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© 2010 IBM Corporation
IBM Institute for Business Value
Global Banking Industry
Point of View
© 2010 IBM Corporation2 CFO Study Banking Point of View
2003
The 2010 IBM CFO Study is the fourth edition since 2003 and builds upon our primary research from 2005 and 2008
CFO Studies
Introduction
20102005 2008
© 2010 IBM Corporation3 CFO Study Banking Point of View
CFO Study 2010 key messages
Leading Finance organizations are evolving to become Value Integrators and thereby more effective executing on their core Finance activities, monitoring business performance, driving the integration of information across the organization and managing enterprise risk. There are two capabilities that Value Integrators have focused on to improve their Finance effectiveness and contribute to enterprise outperformance.
Finance execution excellence matters more than ever. CFOs that have more efficient Finance organizations are more successful at driving operational excellence.
Finance organizations must also deliver value through analytics and business insight. Those that have strong business insight are helping drive greater value across their enterprises.
By doing both well – executing core Finance activities efficiently and providing the insight their businesses need – Value Integrators are helping their enterprises make
smarter decisions.
Source: IBM Institute for Business Value, The Global CFO Study 2010
Introduction
© 2010 IBM Corporation4 CFO Study Banking Point of View
The Global CFO Study 2010 is the largest known CFO-level study of its kind with over 1,900 participants, 164 in Banking
Geography Enterprise Size (US$)
Title Scope of Role
Asia Pacific, 29%
EMEA, 42%
Americas, 29%
BU / Program Area, 10%
Country,34%
Region,7%
Enterprise / Global, 49%
Others, 11%
SVP / Controller / Treasurer,
15% CFO / Deputy CFO / Director,
74%
<=$500MM, 17%
$501MM to $1B, 7%
>$1B to $5B, 29%
>$5B to $10B, 9%
>$20B,21%
>$10B to $20B, 6%
Banking CFO Study 2010 Firmographics
N = 164 Source: IBM Institute for Business Value, The Global CFO Study 2010Geography = Country of Company Headquarters
20% of participants were in the Financial
Services industry, 164 in Banking.
Introduction
© 2010 IBM Corporation5 CFO Study Banking Point of View
Our study was conducted at the height of the economic crises and comes to market as signs of a new economic environment emerge
Introduction
Source: IBM Institute for Business Value; Based on IMF Global Economic Outlook Sep. 2009, CPB Netherlands Bureau for Economic Policy Analysis 24 Dec. 2009, JP Morgan Global
Manufacturing PMI (Jul 2006 – Dec. 2009)
Liquidity driven crises
Real estate bubble burst
Failure of collateralized debt obligations
Drop in global commerce
Cost reduction pressures
Rising unemployment
Drop in commodity values
Dramatic drop in consumer demand
Increased risk, volatility and uncertainty
Subdued growth
Continued cost pressures
Continued high un-employment
Reduced global commerce and demand
End-to-end stimulus and government hand in business
Sovereign debt concerns
Industry restructuring and consolidation
Continued uncertainty, elevated volatility and risk
New Economic EnvironmentGlobal Financial Crises
Economic Environment, Recent Past and Looking Forward
-30%
-20%
-10%
0%
10%
20%
30%
2005 06 07 08 09
Oct
Emerging Asia
EmergingEconomies
World
AdvancedEconomies
2005 06 07 08 09
Nov
EmergingEconomies
World
AdvancedEconomies
30
35
40
45
50
55
Change in Industrial Production
Mfg. Purchasing Manager’s Index
Consumer Confidence
Signs of Stability
© 2010 IBM Corporation6 CFO Study Banking Point of View
Source: The World Bank Global Development Finance 2009; Outlook summary; CFO Magazine, September 2009. Survey of 400 CFO’s: Finance Confronts the New Normal;Reuters Fri Sep 11, 2009 Fri Sep 11, 2009 - Walden Siew; Survey of 700 CPA’s: ERM Initiative at North Carolina State University in collaboration with AICPA
Independent reports confirm global economic challenges have been severe and a new operating environment is unfolding
“Several factors point to continued weakness. Unemployment continues to rise throughout the world, housing prices in many countries are still falling (adding to negative wealth effects), bank balance sheets are fragile, and much more consolidation and recapitalization required.”- World Bank, September, 2009
“A year after the collapse of investment bank Lehman Brothers, frozen credit markets are piecing themselves together again but the face of borrowing is dramatically different.”- Reuters September, 2009
“60% of CPAs believe the complexity of risks have changed “extensively” or a “great deal” in the last five years. 36% were caught off guard. 44% have no enterprise-wide risk management process, 43% do not require it and 75% indicate key risks are communicated on an ad hoc basis.”
