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Financial Governance
FEI
John Van Decker
Research VP
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The Scope of the CFO
Performance
Transactions
• The CFO has
responsibility over an
organization's end-to-end
financial management,
including:
- Managing financial
transactions
Governance
- Establishing performance
management plans
- Ensuring accuracy of
financial processes and
financial reporting
Technologies Supporting the CFO
• The array of technologies
supporting the CFO is vast,
with minimal integration.
PM, BI
ERP
Financial
Governance
• ERP is the most wellestablished of the
technologies, but CPM is
often treated as an
afterthought/bolt-on.
• Financial governance is
emerging as a market,
segmenting GRC for
the CFO.
Key Issues
1. Why is there a market direction toward
financial governance?
2. What are the components of financial
governance?
3. How do you take advantage of the developing
financial governance market?
CPM Suites Market Has Matured Rapidly
challengers
leaders
• Significant consolidation occurred in the
past year:
- Hyperion was acquired by Oracle.
- CorVu was acquired by Rocket Software.
- Cartesis was acquired by
Business Objects.
- OutlookSoft was acquired by SAP.
- Applix was acquired by Cognos.
- Longview was acquired by Exact.
- SAP acquired Business Objects.
- IBM acquired Cognos.
ability to execute
Oracle Hyperion
Cognos
SAP
Business Objects
Infor
SAS
Clarity Systems
Exact Longview
Board International
Lawson Software
Tagetik
Microsoft
Rocket CorVu
niche players
visionaries
• Increasingly, companies are looking for
CPM outside of finance.
• BI and PM are evolving toward common
platforms, and it is expected that BI and
CPM will converge within the next three
to five years.
completeness of vision
As of December 2007
Source: "Magic Quadrant for CPM Suites, 2007" 19 December 2007
Where Are People Today?
Budgeting, Plannning &
Forecasting
Statutory, Management
& Financial Reporting
Financial Consolidation
Profitability Modeling &
Opitimization
Scorecards &
Dashboards
0%
Already Using
10%
20%
Planned (<12 months)
30%
40%
50%
60%
Considering (12-24 months)
70%
80%
No Plans
90% 100%
Don't Know
How Well Have CPM Applications Met
Requirements?
Improved the quality, accuracy and timeliness of financial and
management reporting
Adds more sophistication and confidence to bugdeting,
planning and forecasting
Allows business users to get the information they need with
reduced reliance on IT
Significantly reduced the effort to produce budgets and
reduced budget cycle time
Provides a better understanding of current performance
Allows us to better predict future financial and business
performance
Allows us to better understand the drivers of profitability
Links strategic planning, financial budgets and operational
activity
Improved our ability to meet compliance requirements
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100
%
Far Exceeded
Exceeded
Met
Mostly Met
Did Not Meet
Not Answered
CPM Deployment Patterns
How Is CPM Used In Your Organization?
Mainly used by finance/senior management to
report on financial performance
CPM is dominated by
financial reporting …
Widely used across our organization and helps us
manage our business
An emerging capability that we are actively
investigating
Tactically used at department/function level
Don't know
0%
10%
20%
30%
40%
50%
60%
How Did You Approach Your CPM Implementation?
… and finance
drives the
implementation.
