Translate International Trade Regulations into a Competitive Advantage

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Isn’t the World section of Google news a pretty depressing read lately? There’s the Middle East conflict, upheaval in South America, and a crisis in Syria. Trying to keep the state of international politics straight is head-spinning – but what’s it like for those in the business world whose job it is to manage international trade? A recent SAP Game-Changers radiocast addresses this topic, and panellists Kevin Riddell, international logistics manager at Tremco Inc.; Rajen Iyer, cofounder and CTO of Krypt Inc.; and Marcus Puschke, principal consultant at SAP, discuss ways to reduce the growing complexity of international trade and accelerate it.

Regulations, sanctions, and restrictions!
There’s no way around them, and they get bigger all the time – and so does your compliance burden. According to Iyer, “It’s hard for companies to not just interpret those regulations and apply them in their business, but also look at how they can even automate the supply chain.” He believes that, when dealing with multiple geographies, different languages, and constantly changing regulations, the key to progress is automation.

But automation can’t help without support from the top down. Every organization needs a technology and innovation cheerleader, and, according to Riddell, it would help if these leaders share a few quirks with those who run the government and don’t mind curling up with a giant book of regulations.

Trade as a political chess piece
Moderator Bonnie Graham quotes Riddell as saying, “Trade compliance landscape is changing rapidly. Governments like the EU and the U.S. are using sanctions to exert influence on other countries’ policies. This means they can prevent their citizens from doing business with other countries or listed entities.”

Riddell explains that sanctions can be positive when enforced in lieu of military action. He also details how the list of sanctions can go beyond countries to individuals, including those who reside in the U.S. New sanctions are imposed each day, and your business must react immediately or face consequences.

Iyer suggests that an all-system automation process can help you manage your situation for exception cases where you can selectively release. You have to screen and make sure that you have documentation or that you have interpreted the rule correctly, and that’s why you involve lawyers before you set the system.

The essential human element
Riddell cautions, “You need expertise until artificial intelligence is completely in place. It’s going to be a human interfacing with the automation. And if that human isn’t properly trained or possessing the knowledge, you could still get into trouble.” Iyer agrees that continuous learning on the job is of the utmost importance.

As automation trends down to smaller companies and becomes more widely available, these businesses will be able to handle even more complex requests. Processes will be x-rayed from A to Z, and integrated compliance checks and customs clearance procedures will become a quality feature for a company excelling in these fields. The better you handle the data you transmit, the more trust you can gain from your business partners and from the authorities.

For more information on how to speed up international trade, listen to the full radiocast.

Putting Together the Puzzle of Payment Options

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What defines the current climate of payments? Bonnie D Graham, host of a recent SAP Game-Changers radiocast, lists three attributes:

• Risk
• Cost
• Ability to reconcile

Moderating a panel of guest experts, Graham identifies two choices left for those in this sphere: innovate to improve or accept the status quo and risk losing big. Panelists Tom Durkin, head of integrated channel solutions at Bank of America Merrill Lynch; Laurie McCauley, partner with Treasury Strategies; and Leonard Schwartz, director of solution management for the financial services network at SAP discuss the puzzle pieces that comprise next-generation financial services.

Discover a transformed banking industry

Corporations demand more than ever from their banks – especially following the 2008 financial crisis – but for the most part wish to remain bank agnostic. They want banks to take an omnichannel, customer-centric approach and break out of traditional silos.

The question, says Durkin, is how to “support that when you have a variety of clients that range from business banking type clients to the largest multinationals. [It is] certainly a challenge for any bank in any segment.” He goes on to assert that no corporation is truly “agnostic” in banking, but rather attempts to be independent from the technology systems.

Gain trust through enhanced payment visibility

Clients across the globe expect reliable, quick access to information, according to Durkin. They want to become more efficient in the accounts receivable process and the accounts payable process – getting all the information they need on a particular payment for a receivable account or determining if a supplier actually received the appropriate payment.

Rest easy with stronger data and payment security

“The security question is coming up more frequently,” says McCauley. “How do I know my data is secure? How do I go beyond two-factor authentication?”

