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How finance leaders use analytics to manage risk and maintain profitability

Jon M. Deutsch, Vice President and Global Head of Financial Services  at Information Builders writes,

 

Using data to manage risk

The Amercian Institute of Certified Professional Accountants (AICPA) asked more than 400 finance leaders and chief financial officers about their risk management strategies. The survey, undertaken in partnership with The North Carolina State University Enterprise Risk Management Initiative, found that 65% of those surveyed had recently experienced an ‘operational surprise’ from an unanticipated risk.

Among the top five risk management pitfalls, AICPA identified lack of collaboration with the IT department, advising, “IT can provide key metrics for your risk analysis, help mine the data and assist in SWOT (strengths, weaknesses, opportunities and threats) analysis.”

Using technology to gain visibility

Jon M Deutsch

There are now so many more sources and varieties of data that integration tools are crucial to the success of analytics strategies. To gain reliable business intelligence, organisations need to ensure that they are able to integrate unstructured and structured data. For example, to gain insights into customer demand, organisations might need to combine structured enterprise data from retail sales, with unstructured textual information from customers’ posts on Twitter, Facebook and LinkedIn.

Many of the organisations we work with have unlocked the value of their business intelligence (BI) and data analytics investments by empowering frontline workers to use embedded analytics to generate their own reports and insights to anticipate risk and identify opportunities. It’s really important to remember that most users of operational data will not be trained data scientists, they will be line-of-business managers, call centre staff, or financial advisors. These colleagues need straightforward ways of reading from one or more repositories of trusted information that have been distilled from many sources.

Enabling user insights

Technology is only useful when it’s being applied. The key is to make it easy for all users. To encourage adoption, theWebFOCUS business intelligence platform allows authorised employees to simply search by account name, customer, product, or any other data characteristic available, to discover valuable insights and the detail necessary to identify opportunity and risk – a user experience akin to Google for business intelligence.

Democratising data analytics at PostFinance

 

Switzerland’s number one payment transaction provider, PostFinance Ltd., needs to provide 2,500 users with current operational insights. Using the WebFOCUS BI platform, PostFinance employees have role-based access to portions of the database, which are required to enable them to acquire current operational data. The BI platform goes beyond traditional reporting by enabling employees to conduct self-service analytics on their mobile devices, with the option to drill down into information to enable further decisions and actions.

Ensuring data quality

 

To encourage employees, partners and customers to embrace data analytics and make the most of BI investments, the data must be trusted. It is therefore crucial to address data quality issues before rolling out data analytics to the user base. By using BI platforms that can automatically refine data, organisations can prevent unreliable information making its way into dashboards, charts and reports, without having to devote additional human resource to manually fix bad data. It only takes one bad experience to see people going back to using Excel spreadsheets, calling on the IT department to generate reports, or installing shadow IT tools for data discovery. In addition to wasting the enterprise investment in data analytics platforms, shadow IT use will lead to data silos, disjointed reports and data quality problems across the enterprise.

A picture is worth a thousand words

 

International recruitment agency, Robert Half Finance & Accounting, asked 2,200 chief financial officers what keeps them awake at night. The responses revealed that CFOs are concerned about developing communication skills, as well as managing risk and steering the financial performance of their organisations.

The Robert Half survey revealed that to help their organisations navigate technological transformation, today’s financial directors need to hone their technical and communication skills, as well as their strategic skills. To assist financial directors with communicating key data points to the board and line of business managers, WebFOCUS makes it easy to automatically create infographics from operational data, so that trends, risks and opportunities can be rapidly communicated to those with the power to act.

Creating fresh revenues from data

 

In addition to identifying risks and protecting profits, when high quality data analytics are effectively implemented they can help financial organisations to identify fresh revenue opportunities. This was the case at First Rate Investments.

Each evening, after the market closes, First Rate Investments receives holdings and transactional records for more than one million accounts. Deborah Repak, managing director and general manager of the Products group at First Rate Investments decided to build a self-service analytics portal, ExecView, which transforms this large data set into data visualisations and reports that help clients to quickly see how their portfolios are performing.

