Bringing business realities closer to expectations

Bit of an odd title, isn’t it?  But in how many organisations does reality really line up with expectation?  What would the financial benefit be if we could make this happen?

In our upcoming breakfast briefing on May 4th, we discuss some of the advances in technology and analytics over the past couple of years which make it possible to make the most of the data in your existing ERP or finance systems in a real-time fashion to identify and track opportunities for cost savings, efficiency gains and better risk visibility and management.  We call this continuous transaction monitoring (CTM). 

In a series of three short blog posts, I'll give a brief summary of some points of view we’ll discuss next month, along with some research from our recent global studies and a cheat-sheet of what you need to be thinking about when considering a CTM project to ensure you get rapid, tangible benefits from it.

Chief Financial Officers and Heads of Internal Audit often have ‘wish lists’ along the lines of:

• “Our shared service centre is a streamlined function which processes all transactions correctly and we have no problem with duplicate payments”
• “Our financial controls and approval thresholds are set appropriately and working”
• “We have timely visibility of policy or control violations and changes to risk profiles”
• “Manual journals and bulk actions are valid and do not need significant manual review”
• “Our suppliers conform with delivery and invoicing timelines, we have suppliers appropriately categorised and know which of our third parties or agents are highest risk”

Does this resonate with parts of the ‘perfect world’ scenario for your organisation?

My own view is that there are compelling business cases for CTM, which has a huge amount to offer and is an effective way to streamline processes, reduce headcount, and eliminate root causes of errors and opportunities for fraud or misuse.  I look forward to explaining the reasons for this and hearing other people’s perspectives on May 4th.  I hope that you can join me.

To register your interest in this event please click the link below:

http://www.pwc.co.uk/eng/events/southeast/london/040511_transaction_monitoring.html

Part 2 

The section above set out some wish list scenarios for organisations.  The following often reflects reality more accurately based on what we typically see:

• “A significant number of corrections are required in the shared service centre, which are hard to isolate root causes for and prevent.  We think it’s a combination of 20 suppliers and 5 poorly performing staff but it’s difficult to find out.  Duplicate payments cost us several hundred thousand pounds every year.”
• “Our financial controls degrade over time and staff always find new ways of getting round controls.  Sometimes this is just to do their work.  Sometimes it’s for malicious purposes.”
• “With so many ERP or finance systems across the organisation, it is difficult to get visibility of whether policy is being followed or if, for example, there is inappropriate entertainment expenditure being incurred in Russia”
• “We create a lot of manual journals for corrections, adjustments etc.  This involves a lot of time and expense.  If problems were spotted in real time this could be avoided.”
• “We have no way to monitor high-risk payments being made to suppliers.  And no way of escalating these to the right people automatically.”

Our recent surveys show that addressing these issues and making the points above sound like the ones in our previous blog post is something that’s on the mind of CEOs and Heads of Internal Audit.

PwC’s 2011 ‘Global CEO Survey’ shows that CEOs have a renewed focus on innovation and technology to help reduce bottom line costs, improve top line margins and keep risk in check.  70% of respondents this year are investing in IT to reduce costs and become more efficient, with 54% specifically highlighting data analytics as a strategy for this.

Our 2011 ‘State of the Internal Audit Profession’ study shows that internal audit is focused on areas which support the CEO agenda, but highlights a lack of confidence about keeping pace to effectively address these topics.  This is a particular concern as internal audit transitions from financial controls oversight to advising on wider business and compliance risks, such as the Bribery Act.  Chief Audit Executives are unanimous in saying that risk lies in the speed in which advances happen now and the ever decreasing timeframe in which organisations must react. 

From our experiences, technology has definitely advanced to the point where it can help businesses improve their reaction times.  What are your thoughts?  Please come along to our May 4th event and share your experiences.

To register your interest in this event please click the link below:
http://www.pwc.co.uk/eng/events/southeast/london/040511_transaction_monitoring.html

Part 3

It’s no longer enough to identify issues as part of a light-touch year-end dive into some data.  Running basic red flag tests such as looking at weekend postings is quite limited both in terms of scope and the level of insight such tests provide.

Technology can now enable continuous, automated deep-dives into data from multiple systems, in multiple geographies.  It can feed you with information you need to know about, providing you with the ability to act before something becomes a big issue.

90% of the internal audit survey respondents (from our 2011 ‘State of the Internal Audit Profession’) have an increased focus on “new IT systems or process/control environments” and 82% state an increased focus on “process improvement/operational efficiency/cost reductions”.  We see CTM as an enabler for both internal audit and the wider organisation to meet these objectives.

Our goal with continuous transaction monitoring is to help clients embed analytics as part of their business processes, ensuring accurate information on performance, exceptions and root causes is getting to the right people in real time.  This enables businesses to more continuously tune business performance – driving better user or supplier behaviour, or helping correct processes or controls in your existing systems. This is in marked contrast to the traditional challenges faced by addressing “yesterday’s problem tomorrow”.

The application of real-time analytics should be:

• Intuitive enough to be used and understood by all business users.  It shouldn’t require a PhD in artificial intelligence to understand and results should reported back in the language of the business so they can be easily interpreted.
• Compatible with existing ERP finance systems, able to operate without manual intervention, be used and trusted by the business as a platform for valuable insights as part of normal business, not as a separate project.  Able to scale and adapt as your business grows or changes and designed specifically to operate continuously.
• Collaborative, providing an environment for users to engage jointly in the confirmation of issues and resolution of root causes.  Automatic routing, assignment and escalation of issues to minimise manual effort and free up staff for higher-value tasks.
• Aligned to strategic organisational objectives around efficiencies, cost reduction or risk identification and mitigation.  CTM should be considered a process rather than a project.

We believe that the technologies are now available to make these goals achievable, but we would like to hear your views and experiences.  Please do come along to the event and see how this works in practice.

http://www.pwc.co.uk/eng/events/southeast/london/040511_transaction_monitoring.html