SOX News

Businesses Feeling the Burden of Government Compliance Without Benefit

(March 26, 2007)--The 2007 Aberdeen Report reveals that companies are feeling the weight of government compliance and regulatory mandates without the benefits. Sixty-eight percent (68%) of the 3,170 survey respondents reported that compliance adds costs with little or no benefit, while 48% also noted that compliance slows business progress. In fact, 43% of North American companies reported that government regulation does nothing but add cost, compared to 38% of those in Europe and 25% of those responding from the Asia Pacific region.

While companies have long cited the burden of compliance, data from the Aberdeen Report indicated ways in which the impact of regulation could be mitigated. For example, a small subset of respondents actually reported reducing costs as a result of complying with government mandates. Characteristics among these companies included:

-- IT Performance: 100% reported that Return on Investment (ROI) for IT initiatives either met or exceeded expectations.
-- Process Orientation: 55% reported that they consider process change implications first and foremost when evaluating technology investments.

"A strong IT department is associated with reduced compliance costs, so businesses should pay increased attention to IT performance," emphasizes Carol Baroudi, Research Analyst, Enterprise Technology, Aberdeen Group. "Companies should also be mindful of how limited-scope technology investments (such as Sarbanes-Oxley controls) can be leveraged across other, broader processes (such as enterprise risk management) for maximum ROI and efficiency."

While only 6% of surveyed companies named compliance facilitation as one of the top two roles technology played in their business, they were disproportionately successful in leveraging it, with 57% of the segment deriving positive benefits from compliance initiatives. This stands in contrast to the 36% of all surveyed companies that reported obtaining benefits from compliance. There is strong correlation between corporate awareness of technology's compliance role and the likelihood of turning compliance-related costs into business opportunities.

Government assistance, intervention, and mandates are unlikely to dissipate any time soon. For those organizations not able to find demonstrable return in the form of business benefit from compliance investment, there is always the intangible return of leveling the paying field and fair practice. Thirty-five percent (35%) of European companies and 36% of North American companies report that compliance prevents harmful and unethical business practices.

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