First Rate’s clients saw that there were numerous other questions that could be answered using the same self-service application. Clients suggested several ways they’d like to view their data, such as ‘show me the top 10 holdings across selected domains’. What began as a customised product for one client, quickly turned into a general purpose product that First Rate Investments now sells to broker dealers and other financial services companies.

An investment firm can use the ExecView app to determine activities that may be driving increased revenue through fees, or look for areas where assets under management may be decreasing, or run checks and balances to reconcile accounts that are out of line.

ExecView also helps to prevent regulatory issues in trading, cash management and diversification, and helps wealth management firms to comply with U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) requirements by shedding light on trends and practices that might otherwise be overlooked. Data visualisation within the ExecView InfoApp makes it easy to detect pertinent trends and take appropriate action. Deborah Repak reports, “ExecView has resulted in a 10 per cent increase in our revenue per year as a value-added service.”

Keeping an eye on the future

 

CFOs are agents of change and need to keep abreast of technological developments. Organisations increasingly draw operational data from connected devices, online activity and social media, in addition to traditional EPOS, CRM and ERP systems. By liaising with their colleagues in IT, financial directors can ensure that operational intelligence can be gained from existing data sources as well as integrating business intelligence platforms with emerging technologies such as blockchain, and supporting integration with IoT devices and data science languages such as RScript, RServe and Python.

By delivering models and formulas within intuitive self-service applications, dashboards and reports, everyone in an organisation can be empowered with advanced analytics, without requiring them to become technologists or data scientists. Finance leaders can draw from trusted data sources to identify risk, returns and fresh opportunities and clearly communicate these to the business using familiar data visualisations.

 

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Finance

HOW TO ENSURE YOUR CHILD’S ASSETS ARE PROTECTED

TAX HAVENS

Making money is one thing, but protecting it is another – this is particularly true if you want to pass your assets onto your children. Any reputable bank, solicitor or lawyer will tell you that individuals who have amassed some form of wealth need to protect their assets, especially those with a high net worth. In the event of your death, there are many loopholes that could stop your children from benefiting from your assets, often causing further distress for your loved ones. It is therefore important to shield your assets from any possible risk by having a secure, legally binding plan in place.

As divorce rates in the UK rise, marrying more than once has become much more common. Research shows that one-third of all marriages in England and Wales are between couples where at least one of the spouses has been married in the past. This set-up often brings children from previous relationships, resulting in a UK-wide rise in blended- and step- families. As such, many people find themselves trying to manage the financial needs of their current spouse while ensuring that children from a previous relationship inherit their fair share of your estate. That’s why making a Will is an essential part of protecting your assets for those you leave behind.

 

MAKING A WILL

Making a Will is a necessity that many people ignore. Without a current and valid Will, the law decides who gets what and how much. The majority of your assets will likely be given to your spouse, who can then leave it to whoever he or she chooses. Even if you are separated, but not yet divorced, your children from your previous relationship may be disinherited if your new spouse decides to keep your inheritance for themselves. As such, it is crucial that you update your Will after any life-changing event to ensure the right people benefit from your estate.

For individuals who have remarried, the best thing to do is to write up a will that includes a trust. Not only will this protect your children’s assets, but it will also allow you to look after any future spouses in the event of your death. Your future spouse can access your assets during their lifetime, but once they die, your children will inherit the remainder of your estate.

A trust is particularly important if you don’t have a prenuptial agreement as it will ensure that specific assets are preserved for designated children. However, in the event of a second marriage breakdown, a prenuptial agreement will ensure that the assets owned solely by you (or any assets acquired before the marriage) go only to your own children if you so wish. So, having both a Prenuptial Agreement and a Will in place should account for every eventuality. It’s about exploring the options available to you as to how you can leave your assets.

Thankfully, Turner Little’s Will writing specialists work closely with you to explore every avenue, giving you complete peace of mind. We protect your children’s assets at all costs to ensure fairness and financial security for the whole family. We advise on succession planning, skipping a generation, protecting the vulnerable, preparing for care fees, as well as tax reduction. So if you’re looking for a legally binding document that ensures your wishes are carried out in the most tax-efficient way, get in touch with us today.

