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How finance leaders use analytics to manage risk and maintain profitability

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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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Banking

LEGACY INFRASTRUCTURES MUSTN’T HOLD BACK INNOVATION IN FINANCIAL SERVICES

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By

Ian Perry, Principal Solution Architect at Zscaler

 

We are living in a changed world; one of hybrid home/office work and customers who may never return to bank branches and the services of the high street. According to RFi Group, 73 per cent of UK consumers interact with their main bank via digital banking at least once a week, and only 23 per cent believe nothing can replace what they get in a branch. Meanwhile, institutions including JP Morgan, HSBC and Nationwide have all indicated an intention to retain new higher levels of homeworking.

Now that employees work from a multitude of locations and customers bank and manage their money online the race is on to adapt processes, systems and support structures for safe, secure and productive homeworking and digital access for customers. Inevitably, this calls into question legacy infrastructures in financial services and how they might impact digital progress.

 

New tools, old systems?

The question is, how can banks and other financial institutions securely provide a higher level of remote access to their systems and applications when incumbent infrastructures were developed for an entirely different time?

Of course, the first thing to note is that banks aren’t coming at the problem from a standing start. Oft-cited legacy infrastructures have been added to over time so that many set-ups are now an on-premise/cloud-hosted hybrid. In fact, the finance sector has invested heavily in cloud infrastructures and cloud-based office applications.

The issue is how to harmonise this set-up so that it works for users and organisations as a whole. Here, there is work still to be done. It’s often the case that core banking applications remain in mainframe on-premise networks, whilst other operational tools reside in the cloud. Cloud-based Office 365 is a case in point. It supports digital working, as organisations need it to, but a range of its benefits and functions are at odds with legacy network setups.

Inevitably, when a product or service innovation reaches implementation planning stage, the starting point is the existing network, its systems and processes. The hard part is flipping this approach to assess what the resulting experience will be from the user point of view, but that is exactly what’s needed. It’s an approach that competing market disruptors have been ideally placed to adopt from day one.

However, that needn’t mean that financial institutions must completely overhaul their legacy infrastructure – something that would be expensive and complicated. They can still fully capitalise on the benefits of cloud-based services, among them flexibility, productivity, business continuity and the right customer and user experience.

 

Zero Trust without friction

One way is to take a ‘Zero Trust’ approach. As a result of recognised risks, 72 per cent of companies are prioritising the adoption of such a security model. This resets a data security approach from one that traditionally secured the perimeter to one that protects users, devices and business resources.

It’s a shift in emphasis from securing the network to securing each access and doing so without introducing friction into processes for users. We can think of legacy digital protection methods as a visitor getting a key from reception and being allowed to wander around the building, and compare that to a frictionless cloud experience in which a security guard shows the visitor directly to the room they need.

The Zero Trust model lends itself to high levels of remote access, which is exactly the situation organisations are now in. Employees work from anywhere, from a range of devices, and customers access services previously provided in-person online. Applications are no longer exclusively within the data centre, they are outside the network perimeter meaning that traffic must be enabled to run securely through the internet, rather than through corporate IT. Doing so not only equips organisations for the way things are today, it can also reduce the cost of individual site maintenance and enable the full benefit of cloud-based tools.

The technology now exists to make high levels of security completely invisible and so, with a growing number of security processes now taking place in the cloud, educating customers will be key. The industry must come together to improve user interfaces to signal what’s taking place behind the scenes.

With the right security approach, financial services can deliver on new access priorities to support their workforces and serve customers. Convenience, as well as security, should be the aim along with a strategy that ensures legacy doesn’t hold back innovation. That way, banks and other finance institutions can begin to fully capitalise on the benefits of cloud, adapt to meet customer demands as they evolve and compete in a disrupted market.

