Compared to business environment in 80’s or 90’s many things have changed. And in business - thanks to modern technology, such as Internet and faster connections - we can now produce more and automate many things and processes.
In business, companies have always needed to obey the legislation and conduct good business practices.
However, when companies have had difficulties there has been room for “creative” ways for trying to change things and convince the public in a way that has not been acceptable. This was the case with Enron, an American energy company, based in Houston. For supporting Enron’s stock price, Enron was able to hide billions of dollars in debt from failed deals and projects by using of accounting loopholes, special purpose entities and poor financial reporting. The company CFO and other executives misled Enron’s board of directors and Audit Committee regarding high-risk accounting practices, but also pressured Arthur Andersen to ignore the issues.
In the end the investigations led to lawsuit, and Enron’s stock price lost in practice all its value leading to the biggest corporate bankruptcy in U.S. history. In auditing point of view, Enron appeared also to be the biggest audit failure and hurt deeply Arthur Andersen’s reputation.
In order to cut down on the incidence of corporate fraud, U.S. Senator Paul Sarbanes and U.S. Representative Michael Oxley drafted legislation known as the Sarbanes-Oxley Act (SOX) in 2002. The intent of SOX was to protect investors by improving the accuracy and reliability of corporate disclosures in financial statements and other documents by:
The importance of compliance and business ethics has changed tremendously after the Enron case. Authorities in different continents have worked hard to increase transparency in business accounting for securing the economy, and all facets and businesses in different industries.
Today the most individuals have access to Internet, and this has also brought new challenges to crime prevention. Banks do not any more have millions in bank offices. For robbing a bank, you need to connect to transactions, use false identities and route net traffic through various different servers and domains.
For supporting our personal information, authorities, such as EU, have agreed on different actions and regulations. GDPR regulation has been now in force for one year. This has affected all companies’ information management practices.
We have seen that lots of compliance practices are still managed manually. In the world where all information is stored in different databases and storages growing amount of regulation cannot be managed only by adding manual work. There will be dozens of new regulations avalanching businesses in the coming years. For preparing to make needed actions and turn regulation to competitive edge, the need of brilliant compliance solutions in place is obvious.
When something bad happens, the luxury of spending a lot of time for generating answers or processing corrective actions has disappeared. We need to know immediately what has happened and the reasons why it happened. This is a game of managing information – being able to review the process and backtrack the actions taken (or actions that were not taken). To survive, companies need good practices and information solutions to follow compliance.
One thing we cannot forget is the human factor. We need to train our employees and business partners for code of conduct and understand its relevance for all. After all, information systems operate the way we humans are programming and guiding them.
NordCheck Oy was founded to help organizations in managing daily compliance challenges and demonstrate compliance in the modern business processes, and to help companies stay tuned in compliance issues of daily processes in real-time.
COO and Founder of NordCheck Oy