Fuego Targets Sarbanes-Oxley Act with Supervisory Control Application

September 12, 2003

Adhering to new regulations or emerging industry standards, even though necessary, can be downright painful for some organizations. The Sarbanes-Oxley Act of 2002 is one of the new compliance regulations that many companies are just starting to apply to their high-risk financial processes. For example, in the area of revenue recognition, many retailers are challenged by the reporting requirements for vendor allowances, and as a result have had to restate revenues, a costly and potentially damaging procedure. Sarbanes-Oxley is designed to clarify corporate governance and financial disclosure issues as well as evaluations of internal controls and procedures for financial reporting. These issues can have a direct impact on an organization’s business processes, and as a result, a number of BPM vendors are moving to add components and applications on top of their BPM systems to enable process automation for the emerging industry standards compliance.
One of the early movers in this market is Fuego. Fuego saw the power of applying BPM to financial controls and has developed a package that provides companies with the tools to achieve additional control and auditing capabilities over their financial processes. Working with several of its retail customers and consultant Deloitte & Touche, Fuego determined that by automating certain financial controls, companies are better able to enforce certain standards and regulations, which eases documentation and reporting compliance to section 404 of Sarbanes-Oxley.
Fuego’s Supervisory Control Application™ (SCA) for Vendor Allowances assists companies in proactively automating, managing, and controlling vendor allowances or other accounting processes for retailers. Using templates built on top of Fuego’s BPMS, SCA for Vendor Allowances provides 80% of the work out-of-box for companies to create processes that establish controls over accounting for vendor allowances, including reporting and auditing the entire control process. Once a process is automated, when changes are made to that process, version control enables organizations to capture at any moment what process is being used and provides an audit trail throughout. The SCA integrates with any software an organization uses including ERP, merchandising, deal systems and financial applications, and similar applications. Beyond compliance to section 404 of the Act, Fuego’s application also enables compliance to section 409, an equal-if not more important than section 404- provision that deals with real-time issuer disclosures. Section 409 can be used to make companies prove what they’ve said about their accounting and reporting processes are actually what is being practiced and what is actually implemented. Fuego is working on other similar compliance and reporting applications as well.
Fuego’s SCA for Vendor Allowance is being piloted at several customer sites and generally is expected to take 30-45 days to implement, utilizing a cross-functional team that involves accounting, IT, auditing partners, Fuego consulting, and partners such as Deloitte & Touche. Fuego offers the application as a limited-scope license of its BPMS platform. Pricing starts at $100,000 for software and services. SCA for Vendor Allowance works with a company’s other back-office applications, and is complementary to ERP and business intelligence solutions.
The Upside Uptake
Upside Research believes the ramifications of Sarbanes-Oxley are important to the BPM industry and potential BPM purchasers because it helps crystallize the value of process management and process automation in relation to the definition of auditable, actionable business process information. While Fuego is not the only BPM vendor leveraging the Sarbanes-Oxley opportunity, Upside Research believes their Sarbanes-Oxley solution is important because, unlike many other BPM solutions, it extends beyond simply documenting accounting processes and practices. It provides proactive enforcement and execution of an organization’s defined accounting controls, and audits them every step of the way. The bigger, long-term issue for many companies will be in ensuring that what you define as your process is actually in practice and proving it when or if you get audited. With a Fuego BPM solution, organizations can help address the requirements of section 409 by being able to provide a complete audit trail of process instances and verifying that the process was not only defined but also followed. Fuego’s solution provides important reactive and proactive process management and auditing capabilities that anyone looking for Sarbanes-Oxley solutions should evaluate

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