Compliance and the Director

By | December 20, 2006

“While investment behind compliance is generally viewed as a necessary cost burden, Unilever hopes to exploit the deployment of this ECM solution also to derive value for its business for example by analysing the nature of weaknesses in its global financial processes and therefore implementing the necessary process improvements,” says Williams.

But, how might ECM deliver direct tangible benefits to the finance department? One example is sports clothing company Reebok, which looked at ways of automating its accounts payable procedures. At first glance, the obvious answer appeared to be an ERP system designed to smooth AP processes. However, Reebok was a lot smarter. It realised that automating accounting processes would only go so far so it implemented a document imaging and archiving system that dovetails to its SAP AP system. Invoice payments are processed in conjunction with purchase requisitions and inbound invoices are scanned and handled digitally. Apart from meeting ongoing audit requirements, the system increased AP productivity by 30 per cent. As its AP manager says: “The system makes us look good.”

The email challenge

While many might think that paper-based documents are the principle target for ECM solutions, fax and email are equal candidates. Email is exploding. It is not unusual to find an individual wrestling with upwards of 200 emails per day. While many are spurious, it is estimated that 60 per cent of actionable email has some commercial value. Email is problematic. In many organizations, users have created ad-hoc filing systems by creating email folders. Apart from the sheer volume, users have to decide whether a particular email is transitory – like arranging a meeting – or has a longer term business value – say in relation to a contract. In addition, users are frequently called upon to search for related emails but this is unsatisfactory because email client search technology is crude. Integrating email into an ECM system allows users to ‘tag’ documents with meaningful terms. This in turn assists users in discovering all and any documents related to a specific issue. In doing so, it removes the pain and financial costs associated with document discovery.

Email’s fleeting nature means it is easy to lose. Hit the delete key in Outlook, close down the Outlook client and deleted email is consigned to the electronic dustbin. When that happens, the electronic paper trail falls apart. Even archiving from inside email systems doesn’t really help because then users have to trace through multiple archives. That translates directly into lost opportunities, confusion among customers and suppliers and damage to reputation. And that is apart from any legal or regulatory considerations. This has direct consequences for finance departments, especially where personnel are engaged in activities like contract negotiations and debt recovery. An ECM system views email as just another document type so it can prevent email loss and provide a rapid retrieval mechanism.

This has clear implications for administrative efficiency, cash collection and discount retrieval. But, it is in the area of mergers and acquisitions (M&A) that ECM can have an equally profound impact. M&A activity continues unabated, but is paper heavy. Documents span organisations, cross-national boundaries and are notoriously difficult to maintain in some semblance of order. Until recently, fax was considered the safest form of communication and it was not unusual to see contract drafts flowing back and forth between different time zones. With the advent of email, fax has become partially redundant. Nevertheless, document version control in conjunction with email, alongside the ability to track specific documents, takes on enormous significance, especially as a deal reaches the final phase.

It is at this point, when fine detail is being hammered out, tax, compliance and legal experts are contributing input and a continuous re-crunching of the numbers that we get the impression of organised chaos. It doesn’t matter if the company has a defined M&A processes, without ECM, it is almost impossible to know what has been agreed at any point in time. Once a deal has been struck, organisations then have the problem of bringing all corporate assets together. There is an inevitable duplication of paperwork. In many situations, organisations simply ignore the problem, assuming the acquiring organisation has the most relevant set of documents. But, what happens when a liability claim arises that has a history before the acquisition? How do you marry post-acquisition events to the pre-acquisition history? A comprehensive ECM system will allow merged organisations to weed out duplicates, retain a compliant history and preserve vital histories. This can mean the difference between paying out unnecessary damages and successfully defending a lawsuit.

The bottom line

In this article, I have touched upon several examples where ECM makes a positive contribution to the organisation in the context of a compliance-laden environment.

Directors are at the compliance sharp end because they are best qualified to understand the processes that underpin auditable systems. Directors have an instinctive appreciation of document lifecycle management from acquisition through actions, onto referencing, and finally disposition. But this is only the tip of the iceberg. Every organisation generates communications and most will have a value. Anything that has a value is of interest to Directors. But equally, compliance has a cost. The question then is how to make compliance a value enabler.

Williams declares that: “For example, it gives us the opportunity to identify key weaknesses (and inefficiencies) in our financial processes and therefore focus our resources on driving the required process improvements. In addition, we are working with our colleagues in finance to embed the annual Sarbanes-Oxley compliance process into day to day activities. Automation of the process through ECM will significantly help us achieve this objective across the globe.” In effect, Unilever’s compliance efforts will be enabled by the automation of best practice processes that become part of the fabric of the business.

Open Text UK Ltd is exhibiting at Documation UK

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