It was driven by finance
It was a strategic initiative with senior executive
sponsorship that aligned with our BI strategy
It was driven by IT
Tactically – users buy individual applications
based on a business case
Don't know
0%
10%
20%
30%
40%
50%
60%
70%
Financial Governance Evolves From CPM …
Budgeting, Planning
and Forecasting
Scorecards
Profitability Modeling
and Optimization
Financial
Financial and
Consolidation
Statutory Reporting
Business Strategy
Performance Management
People
Process
Analytic Applications
BI Platforms
Information
Management
Infrastructure
Business Intelligence and Performance
Management Framework
• $1.5 billion market in 2006; 20% growth rate with
large unaddressed market
• BP&F, scorecards, profitability modeling have
proved valuable to improve performance
management initiatives
• Financial consolidation and reporting, while they
contribute to PM, address the accuracy, auditability
and disclosure of external results
… and FG Is Adding Components From
GRC Markets
GRC
Category
Market
Enterprise GRC
Platform
Finance GRCM
Audit
Management
Finance and
Audit
GRC
IT GRC
Business
Risk
Management
Audit Data
Extraction
and Analysis
Segregation
of Duties
Transaction
Monitoring/
Business Rule
Management
Legal and
Regulatory
Information
Governance
The Enterprise GRC Platform Can Be a Starting
Point for a Financial Governance Solution
Auditors
Risk Management
and Compliance
Professionals
Process Owners
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Specialized
GRC
Applications
Enterprise
Content
Management
Controls
Automation
and
Monitoring
FG = The EGRC
platform integrated
with BI, financial
apps. and controls
automation
FG — Emerging Market "GRC for the CFO"
• Parallel path for CPM, along with BI/PM and a subset of
GRC market
• Includes applications that provide control, analysis,
reconciliation and risk/compliance management
• Not a holistic market at present, but clearly developing
• Includes:
-
Financial consolidation
Intercompany transaction management
Reconciliation management
Financial controls and compliance
Financial close management ("the last mile of finance")
Access and segregation of duties controls
Financial risk management
Financial and audit analytics
Typical Flaws in Financial Reporting
and Disclosure
• Processes
- Lack of control in consolidated reporting processes
• Auditability
- Disconnected budgeting systems
- Lack of audit trail from stakeholder information to
source data
• Data quality
- Inconsistent financial and operational data
• Lack of visibility and transparency
• Overreliance on spreadsheets
FG Components — Financial Consolidation
Traditional Approach
• Single, central financial
consolidation system
• Spreadsheet/flat-file transfer
• Time-consuming,
labor-intensive
• No visibility from group to
business units
Best-Practice Approach
• Regional, financial consolidation system implementations with direct links to
local GLs
• Shared dimensions (typically legal entity and account) between consolidation models
• Full visibility from group to BU to source data, plus local analysis capability
FG Components
• Intercompany transaction management:
- Post-ERP consolidation, ensuring that interentity
transactions are accurate and meet approval, often at
the voucher level
• Reconciliation management:
- Ensure that monthly routine account reconciliations are
managed and that exceptions are highlighted
and handled
• Financial controls and compliance:
- As required by SOX, document and access financial
management controls, and communicate their status
across enterprise
FG Components
• Financial close management:
- Ensuring that the last mile of finance is managed and
that all the close activities are completed
• Access controls/segregation of duties:
- Ensuring that, in transactional and reporting processes,
there is control over who has access and who
contributes to and approves financial processes
• Financial risk management:
- Documenting and accessing financial risks, including
the use of strategy maps/scorecards to understand
causal relationships between risk items/activities
FG Components
• Financial and audit analytics:
- Integrated with BI and CPM stack
- Aggregated financial and operational information
- Results in front of those who need to know
- Flash reporting prior to month-end
- Details and OLAP
- Identification of out-of-tolerance conditions and alerts
- Segmentation of reporting into material/significant
elements
Sourcing for Financial Governance — 2008
• Market is developing.
• Best-of-breed applications attempt to target
specific pain points.
• Some suite-based solutions are emerging.
• ERP vendors are beginning to accumulate many
of the components in "Office of Finance."
• Organizations should choose point solutions
where they can achieve pragmatic value to
improve FG initiatives.
FG Examples
CPM Vendors
FG Specialists
Financial Consolidations
and Reporting
All CPM vendors
None
Interentity Transaction
Management
ERP vendors (SAP, Oracle,
Lawson)
None
Reconciliation Management
Most offer intercompany
reconciliations only
Trintech, Movaris
Financial Controls and
Compliance
ERP vendors (SAP, Oracle,
Lawson)
Axentis, OpenPages,
Paisley, BWise,
MetricStream
Some CPM vendors
considering offerings
FG Examples
CPM Vendors
FG Specialists
Financial Close
Management
Oracle, SAP
Movaris
Access Controls, SOD
SAP, Oracle
Approva
Financial Risk Management
SAS, SAP
Algorithmics
Financial Analytics
Cognos, SAP, Oracle,
ACL
Some CPM vendors have
limited offerings
Sourcing for Financial Governance — 2012
• Financial governance will have emerged as a
critical management pillar of financial
management applications.
