Financial Operations Magazine Fall 2015

Q3 Fall 2015 • Canada’s Independent Magazine

Financial S Payables | Receivables | Collections | Data | P-Cards | ECM | Technology

TECHNOLOGY REPORT A look at best practices, fraud protection, and maximizing monetization

Fraud Protection: leveraging analytic technology

Accounts Payable: efficiencies with automation

Trend Report: the transformation of finance PM40050803

Contents

Q3 FALL 2015

Volume 2 Number 3

6 Features Technology Report

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6 Best Practice Solutions for

Accounts Payable Inefficiencies Automate to improve quality, visibility, timeliness, and overall efficiency

4 News 16 Events

10 Fraud Protection Can Stop

21 Trend Report

Cybercrime

Leveraging analytic technology

Finance 2020: the transformation of finance departments

Five years from now, Finance will look a lot different

12 Billing is Broken: 5 Ways to Maximize Monetization

A more comprehensive monetization strategy is necessary

14 Securing Your Company’s Success Anchors to safeguard your enterprise’s crown jewels

Also Publishers of

Canadian Equipment Finance

Advertising Sales Mark Henry mark@financialoperations.ca Publisher and Editor-in-Chief Steve Lloyd steve@financialoperations.ca Editor Karen Treml karen@financialoperations.ca Creative Direction / Production Jennifer O’Neill jennifer@financialoperations.ca Photographer Gary Tannyan

For subscription, circulation and change of address information, contact subscriptions@financialoperations.ca Subscriptions available for $40.00 year or $60.00 two years. ©2015 Lloydmedia Inc. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher. Printed in Canada. Reprint permission requests to use materials published in Financial Operations should be directed to the publisher.

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NEWS Canadian Bank Note acquires Union Graphics Canadian Bank Note (CBN) has acquired Unicom Graphics and will integrate Unicom’s operations with CBN’s McAra Printing division. CBN has made substantial investments in new technology at McAra over the years, and this acquisition is a continuation of this investment.

“By combining the complementary strengths of two leading Calgary-based commercial printers, we have created a single exceptional print solutions provider,” Ronald G. Arends, president & CEO, Canadian Bank Note Company, said.

“Limited CBN is committed to providing McAra Unicom investment and technical support to successfully grow the business.“ The acquisition will allow McAra Unicom to offer high-quality lithographic print including UV technology, digital print and wide format services, complete bindery including perfect binding, foiling and embossing, direct mail and fulfillment, technical consultations and security services.

D+H ranks as top SaaS provider in Canada DH Corporation, a provider of technology solutions to financial institutions, has been named the top Canadian Software-as-a-Service company (SaaS) in the industryregarded Branham300 rankings for the third consecutive year. A reflection of the company’s growth, D+H moved up the rankings for every category it was listed in this year.

The 2015 Edition of the Branham300 moves D+H into 13th place among the Top 250 Canadian Information and Communications Technology (ICT) companies as ranked by revenue (up from 23rd last year). The company landed in the top five in the Top 10 Canadian xSP Companies, and was ranked fourth in the Top 25 Canadian Software Companies – the first inclusion in this category for D+H and a top five placement.

“We are honoured to be recognized again as one of Canada’s top information and technology companies in an industry that is more competitive than ever,” said D+H chief executive officer Gerrard Schmid. “We pride ourselves on being a trusted partner to our clients and a workplace that equally challenges and rewards its staff, always pushing the company to new heights. With nearly 140 years of experience, we understand the importance of leveraging our deep banking expertise to provide relevant innovation that allows our clients to focus on what they do best.”

In the 2015 Edition, Branham300 listed D+H in the following categories: • Top 5 Canadian Software-as-a-Service Companies - ranking: #1 • Top 10 Canadian xSP Companies - ranking: #5 • Top 25 Canadian Software Companies - ranking: #4 • Top 250 Canadian ICT Companies - ranking: #13 As the most comprehensive listing of the top publicly traded and privately held organizations operating in the vital Canadian ICT industry, the Branham300 spotlights the industry’s leaders while illustrating the depth and breadth of world-class technology being developed in Canada.

Amplus Innovations announces launch of EXOCLOUD EXOCLOUD is a subsidiary of Amplus Innovations, a Toronto, Ontario based information technology leader servicing small to medium sized businesses since 1997.

EXOCLOUD is a provider of breakthrough private cloud-based IT solutions and services. It offers state of the art technology at a fraction of the cost along a greater ability to keep abreast of technological changes including access anytime on any device provided there is an internet connection. EXOCLOUD is one of a few players in the industry to offer customized solutions and live support services to meet the needs of individual companies. More importantly, it streamlines processes allowing for more work done in less time.

According to the Conference Board of Canada February 2014 Brief ‘Adopting digital Technologies – the Path for SMEs - SMBs are key drivers of the economy and have a role to play in improving Canada’s global competitiveness’. Therefore it is important that SMBs have the means to expand, gain a competitive edge and enhance their productivity.

Canadian small businesses can now compete with anyone in the world, thanks to low-cost technology solutions from EXOCLOUD.

Cloud computing is the practice of using a network of remote servers hosted on the internet to store, manage, and process data, rather than a local server or personal computer. It is evolutionary in computing and allows applications to run anywhere on any device at anytime. Cloud computing eliminates the costs of purchasing traditional and expensive IT hardware that includes installation and maintenance.

“EXOCLOUD provides the latest cloud technology with the highest level of encryption technology provided by other local cloud services.

EXOCLOUD enables SMBs to enter the market without the barrier of upfront capital costs of hardware and the risk of data loss.” says Victor Ng, President and CEO of Amplus Innovations Inc. and its subsidiary EXOCLOUD. “I want to congratulate EXOCLOUD on their latest offering in the cloud computing space,” says CFIB president Dan Kelly. “As a quickly emerging technology, cloud computing promises to have a significant impact on the small business landscape over the coming years.” Said Dan Kelly, CFIB, President and CEO.

For breaking news and in depth news features, visit our website at www.financialoperations.ca 4

Financial Operations | Fall 2015 | www.financialoperations.ca

Technology Report

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Financial Operations | Fall 2015 | www.financialoperations.ca

Technology Report

Best Practice Solutions for Accounts Payable Inefficiencies

By Cheryl Girling

A

ccording to the Aberdeen Group, in the case of best-in-class industry performers (the top 20 per cent), it takes 4.1 days to process an invoice from receipt through to approval at an average cost of $3.34 per invoice. This compares to worstin-class performance (the bottom 30 per cent), where invoice processing and approval increases to 16.3 days at an average cost of $16.67 per invoice. Furthermore, best-inclass performers typically have a 90 per cent capture rate for any early payment discounts, compared to an 18 per cent capture rate for the worst performers.

This wide variation in performance clearly

highlights the inefficiencies that exist within the accounts payable (AP) function of many organizations. Why does it take one company four times as long, at four times the cost, to do the same thing? What are the bottlenecks?

