BOC faces £20m Sarbanes-Oxley compliance bill

More than we first estimated, says chief executive Industrial gases group BOC said it faces higher than expected costs, totalling around £20m, over the next two years in order to bring the company into full compliance with the Sarbanes-Oxley (SOX) corporate governance regulations.

In the company's third-quarter results presentation to analysts, BOC chief executive Tony Isaac said he was "surprised" about the high corporate costs of compliance compared to first estimates.

The deadline for SOX compliance is September next year and BOC said it will have to spend £10m this year and another £10m in 2006 to bring its financial reporting and internal controls up to scratch.

In a conference call, Charles Spence, director of financial control at BOC, said of the group's increasing corporate costs: "One of the underlying drivers is the cost of compliance with Sarbanes-Oxley." The SOX legislation was introduced by the US to prevent another Enron scandal but there have been increasing calls by businesses for the rules to be relaxed because of the high costs of bringing financial reporting processes and related IT systems into compliance. The Confederation of British Industry called for changes to SOX claiming that it is too onerous and costly, while BT is one of a number of companies which have threatened to de-list from the New York Stock Exchange because of the high costs of compliance.

Continuity Forum Comment

There is no doubt that good Corporate Governance is essential, but the value and cost of compliance needs to be carefully balanced against the benefits gained. Many organisations are finding that SOX is the equivalent of using a sledgehammer cracking a nut!

Yes Enron, was a terrible scandal and many were seriously affected by the collapse of the company, but the proper controls, checks and balances need not entail the spiralling costs that seem to be arising.

What is interesting is that whilst spending on Governance is seen to be rising dramatically, the effective BCM is being overlooked, with many Corporates failing to ensure that the business is sufficiently protected form the myriad of threats facing them. Planning is still somewhat fragmented and BCM teams are often severely overstretched and lacking in both support and resources.

It seems somewhat incongruous to us that there is an awful lot of money being spent on Governance projects that are by their very nature limited and specific in their value when something as vital as BCM is screaming out for serious improvement and investment.

Whilst it is difficult to state as an absolute fact, all the indicators point to Corporations losing far more money through avoidable Business Continuity Events than through Governance issues each year. We, and many others we're sure, would prefer that regulators address these issues rather than aggressively impose overly arduous (and expensive!) Governance Procedures. 

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