SarbOx Sustainability

Raleigh, NC

This installment of our series on SOX Sustainability concerns “Management Issues.”  In Part 1 we introduced Management as one of the significant SOX sustainability challenges.  Additional issues and sustainability planning will be addressed in subsequent topics as we continue to assist our clients achieve repeatable, efficient compliance processes.

Management Issues

SOX sustainability is a significant Management Issue.  Management’s commitment to achieving effective, efficient, sustained compliance will spell the difference between having a legitimate shot at efficient sustainability and having no shot at all.

If Senior Management is not committed to intrinsic as well as extrinsic process integration, cultural and technological growth and integration, then sustainability, per se, can not be optimized.  It will always be an after-thought and an aggravation.  This is because there are many entrenched obstacles (including people, managers, technologies, processes, and biases) that will work against any new initiative in the company.  Overcoming these obstacles requires commitment and a willingness to put matters on the line and to enforce consequences for non-support.

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 bury their heads in the sand preferring to avoid the compliance issue or treat Sarbanes as  "just another one-off project that interferes with how they run their business”(Richard Owen, consultant), 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.  Recalcitrant managers are cultural impediments to growth and evolution.

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 and cheerleading 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 real 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.

Visage has seen a number of cases 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, if 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 on the same page, their respective subordinate departments won’t be.  The departments may even work at odds to each other.  This is not conducive to compliance, per se, much less sustainable, efficient compliance. 

Management should begin the ‘efficiency’ or ‘sustainability’ process by debriefing on 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.  Without a sense of urgency to move forward and to make necessary changes to optimize compliance, the entity risks having to go through late-hour heroics (again) to achieve a passing grade.  If the enterprise procrastinates on making necessary changes to achieve efficient compliance, the buck must stop at the feet of the senior management team.  Those who think that implementing Internal Controls are a one time event are mistaken.  The preceding efforts were a race to the start of compliance, not the finish.

To review earlier articles in the series please visit Visage’s website at the URL below.

VisageSolutions is a group of experienced operational executives focused on providing efficient, repeatable complinace (including Sarbanes-Oxley) solutions. By working carefully with their clients VisageSolutions provides customized solutions that focus on reducing the “operational cost” of sustained compliance through an optimum combination of existing and new technologies and tools, and business process integration.  See www.visagesolutions.com for more information and related links.