Download combining compliance and performance optimisation

Smarter Governance
Combining Compliance and Performance Optimisation
Levine Naidoo – IBM Business Analytics and Optimisation
17 June 2013
Smarter Governance – a new paradigm
• Finance & IT continue to face challenges, in the public and private
sectors
• Past approaches to governance are inadequate in both design and
implementation
• Executives get fragmented views of their true business
performance, and inefficiencies drive up costs.
• A new paradigm is required, that
– takes a value integrator approach to driving finance transformation
– uses standards for financial outperformance
– reuses common capabilities across risk, compliance and performance
optimisation
2
The new normal economic environment
Global Financial Crises
 Liquidity driven crises
Market Pulse
October 2012 World
Economic Outlook (WEO)
New Economic Environment
 Subdued growth
 Real estate bubble burst
 Continued cost pressures
 Failure of collateralized debt
obligations
 Continued high unemployment
 Drop in global commerce
 Reduced global commerce
and demand
 Cost reduction pressures
 Rising unemployment
 Drop in commodity values
 Dramatic drop in consumer
demand
March 2013: Economic
Sentiment in Euro Area
 Increased risk, volatility and
uncertainty
 End-to-end stimulus and
government hand in business
 Sovereign debt concerns
 Industry restructuring and
consolidation
 Continued uncertainty,
elevated volatility and risk
Source: IMF World Economic Outlook Update, European Commission: economic Sentiment Indicator
3
A CFO study in the midst of severe economic uncertainty
CFO Study Provocative Topics
!
The impact of the New Economic Environment on the
CFO’s role
?
What Finance model achieves the optimal mix of
capabilities needed to outperform?
?
What can CFOs do to enable timely and informed
decision-making?
?
How can the CFO help the enterprise anticipate and
shape its environment?
Source: IBM Institute for Business Value, The Global CFO Study 2010
4
CFOs aspiring to evolve their Finance Model to higher capability
should address performance gaps with specific action plans
Paths to Higher Value
High efficiency enabled by process
and Finance data standards
suggests Disciplined Operators
focus on maturing business insight
and partnering capabilities
Value Integrators can maintain
their advantage through a program
of continuous improvement to
sustain capabilities and value with
Data Standards, Information
Integration and Analytics
High
Finance
Efficiency
Scorekeepers can attempt a direct
path to become Value Integrators.
This will involve establishing
Finance efficiency while
simultaneously building business
insight capabilities. Alternatively, a
staged approach can be taken
Low
Low
High
Business Insight
Constrained Advisors have good
business insight, constrained by
structural complexity, therefore
address process and data
standards to improve efficiency,
accuracy and speed
Source: IBM Institute for Business Value, The Global CFO Study 2010
5
Those who excel outperform financially and are more effective
against their agenda
Finance Efficiency and Business Insight
Corporate
philosophy of
information
standards
Standard Chart
of Accounts
High
Finance
Efficiency
Standard data
definitions
Standard
processes
Low
Low
High
Business Insight
Driving
Integration of
information
across enterprise
Managing
Enterprise Risk &
Compliance
Measuring &
Raising
Business
Performance
Source: IBM Institute for Business Value, The Global CFO Study 2010
6
The Scorekeeper’s dilemma
How are we doing?
Transaction Systems
What should
we be doing?
Why?
Warehouses
(Relational & OLAP)
Flat, Legacy
or Modern
External
Sources
7
Scorekeeper to Value Integrator
Risk
Models
Trading
Models
Balance Sheet
Model
Prudential
Analytics Model
Treasury
Models
Past
Present
Future
•
•
•
•
•
•
•
•
•
•
•
•
• Statistical Projections
• Regression,
Extrapolation
• Tolerance, Confidence
• Forecasting, Planning
• Decision Support
• Stress Testing
• What-if Modeling
• Hypothesis Testing
• Scenario Modeling
• Performance
Optimisation
• Resource Optimisation
• Change Management
Analysis
Reporting
Data Mining
Drill Through
Root Cause Analysis
Monitoring
Variance Analysis
Collaboration
Commentary
Workflow
Guided actions
External Data
integration
• Unstructured Data
integration
8
Scorekeeper to Value Integrator
PRUDENTIAL ANALYTICS MODEL
Risk
Models
e.g. London Branch of Bank for
Telecom Customers Risk or Profitability
Trading
Models
Treasury
Models
Past
•
•
•
•
•
Analysis
Reporting
Data Mining
Drill Through
Root Cause Analysis
BANK ENTITY
Balance Sheet
Bank
Group
Model
Directorate
Subsidiary
Present
•
•
•
•
•
•
•
Prudential
Analytics Model
Future
Branch
• Statistical Projections
• Regression,
Extrapolation
• Tolerance, Confidence
• Forecasting, Planning
• Decision Support
• Stress Testing
• What-if Modeling
• Hypothesis Testing
• Scenario Modeling
• Performance
Optimisation
At each intersection, all configured risk •or Resource
profitability
Optimisation
calculations are performed in real-time • Change Management
Monitoring
Variance Analysis
Collaboration
Commentary
Workflow
Guided actions
External Data
integration
• Unstructured Data
integration
9
Common capabilities underpinning compliance and performance
Analytics enabled compliance and performance
Interactive & Collaborative
across Silos
Real-time and Dynamic
Predictive
Data Provisioning
Common Definitions &
Standards
Internal & External
Information Integration
Transformation &
Business Rules
Aggregation,
Enrichment &
Augmentation
10
Business scenarios - optimising decisions & raising performance
•
Operational risk
•
Credit risk
•
Market risk
•
Capital adequacy
•
Liquidity
•
Customer profitability
Deliver optimal answers at the point of impact
11
Value integrator approach across the enterprise
External
Financial
Reporting
Business
Performance
Management
Planning,
Budgeting,
Forecasting
Risk and
Compliance
Management
Treasury and
Investments
KPI Monitoring
Budget/Forecast
Model Design
Risk and
Compliance
Monitoring
Bank Account
Reconciliation
Budget Policy
Monitoring
Controls Monitoring
FX Exposure
Management
Plan Approval
Fraud Management
Portfolio
Performance
Monitoring
Reporting
Compliance
Monitoring
Financial
Statements
Approval
Financial
Statements
Preparation
Business
Performance
Review/Impact
Assessment
Management
Reporting
Cash Mgmt
Operations
Risk Reporting
Regulatory
Enquiries Handling
Scorecard/
Dashboard Creation
Business Case
Preparation
Tax Return
Preparation
Portfolio
Management
Business Analysis
and Modelling
Regulartory
Reporting
Production
Tax Compliance
Monitoring
Cash Forecasting
Risk Scoring and
Evaluation
Budget Preparation
Board Reporting
Preparation
Tax
Management
Forecast
Preparation
Investment
Modelling
Equity/Debt
Management
Compliance and
Controls Reporting
Tax Enquiries
Handling
Capital Acquisition
and Securitisation
12
Summary
• Traditional solutions based on traditional system delivery lifecycles
will not rise above the change challenge faced by business today.
• A new paradigm is required. A business owned self service
capability to rapidly turn information into insight to enable quality
decisions, and ultimately optimise performance.
• Seek to extend investments in compliance solutions to cover
performance optimisation
– Use standardised data and standardised processes
– Integrate information across the enterprise to eliminate silos
– Provide a self service data provisioning for business to analyse and
generate compliance reporting with full auditability and controls
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