Where are the key opportunities to apply best practice solutions? Here is some perspective to help consider these important questions.

The traditional ‘back office’ The traditional AP process is a manual, paper-based, ‘back-office’ function that works, but is outdated and inefficient. Original paper and/or electronic invoices are received from vendors, copied or printed, then manually

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Technology Report reviewed for purchase order matching, discrepancies, and exceptions. Invoice data is then physically entered into an accounting system, coded to the general ledger, and routed for approval or discrepancy resolution prior to disbursement of funds. Subsequently, the accounting system is leveraged for monthly, quarterly, and annual reporting.

This traditional manual workflow and approvals process is both labour-intensive and time consuming. It often means that invoices are sitting on people’s desks waiting to be processed. In addition to the extra time and human resource cost, paper-based processes are prone to data entry errors, duplicate payments, and late payments.

Key goals of automation are to improve quality, visibility, timeliness, and overall efficiency.

Drivers of evolution The practical reality is that traditional backoffice processes and infrastructure no longer provide adequate responsiveness to evolving business, management, and shareholder demands. Organizations are looking for methods to optimize cost and efficiency, especially where technology innovations have created opportunities for centralization of back-office functions to achieve process efficiencies, cost reductions and timely, accurate payments.

This search for optimization of back-office processes is made even more important by increasingly technical AP processes and workflow due to changes to financial standards, tax obligations, and more rigorous compliance and reporting requirements.

Further, multinational organizations and local companies with both domestic and international suppliers, and payroll, are subject to payment fulfilment challenges and foreign exchange risk when they transact payments with foreign banks in different currencies. With these increasing complexities

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of doing business, it is vital that companies assess best practice solutions to meet them.

to be consistent with applicable financial standards and comply with regulatory and audit requirements.

Step 1: Automation of the AP process Automation of traditional paper-based processes is one component of the best practices solution to achieve AP workflow efficiencies. Paper invoices can be digitized to enable invoice data to be automatically populated into a custom web-based workflow system that is designed to integrate with the organization’s existing accounts payable system and processes. The intent of this overlay approach is to preserve the value of investments in existing accounting systems and mitigate cost, risk, and implementation challenges. It also ensures the retention of existing interfaces and reporting capabilities.

Once invoices have been digitized, the custom web-based workflow system can provide for efficient invoice routing and approval from a mobile device or PC, coupled with purchase order verification, exception management, and resolution with appropriate internal controls.

Step 3: Leverage payment fulfillment platform Invoices approved for payment from a webbased workflow system can subsequently

Step 2: Evaluate best practice process controls Importantly, automation initiatives need to consider best practice accounts payable processes and controls. Key goals of automation are to improve quality, visibility, timeliness, and overall efficiency of the process. It should also support and enhance financial and senior management decisionmaking. However, automation of an existing, potentially flawed or broken process will only incrementally improve efficiency, if not lead to further inefficiencies. Accordingly, it is critical for companies to examine and possibly re-engineer their existing AP process to ensure appropriate internal and management controls are in place to comply with relevant standards.

Alternatively, organizations can outsource this function to a trusted service provider with the ability to scale their service to client needs. Leading providers will have invested in developing best practice processes that comply with industry standards and which are enabled by proven AP automation technology. In the outsourcing scenario, however, it is crucial that unique business rules and policies are documented in advance.

Providers must also have the capability to document and enforce internal control procedures for financial transactions, so as

Financial Operations | Fall 2015 | www.financialoperations.ca

Additional benefits of an automated electronic payment fulfillment platform include:

1 2 3 4

real-time bank validation and payment routing; timely and accurate delivery of payments to vendors/suppliers; increased control and visibility of cash flow;

mitigation of foreign exchange (forex) price risk for international payments; and

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reduction of payment processing and intermediary fees through existing banking relationships.

Technology Report

…sophisticated automation is achievable with a clear commitment to accounting expertise, operational excellence, and technology innovation. be integrated with an electronic payment fulfillment platform for optimized funds disbursement. Leading service providers have proven best-practice vendor enablement processes to automate electronic payments and provide for secure and flexible remittance options, including electronic funds transfer (EFT) and prioritized card payments. This reflects a global shift away from paper cheques in favour of electronic payments. The prioritization of card-based payments also provides an opportunity to convert the AP function into a profit centre (via the creation of a revenue stream from card-based incentives).

How automated electronic payments work The organization’s accounts payable system can generate a single payment file (in TXT, CSV, or XML format) which is subsequently uploaded to an electronic payments platform.

The most efficient upload approach is via an automated Secure File Transfer Protocol (SFTP). Typically, you can enable this functionality from your Enterprise Resource Management (ERP) system. Payment files (including beneficiary and payment information) can be periodically dropped into a secure folder and automatically

uploaded for supplier validation and custom remittance in accordance with set criteria.

A reconciliation file can also be generated to describe funding amounts and the exchange rate for foreign currencies for each payment. Consolidated funding transactions are initiated via an EFT debit, which can subsequently be reconciled against the AP sub-ledger.

Enhanced straight through processing Another key determinant in selecting an outsourced provider is the ability to deliver a scalable solution that adheres to existing organizational workflow processes and policies while respecting any limitations of existing accounting systems. Equally important to the technology capability is the service provider’s accounting expertise and ability to maintain the integrity of your database, accompanied by 24/7 customer and compliance support to address any issues that may arise.

Conclusion For the AP function, ‘best practices’ reflects the ability to process invoices for approval and electronic payment in short time periods.

Electronic payment fulfillment incorporates

secure file transfer capability, with supplier validation and custom remittance options.

This level of sophisticated automation is achievable with a clear commitment to accounting expertise, operational excellence, and technology innovation. Organizations should target a best-fit solution that leverages existing accounting systems and back-office infrastructure, while enabling continuous process improvement and compliance.

Outsourced technology providers should be able to offer a fully integrated and scalable technology platform, coupled with personalized support.

Cheryl Girling is Regional Director, Enterprise Sales for Cambridge Global Payments, where she leads a team of risk management specialists in orchestrating complex FX programs for midsize to large organizations. Based in Montreal, Cheryl directs the sales and trading teams within her region while delivering Cambridge’s extensive suite of payments processing and foreign exchange risk management solutions. With over 10 years of experience working with large corporates to implement and streamline FX and payments strategies, Cheryl continues to work with high-value clients to identify and implement successful foreign currency risk management strategies as well as payment solutions including the implementation of check elimination programs.