 

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Finance

HOW CFOS CAN TAKE A HOLISTIC APPROACH TO ENTERPRISE AGILITY

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By

Frederic Portal, Financials Product Marketing Director, at Workday

 

Whether brought on by a market shift, technological innovation or as we have seen over the last year, a pandemic, change in business is constant. But to survive it, or even thrive in it, organisations must find a way to adapt rapidly, while remaining strong and stable in the long-term. This is where enterprise agility and the CFO come into play. In theory, the concept of enterprise agility — a company’s ability to outperform the competition and drive growth in new, ambiguous situations by learning and adapting — sounds like something every business should inherently do. Yet, many are trying to introduce technology or implement processes before defining and establishing what agility really means to them as an enterprise. In other words, embracing agility should be a holistic approach and crucially must be led by the CFO. The CFO and financial team are instrumental in making sure that a business can lead digital transformation, steer through uncertainty and ultimately, embrace a culture with agility at its core. However, in order to achieve enterprise agility successfully, there are some simple factors that a CFO should consider when guiding their organisations to become truly agile.

 

Enterprise agility starts with the CFO

The last year made it clear that the finance function is leading business recovery. In fact, a Workday survey with C-suite leaders showed that 37 percent of respondents agree that finance is the function most likely to influence digital growth in a business. Overnight, CFOs and their teams had to rethink their processes and leave behind legacy technology in order to keep up with the continuous change that the pandemic now demands. Naturally this prompted a company-wide transformation.

To make sure this transformation towards agility doesn’t stop at technology adoption, CFOs should put practical steps in place, working in collaboration with all senior leadership, from IT to Sales and HR, to build a plan that will guide a wider change within the business. Once a plan is in place, it must be communicated and then reinforced to the rest of the workforce by providing them access to real-time data and cloud-based models. Led by the CFO, this will give crucial insight into payroll, cash flow and planning scenarios. In turn getting the entire organisation on board, creating uniformity and ensuring teams are all working from the same source of truth to move the business forward.

 

Embracing an agile mindset 

When incorporating new agile processes, CFOs must work with all business leaders to define and integrate an agile mindset. Enterprise agility isn’t just a process, it needs to be baked into the heart of the organisation — and its digital transformation agenda — so that teams across the business embrace qualities such as quick thinking, being perceptive and taking action. Adopting this way of thinking and behaving is the foundation for any agile organisation and must begin with the finance department.

Take Aon as an example. The multinational British professional services firm sells a range of financial risk-mitigation products, including insurance, pension administration, and health-insurance plans across 120 countries. By March 2020, COVID-19 resulted in the company’s entire team working from home, which meant Aon’s finance team had to do a fully-remote close. While this had never been attempted before, Aon had baked agility into its financial processes by investing in the right cloud-led, and agility enabling technology. With up to date data, and transparency across the regions, Aon’s finance team was able to close remotely, with one region even being able to close a day early.

 

Empowering agility 

Transparency and accessibility are also key to enterprise agility. So, it’s critical that CFOs empower all departments to work from the same data sources, assumptions and outcomes in their workflows. It is only by prioritising digital transformation and having technology structures up-to-date, that businesses can experience real results, and fast.

Take Netflix, for example. Even in this streaming powerhouse there were improvements to be made to back office processes. Netflix’s back office systems had usability issues due to clunky workflows and limited visibility. Led by the CFO and investing in transforming the back office into one unified system, Netflix was able to introduce an agile mindset across the business that was vital in turning this around. For instance, every time Netflix creates an original show or movie they have to create a legal entity and set up the banking and with Workday it just takes minutes to add it to an existing framework. Implementing the right technology resulted in more efficiency, more agility and fewer silos among the IT, Finance and HR teams.

 

Taking a holistic approach to enterprise agility

The disruption of 2020, and impact COVID-19 has had, is showing no signs of slowing down in 2021. It is simply no longer enough to just deploy new technology or processes with hopes of becoming  agile. In order for an organisation to truly embrace agility, it must take a holistic approach and proactively adopt an agile mindset across the entire organisation and its way of working. This is where the CFO plays a pivotal role.

 

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