From Compliance to Competitive Advantage Eric Karofsky AMR Research [email protected]

From Compliance to Competitive Advantage

Eric Karofsky

AMR Research

[email protected]

http://www.amrresearch.com/default.asp

Copyright © 2006 OSIsoft, Inc. Company Confidential. All rights reserved. 2

GO SOX!GO SOX!

Agenda

• Sarbanes Oxley

• General compliance

• Competitive advantages



Waves of ComplianceC

ost

Time

A Long Tail

Do It & You’re Done

Systemic Change



302

404

409

Executive sign-off

Requires corporate officers to personally sign off and attest that financial information is true and internal controls have been evaluated 90 days prior to the reporting date

Requires continuous evaluation of internal controls and procedures for financial reporting

Requires real-time notification within 2 days on material changes in a company, such as loss of or a significant reduction of major account, large write-off

Key Sections of SOX“Real time notification

within 2 days on material changes”

• Plant shutdown?

• Plant failures?

• Quality deviations?

• Recalls?

• Loss of raw material supplier?

• etc.

Evaluate controls

Timely disclosure



SOX needs multiple inputs

Procedures

ReportingReal time

notification

SOX requirements

ERP

HR

Financial

AP / AR

Suppliers

Customers

Procurement

Operations Data!!!

• Real time input

• Repeatable processes

• Audit trails



When Compliance is talked about, it’s usually

Sarbanes-Oxley Act of 2002 (SOX)But it’s just the tip of the compliance iceberg



Regulations AboundFinancial

(e.g. Sarbanes Oxley, Basel II)

Supply Chain Traceability (e.g. RFID, CTPAT, Bioterrorism Act, Country of Origin Labeling)

Import / Export / Trading(e.g. ITAR, Denied Parties Screening)

Product Approval / Certification (e.g. FDA 21 CFR, REACH)

Manufacturing Process Approval / Certification (e.g. FDA, Mil-Spec Compliance)

Manufacturing Traceability (e.g. eBR, eDHR, RoHS, TREAD)

EH&S Compliance (e.g. EPA, OSHA)

Recoverability(e.g. ELV, WEEE)

Information Management(e.g. HIPAA, GLB, FACTA)

Corporate / Industry Sustainability Initiatives (e.g. CAFÉ, Minority Sourcing, Code of Conduct / Training)

65% - 78% of spending is not

SOX related



Regulation complexity

Process / info coordination

x

Applicable regulations

Complexity !!!=

Customer regulations

x

EU (15 27)

Japan / China USA Rest of world+ ++

x



The Risks and/or Costs of (Non)-ComplianceFinancial

Fines, penalties

Legal expenses

Audit Fees Operational

Inability to conduct business

Process/Product change

Entry barriers to new markets Reputation

Brand value

Reduced sales

Reduced stock price

BUT COMPLIANCE ALSO

YIELDS BENEFITS!



What specific business process(es) do you ALSO plan to support with your compliance investment(s)?

10%

28%

36%

14%

11%

2%

Better visibility tooperations

Better quality

Streamlinebusinessprocesses

More secureenvironment

Supportglobalization

efforts

Other



Recommendations for Investment

• Increase investment in technologies that automate testing your internal controls – Key technologies can reduce the cost of SOX compliance

upwards of 25%

• Better visibility though portals, dashboards, and scorecards

• Training and education activities necessary for effective adoption

• Talk with auditors about material events in manufacturing!



“When all regulated entities face the same obligations under the law, the smartest corporations will find a way to comply with imagination and less cost.”

Ben Heineman, Jr: SVP for law and public affairs at GE



Thank you.

Eric Karofsky

AMR Research

[email protected]

GO SOX!


Documents

From Compliance to Competitive Advantage Eric Karofsky AMR Research [email protected]