- AICPA;AICPA Business Brief 05v1|2009
“88% of CFOs believe when the economic recovery takes hold, companies will ‘operate in a new environment.’”- CFO Magazine September, 2009
Introduction
Impact of Global Economic Challenges
© 2010 IBM Corporation7 CFO Study Banking Point of View
This study examines how the CFO can make the enterprise smarter in an era of increased uncertainty
Introduction
Source: IBM Institute for Business Value, The Global CFO Study 2010
The impact of the New Economic Environment on the CFO’s role
What can CFOs do to enable timely and informed decision-making?
How can the CFO help the enterprise anticipate and shape its environment?
!
?
?
What Finance model achieves the optimal mix of capabilities needed to outperform??
CFO Study 2010 Provocative Topics
© 2010 IBM Corporation8 CFO Study Banking Point of View
Regulatory demands in the industry have put the “demand for external transparency” as the top challenge for Banking, ahead of “pressure to reduce cost base”
Industry / Sector Changes Over the Next Three Years
Banking N = 162 to 164; Global N = 1,844 to 1,905Source: IBM Institute for Business Value, The Global CFO Study 2010
Introduction
As a result of these factors, 66% of Banking Finance organizations believe that they have to make major changes to respond.
0% 20% 40% 60% 80% 100%
Demand for external transparency (e.g.,Board, shareholders, taxpayers, regulators)
Pressure to reduce cost base
Need for faster decision making
Ability to attract and retain talent
Product / service demand growth
Potential access to short-term liquidity / long-term capital
Banking Global
69%
78%
74%
56%
61%
40%
85%
76%
70%
59%
58%
48%
© 2010 IBM Corporation9 CFO Study Banking Point of View
CFOs are taking a more prominent role as key enterprise-wide decision makers and enabling partners
Elevated Role of FinanceRole of Finance in Driving Decisions Across the Enterprise
N = 161 to 164Source: IBM Institute for Business Value, The Global CFO Study 2010
Introduction
Banking
Over 65% of Banking CFOs believe they have an advisory or decision making role on the enterprise agenda, especially around performance indicators.
43%
40%
53%
35%
61%
54%
48%
38%
48%
42%
28%
45%
14%
20%
22%
30%
0% 20% 40% 60% 80% 100%
Selection of key performance indicators
Enterprise cost reduction management
Strategic revenue planning
Capital asset management
Business model innovation / reshaping
Prioritization of resource allocation
Risk management
Information management strategy
Advisor (e.g., analysis and insight) Decision Maker (e.g., create the plan)
91%
82%
81%
80%
75%
74%
70%
68%
“The CFO function is becoming more and more critical in the current environment. Financial risk is increasing, transparency is becoming an issue, cost is a driving force. The role of the CFO is becoming more than a financial custodian…The CFO is an advisor to business; it’s a mix of control and advisory function.”
