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Financial Transparency -- A Notoriety Issue

Today’s organisations need to be transparent. They need to have quick access to their data so that they can prove in the event of an audit that they are abiding the regulations and mandates demanded of them and others in their global chain.

But what is transparency exactly?

 Simply put, it’s the ability to prove what actions you’re taking; show what rules you’re enforcing; and answer any question shareholders, regulators, and auditors may have about your operations.

In the Financial Services industry, for example, transparency requires you to be able to validate your quarterly statement figures and prove accountancy within your departments -- all while keeping your customers anonymous. It requires you to satisfy more than just traditional, internal auditors -- you have to satisfy external, regulatory auditors who mean to enforce a slew of regulations, including Basel II & III, FATCA, Dodd-Frank, and IFRS.

And all of this demands significant resources across your organisation, even before audits actually take place.

Some organisations view these demands as unnecessary burdens. They see them as requirements that waste time and money out of principal, not practicality.

Because of this, these same organisations tend to satisfy only the minimum requirements for compliance, maintain inaccurate and incomplete reports, and waste even more time and money reconstructing their operational histories when audits do occur.

So why don’t these organisations make transparency an opportunity instead of an obligation? Is it because their:

  • Accounting departments can’t manage the data, despite being the departments that generate it?
  • IT departments are hiding heterogeneous and complex environments, which complicates any effort to identify the origin of specific data and establish audit trails?
  • C-level thinks this is all a grand waste of time, a fruitless distraction that inhibits productivity?

If any of the above bullets apply to your organisation, know this: solutions do exist.

These solutions give organisations the ability to access and consolidate their audit trails not in hours, days, or weeks, but in minutes. They give organisations the ability to comply with new regulations, provide records to auditors on demand, and uphold the spirit of transparency today’s auditors want to see.

To illustrate, consider something as simple as an account closure. Despite being a routine event, an account closure is apt to bedevil any financial auditability initiative, as an account can take upwards of twenty to twenty-five days to actually close, thereby jeopardising an organisation’s ability to provide an accurate audit trail -- on demand -- to regulatory auditors.

However, global banking and financial services organisations, using the solutions noted above, regularly reduce account-closure times to as little as ten days, all while maintaining their ability to provide an audit trail. Some have been using these solutions to migrate their local Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS) in as little as two months, all while enforcing process traceability.

Compare this to an organisation that has met the minimal requirements and strictly translates its local GAAP statements into IFRS. Not only is this type of action irreversible, but any evidence that regulations have been abided is lost, which then demands a significant reconciliation effort and establishes a reputation for poor transparency.

Fortunately, no organisation needs to accept this kind of notoriety. With a clear, comprehensive process in place for translating business events or operations into accounting postings, taking care of discrepancies or rejects, and enabling and managing manual entries and adjustments -- as well as an operationally monitored audit trail -- any organisation canreadily achieve financial transparency without interrupting their course of business.

The importance of financial transparency has always been clear, but it’s never been so critical as it is today. Today, we not only have existing and imminent regulations, we have the virtual certainty of new regulations that haven’t even been described yet. Those unprepared for these known and yet-to-be-known requirements will soon learn what it truly means to be notorious in a world where customers have plenty of options and don’t have to tolerate any organisation’s notoriety.

However, those who are prepared -- those who put stock in the solutions now available -- will do more than pass audits handily. They’ll earn something quite the opposite of notoriety -- the trust and respect of their business partners, regulatory auditors, and the Financial Services industry at large.

 

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