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Issue Date: October 2007

IT systems keep directors in control

4 October 2007

Relying on third parties to deliver corporate governance and performance information is asking for jail time. Company directors today no longer enjoy the protection from prosecution they once did, as they now have to personally sign-off on financial results and their companies' level of compliance.
"This means personal accountability with no-one lower down the ranks to blame," says Amir Lubashevsky, director of Magix Integration. "Today's directors need to ensure they have the systems in place to be able to easily verify the information they are supplying to the outside world."
In the past, directors would rely on people in middle management to supply them with reports and information. This was rarely checked and when problems occurred these same middle managers would be tasked with finding a solution, which was normally a quick-and-dirty patch that had no bearing on the company's long-term strategy.
"Directors therefore had no access to realtime information and could not ensure the data they were handed was accurate; nor could they be sure every division under them was on running at optimal efficiency," adds Lubashevsky.
"In the business environment we operate in today, it is unthinkable for a director not to have a system available that at least allows for easy access to key indicators of company performance and compliance, even if this is simply compliance to internal policies."
The reality is that directors need a dynamic system that draws information from multiple sources and presents it to them in a simple interface, highlighting the performance of critical business components. When one of these components varies outside of acceptable parameters, an alert should be sent to the relevant people to ensure prompt attention. Of course, while IT systems are used to monitor and alert the business, these risk components are not necessarily technology related.
Unlike a shareholder, who is happy to act on second-hand information to make investment decisions, the CEO and directors of a company can not stake their reputations on third parties when monitoring the performance and level of compliance of their businesses. Key performance and compliance indicators need to be available to them in realtime, making it easier for them to make better decisions faster, making them more productive.
This scenario, Lubashevsky admits, is an ideal as few companies, if any, are geared to implement a system like this. Additionally, few directors will be able to handle this much pertinent information on a 24x7 basis. "What is needed before systems are implemented is a culture change and directors who are able to think and act different to the norm."

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