Sarbanes-Oxley Compliance Gets Cost-Effective and Efficient with India's Financial Services Outsourcing
The Sarbanes-Oxley Act became law in 2002, to make companies more accountable to shareholders in a world rocked by scandals at companies like Enron and WorldCom. Sarbanes-Oxley (Sarbox or SOX) compliance made it mandatory for companies to be transparent in their financial reporting and impose better internal controls and measures for corporate governance. The Act also requires independent auditors to certify quarterly financial results.
Section 404, where most public companies are focusing their Sarbanes-Oxley efforts, requires that public companies must prepare reports to accompany their annual reports. These reports assess the effectiveness of the companies' internal controls and financial reporting procedures.
In Brief, Sarbanes-Oxley is about -
- Internal controls
- Financial reporting
- Corporate governance
This requires a technological underpinning that facilitates integration, collaboration, reporting and monitoring.
What's the Cost?
Sarbanes-Oxley compliance is complex and burdensome to US businesses which are shelling out billions of dollars to achieve regulatory compliance.
Companies must identify their key processes, and important controls within those processes, and also measure the effectiveness of those controls. This requires collaborative effort from multiple departments. The process requires control points throughout the workflow and role-based identity management to determine who has access to what and when. A highly intensive documentation process which could involve (for example) between 210 and 280 control points, is a massive job when done manually. Automation technology makes the Sarbanes-Oxley compliance procedure consistent, sustainable and repeatable. Enterprise-wide standards have to be established to provide the management with 'big-picture' and 'drill-down' views of all data. This enables better decision-making and risk-management.
The task is huge, and so are the costs. Sarbanes-Oxley places a heavy HR and financial burden on companies. Small wonder, then, that most companies place cost-containment at the top of their corporate priorities. They are looking to India, well-positioned as a global finance and accounting outsourcing hub, to provide the answer.
Sarbanes-Oxley Compliance and India FAO
Finance and accounting outsourcing (FAO) is the fastest growing segment of India's thriving BPO sector, which serves 50% of the world's largest banks. India's outsourcing firms help to cut costs (up to 60%) and human effort required to achieve Sarbanes-Oxley compliance. As a result, Sarbanes-Oxley related outsourcing to India is growing at more than 50% per year.
Technology is at the heart of the organizational systems underlying Sarbanes-Oxley compliance. Indian outsourcing firms are helping their US customers with every step of the compliance process, which requires database management, technology and automation, reporting, upgrading and testing customers' systems.
Turning Sarbanes-Oxley into Business Performance
Companies are working towards making the Sarbanes-Oxley compliance a natural outcome of the way they do business. As a result of Sarbanes-Oxley, best practices instituted across the company bring in returns like -
- On-time and accurate financial reporting
- Correct documentation of internal controls and identity management - this allows companies to audit and track changes over time
- Communication, collaboration and operational effectiveness
- Monitoring through dashboards makes the management aware of weaknesses and take action to rectify them (e.g. combining overlapping processes), thus triggering organizational transformation
- Sarbanes-Oxley initiatives support good-governance and added value to whole company
Incorporating Sarbanes-Oxley compliance into the company's culture by using a business performance management (BPM) model will turn Sarbanes-Oxley into profit. Meeting regulatory requirements will then become just another process within the business. It's worth the effort!
Make Sarbanes-Oxley compliance a proactive initiative to run your business better by outsourcing your Sarbanes-Oxley compliance efforts to India.
Contact us to know how our expertise can help you expand your business horizons across multiple domains!