Tuesday Apr 16, 2013

Enrich Your Scorecard with Metadata That Actually Matters

Oracle has released another interesting Podcast – this one is about how Oracle Scorecard and Strategy Management can help you drive behavioural change and improvement at the same time by using metadata that actually matters.

I had the pleasure of interviewing Jacques Vigeant, Product Strategy Director for Oracle Business Intelligence and Enterprise Performance Management and Oracle Scorecard and Strategy Management (or OSSM) about this subject.

After covering the basics about what a scorecard is and how it differs from a BI system or dashboards, we went on to discuss how scorecards should traverse dimensional structures, not just go up and down the hierarchies (like a typical BI system does) but also jump from one hierarchy to another to tie important data together.

Then we got to the heart of the Podcast – metadata that really matters. Jacques told us why accountability is so important – understanding WHO is under or over performing and HOW that performance relates back to the organizational strategy is key to pushing strategy forward. It is difficult to modify behavior if accountability is not included.

Jacques further explained that traditional BI metrics are typically focused around aggregating metadata along a single hierarchy. For example, we all know intuitively that a very high attrition rate in a company can impact the profitability of the company.  Traditional BI metadata focuses on aggregating metadata for HR attrition rates by HR dimensions, like attrition by department or region, but in this example, there is still a chasm between the HR data and financial data. Oracle Scorecard and Strategy Management (OSSM) enables you to draw relationships between your measures that are not necessarily based on aggregate tables or dimensional hierarchies – rather by business insight. You can literally drag and drop scorecard metrics on top of each other to get a better snapshot of what is going on. Jacques provided the following example, “Let’s say my attrition metric has an impact on my employee effectiveness metric, which has an impact on employee productivity, productivity has an impact on cost, and cost has an impact on profitability. You can drag all of these metrics on top of each other to get a whole company understanding of the impact of attrition rate on profitability”. This is new insight about the relationship. Once we understand this relationship, there is now a financial basis for management to ensure that the attrition rate stays within acceptable parameters – which can lead to a change in management behavior.

How does this type of insight help? Jacques explained that OSSM provides a set of metadata that is actually captured by the user using the system, providing new business insight. As more users use the system you are gaining more and more business insight. You get a network effect of new and better business insight as more people use the scorecard tool. This is not the same kind of metadata as traditional metadata that simply describes the existing dimensions.

Near the end of the Podcast Jacques also told us more about how the use of metadata that matters (including accountability) with financial objectives and data and operational metrics and data, can all roll up into the strategy tying everything together. The ability to keep the data current enables users to get a really good picture of the state of the strategy at any time, and which elements are most important to monitor to move the strategy forward. There are really great visual diagrams within OSSM that help you to literally see what is happening.

Jacques provided other interesting examples and useful information about metadata that actually matters in scorecards and how it can help encourage organizational change during the Podcast. I encourage you to listen to the entire interview.

To hear the entire Podcast click here.

For more information about Oracle Scorecard and Strategy Management (OSSM) click here.

Tuesday Apr 02, 2013

Shared Service Costs: Are They Adding or Destroying Company Value?

Recently, Oracle published a very interesting podcast on shared service costs and whether shared services were adding or destroying company value. The information provided was extremely enlightening.

I had the pleasure of interviewing Bart Stoehr, Senior Product Management Director for Oracle Hyperion Profitability and Cost Management (HPCM), and Tom Gargas, a Principal Solutions Manager from Edgewater-Ranzal, an Oracle Partner. Here, I will summarize a few of the key points from the interview. 

According to Bart, shared services are really a concentration of company resources performing like activities, but they are spread out across the organization to service multiple, internal partners at a lower cost and providing higher levels of service. Most organizations have shared services, but often do not understand the value that they add to a company or the value that they can destroy. What are the goals for shared service centers? Bart explained that the goals are “To delight external customers and enhance corporate value”. These centers provide economies of scale and act much like centers of excellence. Examples of shared service centers mentioned by Bart include IT, Human Resources, Finance, Legal Services, Facilities and Communications.

We also discussed why it was so difficult to understand shared service costing. Bart revealed that it was really an aggregation issue. Organizations can see the total cost of a service that is shared, but not necessarily what the business units are consuming and therefore how they relate to products and customers. Understanding how each service is consumed by each part of the business will enable organizations to account for the services and charge back accordingly. But it is not only the financial aspects we are worried about. Understanding the costs of each shared service can help the company see how the costs of the service compare with the value of the service. If a service does not add value, then the company needs to take a hard look at why they are still performing it.

Tom gave us excellent information about a practical implementation approach for shared service costing which includes the FAST characteristics:


Flexibility  (in analysis and cost methods as shared services change)

Audit and Control (ensuring compliance and approved regulatory controls)

Shared Methodology (everyone uses consistent allocation methods which ensures accurate comparisons)

Transparency (details of allocations are provided to all)


Other details in the conversation covered how better understanding shared service costs can lead to organizational and management changes; becoming aligned on allocation methods and improving internal customer service levels. It can lead to excellence in business practices -- finding and exploiting core competencies, partnering with the strategic business units to help them increase their ability to create revenue, and adding value to the organization instead of destroying it through duplication of efforts and misalignment.

Tom indicated that Oracle Hyperion Profitability and Cost Management is an excellent tool for calculating shared service costs, and that these calculations can help in the financial planning process as well.  Shared service centers must plan both for the consumption of services (which services SHOULD they provide, volume of services, cost of services, etc.) and the supply side (workflow, accountability and what actually transpires). Being able to properly calculate service center costs and report against chargebacks by business unit just makes good sense. Being able to calculate and include service charges during budgeting and forecasting cycles makes forecasting more accurate.

“Using Hyperion Profitability and Cost Management with Oracle Hyperion Planning (and possibly Oracle Hyperion Workforce Planning) to manage the supply and consumption of shared services helps ensure that organizations are right-sized”, said Tom.

