Thursday, March 30, 2006
Make the rules work for you
It is almost 20 years since the Big Bang liberated the finance sector by sweeping away what were then considered outdated regulations. Since then, regulation - both at national and at international levels - has slowly crept back and threatens to create a mountain of bureaucracy.
A succession of scandals across the world from the Barings bank debacle to Enron and Worldcom have caused the regulatory pendulum to swing towards tighter rules. The growing list of rules includes the US Sarbanes-Oxley Act, the Basel II risk management rules for financial institutions and the Market in Financial Instruments Directive (MiFID).
The theory is that rules and regulations make for order and stability. But they are also a burden on business and add significantly to costs. Organisations are, therefore, looking for ways to mitigate the cost of compliance and squeeze out some real business benefits from what is a mandatory investment.
A recent survey of 261 US financial executives on the impact of Sarbanes-Oxley, conducted by financial software specialist Oversight Systems, suggests that companies are able to derive benefits from compliance. Improvements in the accuracy of financial reports were cited in 47 per cent of responses. Other perceived benefits included a reduction in errors in financial operations (48 per cent) and empowerment of the board's audit committee through better information.
posted by Brian Moran @ 8:54 AM