Following the much-publicized corporate accounting scandals, including the failures of Enron and WorldCom, insurance company CEOs now not only have to worry about traditional competitive pressures and profits, but also the very real threat of jail time if financial reports are found to be fraudulent.
Luckily, CIOs and their IT teams are quickly developing technology to answer the "most sudden and sweeping changes to corporate governance in history," according to Carolyn Brancato, director of The Conference Board's Global Corporate Governance Research Center (New York).
The Sarbanes-Oxley Act, which requires chief executives to "sign-off" on the validity and accuracy of their companies' financial numbers, "has CEOs and board members in a state of shock," Brancato adds. "People are still reeling from Sarbanes, and there are more regulations coming out, seemingly every week."
In many cases, IT professionals are being called on to help business leaders bring manageability to financial numberswhich in many cases constitute huge volumes of data. "What IT really needs to do is stop the corporategovernance world and get off to check the systems," she says. "But unfortunately, they can't do that. Right now they have to work on the fly."
In many cases, Brancato says, CEOs are desperate for ways to better understand the plethora of financial figures that are begging for their approval and sign-off. In this time of need, a business-savvy CIO can save the day. "There is a huge opportunity for CIOs who understand the business and risk parameters to present useful solutions to the board of directors," she says. "The board of directors is nottechnology oriented and many are unaware of the potential that technology has to solve corporate governance problems. I have seen business-savvy technology leaders consistently amaze their boards with new technology that can make the work in the boardroom easier."
One concern that many CEOs have with the newer corporate governance regulations, Brancato says, is that C-level executives will get bogged down in compliance-related activities and neglect strategic objectives. "There is so much bureaucracy and paperwork around compliance and they want to be able to project a solid view of the company, but they don't want to go through the steps imposed," she says.
Luckily, insurance and financial services companies have had a good track record when it comes to corporate governance. "Most financial companies have already developed good reporting and compliance systems," Brancato says. "In banking and insurance, there has always been a lot of additional oversight from the Federal Reserve and state insurance departments. Financial services is in much better shape when it comes to Sarbanes and they will be better able to absorb additional compliance measures easily."
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio