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Tightened German Regulations Intended to Increase Shareholder Confidence

Is your Finance and Risk team up to date on all the latest compliance regulations? This can be quite a challenge if your company does business in countries around the world. 

The German government’s new law to strengthen financial market integrity (FISG) has been on the books now for less than a week – it is effective beginning July 1, 2021. It was crafted as a reaction to a very highly publicized 2020 German fraud case involving a fin tech and sets out new financial reporting requirements for companies and auditors. The goal of this law, similar to Sarbanes-Oxley in the US, is to increase shareholder confidence in the German capital markets generally. 

The law has consequences for companies, auditors, and the German regulators themselves. Not only will companies have to rotate among auditors more frequently, but also within the audit companies themselves, there is an expectation that personnel will be rotated. An even stronger separation of auditing and consulting is required. Furthermore, the German regulators, the BaFin, has a broader mandate for investigations into financial reports. 

Companies facing increased audit scrutiny will benefit from have strong internal control systems and financial controls in place. To take a systematic approach to these challenges, standardized processes supported by software are key. SAP has been supporting global companies in their finance and risk processes for nearly 50 years. While I could highlight dozens of SAP tools that play a role in helping customers create legally compliant financial reporting in creating legally compliant reports in more than 150 countries, I’ll just focus on a few points: 

  • SAP’s document principle and focus on fully integrated accounting processes
    This is a cornerstone of SAP’s approach to accounting and finance. There are no transactional postings without a data trail, including time/date/user information, and in fact, most financial postings are generated directly from the natively integrated logistical processes, like order-to-cash or source-to-pay. Our engineers strive to create systems that (nearly) eliminate the need for manual adjustments – reducing a major source of potential errors. 
  • SAP Process Control
    This solution was designed for companies to institutionalize their internal control framework. It provides a structured approach for documenting, assessing, testing, and remediating critical process risks and controls –  streamlining enterprise compliance efforts with best practices.  
  • SAP Account Substantiation and Automation by BlackLine
    This solution focuses accountant’s efforts at period end on high-risk accounts, providing a workflow-supported environment for account substantiation activities – with all documentation regarding completeness and accuracy of your balance sheet for centralized, standardized and easier auditor access.  

This new FISG is likely not the last consequence of the 2020 fraud investigation. But with your SAP tools and processes in place, your Finance and Risk team should be a good position to deal with these requirements as they arise. 

 

You can learn more about these solutions, or other SAP solutions, here. 

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