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NFR-0105 Evidence-controlled risk scenario

Carillion plc

When reported strength diverged from contract and cash reality

Within ten months of publishing its 2016 accounts, Carillion entered liquidation with nearly £7 billion of liabilities and £29 million cash.

Data & Control Integrity Conduct & Governance Risk Independent challenge

Documented impact

Bankruptcy or insolvency Compulsory liquidation with nearly £7 billion liabilities and £29 million cash
£1bn Contract provision increased to £1.045 billion

Authoritative findings

The documented event

Carillion published its 2016 accounts on 1 March 2017. On 10 July it announced an £845 million provision against contract values, increased to £1.045 billion in September—equivalent to the company's previous seven years' profits combined. Carillion entered compulsory liquidation in January 2018 with nearly £7 billion of liabilities and £29 million cash. The FRC later found serious failures in KPMG's audits, including insufficient evidence and inadequate challenge of management judgements.

Hypothetical institutional scenario

How might the same control pattern appear?

Contract judgements, cash conversion and reported performance diverge, while governance and external assurance do not force timely recognition of the accumulating position.

Stress-test questions

Questions for challenge and assurance

  1. Risk committee

    Can contract judgements be reconciled to cash and delivery evidence?

  2. Operations

    Are exceptions aggregated across the portfolio for board challenge?

  3. Audit

    Does assurance test management estimates with sufficient independent evidence?

NFRisk practitioner interpretation

Control implication

NFRisk view: contract accounting and cash evidence should be reconciled through independent challenge, with exceptions aggregated at portfolio and board level rather than reviewed one contract at a time.

Evidence register

Primary and supporting sources

  1. Board of Governors of the Federal Reserve System

    Review of the Federal Reserve's Supervision and Regulation of Silicon Valley Bank (PDF) (opens in a new tab) 28 April 2023 · Authoritative primary source

  2. UK House of Commons Work and Pensions and BEIS Committees

    Carillion: Second Joint Report of Session 2017-19 (opens in a new tab) 16 May 2018 · Authoritative primary source

Publication note

A documented external event—not an NFRisk client engagement.

The named organisations are included because authoritative sources document the event. Their inclusion does not imply that they are or were NFRisk clients, that they endorse this analysis, or that NFRisk participated in the event or response. Framework relevance and NFRisk practitioner interpretation are analytical layers applied after the event.

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