RegulationCorporate GovernanceRegulatory work costs companies 1.26% of revenue

Regulatory work costs companies 1.26% of revenue

Compliance issues such as Sarbanes-Oxley continue to become a major hurdle for companies

Companies are faced with spending 1.26% of revenues on the finance function,
as compliance issues such as Sarbanes-Oxley continue to become a major
regulatory hurdle, according to the latest survey by Hackett Group.

The researcher found that ‘typical’ companies spent $940,000 (£520,500) per
billion dollars of revenue on compliance management, while ‘world-class’
companies spent 36% less. These typical companies have seen an 18% increase in
total finance costs since 2003.

‘For most CFOs, the resources and focus required to comply have turned the
tide of more than a decade of efficiency improvements and caused an increase in
the total cost of finance,’ said Hackett chief research officer Richard T Roth.

‘At many typical companies, the bright-line focus on compliance has forced
them to put alignment initiatives and support of the business on the back
burner.

‘World class CFOs, on the other hand, have been able to better manage through
this period. While they’ve also seen a rise in compliance costs, they have
continued to improve overall efficiency and effectiveness.’

Hackett said he thought that average companies are spending an additional
amount, potentially equal to or greater than the compliance management costs on
key control activities. These activities would include documenting, testing and
potentially remediating key controls throughout the business.

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