About Cambridge Global Payments Since its inception in 1992, Cambridge Global Payments has grown to become a leading provider of global payments and currency risk management solutions. With more than 14,000 clients worldwide, Cambridge is among the largest bank-independent providers of hedging and risk management products, powered by technologies widely regarded as industry leading. Cambridge delivers a superior level of service to clients through extensive knowledge of foreign exchange and award-winning operational capabilities, supported by an experienced trading, account management and consultative sales team. With offices strategically located across the globe, including North America, Europe and Australia, Cambridge facilitates the secure movement of over $20 billion annually. For more information, visit www.cambridgefx.com.

www.octacom.ca 1.888.739.1934

Financial Operations | FAll 2015 | www.financialoperations.ca

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Technology Report

Fraud Protection Can Stop Cybercrime Leveraging the analytic technology that is currently applied to fraud security

By Kevin Deveau

N

ews of data breaches continues to dominate headlines in 2015, and cybercrime has made its way to the top of each executive’s list of pressing concerns. And while no industry is immune, the financial services industry appears to be the prime target.

The financial services industry sits on a rich foundation of consumer information, so it is no surprise that this sector experiences the highest percentage of cyberattacks of any industry. A recent study by Raytheon Websense found that financial institutions experience three times as many security incidents compared to any other sector.

There are two factors, which suggest that financial institutions are especially vulnerable. The first is the rapid increase of information, which is more and more available as services are digitized. The second factor is the speed of innovation. As an example of this, the payments industry is undergoing a technology revolution – there is increased consumer adoption of mobile commerce, mobile payments, and mobile wallets. These innovations are changing the payments ecosystem, and they too are adding to the amount of available information.

In this environment, it is increasingly important for all companies, especially financial services firms, to protect consumers’ personal information. This means having the right security measures in place to monitor and manage that

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Financial Operations | Fall 2015 | www.financialoperations.ca

environment. But, many current cybersecurity solutions are insufficient as they lack the ability to adapt quickly, and the time it takes to detect a breach leaves an organization exposed, sometimes for months.

There is a huge opportunity to leverage the analytic technology that is currently applied to fraud security to combat cybercrime. To keep consumers’ data safe, Canada’s financial institutions need to utilize a cyber-security solution that leverages self-learning analytics – models that train themselves on the fly and look for abnormal behaviour of end devices while identifying threats in real-time.

Why financial institutions are especially vulnerable Information on consumer behaviour is increasingly available electronically. But, at the same time, this data also becomes a growing commodity to people that want to exploit it for other purposes. The growth and explosion of data and how digitized it has become presents one of the loopholes.

The current speed of innovation also poses concern. The pace of technological innovation, such as mobile payments and mobile wallets, has been dramatic. And the rate of innovation is going to exponentially increase. We can look at the roll out of ATMs and their widespread adoption in the 1970s and 80s to where we have come in the last few years – being able to access

Technology Report

“Cyber vulnerabilities are terrifying because they are unknown. But they do not have to be …” funds from your mobile phone and having less reliance on cash. But with this innovation, financial services firms need to look at whether they have the right security in place.

Connecting the disciplines of fraud detection and cyber-security Current cyber-security methods are largely signature-based. An organization needs to experience a breach to detect it in a timely fashion, so the threat can be codified and a signature created to detect the same threat elsewhere. These methods do not respond to new threats or morphing of the threat signature.

Another difficulty is time to detection.

Zero-day threats, exploits that are unknown, are sometimes not discovered for weeks or months – because the exploit is not known to developers or users. This means that the organization may not discover the exploit until long after the damage has been done.

Last year, the mean time to detection for a data breach was eight months.

Signatures as defensive methods are not sufficient. At FICO, we see fraud and cybercrime as two ends of the same problem.

FICO plays a unique role within this lifecycle. The company has a history fighting payment card fraud – more than 9,000 of the world’s banks use the company’s software and analytics for fraud protection. The technologies that have been successful in the financial fraud area – such as self-learning

models and behavioural analytics – can apply to the cyber domain.

Using self-learning analytics to protect personal information Cyber vulnerabilities are terrifying because they are unknown. But they do not have to be. It is time for financial services institutions to use predictive and detection technologies to identify threats in real-time.

This means leveraging self-learning analytics. The multi-layered self-calibrating outlier model is one such type of self-learning analytic that can be utilized with both fraud detection and cyber-security. It not only detects some known patterns used by malware to connect to command-and-control structures, but also spot unusual computer activity. The analytics combine several features that are sensitive to such anomalies, and these components are fused into a single score indicating threat risk. All this takes place in real-time.

The major advantage of multi-layer selfcalibrating outlier analytics for industries, such as financial services, is that it requires less labeled data for model development.

Instead of having to be trained with months of historical data to recognize normal and abnormal values for data features, selfcalibrating models infer these values in realtime from the stream of transactions. That makes them effective for new applications where there is an absence of historical data,

for markets where data that is available may be of low quality and for any environment where behaviour is rapidly changing.

Detecting cyber threats as they occur In this digital age, financial institutions are under pressure to innovate as consumers demand convenience. A lot of times, this means quick, easy access to their services, which has led to the incredible growth in technological advancements related to banking and payments. The demand for digital services has also led to a massive influx of information. Taken together, these factors are putting financial services under threat from malware and other systems trying to steal their customers’ data.

Protecting personal data is critical.

Makovsky published a survey in May, which found that nearly half of their respondents said that they would consider switching financial institutions, if those institutions were not able to protect a consumer’s personally identifiable information. The threat, here, cannot be overlooked. No organization can afford to wait months to learn that their data has been compromised. In order to keep attackers at bay – and by extension maintain the loyalty of their customer base – organizations need to leverage self-learning analytics – a solution that is able to detect anomalies in real-time and change along with them.

Kevin Deveau is managing director at FICO Canada

Creating an optimized branch of the future.

During this interactive discussion you will gain insight into creating a more efficient, optimized operating model for your “Branch of the Future”.

Financial Operations invites you to a Free Breakfast Briefing Oct 29, 2015 • 7:30-10am

Twenty Toronto Street Conference Centre, 20 Toronto Street, Toronto

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Technology Report

Billing is Broken: 5 Ways to Maximize Monetization Billing, as commonly practiced, is broken. A more comprehensive monetization strategy is necessary to future success.

By Bob Harden

W

hat’s the difference between billing and monetization?

Monetization is about more than just cutting an invoice and collecting payment. It’s an end-to-end process that requires managing all aspects of a customer relationship, from the moment a customer first visits your web site through provisioning new services, communicating with customers, invoicing, and recognizing and allocating revenue. Billing sits at the heart of that process, and the right billing solution will help keep all of those activities in sync.

Why is the transition from traditional billing to monetization models so critical and how can you get your billing system up to speed? Let me explain.

Quote-to-cash is a dead end We’re all familiar with the traditional oneand-done Quote-to-Cash (Q2C) cycle – you acquire a customer, payment is received, and the transaction is done. This model has been

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in place, with slight alterations, since the day the first caveman swapped a fish and some berries for a handful of shiny rocks. But if you think this is a winning formula for the future of your business, get your resume in order – you might need it sooner than you think. We’re living in a different world now.

In this new world or ‘new normal’ where each and every customer interaction provides an opportunity for monetization, a new economic model is required.

