Johannesburg, 17 Nov 2004
Following recent accounting scandals that brought many public companies into disrepute, the need for more transparent and comparable financial reporting has never been greater.
With the emergence of the Sarbanes-Oxley (SOX) Act of 2002, and the subsequent introduction of the International Financial Reporting Standard (IFRS), businesses, especially those with international bases, are in a mad scramble to comply before the 1 January 2005 deadline, much the same as the pre-Y2K dash.
Stephen Howe, divisional manager at Business Connexion, comments that while IFRS only really pertains to internationally listed companies at present, their local subsidiaries are also expected to comply.
"This complicates things, particularly because those subsidiaries have to comply with local regulations as well," he says.
In terms of international requirements, IFRS will require access to at least one year`s comparative information to comply with SOX, which means that the deadline for those businesses are tighter as the point-of-no return passed on 1 January 2004.
The software impact of these types of compliance regulations could potentially be quite big, according to Howe. He says that while businesses struggle to get higher rates of return on investment (ROI) from traditional enterprise resource planning (ERP) installations, they may now be struck with a list of additional legal requirements that will have to be taken into account.
"To this extent," he says, "businesses will have to look at becoming far more adaptive, through intelligent enterprise application and business process integration.
"The only real way for businesses to gain true ROI from ERP installations is through the ongoing planning and adjustment of business processes (and how enterprise applications integrate with them) to cater for the changing needs of modern business."
According to Meta Group, this could be through establishing a centre of excellence or, as Howe puts it, a "knowledge pool" with the specific focus on ERP and compliance, elements that are not necessarily the business`s core competency.
"An ERP project should be viewed as an ongoing process, not something that is merely installed and forgotten. The best value will be derived from understanding the business needs (which includes the need for compliance) and continually adjusting the solution`s management," Howe says.
Whether this knowledge pool is an internal endeavour or outsourced to a reliable integration partner, the need is to make sure that issues such as compliance do not become the fiasco that preceded Y2K.
"Such moves will ensure that ROI is kept positive and that business derives the required value from its investments in addition to helping it to comply on the correct level," Howe concludes.