By Alex Raymond
Information Technology will play a critical role in a successful C-SOX implementation, so it is important that the IT organization understands how they will support this project. The Basic Standard for Enterprise Internal Control specifically mandates the use of IT to reduce risk and increase transparency in organizations, and successful Chinese companies will make the best use of technology resources. Embedded controls within information systems will increase compliance efficiency and improve the control structures which have been defined by the business.
The IT organization will have two roles to play in a C-SOX implementation. The first is to define their own internal controls and understand what tools are needed to manage any risks. The second role is to provide support to the rest of the organization and make sure the company’s IT infrastructure is up-to-date and meets the requirements of the business.
Most IT organizations are used to complex implementations and will make good partners for the C-SOX project. The key is to get the IT organization’s “buy in” as a stakeholder and not just as a support service for the project.
Choose a Partner
Implementing C-SOX may require companies in China to seek outside help and expertise. In choosing a partner, make sure to look for a successful track record of complex projects and knowledge of internal control processes. It is also beneficial to work with a company that has experience in designing and implementing human resources strategies such as executive compensation, performance management and learning strategy. These companies can provide valuable advisory services in some of the more sensitive areas of C-SOX. Most of the major consulting, accounting and advisory firms will have relevant experience in implementing similar projects overseas. This is beneficial to Chinese companies who can therefore learn from the international experience of their peers.
A best practice is to use external experts rather than pushing responsibilities onto other internal resources during the initial stages of the C-SOX project. This can provide an effective and independent design of internal controls and adequately test the controls and processes for highest impact.
Starting the C-SOX compliance process does not have to be difficult. A high level of visibility and support from the executive team will provide the urgency needed to quick start rolling out training programs and gathering internal resources. Putting these foundations in place early removes time pressure from the compliance project and will give the company a strong basis in risk management and internal controls going forward. In particular, making the effort to develop a culture of risk awareness will pay off through better existing processes, reduction of errors, and increased employee engagement. Companies that begin now will see improving margins, increases in efficiency and growing market respect.
The Basic Standard for Enterprise Internal Control is still evolving and final implementation guidelines are not yet available. However, Chinese companies should take advantage of this time to seek the benefits to improved risk management and internal control systems.
Alex Raymond is based in Beijing and is the Founder and CEO of Vast Talent, a company that specializes in compliance and performance management tools. Vast Talent was the first company to launch a compliance system specifically designed to meet the needs of C-SOX.
This is the third and final part of “Getting a Head Start on Your C-SOX Compliance Project in China”.