Corporates in the US will spend more than $38 billion on compliance this year, with 2007 expected to be even more costly.

Not surprisingly, Sarbanes-Oxley Act compliance is the chief culprit, consuming 22 per cent of compliance spending. According to John Hagerty, vice president at AMR Research, which carried out the study, firms shouldn’t expect costs to moderate. “Spending on Sarbanes-Oxley is only the visible tip of the compliance iceberg,” he said. “Any expectation that compliance spending might moderate is just wishful thinking as companies in all industries grapple with increased regulatory concerns and stricter governance and risk policies within their own firms.”

Observers said the ongoing high cost was due in part to bad technology and business decisions in the early stages of SOX compliance. “Many organisations went for the quick fix option in year one,”said one SOX consultant. “Since then, many of them have had to reengineer the entire process.”

While SOX compliance will cost $8.4 billion in 2006, it is set to moderate very slightly to $8.3 billion in 2007, according to AMR. But there is potentially better news ahead. AMR said its study found that three quarters of organisations are leveraging compliance spending to improve business performance. And technology is playing an increasing role in that, with $12.4 billion of the total $38 billion spend going on technology solutions.

Benefits are also beginning to flow through from compliance. Surveyed firms listed the main business benefits being derived from compliance as streamlined business processes, a more secure information environment and better quality. While SOX was the biggest consumer of compliance spending, Securities and Exchange Commission compliance, customer compliance, records retention compliance and manufacturing traceability were the next biggest compliance expenses, AMR said.