Axiom EPM Whitepaper - Three financial performance pillars for financial services

Axiom EPM:

Three financial performance pillars for financial services; Accuracy, efficiency and accountabilty

Applied Financial Intelligence

Over the last year the financial services sector has been shaken by farreaching challenges, not least, the many problems arising from COVID-19 and Brexit. The pandemic has contributed to additional pressures including rising unemployment, interest changes and factors affecting small businesses. Brexit too has played a part in job and business losses, though the full impact of both is still yet to be seen.

At the same time, the economy has proven more resilient than expected, with the latest forecast from Ernst & Young (EY) predicting an expected GDP growth of 6.8%1 as part of a robust recovery as restrictions ease and the COVID-19 vaccination programme continues.

Furthermore, it depicts the strengths of the financial services sector in continuing to support consumers, businesses and the wider economy within these unpredictable times, highlighted by EY’s forecast that business lending will increase by over 5% in 20212.

Recent research from Syntellis (‘Financial Institutions Finance and Technology Trends’) highlights that 85% of organisations should do more to leverage financial and operational data to inform strategic decisions.4 As a priority, there is a clear and pressing need for the financial services industry to improve collection and use of data and information for high-level decision-making.

Admittedly, the sector has experienced significantly less turbulence compared to other industries. In November 2020, economic output in the sector was only 3% below pre-pandemic levels, partly due to the ability of financial services organisations to adapt to homeworking. And, looking forward, the Government has announced plans to radically overhaul financial services regulation in order to make the UK more attractive to overseas markets in the future.3

From this guide you will be able to explore how financial management principles and solutions can help you across three pillars of planning evolution: • Financial Accuracy • Financial Efficiency • Financial Accountability

However, at the same time, the pandemic, Brexit and on-going unpredictability has also uncovered concerning gaps in key areas of financial performance management including: • Scenario planning and analysis • Long-range/strategic planning

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https://www.ey.com/en_uk/growth/ey-item-club/why-the-uk-economy-lookswell-placed-for-a-post-pandemic-recover

• Performance dashboards

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https://www.ey.com/en_uk/financial-services/why-financial-services-firmsare-facing-multitude-of-challenges

• Capital projects planning and management

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https://commonslibrary.parliament.uk/research-briefings/ sn06193/#:~:text=In%202019%2C%20the%20financial%20 services,6.9%25%20of%20total%20economic%20 output.&text=Luxembourg’s%20financial%20service%20sector%20 was,%2C%203.2%25%20of%20all%20jobs).

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Syntellis performance solutions 2021 Financial Institutions Finance and Technology Trends

• Profitability and funds transfer pricing •R elationship management, profitability analysis and pricing

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Applied Financial Intelligence

Financial accuracy According to an overview of European Financial Restatements by Audit Analytics5, there have been roughly 500 financial restatements disclosed by nearly 400 companies listed on exchanges in the EEA, UK, and Switzerland since January 1, 2018.

And the UK accounted for 32% of restatements.

Inaccurate filing and reporting can impact business decisions. By adopting financial performance management tools like Axiom, decision-makers can optimise accurate data that improves financial insight and intelligence. Moreover, Axiom provides a single point of truth for forecasting, budgeting and profitability. By linking all financial and operating data you can model long-term plans that are fully integrated with operational and capital budgets, while also streamlining the budgeting process. For instance, with our Budgeting and Forecasting solutions you can leverage real-time data to acquire insights, accelerate informed decisions, and design, manage and administer plans to stay competitive.

Looking ahead to changes on the horizon.

A significant requirement for financial services companies, especially in these unpredictable times, is to map out a range of potential future situations, depending on the scale of potential economic challenges.

In addition, current research highlights a pressing need to build on technology to enable change, including embedded AI and analytics, which have the potential to transform the financial services sector over the next five to ten years.6 But, still, many financial services companies continue to use manual and error prone processes. Why, when new technologies aim to automate much of this?

