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Making sure your IT delivers

For companies looking to list or those listed that are undertaking major acquisitions and divestments, ensuring IT will deliver on the increasing requirements for financial position and prospects procedures is a crucial consideration. Az Ajam-Hassani of Deloitte considers the impact on financial IT systems and how the landscape can evolve

Corporate Financier article imageUnder the UK listing rules, the directors of a company seeking to list must have “established procedures which provide a reasonable basis for them to make proper judgements as to its financial position and prospects“. Each business throughout its life as a listed company “must take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations”.

Because technology is often the most critical component supporting business operations, governance over the financial IT landscape – and the impact that IT has on financial controls – is more important than ever for listed companies.

Unforeseen events, such as security or data breaches and IT system downtime, can have a wide-ranging impact: fines and additional costs, negative effects on brand and reputation, or a loss of customer and investor confidence.

The ICAEW Corporate Finance Faculty’s Technical Release regarding guidance on FPP procedures, issued in 2014, sets out, among other things, principles of good governance over the IT environment used for FPP information.

Judgement must be used in applying the principles to the specific facts and circumstances of each case. In practice, therefore, views of market participants – companies, sponsoring banks and reporting accountants – on the minimum requirements for the IT environment can differ ahead of an IPO or a transaction. Management often believes its technology environment is already appropriate, and the requirement for any IT change or testing prior to an IPO or transaction may be underestimated.

The fast pace of technological change can lead to increased risks for management. Just how should such risks be identified and managed? Subject matter experts will often be involved to challenge company management on their take on IT risks and consequential risks to FPP. We’ve listed some common IT challenges affecting the FPP environment that market participants should consider ahead of an IPO or transaction.

About the author

Az Ajam-Hassani is an equity capital markets partner at Deloitte, specialising in IPOs and Class 1 transactions

This article originates from the Corporate Financier March 2020 edition. The magazine is exclusively available to ICAEW Corporate Finance Faculty members.