Schwartz indicates that the other side of this issue is reliability. In case of a major cyberattack or even just some system downtime, it’s important to have a strategy in place. He suggests companies start by asking questions such as, “What are your alternate routes, what’s your disaster recovery plan? To me, it’s about figuring out how to use technology that evolves – both for reliability and to add extra layers of security.”

Navigate a new breed of payment providers

As technology has evolved, so have payment methods. The use of checks has plummeted in recent years. They may never disappear completely, but electronic payment methods are becoming more popular and seem to be the norm for tech-savvy millennials. Why wait for a check (and waste all that paper) when you can just hold your phone up to a scanner?

Synthesizing the comments of the show’s guests, Graham asserts that Amazon, PayPal, and Facebook are redefining what payment providers look like. McCauley includes Walmart in this new contingent as the company has an arrangement with MoneyGram to send Walmart-to-Walmart payments through the store.

Is it possible for so many puzzle pieces to support a quest for continued innovation? Listen to the full radiocast for more information.

Are Predictive Analytics the Best Weapon in Fighting Fraud?

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Fraud is as old as crime itself. Patterns emerge, are cracked, and then overhauled by crafty schemers. Methods become more sophisticated and evolve with technological innovations. In turn, companies must remain vigilant and adapt strategies against new types of attacks. Such strategies were the topic of a recent financial excellence radiocast for SAP Game-Changers, discussed by three expert panelists.

A sobering stat

If you think fraud is something that only happens to other companies, Derek Snaidauf, senior manager of advanced analytics with Deloitte, offers a startling wake-up call: “By some estimates, the typical organization loses five percent of its revenues to fraud each year, which translates to a potential projected global fraud loss of over $3.5 trillion.”

That number is not easy to dismiss, Snaidauf offers a few reasons for the growing fraud problem:

  • Further advances in technology
  • Improved coordination
  • Lower barriers to entry
  • Turbulent economic conditions

Fraud isn’t just on the rise in one area, but pervasive across all industries. Snaidauf says that the time for reactionary behavior and chasing lost payments is over. You need to prevent the dollars from going out the door in the first place.

A case for predictive analytics

President of the Cangemi Company, Michael P. Cangemi, believes most companies don’t leverage predictive analytics enough in disbursement areas, instead using a contingency firm to avoid double payments. This doesn’t fix the system – and then companies give half of the recovery money to a contingency firm. It’s not a sustainable model as the threat of fraud grows stronger.

“If you don’t think it’s happening, you’re just naïve,” Cangemi challenges. “The question is how much it is and then the cost benefit of implementing some kind of controls.”

Jérôme Pugnet, director of solution marketing for SAP solutions for governance, risk, and compliance, takes issue with the “predictive” label, because you cannot predict a specific event. Instead, he specifies, “It [software] helps you predict where it could happen, most likely, and how it could happen so you can be prepared.”

According to Snaidauf, a leading practice is having an enterprise fraud management office, the size of which varies based on the severity of your fraud problem. The trick is to break free from silos to centralize fraud applications throughout an organization, boosting their value. Institute a set of pillars to lead a successful fraud prevention program with:

  • Data scientists to build the rules and models
  • Investigators to pursue leads
  • Processes in place to treat and deal with fraud in the most effective manner with comprehensive analytics

A future of cooperation instead of competition

In the coming years, the panelists envision a climate where fraud detection approaches are far more open and shared across companies and industries. Big Data and social data will also play a large part in enhancing predictive models.

Pugnet takes this one step further, positing a theory that enhanced predictive capabilities will uncover trends that revolutionize the way employers treat their workforce. Motivating employees and treating them well could do a world of good in abating fraud. Instead of disgruntled employees with motives to commit fraud, there will be a team of workers invested in protecting the company from such actions.

Is your business ready to adopt predictive analytics in the fight against fraud? Get more information from the full radiocast.

