Performance indicators pose challenge for FDs

Finance directors must brace themselves for another round of IT systems
investment in a bid to deal with the technological issues surrounding compliance
with the operating and financial review, according to industry experts.

Fresh from ensuring that their businesses cope with collating financial data
properly to deal with IFRS, and mapping internal controls processes as part of
Sarbanes-Oxley compliance, FDs of listed companies face different IT concerns
for the OFR.

A key feature of the OFR, which must be provided by UK businesses with
financial years commencing after 1 April 2005, is to disclose business strategy
and the basis of its measurement. This involves the disclosure of key
performance indicators (KPIs).

But the requirements are very demanding and have ‘more teeth’ than the IT
problems posed by Sarbox and IFRS, according to Cognos VP Stephen Arnold.
‘Sarbox ended up as more of a consultative and project basis ­ it wasn’t too
much about software implementations,’ said Arnold.

‘Many businesses don’t have good underlying systems to provide the detail
required on KPIs.’

James Fisher, a director of business process software company Cartesis, said
that FDs must accept they live in a compliance environment, in which there will
be a ‘continual flow’ of governance changes.

On this basis, Fisher said that businesses must have all their information
and processes stored in one place, rather than a set of disparate systems linked
together when required.

‘The OFR will underline the challenges companies face in managing data, and
how you analyse this. It’s best from one single database rather than an
integrated framework,’ he said.

Analyst firm Gartner has claimed that the OFR will have an ‘immediate impact’
on the financial reporting processes of UK companies, and FDs should start
addressing the impact on corporate reporting and business intelligence systems.

Related reading