In April 2005, the SEC introduced a Voluntary Filing Program, allowing companies to submit and publish their financial reports in an interactive format. So far, 137 companies have filed more than 592 interactive reports, which allow users to create on-the-fly pie comparison charts and bar graphs, to set up RSS feeds on companies’ pages to deliver updates instantly, and to allow easier data exportation and mapping. Early adopters include Microsoft Corp.; Adobe Systems, Inc.; and Johnson & Johnson.
The SEC offers detailed guidance and a U.S. XBRL standards website, and it has been actively encouraging adoption among America’s top public companies. In 2007, financial ministers from China—the first country to require XBRL reporting—and Japan said they had set “aggressive timetables” for interactive XBRL reporting.
Beginning in 2009, the SEC started rolling out its own XBRL compliance program. The 500 largest companies in the U.S. will start filing their quarterly reports on June 15 using XBRL. They’ll be joined by 1,800 of the next-largest companies in June 2010 and by all other publicly traded companies in June 2011. All credit rating agencies must also begin filing XBRL-compliant reports in August 2009.
“This is hopefully going to be a turning point,” says Mueller. “The connectedness of the data is going to change information.” She admits the first few filings might be rocky. “The first 500 will probably turn to their financial publishers and say, ‘You write it,’” says Mueller. “And they won’t gain any internal efficiency. But more and more people are taking advantage of this mandate to implement a more modern document management system into their financial documents,” such as JustSystems’ XBRL Report, a CMS solution that builds XBRL compliance around documents automatically.
Gianluca Garbellotto, president and CEO of XML-related consulting firm Iphix, LLC and chair for the XBRL Global Ledger Working Group, believes that the rollout of SEC mandates will increasingly impact his clients. “XML- and XBRL- based ‘digital filings’ enable us to change the underlying reporting processes, bringing efficiencies in terms of automation of previously manual steps, a widespread issue in even the most advanced IT reporting environments, and benefits in the reporting assembly and review process.”
In bringing clients up-to-speed, Garbellotto uses Altova’s MissionKit suite, which combines tools that address the many basic compliance steps. For extracting data from source-accounting software and enterprise resource planning systems, he uses MapForce. The XMLSpy tool reviews, edits, and validates the results, and DiffDog runs versioning analysis on the data, while StyleVision renders it into a publishable format.
It seems daunting, but Garbellotto says that once the XML and XBRL structures are deeply embedded into the company’s CMS, employees can “extract and convert data at the level of granularity that is more appropriate for the specific compliance purposes being addressed.”
Raising the Bar for Legal Compliance
Legal compliance issues aren’t just for lawyers. Companies that frequently find themselves in court are finding out that their content repositories make meeting e-discovery deadlines frustrating. As companies merge and split up, critical documents can get lost in the shuffle.
Significant rule changes are already leaving some legal offices scrambling for solutions to help track and monitor their documents. FRCP Rule 26(b)(2)(B) now allows courts to compel parties to produce documents even at “undue burden or cost” if so ordered during discovery, and Rule 26(f) requires parties to meet within 99 days of a lawsuit being filed to discuss digital discovery issues.
For lawyers and legal professionals, “The world of digital content changed forever in 2005,” with the FRCP rule changes. According to Bobby Balachandran, CEO of Exterro, a company that provides digital life-cycle management tools for the legal industry, “Companies—and their lawyers and IT teams—are now required to keep tabs on all their digital files at all times, making electronically stored information management one of the most essential legal, and IT, business practices today. … Regulations in response to the global financial crisis are inevitable, and legal departments will have to adapt and remain agile to stay afloat.”
Today, “I would put electronic discovery into the 95 percentile,” says Balachandran. “E-discovery is a market driver.”
In February 2009, Exterro launched Fusion Genome 2.0 to help lawyers build dynamic, evergreen data maps for their documents. Fusion Genome relies on multiple views of each document, including what kind of document it is, its subject matter, and its client profile, and it runs real-time compliance checks on the array of laws governing compliance for each view. Fusion Mobile is a mobile extension that provides real-time compliance checks for corporate counsel, 76% of whom Balachandran estimates are frequently away from their desks.
Balachandran explains that Genome is seeking to automate a compliance cycle that was executed—slowly—by hand in the past. “We’ve seen companies that have invested $3 million in making a data map, but the data map becomes obsolete even before it’s completed—new business units have been added or employees have changed,” says Balachandran. “Without the foundations of a good data map, it’s hard to have a good legal hold or discovery process.”
Companies in pharmaceutical or biotechnology industries have particularly sensitive document-sharing compliance needs, with highly sensitive proprietary R&D and licensing information. According to Infotrieve director of licensing and content procurement Julie Geagan-Chevez, “The most common form of noncompliant behavior is improper redistribution of documents.”
Infotrieve’s Content SCM focuses more on enforcing rules from within the system—real-time, actionable compliance within the companies themselves. The system assigns certain privileges based on the user’s predefined legal rights, in order to ensure compliance with intellectual property and copyright law, and it leaves an access audit trail in its wake. “The greatest danger of noncompliant behavior exists when employees, under pressure to perform quickly, are asked to act as their own compliance experts,” says Donna Pouliot, VP of sales at Infotrieve.
Balachandran says that many of the legal departments and firms are “lagging” in terms of digital compliance. “But the interesting part is they have the eagerness to deal with it,” he says. “We haven’t run into companies where they say they don’t care about it. They have a high priority attached to it.”
The economic downturn may squeeze some legal resources, but compliance remains a top priority for companies under increased scrutiny. “It’s not just the risk and related cost, but it’s also the high cost of not having processes in place,” says Balachandran. “It’s like walking on a sheet of ice—you don’t know when it’s going to break and you’re going to fall.”