Dependability in the Midst of Chaos
April 8th, 2009 | Published in Uncategorized
The fact is that regulatory bodies like SEC and PCAOB in the US, ASIC in Australia and of course, SEBI in India have been known to take stringent action on many occasions where whistle-blowers have come forward. It is also a fact that corporations are often protected if it can demonstrate to judge and jury that reasonable – and practical – steps were taken to honestly invest in a sound corporate culture.
Perhaps for this reason – there has been a high amount of expenditure on compliance. The central issue, from our perspective, is to have a better grip on the quality of compliance spend. The following constraints complicate the issue:
- Auditors often only provide a professional opinion on the adequacy of controls and provide recommendations on where and how the internal culture, the tone at the top must change. Internal Audit departments are often stretched for resources; and reliance on internal audit alone is far from the answer.
- Board Members, can, at best, spend a few days (if not hours) in a year – engaging with the firm. There is simply not enough time to influence the firm in any robust fashion.
- The superficial use of generalist ‘management consulting’ frameworks and methodology – as is common practice - tends to obfuscate the root causes and issues rather than make a significant difference to the day-to-day running of the firm.
- The extensive use of IT and automation of financial (and other business) processes makes it more challenging to gain an integrated view of risks across the firm.
Clearly, this is not sufficient. However, there is growing evidence, based on our own successes over the last eight years and from our research of industry literature – that much can be done to prevent such issues and in fact – make good governance part of the critical action of the organisation’s leaders.
A deeper, more cost-effective approach:
Our learning has been that the answer lies in ‘partnering with the enterprise ‘ – to work within the corporate to build their “internal capacity” for governance – that is: move them forward through training key personnel on better mechanisms for Governance and the management of risk. This means the careful use of agile techniques, used in a muti-disciplinary manner – in close consultation with experts of Management Accounting. This approach also creates opportunities for innovation and process maturity. This approach targets the elimination of bureaucracy, duplication of work, cost and confusion – all of which do not add value to performance.
Our article: Controlling Cost of Compliance: Key Areas has more information, based on the work we have done in the field.
There is no doubt that the shift in governance capability means there must be a postive impact – a change - to the way the company runs. Therefore, the capability of the firm to innovate more dependably is a key part to the road to improvement. We have achieved good results in this direction because we have been able to operate as a ’safe pair of hands’ establishing a network of trusted relationships within the client firm. The Accenture article Capturing the essence of Innovation, describes the rationale for this eloquently. Further, the power of Collective Achievement is discussed with real-world examples in ‘The Quick Wins Paradox‘, Harvard Business Review, January 2009, pp. 55-61.
About Essence Networks Ltd.
Essence Networks helps build the internal capacity of their clients, using our proven approach. We can offer a single, ‘blended’ service of legal, financial and organizational design that incorporates leading-edge Enterprise IT. We aim at offering the most economical and cost effective way of achieving better brand protection and innovation.
We are a network of professionals in the Governance, Risk Management and Compliance discipline and also offers services in Business Architecture, IT Enterprise Architecture & Assurance. Our track record includes work for leading Finance & Public Sector organisations globally.
