Sarbanes-Oxley on the Ropes: Is That a Good Thing?
Insurance Experts' Forum, December 8, 2009
This week, INN's Bill Kenealy reported that the much-loathed Sarbanes-Oxley Act (SOX) is up for review by the U.S. Supreme Court, as well as the U.S. Congress. The Supreme Court case challenges the constitutionality of the disputes the authority of the Public Company Accounting Oversight Board (PCAOB) that oversees compliance, while Congress may take other measures to weaken the act, which dictates that publicly traded companies need to verify and document the information they are reporting to shareholders, or face harsh penalties.
At last, good riddance to SOX, right?
The law, passed in the wake of the Enron scandal, places an administrative burden on many companies—not just publicly traded concerns, but the companies that deal with them as well. Surveys I have conducted among user groups consistently find – up to this day – that many companies still assign employees to manually pull up data on a regular basis for compliance reporting. No doubt these employees probably drew the short straws, and probably wish they could be doing something else—anything, please, anything else—besides assembling compliance reports. More automation needs to be introduced to manage these processes more effectively. For insurers, SOX was yet another process to be built into an already rigorous compliance franchise.
But while SOX was a burden to be dealt with back in the early part of the decade, it may be actually more of a natural part of the business of 2010. Data transparency—knowing the origin and history of information, its ownership, critical path, and accuracy—is essential in an online, analytics-driven organization. If companies are going to respond to real-time information moving through the enterprise from various sources, it's essential that this data be timely, clean and, above all, trusted.
In the end, it appears SOX may have only sped up the inevitable—companies getting their data stores in order to meet the new challenges of global competition head-on. The law may eventually get watered down, much to the relief of overburdened staffs. But transparency and accountability of information will live on as perhaps our most important corporate value—especially for competing on analytics.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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