EU Financial Compliance Rules

The EU Commission has decided to make changes to the 8th Directive on Corporate Governance. The changes will affect all stock-exchange listed companies in the EU and associated countries.

8th Directive

The EU 8th Directive on Company Law is for European listed companies what Sarbanes-Oxley was for US SEC listed companies: a set of rules and legislation to improve investor confidence. With comparable rules in all parts of the world and not US alone or EU alone, it will be easier for investors to compare their options.  Some of the most costly elements of compliance with the EU legislation will be documentation of financial processes and risks plus documenting and running internal controls procedures.

Efficiency

During the 1990’ies many BPR (Business Process Reengineering) projects raised questions on the Value Add on activities around Internal Controls. With the recent financial scandals the pendulum has in recent years pointed in the direction of Internal Controls again. B-Innovation believes that the upcoming projects related to EU 8th Directive should focus on both improving internal controls and deriving efficiency from conducting the projects. A potential way forward is adapting the techniques from lean.

B-Innovation

B-Innovation focuses on helping companies innovate and improve their business. We believe that the changes in the 8th Directive will affect the way companies conduct their business. They will have several reasons including:

• Compliance with the directive
• An interest in improving business processes
• Improve risk management and internal controls
• Be comparable with global companies on corporate governance
• Inspiration from the US Sarbanes-Oxley regulation
• Intent to be on the same control and risk level as US-listed companies to stay competitive on the stock market

Whatever the reasons, companies will change their approach to compliance.

Whereas certain US companies derived business benefits through their Sarbanes-Oxley projects, many companies envisaged large costs but few benefits.