Five Strategies That Will Accelerate Financial Transformation Within Multinational Companies In 2018

– Dr. Andrea Rösinger

 

With the growing complexity of global transactions, expansion of information availability, and increase in regulation, companies are being led to accelerate financial transformation. In this new global economy, organisations are experiencing an increasing demand for value-oriented management control systems that provide a single view upon which to make business decisions.

However in realising such financial transformation goals, companies are also often caught between three requirements. First, there are increased national and international regulatory requirements that have a direct bearing on a company’s reputation, and ultimately its brand value. Second, companies need to redefine the accounting function and comply with requirements for increased information. Finally, while heterogeneous legacy equipment hinders rapid information gathering and increases the risk of incompatibility and the difficulty of integration, companies cannot suddenly retire an entire generation of IT systems. Resolving these layered challenges to navigate rising global complexities will help companies derive more value from their finance functions. Here are five strategies that businesses can employ towards this goal, in the journey to achieve financial transformation.

Make finance a strategic partner

Make finance a strategic partner

Companies can make the corporate finance function a strategic partner at the centre of management control. Injecting new value-oriented thinking into organisational philosophy and incorporating information on risks “on the fly” enhances the decision-making process and serves as an early warning system for a company’s leadership to be able to take proactive measures. By quickly combining data and information for the executive suite, financial IT can transform itself into the “one source of truth” based on a central IT journal.

Semantically harmonise big data through business rules

Big data is fueling “customer intelligence”— customer-centric services, offerings and interactions are fed by growing data on consumer behaviour. At the same time, real-time data analysis, backed by simulation and prediction, is helping to derive business insights and strategic business options. Financial analytics of these massive volumes of data enables insights from rapidly changing, qualitatively diverse, and differently structured information. Big data analytics provides the concepts, methods, technologies, IT architectures and tools to translate the exponential growth in the volume of diverse data into better-informed and timely management decisions. The essence of a significant transformation strategy hence involves a substantial amount of data to be semantically harmonised with the help of business rules in order to improve the innovation capabilities and competitiveness of companies through big data analytics.

Move towards a centralised finance platform

A finance system that seamlessly unifies multiple softwares, currencies and accounting principles is critical in an increasingly connected global economy. Not having such a centralised platform will result in the lack of a central source of information and severely limit value for the business. The goal of centralised finance systems is to support fast-moving and volatile business operations. As data grows and companies strive to differentiate themselves from their competitors, new technologies including in-memory, analytics and cloud technologies combine in centralised finance systems. As a case in point, a large German airline group embraced one such centralised platform to enable its financial transformation, integrating 12 different systems that had finance processes and charts of accounts. Getting the entire organisation to move in the same direction was a huge challenge, but today the business is ready for a digitally driven future.

Encourage transparency in the global value chain

In the coming years, companies will invest in corporate finance or global value chain financial transformation or even both. These approaches will trigger top-down transformation rather than the historical bottom-up approach that transformed legal entities sequentially. The shift from supply chains to global value chains integrates all people, teams, processes and stages in an organisation with the aim of reducing silos and optimising value throughout the journey. Technology platforms are enabling organisations to manage this operationally and achieve transparency—especially around real transfer prices and inter-company profits—in ways that are also compliant with regulatory requirements. The Trumpf Group, headquartered in Ditzingen, Germany, has implemented one such technology solution to analyse costs and revenues along its entire value chain based on different combinations of product features and attributes. The group introduced the EXA Global Value Chain (GVC) add-on to the SAP platform, a business analytics tool capable of processing data from SAP and non-SAP systems. Today, production, warranty and goodwill costs as well as planned and actual manufacturing costs can be calculated precisely—down to the very last cent and item, if necessary—and the solution thus supports efficient and informed business decisions.

Along with machines, invest in people

Along with machines, invest in people

Whether it is spotting specific variances, detecting fraud, handling information for faster results, or even implementing algorithms against cybersecurity risks, complex financial data is easily processed by AI and machine learning solutions. The benefits are manifold. Today, machine data can substitute gut feeling and unsubstantiated bias, and help leaders manage their companies based on facts, real correlations and precise calculations. Companies cannot overlook the crucial “people factor”. Incorporating machine data into performance management solutions can improve transparency, reduce costs and support a sustainable way of working. Financial transformation and IT transformation calls for investments in change management strategies. Training programmes for data scientists and other employees of the analytical workspace will also need to be thought out.

As we move ahead in 2018, companies are recognising that the way they do business in the new world is changing fundamentally. Instead of resting on established business models and methods that were successful in the past, they are embracing creativity, innovation, transparency and sustainability and putting mechanisms in place that transform the way they do business.

Feb 1, 2018

Dr. Andrea Rösinger is a Senior Advisor at EXA.
You can reach her at andrea.roesinger@exa-ag.com
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