CFO, European Bank
© 2010 IBM Corporation10
CFO Study Banking Point of View
N = 164 Source: IBM Institute for Business Value, The Global CFO Study 2010
28%
19%
19%
4%
20%
28%
Core Finance
Enterprise Focused
Similar to the Global results, in Banking, Finance also needs to improve its effectiveness in order to deliver on the enterprise agenda
CFO Agenda: Importance vs. EffectivenessGap
Introduction
Importance
EffectivenessDriving integration of information across the enterprise
Driving enterprise cost reduction
Strengthening compliance programs and internal controls
Driving Finance function cost reduction
Executing continuous Finance process improvements
Developing your people in the Finance organization
51%55%
60% 80%
57% 85%
53% 72%
53% 72%
47% 75%
0% 20% 40% 60% 80% 100%
26%Supporting / managing / mitigating enterprise risk
51% 77%
17%
17%
Providing inputs into enterprise strategy
Measuring / monitoring business performance
67% 84%
66% 83%
Banking
© 2010 IBM Corporation11
CFO Study Banking Point of View
Supporting a broader enterprise focused role requires Banks to have core Finance efficiency and strong business insight
Introduction
Addressing the Broader Enterprise Focused Role of Finance
Source: IBM Institute for Business Value, The Global CFO Study 2010
Finance Efficiency
Business Insight
Demands on Finance
Help drive enterprise cost reduction
Support risk management
Partner in strategy and value creation
Improve access to and reduce cost of capital
Provide performance insight and anticipate
Finance Capabilities Needed
© 2010 IBM Corporation12
CFO Study Banking Point of View
Analysis of CFO responses and objective enterprise financial measures identified enablers to deliver efficiency and insight
Finance Efficiency and Business Insight Enablers
Introduction
Low High
Corporate philosophy on information standards
Common Finance data definitions and data governance
Standard Financial chart of accounts
Standard / common Finance processes
Do not see any value in enterprise-wide standards
Enterprise-wide standards mandated for all business units
and enforced
Not adopted Enterprise-wide > 75%
Not adopted Enterprise-wide > 75%
Not adopted Enterprise-wide > 75%
Enabler
Analytical capability (operational planning and forecasting)1
People / talent (effectiveness of developing people in Finance)
Technology (deployment of a common planning platform)
Not deployed Satisfactory analytical capability
Ineffective Effective people / talent
Not deployed Deployed to a large extent
Fin
ance
Eff
icie
ncy
Bus
ine
ss I
nsi
ght
1 Also analyzed Scenario Planning, Predictive AnalyticsSource: IBM Institute for Business Value, The Global CFO Study 2010
© 2010 IBM Corporation13
CFO Study Banking Point of View
Four Finance profiles emerge when considering capabilities on both dimensions. In Banking, on average, there are more Disciplined Operators and Value Integrators, compared to Global results
Finance Profiles
Banking N = 118; Global N = 1,478Source: IBM Institute for Business Value, The Global CFO Study 2010
Introduction
Finance Efficiency
Business InsightLow High
Low
High
26%banks
10%banks
38%banks
26%banks
23%
12%
32%
33%
© 2010 IBM Corporation14
CFO Study Banking Point of View
Value Integrators in the Banking industry outperform, on average, other Finance profiles
Efficiency + Business Insight Contributes to Outperformance
Revenue Growth: N =72; EBITDA: N = 58; ROIC: N = 73Source: IBM Institute for Business Value, The Global CFO Study 2010
Introduction
Value Integrators in Banking also have a more than 5% better operating efficiency ratio thanall other banks.
14.7%
18.2%
8.4%8.8%
14.6%
5.6%
EBITDA Revenue Growth ROIC
67% better
25% better
50% better
5-year CAGR, 2004-2008 5-year CAGR, 2004-2008 5-year average, 2004-2008
Value Integrators
All other banks
© 2010 IBM Corporation15
CFO Study Banking Point of View
Three key themes emerged from examining the four profiles
Delivering efficiency through standards matters more than ever
Providing business insight drives performance improvement beyond Finance
The greatest rewards come from doing both well
Themes
Source: IBM Institute for Business Value, The Global CFO Study 2010
“We will constantly focus on the priorities of an enterprise-wide standard mandated for all business units.”
CFO, German Bank
“Driving consistent standards is a very high priority for Finance since it drives process simplicity and it aligns everyone operationally in a procedurally-focused environment.”