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Finance

THE IMPORTANCE OF THOUGHT LEADERSHIP CONTENT IN THE FINANCIAL SERVICES SECTOR

The collapse of Lehman Brothers in 2008 marked a turning point in the financial services industry. Not only did the collapse have disastrous financial and regulatory consequences, but it also caused reputational damage on a mass scale, leaving the entire industry to rebuild trust. Indeed, as little as two years ago, AXA Group CEO, Thomas Buberl, commented that while trust may have returned to the financial markets, “it has still not found its way to society and citizens yet.”

Perhaps hauntingly, Mr Buberl also warns of the need to “better understand new risks to avert the next crisis”, which he says “could well have a non-financial cause.”

If the issue of trust remained fragile two years ago, then the challenges that COVID-19 has added only compound matters. KPMG recently reported that out of six principal matters financial services organisations face as a consequence of the pandemic, communications and transparency is right up there. For Executive teams and CMOs, in particular, this highlights the need to communicate effectively, not just with customers but with employees, suppliers and third-party dependents too.

But what does effective communication entail? As Yogesh Shah, CEO, iResearch, argues, now more than ever there is a huge opportunity for financial services organisations to leverage the benefits of thought leadership content within their communications strategies to re-build brand authority and trust at a time when it’s needed most.

 

Banking on industry expertise

Within every financial services organisation, a CMO will be able to find spokespeople with a wealth of expertise and experience in a range of industry matters. From data security to financial liquidity, business stability and risk mitigation, it is these experts that must form the backbone of an effective communication strategy. Effective communication, after all, relies on the ability of the reader to relate to their content; this in turn, relies on the ability of the author to convey their thought leadership position.

Thinking back to rebuilding trust post-Lehmans and beyond, there are many related and relevant topics to be addressed. What impact will particular regulations have on not just demonstrating compliance, but on providing customer insight as well as safeguarding customers and investors in the event of economic uncertainty? How will these regulations enable the market to continue to grow, whilst protecting data and removing unethical sales and promotions from the industry? Furthermore, how can customers be reassured about the use of automation, AI and data security in the midst of seemingly consistent reports of cyber security breaches? Every CMO should have a solid content strategy built around addressing these topical issues – and planning for other eventualities.

There are numerous examples of financial services companies that have used thought leadership effectively within their content strategies. In addition to the excellent example from Mr. Buberl, in response to the discussions around topics such as Brexit and the coronavirus, J.P. Morgan regularly produces thought leadership articles, reports and insights on the consequences of new developments and practical advice for not just its customers, but for the industry as a whole.

 

Demonstrating data depth

Using data within thought leadership content is also extremely important. Backing up key arguments with industry research or surveys to show why the issue or challenge is so pertinent, and how the rest of the industry might be responding to these issues, will also see engagement soar, especially if the research is relevant, timely and issues-driven. BlackRock Investment Institute has used data intelligently within its thought leadership strategy by creating focused investment information that aims to improve the way its portfolio managers control their funds and, importantly, helps its clients to maximise their own investment results.

 

Community and continued communication

Thought leadership content should be used to create a community; after all, every CMO will be aware that the financial services sector has been through the same challenges together for years. Capital Dynamics has been a prime example of this, regularly producing a 200-page guide of professional advice, guides, statistics and case studies in order to encourage other institutional investors to invest in its clean energy strategy. It is by creating this community that financial services companies can truly establish trust and authority with their target audience, and in turn, that the industry’s reputation can continue to be rebuilt. HSBC is demonstrating both data depth and continued community communication effectively in this space through their annual sustainable financing and investing survey.

 

Opportunities to engage in uncertain times 

KPMG highlighted how important both communication and transparency are for financial services organisations, and with so much change and turbulence currently across many sectors, customers in both the B2B and B2C worlds need to be assured that they can have confidence in financial services organisations once again; that they are one step ahead of industry issues and that their investment, in any capacity, is safe. And, with no doubt that more disruption and uncertainty is on the horizon, CMOs need to plan how they can use thought leadership content to support future contingency plans and be prepared with comments on possible scenarios.

By discussing issues directly relating to the sector and subtly showing the reader a solution to their challenge, thought leadership content will demonstrate invaluable industry expertise. Every CMO knows that content is king, but data-driven, issues-led thought leadership content is a proven way to appeal to target audiences and show how they can trust financial services industry once more.

 

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