Bart and Tom convinced me that having well run shared service centers, understanding true shared service costs, and using those costs to plan for the future adds tremendous value to a company. Understanding these costs and using them to make sound business decisions can certainly make the difference between company financial profitability and loss.

To listen to the entire podcast, click here.

For more information about Hyperion Profitability and Cost Management, click here.

Tuesday Mar 26, 2013

Best Practices in Profitability and Cost Management

I recently had the opportunity to run some roundtable discussions on best practices in profitability and cost management with financial executives attending the CFO CPM Conference in Philadelphia and CFO Rising East Conference in Orlando. The attendees represented companies in different industries ranging from manufacturing, to transportation, real estate, insurance, telecommunications and healthcare.

The premise for the roundtable discussion was this; For most organizations, aggressive cost-cutting and management were critical to remaining profitable while top line revenue was flat or shrinking during the recession. However, now many organizations taking a more “surgical” approach to profitability and cost management, by understanding which products, services, customers and channels are truly profitable and which ones are draining value from the business. In these roundtable sessions we discussed best practices in profitability and cost management, including how to accurately allocate revenue and costs to individual product lines, services, customer segments, locations, channels and other lines of business in order to improve decision-making. Here’s a summary of the feedback I received from attendees at these sessions:

At what level does your organization analyze and manage profitability? The answers to this question varied by industry and company: Insurance - region, state and products.  For example:


+ Real Estate Brokerage - offices, products
+ Healthcare Providers – hospitals, business units, departments, services, patients
+ Healthcare Insurance – products, markets, customers
+ Transportation/Freight – ship level, market (car rentals), customers
+ Manufacturing – location/site, products, major customers, projects
+ Retail – store level, regions
+ Telecommunications – business units, products


Are there any regulatory requirements driving detailed allocations of revenue and costs in your industry or organization? Based on the roundtables, the primary industries where there is a regulatory driver behind cost allocations and profitability analysis are Telecommunications, and Healthcare. (The latter as a result of the Healthcare Reform legislation and need to report on Medical Loss Ratios)

How are allocations performed to distribute revenue and costs down to the appropriate level in the business? What allocation techniques is your organization using? Here the participants indicated they are using a variety of techniques ranging from standard costing based on headcount, square footage, and revenue contribution to activity-based cost drivers and allocations for certain areas, such as customer service.

How frequently are detailed cost allocations performed? The frequency of allocations varied across individual companies. Some are performing this task on a quarterly basis, some semi-annually, one bi-weekly, and most of the participants are doing detailed allocations monthly. One company, in Transportation, mentioned they were doing this on a daily basis, running detailed P&Ls for each of their ships (pretty impressive).

What tools are used to perform the allocations and report on profitability at the line of business level? The tools used to perform detailed allocations, cost and profitability analysis included spreadsheets, ABC tools, multidimensional OLAP tools (i.e. Oracle Essbase), and in some cases, the general ledger system.

Who consumes the profitability reporting in your organization? The consumers of this information varied by industry and company, for example:


+ Insurance – product line managers, actuaries, regulators
+ Real Estate Brokerage – branch managers (with compensation linked)
+ Healthcare Providers – doctors, marketing campaign managers
+ Manufacturing – senior management, controllers, sales managers, business unit leaders, operations managers
+ Telecommunications – finance, business unit leaders


Is profitability reporting and management linked to the annual budgeting process? The answers to this question were more varied across the participants. Some leverage this information in their long-term strategic planning process, some link to their annual financial budget, and some are just starting to create a link to their planning processes.

Overall I was impressed with the feedback I received from participants in these sessions. Every company who participated was performing cost allocations and analyzing profitability at some level other than the corporate summary. Some were doing this at a very detailed level (i.e. daily ship P&L), and others at a more summarized level but looking to get more granular over time. I was also impressed with the frequency of profitability reporting, with most of the participants doing this on a monthly basis, some less frequently. And it was clear that the information being generated was actively shared and utilized beyond the finance organization to business unit leads, product managers, sales managers and other line of business decision-makers.

Areas for improvement that most participants identified included moving this process from spreadsheets to analytic tools and applications designed to automate and support detailed allocations and costing on a more frequent and repeatable basis. The good news here is that there are a number of packaged applications available in the market designed to support detailed allocations of revenue and costs. These applications include powerful reporting and analysis tools to provide insights and support improved decision-making regarding resource allocations, product/service mix, pricing, customer service and campaign strategies. Some of these are available as standalone solutions, while others are delivered within Enterprise Performance Management (EPM) application suites and provide seamless integration with EPM planning and reporting applications.

For more information about the profitability and cost management applications offered as part of Oracle’s EPM solutions please go to www.oracle.com/epm.


 

Monday Mar 25, 2013

Optimizing the Business as a Whole: The Case for Enterprise-Wide Planning

I recently interviewed David Jones, Director in PWC’s Consulting Services EPM Practice, and Simon Kenney a Senior EPM Consultant also from PWC, in a podcast about their successes in enterprise planning implementation and their research on finance effectiveness.


Initially, we discussed the research they have been conducting around planning and forecasting effectiveness; they call it the Finance Effectiveness Benchmark. For 2012, some issues were consistent with previous years. Planning, budgeting and forecasting is taking too long to pull together, it’s still too manual and requires too many resources or effort to get it done. But the interesting headline this year is that 80% of the respondents declared that the accuracy of their forecasts is critical to the running of their business, but only 45% said that their forecasts were actually reliable. This result is very concerning as this deficiency will prevent companies from making the right critical business decisions.


So what are the causes of this large deficiency?


According to Simon, a lack of integration across the entire planning process – front office to back office is a key issue. The business functions are just not engaged enough as the forecasting is mostly finance led. Sales and marketing are essential to any forecast, but they are often not engaged properly. Ultimately, those that generate the opportunities and the revenue need to be involved with the forecast.


No wonder the forecasts are not accurate!


How do companies to fix this deficiency and move to an integrated more inclusive world of forecasting? Simon suggested the following three steps are a good start.


