Spreadsheet Woes – Burden in SOX Compliance and Other Regulations

End User Computing (EUC) or end User Developed Application (UDA) systems like spreadsheets used to be ideal ad-hoc solutions for data processing and financial reporting. But those days are long gone.

Today, due to regulations like the:

  • Sarbanes-Oxley (SOX) Act,
  • Dodd-Frank Act,
  • IFRS (International Financial Reporting Standards),
  • E.U. Data Protection Directive,
  • Basel II,
  • NAIC Model Audit Rules,
  • FAS 157,
  • yes, there?s more ? and counting

a company can be bogged down when it tries to comply with such regulations while maintaining spreadsheet-reliant financial and information systems.

In an age where regulatory compliance have become part of the norm, companies need to enforce more stringent control measures like version control, access control, testing, reconciliation, and many others, in order to pass audits and to ensure that their spreadsheets are giving them only accurate and reliable information.

Now, the problem is, these control measures aren’t exactly tailor-made for a spreadsheet environment. While yes, it is possible to set up a spreadsheet and EUC control environment that utilises best practices, this is a potentially expensive, laborious, and time-consuming exercise, and even then, the system will still not be as foolproof or efficient as the regulations call for.

Testing and reconciliation alone can cost a significant amount of time and money to be effective:

  1. It requires multiple testers who need to test spreadsheets down to the cell level.
  2. Testers will have to deal with terribly disorganized and complicated spreadsheet systems that typically involve single cells being fed information by other cells in other sheets, which in turn may be found in other workbooks, or in another folder.
  3. Each month, an organisation may have new spreadsheets with new links, new macros, new formulas, new locations, and hence new objects to test.
  4. Spreadsheets rarely come with any kind of supporting documentation and version control, further hampering the verification process.
  5. Because Windows won’t allow you to open two Excel files with the same name simultaneously and because a succession of monthly-revised spreadsheets separated by mere folders but still bearing the same name is common in spreadsheet systems, it would be difficult to compare one spreadsheet with any of its older versions.

But testing and reconciliation are just two of the many activities that make regulatory compliance terribly tedious for a spreadsheet-reliant organisation. Therefore, the sheer intricacy of spreadsheet systems make examining and maintaining them next to impossible.

On the other hand, you can’t afford not to take these regulations seriously. Non-compliance with regulatory mandates can have dire consequences, not the least of which is the loss of investor confidence. And when investors start to doubt the management’s capability, customers will start to walk away too. Now that is a loss your competitors will only be too happy to gain.

Learn more about our server application solutions and discover a better way to comply with regulations.

More Spreadsheet Blogs


Spreadsheet Risks in Banks


Top 10 Disadvantages of Spreadsheets


Disadvantages of Spreadsheets – obstacles to compliance in the Healthcare Industry


How Internal Auditors can win the War against Spreadsheet Fraud


Spreadsheet Reporting – No Room in your company in an age of Business Intelligence


Still looking for a Way to Consolidate Excel Spreadsheets?


Disadvantages of Spreadsheets


Spreadsheet woes – ill equipped for an Agile Business Environment


Spreadsheet Fraud


Spreadsheet Woes – Limited features for easy adoption of a control framework


Spreadsheet woes – Burden in SOX Compliance and other Regulations


Spreadsheet Risk Issues


Server Application Solutions – Don’t let Spreadsheets hold your Business back


Why Spreadsheets can send the pillars of Solvency II crashing down

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Systems Integration as a means to cost reduction

System integration in an organisation refers to a process whereby two or more separate systems are brought together for the purpose of pooling the value in the separate systems into one main system. A key component of process consolidation within any organisation is the utilisation of IT as a means to achieve this end. As such, system integration as a means to cost reduction offers organisations the opportunity to adopt and implement lean principles with the attendant benefits. The implementation of lean techniques requires an adherence to stated methods to facilitate the elimination of wastage in the production of goods and services. In summary, the lean philosophy seeks to optimise the speed of good and service production, through the elimination of waste.

