Smarter Governance Combining Compliance and Performance Optimisation Levine Naidoo – IBM Business Analytics and Optimisation 17 June 2013

Smarter Governance – a new paradigm 2 Finance & IT continue to face challenges, in the public and private sectors Past approaches to governance are inadequate in both design and implementation Executives get fragmented views of their true business performance, and inefficiencies drive up costs. A new paradigm is required, that –takes a value integrator approach to driving finance transformation –uses standards for financial outperformance –reuses common capabilities across risk, compliance and performance optimisation

The new normal economic environment 3 Source: IMF World Economic Outlook Update, European Commission: economic Sentiment Indicator  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 October 2012 World Economic Outlook (WEO) March 2013: Economic Sentiment in Euro Area New Economic EnvironmentGlobal Financial CrisesMarket Pulse

A CFO study in the midst of severe economic uncertainty 4 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 Provocative Topics Source: IBM Institute for Business Value, The Global CFO Study 2010

CFOs aspiring to evolve their Finance Model to higher capability should address performance gaps with specific action plans 5 Paths to Higher Value Finance Efficiency Business Insight LowHigh Low High Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value with Data Standards, Information Integration and Analytics 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 be taken Source: IBM Institute for Business Value, The Global CFO Study 2010

Those who excel outperform financially and are more effective against their agenda 6 Finance Efficiency and Business Insight Source: IBM Institute for Business Value, The Global CFO Study 2010 Corporate philosophy of information standards Standard Chart of Accounts Standard processes Standard data definitions Driving Integration of information across enterprise Managing Enterprise Risk & Compliance Measuring & Raising Business Performance Finance Efficiency Business Insight LowHigh Low High

The Scorekeeper’s dilemma 7 Warehouses (Relational & OLAP) Transaction SystemsFlat, Legacy or Modern External Sources Why? What should we be doing? How are we doing?

Scorekeeper to Value Integrator 8 Past Analysis Reporting Data Mining Drill Through Root Cause Analysis Present Monitoring Variance Analysis Collaboration Commentary Workflow Guided actions External Data integration Unstructured Data integration Future Statistical Projections Regression, Extrapolation Tolerance, Confidence Forecasting, Planning Decision Support Stress Testing What-if Modeling Hypothesis Testing Scenario Modeling Performance Optimisation Resource Optimisation Change Management Risk Models Balance Sheet Model Prudential Analytics Model Trading Models Treasury Models

Scorekeeper to Value Integrator 9 Past Analysis Reporting Data Mining Drill Through Root Cause Analysis Present Monitoring Variance Analysis Collaboration Commentary Workflow Guided actions External Data integration Unstructured Data integration Future Statistical Projections Regression, Extrapolation Tolerance, Confidence Forecasting, Planning Decision Support Stress Testing What-if Modeling Hypothesis Testing Scenario Modeling Performance Optimisation Resource Optimisation Change Management Risk Models Balance Sheet Model Prudential Analytics Model Trading Models Treasury Models BANK ENTITY Bank Group Directorate Subsidiary Branch Company Parent Company Economic Sector Geography All Contract Maturity Product Type Product Group All CUSTOMER OR OBLIGOR ASSET OR INSTRUMENT e.g. London Branch of Bank for Telecom Customers Risk or Profitability At each intersection, all configured risk or profitability calculations are performed in real-time PRUDENTIAL ANALYTICS MODEL

Common capabilities underpinning compliance and performance 10 Data Provisioning Common Definitions & Standards Internal & External Information Integration Transformation & Business Rules Aggregation, Enrichment & Augmentation Analytics enabled compliance and performance Interactive & Collaborative across Silos Real-time and DynamicPredictive

Business scenarios - optimising decisions & raising performance 11 Operational risk Credit risk Market risk Capital adequacy Liquidity Customer profitability Deliver optimal answers at the point of impact

Value integrator approach across the enterprise 12 External Financial Reporting Business Performance Management Planning, Budgeting, Forecasting Risk and Compliance Management Treasury and Investments Tax Management Financial Statements Approval Financial Statements Preparation Board Reporting Preparation Regulartory Reporting Production Regulatory Enquiries Handling Business Performance Review/Impact Assessment Management Reporting Business Analysis and Modelling Scorecard/ Dashboard Creation Business Case Preparation Budget/Forecast Model Design Budget Policy Monitoring Plan Approval Budget Preparation Forecast Preparation Risk and Compliance Monitoring Controls Monitoring Fraud Management Risk Scoring and Evaluation Risk Reporting Compliance and Controls Reporting Bank Account Reconciliation FX Exposure Management Portfolio Performance Monitoring Cash Forecasting Cash Mgmt Operations Portfolio Management Investment Modelling Equity/Debt Management Capital Acquisition and Securitisation Tax Compliance Monitoring Tax Return Preparation Tax Enquiries Handling Reporting Compliance Monitoring KPI Monitoring

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