Step 1: Identify why the forecasting process is failing (Is each function independently running their own processes? Is there a lack of clearly defined accountabilities?)


Step 2: Determine if/when the company is ready to integrate their processes. (Does it have the required level of sponsorship in place to move to an integrated planning process? Are the functions prepared for change?)


Step 3: Define a blue print or target “n” state (Design the integrated process. Determine which technology can help support the new integrated process)


These steps sound fairly simple, so I asked David what some of the more difficult or challenging things are that he sees when undertaking these steps with his customers. David indicated that there are challenges specific to each industry, but some common ones to watch for are:



  • Lack of executive sponsorship across functions (Very Key!) The drive to implement change must come from the top and be a collaborative process.

  • Miss-aligned performance measures that drive the wrong behaviour.

  • Too much granularity or unnecessary detail in the financial plan. Requests for more detail and more clarifications lengthens the process (without sufficient benefit) taking too much time and effort.


Simon shared his experience working with a large UK based motor car manufacturer – the challenges and success they had experienced.


Car manufacturers are a more traditional type of company with lots of legacy systems. Being so entrenched in these systems meant that they were not sure if they were really ready for a big bang approach to integrated planning and forecasting. They, therefore, decided to work on one area of the company at a time – in waves – so they could prove it was the right thing to do by demonstrating success and showing value to drive further change.


I asked David how real the benefits were that could be obtained through integrated planning and forecasting. David said that he sees real results in more accurate forecasts and a much better understanding of what goes on in the business, how it behaves, and the impact each business function has on delivering the optimal level of profit. These are real and tangible benefits. Individual functional areas need to understand their role in the overall plan and not behave independently.


What can organizations do today to evaluate their planning and forecasting processes? Simon suggested the following:



  • Look at your existing processes – are they collaborative and integrated?

  • How accurate are your forecasts? If you are not sure, take a retrospective look and find out.

  • How effective are the different business functions in forecasting accurately?

  • Take a look at benchmarks and case studies outside your organization and see how you measure up and what else you can achieve.

  • If you are in the spreadsheet world, re-evaluate the process and take an honest look at how it is working for you. How accurate are your forecasts?


It became quite apparent from speaking to David and Simon that it’s all about optimizing the business as a whole and not the individual parts; without enterprise planning integration, this is simply not possible.


To listen to the webcast, click here.

Monday Feb 25, 2013

Gartner Positions Oracle as a Leader in CPM Suites

On February 14th Gartner released their 2013 Magic Quadrant for Corporate Performance Management Suites report. In the report, Oracle was recognized as a Market Leader for the sixth consecutive year.


Gartner’s Magic Quadrant reports position vendors within a particular quadrant based on their completeness of vision and ability to execute. In this year’s report, among the market leaders, Oracle is positioned with the highest ability to execute and the strongest in completeness of vision.


Here’s an excerpt from the report with some comments about Oracle from Gartner:


“Oracle is a Leader in CPM suites, and the Hyperion brand is respected by finance executives worldwide. Oracle has a very broad and deep CPM product suite, which employs a multiproduct approach with different applications for each of the major CPM processes; however, these products employ a common foundation and administrative components. The vendor has a well-established partner channel and Hyperion skills are plentiful among the consultant community, given the well-established products.”


Oracle Hyperion Performance Management Applications are part of Oracle Business Analytics, which combine market-leading enterprise performance management applications with business intelligence tools and technology and analytic applications to help organizations strategize, plan and optimize business operations and achieve better business outcomes.


Click here to learn more:  reportpress release


For more information about Oracle’s Hyperion Performance Management Applications please go to www.oracle.com/epm.

Wednesday Feb 13, 2013

Tax Provisioning: Simplify, Standardize then Automate

Tax provisioning is a process that has become increasingly more complex to perform, but increasingly more important to do well. I recently interviewed Andy Oliver, a PWC Director in their Tax Practice and an expert in Tax Provisioning, in a Podcast which I feel sheds some light on this increasingly complex matter. To listen to the Podcast, click here.


Tax provisioning is the process of reporting current and deferred income taxes in a company’s financial statements – tax on current profits and estimated future tax on future profits. There are a myriad of rules and requirements for calculations and disclosure that apply to different companies and countries and they are changing all the time. It is extremely important to have accurate, transparent calculations as when and what to pay and defer can make a huge difference to a company’s bottom line.


How do most tax accountants and departments manage this process? Andy indicated that a majority of companies pull this information together through numerous and large spreadsheets with complex and convoluted calculations. And although these spreadsheets offer flexibility – to keep up with the ever changing rules – they do not provide consistency in calculations, standardization of the process, or data security. This means that the calculations and resulting reports are error prone and can cause countless hours of work to find and correct the errors.


Ideally, the tax provisioning process should be performed early in the financial close process to get a really good picture of the end result. However, inevitably being early in the process means the financial results will change and the provision or estimation will have to be recalculated. Having the tax provisioning process integrated with the financial close process and systems makes a lot of sense, from an efficiency standpoint, to reduce the amount of work required each time there is a change to the financial results. We also discussed how important it is to SIMPLIFY the tax provisioning process and then standardize and automate the process before integrating with the financial close process to be truly effective and world-class.


Oracle’s Hyperion Tax Provision solution was designed to provide this integration with the financial close process and drive efficiency into the tax provisioning and disclosure process.


Finally, Andy had this advice for the listeners, “If you can align the tax reporting process with the financial close process – eliminating much of the manual, spreadsheet-based calculations, you will get the job done quicker, experience fewer mistakes, and be able to spend more time doing the important part of your job as a tax accountant; analyzing the numbers, and providing insight on the results such as WHY the numbers are different from forecast or from last year.


For more information on the Oracle Hyperion Tax Provision solution, click here.


To listen to the podcast, click here.


 

Tuesday Feb 05, 2013

How Corporate Culture Affects Performance Management

Good news – now there is research to support the idea that corporate culture really does impact corporate performance management!

