Compliance Needs ERP
The regulatory landscape is getting more complex for corporate entities all the time, both nationally and internationally. In the EU, the GDPR regime is looming in May 2018. The slightly less well known 2014 Directive 95 is already in force, mandating non-financial and diversity information from over 6,000 large organisations across the EU.
These are general corporate obligations, layered on top of which are specific regulatory requirements for particular sectors such as financial services, pharma, carbon fuel processors and distributors, waste processing and many others. In financial markets, MiFID II also comes into force this year.
This is not to mention the accounting requirements and standards for every organisation from multinational PLCs to SMEs to charities and not-for-profits. Within the EU and under the International Accounting Standards Board they are mostly standard but in individual countries and internationally there are inevitable variations.
All of this means a potential mountain of work for corporate administrators. It will mostly add to the responsibilities of financial and accounts executives but also company secretaries (or their equivalents in different jurisdictions) and in some cases senior HR/HCM managers. Above all, the legal responsibilities for governance and compliance, as well as strict adherence to accounting standards, always end up with the CEO and board of directors. Who in turn expect their staff and systems to cope with the day-to-day details.
This is where ERP comes in with strength. Almost all of the facts that have to be recorded and accounted for in regulatory compliance can be maintained in the corporate ERP system and its database(s). Financial accounting transactions are obvious, but ERP extends the capabilities to traceability of products through their manufacturing and distribution cycle, for example, or conformance with the WEE Directive. Compliance with the GDPR Directive on protection of personal data, now less than a year away and affecting all organisations to some degree, depends heavily on customer records in the sales, marketing and CRM systems. HR software, often an ERP module, is the repository for protected staff records.
ERP is often described popularly as a fully joined up system, which indeed is a pretty good description. It strives to link every process and record in the organisation. Precisely for that reason it is the primary tool today for compliance across the board, whether financial and taxation or data protection or adherence to environmental regulations. It is comprehensive, accurate and transparent by its nature. Management decides who allows access to what, or what to disclose. But the required information is always in the ERP system.
Equally important, the information is easily extracted and compiled for statutory compliance reports to regulatory authorities or to answer specific enquiries or investigations. Even the most obscure (and historical) details can often be found through an ERP system’s search function.
There are also reputable specialist solutions for compliance in specific regulated industries like financial services that are essentially dependent on the data in ERP systems. They are designed to work with the leading ERP brands such as SAP, Oracle, Infor and others. They could be described as add-ons but that would be a misnomer since some are so powerful in their own right. But the salient fact is that they work with and depend on the ERP system in any organisation.
As the extent of regulatory compliance extends within the EU and internationally—and undoubtedly Brexit will add further complications or at least special requirements—software is the only solution. Compliance depends on two things: actually complying in all your business dealings and processes—and being able to prove that you have. That is where your data records are essential and they are almost exclusively generated within your ERP system.
This blog post was written by Sean Jackson, Managing Director at Lumenia Consulting. If you would like further information on ERP Compliance or any aspect of ERP, please send an e-mail to Sean Jackson.