CFO, United States Bank
© 2010 IBM Corporation16
CFO Study Banking Point of View
Finance organizations in Banking struggle with structural complexity issues related to automation and standards
38%
37%
26%
40%
39%
48%
26%
36%
Financial metricsproduced manually
Percent of time spent ontransactional activities
Lack of common datadefinitions and processes
Lack of a commonreporting platform
Banking N=162; N=118; N=160; N=160; Global N=1,895; N=1,478; N=1,892; N=1,888Source: IBM Institute for Business Value, The Global CFO Study 2010
Efficiency through standards
Efficiency Challenges
“…the quality of the existing management information should be enhanced and improved. Too many spreadsheets and handwork.”
CFO, Netherlands Bank
Banking Global
© 2010 IBM Corporation17
CFO Study Banking Point of View
IBM’s CFO Study 2008 revealed that enterprises with Integrated Finance Organizations outperformed due to enterprise-wide standards
Integrated Finance Organizations and the Finance Profiles
Efficiency through standards
Efficiency
Business InsightLow High
Low
High
Source: IBM Institute for Business Value, The Global CFO Study 2010
Integrated FinanceOrganizations
• Corporate philosophy on Information standards - mandated and enforced
• Strict adherence to common Finance data definitions and data governance – enterprise-wide
• Implemented a standard Financial chart of accounts – enterprise-wide
• Use of standard / common Finance processes - enterprise-wide
© 2010 IBM Corporation18
CFO Study Banking Point of View
-5.0%
13.1%
Finance Efficiency Contributes to Financial Outperformance
Revenue Growth: N = 102; EBITDA: N = 89; ROIC: N =104Source: IBM Institute for Business Value, The Global CFO Study 2010
6.3% 6.1%
Efficiency through standards
Enterprises with high Finance efficiency
All other enterprises
Return on Invested Capital5 Year Average (2004-2008)
Revenue Growth5 Year CAGR (2004-2008)
EBITDA5 Year CAGR (2004-2008)
Banking
16.6%
13.2%
Banks with high Finance efficiency are rewarded financially
© 2010 IBM Corporation19
CFO Study Banking Point of View
Effectiveness Benefits of Finance Efficiency
Banks that have adopted standards and increased Finance efficiency are performing better
Efficiency through standards
Finance Efficiency Helps the Enterprise React to External Forces
Banking N=163Source: IBM Institute for Business Value, The Global CFO Study 2010
Banking Global
74%
62%
Enterpriseswith Finance
efficiency
All otherenterprises
% Better
19%
78%
72%
Enterpriseswith Finance
efficiency
All otherenterprises
% Better
8%
Global N = 1,886
© 2010 IBM Corporation20
CFO Study Banking Point of View
Accelerator #1: Process Ownership
84%
36%
Enterpriseswith Finance
efficiency
All otherenterprises
Banking N = 159Source: IBM Institute for Business Value, The Global CFO Study 2010
% More
133%
Efficiency through standards
Banks that establish process ownership are far more likely to achieve the standards that enable Finance efficiency
Adoption of Process Ownership
81%
33%
Enterpriseswith Finance
efficiency
All otherenterprises
% More
145%
“Centralization of management information is important to gain oversight. Finance is owning the Master Data Management definitions”
CFO, Netherlands Bank
“Half of the breakdowns occur in Finance because of a lack of ownership. Successful Finance functions need to constantly ensure staff are clear on accountability and roles and responsibilities”
CFO, United States Bank
Banking Global
Global N = 1,870
© 2010 IBM Corporation21
CFO Study Banking Point of View
A common ledger platform drives a greater adoption of standards, and in banking this holds true even more
Accelerator #2: Common Ledger and Accounting Transaction Applications
87%
51%
Enterpriseswith Finance
efficiency
All otherenterprises
Banking N = 160Source: IBM Institute for Business Value, The Global CFO Study 2010
% More
71%
Efficiency through standards
Implementation of a Common Ledger and Accounting Transaction Applications
91%
62%
Enterpriseswith Finance
efficiency
All otherenterprises
% More
47%
While a significant number of Finance organizations have implemented a common platform, there remains a number of challenges still to be tackled including improving data quality and enterprise data integration.