A new article by the Business Research and Analysis Group (BRAG) was published in the January 2013 issue of Strategic Finance called "How Corporate Culture Affects Performance Management". Click here to read the article. It is an interesting piece that focuses on two main things:

1) An original bit of research on the attributes of effective CPM systems (EPM in Oracle vernacular) and

2) How/if those criteria support Howard Dresner’s Performance Culture Maturity Model. This model tracks 6 critical measurement criteria through four levels of maturity therefore highlighting the status of any company in fostering a performance directed culture. 

The article starts off listing strategic and operational benefits that can result from having an effective EPM system, and then goes on to investigate how significant Dresner’s six criteria of a performance directed culture are to the organizations in the survey that had achieved significant strategic and operational benefits – with a view of the level of maturity organizations reached with respect to these criteria. In the end, we can see which factors impact the achievement of benefits from an EPM system.

Dresner’s six criteria from his Maturity Model are:

1) Alignment with Mission

2) Transparency and Accountability

3) Action on Insights

4) Conflict Resolution

5) Common Trust in Data

6) Availability and Currency of Information


Through a series of graphs and tables presented and an analysis performed, it was determined that three of the six criteria are very significant to achieving benefits from an EPM system, while the  other three (although still important) are less significant to the sample of organizations involved in the study. The three very significant criteria are:

a) Alignment of an organization with its mission and vision

b) The presence of transparency and accountability

c) The ability of an organization to resolve conflict effectively

An interesting detail noted in this article was that in general, organizations are doing a poor job of achieving organizational maturity in the three areas that were found to have the most significant impact on achieving benefits!  The four levels of maturity modeled were Level 1: Chaos Reigns, Level 2: Departmental Optimization, Level 3: Performance Directed Culture Emerging, Level 4 Performance-Directed Culture Realized.

Another interesting detail was that the ONE criteria that organizations have really improved upon over the years and have reached a higher degree of maturity on – was one that was considered to have less impact on achieving significant benefits (Availability and Currency of Information).

The big message here is although it is important to have good EPM information in a timely fashion upon which to base sound business decisions, corporate culture has an even bigger impact on being able to achieve significant EPM benefits.

Click here to access the article.

Friday Feb 01, 2013

Not Your Father’s Scorecard

If you are new to the world of Business Scorecards – Welcome! If you have been at it for a while, it might be time to have another look at what your scorecard is doing for you.

Jacques Vigeant, Product Strategy Director for Oracle Business Intelligence and Enterprise Performance Management, was interviewed in a podcast by Nigel Youell, Director of Product Marketing for Oracle Performance Management Applications, and had a very interesting discussion about the business value that scorecards add to dashboards. To listen to the podcast click here.

To summarize, Jacques explained that dashboards are really about monitoring organizational metrics, usually including data that has been rolled up by dimensions relative to the business. Typically they are single page dials and graphs that give you information about trends and data in a point in time. Very useful for keeping track of what has happened. Whereas scorecards can provide a huge amount of business value by supplying additional information about how those metrics are related to the business strategy, which metrics are particularly important, what impact a particular metric has on the strategy, and who is accountable for the metric. This additional information enables employees to better evaluate their own impact on strategy and effect real change based on the metrics and initiatives they can influence.

According to Jacques, not all metrics are created equal. Some have a much bigger impact on strategic outcomes than others. For example, the number of units sold is a good metric to watch, but the profit on those units sold is MORE important. Importance can be seen through weightings placed on metrics relative to the strategy, and through maps showing how each of the metrics are related – cause and effect style.

The BIG news however is how scorecard functionality is changing, and Oracle is investing here.   Oracle Scorecard and Strategy Management, or OSSM, has taken better decision making very seriously. Oracle has introduced the concept of ‘actions’ and invoking those actions based on who is viewing the scorecard (position in the organization) and which metric they are viewing. If a value has gone wrong (or very right) a list of suggestions – based on the individual viewing the metric – can be presented to the user. In some cases, it is appropriate to automatically invoke a business process, trigger a workflow or initiate a job requisition based on a metric result value. In other words, intelligence can be built in to assist employees to make better business decisions every day. In addition, employees can support each other even more in making better business decisions through written collaboration and annotations on metrics and initiatives and what is happening to improve them.

Finally, reporting has changed to improve understanding of how each metric contributes to the organizational strategy.  Strategy maps show relationships between objectives, but can also show relationships to specific metrics. The ‘contribution wheel’, a patented graphic that Jacques himself designed, beautifully depicts how each metric and initiative contributes to the overall strategy in one graphic.   





So as you can see, Oracle Scorecard and Strategy Management is not your father’s scorecard. It has moved on to enabling managers and business leaders to see the impact of initiatives and metrics on the organizational strategy and, more importantly, helping to modify the behavior of employees to make better business decisions every day. At the end of the day, Oracle Scorecard and Strategy management can help provide enough business context so that everyone can make better business decisions every day. When this happens, achieving organizational goals and strategy is possible!


To listen to the Podcast, click here.

Thursday Jan 31, 2013

Profitability – the Proof is Deep Inside the Pudding

Recently, Oracle published a very interesting podcast on how the ability to view and analyze detailed costing is enabling us to better see the impact of costing on organizational success. To listen to the podcast, click here.

Bart Stoehr, Senior Product Management Director for Oracle Hyperion Profitability and Cost Management (HPCM), was interviewed by Nigel Youell, Director of Product Marketing for Oracle Performance Management Applications. Here I will summarize some of the key points. 

Bart started off by explaining why detailed costing is more important now than it has been in the past. More and more organizations have the need to understand costing and/or profitability on a granular level due to extreme competition, or due to inflexible regulation by governing bodies. For example:

- Financial institutions such as banks have to compete on a daily basis to keep a customer. For this reason they need to understand cost and profitability by customer for each of the products and services they consume: checking accounts, savings accounts, mortgages, loans, etc.

- Healthcare providers need to better understand the cost for each patient by the treatments they receive (DRGs) and types of services they consume.