Three Ways to Advance Your Finance Operations

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Can a Finance department become more effective – even strategic to the business – through the applied use of innovative technologies? While many field experts say “yes,” Finance lags other corporate functions in technology adoption. Panelists on a recent SAP Game-Changers radiocast agree and suggest three promising technology-inspired alternatives to business-as-usual:

  1. In-memory computing for up-to-the-minute financial and operational data
  2. Cloud technology for quick implementations
  3. Analytics and enterprise mobility innovations for combined company and market information

So why have Finance departments made so little progress? Have they not found the right software or are tight budgets the issue? Panelists Bill Sinnitt, senior director of research for Financial Executives Research Foundation; John Steele, principal in Deloitte Consulting’s technology service area and leader in the SAP finance transformation practice; and SAP’s Birgit Starmanns, senior director in marketing for finance solutions, discuss these alternatives.

Leveraging in-memory computing and the SAP HANA platform

The SAP HANA platform, Steele notes, has democratized information, changing how information is gathered and what types are gathered. “I’ve never been more excited to be a practitioner in the whole finance and technology arena,” he says. “Over the last two years [companies have] moved their transaction processing …over into in memory. This is one of the most fundamental shifts that I have ever seen and it pulls together your analytical and transactional information into one common platform.” He then underscores the significant benefits of this shift:

  • Instant visibility into the organization
  • Greater focus on data quality
  • More time to focus on business processes through integrated planning

Getting comfortable in the cloud

SAP’s Birgit Starmanns explains that Finance has an obvious interest in the cloud, but many organizations are hesitant to put all their data there. For now, larger companies are cautiously migrating to the cloud with hybrid scenarios.

Smaller companies, on the other hand, are open to making a complete move to the cloud because, as Starmanns explains, “Lots of times they are using Microsoft Office applications to manage their business, so they are more ready because they don’t really have that historical larger footprint of an ERP system.”

Capitalizing on enterprise mobility and analytics

“You can never have enough analytics from business intelligence,” Sinnitt rationalizes.

With mobile devices playing an integral role in daily life, enterprise mobility has become a must for financial execs. The panelists examine some of mobile’s largest contributions:

  • Smoother and enriched order-to-cash processes
  • Enhanced forecasting and planning by putting the right information in the right hands
  • Greater insight from social data

All panelists agree that future CFOs will act as the catalysts for innovation. They predict that the next wave of advances will come in the form of visualization technology. Do you agree with this prediction? Listen to the full radiocast for more insights.

Reimagine the Role of Internal Auditors

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If there’s any business group that could use a PR makeover, it’s the internal audit. Once a team that inspired dread and fear, it’s now undergoing a dramatic transformation, as discussed during a recent SAP Game-Changers radiocast, part of the Financial Excellence series. According to panel moderator Bonnie Graham, there are three reasons the role of internal auditors is changing:

1. Stakeholders are challenging internal auditors to up their game.
2. Boards are demanding better assurance of the value that internal auditors provide.
3. Management requires clearer insights.

Move from compliance police to strategic advisor

One of the panel guests, Malte Globig of the Flint Group, offers the idea that the internal audit group must act like external service providers, developing a better understanding of what’s important to their customers. If the company can more clearly understand the value their internal auditors are providing, it will be more willing to pay for their services, instead of looking to an external vendor. “We must never forget who our customers are,” Globig cautions.

Michael O’Leary of Ernst & Young goes a step further, saying, “What we are actually seeing is…the need for internal audit to innovate in order to keep up with such a fluid business environment.” He details three key principles for effective audit delivery:

1. People: Compile the right skill sets, the right talent, and the culture and geography that serve the needs of your company.
2. Processes: Streamline complex processes companywide to support the changing risk environment. Make sure that an internal audit function has the right people and processes for the company’s historical strategy, but also for the risks that lie ahead.
3. Technology: Deliver as much value as possible to stakeholders by adopting the most innovative technology. The percentage of spend that most internal audit groups dedicate to technology shows an upward trend that bodes well for internal auditors and the services they provide.

Take the audit mobile

Building on the discussion of advanced technology, moderator Bonnie Graham wonders whether introducing tablets to the audit process would enhance professionalism, ease evidence capture, grant instant data availability, and improve paper management.

Bruce Carpenter of SAP posits that, since we have all grown accustomed to using our mobile devices, providing auditors with tools like tablets is of paramount importance. He challenges internal audit groups to demonstrate innovation in each audit. Carpenter believes the increased sophistication of databases, and their ability to store structured and unstructured data, offer new opportunities to internal auditors; the enhanced insight that can be gained from such analysis raises the game of internal auditors’ work.

