Compliance Solutions

Managing the Cost of Compliance

SEC has decreed that companies with a market value of less than $75 million now must prove their internal financial controls are reliable and accurate for fiscal years ending on Dec. 15, 2007, or later. The Compliance landscape brings new challenges that now affect not only the large companies, but the smaller ones too. Yet another deadline to reckon with is the implementation date of November 1, 2007, for the Markets in Financial Instruments Directive, or MiFID. Experts regard the MiFID as the most substantial and far-reaching regulatory initiatives. MiFID is expected to significantly impact the market structure with substantial increase in market data and reporting requirements. The compliance strategy of firms is no doubt going to be influenced by this. Smaller companies joining the compliance band wagon have quite a lot to learn from the experience of larger companies. Surveys have shown that the financial burden for SOX compliance have started to ease. "Technology has a lot to do with the cost reduction," said Sanjay Anand, chairperson of the Sarbanes-Oxley Institute. Public companies "are actually automating their controls. A good 20 to 30%, even as much 40%, of the cost reduction is actually coming from automated controls rather than manual controls."

Planning your Compliance Office

A Compliance Office is nothing but the sum total of the various competencies that come together to assure the firm's compliance requirements. It is now well understood and accepted that auditors play but one of the significant roles involved. AMR Research projection for 2006 was that spending on Sarbanes-Oxley compliance will hold steady, but the percentage spent on IT will increase, with overall IT dollars spent on compliance hitting nearly $2 billion. Increased IT spending on compliance is arguably because companies are using technology to reduce the overall cost of compliance by automating processes and reducing the time factored for auditors and consultants who accounted for most of the costs during the early SOX panic. AMR does say that IT spending will reduce headcount, and will ultimately lead to decreased spending on compliance. However, the CFOs of smaller companies are going to be guarded about doling out big bucks to IT in spite of the argument above. The good news for them are alternate strategies such as using Global or offshore capabilities to reduce costs on key components of the Compliance Office including business process analysis, Process mapping and process automation using offshore IT capability. For this strategy to work, CFOs with the active participation of their IT managers or consultants must create a plan to engage specific competencies from offshore locations and reduce the cost of compliance. T&A has already an experienced team that has participated in such an initiative, where they worked with SOX consultants advising a firm in the US, to carry out the business process mapping and documentation activity entirely offshore, resulting in significant cost savings to the firm. An additional advantage T&A boasts of is the services of a very experienced IT team that has served customers in the US and Europe for the past 7 years using an offshore model. If you are interested in exploring this strategy for your compliance office requirements.