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Financial Foresight is a publication providing analysis about trends and issues important to senior- and middle-management executives at financial
services companies.

Financial Services

Financial Foresight

Streamlining Corporate Governance Through Control Rationalization

Since passage of the Sarbanes-Oxley Act in 2002, addressing
compliance issues and managing risk have become increasingly
complex, costly and even redundant concerns for many domestic and
foreign public companies doing business in the U.S.

According to an informal online poll that Deloitte & Touche LLP
conducted among more than 400 banks, investment management
firms and insurance companies, the vast majority (83%) said that their various internal control and compliance programs overlap. Only 17% reported no redundancies.

“Public companies are now subject to so many levels of overlapping regulations that many organizations are looking to create a more cost-effective corporate governance model that aligns Sarbanes-Oxley Section 404 compliance with operational risk initiatives and other enterprise risk programs,” says Carol Larson, deputy managing partner for Deloitte & Touche USA LLP’s financial services practice. “The question becomes how to merge all these compliance requirements into a single process that satisfies multiple objectives.”

For a growing number of financial institutions, the answer is to develop a holistic, enterprise-wide corporate governance system that uses a single technology tool, common language and common
framework. Combined with a philosophy to use a top-down
rationalized approach to identifying key risk areas, such a model
– control rationalization – can improve the effectiveness of corporate
governance compliance by focusing management’s attention on the
most critical control issues while decreasing cost.

“Instead of treating all control issues with equal importance, a rationalized corporate governance model eliminates what some in senior management call ‘death by a thousand cuts’ – dealing with all the routine business process control issues,” says Henry Ristuccia, a partner in Deloitte & Touche LLP’s enterprise risk services practice. “Organizations that embrace a control rationalization approach to corporate governance could save 20% to 50% of the cost of compliance.”

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