Challenges

In this day and age, compliance is the cornerstone of any effective operating infrastructure. This is true not only for traditional compliance-intensive industries such as financial services, pharmaceuticals and healthcare but also for other less compliance-intensive industries such as manufacturing, business services or retail.

No matter what industry you are in, expect to encounter these challenges in the forthcoming years:

• Increasing number and complexity of new regulations

The list of existing and new regulations is impressive – the Sarbanes-Oxley Act (SOX), the Foreign Corrupt Practices Act (FCPA), the U.S. Patriot Act, Basel II Accord, EU Data Protection Directive/UK Data Protection Act, etc.

New regulations affect not only large and established companies but also smaller companies. For example SOX affects both small publicly held and privately owned companies not just based in the U.S. but all over the world.

While there is not yet a European Union equivalent to SOX, individual EU nations have generated corporate governance regulations that are similar to SOX. Notable among these are:

France’s Loi sur la sécuritié financière (LSF), in force since 2003, which requires companies to document all their main business processes; and
Germany’s Data Access and Digital Signature Authentication Law (GDPdU), which empowers tax officials to instantly access company financial documents.
The cost of non-compliance is exposure to liability issues as well as civil and criminal penalties.

• Managing by spreadsheet

The number one financial analysis and reporting tool in the world is the spreadsheet. This is true not only for SMEs but also for the large listed companies, which have ERP systems installed and fall under the SOX regulations.

However, spreadsheets are rarely under administrative and management control, they are usually poorly managed, and are often a big headache for auditors and regulators. Managing by spreadsheet often leads to costly mistakes and breaches of important compliance regulations.

• Soaring auditing costs

Auditing, whether internal or external, is very expensive on two fronts. First, valuable employees are taken away from their normal jobs and shifted to supporting the audit, which is not the best use of their time and disrupts the normal day-to-day operations.

Second, once the auditors come in, if your controls are not in order or are not readily testable, than the expense to get them in line will be significant. With spreadsheets, for instance, an auditor will charge upwards of €150 per hour to test the accuracy and completeness of the data manually. Such expenses impair companies’ competitiveness and the cost of audits sometimes becomes prohibitive.

• Unsafe data practices

Sensitive and confidential data is routinely put at risk in smaller and large companies alike. Companies pay the cost of this through either suffering a data breach or paying high auditing costs. Usually, confidential data is copied onto unsafe peripherals, because of employees’ desire to work more quickly, effectively and efficiently. Solving this problem is hard, as it is difficult for companies to increase document security without placing a burden on their employees’ productivity.

Balancing security with productivity will be key to solving this problem in the future.

Conclusion

Increasingly, staying in business means staying compliant with new laws and regulations. And to stay compliant, all businesses must adopt basic security, data backup, and records management practices and technologies.

The first place that smart companies will turn to in order to address all these challenges is automation. Automation is the single best way to keep compliance costs in check.

Questions

So, if your answer is ‘Yes’ to any of the following questions, then you probably need to get in touch with us:

• Do you routinely make decisions based on reports and analyses created in Excel or another spreadsheet software, which have been created without proper management control?
• Are your compliance and auditing costs (direct and indirect) going up every year?
• Are you finding it hard to ensure compliance during internal, external, Sarbanes-Oxley, and tax audits without disturbing your company’s normal operations?
• Are you finding it hard to make fast expenditure decisions without worrying about compliance issues?
• Can you respond quickly to customer requests while staying compliant and not compromising profitability?