- Transportation organizations (e.g., airlines, trains, etc.) have to understand costs by route, segment, seating class, etc. Without this crucial information, companies in these types of industries might not survive. Competition and regulation prevent them from jacking up price, so they instead must understand costs, how they are consumed, and therefore which products, services and customers are profitable and which are not. The ultimate business goal of detailed costing is to be able to manage the profit creating and profit destroying customers and parts of your business.

Applications like Oracle Hyperion Profitability and Cost Management enable our customers to analyze their customers, patients and subscribers (often counted in the millions) and to differentiate themselves through their sales, service and marketing functions.   These tools help managers find the “proof in the pudding” , and figure out what and who work(s) well and what and who does not.

When asked how most organizations currently perform this type of detailed analysis, Bart explained that most companies don’t attempt to do it because it is SUCH a daunting task despite the unprecedented insight into profit creation and profit destruction. Bart went on to explain that Oracle Hyperion Profitability and Cost Management has introduced detailed costing (available to the business user) to enable analysis and reporting at granular level, and to potentially enable 100’s of millions of allocations in a reasonable timeframe.

The podcast closed with the following thought – given the economic climate of today, is it enough to understand the average unit costs for an average customer, patient or subscriber? To stay competitive, or to convince a governing body that a service rate is unfair or unrealistic – you need to understand highly financially accurate and detailed records reflective of specific consumption. In other words, what each customer, patient or subscriber is REALLY costing you.

To replay this podcast, click here.

Thursday Jul 19, 2012

Progress Towards Integrated Financial and Sustainability Reporting

A few weeks ago in June 2012, thousands of diplomats, world leaders, executives of corporations, institutional investors as well as social and environmental activists gathered in Rio de Janeiro for the U.N. Conference on Sustainable Development, a.k.a. Rio +20 Earth Summit.  Among the agenda items discussed was corporate sustainability disclosures - and although a global agreement was not reached on this topic, there was some progress made here. 


While over 2000 organizations already have registered sustainability reports with the Global Reporting Initiative (GRI), and more than 3000 organizations have submitted their environmental information to the Carbon Disclosure Project (CDP), investors are pushing for more consistency and global standards in environmental and sustainability reporting and standards are being defined for integrating sustainability reporting with financial reporting. 


Towards this goal, the Nasdaq OMX Group Inc. joined stock exchanges in Sao Paulo, Johannesburg, Istanbul and Cairo in an effort to require listed companies to report material information about environmental, social and governance risks.  


Also at the conference, UK deputy prime minister Nick Clegg revealed a government mandate that will force companies listed on the London Stock Exchange’s main market to publish the full details of their greenhouse gas emissions.  What this means is that all LSE-listed businesses will have to report total greenhouse gas emissions for the year beginning April 2013. The regulations will be reviewed in 2015, before ministers decide whether to extend the approach to all large companies starting in 2016.


By encouraging companies to take social and environment dimensions into consideration, and by helping investors to make socially responsible decisions, the exchanges are hoping to enhance transparency of information in capital markets and help create more aware investors.


These exchanges agreed to urge their more than 4,600 listed companies to measure and report on environmental and governance issues such as greenhouse gas emissions, water usage and gender equality, or explain why they won’t. They are also asking more exchanges to join the effort.


So again, while a global standard was not agreed upon at the conference, some progress was made in getting additional stock exchanges to require or encourage listed companies to provide more disclosures to investors and other stakeholders about the environmental and social impacts of their organizations, in addition to their financial results.  These initiatives are positive steps towards the adoption of “integrated reporting”, or the alignment of sustainability reporting with financial reporting which I covered in a prior article on this blog.  See link here:


https://blogs.oracle.com/epm/entry/integrating_sustainability_reporting_with_financial


For more information about the Rio 20+ Earth Summit and announcements made there, see the links below:


http://www.environmentalleader.com/2012/06/20/firms-on-london-stock-exchange-will-be-forced-to-report-co2-data/


http://www.businessweek.com/news/2012-06-19/nasdaq-joins-four-exchanges-in-sustainability-effort


http://www.forbes.com/sites/mindylubber/2012/06/19/a-tipping-point-on-sustainability-disclosure-in-rio/


For more information about Oracle’s solutions for environmental and sustainability reporting, check out the following resources:


Press Release - http://www.oracle.com/us/corporate/press/513393


Sustainability Reporting page on O.com – http://www.oracle.com/us/products/applications/green/risk-performance-management-304575.html#sustainabilityreporting


Feel free to contact me if you have any questions or need additional information:  john.orourke@oracle.com

Friday Jul 13, 2012

Account Reconcilations - Making this Less of a Headache

The finance department in most organizations is coming under increasing pressure to transform and streamline the financial close and reporting function while continuing to maintain the integrity of the financial statements and close process. A key part of this close process includes the completion of detailed account reconciliations, which can be a major bottleneck and headache in the close process. The necessity for understanding and certifying an account balance and its transactions is prompted by regulatory and audit control requirements. In addition to the statutory pressure for account reconciliations, the current economic situation makes it imperative for Finance executives to understand the details and transactions behind every account. They need to be able to easily identify fraudulent, improper and excessively aged transactions. In most organizations, the account reconciliation process is a very time consuming and manual process. A robust and integrated account reconciliation software application   will allow Finance to more effectively manage their business.


Account Reconciliations Can Extend the Financial Close and Introduce Risk


Medium to large organizations often have the need to perform thousands of account reconciliations during the quarter-end or month-end close.  Examples of the typical reconciliations include tying general ledger balances to sub-ledger balances, general ledger balances to bank account balances, general ledger balances to data warehouse balances, and consolidation application account balances to general ledger account balances.  Most organizations also maintain reconciliations of general ledger balance sheet accounts such as prepaid expenses or accrued liabilities.