The office of finance will deliver a more strategic and analytical role by utilising financial management performance software like Axiom. Software technology that ensures accurate data for improved, faster decision making and adopting new continuous, real-time practices using a single source of financial data truth.

Optimising accurate data Recent research also highlighted that 71% of financial services companies cite pulling data from multiple sources into a single report as their most difficult task. In addition, 52% claim to find drilling into reports for underlying data the most difficult. Yet, it is vital for financial services firms handling enterprise data at such a level of complexity that processes are kept simple and effective, speedily bringing together data from across the business in order to create a unified reconciliation process.

By adopting fintech tools like Axiom, decision-makers can optimise robust, accurate data that will increase efficiencies, equipping leaders for truly effective, data-driven decision making. For example, Axiom’s Financial Close and Consolidations solution takes the pain out of the close process, by enabling you to automate manual processes, allowing your team to focus on higher level tasks.

‘What if’ scenario planning empowers multiple financial responses, which can be quickly enacted when needed – testing various outcomes to help develop new strategies for success, ensuring your firm can quickly flex and adapt to changing circumstances. For instance, Axiom Scenario Planning enables your office of finance to deliver multiple projections for forecasting, re-budgeting, capital planning and investment.

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https://blog.auditanalytics.com/an-overview-of-european-financial-restatements/

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Syntellis performance solutions 2021 Financial Institutions Finance and Technology Trends

Applied Financial Intelligence

Financial efficiency “ Our vision is for a more open, greener, and more technologically advanced financial services sector. The UK is already known for being at the forefront of innovation, but we need to go further. The steps I’ve outlined today, to boost growing fintechs, push the boundaries of digital finance and make our financial markets more efficient, will propel us forward. And if we can capture the extraordinary potential of technology, we’ll cement the UK’s position as the world’s pre-eminent financial centre.”

Chancellor of the Exchequer, Rishi Sunak.8

Currently, the financial services sector is dominated by demands to grow insight and efficiency by leveraging technological advances to meet rising customer expectations – with consumers increasingly looking for personalised services from their financial service providers.

To confidently face the current range of challenges and spot future opportunity, it is vital that financial services companies embrace change and make full use of tools to improve efficiencies and financial performance.

Axiom Allocations enable financial service companies to develop allocations of revenue and expenses in support of the annual budgeting process; to analyse margins at a granular level and centrally store data, making reporting and analysis easy, with the ability to roll data over from year to year.

https://www.gov.uk/government/news/ambitious-plans-to-boost-uk-fintech-andfinancial-services-set-out-by-chancellor

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Applied Financial Intelligence

The rise in digital demand

Accelerating cost reduction and restructuring

Digital transformation for the sector is an urgent issue, especially considering the current climate with reduced interaction with physical services. In addition, according to Accenture, one in two consumers wants personalised advice from banks based on their personal circumstances, along with an analysis of their spending habits and advice on how to handle money.9 A further report from Protiviti highlights how financial service firms need to continue to invest in technology such as robotics and other workflow automation tools in order to increase their efficiency and reduce the costs associated with operational, risk management and compliance.10

Moreover, in order that financial services firms can effectively prepare for the wide range of potential outcomes from the current crisis, it will be paramount to balance risk exposures, while allocating capital and resources to core and periphery business lines. By applying financial intelligence, organisations can be confident in delivering both operational and financial decision-making efficiency.

Many institutions still use heritage ERP systems, which are often customised to fit the specific need of the company and so, understandably, transformation can seem daunting. But these older systems are customised at the point of installation and can be difficult to keep updated, so at some point change is inevitable. To counteract this, one approach might be to build a new bespoke platform – but this may bring you back to the same point in the future. Or you could adopt an agile approach, implementing modular finance systems, depending on the requirements and fit of each organisation.

Clearly then, financial services companies who trailblaze new technologies, such as automation, will have a significant advantage in the financial market, integrating to other systems and technology by:

Optimising solutions like Axiom’s Profitability and Cost Management modules mean financial service companies can be supported to avoid false assumptions based on top-level revenue figures. In addition, Axiom’s profitability tool equips you to make better decisions on spend allocation, product-mix choices, marketing decisions and more.

