Framework for shared services

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Framework for shared services

  1. 1. iprocess creating intelligent and cost conscious processes for shared services
  2. 2. Contents 1 iProcess Value Creation Approach 2 Shared Services Vision 3 Shared Services Rationale 4 Shared Services Deployment 5 Alternate Shared Services Models 6 6 Functional Placement 7 Finance & Accounting Process Design 8 Risk Assessment 9 Organizational Design & Governance Ramesh Krish Proprietary and Confidential P1
  3. 3. 1 iProcess Value Creation Approach Ramesh Krish Proprietary and Confidential P2
  4. 4. The iprocess Approach to Shared Services 1. Current State 2. Options Assessment Formulation • Apply appropriate assessment and • Develop options in conjunction with operating measurement techniques to understand company leadership to transform the cost base the current portfolio mix in light of investment parameters 5. Transformation & Governance 3. Feasibility • Monitor key performance indicators derived from initial investment criteria CUSTOMER Analysis • Understand and evaluate transaction merits and exit considerations • Develop a detailed blueprint for future state and transition plan from the current state outlining the financial viability of 4. Low Cost Model proposed projects Development • Implement the blueprint – strategic sourcing, shared services, process integration, physical layout consolidation, organizational transition etc • Review performance metrics and refine implementation Ramesh Krish Proprietary and Confidential P3
  5. 5. 2 Shared Services Vision Ramesh Krish Proprietary and Confidential P4
  6. 6. Key Objectives We understand that: - this project reflects a number of internal and external influences on process design, placement and ownership; - the desired approach to Organizing “Business Support Services” is part of a global vision to develop a shared services model Strategic Direction Outsourcing Business Potential Philosophy Organisational Business Scale Model Business Support Services Business Unit Activity Alignment Scale Business Activity Unit Usage Content Business Unit Position Ramesh Krish Proprietary and Confidential P5
  7. 7. Shared Services Structure In defining the appropriate approach to organizing “Business Support Services”, a number of criteria can be utilized to assess available options. In the context of shared services, the Accounts Payable “Business Support Service” will act as pilot. Criteria Approach represents Direct accountability is strategic consistency Accounts Accounts reinforced through process with corporate direction Payable Payable Check Check ownership Purchasing Purchasing Disbursements Disbursements Travel Travel Process Services Services Payroll Payroll Approach Model supports Security Security supports creation of a high Services Services ability performance Business to realize organization Support service-level Office Office Services improvement Support Support Technology People Services Services HR HR administration administration Facilities Facilities Management Management Structure creates a Model provides scalable platform to Bank Bank Events Events for cost efficient support future growth Reconciliations Reconciliations Accounts Accounts delivery of services Receivables Receivables Ramesh Krish Proprietary and Confidential P6
  8. 8. 3 Shared Services Rationale Ramesh Krish Proprietary and Confidential P7
  9. 9. Vision for an A/P Shared Service Centre Vision for Accounts Payable – To satisfy the clients/suppliers by paying Vision for Accounts Payable – To satisfy the clients/suppliers by paying accurately and on time, as well as resolving issues in a timely fashion: accurately and on time, as well as resolving issues in a timely fashion: Supplier Management •• Service-oriented processes and scalable infrastructure; Service-oriented processes and scalable infrastructure; •• Appropriate accountability to be supported by the management; Appropriate accountability to be supported by the management; •• Optimal use of technology and of automation; Optimal use of technology and of automation; •• Better communication among all groups (Accounts Payable, Purchasing, internal Better communication among all groups (Accounts Payable, Purchasing, internal clients and external clients/suppliers). clients and external clients/suppliers). Purchasing Business Performance Dimensions – Sample of performance metrics for A/P Productivity Cost Efficiency Quality Customer Satisfaction Manual Invoices/FTE Cost/Invoice (manual Days Payable Outstanding % Paid on Time Satisfaction Survey payment) Accounts Lost discounts due to late Full (3 ways-matching) Avg. number of hours to send invoices % calls abandoned Payable Cost/Invoice (EFT) invoice to SSC Invoices/FTE % incorrect invoices First pass resolution Evaluated receipts/FTE Average Invoice € Avg. number of hours to enter Amount/Vendor invoice First pass yield % Average Cost/FTE Average hold Invoices/vendor time % invoices under €500 Duplicate payments collected Payments or avoided 24 hour % procurement Card Process defects by reason resolution purchases to total purchases code under €500 % calls answered in less than 3 rings Ramesh Krish Proprietary and Confidential P8
