Download - Enterprise Performance Management
I N D U S T R Y O U T L O O K 2 0 1 3 : E N T E R P R I S E P E R F O R M A N C E M A N A G E M E N T
2 APRIL 2013
Business today is moving at light speed. At the same time, organizations are
governed by stricter regulations requiring more stringent compliance. This
creates a demand for more informed decision-making and faster turnaround
times in an environment of greatly increased risk.
For that reason, Chief Financial Officers these days are expected to take on more than
their traditional share of responsibility and accountability in the corporate hierarchy. Over
and above their traditional roles in finance and transaction processing, CFOs are now being
looked to as enterprise change agents and advisors to top management.
To aid in these added responsibilities, CFOs need standardized, enterprisewide data to
make more accurate and faster decisions. Technology — the right kind of technology — can
help. The spreadsheet, the traditional tool still widely used in offices of finance the world
over, is clearly narrow in focus and severely limited in functionality. ERP systems are effec-
tive but, in terms of data consolidation, unwieldy and incomplete.
This puts a spotlight on Enterprise Performance Management (EPM) applications and
processes. EPM offers the promise of effective information management, performance
measurement and business optimization. CFOs can leverage EPM to standardize and opti-
mize their organizations from the inside out, and at the same time help differentiate their
organizations from their competitors.
CFOs are the ones who need to drive the adoption of EPM processes and technology. And
many are beginning to realize that. In a survey last year, research firm Gartner found that
nearly two-thirds of CFOs were planning upgrades to their business intelligence, analytics
and performance management technologies.1
PRESSURE ZONES
CFOs are under increasing pressure in specific financial areas. One of the many critical
ones is the financial close. Due to the global, round-the-clock nature of business today,
there is an increasing demand for shorter, error-free close periods. In fact, “The Data
Directive,” Economist Intelligence Unit survey, 2013, commissioned by Wipro Technolo-
gies, found that improvement in financial close management was rated among the top
two process areas for which CFOs say data creates a clear positive difference.2
Again, in a recent survey of CFOs regarding the financial close process, Ventana
Research, a research and advisory firm, found that completing the accounting cycle
quickly and accurately is a good measure of efficiency — and more. “Companies that
Chief financial officers must address a growing list of modern business imperatives, and EPM can help.
1. Top 10 Findings From Gartner’s Financial Executives International CFO Technology Study,” John E. Van Decker, Gartner, May 16, 2012. http://www.gartner.com/id=2018115
2 “The Data Directive: How data is driving corporate strategy — and what still lies ahead.” Economist intelligence unit survey, 2013, commissioned by Wipro
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take six days or fewer after the end of the period to close their monthly, quarterly or
semiannual accounts demonstrate a basic level of effectiveness that those that take
longer do not,” according to Robert Kugel, senior VP of research for Ventana Research.
Unfortunately, that kind of financial performance is starting to lag. According to Kugel,
“companies in general take longer to close today than they did five years ago.”3
Another critical area for CFOs is statutory reporting. Due to burgeoning regulatory and
compliance requirements, there are far greater demands for organizational transpar-
ency. Those demands — as well as the difficulty in addressing them — increase in scope
depending on the size of the organization, its business model and its global footprint.
However, such transparency can be facilitated through standardized compliance report-
ing methods deployed throughout an organization.
A third area of increasing importance is the planning, budgeting and forecasting
process. Due to the dynamic nature of business, and the need for agile business models,
there are greater demands for flexible budgeting and planning capabilities, incorporat-
ing both short-term and long-term driver-based financial planning. Such pinpointed yet
flexible budgeting requires tightly integrated financial and operational planning models.
EPM technology and processes are designed to address each of these areas of impor-
tance. Organizations that have older or under-performing EPM systems will benefit
from modernizing and optimizing that technology and those processes to target today’s
emerging challenges.
BEYOND THE SPREADSHEET
Most CFOs realize they need more than spreadsheets to handle today’s multifaceted
business requirements. Yet, there is still a great deal of inertia in connection with
upgrading technology and its inherent potential for disruption.
“An over-reliance on Excel is an obvious problem that a lot of companies create for
themselves,” says Tanoop Gupta, General Manager and Global Head, Enterprise Per-
formance Management for Wipro Technologies. That’s because moving beyond the
spreadsheet may involve upsetting traditional, deeply ingrained, dyed-in-the-wool
financial processes. “Overcoming that over-reliance requires a decision that will affect
not only how they use technology, but also some of the processes that are part of their
planning, budgeting and forecasting.”
The advantages offered by EPM applications and processes offset the potential for
business disruption. At the same time, that disruption itself may be one of the biggest
advantages of EPM.
For instance, EPM can help CFOs in their efforts toward faster and more efficient
financial closures through standardized financial data and data management processes
within organizations, including their subsidiaries. Integration with ERP systems helps
with access to financial and nonfinancial data, including details of transactions, and
Improvement in financial close management was rated among the top two process areas for which CFOs say data creates a clear positive difference.
— “The Data Directive,” Economist Intelligence Unit survey, 2013, commissioned by Wipro Technologies
3. “The Financial Close Measures CFO Effectiveness,” Ventana Research, July 2012. http://robertkugel.ventanaresearch.com/2012/07/02/the-financial-close-measures-cfo-effectiveness/
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end-user-oriented workflow technology helps facilitate efficient data delivery.