This tedious process is typically performed in Microsoft Excel, where Finance staff manually tie out the list of items in a spreadsheet to those in the general ledger and other systems.  Managers usually send emails or make phone calls to track progress and follow up on delinquencies.  Due to the challenges in tracking account reconciliations, companies typically prepare and review most reconciliations on the same schedule and are often not factoring in risk when determining frequency and due dates.  Common failure points include:


- Missing or lost reconciliations


- Unreconciled accounts


- Improper use of roll-forwards


- Reconciliation of the wrong balance (balance changed after certification)


- Insufficient justification or documentation


When these failures occur, audit findings can result in a significant deficiency or a material weakness in internal control, and costs can reach the hundreds of thousands, or even millions of dollars.


Integrated Account Reconciliation Management Applications Meet the Challenge


Leading edge Finance organizations are now looking to eliminate spreadsheets and manual processes used to support account reconciliations, and adopt packaged software applications designed to automate and streamline the process.  But it’s not enough to have a packaged software application to support account reconciliations, this application should also be integrated with financial close workflow, and the various systems in which account balances and transaction detail reside, such as financial consolidation applications and specific general ledgers.  Key features in account reconciliation software packages include:


- Currency translation


- Audit controls for all activities


- Reporting and Monitoring


- Pushback of reconciliation adjustments to source systems


- Rule based thresholds for automatic certification and risk assessments


- Workflow support for reconciliation process


- Tasks and task assignments


The key benefits of integrated and packaged account reconciliation software packages include efficiency gains as well as reduction in risk to Finance organizations.  Efficiency gains can be measured by the value in labor savings achieved by making the administration, preparation, and review of account reconciliations more efficient.  Reduction in risk can be measured by the avoidance of costs associated with a failure in internal controls around account reconciliations.  If material weaknesses are found and announced in external audits, the consequences can be costly.  Companies incur expenses for additional legal and audit fees and there can be an impact on the stock price for publicly-held entities.


In summary, with increasing pressure to reduce close times and improve the integrity of financial reporting, Finance departments need to eliminate spreadsheets and manual processes and adopt technologies that can help automate and streamline the financial close process and eliminate the chances for errors, omissions and fraud.  Integrated and packaged account reconciliation software applications can help alleviate a major bottleneck in the financial close process, increase accuracy and reduce risk, and can complement existing investments in financial consolidation, financial reporting, financial close workflow and transaction processing systems.


Here’s a link where you can find information about how the new Account Reconciliation Manager feature in Oracle Hyperion Financial Close Management can help make account reconciliations less of a headache:


http://www.oracle.com/us/solutions/ent-performance-bi/financial-close-065894.html


Also, here’s a link to a recent webcast replay on this topic:


https://oraclemeetings.webex.com/ec0605lc/eventcenter/recording/recordAction.do;jsessionid=gLMyQNcpqmQSGGf8h2YNZYT2gcwpdQNyTjvlxMj2hP0rXFJSSDTz!-866538466?theAction=poprecord&actname=%2Feventcenter%2Fframe%2Fg.do&actappname=ec0605lc&renewticket=0&renewticket=0&apiname=lsr.php&entappname=url0107lc&needFilter=false&&isurlact=true&rID=69582487&entactname=%2FnbrRecordingURL.do&rKey=168b45687e963894&recordID=69582487&siteurl=oraclemeetings&rnd=0489765029&SP=EC&AT=pb&format=short


Please contact me if you have any questions or need more information:  john.orourke@oracle.com

Tuesday May 29, 2012

What's Going on With IFRS?

There hasn’t been much news lately about the adoption of IFRS in the United States, and I have received some questions from customers and partners on this topic.  So here’s a quick update.


Most of the world has moved to International Financial Reporting Standards (IFRS) with the last holdouts being Japan, India and the United States.  Japan has started the transition process and should be complete by 2015 and India will be in transition through 2018.  The Financial Accounting Standards Board (FASB) has been discussing and working with the International Accounting Standards Board (IASB) on the convergence of US GAAP and IFRS for many years.   The reality is that the United States Securities and Exchange Commission (SEC) is not going to force a switch entirely over to IFRS, but is proposing a slow convergence of US GAAP with IFRS principles over time.  In fact the latest word being used to describe this process is “condorsement”, as per a proposal issued by the SEC in May 2011. 


There are a number of convergence projects now being worked on between the two standards committees, but the four that are in focus currently relate to Financial Instruments, Revenue Recognition, Financial Statements and Leases.  Exposure drafts on these topics were released for public comment back in 2010 and SEC board reviews occurred in 2011.  The expected timeline for adoption of the revised US GAAP rules in these areas is highlighted below.


Revenue:  Exposure draft closed, comment period over, the boards are mulling the exact wording.   This is expected to be finalized in late 2012.  Effective date unknown – but not likely until 2015, with retroactive reporting back to 2013.


Leasing:  Principles established, exposure draft still being finalized.  Anything that meets the definition of a lease will be on the balance sheet as a right to use asset and a lease liability.  P&L expense will distinguish the interest element from the usage element.  Some issues still to be resolved.  This is expected to be finalized in 2013.


Financial Statement Reporting: Postponed indefinitely.


Financial Instruments:  Progress, dialogue this year between FASB & IASB.  Basel III, Dodd-Frank, JPMorgan Chase, Greek exposure all factors in getting this one done.  No final dates at this point.


The SEC has not made their announcement, but everyone is pretty certain that what they will do is ask the FASB to expose the IFRS statements, other than the 4 convergence ones listed above, as ASUs (Accounting Standards Updates) to US GAAP: that is, FASB will adopt IFRS, not companies.    Companies will then adopt the IFRS statements as US GAAP Updates as FASB rolls them out, but absolutely no details are available on that program currently.