• Much FG functionality will be consolidated in
megavendor/ERP offerings.
• ERP vendors will combine CPM and EGRC
platforms and add modules for financial
governance, including modules from FG ISVs.
• Service providers will offer financial governance
as part of financial BPO.
XBRL Continues Its Progress
U.S. Securities and
Exchange Commission
• September 2007 announcement:
completion of all work on developing
data tags for the entire system of U.S.
GAAP
• Newly created "Office of Interactive
Disclosure"
• SEC report is expected in spring 2008
which should lead to a course of action
being laid out in the fall of 2008
• Mandatory XBRL filing likely within 3
years
Other Developments
• Deloitte Australia: Using XBRL to reduce costs of preparing tax and account returns
• Singapore: Mandated full or partial XBRL filing for financial statements ending on or
after 30 April 2007
• Belgium: Filing accounts in XBRL format possible from April 2007 onwards
XBRL Brings Web 2.0 to
Financial Reporting
• Managers are fed latest financial performance data
as soon as it is available
• Key financial data for store or business unit based
on GPS proximity
• Mashups of finance and other relevant information
Using CPM and BI to Improve
Compliance Initiatives
• Aggregated financial and operational information
• Results in front of those who need to know
• Flash reporting prior to month-end
• Details and OLAP
• Identification of out-of-tolerance conditions
and alerts
• Segmentation of reporting into
material/significant elements
Recommendations (1)
 As FG emerges, understand how point solutions can add
pragmatic value to reporting and control initiatives …
 … and how those point solutions are integrated into CPM
and EGRC platforms.
 Develop a target architecture for FG within your
enterprise.
 Understand how your ERP vendor is providing additional
FG capabilities and if you can leverage these.
 Make FG an architectural consideration in any CPM and
EGRC acquisition or BPO.
 Monitor the FG improvements from your CPM vendor.
Recommendations (2)
 Monitor market developments closely:
- Consolidation will continue
- Battle of the vendor road maps
 Balance tactical needs against longer-term
vendor promises
 Consider smaller vendors alongside established
names
 Plan for XBRL adoption within three years
New Gartner Research:
CFO Special Report - Themes
Four main themes:
•
Managing corporate performance: How applications that support
Corporate Performance Management (CPM) enable the CFO and
finance function to understand the drivers of performance and deliver
real strategic business value to the CEO and management team.
•
Technology for finance: The technologies that will impact the way
companies manage and report financial and management
information, and why should CFOs care
•
Governance & compliance: Where SOX went next and how
emerging trends in financial governance will change the way CFOs
ensure that financial information is free from material weaknesses.
•
Finance organization and processes: How CFOs can optimize
operating efficiency and realize cost savings in the finance function
while delivering a higher quality of service
CFO Special Report Content
Theme
Managing
Corporate
Performance
Technology
for Finance
Governance
& Compliance
Finance
Organization
and
Processes
CFO Special Report Top View
Using Corporate Performance Management to deliver the CEO’s strategic vision
Rayner
Rayner
Corporate Performance Management trends that will impact the CFO
The Finance Skills Gap Will Limit Success With Corporate Performance
Management
XBRL Will Enhance Corporate Disclosure and Corporate Performance
Management
Q&A: Master Data Management and Finance Systems
The Impact of SOA and SaaS on Finance Systems
Q&A on Financial Governance Market Trends
Chandler
Rayner
Sarbanes-Oxley Update: How to Best Support the CFO
Leveraging technology to improve Reconciliation Management
When to Consider a Single-Instance Finance System Strategy
Van Decker
Van Decker
Rayner
Finance shared services - benefits & best practices
What a CFO needs to know about BPO
Aligning Finance Processes and Technology for Enterprise Value
How the CFO Should Approach the Financial Application Portfolio
Rayner
Tornbohm
Van Decker
Van Decker
Rayner/Chandler
Rayner
Rayner
Van Decker