By using financial performance management software, the office of finance can gain a complete framework for measuring margin ratios, acquisition costs, ROI and all other key enterprise profitability metrics. Through additional robust reporting capabilities, your financial teams can quickly and easily understand the contribution of each division to the business’ overall profit.

In addition, Axiom Allocations enable financial service companies to develop allocations of revenue and expenses in support of the annual budgeting process; to analyse margins at a granular level and centrally store data, making reporting and analysis easy, with the ability to roll data over from year to year.

• Re-engineering end-to-end processes • I nvesting in proven technologies that are scalable to improve efficiencies •E mbedding these into their current operational environments In fact, UK-based Sarah Ghosh, FCMA, CGMA, the director of Onyx AI and a board member for the Association of International Certified Professional Accountants, has stated that CFOs’ roles are expanding in part due to advanced data analytics and machine learning technologies offering new ways to find value in the data and provide business insights. “To apply these new technologies effectively, they must focus on data quality”.

A financial planning and analysis software provider, like Axiom, not only builds and implements a new system, but supports you on a strategic level to understand the best way forward for your business, including how to approach transformation to new systems and processes.

https://www.accenture.com/_acnmedia/pdf-95/accenture-2019-global-financial-services-consumer-study.pdf

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https://www.protiviti.com/US-en/insights/top-risks-2019-financial-services

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Applied Financial Intelligence

Financial accountability At present, there are significant landscape changes taking place within financial compliance, largely driven by new regulations, new trading communication channels and emerging new technologies.

Considering that many financial services companies have concerns about the increasing cost of compliance and resource constraints, it is critical then that the sector is able to optimise solutions that reduce risk, monitor compliance and improve accountability.

Regulations and compliance

“ Staying on top of the regulatory agenda will require agile governance and technology approaches” Grant Thornton12 In March 2021, the Prudential Regulation Authority (PRA) issued a policy statement with the FCA and the Bank of England on ‘Outsourcing and third-party risk management,’ clarifying the PRA’s approach to regulatory framework areas such as governance, risk management,13 business continuity planning and the management of outsourced relationships.

High on the agenda is securely storing and sourcing high quality data – now vital compliance imperatives under MiFID II, MAR and other financial services regulations.

It is paramount that more data points need to be captured, which in turn naturally leads to an urgent requirement for additional investment in data storage, compliance assurance and an integration with trading systems for improved business intelligence and extended surveillance capabilities.

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Consequently, financial service companies urgently require financial management performance solutions that help make sense of vast amounts of unstructured data, monitor compliance infrastructure, and manage and mitigate potential risks. Axiom software supports your financial service company to mitigate risks, highlight opportunities and prepare strategically for whatever the future brings next across planning, forecasting, profitability analytics and cost management. Axiom also helps your office of finance create a reporting hub accessible to stakeholders across each financial service company that provides users with real-time access to one source of accurate financial data.

Axiom’s planning solutions have been developed to be flexible enough to meet a range of industry-specific needs, regulatory requirements and organisational preferences. And, while the right technology is important to get the most out of your FP&A investment, so too is having the right people behind the technology. Axiom only hires specialists with applicable industry experience with core finance and technology backgrounds.

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https://www.grantthornton.co.uk/insights/uk-banking-sector-top-ten-themes-for-2021-and-beyond/

13

https://www.bankofengland.co.uk/prudential-regulation/publication/2019/outsourcing-and-third-party-risk-management

Applied Financial Intelligence

Axiom’s rich reporting and modelling functionality enables you to report, track, measure and plan for immediate reporting and long-range plans.

Improving resilience and transparency Transparency, trust and governance – these are the key pillars to accountability for the financial services sectors, as well as their customers, clients, investors, stakeholders and the wider community. During the 2008 financial crash, the financial services sector was perceived by many to be part of the problem, but, conversely, in this current climate dominated

by COVID-19 and Brexit, financial services firms are viewed as a significant part of the solution.