Oracle has staff carefully tracking these developments and provides features and capabilities in our financial management applications designed to help customers migrate smoothly from their local GAAPs to IFRS.  For news and updates on US GAAP/IFRS convergence projects, please consult the following resources:


US SEC:  http://www.sec.gov/


FASB:  http://www.fasb.org/home


IASB:  http://www.ifrs.org/Home.htm


For information about how Oracle’s financial management solutions can help with the transition to IFRS:


http://www.oracle.com/us/solutions/corporate-governance/ifrs/061806.html


Please contact me if you have any questions or need more information:  john.orourke@oracle.com

Wednesday Mar 28, 2012

XBRL - Moving from Production to Consumption


Here's an update on what’s new with XBRL and how it can actually benefit your organization versus adding extra time and costs to financial reporting.  On February 29th (leap day) of 2012 I attended the XBRL and Financial Analysis Technology Conference at Baruch College in NYC.  The event, which attracted over 300 XBRL gurus and fans was presented by XBRL US, The New York Society of Security Analysts’ Improved Corporate Reporting Committee, and Baruch College’s Robert Zicklin Center for Corporate Integrity.  The event featured keynotes from the U.S. Securities and Exchange Commission (SEC), and the CFA Institute as well as panels covering alternative research tools and data, corporate reporting to stakeholders and a demonstration of XBRL analysis tools.  The program culminated in a presentation of the finalists and the winner of the $20,000 XBRL Challenge.   


Some of the key points made in the sessions included:


The focus of XBRL tools is moving from production to consumption.


As of February 2012, over 9000 companies are reporting in XBRL, with over 10 million facts filed to date


XBRL taxonomy extensions have dropped from 27% to 11% making comparisons easier


The SEC reports that XBRL makes it easier to analyze disclosures, focus on accounting issues


XBRL is helping standards-setters like the FASB speed their analysis of impacts of proposed accounting rule changes


Companies like Thomson Reuters report that XBRL is helping speed the delivery of data to clients


The most interesting part of the program though, was the session highlighting the 5 finalists in the XBRL Challenge competition and the winning solution.  The XBRL Challenge was launched in 2011 as a means of spurring the development of more end-user tools to help with the consumption of XBRL-based financial information.       Over an 8-month process handled by 5 judges, there were 84 registrants, 15 completed submissions, 5 finalists and one winner of the challenge.  All of the solutions are open-sourced tools and most of them focus on consuming XBRL-based data.  The 5 finalists included:


Advanced XBRL Processing from Oxide solutions – XBRL viewer for taxonomies, filings and company data with peer comparison capabilities.


Arrelle – API for XBRL processes, supports SEC Validations, RSS Feeds to access filings etc.


Calcbench – XBRL data analysis tool that can be embedded in other web applications.  This tool can combine XBRL filings with real-time market data.


XBRL to XL – allows the importing of XBRL data into Microsoft Excel for analysis, comparisons.  Users start on the web and populate Excel with XBRL data.


XBurble – allows users to search and view XBRL filings, export to Excel, merge for comparison, and includes a workflow interface.


The winner of the $20,000 XBRL Challenge prize was CalcBench.  More information about the XBRL Challenge and the finalists can be found at www.XBRLUS.org/challenge


XBRL for Sustainability Reporting – other recent news on the XBRL front was the announcement by the Global Reporting Initiative (GRI) of an XBRL taxonomy for Sustainability Reporting.  This taxonomy was co-developed by the GRI and Deloitte and is designed to make the consumption of data found in Sustainability Reports much easier.  Although there is no government mandate to file Sustainability Reports in XBRL format, organizations that do use the GRI guidelines for Sustainability Reporting are encouraged to tag and submit their data voluntarily to the GRI – who will populate a database with Sustainability Reporting data and make this available to the public.  For more information about this initiative, you can go to the GRI web site:  www.globalreporting.org.


So how does all of this benefit corporate filers and investors?  Since its introduction, the consensus in the market is that XBRL has mainly benefited the regulators and investment analysts who need to consume and analyze large volumes of financial data.  But with the emergence of more end-user tools for consuming and analyzing XBRL-based data, and the ability to perform quick comparisons of one company versus its peers and competitors in an industry group, will soon accelerate the benefits to corporate finance staff, as well as individual investors.  This could apply to financial results tagged in XBRL, as well as non-financial information such as Sustainability Reporting – which over the long-term will likely be integrated with financial reporting.   And as multiple regulators and agencies in a country adopt the XBRL standard for corporate filings, more benefits will accrue as companies will be able to leverage one set of XBRL-based financial data for multiple regulatory filings.    


For more information about the latest developments in XBRL, check out the XBRL US or XBRL International web sites:  www.xbrl.org, www.xbrlus.org.


For more information about what Oracle is doing to support XBRL, here are some links:


http://www.oracle.com/us/solutions/ent-performance-bi/disclosure-management-065892.html


http://www.oracle.com/technetwork/database/features/xmldb/index-087631.html


Feel free to contact me if you have any questions or need more information:  john.orourke@oracle.com

Wednesday Mar 21, 2012

What's New in Business Analytics at Oracle?

Business Analytics, which includes Business intelligence and Enterprise Performance Management, are top priorities for IT and Finance executives in 2012.  Some of the hot market trends and topics include managing big data, mobile information access, in-memory computing, advanced analytics, predictive modeling, leveraging unstructured data, as well as risk and performance management. 


Find out what Oracle is doing about all of this, and what’s new from the market leader in Business Analytics by attending our live webcast event on April 4th titled “Introducing Oracle’s Business Analytics Strategy”.  At this event, you’ll hear about Oracle’s strategy for Business Analytics from Mark Hurd, Oracle President and you can learn about the latest advancements in Oracle’s Business Analytics solutions from Balaji Yelamanchili, SVP of Analytics and Performance Management.


The keynote session from Mark and Balaji will be followed by breakout sessions that provide a more in-depth look at what’s new in specific product areas including the latest release of Oracle’s Hyperion Enterprise Performance Management suite, Oracle Business Intelligence Applications and Exalytics In-Memory Machine, Oracle Endeca Information Discovery, Big Data and Advanced Analytics solutions.


