of Nakolia. We advice the Board to proceed with Option 3 - negotiate and stagger
payments but list on the NSE; only if you we can negotiate the 60% provision to below 50%, to
reduce our vulnerability to expropriation and corporate takeover in that market. Otherwise, we

recommend Option 2, negotiate and inject cash up front. Option 4 is simply a bad idea given
that about 48% of Group value would be lost!

2nd Priority: Appointment of New Group CEO

The Nakolia fine saw in its wake the resignation of key executives -the Group CEO, Group CFO,
CEO of MCOM Nakolia and the Head of Regulatory and Corporate Affairs. The current Group

CEO was rushed in from his Board Chair role as an interim measure. We cannot over-
emphasise the criticality of the stability of tenure of the Group CEO in the delivery of our
mandate. Given the length of time needed to headhunt a candidate with the requisite stature

including the possible notice period, we need to get on with that urgently in order to provide
much-needed certainty to the markets. This issue is Priority 2 because it is discretionary given
that our interim CEO who has previously served in this position has accepted to hold the forte in

the time being, compared to Priority 1 which is largely a threat imposed on us by the Nakolian
Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2016'
www.charterquest.co.za | Email: thecfo@charterquest.co.za