It was a $91 million keynote speech. Amit Chatterjee, senior vice president of commercialization for SAP Governance, Risk, and Compliance (GRC), said that’s how much his 70-minute speech would cost, measured in terms of corporate financial loss attributed to GRC challenges.
According to the Public Company Accounting Oversight Board, companies lost an accumulated $638 billion in 2005 because of unresolved GRC issues. That equates to $20,000 per second. And that’s how Chatterjee arrived at his figure, giving the audience a striking example of the staggering costs created by companies that don’t address GRC requirements.
It was one of several keynotes delivered by SAP executives at the SAP Insider conferences held March 12-14 in Las Vegas. With a new, stronger focus on GRC topics, Wellesley Information Services combined its Financials, HR and GRC 2007 events. About 5,000 attendees had the chance to learn the latest IT innovations and hear from companies with successful strategies.
With three days of presentations, attendees could gather information, network with peers and pick up tips to take back to their companies. SAP’s Doug Merritt, executive vice president and general manager, Suite Optimization, SAP Labs, spoke on general business trends. SAP Americas’ CFO Mark White spoke about how to improve financial visibility and predictability. As always, finance and HR sessions were in demand. But it’s fair to say that GRC stole the show as a new and somewhat frightening issue.
A massive problem
Chatterjee’s comments were among the most compelling. He used hard data to appeal to listeners, trying to persuade them to tackle GRC head on. He noted that 50 percent of all publicly traded companies will be written up in the newspaper for something negative, a statistic he attributed to the Wall Street Journal. As well, 50 percent of the Fortune 1,000 lost 20 percent of their stock value because of just one negative event that made the news. Finally, he said that 22 percent of those affected by such negative publicity never recover, a fact he attributed to research from consultant Deloitte.
“It’s a massive problem,” Chatterjee said. While some executives worry about the expense of implementing compliance software, he said, they fail to understand the potential liability of not doing so.
He noted that SAP launched a dedicated GRC unit about a year ago, offering SAP applications for Governance, Risk and Compliance. This suite includes SAP GRC Process Control for monitoring key controls for business processes and SAP GRC Global Trade Services, to manage foreign trade processes to ensure compliance, expedited cross-border transactions, and optimum utilization of trade agreements.
He highlighted SAP customer Tesoro, one of the U.S.’s largest independent refiners of petroleum products. It has used SAP to achieve greater efficiency and reduced manual labor in its GRC processes. It also created a more accurate and timely reporting process, something Chatterjee said all companies should strive to do.
More regulations, higher cost
Another data-heavy GRC presentation came from SAP and PricewaterhouseCoopers executives, “101 Ways to Increase ROI (return on investment) on Your Company’s Compliance and Risk Spend.” Speakers noted that the number of regulations that affect IT is expected to double by 2012, and that by 2010 companies will spend $855 million on GRC software.
Regulations such as Canada’s Bill 198, the U.S.’s Sarbanes-Oxley Act of 2002, and Hong Kong’s Code on Corporate Governance Practices are just a few of the growing number of rules. Compliance creates extra cost and IT work, but failure to comply can be a financial disaster.
“Good corporate governance is reflected by many intangibles, including brand and reputation, and it translates directly into share price premiums,” said SAP’s Louise Stonehouse. She and PricewaterhouseCoopers’ Daphne Teo cited examples of success with GRC implementations, including one SAP client that improved its compliance by 85 percent with SAP GRC Global Trade Services.
Rounding out a packed GRC agenda were many other sessions, including one by Erwin Heblon from electronics firm Jabil. His presentation was entitled, “Case Study: Lessons from Jabil’s Holistic Approach to Governance, Risk, and Compliance.” He explained that Jabil implemented SAP xApp Analytics for Corporate Governance in combination with SAP Management of Internal Controls for some aspects of its compliance needs.
Suzanne Flannery presented, “Case Study: How HRIS Contributes to Sarbanes-Oxley Compliance at Ogilvy & Mather.” She stressed the idea that Sarbanes-Oxley compliance is a work in progress and that it’s critical for the HRIS department to ensure that everything is documented in as much detail as possible.
But GRC wasn’t the only topic on the agenda. SAP’s Doug Merritt spoke about general business trends, finance and HR issues too in his day-one keynote. For instance, he said the top five business drivers today are: companies trying radical new business models; a paradigm shift to circumstances where customers most of the power; a “flattening” of the world, with real-time, global access to products, services and customers; an imperative to handle GRC issues; and broad access to global capital.
He also pointed to results of the ongoing SAP/ASUG Benchmarking program, an initiative that lets SAP customers assess their use of technology and compare their results to other companies’ results. For instance, he noted that companies in the high-tech sector with top-notch HR performance generate 16 percent greater operating income per employee than average performers. He said best performers have certain traits in common. They have technology that is aligned with business priorities. They measure and benchmark their performance. They adopt shared services. And they have consolidated systems.
Merritt and co-speaker Chakib Bouhdary, senior vice president, Value Engineering, SAP Americas, presented a newly created award, the SAP Annual Finance & HR Leadership Award. They gave the award to Slade Gorton, a fast-growing seafood wholesaler with $320 million in revenue and 225 employees. Slade Gorton used SAP applications to achieve a 70 percent lower finance cost than that of average performing companies, results confirmed by SAP/ASUG Benchmarking. And they gave the award to Marathon Oil, a $6.4 billion company with 28,000 employees. It achieved a 158 percent return on investment from its SAP applications.
Award-winning “People Portal”
One of the most popular sessions was presented by Steve Savis from Monsanto, an agriculture company with $6.3 million in revenue. Savis talked about the company’s “People Portal” in his presentation, “Case Study: Mission Impossible – Globally Implementing Incentive Planning, Performance Management and Succession Planning at Monsanto Company.”
Monsanto implemented SAP NetWeaver Portal to create a site for managers, employees and HR generalists. They can view and update personal, job and team information. They can review and plan incentives, create goals online, perform people review and succession planning. And they can access policies, procedures and corporate communications, all online through the portal.
Savis stressed that the user interface of the Monsanto People Portal is simple to learn. “If you’re spending a lot of time training on your self-service portal, it’s not successful,” he said. He noted that the company’s HR team won Monsanto’s “Passion, Courage & Ability Award for Project Excellence” for the portal, which serves 17,000 employees in 64 countries and five languages.