Compliance costs rise

Next few years to see big increases in spending

The total cost of implementing systems to aid compliance with corporate governance legislation may increase over the next few years as those systems are streamlined and improved, say experts.

Twenty-three percent of companies have had to invest more than they anticipated to achieve compliance with International Financial Reporting Standards (IFRS), according to a survey of 236 European chief financial officers late last year by management consultancy and IT services firm Atos Origin.

Sixty-seven percent kept to their budget, which was under 1m (euros) for 57 percent of respondents.

Atos Origin partner Dennis Horner believes that many organisations have implemented manual workarounds while rushing to meet IFRS, Basel II, Sarbanes-Oxley and other compliance deadlines. The resulting lack of automation will cause compliance costs to rise over time as these systems are updated, he predicted.

“Many organisations are still using Excel spreadsheets to recalculate figures for IFRS rather than adjusting the underlying ERP [enterprise resource planning] systems,” he said. “The whole IT cost has not yet been fully explored.”

Elsewhere, a poll of European enterprises and storage suppliers suggests large organisations will spend more in 2006 on installing Sata hard disks to aid compliance by speeding data retrieval.

“Organisations are copying multiple images straight to disk,” said Hamish Macarthur of analyst Macarthur Stroud International.