Our investment columnist, Bill Schaff, wrote last week about a new disease infecting the nation--Enronitis. It comes when investors closely scrutinize a company's financial statements and discover "something." Maybe it's some sort of smoking gun, or just an ordinary, though complex, financial transaction. But if symptoms persist, Enronitis can quickly turn fundamental, responsible, and necessary financial analysis into a witch hunt. Not a good idea. But while you can't blame individual investors for becoming cynical or for wondering if other seemingly successful companies aren't doing a few magic tricks with their data, Schaff warns us not to overreact. Good advice, indeed.
New disclosure proposals from the Securities and Exchange Commission and Congress may help calm investors' fears while putting significantly more pressure on public companies to provide timely health reports. For starters, the SEC thinks companies should accelerate the filing of 10Q quarterly disclosures from the current 45 days to 30 days from a quarter's end, and 10K annual reports from the current 90 days to within 60 days of a fiscal year's end. It also wants companies to report sales of stock by executives within days of the transaction. And it wants to expand the list of "significant events," such as a change in debt ratings, that companies must report. In a nutshell, the SEC wants more data reported, it wants it to be of higher quality, and it wants investors to hear it more quickly.
In this week's cover story, associate editor Eileen Colkin and senior editor Rick Whiting look at how the proposals could affect a company's IT systems. For some, it will be no big deal: In efforts to increase their own visibility into the business and to improve decision-making capabilities, they already have the tools in place to gather, analyze, and inform in a timely manner. But others may find themselves installing new financial-reporting systems, reprioritizing the workloads of their ERP systems, changing internal business processes, and possibly hiring more people to meet the new regulatory requirements. It might create a short-term (or longer) strain on IT budgets and resources--but if the end result is more confidence in financial markets and a free flow of capital, who can argue with that?
Stay tuned. InformationWeek Research will soon release the results of its study on IT's readiness to meet the proposed SEC guidelines.