That model is recurring services, in which the attention shifts away from products and toward the single constant over time – the customer account. In these models, your goal is not just to close a sale and collect payment; it’s to retain customers and to maximize customer lifetime value.

This is not what traditional quote-to-cash processes and legacy billing and receivables systems are designed to do. These systems are outdated and focus only on managing and completing one-time transactions rather

Financial Operations | Fall 2015 | www.financialoperations.ca

than developing and nurturing customer relationships. To successfully navigate the new normal, you need to forget about the old one-and-done sales models. The greatest growth potential going forward will be in recurring services and long-term customer relationships.

If you approach recurring revenue as a series of one-time Q2C transactions stacked end-to-end, like some enterprises do, you’ll fail. Miserably. Forget the old Q2C mindset.

Start thinking about monetization.

Monetizing relationships Monetization is the process of converting business assets into recurring revenue.

It begins with knowing each customer intimately, at a macro, micro, and segment level. It requires managing each and every interaction with the customer as a potential revenue moment – an opportunity to earn (or lose) revenue. Knowing your customer gives you the ability to personalize offers

Technology Report and services, resulting in greater customer satisfaction. Satisfaction leads to retention and brand loyalty, which help to maximize the lifetime value of each customer relationship.

Recurring revenue is relational, not transactional – it’s about monetizing relationships, not executing transactions.

However, the majority of existing billing systems don’t or can’t handle this type of relationship. Recurring revenue models – subscription, usage-based, freemiums, and hybrids – are inherently customer centric, allowing the customers to vote with their wallets and requiring you to know and continuously satisfy your customer.

A good monetization strategy and platform puts the ability to manage customer relationships front and center with the tools to manage offers, accounts, and revenue operations. It helps you master markets by enabling innovation and giving you the ability to roll out new services and offers faster than your competitors. And it provides the finance and billing tools – invoicing, payment, dunning, revenue recognition, etc. – to manage revenue operations. If your current system doesn’t support your efforts to increase customer lifetime value, your future, though short-lived, will be bumpy.

The modern ‘billing system’ – 5 requirements The modern billing system – the one you need to support monetization – has a unique set of capabilities, different from what traditional billing systems can provide.

Following is a quick litmus test is to see how your current solution stacks up in these five key areas.

1. Extensible product catalog In a recurring revenue model, a single ‘item’ can be packaged and priced in several ways. The product catalog should support this without creating an unmanageable explosion of SKU numbers.

Effective solutions allow business users to manage the product catalog and create new offerings without IT intervention.

2. Monetization and pricing flexibility Support for subscription and usage-based models, along with a variety of flexible pricing options, is a must. Pricing options include: complex tiered and volume pricing, discounts, minimums, free trials,

promotions, and the ability to mix and match any/all of these in creative ways.

The best solutions also allow you to embed your own monetization business rules within the billing process, without writing custom code.

3. Proration and non-sale transactions Recurring revenue models generate non-sale transactions like upgrades, downgrades, cancellations, and renewals.

When a customer changes service levels mid-cycle, your solution should give you the option to seamlessly make prorated adjustments to period charges to account for the change.

4. Security To process card-based payments, billing and the infrastructure around it must meet PCI-level security requirements. To protect your customers, their data should be encrypted in transit and at rest. The best billing system vendors work overtime to prevent fraud and security threats.

compliance with data privacy regulations, and specific integrations with widely-used software packages like Salesforce.

Traditionally billing has been viewed as an invoice assembly and presentation tool–a commodity product. The modern view sees billing as a service enabler and revenue generator operating at the center of your business, with a new set of capabilities to drive your monetization strategy. Your success in monetizing recurring revenue requires you to adopt this second view, coupled with a solution that empowers you to realize and fulfill this vision.

So forget one-and-done transactions. The “new normal” requires a new way of thinking – a fundamental change in the way you do business by putting the customer relationship first at every revenue opportunity. Those that monetize will thrive. Those that don’t won’t survive.

Bob Harden has 30 years of IT experience. He is the former Director of Billing Solutions at Experian and current founder and principal of The Harden Group, where he often teams up with Aria Systems.

5. Integration Solutions with tools like datarich messaging, robust APIs, and flexible reporting capabilities enable you to link billing with processes like provisioning and customer care.

This allows you to provide the right services, at the right times, at the right cost to maximize customer satisfaction and loyalty.

Depending on your circumstances, additional requirements could include multi-language and multi-currency support for global business, certified

Fasten your seatbelts. Roll up your shirtsleeves. And prepare yourself for an information packed day.

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a k ives rece e’s boo e t r a i g s o r e B l e e g ich na hd Eac py of R for Ma E co Mining E R F Data

In a world of Big Data, fragmented marketing channels and the rise of social media, how do you ensure that your organization is driven by hard data rather than just gut feel? How do you leverage your customer information most effectively? How do you incorporate Analytics in general, and Predictive Analytics in

particular, to improve your business results?

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Technology Report

Securing Your Company’s Success Five anchors to safeguard your enterprise’s crown jewels

By David Drury and Xerxes Cooper

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aced with the pressures of a growing and rapidly changing landscape, executives from companies of all sizes and sectors must focus on their organization’s strategic priorities and hone the ability to adjust to the realities of uncertainty, volatility, and complexity.

Companies exist in a new competitive horizon where each day approximately 2.5 quintillion bytes of data are generated. To put that in perspective, that’s more than 500 million DVDs worth every day. And about 90 per cent of today’s available data was created within the past two years.

Adding to this perplexity is the fact that all of that data now originates from diverse sources – with 80 per cent unstructured. Data is coming at us simultaneously from texts, tweets, blogs, and YouTube videos to sensors, traffic cameras, and more.

The point is, data must be managed at all times and it is paramount to everything CFOs and executives do – now more than ever.

So how do we keep it under control and better protect the data that is relevant to an organization’s health? There are a number of factors to consider, but the groundwork starts with strengthening your enterprise’s defenses.

Preserving instrumental parts of the body is mandatory to surviving in a data-driven environment. Implementing the correct, most efficient cybersecurity is necessary to understanding the entire picture of your company’s current health.

While this may not seem difficult to decipher, stats and recent cases reveal that more attention from top-level staff is required. The 2015 IDC report ‘Determining How Much to Spend on Your IT Security’ states that Canadian companies currently spend, on average, 9.8 per cent of IT budget on IT security – while the ideal spend is actually 13.7 per cent of the IT budget.

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Cyber-attacks are growing – targeting our workplace and identifying new vulnerabilities as we speak. This year’s Ponemon Institute ‘cost of data breach’ study revealed that in Canada, the average per capita cost of a breach is $250 and the average total organizational cost is $5.32 million as a result of countless attacks compromising more than hundreds of millions of personal records.

Globally, the average total cost of a data breach for the participating companies increased 23 per cent over the past two years to $3.79 million. These attacks include stealing and tampering lucrative property, such as spreading malware and fraudulent emails to acquire sensitive information.