Naturally, such firms are ultimately accountable to all their stakeholders, but most particularly the customers and consumers who entrust their financial decisions to them. Therefore, financial data and accuracy of reporting form the basis for communication – and demonstrating accountability is critical to an organisation’s future growth and success.

By using solutions, such as Axiom Allocations, the office of finance helps to improve data transparency, integrity and financial accountability across your business. The ability to integrate data directly into your budgeting process means that your budget cycle is shortened and time-consuming manual data processes are minimised, freeing up precious time to refocus on higher value and mitigate higher risk activities.

Furthermore, Axiom’s Budgeting and Forecasting, FTP and Profitability, Reporting and Analytics and Incentive Compensation Management supports your company to actively demonstrate accountability to regulators and clients. Plus, Axiom’s rich reporting and modelling functionality enables you to report, track, measure and plan for immediate reporting and long-range plans.

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Applied Financial Intelligence

Summary “ Fintech is not a niche within financial services. Nor is it a sub-sector. It is a permanent, technological revolution, that is changing the way we do finance.

Its essence is in both fast-growing fintech companies, and the investment and use of technology by our incumbent financial institutions. It’s in the way we regulate previously unknown technology and set new standards. But most importantly, it’s about delivering better financial outcomes for customers, especially consumers and SMEs.” Ron Kalifa OBE.14

Within an ever-changing landscape marked by wideranging challenges, to new regulations and customer expectations, this is the time for financial technology to be brought firmly centre stage.

Kalifa refers to a revolution above – the growth of a more supportive regulatory agenda, with the UK trailblazing innovative approaches to regulations and the Bank of England and FCA providing extra support for organisations seeking a banking licence. This is the kind of environment that values data-led solutions for the financial services sector. That emphasises the importance of financial management performance software to deliver accurate data and information that not only inform and meet the scale and scope of uncertainty but help financial service companies define and embrace the next levels of opportunity, investment and technology with confidence.

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By working in partnership with Axiom as a financial management performance partner, your financial service business is supported in delivering the three pillars of planning evolution – accuracy, efficiency and accountability – to regulators and clients.

With planning solutions that are flexible to meet a range of industry-specific needs, regulatory requirements, and organisational preferences, Axiom’s software can be embedded with existing or new processes and technology. You can optimise your data through solutions related to long-range planning, budgeting, cost accounting, profitability analysis and reporting, with in-house expertise for successful implementation and strategic guidance.

As a result, your overall financial performance will be improved and your client experience transformed, now and into the future.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/978396/KalifaReviewofUKFintech01.pdf)

Applied Financial Intelligence

Axiom solutions About Axiom Axiom for financial service companies enables; •O ptimal decision making • I mproved financial performance •B etter management •S harper focus • I ncreased control and visibility •C learer predictability Linking all financial and operating data, our unified platform lets you model long-term plans that are fully integrated with operational and capital budgets while also streamlining the budgeting process. Profitability analysis tools enable you to analyse the performance of your existing portfolio, to assess profitability dimensions across the institution and to design, manage and administer plans to stay competitive.

By creating a reporting hub accessible to stakeholders across the organisation, you can provide users with real-time access to one version of financial data truth.

All of this makes your financial service company much better equipped for mitigating risks, highlighting opportunities and preparing for whatever the future holds •B udgeting and Forecasting •F TP and Profitability •R eporting and Analytics • I ncentive Compensation Management •A dvisory Services

Why not get in touch and see how Axiom can help your office of finance face the challenges of today and tomorrow.

Contact us by emailing hello@axiomepm.co.uk or call us on +44 1932 548 465 to talk to one of our specialists.

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Applied Financial Intelligence

Dixcart House, Addlestone Road, Addlestone, Surrey, KT15 2LE T +44 1932 548 465 E hello@axiomepm.co.uk

axiomepm.co.uk

Applied Financial Intelligence