EVERYBODY IN business watched in awe as one after another billionaire American executive was brought up on various fraud charges a few years ago. Enron, MCI, Parmalat and others were found to have executives who had broken the law. After the initial shock - and a few convictions - many lawmakers and executives in the US and Europe began working on ways to make companies more compliant with the law. One strategy that became immediately obvious was that IT could be a useful ally.
Sponsored by Symantec's Veritas division, the Economist Intelligence Unit has published an extensive report on the role of IT in compliance. The study drew on a global online survey, conducted earlier this year, of 133 senior executives on the changing role of IT in compliance, and supplementary in-depth interviews with senior executives.
'The Sarbanes-Oxley Act in the US and similar laws elsewhere have led many companies to scramble to overhaul their financial reporting, internal controls and data storage in order to meet unprecedented requirements for speed, consistency and accuracy. Companies have found Section 404 of the act to be particularly demanding. It requires corporations and their auditors to report on the effectiveness of the former's internal control structures and procedures for financial reporting. In practice, this has meant describing, documenting and demonstrating the robustness of a vast number of processes, most of which use information technology,' the report said.
Another regulation that is also causing a considerable amount of concern - Basel II - is aimed mainly at financial institutions.
'For banks, the Revised International Capital Framework (commonly known as Basel II) will radically change how financial services organisations calculate risk. Rather than using the same measures of risk across all banks, the accord will allow them to use their own performance data to measure risk and therefore capital requirements. Basel II also introduces the need to measure operational risk arising from internal or external problems,' the report said.
This recent wave of new corporate rules has had a strong effect on the way technology is used and the role played by IT departments in compliance. According to the report, the use of IT to monitor business activity has been growing rapidly and expenditure on compliance-related IT has also been expanding at a fast clip.