However, in addition to the large financial losses that follow, equally as important is to recognize the negative impact these circumstances have on brand reputation.

The same Ponemon study described 2014 as being “remembered for … highly publicized mega breaches.” Last year, several companies suffered from major data breaches, leading to the release of confidential data and information of employees and their families, including emails, salaries, and more.

As a result of these breaches, a company’s credibility and practice come into question, and various parties involved are often subjected to threats, extortion, and humiliation.

Even worse, multiple reports speculated these attacks took place months prior to being known. IBM studies and research shows us that on average it takes companies eight to nine months before they detect a breach.

But, that’s only the tip of the iceberg.

Numerous big-box stores were hacked last year, targeting millions of credit card numbers, information, and personal data.

And more recently, frightening news of national security breaches are being reported,

Financial Operations | Fall 2015 | www.financialoperations.ca

both from our neighbours and right here at home.

So where does this all leave us?

Larry Ponemon, the founder of Ponemon Institute, positioned the wake-up call as “an enterprise-wide issue, not just a technology problem” – and that’s exactly what business leaders need to embody.

Executives need to realize that risk with such a profound impact on a company requires more than just IT experts – it requires action from empowered decisionmaking staff as well. And that includes the office of finance.

In today’s age, where brand reputation and customer loyalty is at the center of every business, leaders must be diligent in the steps they take to appropriately manage risk.

Quite frankly, identifying and establishing the proper security system prior to an attack is what makes the difference of a company that’s here to stay.

Outlined are the five key steps every organization needs to achieve to reduce risk and harm from a data security breach:

1. Build a risk-aware community It takes the entire company to maintain a risk-aware culture – having only a couple of employees follow standard procedure isn’t enough to prevent a cyber-intrusion.

In Canada, 48 per cent of security incidents were attributed to the result of employee errors and internal system glitches, according to this year’s Ponemon Institute study.

To prevent this from reoccurring, training and awareness programs on security measures must be established and available to everyone at work – including departments outside of IT such as sales, marketing, and human resources.

Technology Report 2. Be responsive The longer it takes to counter an attack, the more costly the outcome will be – and that applies to both your company’s money and its reputation. In essence, time allows the breach to progress and escalate the issue to greater heights. Immediate and impromptu responses for what appears to be spontaneous attacks also tend to require a hefty sum of money.

The key to prevention is having a rigorous incident-response plan in place, and always monitor what is happening across your infrastructure.

3. Protect your devices Personal technology in the workforce has become a common preference for employees, with many latching on to BringYour-Own-Device (BYOD) programs – offering members the power to go beyond traditional workstations and use their own smartphones, tablets and other devices.

That being said, these programs can often leave the company’s assets more vulnerable to outside activities. According to the IDC report, it’s striking how these new devices are not considered more strongly as points of security weakness.

IBM personnel use Maas360 from Fiberlink, an IBM company, to identify, control, and secure all mobile devices accessing the enterprise. The system follows a containerization approach – ensuring corporate data and personal data remain separate.

But reality is, even with the toughest BYOD technology solutions – your company is still at a risk. Similar to the first

recommendation, education is critical for your employees. Define which uses adhere to your company’s policy and clearly outline the business’ conduct guidelines.

It provides automated, real-time intelligence and situational awareness about the state of security to help mitigate an attack.

Integrated solutions help prevent highly sophisticated threats by implementing the right tools to protect and provide predictive analytics – all in a significantly decreased amount of investigation time.

4. Go for quality not quantity Proprietary data takes up a very small portion of your overall information – specifically less than two per cent – but it can represent as much as 70 per cent of your market value. This data includes trade secrets, intellectual property and confidential business plans and communications. That’s why overseeing quality content is crucial.

As a leader, ensure your parties have fully identified the crown jewels of the company, then build a program to safeguard these assets. Data has become the new natural resource, so it is imperative to keep your managers accountable and on-guard.

5. Use your resources A reoccurring theme in the digital age is that data is growing quickly and exponentially. Therefore, using old methods to analyze data and predict a security breach has become a significant global concern. Organizations need to acknowledge the fact that sifting through data manually simply isn’t an option anymore. Previous cases have shown that by the time an attack has been identified, it’s already lodged itself deep into the system.

Big data analytics tools have the ability to trace suspicious behaviour before the alarm goes off. Applying analytics to business data drives new insights and positive transformation in the organization.

Studies have shown an influx of data breaches on a national and global scale – proving to be not just an IT issue, but a challenge that affects all parties. Regardless of whether it’s driven by social, political, or personal motives, cyber threats are evolving and therefore C-level staff especially need to raise awareness across the board. This is what needs to happen for executives to leverage their resources, make more strategic decisions and gain competitive edge in the 21st century.

Prepare your enterprise with the correct utilities and exemplary practices – strong security practices are pivotal to ensure the longest survival and future growth.

David Drury is the General Manager for IBM Global Technology Services in Canada. Over his 31-year career with IBM, Drury has taken on leadership roles as a Systems Engineer, a Client Director and the Vice President for Financial Services. Drury also serves on the board of directors for the Ontario Research and Innovation Optical Network (ORION), the Foundation Fighting Blindness, and as chair of the Board of Governors, Junior Achievement of Central Ontario. Drury’s focus is on advancing the role of IT for his clients’ organization, using emerging technological solutions and collaborative leadership.

Xerxes Cooper is the Chief Financial Officer for IBM Canada. Prior to taking on the role, he’s served as Director of Finance for Software Group, Controller for Global SWG Services and Controller for Global GTS Consolidations in the U.S. Xerxes has extensive experience in pricing consolidations, planning and delivery across many business lines, along with his collaborative style and creative mind.

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EVENTS 2015 JUNE

August

June TBA ATMIA Canada Annual Canadian Conference 2015 Niagara Falls, ON www.atmiaconferences.com

August 2-5 Retail Solutions Providers Association - RetailNOW 2015 Orlando, FL www.gorspa.org August 11-13 tppEXPO 2015 The Pre Paid Press Expo Las Vegas, NV www.prepaidpressexpo.com

June 10-12 FEI Canada Annual Conference Winnipeg, MB www.feicanada.org

September June 16-17 ACT Canada Cardware 2015: Payment Insights Niagara Falls, ON www.actcda.com

September 14-16 IFO Canada 4th Annual Canadian Financial Operations Symposium Vancouver, BC www.financialops.org/

canada2015

October October 4-6 Members Meeting Smart Card Alliance Phoenix, AZ www.smartcardalliance.org October 7-8 Smartcard Alliance NFC Solutions Summit 2015 Phoenix, AZ www.smartcardalliance.org Oct 12-18 Sibos Annual Conference 2015 Singapore, MY www.sibos.com

October 13-15 BAI -BAI Retail Delivery Conference 2015 Las Vegas, NV www.BAI.org October 18-21 Association of Financial Professionals AFP Annual Conference 2015 Denver, CO www.afponline.org

NOVEMBER November 17-19 Comexposium CARTES & Identification Exhibition 2014 Paris, FR www.cartes.com

Visit us online www.financialoperations.ca/events.html 16

Financial Operations | Fall 2015 | www.financialoperations.ca

Sponsored content

Mitigating Risk with Location Intelligence With enhanced data, financial institutions can optimize their risk management strategies

By Karen Treml

Summary Efficiency is essential to gaining a competitive advantage in today’s complex, consumer-focused business environment. Driven by the surge of technology and its focus on data analytics, issues arise with data governance and most organizations are facing challenges with data quality.