Banking Global
Global N = 1,875
© 2010 IBM Corporation22
CFO Study Banking Point of View
52%
35%
Enterpriseswith Finance
efficiency
All otherenterprises
Alternative delivery models enforce the adoption of standards
Accelerator #3: Alternative Delivery Models for Transactional Activities
% More
49%
Enterprise-wide Shared Services /Centers of Excellence or Outsourcing Adoption
Efficiency through standards
Banking N = 164Source: IBM Institute for Business Value, The Global CFO Study 2010
49%
29%
Enterpriseswith Finance
efficiency
All otherenterprises
% More
69%
“We have put shared service centers and centers of excellence at the point of greatest efficiency”
CFO, United States Bank
“…reorganize to a central shared services model with client facing Finance supporting the business units…”
CFO, Canadian Bank
Banking Global
Global N = 1,892
© 2010 IBM Corporation23
CFO Study Banking Point of View
Three key themes emerged from examining the four profiles
Delivering efficiency through standards matters more than ever
Providing business insight drives performance improvement beyond Finance
The greatest rewards come from doing both well
Themes
Source: IBM Institute for Business Value, The Global CFO Study 2010
“Measuring and monitoring the business is seen as the most important area of responsibility since controls and risk are considered inherent to the Finance department.”
CFO, Swiss Bank
“Business analytics will become more important to us in the next three years.”
CFO, Australian Bank
© 2010 IBM Corporation24
CFO Study Banking Point of View
Rear View Forward-Looking View
The following are examples of business insight from rear view to forward-looking view
Source: IBM Institute for Business Value, The Global CFO Study 2010
Business Insight
Business insight
• What happened?
• How many, how often?
• Where exactly is the problem?
• Why is this happening?
• What actions are needed?
• What will happen next?
• What if these trends continue?
• What are the risks or opportunities?
Key Business Questions
Examples of Business Insight
Current View
• Balance sheet, profit and loss, and cash flow statements
• Revenue and cost variance analysis
• Customer, product and market profitability
• Spend optimization• Working capital analysis• Market, customer and
channel pricing• Sales and supply chain
effectiveness
• Cash forecasting• Scenario-based
planning and forecasting
• Strategic investment decision support
• Volatility and risk-based predictive and behavioral modeling
© 2010 IBM Corporation25
CFO Study Banking Point of View
In Banking, there are challenges to effectively delivering business insights due, again, to structural complexity
Banking N=160; N=118; N=160; N=163; Global N=1,889; N=1,466; N=1,864; N=1,903Source: IBM Institute for Business Value, The Global CFO Study 2010
Business insight
46%
52%
58%
39%
49%
55%
53%
44%
Lack of a commonplanning platform
Not statisfied withoperational planning and
forecasting analyticalcapability
Operational metricsproduced manually
Poor to average atanticipating external
forces
Business Insight Challenges
Banking Global
© 2010 IBM Corporation26
CFO Study Banking Point of View
Most objective financial data validates that decision making supported by business insight contributes to enterprise outperformance
Business Insight Contributes to Financial Outperformance
Revenue Growth: N =72; EBITDA: N = 58; ROIC: N = 73Source: IBM Institute for Business Value, The Global CFO Study 2010
Business insight
8.8%
5.0%
Finance organizations with strong business insight
All other enterprises
Return on Invested Capital5 Year Average (2004-2008)
Revenue Growth5 Year CAGR (2004-2008)
EBITDA5 Year CAGR (2004-2008)
Banking
9.2%
15.4%
18.1%
14.0%
© 2010 IBM Corporation27
CFO Study Banking Point of View
76%
61%
Financeorganizationswith strongbusinessinsight
All otherenterprises
Effectiveness Benefits of Business Insight
Finance organizations with strong business insight are performing better
Business insight
Business Insight Helps the Enterprise Anticipate External Forces
Banking N = 117Source: IBM Institute for Business Value, The Global CFO Study 2010
% Better
25%
Global N = 1,471
% Better
39%
71%
51%
Financeorganizationswith strongbusinessinsight
All otherenterprises
Banking Global
© 2010 IBM Corporation28
CFO Study Banking Point of View
Finance organizations with business insight have automated production of financial metrics, which facilitates faster and more efficient insight
