SarbOx Sustainability

Raleigh, NC

This installment of our series on SOX Sustainability concerns the “Integration Issue.”  In Part 1, we introduced Integration and Communication as a significant SOX sustainability challenge.  Other installments have(will) address the remaining challenges and provide a series wrap-up.

 Integration

Sustainability requires Integration and Coordination.  All departments of the enterprise must understand what is expected and required of them, and they must understand what other departments are doing.  The Accounting Department must understand what I/T is doing to improve corporate process, and vice versa.  Sales needs to know what software MIS is implementing or developing, and MIS needs to know when Manufacturing is implementing a new vendor certification process.  Treasury Services needs to advise Internal Audit and MIS when it changes providers of electronic funds transfer (EFT) services, notably if a new vendor-furnished software system is part of the change.  And Internal Audit needs to know when internal control processes anywhere in the organizations will change so it can coordinate management assessment and attestation requirements.  Lack of integration and coordination causes duplicate or triplicate work across the enterprise and may lead to attestation issues.

Integration and coordination must exist within the enterprise and extend to all outsourced service providers supporting the initiative.  This is especially true when timelines are short for completing the compliance work (or process make-overs).  Companies must dedicate resources and funds to establish an effective, real-time integration mechanism.  Generally, integration requires conspicuous thought and effort:

• How will we align our internal and external resources to best achieve the sustainability goals without disrupting our business?
• How will we coordinate progress and open issues across departments to assure prompt action and issue resolution?
• What is the best method to communicate issues, results, and open items? What is the appropriate frequency? 
• How will we resolve contentious or diverging needs and approaches?
• How will we assure that material events as contemplated by §409 result in a timely 8K disclosure within 4 business days?

 And technology integration brings its own set of concerns:

• How will we resolve the data interchange problems that exist between Systems A and B?
• If we introduce a new Accounting module or Inventory System, how will we assure ourselves and our auditor that the systems are properly integrated?
• Do all of our data protection, security, and virus protection systems inter-work with each other correctly?
• Our proposed acquisition runs a different ERP.  How will we align their system(s) with ours?
• Do we have the “right” systems to support our business – what can be done to stretch our current technologies to support our people and process?

 Integration may be best viewed as a process of removing barriers and impediments to efficient business operations and efficient inter-operation of technology systems.  Impeccable technology, process and culture is not feasible without impeccable integration.  The only way to achieve a synergy of these three drivers is to integrate them to achieve an optimal mix for the enterprise at a point in time.

 While §404 is concerned with the effectiveness of internal control over financial reporting, the reality is that efficiency is only attainable through integrated and effective operations, financial, disclosure and regulatory processes across the enterprise.  It is virtually impossible to segregate or isolate “financial reporting processes” from ongoing business process.  If they are efficient, they are already merged.  Creating an efficient construct inclusive of SOX requirements will require considering the merged processes, and re-integrating or re-aligning new processes, technologies, etc. to meet a new set of goals.

 Integration requires aligning people (culture), process and technology (“CPT”) toward one or more established goals.  Without specific, sustainability goals, “CPT” may be organized or aligned in any number of ad-hoc constructs.  Specific sustainability goals will force CPT to align to meet the goals.

Supporting this alignment or integration may require specialists trained in management, technology and business process functions.  Internal program managers with management and technology experience may fill the bill.  Many companies will do well to look outside their organizations to find professionals who provide objective guidance and feedback to help optimize and align “CPT.” Experienced program managers and consultants can also evaluate and design communications mechanisms to assure that all critical parties are abreast of progress and issues, and that timely, “integrated” actions take place to move the initiative forward.  Persons who are weak in project management skills and/or who have very limited experience in management, technology and process evaluations are probably poor candidates to administer the type of program that we are describing.  At a minimum the PM should be someone who has significant experience in process management/re-engineering and at least one of the other two factors. 

Achieving sustainability also requires integrating incentives and drivers to reasonably assure the voluntary alignment of CPT on a long term basis.  Bonuses and awards that incent un-aligned behaviors must be addressed.  As discussed above, this requires establishing over-arching sustainability goals and then removing the barriers (including disjointed incentive programs) that derail efficient process.

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.