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Compliance

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Firing On All Cylinders

Having the proper infrastructure in place is critical to measuring enterprisewide performance.

In this era of heightened concern about compliance and cost controls, it's easy for investment management executives to monitor some parts of their organization. They can put in cost controls to oversee accounting and budgets or add technology that monitors trading compliance. But what about the overall operation? How do they know when the enterprise engine is firing on all cylinders? Corporate performance management (CPM) is a growing trend among financial services firms looking to improve their bottom lines and ensure that they don't run afoul of the ever-increasing regulatory environment in which they operate. "It's absolutely on people's radar screens," says Lee Geishecker, VP and research area lead for cross-enterprise operations at Stamford, Conn.-based Gartner. "Investment is starting to happen, and compliance is starting to have an impact."

Gartner estimates that spending on technology and services to assist firms in managing the performance of their companies is in the $350 million to $500 million range and will grow to more than $1 billion in about four years. One of the driving factors will be Section 404 of Sarbanes-Oxley, which requires publicly traded companies to put in place and maintain an adequate internal control structure and procedures for financial reporting, according to Geishecker. "You don't buy a CPM application and suddenly you're in compliance with [Section] 404," he says. "It comes down to getting a much better handle, in a faster time frame, of accurate, consistent financial data. You don't have the luxury anymore of taking 28 days to close your books."

Warning: Slippery Road Ahead

Most companies are extremely aware of the need to ensure the accuracy of their financial records and the soundness of their infrastructure, says Robert Coghlan, head of corporate governance at PNB Paribas in New York City. What's lacking is "the overall hierarchy of reviewing the entire organization," he says.

That means comparing what goes on across the entire organization and using a team approach to pinpoint deficiencies and ensure that steps are taken to improve weaknesses. And it means building an infrastructure comprising technology, policies and procedures, and standards for everything from human resources to accounting, and then ensuring that those policies and standards are the rule and not simply the exception. Coghlan says good governance stems from four factors: instilling a culture of integrity; integrating governance into business processes; creating measurement tools and metrics; and leveraging technology to make it all happen.

Tracking what's going on at any given time in the organization is not easy, but Coghlan has built a dashboard that tells him if the wheels are falling off in any area of the business. "It's a real-time dashboard that tells me if something or some things are failing," Coghlan says. He calls it RPM, short for Reporting Project Management. "It's a way for us to measure the performance across the entire corporation."

The dashboard draws on feeds from multiple systems and centralizes information into a database, which rates performance within pre-set ranges as green, yellow, orange or red. "I can see if an area is deteriorating - it stands out on my computer so that I need to take a look," he says. The system covers a wide swath of activity in the company and drills down into different divisions, covering activities including finance and compliance.

To make sure policies and procedures are current, PNB Paribas conducts annual department reviews. The monitoring can range from ensuring job appraisals and training standards are up to date to monitoring ongoing group performance on elements such as travel budgets. "If you're traveling and the only flight you can get is 40 percent over what your policy says, we don't hinder an account officer from traveling," Coghlan says. "However, we track it because it should be the exception and not the norm." Think PNB Paribas is sweating the small stuff? "You look at $3,000 here and $3,000 there, and before you know it, with 2,000 employees, you're [over] budget," he says.

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