Tips to Evaluate Compliance Strategies in Brazil

November 7, 2016 Steve Sprague

With arguably the most complex business regulatory environment in the world, Brazil presents challenges to global enterprises that go well beyond systems integrations and updating compliance interfaces. The requirements in Brazil – including NFe, SPED, Block K and eSocial – necessitate not just a technological solution, but changes to operational process and business strategies as well. That’s why a critical evaluation of your compliance approach that takes into account the long-term compliance landscape is so important – regulations are changing faster than enterprises can keep up internally, and the penalties for non-compliance and errors are drastic.

From a process perspective, companies need to think through questions like:

  • What happens when an invoice fails?
  • How do we account for every single item on an individual expense report?
  • How do we handle credit notes?
  • Where and how will we access historical archives in the event of an audit?
  • How do we track inventory with enough detail and accuracy to comply with Block K?

The technical side of compliance presents a whole separate list of challenges. For example:

  • How do you integrate local standards into your global ERP?
  • How do you manage constant legislative changes with your SAP upgrade strategy?
  • What is the contingency plan in case of a network outage to ensure you can always ship?
  • Who provides support in the event of an issue? 

As enterprises consider these questions, four potential compliance strategies may be considered: on-premise, cloud, BPO or hybrid cloud. Let’s quickly examine each:

  1. On-premise: The most expensive and time-intensive option, managing compliance fully on premise – within SAP – presents several challenge. First, SAP does not offer solutions for every single requirement – leaving several holes and therefore risks. Second, this approach disrupts SAP upgrade policies, as compliance integrations are released only on the current version of SAP. An N-1 upgrade strategy won’t work for compliance in Brazil. Finally, this approach removes the economies of scale that result from a regional compliance approach – requiring separate on-premise integrations for every single operation in Latin America.
     
  2. Cloud: A cloud solution, such as those prevalent in Europe, presents several advantages as compared to on-premise solutions – particularly when it comes to economies of scale. This approach can be rolled out in multiple countries with less hardware involved. However, it still requires ample time from your IT team in terms of integrating SAP with the government processes and services. Plus, this approach offers no on-premise contingency – meaning if the network is down, you can’t ship.
     
  3. BPO: Compliance is no doubt a headache, so it may seem tempting to outsource the whole process, but this is by far the riskiest approach. First, outsourcing means critical information will be housed outside of your system of record – opening up the risk of errors. Second, compliance is a real-time process – adding in a third-party can slow things down significantly – delaying operations. Finally, the risks are just too heavy. Errors can result in operational shut downs and even violations of the FCPA. Do you want to outsource a process that can totally shut down your business and leave you in jeopardy with both the Brazilian and U.S. governments?
     
  4. Hybrid cloud: At Invoiceware, a hybrid cloud approach is our recommended compliance model. It combines the benefits of an on-premise SAP extension to manage customizations and a single user interface with the power of the cloud for economies of scale. Eliminating change management and support issues, this approach reduces staff time while adding contingences and verifications that ensure business continues to run smoothly.

Learn more about why companies like The Coca-Cola Company, Pfizer, DuPont and Kellogg are employing a hybrid cloud approach to compliance here, and listen to our recent webinar on the Top 10 SAP Implementation Challenges In LATAM.

 

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