Part 1 SOX Sustainability – Management Issues

SOX sustainability is a significant Management Issue.  Management’s commitment to achieving effective, efficient, sustained compliance will spell the difference between success and failure.

Sustainable compliance requires Senior Management commitment to intrinsic as well as extrinsic process integration, cultural and technological growth, and functional integration. The path may include entrenched obstacles, including people, managers, technologies, processes, and biases, that will often present challenges. Effective management of these challenges requires a commitment to hold employees  accountable for compliance.

Once a company has achieved a certain level of performance, it has climbed a mountain of some size.  Climbing an even higher performance mountain often requires some degree of dissimilation and/or de-construction (e.g. descending the mountain) to climb the next.  Optimizing SOX compliance going forward will be no different.  It is all about preparation and execution (process), team (culture), tools (technology), capital, and commitment (management).  Managers who prefer to avoid what many Banks perceive as the “latest” compliance issue or treat Sarbanes as just another mandated compliance project, are effectively sending their teams up the new mountain without a plan.  Managers who assume that their teams can climb a higher mountain without the necessary tools or preparation are naïve or ignoring the reality that internal controls are here to stay.  Management commitment is necessary to nudge or pull reluctant cultures toward the next mountain, and to overcome substantial obstacles in the path. 

Management signals its commitment to efficient compliance by establishing clear, attainable goals for the organization and holding itself principally responsible for achieving them.  This includes holding itself accountable for continuously evaluating progress in the other six issue areas: (Corporate) Culture, Process, Technology, Integration, Testing and Change Management.  Management cannot simplify its responsibilities by focusing too narrowly on only technology or process solutions to an enterprise challenge.  Culture and integration, the two most people-centric issues must be addressed as part of any sustainability equation, and people-based impediments and roadblocks must be dealt with.  Management must provide the leadership to deal with these challenges.  Software doesn’t require leadership and coaching to perform new roles.  It only requires coding and deployment.  It is people that require leadership, and it is people that will take short-cuts, perpetuate fraud, and resist changes in their roles and responsibilities.  Management must repeatedly focus the troops on the combination of the six other elements to achieve an efficient, sustainable result.  Focusing too narrowly on any one of the factors necessarily sub-optimizes a factor at the expense of the whole.

SOX sustainability requires objective and candid assessments and feedback of what works, what will work, and what doesn’t work within the organization.  CEO’s, CFO’s, CIO’s, CRO’s and Internal Audit officers must operate from the same page to evolve the sustainability program toward an efficient model that satisfies all critical compliance requirements while efficiently supporting the business.  Unless all officers and their team leaders understand what is happening and where the compliance program is going, it is unlikely that any synergy will take place.  Front-line workers will not have the vision to see where they need to go if their respective managers are clueless, uncommunicative or intransigent.

Examples exist where CFO’s and CIO’s were not even reading the same book, much less being on the same page, when facing SOX compliance issues.  This should be especially troubling to CFO’s who have to sign §302 certifications when they don’t understand the I/T environments and have the full support of CIO’s whose technology systems process the CFO’s financial data.  It should be apparent that unless all top officers are in unison, their respective subordinate departments won’t be.  The departments may even work at odds to each other.  This is not conducive to compliance, much less sustainable, efficient compliance. 

Management should begin the ‘efficiency’ or ‘sustainability’ process by reviewing past compliance efforts and opening discussion lines to determine optimal solutions going forward.  Once a plan has been developed, management must become cheerleaders and enforcers.  Throughout the initiative management must maintain and communicate a sense of urgency to move forward.  Non-committal management will experience a difficult time getting the entity to overcome its own pre-SOX inertia. A casual approach, lacking a sense of urgency, can require late-hour heroics to achieve a passing grade.

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