Accelerator #1: Timely Metrics
Business insight
Impact on Analytics SatisfactionHigh Automation
% More
54%FinancialMetrics
% Better
78%
Banking
% More
28%FinancialMetrics
% Better
29%
Global
Banking N = 116; Global N = 1,463Source: IBM Institute for Business Value, The Global CFO Study 2010
Banking: N = 116; Global N = 1,454
Global N = 1,454
© 2010 IBM Corporation29
CFO Study Banking Point of View
Finance organizations with business insight have automated production of operational metrics, which facilitates faster and more efficient insight
Accelerator #1: Timely Metrics
Business insight
Banking N = 114; Global N = 1,435Source: IBM Institute for Business Value, The Global CFO Study 2010
Banking N = 114; Global N = 1,428
Impact on Analytics SatisfactionHigh Automation
% More
67%Operational
Metrics
% Better
23%
Banking
% More
42%Operational
Metrics
% Better
39%
Global
© 2010 IBM Corporation30
CFO Study Banking Point of View
53%
35%
Financeorganizationswith strongbusinessinsight
All otherenterprises
41%
36%
Financeorganizationswith strongbusinessinsight
All otherenterprises
Finance organizations with business insight establish operational data standards, providing insight based on a common “truth.” In Banking, on average, there are more challenges in defining non-financial data standards, compared to Global results
Accelerator #2: Establishment of Non-Financial Data Standards
Business insight
% More
14%
High Adoption of Non-Financial Data Standards
Global N = 1,449Banking N = 114Source: IBM Institute for Business Value, The Global CFO Study 2010
Banking Global
% More
51%
“We are very strict on financial information and it is from a single source. We use a warehouse concept to control data definition and request for information enterprise-wide”
CFO, Australian Bank
“Enterprise data warehouse build will enforce single source of the truth.”
CFO, Australian Bank
© 2010 IBM Corporation31
CFO Study Banking Point of View
Three key themes emerged from examining the four profiles
Delivering efficiency through standards matters more than ever
Providing business insight drives performance improvement beyond Finance
The greatest rewards come from doing both well
Themes
Source: IBM Institute for Business Value, The Global CFO Study 2010
“The CFO can influence the organization and is increasingly important and involved in strategic direction…need to have integrated financial information for decision making.”
CFO, South Africa Bank
“Near real-time planning / forecasting functionality is becoming essential.”
CFO, UK Bank
© 2010 IBM Corporation32
CFO Study Banking Point of View
Value Integrators in Banking outperform, on average, other banks in Revenue Growth and EBITDA
Efficiency + Business Insight Contributes to Outperformance
Revenue Growth: N = 72; EBITDA: N = 58; ROIC: N = 73Source: IBM Institute for Business Value, The Global CFO Study 2010
Efficiency + Business insight
Value Integrators also have a more than 5% better operating efficiency ratio than all other companies examined.
Return on Invested Capital5-year average, 2004-2008
Revenue Growth5-year CAGR, 2004-2008
EBITDA5-year CAGR, 2004-2008
Fin
an
ce
Eff
icie
nc
y
Business Insight
15.6%
18.2%
11.8% 18.0%
10.8%
14.7%
6.8% 4.5%
Business Insight
5.3%
9.8%4.4%
8.4%
© 2010 IBM Corporation33
CFO Study Banking Point of View
Value Integrators are more effective across the entire CFO Agenda
N = 1,454 to 1,469Source: IBM Institute for Business Value, The Global CFO Study 2008, 2010
Efficiency + Business insight
Effectiveness Across the Full CFO Agenda
Driving integration of information across the enterprise
Providing inputs into enterprise strategy
Supporting / managing / mitigating enterprise risk
Value Integrators
Driving enterprise cost reduction
Strengthening compliance programs and internal controls
Driving Finance function cost reduction
Executing continuous Finance process improvements
Developing your people in the Finance organization
Measuring / monitoring business performance
Percent more effective than baseline
140%100%80%60%0% 20% 40%
DisciplinedOperators19% Better
ConstrainedAdvisors
33% Better
ValueIntegrators59% Better
Scorekeepers(Baseline)
0%
120%
Constrained Advisors
Disciplined Operators
Scorekeepers
Global
© 2010 IBM Corporation34
CFO Study Banking Point of View
Value Integrators drive broader improvements in data and analytics, process, technology and people
What Do Value Integrators Do Differently?
