Financial institutions profits depend heavily on how well they understand their results and the reasons for them. This understanding determines their ability to manage and steer the business, and to further decrease costs and increase profitability. However, it often is challenging for users who are monitoring results to be sure that they are using the best approach and the right technology to make far-reaching decisions.
What is needed are solutions that help the finance function to better assess the current situation along the finance value chain – from financial monitoring to reconciliation. The software tools used should provide the ability to deep-dive into the underlying information, and then suggest suitable actions that the user can pursue.
To address current challenges of the finance functions, Capgemini offers Focus Topics which deliver solutions using the latest technologies and innovative approaches. The current Finance Focus Topics are:
1. CFO Agenda
The CFO Agenda helps Chief Financial Officers to tackle today´s main challenges in an environment driven by cost pressure and increasing regulations.
- PMI: Supporting clients in defining a Finance Target Operating Model in the context of bank mergers and acquisitions Cost Reduction: Determining the right cost optimization strategy to identify cost saving potential by benchmarking the FTE structure to relevant peers.
- Regulatory: Helping banks to select and implement software solutions targeting the Fundamental Review of the Trading Book (FRTB)
- New technology: Leveraging new technologies to solve current problems of banks in the fields of Finance, Risk and Compliance
2. Smart close & closing innovation
Finance functions face new disruptive challenges and cope with ever more complex data structures and increasing requirements –smart closing prepares them for the future. Capgemini Invent offers an End2End solution over the whole closing process. We have impactful partnerships with different vendors suiting individual customer needs and support with best practices and implementation experience. The End2End tooling targets every individual closing step from subledger close to reporting.
3. Innovative BI & visualization
BI is about providing the right data at the right time to the right people so that they can take the right decisions. Capgemini Invent helps its clients to make informed business decisions. We developed innovative approaches such as individualized reporting solutions in combination with Natural Language Generation (NLG) that provides data visualization and automatized commenting in order to analyze and interpret existing data as well as derive and initiate concrete measures.
4. Automated data reconciliation, analysis & correction
Financial institutions strive for a more efficient and timely finalization of their month end closing while minimizing manual workarounds, risk and cost at the same time. One of the greatest drains on productivity remains mismatched and erroneous data which leads to high efforts in manual handling and data correction. The introduction of automated reconciliation based on AI and RPA enables early detection of front-to-back data breaks and helps financial institutions to further reduce risk and cost associated with manual data correction.
5. IFRS & regulatory reporting change
Regulators will continue to focus on better assessment and control of risks by requiring more granular disclosures. For example, in the context of IFRS 17, Insurers will have to disclose their liabilities resulting from insurance contracts significantly differently .
Capgemini Invent tackles these challenges with disruptive approaches, e.g. impact analysis on existing processes and architectures and design of target states in accounting and regulatory reporting, including the identification of process and data gaps based on best practices and our DQM framework.
6. Digital controlling agenda
Many controlling departments struggle to find their new strategic and operational role within the organization as Business reaches out to dedicated analytics departments when it comes to gaining new insights.
Controlling departments need to redefine their roles as Business partners in a data-driven environment while converging from a service delivery center to an innovation lab. Capgemini Invent can support the definition of a new digital operating model for Controlling including an agile organizational set-up within Finance and new technology concepts, e.g. driver-based planning, with our trusted solution vendor partners.
Use case example: Driver-based planning, budgeting, and forecasting
Universal banks perform their business planning top-down, bottom-up, or based on a combined approach (e.g. planning of revenue, cost and risk/return of credit portfolios). All these common methods are assumption-based to a large degree, which means that the resultant predictions are mostly arbitrary. The methods’ over-simplistic approaches do not match the complexity of the banks’ business.
The usual control methods come with two main weak points:
- They are time-consuming and tie up resources, and hence they increase non-productive work.
- Their outputs are not strongly representative for future developments because predictions are only as good as their underlying assumptions, which are mostly set by looking in the rearview mirror.
But banks now have an alternative way to improve the accuracy and reliability of their planning, budgeting, and forecasting by enriching their planning processes through use of the increasing number of available data sources. To achieve this data-driven approach, the banks must:
- Define key metrics and KPIs.
- Identify key business drivers and map them to the key metrics and KPIs.
- Detail the logic (causality) and quantitative (statistical) impact of drivers on key metrics & KPIs (e.g. correlation of unemployment, GDP, etc., on portfolio volumes).
- Identify required data sources (internal and external).
- Scan and select solutions and technology partners to best interpret what the data is telling the bank.
- Establish minimum viable products (MVPs).
- Refine logic and extend each MVP for additional key metrics and KPIs via an iterative approach.
The main benefits are:
- Increased earnings due to increased business.
- Decreased costs due to shorter budgeting cycles that require less human involvement.
- Decreased risk due to more accurate budgeting.
- Improved steering due to a reality-based, learning estimation model.
The opportunities to link planning metrics to measurable data sources with internal and external impact extend to every aspect of the planning process: from data-driven customer segmentation, through estimating the impact of measurable macro-economic developments, to identifying what the real quantitative drivers of the business are. The end result is to give banks a stronger steering instrument.