The Reality of Real-Time Reporting

New, superfast 8-K rules under the Sarbanes-Oxley Act could spawn problems with mergers, loan covenants, and share prices. Needed: a solid risk-management plan.

To avoid problems with real-time reporting, some executives are taking a longer-range approach. Scanning data generated by their operating units, they hope to uncover brewing material problems early in the game. Each morning at Cognos, for example, Manley pores over “a rich array of report cards,” including current information about software deals that have been closed or changed in the last 24 hours or ones that have been pushed to a later quarter. The finance chief feels that the data provides him with an excellent resource for tackling 409-related risks. “If I had several large deals fall out of a quarter, that could create a potential material event,” he says.

But such internal transparency will likely be hard to come by at most companies. “CFOs are going to have a huge challenge on their hands to comply with 409,” says Richard Roth, chief research officer at The Hackett Group. “Even at the best companies, it’s a tremendous task to find and reconcile data and get it back to the business unit” for confirmation. Finance executives at companies with many operating units, each with differing data standards, will find it particularly tough sledding, he adds.

At the same time, some executives feel that investments in technology can go a long way toward helping their companies comply with the dictates of current financial reporting. Even as it attempts to emerge from bankruptcy, Owens Corning will be installing a business-performance-management system over the next few years, according to corporate finance director Kent Wegener. A data-warehouse system (with software provided by Kalido) has already been installed, although providers for the data-forecasting and data-presentation functions have yet to be chosen.

Until the system is in place, the company plans to comply with Section 409 through a “manual, brute-force kind of effort,” says Wegener. But once it’s up and running, he expects Owens Corning’s finance executives to have a much clearer and more current view of the company’s risks. “Today, if we have an operating issue in a business, it would go through several layers of management and analytical cycles before it reached the top layer of the company. But because of technology, it would be available at the same time at the top level as lower management,” he says. “It would compress that cycle dramatically.”

David M. Katz is the deputy editor of CFO.com.

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