Does finance transformation deliver benefits that IFRS 17 programmes are struggling to?

08 July 2020

by Alwin Swales Partner, PwC United Kingdom

Email +44 (0)20 7212 2032

In March 2020, we carried out a comprehensive survey of our IFRS 17 projects across the globe. While supporting clients with IFRS 17 compliance in the UK, we noticed a shift away from minimum viable product (MVP) towards finance transformation. They had started looking to prioritise broader finance change to help resolve IFRS 17 challenges.

We were eager to understand whether this trend was happening globally or just in the UK. Many UK clients questioned whether combining their IFRS 17 project and finance transformation could deliver the business benefits that MVP IFRS 17 projects lack.

Speaking to clients, some key findings emerged:

  1. Two-thirds of companies are carrying out wider transformation activities as part of their IFRS 17 programmes. This is a major shift from the client conversations we had a few years ago.
  2. Only 20% of projects were confident of achieving compliance on the old timeline (before the additional one-year extension was granted).
  3. 52% are finding it difficult to resource projects appropriately, either due to availability or variability of skills in the market.
  4. The two biggest areas of investment were data estate (data lakes were a common theme) and streamlining actuarial platforms.
  5. There is a significant focus on IFRS 17 calculation engines. Most are buying off-the-shelf solutions rather than building their own, with many yet to decide.

There were also some interesting additional comments. Compliance is already hard enough - many are concerned that adding finance transformation might further complicate compliance requirements. IFRS 17 budgets are already under significant strain and some clients either cannot afford to spend more or cannot justify spending more because of the extended timeline. Also, with the standard already complex, clients are being cautious. They want to keep changes as simple or as limited as possible.

Those already on underway with finance transformation told us that:

  • There is a synergy between finance transformation and IFRS 17, with most treating IFRS 17 as a discrete piece of work inside their wider finance transformation projects.
  • Many view finance transformation through a specific lens. They are not thinking about general finance transformation end-to-end, but have a more tailored focus on specific areas to develop and use as a stepping-stone for future enhanced capability. For example, data lake projects where finance is the first-use case (driven by IFRS 17 requirements).
  • They are looking to reduce IFRS 17 delivery costs. Advocates of finance transformation are often influenced by the wider business change agenda, e.g. if the business is replacing a platform, there may be some benefit to seeing how IFRS 17 programmes can be included.
  • There is a massive data integration and data management opportunity. Many see IFRS 17 as a data challenge and are investigating how to process and store detailed data sets that will be used for accounting transactions. This presents an opportunity for more specialised data storage mechanisms (e.g. using data lakes to provide some level of opportunity for the future).

Can finance transformation deliver on the benefits case that IFRS 17 projects lack? There is promising evidence in support, but it is too early and too difficult to say definitively. However, one trend is certain - clients are doing much more than MVP, in some very specific areas, and this is a significant change we cannot ignore.

Note - To put these results in context, this survey was conducted before two significant events:

  1. The IASB’s decision to delay IFRS 17 implementation by one more year to January 1, 2023
  2. The global shut-down of major economies because of COVID-19

by Alwin Swales Partner, PwC United Kingdom

Email +44 (0)20 7212 2032