This whitepaper demonstrates how financial institutions can leverage location intelligence to increase data quality, better manage risk, streamline business processes, and increase operational efficiency.

Introduction Financial and operational risk management is at the core of financial institutions. In a constant quest to gain a competitive advantage in the marketplace, and mitigate these risks, many organizations are seeking to unlock new insights by combining business analytics and geo-data together.

Mapping and spatial analytics tools provide a context that is not possible with tables and charts alone. While this geographic aspect has been largely absent from business analytics solutions, many organizations are now looking toward incorporating location analytics into their operations.

Data governance – Accuracy with geo-coding Most financial institutions use standard systems of identifying addresses, such as those based on municipal registries or postal addresses. Inherent nuances within those systems create ambiguities that, in turn, leave margin for errors, omissions, and confusion. Standard systems can be further compromised when municipal changes are implemented. For example, when a property is repurposed and results in additional or altered postal codes, or in the case of the 1998 municipal amalgamation of Toronto, ON and its surrounding communities, whereby many addresses (i.e. 3 Byng St.) became duplicates and same name streets – once formerly defined by their own town or city name – now fall within the City of Toronto.

Another problem with standard systems occurs when streets have multiple names. Highway 48, a roadway running north/south in Ontario, Canada, begins as Markham Road, changes to Highway 48, becomes Main Street as it runs through Markham, Ontario, then switches back and forth between Highway 48 and Markham Road as it continues northwards. This is complicated by the fact that Main Street runs through Markham, but there is also a Main Street in Unionville, which is a suburban village within Markham.

“In today’s technology driven, customer-centric world, the competitive edge for financial institutions lies in providing answers quickly …”

In today’s technology driven, customer-centric world, the competitive edge for financial institutions lies in providing answers quickly – essentially getting to the yes or no – while mitigating and managing their risk. Location intelligence helps to more quickly determine the answers to questions such as – does the property exist? Is it accurately identified? Is everyone within the mortgage ecosystem referring to the same property? Is the property subject to any environmental or demographic factors that require further risk assessment or result in greater assumption of risk?

Location intelligence provides specific location identification, ensuring its accuracy, and facilitating the current, historical, and predictive multifaceted environmental and demographic data for that location.

Another hurdle in data analytics that most organizations currently find challenging, is ensuring data quality. For instance, a city name could be spelled in multiple ways, or users enter different abbreviations for the same data. As organizations grow inorganically – by mergers and acquisitions, this problem is compounded due to inconsistent data and data definitions between the various systems.

At the core of location analytics is geo-coding, an identification method through which data becomes geo-enabled. Unlike the standard systems, geo-coding is the identification of a precise location through geographic coordinates (latitude/longitude), with rooftop level precision. That location is further verified through various external inputs, thereby providing a high degree of reliability. One location intelligence system, DMTI Spatial’s Location Hub assigns what is known as a UAID™ (Unique Address Identifier) to each individual address. The self-service data analytics engine leverages Canada’s most robust, accurate, and up-to-date location-based data, to cleanse, validate, and geo-code the organizational address database. The company covers 94.8 per cent of all possible Canadian addresses and realizes a high precision coverage of 95 to 99 per cent in urban areas.

Financial Operations | FAll 2015 | www.financialoperations.ca

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Sponsored content With the reliability provided by such a high precision coverage address system, financial institutions realize seamless transitions between all stakeholders. This provides for such things as ensuring that a given location is one and the same property being referenced by the vendors within the property based lending ecosystem, or providing clean data that can be analyzed for essential trends and patterns. With the results displayed on a map, it allows user visualization and interaction for better data profiling which not only ensures operational efficiency, but is a critical first step in risk management.

Property based lending ecosystem

insured mortgages. Banks will now have to think beyond the traditional method of relying on the credit history for risk assessment.

Location intelligence will become increasingly important in risk mitigation as well as analyzing the risk concentration. Clean data can be enriched with various demographics information for analysis on risk concentration and customer intelligence. Financial organizations can generate risk concentration lists and apply risk mitigation / risk diversification strategies by infilling the addresses within specific territories that are not in their current database.

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Geo-coding for fraud management

Within Canada, banks are being impacted by ongoing government efforts to rein in mortgage lending and forestall the sort of housing crisis experienced in other parts of the world. The federal government is scaling back the role and size of Canada Mortgage & Housing Corporation (CMHC) in an effort to reduce taxpayers’ exposure to housing-sector risk, after a real estate boom turned CMHC into Canada’s largest bond issuer and saw the amount of mortgages it insures swell to $567 billion in 2011. CMHC currently insures $543 billion in home loans. Eventually it may only insure lowratio mortgages to those used in CMHC-backed securitization programs and prohibit the use of any taxpayers backed mortgages as collateral in non-CMHC securitized vehicles. This change, along with prior adjustment to mortgage lending rules, will change both the way Canadians obtain mortgages and the way their bank funds those mortgages. Banks will need to decide if they wish to underwrite more non-insured mortgages, increasing their credit risk, or lose the business to non-bank lenders. This will call for better risk assessment techniques to underwrite more non-

Another area of opportunity using location intelligence and its geo-coding capability is within fraud management. Fraud management represents a multi-billion dollar problem for the banking and insurance industry in Canada. Location intelligence and analytics can add a powerful dimension to fraud management.

The growing complexity of fraud and well-executed rings have exposed the limitations of traditional detection systems, such as red flag indicators, investigations based on manual observations, internal audits findings, and software that shows anomalies based on a pre-defined set of business rules.

In order to address fraud, organizations are becoming more proactive and sophisticated in their approach to data and information. In particular, data analytics and predictive modeling are allowing insurers to uncover complex, organized fraud activities using both structured and unstructured data.

Although location intelligence and analytics represent a key piece of the fraud puzzle, traditionally they have been overlooked or vastly underutilized. Geospatial analytics tools provide access to a rich library of

18 

Financial Operations | Fall 2015 | www.financialoperations.ca

Sponsored content address-related content including name and phone number, demographics, firmographics, Canadian flood data, environmental risk information, land use information, earthquake boundaries and more, and can help unlock useful information and allow insurers to connect the dots on previously hidden fraud schemes.