Source: IBM Institute for Business Value, The Global CFO Study 2010
Efficiency + Business insight
Data and Analytics
Process
Technology
• Improve information delivery• Drive data integrity• Use different approaches to help the
enterprise make decisions
• Focus on next tier process improvements
• Rationalize and standardize analytical technologies
People• Drive risk management through CFO direct
reports of Controls and Risk Management
© 2010 IBM Corporation35
CFO Study Banking Point of View
Value Integrators drive broader improvements in data and analytics, process, technology and people
N = 112 to 115Source: IBM Institute for Business Value, The Global CFO Study 2008, 2010
Efficiency + Business insight
Streamlined information delivery
Value Integrators
Percent adopted
100%80%60%20% 40%
Constrained AdvisorsDisciplined Operators
Electronic data capture at the source
Systematic data cleansing and auditing
Business risks in performance reporting
Utilized automated workflow tools
Measurement & monitoring of processes
Common reporting platform
Common planning platform
What Do Value Integrators in Banking Do Differently?% More
74%
16%
75%
11%
54%
43%
50%
0%
8%
© 2010 IBM Corporation36
CFO Study Banking Point of View
People are the essential enabler in all Finance teams. Significant attention is devoted to enhancing analytical and insight skills
Efficiency + Business insight
Source: IBM Institute for Business Value, The Global CFO Study 2010
People: Imperatives for Building the Finance Team
#1 Attract and retain the right talent
#2 Provide business analytics and insights training
#3 Develop leadership skills
“Performance management will be more effective if the competencies of Finance staff will be strengthened by more communication and advisory skills… growth in decision support by developing the competencies of staff.”
CFO, Netherlands Bank
“Talent management is a big factor for us. Ensuring that talent can grow with the business. Learning capabilities are needed to be sure to advance the organization.”
CFO, Jamaica Bank
“In our transformation of Finance, we find talent management the most critical item.”
CFO, Canadian Bank
© 2010 IBM Corporation37
CFO Study Banking Point of View
Being a Value Creator: The Path Forward
The Path Forward
© 2010 IBM Corporation38
CFO Study Banking Point of View
Source: IBM Institute for Business Value, The Global CFO Study 2010
The Path Forward
Paths to Higher Value
CFOs aspiring to evolve their Finance Model to higher capability should address performance gaps with specific action plans
Finance Efficiency
Business Insight
Low High
Low
High
Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value
Constrained Advisors have good business insight, constrained by structural complexity, therefore address process and data standards to improve efficiency, accuracy and speed
High efficiency enabled by process and Finance data standards suggests Disciplined Operators focus on maturing business insight and partnering capabilities
Scorekeepers can attempt a direct path to become Value Integrators. This will involve establishing Finance efficiency while simultaneously building business insight capabilities. Alternatively, a staged approach can also be done
© 2010 IBM Corporation39
CFO Study Banking Point of View
The Scorekeeper is characterized by low efficiency and business insight capabilities, suggesting three possible paths
Source: IBM Institute for Business Value, The Global CFO Study 2010
The Path Forward
With the proper mandate, sufficient resources and executive support, Scorekeepers should consider simultaneously addressing efficiency and business insight capabilities.
