NEW YORK, 29 JUL 2004 � Compliance with the Sarbanes-Oxley Act and other new corporate reporting requirements are a “major challenge” for most U.S. multinational companies. More than half are considering purchasing new technologies over the next 12 months to improve their current reporting infrastructure, according to PricewaterhouseCoopers Management Barometer.
According to the survey, Sarbanes-Oxley presents the greatest challenge to companies’ corporate reporting and compliance. It was cited by 84 percent of senior executives, including 49 percent who describe it as a “major challenge:”
|Major Challenge||Minor Challenge||A Challenge|
|Other SEC Requirements||15%||55%||70%|
|Internal Reporting & Compliance Needs||15%||53%||68%|
|Other Non-SEC Requirements||12%||48%||60%|
|Customer/ Supplier Requirements||18%||38%||56%|
“Sarbanes-Oxley is Corporate America’s number-one challenge for reporting and compliance. The new requirements are a significant test of existing information systems and capabilities because of their far-reaching scope,” said PricewaterhouseCoopers Partner Mike Willis.
Processes Less Than Highly Effective
Overall, only 39 percent of interviewed executives rate one or more of their company’s business information processes as highly effective. Further, 29 percent describe at least one of their processes as less than acceptable:
“Sarbanes-Oxley compliance has drawn attention to some glaring weaknesses in business information processes,” said Willis. “Its extensive requirements are exposing recurring weaknesses in all major aspects of corporate reporting.”
Majority Considering New Technologies
Nearly half, 46 percent, of surveyed executives, report that expanded corporate reporting resulted in larger IT budgets, including 11 percent that increased their IT budget considerably, and 35 percent moderately. Over the next 12 months, 51 percent are considering adopting new technologies to improve their company’s current reporting infrastructure. An additional 11 percent are still evaluating options.
More service businesses, 60 percent, are considering new technologies, than product sector companies, 48 percent, although a high level of change is likely among both industry segments.
Tools presently used that most effectively impact or enhance access to data, and the control and reliability of that data are ERP, cited by 40 percent, and data warehouses, 39 percent.
|Most Effectively||Presently Used|
|Business intelligence software||6%||43%|
|XML and web service||4%||44%|
|XBRL and web service||—-||6%|
|None of the above||4%||4%|
Companies finding ERP most effective tend to be smaller, with $5.9 billion in revenues, versus $8.7 billion for the average�while those finding data warehouses most effective are above average in revenue size, $10.6 billion.
Drags on the System
Two-thirds of executives report that their company’s business information processes typically require significant amounts of human intervention, re-keying of data, or a lack of imbedded compliance controls – each of which slows data flow.
Service companies report more human intervention required, 79 percent, than product sector companies, 63 percent, while technology companies report more problem areas, 81 percent, than non-techs, 61 percent.
Abundance of Manual Preparations
According to the survey, policies and procedures for reporting information are primarily focused on channeling information to the right places, validating that the information is correct, and deriving high-value analytics. Only 15 percent report that these reporting policies and procedures are fully automated. Seventy-one percent say they are half manual and half automated, and seven percent report they are completely manual.
“In the midst of an information revolution, it is amazing how much time and energy is still expended manually obtaining, assembling, and assessing the data needed for management analysis,” Willis noted.
PricewaterhouseCoopers’ Management Barometer is a quarterly survey of top executives in a cross-section of large, multinational businesses developed and compiled with assistance from BSI Global Research, Inc. These findings are from first quarter, 2004 interviews with 177 CFOs and Managing Directors of U.S.-based multinationals. Information about Barometer surveys is available at: www.barometersurveys.com.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 139 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders.
“PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.