Accurate geo-coding can also help verify the claim location. Encircle Inc., a privately held technology company dedicated to improving field documentation and workflow for Property and Casualty insurers and claims professionals globally, uses geo-tagging and time stamping to determine the authenticity of information of property claims in an exact geographic coordinate. Was the claim in an area where a significant loss event, such as flooding, actually occurred? Geospatial analysis can be used to identify the exact area affected by a natural disaster, which helps determine the amount of risk to insured properties and weed out claims that are filed from areas not located in the affected zone.

This could involve, as an example, a spate of hail damage claims in a particular area. An insurance company can quickly pinpoint the exact geographic coordinates of the claim in real-time and overlay the storm’s path over that location. Was the claim location actually affected by the storm, or is it outside the boundaries (or marginal)? In large loss events, insurance companies often experience claims ‘leakage’ – when claims payouts are more than the terms set out in the policy. Precise use of location intelligence can help stop the leakage of opportunistic claims, or ‘soft fraud’. Location intelligence can help with more than just catastrophic events. There may be, as an example, a series of small, but costly kitchen fires in a certain neighborhood. Is this just an anomaly or is it neighbors’ talking over the fence about how small fires can lead to full kitchen replacement costs? With location intelligence, this cluster can be flagged for follow up investigation.

In June 2013, Alberta, Canada, experienced heavy rainfall that triggered catastrophic flooding which the provincial government described as the worst in Alberta’s history. Areas along the Bow, Elbow, Highwood, Red Deer, Sheep, Little Bow, and South Saskatchewan rivers and their tributaries were particularly affected. A total of 32 states of local emergency were declared and 28 emergency operations centres were activated as water levels rose and numerous communities were placed under evacuation orders.

In September 2013, the Insurance Bureau of Canada stated that insurable losses had exceeded $1.7 billion and continued to grow, making it the costliest disaster in Canadian history in terms of insured damages (and without accounting for inflation), surpassing the $1.6 billion cost of the North American Ice Storm of 1998.

In looking at the immense costs involved in the Alberta floods, one can only speculate whether the banks would have made different decisions on lending in Alberta had they known the flood information.

On July 6, 2013, an unattended 74-car freight train carrying Bakken formation crude oil rolled down a 1.2 per cent grade hill, resulting in its derailment in downtown Lac-Mégantic, QC, resulting in the fire and explosion of multiple tank cars. Forty-two people were confirmed dead, with five others reported missing and presumed dead. More than 30 buildings in the town’s centre, roughly half of the downtown area, were destroyed and all but three of the thirty-nine remaining downtown buildings were deemed to require demolition due to petroleum contamination of the town site. Reports described a one-kilometre blast radius that formed the primary evacuation zone.

Location intelligence is very useful to determine the risk exposure of any company in these types of situations. In the case of Lac Mégantic, DMTI Spatial was able to use its Location Hub® Post Event Service to determine the boundary of the event and its evacuation zone. It built a geographic fence around the disaster zone and in so doing, was able to highlight the properties affected by the explosions and fires. Through satellite imaging, pre and post event images were captured which were then compared to the evacuation zone. By overlaying the images, a more clear and accurate assessment of the affected properties was possible. This in turn provided the ability for any given institution to understand what their real and specific risk was.

There is clearly a business case for financial institutions to be able to predict, analyze, and potentially mitigate their risks with respect to properties based on their location or proximity to zones prone to catastrophic flooding, forest fires, earthquakes, ice storms, and other catastrophic perils.

Conclusion Location analytics reveals trends, opportunities and patterns otherwise hidden in traditional reporting tools.

Identifying and managing risk exposure In addition to fraud management, once the precise location identification of a given property is determined, location analytics can then provide the ability to layer critical decisioning data to that property. By overlaying available data, past, present, and predictive information becomes available.

Environmental, weather, and demographic data provides insight into potential risks from such things as flood, earthquake, railways, pipelines, weather events, crime, etc.

With the inherent accuracy provided by geo-coding and the analytic capabilities afforded from a vast number of inputs, location intelligence is a powerful tool for risk mitigation. Whether for data governance, risk assessment, fraud management, or for identifying and mitigating risk exposure, leveraging highly visual, interactive, and user-friendly tools like DMTI Spatial’s Location Hub®, is a good business strategy for financial institutions. Organizations that build location intelligence into their business strategy will undoubtedly have a competitive advantage through better risk management, visual diagnostics related to geography, and ondemand access to a wealth of location- based information and assets.

Karen Treml is Editor, Financial Services Group, Lloydmedia Inc.

Financial Operations | FAll 2015 | www.financialoperations.ca

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Thanks for a great year.

Neopost named a

Visionary in the 2015 Gartner Magic Quadrant for Data Quality Tools Download the report at: dmtispatial.com/DQMQ

DMTI Spatial is the proud recipient of the ICTA 2015 Technology of the Year Award.

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INCREASE EFFICIENCY

High-precision data and real-time addressing enables you to better understand concentration risk, exposure to perils, manage and ‘stress test’ your portfolio, and report on profitability.

Our exclusive Unique Address Identifier (UAID™) expedites the mortgage approval process with high-precision addressing and can increase the average match by over 30% across internal and partner networks.

Utilized by Canada’s top 3 mortgage insurers, our widelyadopted UAID significantly reduces instances of manual intervention and boosts cycle times.

About DMTI Spatial A Neopost Digital Company, DMTI Spatial is the Canadian market leader in location based information, making breakthrough products that change the way people use location. Our award-winning solutions and highprecision data are relied upon by Global 2000 companies including top Canadian insurance companies, financial institutions, telecommunications companies and government agencies.

www.dmtispatial.com

|

1.877.477.3684

|

info@dmtispatial.com

Gartner Magic Quadrant for Data Quality Tools, Saul Judah & Ted Friedman, 18 November 2015.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Trend Report

Finance

2020

At long last, Finance departments are beginning to be transformed.

Five years from now, Finance will look a lot different and have far greater capabilities than it does today.

By Steve McCaughey and Michael Goodfellow

W

alk into many Finance departments today and they don’t look a lot different than they did five, 10, or even 15 years ago. They do the same things they’ve always done, in much the same way and with many of the same tools.

Finance may have seemed destined to forever be a land that time forgot, but that’s all beginning to change. Today, Finance is on the cusp of a major disruptive transformation driven by a variety of factors including new technologies, such as the cloud, mobile and analytics; changes in business processes

management; emerging talent issues; and other factors – not the least of which are the changing and increasing demands being made on Finance by the rest of the organization. The result: five years from now, Finance departments will be radically different than they are today, with much greater capabilities.

What will Finance look like in 2020?

Perhaps, the most visible difference will be that there will be no paper – anywhere.

Employees will use cloud-based apps on

mobile devices to transact their business, and highly standardized, simplified workflowenabled business processes to handle the rest.

Day-to-day transactional finance – from payables, receivables and invoices to treasury transfers, journals, capital expenditures and the close cycle – will be managed centrally in shared services centres. Think of them as “finance factories” that handle core finance processes and connect to finance centres of excellence and outsourcing partners in a huband-spoke model.

