The Financial Security Law of France (known in France as LSF or Loi de sécurité financière), signed by the Minister of Finance, Francis Mer, was adopted by the French Parliament on July 17, 2003 in order to strengthen the legal provisions relating to corporate governance. The LSF was published in OJ No. 177, August 2, 2003 (No. 2003-706, dated August 1, 2003) and appliesto fiscal years beginning January 1, 2003.
Similar to the American Sarbanes-Oxley Act, regulatory compliance with the LSF consists of 3 steps:
- Implementation of regulatory controls,
- Monitoring of internal control procedures,
- Reporting on regulatory control compliance.
The chief executive is responsible for the preparation and content of the company’s annual report, containing an "internal control report," which must:
- affirm the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and
- contain an assessment, as of the end of the company’s fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.
Compliance with the LSF leads to:
- greater transparency in financial reporting for company stakeholders, shareholders, and investors,
- increased management responsibility,
- stronger internal control,
- fewer sources of conflicts of interest.
Using GRC tools such as ARIS Solution for Governance, Risk and Compliance Management, enabled French companies to deploy company procedures. This included documentation of the internal controls and risks, which not only agreed with the objectives of LSF, but could also be re-used for other compliance topics, such as ISO or industry regulations like Basel II, Solvency II, SOX, Reach, etc.
By implementing internal control directly in the company processes and procedures to assess the effectiveness of the implemented Internal control system, most of these LSF projects were accelerators for the deployment of the BPM approach in French companies, and led to a new vision of these companies that was not the case at all before.
Additional links:
- all articles of the #LoungeTalk series
- www.grc-lounge.com
- GRC discussion group at ARIS Community
- Governance, Risk, and Compliance category
