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Compliance Mountains to Climb

Almost half of finance executives predict they'll have to spend more to follow the rules in 2014.

13Dec_Outlook_p23aA Change in Structure
Conversely, for some companies a change in structure can lead to diminished compliance burdens. “We are pretty fortunate in that we are no longer a public company,” says Darren Heffernan, CFO of Trintech, a previously public financial-reporting software firm acquired in December 2010 by Spectrum Equity Investors. “A lot of things that would concern me out in the marketplace don’t specifically apply to us.”

Heffernan estimates that the company spent about $1 million a year “for the privilege of being a public company.” Yet Trintech’s decrease in spending on internal compliance — about 50% — is virtually a wash against the 50% increase Heffernan expects in spending this year on upgrading systems and hiring staff to help a growing number of clients comply with their own rules and standards.

For example, a growing number of the firm’s clients in Europe, Asia and Australia have regulatory protection of their data handling that they don’t want to risk losing by moving to Trintech’s systems in the United States, according to the CFO. In such cases, the firm has sometimes had to pay to provide a separate data center in the client’s country of origin, he notes.

As data-centric as his firm is, however, the first thought that comes to Heffernan’s mind when asked about the company’s biggest compliance challenges next year echoes that of a large swath of his peers: the Affordable Care Act. “I don’t think we have enough data yet to know whether I should really be worried about it for next year,” he says.

13Dec_Outlook_p24aAs the firm proceeded through its fall budgeting season, the finance chief says, he discovered that “it just seems like there are so many unknown factors about what insurance companies are going to do with the premiums.”

Normally, Trintech’s health insurer based the company’s premiums on its claims history. “But we’ve had indications from our provider that they may have to increase the premiums for next year depending on what they think is going to be put on their backs” by the ACA, Heffernan said. “Will it grow by 10%? Twenty percent? The money is one factor, but it’s the unknown that’s more worrisome. I can’t budget or plan for that.”

The recent Congressional brouhaha over health reform has helped make complying with it top-of-mind for many senior finance executives. In the CFO survey, 32% of respondents said health care reform will be of “high concern” in the upcoming year, while 30% expect it to be a “moderate concern.”

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