The Data Dynamic

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Australia's new Carbon Pollution Reduction Scheme will highlight the need for dependable information systems, Micheal Axelsen writes.

This article appeared in MIS Australia Magazine and the CFO Software Guide 2009.

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The Data Dynamic

  1. 1. 2009 Author: Micheal Axelsen The Data Dynamic Micheal Axelsen FCPA is director of applied insight pty ltd, and provides specialist consulting services in improving data governance with clients. Micheal can be contacted by email on micheal.axelsen@appliedinsight.com.au, or followed on twitter at www.twitter.com/MichealAxelsen. Micheal chairs the CPA Australia Information Technology & Management Centre of Excellence. This article was published in the Australian Financial Review ‘MIS’ Magazine on 1 May 2009 and the 2009 CFO Magazine Software Guide. The Data Dynamic
  2. 2. The Data Dynamic CPA Australia believes that a properly designed emissions trading scheme that incorporates well-calibrated caps and emission trajectories is central to reducing carbon emissions. Australia’s ‘Carbon Pollution Reduction Scheme’ (CPRS) introduces a ‘cap-and-trade’ emissions trading scheme for the nation’s top 1000 polluters. It presents diverse challenges for businesses directly affected by the CPRS, but the resultant ‘market pricing’ of pollution affects the cost structures of smaller businesses as well as large businesses. Businesses must consider the challenges that the implementation of this scheme will have upon Australian business practices, particularly for information systems. The CPRS will have specific reporting guidelines requiring transparency, comparability, accuracy, consistency and completeness, and it is proposed that records be maintained to within ‘95% confidence levels’. Such obligations can only realistically be met through dependable information systems to record the information the CPRS will require. Many large polluters already comply with the reporting guidelines. However, these businesses continue to refine and improve their methods. Some have implemented new information systems, whilst others have opted for integrated solutions with existing information systems. The accounting information system is a prime candidate for an integrated solution, as it already processes invoices with the relevant consumption information, and is an audited and reliable information system. Although only the largest of the large polluters must have their information audited at this stage, all polluters must retain auditable records. As the scheme is proposed to require ‘95% confidence levels’ and proposes significant penalties if This Draft: 2nd April 2009 1 The Data Dynamic
  3. 3. The Data Dynamic adequate steps to address errors are not taken, a reliable information system with an audit trail to support the audit of this information by external third parties is necessary. The data quality of this system must be high, and staff training and awareness will be needed to ensure the accuracy of records. This implies that information systems need to be developed or selected in accord with best practice frameworks such as COBIT (Control Objectives for Information Technology). There will be risks and issues associated with the implementation of these solutions. The solutions are potentially complex, and will require accuracy and completeness from implementation so as to avoid potential legislative penalties. A definite and planned approach to data governance will be good for the business – and good for the environment. Those businesses affected directly by the CPRS, as well as smaller businesses, will also need to consider the likely price changes to their costs of production. The CPRS ensures that the cost of most of Australia’s greenhouse gas emissions is incorporated into the price of all goods and services. By way of example, the cost of electricity is expected to increase on average by 18% and the cost of gas by 12%. Market forces will encourage the adoption, where appropriate, of less expensive (and thus less emissions intensive) alternatives, or ration their consumption of these more expensive products and inputs. All businesses will need to model the effect of the increases in these costs on their own prices to ensure that the business remains sustainable. Information of a high quality, and reliable pricing and budgeting models, are needed to ensure that the business does not adopt poor approaches to the pricing of its goods and services. The This Draft: 2nd April 2009 2 The Data Dynamic
  4. 4. The Data Dynamic need to achieve this fine balance is only heightened by the requirements of the ACCC in the setting of prices, and the possible damage to business reputation if the approach to pricing seems unreasonable to the business’s customers or the wider community. The success of this universal adjustment of prices depends upon the business’s data quality and the use of appropriate and reliable models, in addition to market knowledge. These issues are as important today for businesses as they were in the implementation of the GST in 2000. Addressing these issues is key to understanding the impact of CPRS on the business’s bottom line. No business should allow these changes in cost structure to affect the business’s viability in the long term. The CPRS affects all businesses to some degree. The implementation of the CPRS highlights the need for strong data governance practices and accurate business information through the adoption of best practice control frameworks such as COBIT and data assurance services. Businesses need to address these issues through rigorous assessment of their current situation and development of innovative solutions. This Draft: 2nd April 2009 3 The Data Dynamic

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