This event will provide a great opportunity to hear about what’s new in Business Analytics at Oracle, and for attendees to pose questions to Oracle experts during live chat sessions.  Here’s a link to the registration page, and more details about the April 4th event.  We hope to see you (virtually) there!


http://www.oracle.com/us/corporate/events/business-analytics/index.html


Also, use the following hashtag to follow along on Twitter and share comments during the webcast and Q&A sessions:  #oracleanalytics

Friday Mar 02, 2012

Key Findings from Latin American CFO Summit

I recently had the pleasure of speaking and attending a Latin America CFO Summit in Puerto Vallarta, Mexico, sponsored by Oracle and Deloitte.  The event drew over 50 CFOs from mainly Mexico, Columbia and Ecuador for a day and a half of presentations, workshops and networking.  Here is a summary of some of the key points and findings that were discussed at the event.


Keynote speaker: Alfonso Stransky Paniuahua, Partner, Mexican Institute of Finance Executives.  In his keynote, Mr. Stransky revealed new research from the 1600-member IMEF on the “Evolving Role of the CFO in the 21st Century”, and the CFO’s increasingly important partnership with management and the business to drive value and mitigate risk.  He highlighted the CFO's increasing role in talent management and development, focusing on intangible assets, and encouraging innovation.  He also discussed the new global economy and the need for CFOs to take a bigger role in strategic planning, driving efficiency, and re-engineering business processes, and encouraged CFOs to embrace change, adapt to the new rules of business and be prepared for increase risks.  His discussion of risk management included information risk as well as social risk and responsibility.  In summary, his research revealed an increasing focus on the CFO as a strategic business partner, key driver of both performance and risk management, with an increasing emphasis on creating long-term business value vs. short-term profitability.


Francisco Silva, Partner at Deloitte Latin America followed with a session focused on “current opportunities and challenges facing Latin American CFOs.  In this session, Mr. Silva highlighted the results of a recent benchmark study of LAD CFOs, and their recent CFO Signals survey on the transformation of Finance.  Some of the key finding from the benchmark study included the following:


-  Costs of Finance in LAD are generally 25% lower than for US companies at 1.10% of revenue.  LAD companies spend less on Finance Staff and IT, but they spend more time and resources on transaction processing and less on performance management and analytics than their counterparts globally.


-  LAD companies tend to make less use of technology, and apply more Finance staff – this was identified as an opportunity for productivity improvement via better use of technology.


-  LAD companies have a high degree of complexity in Finance – too many controls and costs of compliance, they need to strike the right balance of controls.


-  With regards to compensation, Brazil has the highest Finance salaries, much higher than the LAD average and very close to the US.  Chile has the lowest Finance salaries.


-  With regards to FTEs in Finance, Mexico and Argentina have the highest, albeit with some of the lowest costs of Finance staff.    


-  In general, it was found that the larger companies had the lowest cost of Finance as a percent of revenue, but LAD in general has a lower cost of Finance across all sizes of companies vs. the US.


-  One interesting point is that multi-national companies operating in LAD have higher Finance costs than local companies, but with fewer FTEs.  This trend reflects the higher salaries of LAD staff of multinational companies, but better use of technology and fewer FTEs. 


Mr. Silva also highlighted some of the key findings of Deloitte’s recent CFO Signals Survey.  Some of the key points include:


-  The role of Finance in driving strategy is growing in response to economic uncertainty, creating new demands on the broader finance organization.  This is causing significant growing pains, as many CFOs already operate lean organizations.


-  CFOs see the recession continuing, but most are focused on growth. Even as companies eye longer-term growth, they are focused on protecting near-term profitability.


-  Continuing global economic malaise appears to be causing rising uncertainty around global market demand and heightened competition for revenue. Pricing trends are a top concern for 52% of companies (up from 40% last quarter) and new competitive tactics are on the rise.


-  Over a third of North American CFOs surveyed cited economic uncertainty in Europe as the biggest potential risk they face - this despite European CFOs being among the most optimistic of the regions surveyed by Deloitte.


-  Despite focusing on growth and investment, CFOs in North America don’t expect hiring to pick up.


Marie Hollein, President and CEO of Financial Executives International (FEI) discussed “The Growing Influence of CFOs Over Technology’ and the finding of the 2011 survey on the use of Finance technology.  Some of the key findings included:


-  42% of CIOs report to the CFO, and this will likely increase.


-  Performance Management/BI/Analytics is the #1 priority for technology investments followed by Enterprise Business Applications.  This trend will continue in 2012.


-  Licensed software will continue to be the primary delivery platform, with 76% of respondents running their applications in-house.  But Cloud-based adoption is increasing with 10% embracing SaaS and 12% running with ASP models. 


-  ERP consolidation is a preference, with 64% of organizations favoring a single instance ERP. 


-  54% of companies are making improvements in BI now or are targeting BI investments over the next year. 


-  Planning/Budgeting/Forecasting is the #1 focus for BI/PM investments, followed by Performance Scorecards/Dashboard applications.  


-  The market for XBRL financial statement generation products is growing with 30% looking for in-house solutions and 24% of respondents outsourcing XBRL tagging to 3rd party publishers. 


-  Only 16% of respondent companies are planning or evaluating the impact of IFRS (this was not surprising since the survey base was mostly US companies)


There were also sessions at the event delivered by Oracle executives on key market trends and the investments Oracle is making to help CFOs address today’s challenges, as well as some customer case studies.    Key takeaways include:


-  The role and influence of the CFO continues to evolve and expand beyond Finance into corporate strategy, talent management, IT management all with a focus on optimizing performance while managing risk


-  While costs of Finance in Latin American companies is generally lower than in the rest of the world, CFOs in this region can improve productivity by better leveraging technology and shifting the focus of Finance staff from transaction processing to value-added analysis.


-  Performance Management and Analytics are key priorities for CFOs globally, and can help organizations plan and forecast more accurately through market volatility, while improving the timeliness and quality of information they deliver both internally and externally.


To get access to some of the content presented at the Oracle LAD CFO Summit, please visit Oracle’s CFO Central web site at http://www.oraclecfo.com/Main/Events/Events_w.html?step=3

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This blog will highlight key EPM market trends, recent events and other news of interest to our field, customers and partners.

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