With the advent of financial reporting standards like MER, Sarbanes-Oxley and Basel II, Irish firms are in a good position to take advantage of opportunities in the UK financial services sector, Enterprise Ireland (EI) has told siliconrepublic.com.
Judi Blackmur, senior advisor for software and services at EI in London told siliconrepublic.com that Irish software players should be fine-tuning their products and messages towards the needs of UK financial services firms keen to comply with a seismic shift in the way they report to financial authorities.
Earlier this year, the UK Financial Services Authority (FSA) announced the planned introduction of Mandatory Electronic Reporting (MER) for all British regulated companies. The introduction of MER will require companies in the UK to adopt financial documentation and processes based on XBRL – Extensible Business Reporting Language. XBRL is a new electronic format for simplifying the flow of financial statements, regulatory data and other financial information between software programs.
The move has been described by EI as providing a significant “window of opportunity” for Irish IT vendors in the UK. At a recent event held by EI (UK) in Dublin, representatives of more than 40 Irish technology companies were briefed by David Anderson of the FSA on the imminent changes in British financial reporting regulations and how this could result in business opportunities for Irish IT vendors in the UK.
Blackmur said: “XBRL is one of the most open and user-specific standards ever developed. Because it simplifies the electronic distribution of financial statements and other financial data, its use is gaining momentum around the world as an increasing number of central banks, financial regulatory authorities, statistical bureaux and taxation agencies drive uptake.
“In the UK, this represents a new technology requirement for the 30,000 organisations regulated by the Financial Services Authority, all of which will now have to review and enhance their financial reporting and documentation structures in line with the demands of MER.
“Irish IT companies selling financial solutions into the UK market need to familiarise themselves with the reporting requirements of their existing and targeted customers and determine whether their solutions will need to include an XBRL component. Additionally, very few financial applications are written in XBRL at present, so there is a significant window of opportunity to facilitate companies with the introduction of MER and the necessary changes to their IT and business systems. Even more interesting is that XBRL is growing in importance in the public sector. There are new markets and customers emerging for companies developing competencies in XBRL,” Blackmur said.
In the initial stage of the introduction of MER, from April 1st 2005, more than 30,000 companies coming under the new general insurance and mortgage regulatory regime, as well as independent financial advisors and other retail investment firms, will be required to adopt the new systems.
The adoption of the XBRL standard in British financial reporting regulations will require adjustments for both technology vendors – including Irish IT companies – and the wider financial services sector in the UK, according to UK industry bodies.
The UK technology market is a key target market for Irish software and services vendors. In 2002, their exports to this market earned €455m, an increase of 14pc on the previous year. Key sectors of focus for Irish technology companies are financial services, telecommunications, public sector, e-learning and life sciences.
Blackmur cited Fineos, Norkom and Zarion as examples of companies that are already doing considerable business in terms of selling and implementing enterprise compliance software for the financial services sector in the UK and across Europe.
In an earlier interview with siliconrepublic.com, Justin Keatinge, managing director of Version 1 said that financial compliance regulations are having a similar affect on the market place for IT as the Y2K and Euro trends had in 1999 and 2001 respectively. He said: “Basel II has resulted in a major rush to invest in new MIS technologies and IT overhauls that has been compared to the Y2K situation of four years ago.
“However, this is different to Y2K insofar as there is a strong potential for return on investment for financial institutions as a result of better ongoing efficiencies that translate into better management of the business and ultimately better financial management that releases capital that otherwise would have been tied up,” Keatinge said.
By John Kennedy