Is SOX too costly?

Since Sarbanes Oxley became the law in 2002, the average cost of compliance for companies with revenue less than 1B has risen from 1.7 M to 2.8 M in 2006, a 165% increase since 2003.

For companies with annual revenue over 1B, the average compliance cost increased by 54%, from 8.1 M in 2003 to 12.4 M in 2006.

Is SOX compliance too costly?

Is it not surprising that many companies are thinking about going private or merger and acquisition, because of the increasing cost of compliance. This is also the concern for foreign companies who is considering the listing on US stock market.

After 5 years of SOX, it is the time to strike the balance of cost and benefit with both regulations and technology.

The regulation is becoming more realistic with the release of AS5. And, there are tons of technologies and software, which can help improve compliance efficiency.

Recent numbers from Michael Rasmussen at Corporate Integrity blog, GRC market is sized as below:

  • GRC Professional Service Market is $40.6 billion in 2008.
  • GRC Technology Provider Market is $9.3 billion in 2008.
  • GRC Information/Content Provider Market is $2.2 billion in 2008.
  • SOX compliance is still one of the major drivers for GRC market. Driving efficiency, reducing the SOX compliance cost, and streamlining operational processes remains still remains the top priority.

    The good news is that there is plenty of room for innovation and co-existence of many players, large or small.  

     

     

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