It's been a brutal couple of years. Terrorism, preparations for war, a clampdown on IT spending, corporate scandal and malfeasance - it's left us shell-shocked, hoping that whatever comes next has got to be better.
We think it will be. Bubbling under the crust, in the creative hotbeds of companies and labs, and in the minds of entrepreneurs and dreamers, is a profundity of new technologies, new tools and new approaches - proof that no matter how twisted the rails of the bodies economic and politic, the engine of innovation keeps chugging along.
This special section is devoted to highlighting those ideas as well as some trends that will show up on your radar screen this year. Some will enlighten (How Monte Carlo simulations can save you from the "flaw of averages"), others might scare you (How safe are your customer databases? Not very), and a few will chill you (The latest raft of management books from the US? How about a slew of primers on to keep your job without going to gaol). All of them will demand at least a few minutes of your time. And you never know: Any one of them might become central to your life and business in 2003.
So take a few minutes to get off the high-pressure interstate of mournful budgets, dour forecasts and workplace stresses. A new year has begun, you're fresh from the summer holiday - at least for a while - and it's a perfect time to rubberneck the new, the intriguing, the different.
FINANCIAL REPORTING1. No More Bogus Data
by Christopher Koch
In 2003, CIOs will need to think of themselves as CAOs - chief accuracy officers.
Until Enron came along, most CIOs never thought of themselves as accountable for data accuracy, only for storing and transporting information around the corporation without losing or corrupting it. If the data entered into the system was wrong, well, the CIO could not be held responsible for that.
But the wall separating data transport from data accuracy is crumbling. Investors no longer trust the people entering the data, and Business Week predicts 250 companies will restate earnings this year, up from 50 in 1995.
As the ASIC, ASX, SEC and investors push for more, better, faster financial reporting, CFOs and CEOs will increasingly look to the CIO as the steward of data accuracy. "CIOs won't just be data logistics providers any more; they will have to guarantee accuracy and timely delivery," says Susan Dallas, research director for Gartner (US).
One way that CIOs can try to improve data accuracy will be to help ensure that people aren't entering bogus numbers from the start. There is precedent: credit card companies use monitoring software that scans for unusually large or frequent charges and automatically posts a red flag. Companies will build similar systems to monitor for such suspicious events as an unusually high level of product returns, which could mean a manager is trying to inflate revenue by shipping things customers never ordered. And the software monitors will aim high. "We're going to see a shift away from just monitoring low-level transactions like time cards toward monitoring high-impact transactions like who has the authority to sign a $10,000 cheque and what they're writing it for," says Jack Heine, vice president and research director at Gartner.
"You'll never be able to stop people from doing bad things, but you can make it hard to hide the bad things," adds John Parkinson, chief technologist for the Americas at Paris-based Cap Gemini Ernst & Young.
But the monitoring systems can't monitor what isn't being entered into computers in the first place. Finance people routinely keep their numbers in Excel spreadsheets and crunch numbers manually, where no one can see what they're doing. CIOs need to make all financial information digital and store it in one place. That's going to take a lot of work. Companies have an average of 32 different financial systems for each $US1 billion in revenue, according to a study by Hackett Benchmarking, a division of consultancy Answerthink.
Nevertheless, if companies don't respond with new systems to report data more quickly and accurately, investors and analysts may assume they have something to hide, given the current climate. "If there is an error in the reporting, it will be perceived as [financial shenanigans]," says Renee Lorton, senior vice president and general manager of PeopleSoft Financial Management Solutions. "There is very little forgiveness out there right now."
Despite tight purse strings, CIOs may finally get the money they've been asking for to integrate and build a data warehouse for financial data. "You can bet your bottom dollar that companies' budgets are going to shift funds to what is a messy job, which is assuring end-to-end the accuracy of financial information," says Ken Harris, CIO of clothing retailer the Gap.
In fact, the forced march toward better financial reporting could be a blessing in disguise for CIOs having trouble funding integration. In that sense anyway, CIOs may start to see Andy Fastow as not such a bad guy after all.
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