RegulationCorporate GovernanceScrapping OFR could lead to IT cuts

Scrapping OFR could lead to IT cuts

IT budget cuts could result from scrapping of OFR, experts warn

The government’s decision to scrap new corporate reporting requirements may
encourage companies to slash IT budgets for compliance, experts have suggested.

Operating and Financial Review (OFR) rules would have required quoted
companies to offer greater detail about their business performance in areas such
as corporate governance and environmental practices. The move was welcomed by
the CBI, a long-term campaigner against red tape.

However, critics said the decision could be seen by some firms as an
opportunity to cut investment in reporting technology. Jason Goodwin of business
intelligence software vendor SAS Institute said IT decision-makers should resist
any pressure to scrap OFR-related projects, as reporting tools that monitor key
performance indicators could improve corporate decision-making.

John Taylor of business software vendor Cartesis agreed. ‘Visibility over
performance helps you react faster to changes in the market,’ he said.

Axing OFR projects may also leave firms unprepared for other changes. For
example, the Association of British Insurers will shortly discuss incorporating
OFR requirements into the combined code of corporate governance, which quoted
companies must comply with.

Many businesses have benefited from voluntarily publishing OFR-style reports,
said Mike Davis of analyst Butler Group. ‘OFRs can be used as a marketing tool
to prove to investors your firm has good governance,’he said.

Jon Symonds, the CFO of AstraZeneca and ASB board member, expressed surprise
at the decision to scrap the OFR: ‘The basic idea of communicating to
shareholders through the eyes of the board seems to be quite sensible.

‘Some of the broader aspects, such as the OFR now going to have environmental
KPIs, now going to bring in social responsibility, bring in employee metrics, et
cetera… that was all largely eclipsed by picking out the financial metric
because this is a report to shareholders, not to single stakeholder groups,’ he
added.

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