KPMG laps up McLaren's F1-style analytics

McLaren Group has signed an alliance with KPMG to apply the same predictive analytics and technology it does to its Formula One team to KPMG's audit and consulting clients.

McLaren has signed a 10-year deal with the Big Four professional services company, which is the second-largest auditor to FTSE 100 companies including SABMiller, Diageo and Standard Chartered.

Through the alliance, KPMG will be able to introduce an audit model that is forward looking and predictive, based on multiple sets of data. It will move away from the current auditing model which has drawn criticism for being largely retrospective and subjective.

KPMG will also sponsor McLaren's F1 team as part of the deal.

Simon Collins, UK chairman and senior partner at KPMG, said: "The ability to have multi-dimensional changes in predictive modelling is extraordinary. It will eliminate a huge amount of the noise that makes judgment for auditors so difficult around areas such as going concern and goodwill."

At the Abu Dhabi Grand Prix this weekend, McLaren will generate gigabits of data from its cars, which are then sent back to a control room at its headquarters in Woking, in Surrey, where the data are analysed and used to direct the drivers.

Just as McLaren's F1 data analytics runs scenarios around weather, pit stops and wheel changes, in applying the technology to KPMG's auditing clients it will be able to run live scenarios around how changes in a company's cash flow, interest rates or marketing spend will affect its revenue.

Specific scenarios might include how China's crackdown on corporate entertaining and gift-giving is likely to hit the sales of luxury companies, or how a spot of sunny weather could impact a beer producer. This information could then feed through to a company's supply chain.

The idea is to make the audit predictive rather than reactive, so that companies can anticipate issues before they become an impairment.

Auditors have been criticised as a profession around judgment areas such as loans, brands/goodwill, receivables and income from suppliers.

Supplier income is at the centre of a Serious Fraud Office investigation into Tesco, which is audited by PwC, after the retailer said in September it had overstated its profits by £250m.

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For McLaren, KPMG will bring scale and distribution for its technology and access to its clients. The alliance is the latest step for McLaren in seeking to position itself as a technology company with an F1 team, rather than an F1 team that develops technology.

Ron Dennis, chairman and chief executive of McLaren Group, said: "I want McLaren to be perceived as a tech brand that has a tech demonstrator called a Grand Prix team."

In 2013 McLaren recorded an £18.8m profit before tax, up from a loss of £2.5m in the previous year, according to documents filed at Companies House.

The company, which was founded in 1963 as a motor racing company, pioneered simulation and data analysis within motor racing. In the past decade it has expanded into high performance sports cars and retail, and through its technology business partnered with aviation, pharmaceutical and oil and gas companies.

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