How does UK SOX fit into Compliance Management?
The UK audit industry and Financial Reporting Council (FRC) have been designing a UK version of the US Sarbane-Oxley Act (SOX), a piece of US governance first brought into law in 2002. In March 2021, the Department for Business & Industrial Strategy (BEIS) published a whitepaper setting out its proposals for a UK equivalent of the US SOX legislation. Designed to restore confidence in the auditing of listed companies and protect investors from fraud, UK SOX will force UK-listed companies to adopt a more rigorous internal framework. Directors will be required to attest that internal controls are robust and effective to ensure the company’s financial statements are reliable.
Many assume that achieving SOX compliance is a herculean task, a complex and costly endeavor that would put an untenable strain on already stretched resources. However, Yang Zheng, Senior Director of Customer Success, says the good news is that through proactive planning and clever implementation of the right technologies, businesses can minimize the impact of UK SOX and can actually benefit from it. Rather than allowing UK SOX to become an additional reactive and administrative overhead, the business can redesign its risk and compliance culture by proactively implementing a successful SOX strategy to manage its entire GRC landscape.
What is the timeframe for UK SOX?
The government has outlined its intentions to bolster Britain’s compliance landscape, with the UK SOX regulations applying to financial years ending in December 2023 or after.
Suppose you are a listed company in the UK. In that case, you need to proactively prepare your UK SOX strategy as soon as possible to allow adequate time to lay the foundations for operationalizing UK SOX and implementing technologies that will help you to achieve a future-proofed risk and compliance solution.
What does this mean for your business?
Whether it’s the evolving nature of business or the leveraging of new technologies, the compliance landscape is constantly shifting. There are more challenges today in the security and compliance world than ever before, so it’s easy to see why many view UK SOX as an additional headache.
But the implementation of UK SOX is not without its benefits. The legislation would provide us with a more detailed and controlled compliance management environment and improve documentation, increase audit committee involvement, standardize processes and reduce complexity.
However, those benefits will only be achieved by taking a proactive approach to risk and compliance and using the run-up to legislation to understand how we can simplify different regulatory needs alongside the amount of testing and evidence collection needed.
Compliance Management technology can help.
Implementing the right compliance management software system, or stack of systems, can significantly reduce the strain by automating tasks and providing ongoing monitoring across an entire organization. This will, in turn, save you time and money, allowing you to reallocate your resources to achieve other business benefits.
Taking a proactive approach
If we consider the US case, the companies that have thrived since the introduction of SOX were those that have understood the bigger picture. These companies haven’t just focused on providing the auditor with the information they need, but on wider objectives from across the compliance landscape. This broader approach means that SOX can become a catalyst to mature your existing risk and compliance management culture or develop new ways of working that maximize your return on investment.
Proactivity is key.
Though your organization may still have time left before it has to tackle SOX, by acting now, you can lay the foundations of frameworks that will enhance your entire compliance infrastructure. This means that, instead of operating reactively to address any issues that SOX may create, you are proactively monitoring your business, identifying any areas in which you may fall short, and taking action before you even begin your end-of-year reporting.
Choosing the right tool for the job
Today, most listed companies utilize large technology stacks to monitor different areas of risk and compliance. But to fully operationalize your approach to UK SOX, you need to expand these frameworks and look beyond what the auditors might look for, instead considering localized risk factors from across your entire operation.
GRC Software
Many modern GRC tools on the market can help. GRC software platforms such as SureCloud are specifically designed to help you change how risk and compliance management is delivered within your organization. They are designed to seamlessly integrate with your existing systems and level up your compliance culture by covering strategic planning and process automation.
The current best-in-class GRC tools do this through a process of continuous control monitoring. This means they are constantly evaluating all aspects of your business and feeding them back into one central point of evaluation – a single source of truth that gives you a line of sight on compliance across your entire operation.
Because everything is centrally managed, you can adapt your current processes to any changes in the legislative landscape. Understanding how UK SOX will impact your organization can be rolled in with your existing compliance activities, significantly reducing time and expense.
Continuous monitoring also means that you can react to issues in real time. By implementing these processes now, your company will understand how the current risks within the business map onto UK SOX, enabling you to proactively remediate problems before they become compliance issues.
SOX isn’t a burden, it’s an opportunity
The uncertainty around UK SOX and its impact on the risk and compliance community is understandable. While we won’t have concrete information on specific rules and regulations until any legislation comes into effect, businesses can work proactively using existing frameworks and evidence from the US to prepare for the future.
By implementing new technologies and laying the foundations of your processes now, you can get a better picture of what your roadmap to compliance looks like. It’s an investment that will not only harmonize your compliance strategy but save you valuable time and resources when the standards are eventually finalized.