The Sarbanes-Oxley (SOX) Act 2002 brought new governance and financial disclosure requirements for US public companies, the likes of which had not been seen for over 70 years. The goal of putting these new obligations in place was to reform standards of public financial reporting and auditing, and strengthen corporate accounting controls following such financial disasters as the Enron and WorldCom collapse, among others.
Other reforms and accords such as Basel II for Banking and Finance, and Clerp 9 2004, governing Australian corporate law, also provide guidelines to help improve financial disclosure and risk mitigation processes.
Section 302 of Sarbanes-Oxley outlines that officers signing financial reports must set up and maintain internal control systems and procedures for financial reporting.
Real contract management systems such as Open Windows Contracts provide effective transparency and visibility into financial commitments that organizations are often unable to achieve using financial and accounting systems. Public companies require control procedures to be established and continuously improved, over financial commitment handling and operational activity. Contract management systems with business process automation can ensure a corporate-wide consistency of risk identification and mitigation procedures that is easily and regularly auditable by signing officers responsible for Financial Reports.
Real contract management systems allow for greater controls to be put in place around:
- contract development processes,
- contract award, negotiation and agreement creation,
- relationship compliance,
- commitment management, and
- risk mitigation and Business Intelligence.
The centralization and standardization of these processes helps companies comply with their commercial and regulatory obligations, and in addition, substantially reducing the cost of compliance, and the risk of litigation and penalties having to be enforced.
Sarbanes-Oxley Section 409 deals with 'Real Time Issuer Disclosures' and requires "urgent" public disclosure of material changes in financial or operational conditions. Material information relating to the company and its subsidiaries must be made known to responsible officers within each entity. This means again that systems for corporatization of procedures for disclosure must be put in place.
One of the real benefits of implementing a contract management system using software, is your ability to take pre-emptive action on any commercially critical corporate trigger point before it impacts your business. This also allows early disclosure in accordance with regulations.
Material changes in operating conditions are required to be urgently disclosed, therefore the earlier operational changes are picked up the better for shareholders. These events can be identified earlier with systems in place for tracking and managing commercial operations, and reporting flows from real-time data. It's not rocket science.
Open Windows Contracts, is the leading Asia Pacific vendor of contract management software. Open Windows offers a free version of their contract management software and further commentary that you may find interesting.
Orignal From: Sarbanes-Oxley and Contract Management
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