To remain competitive, insurance companies must successfully respond to merger and acquisition activity, escalating customer demands, and increased regulatory pressures. And all of these factors are expanding the human resources professional's role.HR staff is expected to perform more than traditional reporting and operational duties. In addition to ensuring recruitment of the best employees, HR must also spearhead cost-containment initiatives, provide strategic leadership and, more recently, assist with and oversee regulatory compliance.
The regulatory burden for the HR department grew significantly in 2002 when Congress passed the Sarbanes-Oxley (SOX) Act.
One of the most common misconceptions about SOX compliance is that it only involves the finance and IT departments. In reality, SOX impacts almost every HR function. While the CFO often is the primary owner of compliance issues related to financial transactions, the HR department plays a vital role in many compliance activities and in the overall companywide adherence to SOX and other regulatory standards.
As a result, HR is often responsible for developing and documenting internal controls, maintaining auditable processes, enforcing privacy standards and ensuring the security of HR systems. Yet, traditional HR processes and tools cannot keep pace with the current and projected demands.
For example, HR professionals must continuously monitor state-required licenses and certifications of claims adjusters, examiners and sales representatives, and check for incomplete licensing and approaching expiration dates.
Rather than manually tracking for this information in paper files or spreadsheets, HR needs automation technologies that deliver proactive alerts to support monitoring of staff licensing status with less time, effort and resources-and with a higher degree of certainty.
With these tools in place, HR becomes an essential and vital player within the company. It not only provides relevant and required information pertaining to SOX requirements, but also establishes more efficient and effective HR business processes that can improve employee and customer satisfaction.
By meeting both needs, insurance companies are able to defray the costs of implementing SOX-compliant technologies while the HR department helps to drive operational excellence and increase its strategic participation in the organization.
For example, many insurance HR executives struggle to effectively manage employee information across many divisions, often merged entities.
Insurance HR staff processes and approves new hires, transfers, promotions and terminations, and also manages executive hiring, incentive plans, stock options, direct and deferred compensation and supplemental programs.
The HR department also must manage headcount reports, budget verifications, discrimination testing, and employee benefit programs.
The accuracy of this data is critical for effective employee management-and is required by SOX regulations. External auditors need to see that formal processes, ownership and controls are established.
Take, for example, common employee transactions, such as salary increases or bonus payments. As a result of SOX, these processes face added scrutiny, and warrant more review and documentation. HR teams that identify better workflow processes throughout the organization and develop business process changes along with the SOX-required audit trails reap more bottom-line benefits.
These process changes, along with the automation of processes, controls and workflows, ensure that employee transaction requests follow uniform review and approval guidelines, and that auditors can easily evaluate each step of the process.
The question for any HR organization is how it will approach its compliance obligations and use the regulations as an opportunity to evaluate business processes and become more efficient.
When this is accomplished, HR has more time to spend on strategic activities, such as attracting, developing and retaining a strong workforce, building on the companies' most strategic asset and ultimately delivering more value to the organization.
Steve Brandano is a financial services business solutions architect at Lawson Software, St. Paul, Minn.
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