Calls for greater transparency in the capital markets first emerged in the aftermath of the Enron and WorldCom scandals, which shook investor confidence and spurred Sarbanes-Oxley in 2002. The current financial crisis has intensified these calls, which peaked following the Madoff scheme.

Now, as the U.S. struggles to emerge from its worse economic crisis in 80 years and regulators ratchet up the scrutiny, every capital markets firm has been forced to reexamine the way it reports financial information.

"Our clients at MTB have long wanted transparency," says Jim Hannan, managing director of fixed income strategy at MTB Investment Advisors, which manages $14 billion in assets. "WorldCom and Enron and Sarbanes-Oxley led to the first wave of demand for increased transparency as to what a cash manager was doing. But especially at the short end of the yield curve, if you're managing the operating cash of a large corporation, there is now tremendous demand to know what you're doing with the money."

Tolerance for risk is at an all-time low. "The world has changed," says Courtlandt Gates, CEO of Clearwater Analytics, a provider of Web-based portfolio reporting and analytics. "We're almost at the two-year anniversary of the hedge fund meltdown at Bear Stearns and at the one-year anniversary of Lehman Brothers and AIG. People want to understand their exposure to asset categories, and they want to know their exposure to issuers or counterparties."

Treasurers, CFOs and chief investment officers can't survive if it takes them two days to understand their counterparty exposures, Gates adds. "They need to have the information at their fingertips."

While regulators are pressing firms for more data, organizations pushing to retain clients are simultaneously increasing internal governance, reporting and communications efforts. Together, these pressures are driving investment in tools to enable the necessary transparency. According to a recent Forrester Research study, the market for security governance, risk and compliance software is expected to grow to $1.3 billion by 2011.

Daily verification and data scrubbing is critical for an accurate accounting of financial risk and performance, Clearwater's Gates notes. And if transactional data is wrong, both accounting and risk data will be wrong, he suggests, asserting that automation is the key to effective reporting.

"People can't rely on spreadsheets now," he says. "Historically firms generated information for investors by using manual processing and spreadsheets like Excel. But it's very difficult to do [reporting] accurately or on a timely basis like that."