While analysing some of the traditional sources of waste in organisational activities, things like overproduction, inventory, underutilised ideas, transmission of information and ideas, transportation of people and material, time wastage and over-processing stand out. The fact is that companies can eliminate a significant portion of waste through the utilisation of IT to consolidate processes within their organisation.

Adopting lean principles calls for the identification of all of the steps in the company value stream for each product family for the purpose of the eliminating the steps that do not create any value. In other words, this step calls for the elimination of redundant steps in the process flow. This is exactly what the utilisation of IT to consolidate processes offers a company. For instance, the adoption of a central cloud system across a large organisation with several facilities could increase efficiencies in that company. Such a company would drastically reduce the redundancies that used to exist in the different facilities, eliminate the instances of hardware and software purchase, maintenance and upgrade, modernise quality assurances processes and identify further opportunities for improvement.

Perhaps, from the company’s point of view, and from the perspective of lean process implementation, the most important factor is?the effect it has?on the bottom line.’reducing the number of hardware, eliminating the need for maintaining and upgrading hardware, removing the necessity for software purchase and upgrade across facilities also contributes to a significant reduction in operational costs.?This reduction in the cost of operations leads to a corresponding increase in the profit margin of the company.

Applying system integration as a means to cost reduction can also lead to the reduction in the number of people needed to operate the previous systems that have been integrated into one primary unit. Usually, companies must hire people with specialised knowledge to operate and maintain the various systems. Such employees must also receive special training and frequent ongoing education to constantly stay informed of the latest trends in process management. With the integration of the system, the number of people needed to maintain the central system will be significantly reduced, also improving the security of information and other company trade secrets.

Based on an analysis of the specific needs that exist in a particular company environment, a system integration method that is peculiar to the needs of that organisation will be worked out. Some companies may find it more cost-effective to use the services of independent cloud service providers. Others with more resources and facilities may decide to set up their own cloud service systems. Often, private cloud service system capabilities far exceed the requirements of the initiating company, meaning that they could decide to “sell” the extra “space” on their cloud network to other interested parties.

A company that fully applies the lean principles towards the integration of its systems will be able to take on additional tasks as a result of the system consolidation. This leads to an increase in performance, and more efficiency due to the seamless syncing of information in a timely and uniform manner.

Companies have to combine a top-down and a bottom-up approach towards their system integration methods. A top-down approach simply utilises the overall system structure that is already in place as a starting point, or as a foundation. The bottom-up approach seeks to design new systems for integration into the system. Other methods of system integration include the vertical, star and horizontal integration methods. In the horizontal method, a specified subsystem is used as an interface for communication between other subsystems. For the star system integration method, the subsystems are connected to the system in a manner that resembles the depiction of a star; hence, the name. Vertical integration refers to the method of the integration of subsystems based on an analysis of their functionality.

The key to successful system integration for the purpose of cost reduction is to take a manual approach towards identifying the various applicable lean principles, with respect to the system integration process. For instance, when value has been specified, it becomes easier to identify value streams. The other process of removing unnecessary or redundant steps will be easier to follow when the whole project is viewed from the whole, rather than’the part. Creating an integrated system needs some?patience?in order to work out kinks and achieve the desired perfect value that creates no waste.

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Business Turnaround Tip for a Successful MBO Turned Awry

When you acquire a company through an MBO, your hopes are always high. You know the business more than anyone else and you’ve got too much at stake to do a sloppy job. So how could things go wrong? Well sometimes they do. And if you don’t make a quick business turnaround, you could end up losing more than just your company.

If that management buyout was financed by a bank, then chances are you were required to invest a sizeable amount from your own pockets. I won’t be surprised if you even remortgaged your house for it.

Regardless of your source of funding, whether it was a bank, a venture capitalist or through a deferred consideration, the mere thought of losing your job and getting buried in enormous debt at the same time might be too much to bear. If you get too overwhelmed by your emotions and can’t think clearly, you’ll have to step out of the driver?s seat and have someone take over.

