context
Financial governance covers a range of applications that are targeted at the CFO and are focused on improving financial processes and controls, particularly in the final stages before disclosure. Many applications focus on particular aspects of financial governance. In the next three to five years, a clearly defined market will emerge that will provide application suites specifically addressing this topic.
Financial governance is a new market that will emerge in the coming years, combining elements of ERP, finance GRCM and CPM suites. It will build additional process controls around financial consolidation to support financial close processes and the production of periodic financial statements for regulators. It will augment the compliance controls in finance GRCM solutions with broader controls that monitor capabilities. When delivered as a comprehensive solution, it will enable CFOs to better manage financial risk.
However, while financial governance solutions mature, CFOs will be faced with the challenge of addressing their most pressing governance issues with a variety of point solutions. IT professionals must help balance these short-term needs with longer-term strategic investments, and should understand the plans of their ERP, BI and CPM vendors to provide solutions in this area.
With ever increasing regulations, the maturity of SOX (Sarbanes-Oxley) processes and the growing need for enhanced risk management disciplines, enabling a sound financial governance strategy is very complex. Most finance departments currently manage these processes in disparate silos and systems that fail to provide an integrated view of audit, risk management and financial control compliance. The need to comply with global financial disclosure legislation, such as Sarbanes-Oxley, has been a major challenge for CFOs in recent years. Companies have invested millions of dollars to document key risks and internal controls, test them, and audit the results. Today, the burden of this effort is all too apparent-now, CFOs must focus on reducing the costs associated with financial compliance legislation, establishing repeatable and sustainable governance practices in order to streamline financial statement production.
The convergence of financial governance disciplines provides the opportunity to streamline processes, improve risk management, and create greater transparency and visibility to financial processes, risks and controls.
core components
Financial governance applications support financial departments in streamlining financial processes, improving audit processes, extending the controls inherent in ERP systems and managing financial risk. The core components of financial governance include:
- Financial consolidation,
- Inter-company transaction management,
- Financial controls and compliance,
- Financial close and reconciliation management,
- Financial analytics
challenges
- integrate different applications, usually from different vendors (ERP systems, CPM suites, and finance and audit GRC products);
- high risk error due to too many manual operations in the closing financial reporting process;
- long closing cycles;
- inadequate process controls and auditability;
- lack of supporting documentation and approvals;
- reduced filing deadlines;
- emphasis on public accountability and transparency;
- complexity of corporate governance;
- organization and management of compliance activities determined by international regulations, such as the Sarbanes-Oxley Act (SOX), and local regulations such as Legge 262.
