COMPLIANCE

A number of financial scandals in recent years has placed emphasis on corporate governance.

In the USA this is illustrated by the Sarbanes-Oxley legislation which embraces a wide range of compliance measures. These drive towards greater information transparency, accuracy and accelerated reporting. Whilst the rules apply to US companies, they also have an impact on European subsidiaries and partners. Section 404 of this Act makes Managers responsible for maintaining an adequate internal control structure and procedures for financial reporting. The legislation has put strong pressure on companies to implement Enterprise Risk Management (ERM) programs.

In Europe, the Basel II legislation also addresses compliance but in a different way. It focuses on risk management in the financial services sector and defines operational risk as 'resulting from inadequate or failed internal processes, people and systems'.

How Promoter handles compliance issues

Promoter addresses a number of issues raised by recent compliance directives and by the obvious shortcomings of spreadsheets, as follows:

Promoter is not a spreadsheet based model. It has no formulae which the user can directly manipulate. But it does allow you to change the underlying formulae in a structured way and to see how the figures were generated. This procedure ensures that the user does not compromise the integrity of the model in any way.

Promoter has undergone a rigorous testing programme under extreme conditions. All input has upper and lower limits beyond which the user cannot go.

Promoter contains a basic audit trail. The most recent changes to each set of input data are recorded and saved with the file for audit purposes. The file contains the name of the user and the date of the change together with any comments he made at the time to explain his choice of figures and data.

In a corporate environment, the Enterprise version of Promoter further supports ERM in the following way:

It can ensure that all users obtain key information, such as the predicted future price of a commodity (say crude oil) or the future exchange rates are obtained from a single managed source on a file server and that the user cannot change it. This procedure ensures the assessment of different projects on a more level playing field. 

It contains a Monte Carlo simulation which inputs random numbers into the input figures (not the output figures as on some models) in a controlled manner to produce risk weighted cash flows and results. It produces mean and standard deviations for all main output results together with suitable histograms.

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