CIOs have a role in protecting companies from financial mismanagement.
Cendant Corp. CIO Larry Kinder isn't the only business executive with corporate honesty on his mind. Last week's Wall Street roller coaster made CEOs and CFOs at even the most squeaky-clean public companies desperate to restore trust in the markets. Kinder knows how IT can help.
At Cendant, the $8.9 billion-a-year travel conglomerate in New York, maintaining business integrity is a top priority, and Kinder says the IT department plays a significant role in helping the company live up to its high standards. "It's a primary focus for all of us to manage finances properly and better," Kinder says. Cendant, born of a 1997 merger between hotel and rental-car franchiser HFS Inc. and direct marketer CUC International Inc., quickly came under fire when impropriety in CUC's accounting practices came to light, and the new company spent a lot of time and money clearing its new name. Last week, Cendant closed the door on the scandal, finalizing a $3.2 billion settlement with shareholders.
Cendant's Kinder and his staff provide apps to guard against accounting inaccuracies.
Kinder joined the company only 18 months ago, but he and his staff are imbued with the culture of integrity. They have helped guard against accounting inaccuracies by creating controls that analyze data in financial software from Oracle and Geac Computer Corp. and flag potential problems. For instance, exception-analysis controls enable Cendant's internal audit department to spot unusual increases or decreases in revenue.
President Bush, Congress, and the Securities and Exchange Commission have made restoring the good name of the country's capital markets a priority. This has created incentives for the highest-level business executives to work with business-technology professionals to ensure that financial reports and business data are as accurate as possible. Starting Aug. 11, the SEC will require CEOs and CFOs to sign off on all financial reports, and last week Congress passed legislation prescribing stiff prison terms for senior execs who knowingly publish misleading financial statements.
CIOs could be most helpful in these times by making sure their CFOs and CEOs are fully aware of how their financial-reporting systems work and to what degree those systems help ensure data accuracy. Tech execs also can be instrumental in providing CFOs with more ammunition to discuss with analysts and regulators the rigor behind their internal accounting processes, says Morgan Stanley analyst Charles Phillips. "Describing how real-time the data is, the security behind it, and how integrated the systems are across geographies and departments would be of interest to investors," says Phillips, who released a report this month on accounting forensics (http://www.morganstanley.com/mrchuck).
Bar-coding equipment maker Zebra Technologies Corp. doesn't share information about its financial technology as part of its quarterly reports, but CFO Randy Witcherch believes that might not be a bad idea. "It can't hurt; it can only help," he says. Witcherch is confident that Zebra generates accurate reports, in part because the Vernon Hill, Ill., company's IT department worked closely with Witcherch's finance team to deploy Hyperion Solutions Corp.'s Financial Management system, enabling consistent mapping of accounts in one database by pulling data from all of the company's general ledgers and enterprise resource planning systems.
CIOs might even attend stockholder and financial-analyst meetings to provide such information themselves. Accounting experts say it would be helpful, though, if more CIOs had greater familiarity with generally accepted accounting principles.
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