Monday, November 07, 2016

When running against time, you rarely win !

Every industry has its share of regulations to which they need to comply; regulations could vary by geography or product within the industry. In a global economy this becomes important towards growth as well as the ability to continue doing business in a market. Enterprises have over a period of time set in a process to respond to changes in regulations which impact their profitability or revenue in any significant way; most compliances are driven by technology solutions driven by IT teams and thus making the CIO a key stakeholder.

Compliance requirements are broadly of two types: the first one related to taxes and levies which apply in the operating market or country of origin of the enterprise. Companies have to comply to both and at times they can be complex and time consuming; applicable benefits and incentives also need to be factored in to get the financial benefit. Most large software vendors have modules to help their customers comply within the timelines; for custom solutions, IT organizations eventually get the process and timeline right.

The second type of compliance is driven by consuming markets driven by protectionist measures or keeping in mind the interests of citizen consumers. Such requirements have a much wider impact to the industry and result in lobbying for and against depending on the impact. Such regulations or laws tend to have high budgetary requirements and need longer timelines to get the organization ready. At times they may impact core processes or make a market unviable to service, requiring a strategic decision to continue to operate.

While the discussion started a decade back, in the last 5 years there has been impending regulation which required every company in that sector to comply to continue doing business. The timeline shifted a couple of times and then a phased compliance roadmap spread over 5 years was published allowing more than reasonable time to plan, execute and comply. The high complexity technology dependent process that impacted core business thus necessitated companies to go back to the Board to gain approval for budgets.

This was a big one and had real impact to business; so Consultants, vendors, business partners and IT solution providers started discussion with their customers who needed to comply with the new regulation. Different companies reacted in as many ways; the early adopters listened to everyone, initiated a cross-functional team to review the impact and craft a program towards compliance while there is still time. They ensured that there is adequate time to get it right and make it standard process before the deadline.

The second lot of companies took the wait and watch approach observing the early adopters, talking to the ecosystem who helped the first lot and then put together a program to implement solutions that have already been proven to work. They did not get early pricing benefit but took relatively less time to implement the solutions towards compliance in time; they could compare options from within the working set. Surprisingly between the first and the second set of companies they represented only about 60 percent of the industry.

So what about the rest ? Did they know something the others did not ? Did they not understand the adverse impact of their inaction or failure to comply ? Was the problem not as acute as the industry touted it to be ? No exemption was available nor there existed possibility of an extension to the deadline. The group had enterprises big and small, multi-national as well as family owned companies and they were geographically spread thereby not forming any trend that could justify their stance of not taking action.

Talking to a few of these companies, they fell into a few distinct buckets: the first who would do only the bare minimum to comply, and that is what they had done. Their decision making criteria was that why change until absolutely necessary. The second understood the problem and took decisions based on cash outflow, deferring until the last minute and choosing the lowest cost option. The rest of the rest were resting not necessarily fully aware of the challenge and the solution; some were surprised that many in the industry had already taken big steps.

Will they make it unscathed ? Coming soon …

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