Alternatively, a staged approach would suggest 1) addressing a Process and Data Standards foundation (efficiency first), then leveraging that to deploy improved business insight capabilities next or 2) addressing business insight capabilities first and then follow with standards
Suggested Focus Areas
Findings: Scorekeepers lack the standards that are foundational and essential to excel in either Core Finance or Enterprise-Focused activities
– Establish process owners and drive to process commonality– Benchmark processes to identify underperforming areas and redesign– Establish and enforce Finance data standards, as broadly as possible– Rationalize and deploy a common Finance technology platform– Increase automation of data acquisition and integration– Drive error processing and reconciliation functions close to the source– Consider accelerating the journey with less risk and cost by migrating to an established and proven platform– Build upon improved Core Finance infrastructure to deploy leading analytical capabilities
© 2010 IBM Corporation40
CFO Study Banking Point of View
The Constrained Advisor has low efficiency and high business insight, so the focus should be on standards and efficiency
Source: IBM Institute for Business Value, The Global CFO Study 2010
The Path Forward
Current inefficiency may be making analytic support difficult & complex for Constrained Advisors. Addressing structural complexity inherent in Finance can help improve efficiency, timeliness and integrity of analysis.
Suggested Focus Areas
Findings: Constrained Advisors have advanced their analytical capabilities without addressing standards that improve speed, efficiency and reliability
– Establish process owners for core Finance and decision support processes– Target core Finance processes to improve efficiency and speed– Drive data standards for financial and operational metrics and analysis models– Leverage commonality to automate more with technology
© 2010 IBM Corporation41
CFO Study Banking Point of View
The Disciplined Operator is characterized by high efficiency but low business insight, so the focus should be on business insight
Source: IBM Institute for Business Value, The Global CFO Study 2010
The Path Forward
Building upon a solid foundation of Finance efficiency, Disciplined Operators can concentrate on developing the high-value skills and tools required to provide forward-looking analytical support to the business. With their fiduciary and reporting responsibilities demanding less executive attention, they can invest more effort in becoming Value Integrators.
Suggested Focus Areas
Findings: Disciplined Operators have more advanced Core Finance capabilities and are positioned to leverage a foundation of standards to deploy analytics
– Apply process ownership and standards to decision support processes– Apply data ownership and standards to analytical data and operational metrics– Attract and retain higher order talent and deploy decision support COEs– Drive commonality into the decision support technology platform– Deploy advanced analytical models such as predictive modeling as deeply into operational systems as feasible
© 2010 IBM Corporation42
CFO Study Banking Point of View
The Value Integrator is characterized by both high efficiency and business insight capabilities, so the focus should be on “sustaining”
Source: IBM Institute for Business Value, The Global CFO Study 2010
The Path Forward
Value Integrators have achieved the requisite balance of efficiency and business insight to effectively partner on Enterprise-Focused activities.
Suggested Focus Areas
Findings: Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value
– Adopt a continuous improvement program to sustain and expand current capabilities– Deploy a robust governance and succession program for process and data management– Increase focus on attracting and retaining talent– Expand focus on value creation analysis to drive further performance improvements– Protect from downside performance by embedding risk into performance analytics– Embed risk measures and predictive analytics into operational systems and processes
© 2010 IBM Corporation43
CFO Study Banking Point of View
Conclusions
They have implemented common process and data standards across their organizations to increase speed and curtail reconciliation and duplication. With reliable, integrated information as their springboard, they have also developed the talent, technology and analytical capabilities to proactively uncover and communicatebusiness insight.
By executing their core financial activities efficiently and providing the insight their businesses so desperately need, Value Integrators are helping their enterprises make smarter decisions.
Value IntegratorsHow can the CFO help the enterprise anticipate and shape its environment?
What can CFOs do to enable timely and informed decision-making?
What Finance model achieves the optimal mix of capabilities needed to outperform?
Finance Efficiency Business Insight
How can you increase the effectiveness of Finance to satisfy rising expectations?
How do you drive the integration of information across the enterprise?
How do you control costs and improve productivity?
How do you ensure data integrity to produce valid insights?
Do you have the business insight to drive performance improvement beyond Finance?
Does your Finance organization have the talent to provide forward-looking insight?
The CFO Study reveals that Value Integrators provide compelling insights into how the CFO can make the enterprise smarter in an era of increased uncertainty