Analysis: High Speed Compliance

By Jeffrey Rothfeder  |  Posted 05-01-2004 Print Email
Every company will approach Sarbanes-Oxley compliance differently, depending on its DNA. Yet certain features of the "compliant company" of the future are emerging, with technology, operations, networks and databases all affected by the legislation.

No one would confuse Crown Media Holdings Inc. with media giants like Time Warner Inc. and Viacom Inc. With only $208 million in 2003 sales, the Greenwood Village, Colo. owner of the family-friendly cable station Hallmark Channel competes for advertising and distribution agreements with some of the best-known corporations in the U.S. Still, over the past year, Crown Media has been undertaking a dogged self-analysis that may, to some degree, reduce the gap between the company and its much larger rivals.

Credit the effort to the Sarbanes-Oxley Act. Passed in the summer of 2002, the legislation sets a series of deadlines for public companies to certify that their financial results are accurate, that all material information is reported in a timely fashion, and that they have ironclad process controls to protect the integrity of their financial data. Otherwise, they risk having their CEOs experience the indignity of a perp walk out of company headquarters. In demanding these guarantees, the act is arguably responsible for the most thorough going facelift among U.S. businesses since the founding of the Securities and Exchange Commission in the wake of the Great Depression.

To accommodate Sarbanes-Oxley, Crown Media, which must produce its compliance report by the end of this year, mapped every major process in its balance sheet used to handle incoming and outgoing revenue and expenses. Much of this data had been consigned to simple, stand-alone, Excel spreadsheets, often without any safeguards to ensure that the numbers weren't tampered with before being consolidated into overall company results. To aid in this effort, Crown Media purchased a software package called Movaris Certainty, one of many programs offered in the wake of Sarbanes-Oxley (others include SAS Corporate Compliance, Oracle Internal Controls Manager and OpenPages' SOX Express).

The Company of the Future

Application

Financial Control Software
Creates and monitors processes and controls in financial-related databases.

Accountability Programs
Monitors specific underlying critical and material financial activities, such as marketing and sales campaigns, T&E accounts and equity offerings.

Dashboard Software
Tracks information in financial-related databases to provide "instrumentation" that illustrates key areas of corporate operations and compares them against industry or internal benchmarks.

E-mail Security
Monitors incoming and outgoing e-mail for suspicious behavior and catalogues and archives these files for future reference.

Crown Media uploaded its Excel data into Certainty, and input the processes used for recording each financial transaction. The software, in turn, produced a hierarchy of preventive controls for every division and for every type of financial activity in the company. With these controls, when there is noncompliance or a possible misuse of internal data—a purchase order filled out by someone not authorized to do so, for instance, or a number changed in an accounts-payable record without sign-off from a chain of supervisors—executives receive an alert that pinpoints the problem and triggers possible disciplinary or mitigating action. "The program is analogous to an IT monitoring system that tracks a network for glitches, intrusions and other anomalies," says Mark Thompson, Crown Media's senior vice president of finance and IT.

That should satisfy the Sarbanes-Oxley requirements. But there's an added potential benefit emerging from Crown Media's compliance project that its executives are just beginning to appreciate: Much more than before, the new system has made internal financial data instantly available and transparent throughout the company. Information such as advertising contracts is no longer locked away in spreadsheets. That lets Crown Media pursue the kind of nimble campaigns, involving sales and other strategic operations, that larger corporations with expensive, proprietary company-wide networks traditionally enjoy as a business advantage. "We're not approaching Sarbanes-Oxley as purely a compliance process," says Mary Dzabic, Crown Media's director of reporting and compliance. "Automation generates cost savings and cross-team activities that allow us to focus more on analysis and adding value to our jobs."



 

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