Implementing EPM not only aids in collecting and consolidating standardized data,
but also helps organizations improve the way they go about their consolidations. “A
typical EPM engagement in financial consolidation will address the business processes
in addition to the technical implementation,” says Wipro’s Gupta. “It also brings up
opportunities for improving these business processes, not just of optimizing them in
their current setting, and that makes it a far more efficient financial close.”
EPM can help CFOs in the area of statutory reporting, by providing a sophisticated
level of governance, visibility and transparency into the financial close and reporting
cycle, enabling CFOs to be confident in the numbers they report to stakeholders. EPM
technology supports and incorporates reporting standards such as IFRS and XBRL.
By identifying the correct metrics to enable driver-based planning models, EPM helps with
establishing effective and efficient planning, budgeting and forecasting activities. EPM also
provides much-needed audit trails — a feature greatly appreciated by finance executives.
Indeed, EPM allows CFOs to approach planning proactively. “Any planning,” says Prem
Swarup, General Manager and Global Head, Business Intelligence for Wipro Technologies.
“It could be as simple as travel and expenses, or it could be their revenue plan, sales
plan, or workforce plan,” he says. “All of that requires certain budgeting, certain plan-
ning, and some kind of a forecasting, which can be automated with technology tools.”
THE MULTINATIONAL CHALLENGE
A steady stream of mergers and acquisitions shape — and reshape — the outlines of the
modern business environment. And that process shows no signs of abating. Experts say
to look for cash-rich American companies to boost M&A activities this year.4
A merger or acquisition presents an immediate challenge in terms of financial recon-
ciliation. There is a certain time period provided by statutory agencies within which the
merged entity needs to submit its regulatory reporting. Two sets of regulatory reports
have to be consolidated and a single, reconciled statutory report needs to be submitted.
But the M&A challenges don’t end there. Financial systems, processes and tools need
to be evaluated, optimized and integrated to facilitate the smooth flow of financial data
from the new entity to the acquiring organization as quickly and effectively as possible.
Those challenges are even more pronounced when it comes to multinational corpo-
rations. Consolidations across different countries are arduous. Budgeting in multiple
currencies and then translating that data into a single currency for planning and analysis
purposes can be time-intensive. And when it comes to statutory requirements, to be
in compliance with foreign regulations regarding, for example, currency translations,
is a daunting process that if not handled correctly can result in a worst-case scenario
of having to restate financial results. Foreign tax laws are emerging as an area that will
require strict oversight and considerable effort.
4.“PwC Says Fundamentals Are Strong for U.S. Mergers and Acquisitions Activity in 2013,” PwC, December 2012. http://www.pwc.com/us/en/press-releases/2012/pwc-mergers-acquisitions-outlook-in-2013-press-releases.jhtml
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EPM technology and processes address these challenges. The complicated process
of intercompany eliminations is one striking example. “If you take massive corpora-
tions and you view the number of these intercompany transactions, eliminating each
one of those transactions is absolutely vital, otherwise it may result in incorrect num-
bers being submitted to, for example, the SEC,” says Wipro’s Gupta. “And how that is
addressed and how that is handled both from a business process standpoint and from a
technical implementation standpoint is another key benefit EPM offers organizations.”
GREATER RESPONSIBILITIES
CFOs are also moving up the organizational responsibility chain, being looked at to
provide leadership in areas other than those traditionally assigned to the financial func-
tion, such as strategic planning, execution and performance measurement. For instance,
there is an increasing need to identify and execute viable and effective strategic plans to
enhance an organization’s business agility, competitive posture and, ultimately, value.
The financial function is in a position to interpret and institutionalize those mea-
sures and actions. EPM technology and processes can help in that effort by enabling
CFOs to develop realistic strategic plans, measure performance against goals, and
monitor the progress of those actions on a regular basis, and then communicate this
information across their enterprise.
CFOs are also in a strong position to help accomplish two compelling, present-day
business imperatives: maximize profitability and enhance cost management. EPM
can help CFOs understand cost and profitability beyond the usual lines of business,
such as product lines, service areas and customer segments.
SUMMARY
Financial processes are driven by data, and the quality of that data is of the utmost
importance, especially as it relates to the changing role of the finance function in
most organizations.
EPM technology and processes, in conjunction with business intelligence efforts,
can help CFOs maintain a high level of quality regarding their financial data by
pointing out where that quality level falls short. According to Wipro’s Gupta, “When
it comes to the data side, where BI gets involved, it is a rare EPM engagement that
does not reveal underlying data issues.”
Business intelligence, analytics and information management technologies are
becoming more and more of a priority for today’s CFOs because they address many
of the areas where financial operations are most vulnerable, and the areas where
CFOs increasingly need to focus to help advance their organizations. Savvy CFOs
need to champion initiatives to transform their finance functions and enhance their
organizations by aligning spending and organizational priorities through the use of
these powerful technologies and processes.
“An over-reliance on Excel is an obvious problem that a lot of companies create for themselves.”
—Tanoop Gupta, General Manager and Global Head, Enterprise Performance Management, Wipro Technologies
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