But the biggest and most welcome shift, Carpenter suggests, is that “the auditor is increasingly going to become a collaborator in business progress and that evolution is already starting to happen.” Rather than being seen as a numbers cop or a distraction, the auditor can be integrated more seamlessly into business processes.

Is your company ready to embrace this new role of the auditor? Listen to the full radiocast to find out more.

What Defines the CFO of the Future?

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It’s no secret that the financial world is dealing with a period of rapid change. Effectively managing these fluctuations is ultimately the job of the CFO – but what does the role of CFO look like now? A recent SAP Game-Changers radiocast explored this question with three panelists. Here are their opinions.

Diversify your duties

“Remain constructively discontent” might be the most useful advice to current CFOs and other financial leaders. This quote from Coca-Cola CEO Muhtar Kent was invoked by Kyleen Wissell, Corporate Director of Internal Controls within the office of the CFO at the Coca-Cola Company. She believes in a culture of innovation and growth – and that starts with strong entrepreneurial mentality at the top levels. Contentedness can lead to complacence, especially in a time of rapid advancement. A watchful eye on possible improvements inherently enables progress.

Elena Shishkina, CFO of SAP UK and Ireland, agrees. She multitasks in as many areas of the company as possible, because, as she says, “I don’t know how my role will look tomorrow. I strongly believe you can only achieve the best outcome for the team and for the organization if you lead with excellence.” Shishkina views herself not just as a leader in finance but a leader in overall business transformation.

Many CFOs now realize that their position is defined by more than a collection of numbers. Richard Sernyak, principle at PricewaterhouseCoopers responsible for the SAP finance transformation practice, concurs that statistics don’t paint a full picture of an organization’s financial health. Greater focus should be placed on unstructured data such as social media. He explains, “What’s important is that not everything that can be counted counts…you need to look beyond the data and really understand what’s important.”

Take control of a new role

The paradigm is shifting as CFOs need to keep up with their traditional, spreadsheet-intensive responsibilities while creating more value for the business. Some of the unique responsibilities now require CFOs to:

1. Act as the lynchpin across the company for presenting actionable information in a dynamic way.
2. Enable proactive, predictive modelling in real time on mobile devices.
3. Enhance performance by spending less time on tasks that don’t provide added value.
4. Look past the numbers to see their context.
5. Take a more holistic view of the business by adopting innovative technologies (which we discussed in another recent radiocast).

Leading a top-notch finance department requires more soft skills than ever before, according to Wissell. CFOs must draw upon emotional intelligence, considering their internal customers, external customers, and opportunities to introduce a pure model that touts more of a specialist view.

As the transformation marches on, all panelists agree that championing technology will become paramount for the CFO. Sernyak sees the role becoming more intertwined with that of CIO as more millennials flood the marketplace and eventually move into leadership positions. Beyond an affinity for fast-paced innovation, Shishkina asserts that CFOs of the future must be culturally aware and sensitive to different aspects of diversity.

That’s quite a list of attributes! So are you a CFO of the future? Listen to the full radiocast.

Big Data for Finance

From Rob Jenkins, SAP Global Center of Excellence (Originally posted on the SAP Analytics blog)

Big Data is often mentioned as one of the game-changing technology trends that every company must capitalize on to stay competitive. Most CIOs are familiar with how Big Data can be leveraged for transforming marketing (like multi-channel promotion effectiveness), manufacturing (defect prevention) or distribution (dynamic routing systems). In this era of technology innovation, the traditional constraints of storing and analyzing the 5 V’s of Big Data – variety, velocity, volume, veracity, value – have been all but eliminated.

The advances in massively parallel computing and columnar storage databases, along with the price declines in DRAM-enabling in-memory processes, have enabled performance gains by 10,000 times. And the innovation around capturing and analyzing unstructured data (such as social networking data) with user-friendly business analyst tools that require no programming brings a whole new perspective to analyzing and improving all business processes – from employee recruiting to product development to sales to customer retention.

