A twist of irony attended Tuesday's media briefing by J.P. Morgan Chase and Co. in Manhattan. Less than a mile from where Chase execs were finishing a presentation on the company's risk-management products, Martha Stewart was being photographed and fingerprinted at the FBI -- the latest of indignities she's suffered since she was implicated in the ImClone stock-trading scandal.
Had they been aware of the event, Chase's execs might have figured out a way to weave it into their pitches. For the domestic-chore diva's legal difficulties, with their overtones of comic opera, provide testimony not only of greed, but of the need for greater corporate accountability, which Chase's products are intended to address.
Among the products showcased was Horizon, Web-based software that identifies and manages operational risk, a catchall for the unpredictable calamities that can befall a company, from fraud, to acts of God, to computer glitches. Through a set of self-assessment tools, Horizon enables companies to gain a clearer picture of their operational risks and the steps needed to control them.
Horizon provides a practical solution to the challenges of complying with the requirements of Sarbanes-Oxley Act, according to Craig Spielmann, a product manager at J.P. Morgan Treasury Services. The product, he says, helps companies establish sound practices in the areas of financial reporting, conflicts of interests, corporate ethics, internal processes, and accounting oversight.
Passed in the wake of the Enron and WorldCom accounting scandals, Sarbanes-Oxley stipulates procedures for improving corporate ethics, such as requiring CEOs to certify the accuracy of financial statements and prohibiting a firm's outside auditors from engaging in any activity that might conflict with their auditing responsibilities. The Securities and Exchange Commission last month adopted rules implementing Sarbanes-Oxley's section 404, which requires that annual reports contain a statement of management's responsibility for establishing financial controls, and that outside auditors testify to the adequacy of a company's controls and reporting procedures.
Yet risk management entails more than just monitoring internal procedures. Companies also need to be attuned to external risks, such as the risk that a trading partner could default on its obligations. To that end, Chase offers an electronic trading system, TradeDoc, that automates the preparation of trade documents, e.g., letters of credit, by importers, exporters, logistics companies and other service providers.
Traditionally, trade document preparation was a manual process marked by errors and delay. By providing an end-to-end electronic process for the trading cycle, TradeDoc reduces the risk related to payments, accelerates settlements and cash flow, and eliminates delays, says Paul Simpson, head of trade services at J.P. Morgan. For example, a built-in document "comparison engine" identifies potential discrepancies between documents, enabling them to be corrected earlier in the cycle.
As more of its import and export customers transact their business on the Web, Chase is delivering more of its services via the Web. Through TradeDoc, for example, customers can prepare their own trade documents online or have Chase do it for them. Documents can be created from templates or from documents such as purchase orders. In addition, customers have the ability to perform inquiries and obtain real-time status of trade transactions, letter of credit history, and related account information.