That someone can’t be a member of the management team that took part in the management buyout. Like you, he/she might be in panic mode as well. You need someone from the outside who has no emotional attachments to the company and hence can view the crisis from a clear perspective.

Here’s what’s needed:

Review and Plan

Take a closer look at all factors affecting your business: governance and organisational structures, employees, suppliers, systems and procedures, roles and responsibilities, etc. Identify potential risks and assess the likelihood of them affecting your business.

This will give a clearer picture of cause-and-effect relationships as well as the specific tasks on hand.

Thus, when it is time to draft a plan, you can do so from a well-informed standpoint. This will enable you to target specific areas of improvement and avoid pointless activities.

Assure all stakeholders

Once a watertight plan has been formulated, you will have to approach your stakeholders. They?ll need to know what your directions are. Once they’re all sold on the plan, you could implement our strategies unimpeded.

This is a very crucial part because a sceptical stakeholder can serve as a major stumbling block in our efforts to improve the situation. You need to convince your banks, sponsors, and investors in order to avoid additional financial obstacles. You need to convince your suppliers too. If they cut off or limit supply, you won’t be able to continue doing business.

Most of all, you need to persuade your staff and employees that the proposed major changes have to be carried out in order for the company to survive. You can’t run your operations without them on board.

Redesign and set up new systems and procedures

Any company requiring a turnaround will certainly have systems and procedures that are no longer working well in the current conditions and hence would require either major changes in key areas or a total revamp. You need to study personnel roles and responsibilities as well as systems and processes, including financial and IT systems, and supervise the implementation of necessary changes.

You will need to evaluate your existing IT architecture and determine how you can best maximise what you already have and propose what you think will work more efficiently for our proposed systems and procedures. Every piece of hardware or software recommended will take into consideration your present resources. There are many solutions out there, you just need to find the best fit.

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Energy Cooperation Mechanisms in the EU

While the original mission of the European Union was to bring countries together to prevent future wars, this has spun out into a variety of other cooperative mechanisms its founders may never have dreamed of. Take energy for example, where the European Energy Directive puts energy cooperation mechanisms in place to help member states achieve the collective goal.

This inter-connectivity is essential because countries have different opportunities. For example, some may easily meet their renewable targets with an abundance of suitable rivers, while others may have a more regular supply of sunshine. To capitalise on these opportunities the EU created an internal energy market to make it easier for countries to work together and achieve their goals in cost-effective ways. The three major mechanisms are

  • Joint Projects
  • Statistical Transfers
  • Joint Support Schemes

Joint Projects

The simplest form is where two member states co-fund a power generation, heating or cooling scheme and share the benefits. This could be anything from a hydro project on their common border to co-developing bio-fuel technology. They do not necessarily share the benefits, but they do share the renewable energy credits that flow from it.

An EU country may also enter into a joint project with a non-EU nation, and claim a portion of the credit, provided the project generates electricity and this physically flows into the union.

Statistical Transfers

A statistical transfer occurs when one member state has an abundance of renewable energy opportunities such that it can readily meet its targets, and has surplus credits it wishes to exchange for cash. It ?sells? these through the EU accounting system to a country willing to pay for the assistance.

This aspect of the cooperative mechanism provides an incentive for member states to exceed their targets. It also controls costs, because the receiver has the opportunity to avoid more expensive capital outlays.

Joint Support Schemes

In the case of joint support schemes, two or more member countries combine efforts to encourage renewable energy / heating / cooling systems in their respective territories. This concept is not yet fully explored. It might for example include common feed-in tariffs / premiums or common certificate trading and quota systems.

Conclusion

A common thread runs through these three cooperative mechanisms and there are close interlinks. The question in ecoVaro?s mind is the extent to which the system will evolve from statistical support systems, towards full open engagement.

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