Yet to date, finance hasn’t been a focus area for applying Big Data and analytic technology. As many CFOs expand their role to become a strategic decision-making partner of the CEO and take on operational oversight (including IT), they’re seeking ways to utilize Big Data and analytics to optimize finance processes for increasing efficiency and business insight. In fact, a recent study by Tata Consulting Services found that finance had the 2nd-highest level of expected return on investment (ROI) from Big Data.[i]

Businesswoman touching digital tablet in office

Big Data and Analytics Technologies Improve Finance Processes

CFOs know they need to translate data to decision in real time for competitive advantage.   Market signals can improve forecasting accuracy. Customer sentiment and buying behavior can improve price promotion modeling and “demand-shaping.” Assessing and proactively managing changes in customer payment behavior impacts working capital (DSO). Daily forecasting at retail store level optimizes the supply chain. Currency and commodity markets move in microseconds, so understanding the need for additional hedging in real time is critical.

And every CFO understands the need to focus on fraud detection by analyzing signals with real-time visibility to transaction data. Big Data and analytics techniques and technologies can dramatically improve the efficiency and effectiveness of all finance processes.

“Better, faster, cheaper” is the mantra for CFOs, and with Big Data there’s no need to use short-cuts such as averages. This means running more simulations with no latency – which leads to better decisions with live data. It also means reducing manual processes by simplifying data integration to eliminate reconciliations caused by duplicate and incorrect data.

Finance now has the ability to enable real-time scenario analysis based on market and internal process signals to optimize financial planning and analysis, consolidation and close, collections, and treasury and risk compliance, just to name a few.

Impact on Financial Planning and Analysis

From the development of strategy to budgeting/forecasting to reporting, Big Data and analytics cannot only transform the process but they can also change the way the organization thinks about business model agility. Imagine the CFO’s team using correlation analysis to determine which market signals impact revenue to increase forecast accuracy. Combing the analysis with visualization and spatial analysis BI tools can greatly enhance communication and understanding.

Or consider the ability to perform accelerated cost assignments using relevant drivers on massive data volume to arrive at accurate profitability by granular business dimension. Finance could drive cross-functional collaboration on product/service pricing by leveraging historical sales data to derive insights into demand elasticity by channel or customer category.

Impact on Accounting and Financial Close

Accounting, close, disclosure, and close governance can all be improved with Big Data and analytics. Finance can significantly reduce the time to close the books through accelerated runtimes for period-end reports and using statistical analysis on historical data to automate real-time accruals. Employee productivity is enhanced through self-service information access with visualization enabling rapid review, analysis, and reporting.

Intercompany transaction anomalies can be flagged for managing risk, while journal entry elimination and reconciliation is automated. Business rules and role-based workflow enhance close governance through exception-based approval routing.

Impact on Treasury and Financial Risk Management

Big Data and analytics enable the treasury team to gain immediate insight into liquidity information through real-time, centrally-managed cash forecasts. This zero-latency insight accounts for currency movements and signals if and when there’s a need for additional hedging.

Risk policy compliance is ensured with instant net-open positions (like commodity prices) monitoring. From an internal control perspective, fraud prevention can be enhanced by exposing problematic patterns in payables operations, cash balances, and journal entries.

Impact on Finance Operations – Credit and Collections, Payables, Supply Chain

Changes in customer payment behavior can signal cash flow problems. Reacting quickly, or using analytics to determine when to proactively manage payment terms or arrange alternate financing, can make the difference in getting paid fully on time and not getting paid at all. Some customers are more economically sensitive and liquid than others, and patterns can be amazingly predictable by analyzing the right variables.

Big Data and analytics can also identify process errors, such as duplicate payments by vendor or unusual changes in account balances. Supply chain negotiations can be approached with an entirely new strategy using price and transaction data to define shipment terms and reorder points while maximizing inventory turns and minimizing unit cost.

The Take Away

By applying Big Data and analytics across the portfolio of finance processes, the CIO and CFO can partner to transform the finance function’s efficiency and effectiveness. This enables the vision of “finance as a strategic partner” to become a reality.

[i] http://sites.tcs.com/big-data-study/big-data-roi-logistics-finance/