February 20, 2008. IBS Borlas announces completion of the project of building a financial statements preparation internal control system for OAO Magnitogorsk Iron and Steel Works (MMK).
The Enron affair and the introduction of the U.S. Sarbanes-Oxley Act of 2002 (and a number of similar laws in other countries and in the international community) brought internal control systems to the fore of corporate attention for many companies including fast growing Russian corporations entering international markets and having strong relations with foreign investors. According to Alexei Ananyin, President of IBS, “In order for investors to be confident with a Russian business or in order for a specific Russian corporation to be able to implement its production development and upgrade program, the business has to be efficient, open and managed in an appropriate and easy-to-understand manner. Company results have to be clear to both strategic investors and stock traders. Those results have to be trusted ruling out any possibility of a repeat of the Enron affair”.
In 2006 the management of OAO Magnitogorsk Iron and Steel Works (MMK), one of the world’s leading steel manufacturers, initiated the project of building the financial statements preparation internal control system for MMK, with the Oracle Internal Controls Manager solution used as the IT platform. The project started in August 2006 involving professionals of MMK, Borlas Consulting Group (Oracle product implementation projects are now carried out by IBS Borlas) and KPMG (KPMG dealt with methodology issues under the project). Borlas consultants produced and implemented the internal control system based on the Oracle Internal Controls Manager (Oracle ICM) module, thus delivering on the IT part of the project.
At the same time, Borlas business consultants were closely involved with KPMG consultants in setting up the methodology of internal control processes at MMK. More specifically, quite a lot of work had to be done to identify ways of applying COSO Enterprise Risk Management Framework methodology to the Oracle ICM module functionality (this methodology, developed by COSO, the international organization, is used for compliance with section 404 of the Sarbanes-Oxley Act). Having business consultants and experienced IT professionals within one team helped to implement the project on schedule and with high quality.
According to Dmitry Kaplan, CIO of OAO Magnitogorsk Iron and Steel Works (MMK), the project of building the financial statements preparation internal control system at MMK provided
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automated document management within the financial statements preparation internal control system,
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information storage and an appropriate level of information protection,
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integration of processes of the financial statements preparation internal control system with processes of the corporate information system of MMK, which runs on Oracle E-Business Suite applications,
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one common information environment for all stakeholders (business process owners, internal and external auditors, the top management) with authority separation within the financial statements preparation internal control system.
Vladimir Shmakov, Vice President for Finance and Economics of MMK Managing Company said that the project made company operations fully compliant with section 404 of the Sarbanes-Oxley Act. Risks related to producing financial statements are being identified; appropriate control procedures are complied with and the efficiency of those control procedures assessed; shortcomings identified are eliminated; repeated checks are made and the results of those repeated checks documented. Going forward, the system will encompass all MMK group subsidiary companies that are deemed to be material.
Profiles of the companies
OAO Magnitogorsk Iron and Steel Works (MMK) (www.mmk.ru) is among the world’s top twenty steel manufacturers and currently has a headcount of 30.5 thousand employees. This is Russia’s biggest steel manufacturer, fully integrated and encompassing all the required processes. MMK produces the widest range of steel products among steel manufacturers in Russia and the CIS and exports about 50 per cent of its output to countries in South East Asia, Middle East, Africa, Eastern Europe, and also to Belarus, Ukraine, Kazakhstan and other CIS states.
MMK has over 100 geographically distributed workshops that are inter-related in processes. Workshops are major units with independent and complex manufacturing and business operations.
MMK is a fast growing company with a strong focus on technical upgrade. MMK has entered the new millennium having had a full renovation and all important manufacturing facilities are being revamped to meet global standards, including all aspects of using information technologies. In an important move towards a highly efficient business, the management of MMK decided that an integrated corporate management system should be built.
IBS is Russia’s leading player in the IT and consulting market. It was formed through the merger of IBS and Borlas Consulting Group. It is part of IBS Group Holding Limited, along with Luxoft and Depo Computers. Its core lines of business are management consulting, business applications implementation, IT outsourcing and IT infrastructure. IBS headcount exceeds 3400 employees including over 1500 certified consultants. 84 of Russia’s top 100 companies are customers of IBS. For more information on IBS please visit www.ibs.ru
IBS Borlas is part of IBS and specializes in building management systems based on Oracle E-Business Suite applications and other products of Oracle Corporation. An Oracle Master Partner, IBS Borlas has the strongest Oracle E-Business Suite team in the Russian market, with over 500 consultants and experts having a track record of more than 50 projects. IBS Borlas is the only first-line technical support center among Oracle partners, for both Oracle basic products and Oracle business applications, and the Competence Center for Oracle's four key technology areas. For more information on IBS Borlas please visit www.borlas.ru.
For further information on IBS please contact Lada Scherbakova, PR Director, telephone: +7 495 967-8080, e-mail: lada@ibs.ru.
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