Can they be reduced?
Andy Dunn advises energy companies on risk management, pricing, and portfolio-optimization issues.
The Sarbanes-Oxley Act has cost public companies millions, if not billions, of dollars in extra costs since the epic corporate meltdowns in 2000 and 2001. It has required a great deal of time and effort in the implementation of internal controls and processes in the hopes that these steps would prevent the high profile abuses of Enron and other companies. Energy trading, in particular, has been criticized highly for its abuses.
Before Sarbanes-Oxley, mark-to-market (MtM) processes included procedures that aggregated trader input and external market data in the forward curve-building process. However, the instances where traders took advantage of their position in the market to influence prices have created an environment where all trader insight is suspect. Sarbanes-Oxley rules and the audit firms have encouraged organizations to build processes for forward curve-building and MtM that circumvent trader insight altogether. Extensive controls and processes around data gathering, storage, and processing have occurred in this controlled environment.