As European governments step-up regulation on corporate governance how can Directors and Executives best keep up?
In the wake of the financial crisis, governments have begun to more closely scrutinise the governance and accountability of corporations. To that effect, many European countries have implemented new regulation on corporate governance with the intention of making boards and Executives more accountable to their staff and shareholders. For example, both the UK and Germany’s new Corporate Governance Code sets out new guidelines that affect the way we audit and report both a company’s financial position and the strategic impact of its position.
So how can companies apply best practice to these new regulations?
In the UK, new financial auditing reforms mean that smaller businesses and some subsidiaries are now exempt from external audits. This will save businesses a huge amount of money each year in audit fees but transfers the risk of accounting and reporting errors onto the business – if there’s a mistake it is up to the business to spot it before it is too late.
This means that top-down accounting policies and procedures must be absolutely clear and followed to the letter. The potential for huge losses as a result of manual accounting errors also means that extra care must be taken and extra checks put in place to ensure there are no mistakes.
Adra Match Advantage: With automatic data matching software from Adra Match, the majority of your reconciliation is completed automatically leaving only a small percentage of mismatched items to be approved semi-automatically. This ensures close to zero mistakes as a result of human error and a remarkably clear auditing trail should anything go wrong. We’ve all been a victim of human error in the reconciliation process as some stage. Wouldn’t it be great to reduce risk and shrink the manual labour down to a minimum?
A key focus of all new regulation is to ensure better transparency and accountability of a company’s financial position to employees and shareholders. This is carried out primarily through financial reports which are expected to be compiled promptly before each meeting and include a good deal of strategic analysis and insight.
This will be a tricky issue to deal with for most businesses. Policy and procedure can stipulate that more detail and strategic analysis needs to be included, but down in the finance department we are stuck for time to complete this detailed analysis. For most businesses this will require additional staff or responsibilities to be assigned to the financial department.
Adra Match Advantage: Using Adra Match’s automatic reconciliation software frees up time for strategic analysis of the figures and to create stunning reports to present to the board and shareholders.
This article forms the first part of our Governance, Risk and Compliance (GRC) mini-series. Check back next week to take a closer look at risk – what new regulation means and how risk can be managed and minimised.