Another big change from today: the close process will be continuous, if not

Financial Operations | FAll 2015 | www.financialoperations.ca

21

Trend Report yet in real-time. A daily soft close will be the norm, made possible by visual close management tools, integrated sub-ledgers, daily time capture, journal workflows, reconciliation tools, as well as the automation of consolidation, foreign exchange, allocation and intercompany transfers.

Not surprisingly, with operational processes automated and integrated, the role of the CFO will have changed by 2020. CFOs will devote greater attention to delivering data-driven insights that enable them and their c-suite colleagues to make smarter decisions. Using integrated planning models and sophisticated analytics tools, Finance will be able to undertake rapid, scenario-based planning, cost modeling and risk simulations with forecasting cycles shortened to the point where same-day turnaround will be the norm.

Specialized finance processes, such as tax, risk, treasury and compliance, will be undertaken by finance specialists who are embedded into the business itself so they can better provide insights and advice.

After the 2008 financial crisis, “cash czars” emerged in many organizations. With their deep understanding of how cash flows into, through and out of the business, they are able to plan, forecast and manage cash, working capital and liquidity. By 2020, “czars” will have emerged to lead other areas. Many organizations already have “risk czars” – or chief risk officers – who are responsible for monitoring the risks facing the organization, including currency, interest rates, foreign exchange, competitive, environmental, regulatory and other risks, and assessing the impact these risks may have on the organization’s strategy and objectives. There will be “data czars.” And there will be an “economics czar” – increasingly, CFOs will serve as their organization’s chief economist, scanning the wider landscape to monitor larger macroeconomic events and interpret what they could mean to the business.

No doubt, many CFOs will find our vision of Finance in 2020 to be a compelling one.

CFOs, in overwhelming numbers, have told us they not only want to, but should be playing a more strategic role along with their c-suite colleagues. At the same time, we also know that many CFOs will find our vision to be fantastical – yes, they’d like to see it happen but they don’t think it will, and certainly not in just five years.

We believe our vision of Finance in 2020

22

is realistic and achievable. We’ve seen how quickly and dramatically digital technologies have transformed many organizations, upturning long-standing business models and creating new opportunities. There is no reason to believe the impact won’t be equally great on Finance. And while many organizations have long overlooked Finance while investing in technologies throughout the rest of their operations, that has also started to change. The cloud has made technology cost effective for Finance, and growing numbers of organizations are moving their Finance departments to it.

But while the cloud is a critical foundation of Finance in 2020, fully achieving all of the capabilities we foresee for Finance will require more than just implementing new technologies. To become the Finance team of 2020, today’s finance teams will need to address and manage a number of important factors.

One of the most important of these will be to obtain the support of the CEO and management team for the Finance transformation. Obtaining this buy-in is often a major challenge that takes considerable effort, but it is essential since Finance’s transformation will impact the entire organization. In the short-term that impact will be disruptive, as Finance adopts and learns new systems and processes; in the longterm it will be a change in the way the rest of the organization interfaces with Finance.

To obtain management’s support, and also map out its own transformation, Finance needs to develop a holistic vision that describes its proposed end state, supported by a transformation plan to achieve that state.

The Finance transformation plan should include a description of Finance’s technology needs and its systems strategy. It should also include a plan for transitioning from manual to automated processes, a key consideration of which will be developing integrated approaches that improve efficiency, avoid duplications of effort, create team alignment, and replace ad hoc approaches with standardized documented procedures.

It’s also important that Finance understand how reporting will be streamlined. Having highly integrated systems that are seamlessly linked across the organization will make it easier and faster to gather information about all aspects of the organization, freeing up time to analyze that data and provide more

Financial Operations | Fall 2015 | www.financialoperations.ca

focused reports that provide clear insights into operations, cash flows, and the financial condition of the business. To achieve this, most organizations will need to more clearly define “performance” and then identify the most relevant KPIs to measure that performance in real time.

Finance will also need to develop a talent strategy. People will need to transition from their current roles and responsibilities to new ones that are aligned with Finance’s future role and objectives. When investing in talent, organizations need to critically assess Finance’s current structure and talent, and then determine the required training and development for current team members, as well as identifying where new talent and expertise needs to be recruited.

Transforming Finance from where it is today to where it will be in 2020 will be a complex process in which multiple activities will need to be carefully coordinated and undertaken in appropriate timeframes.

Finance will need to work in partnership with others to minimize the disruptions that will occur during the transition so there should, therefore, be a comprehensive change management plan to manage all of these activities.

Perhaps, the biggest challenge during the transformation will be ensuring that Finance does not lose sight of the needs of its customers, including the board, audit committee, other members of senior management, and Finance itself. Finance, therefore, cannot lost control of its traditional financial reporting responsibilities during the transition, since they are the foundation of CFO’s credibility and the value Finance brings to the organization.

Steve McCaughey is a Consulting Partner in Deloitte’s Finance & Performance Management Consulting practice. With more than 20 years consulting to some of the largest Finance organizations in North America, South America, Japan and Europe, Steve delivers large scale finance transformation projects including finance strategy, process design, systems implementation, organization design and performance management.

Michael Goodfellow is a Partner in Deloitte’s Audit and Advisory practice.

With more than 17 years of experience in financial transformation and technology, Michael works with clients on strategic constructive solutions and delivers projects including finance strategy, process design, systems advisory, organization design and performance management.

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This is intended as a general description of certain types of insurance and services available to qualified customers through subsidiaries within the Zurich Insurance Group, as in the US, Zurich American Insurance Company, 1400 American Lane, Schaumburg, IL 60196, in Canada, Zurich Insurance Company Ltd (Canadian Branch), 100 King Street West, Suite 5500, PO Box 290, Toronto, ON M5X 1C9, and outside the US and Canada, Zurich Insurance plc, Ballsbridge Park, Dublin 4, Ireland (and its EEA branches), Zurich Insurance Company Ltd, Mythenquai 2, 8002 Zurich, Zurich Australian Insurance Limited, 5 Blue St., North Sydney, NSW 2060 and further entities, as required by local jurisdiction. Certain coverages are not available in all countries or locales. In the US, risk engineering services are provided by The Zurich Services Corporation. Employee benefits insurance coverages are provided by the relevant Zurich entity or a network partner in the main jurisdictions. Employee benefits insurance coverage issued in the United States in all states except New York is issued by Zurich American Life Insurance Company, an Illinois domestic life insurance company located at its registered home address of 1400 American Lane, Schaumburg, IL 60196.

In New York, employee benefits insurance coverage is issued by Zurich American Life Insurance Company of New York, a New York domestic life insurance company located at its registered home address of One Liberty Plaza, 165 Broadway, New York, New York 10006. Certain products, contract terms and services may not be available in all jurisdictions or may vary by local jurisdiction. ©2015 Zurich Insurance Company Ltd. All Rights Reserved. Zurich® and the Zurich logo are trademarks of Zurich Insurance Company Ltd.