Compliance Cost and Related Requirements

The decentralized approach to compliance is expensive and complex to manage and coordinate. French Caldwell, vice president, research, Gartner Group, said recently, "We estimate that this separated approach (to compliance) adds 130% to 150% more to the cost of the compliance effort – and the technology portion costs ten times as much."

These statistics apply to the current situation and do not even address future requirements, as the regulatory burden grows even larger. Sarbanes-Oxley was created in response to the corporate financial scandals at Enron, Worldcom, and Tyco. The Anti-Money Laundering regulation resulted from terrorism. In Europe, all financial institutions must adopt Basel II requiring that firms establish a company wide process to measure, monitor and manage risk. There is a new bill, the Specter-Leahy Bill, which will increase penalties for electronic ID theft, and some say new legislation will result from the recent HP scandal and settlement regarding pretexting.

According to The Economist, "77% of companies are coping with present compliance requirements, but say they will have difficulty complying with any major new regulations." New regulations are a fact of life that businesses must deal with and respond to on a continuing basis.