  10. 10. Why a Shared Services Approach? Key Benefits Evidence of superior performance Companies participating in an industry survey reported the Cost savings (e.g., reduction in headcount, following results regarding their implementation of a SSC: administrative cost reduction). On average, a ROI of 27%. Operational flexibility and customer service (e.g., by establishing a SSC, divisions can concentrate Reduction of headcount by 26%. more on the value-added activities of their core business). When Elizabeth Arden International moved to a SSC, they saved: Improved growth. • 30% on administrative costs. • 60% reduction in headcount. • 50% cut in working capital. Improved service quality. Cargill consolidated 130 separated accounts payable, accounts receivable and general ledger systems into its IT coordination. SSC. This reduced A/P processing by 34% and the cost for cash application processing by 20%. Facilitated ERP optimization. AlliedSignal reports a 30-35% savings in accounting costs since they moved to a SSC. Tax savings. Shared Services is a method of organization and operation in which support processes of an organisation are “centralized” and independently structured. Ramesh Krish Proprietary and Confidential P9
  11. 11. Alternative Shared Services Models A variety of factors have an influence on the selection of the appropriate organisational model for a “Business Support Service”. Models Related Influences Centralized Best suited where critical mass is necessary or present and business model is focused on service levels. Key influences are business philosophy, content and organisational scale. Hybrid Appropriate where organisational model is undeveloped and strong standardization for selected functions is desired. Key influences are business philosophy, future strategic direction, volume, and business unit integration. Distributed Applicable when focus is on business unit autonomy and variability is significant. Key influences are business model, content, business unit usage and business unit integration. Hosted Relevant where natural organisational ownership is apparent and critical mass is not necessary. Key influences are business model, content, volume, business unit usage and organisational scale. Ramesh Krish Proprietary and Confidential P10
  12. 12. Alternative Shared Services models The assessment of the available organisational approaches to “Business Support Services” provides insight into the applicable structural model. Illustrative assessment for several “Support Services” is presented below: Key Characteristics Implications Purchasing Principally driven by Wholesale business with substantial volume Close affinity to single business and Accounts Payable Directly tied to supply chain with substantial volume natural process flow provide natural opportunity to concentrate activity Check Disbursement Linked with supply chain and payroll with substantial volume Moderate volume with some activity being conducted at Narrow process scope and natural Bank Reconciliation businesses already relationship to cash management suggests business unit responsibility Payroll High volume with direct relationship to broader Human Multiple linkages to HR function offers Client X activities natural aggregation source Security Services Low volume mixed activity set with partial outsourcing Travel Lower volume with outsourced providers Infrastructure-related nature provides natural aggregation source and Office Support Mixed activity set with very high selected volumes focused management of outsourced Services relationships Facilities Management Low volume, mixed activity set with partial outsourcing Ramesh Krish Proprietary and Confidential P11
  13. 13. Opportunity Analysis Framework Cost Structure Comparative Management Segment Analysis Analysis Analysis Knowledge Analysis - Where are What do we compare to? Where are costs high Where does the large areas of cost relative to revenues? management believe and what are the opportunities exist? primary drivers? Major Processes Competition Business Units Interviews Functional / Internal Comparatives Customer Groups Focus Groups Organizational Historical Performance Product Groups Workshops Line Item Benchmarks/Best Channels Initial opinion can be Cost of Management Practices directionally correct Geographic Reasonability Treated as a hypothesis, Standards then tested with facts Ramesh Krish Proprietary and Confidential P12
  14. 14. 4 Shared Services Deployment Ramesh Krish Proprietary and Confidential P13
  15. 15. Shared Services Approach Approach for outsourcing There is a spectrum of solutions… Evaluate Evaluate Assess Assess Solicit and Solicit and Finalize Finalize Supplier Supplier Opportunity Opportunity Evaluate Bids Evaluate Bids Partnership Partnership Universe Universe 4 Finance 4 Property services 4 Payroll Define functional Determine Define service Conduct face-to- “candidates” supplier universe requirements, face discussions within company specifications with finalists 4 Middle Office 4 IT Strategy & 4 Operations Establish and metrics Development Compare qualification Review final 4 Regulatory 4 IT functional criteria Develop and proposals and reporting Infrastructure performance distribute RFP select vendor(s) with industry Conduct vendor benchmarks 4 Global 4 Data interviews, as Manage RFP Develop required response transition plan procurement processing in Assess process jointly with Finance intangibles, such Evaluate vendors vendor as service, against criteria Evaluate bids quality to determine and select Begin migration Shared service Service companies Outsourcing improvements short list finalists and monitor centres performance Finalize list of functions to be outsourced Savings can be achieved by… • Establishing shared service centers for core activities allows organizations to achieve economies of scale. • Setting-up service companies allows organisations to operate on a more commercial basis and to better understand performance. • Outsourcing non-core activities allows organizations to focus investment and management attention on more critical issues. • Provides near-term realization of cost savings and significant scale flexibility, particularly in multi-vendor arrangements. Ramesh Krish Proprietary and Confidential P14
  16. 16. The Shared Services Assessment Framework Multiple Multiple Systems Processes Rationalize Systems Define Processes Move to One Commonize Policies System Move to One Database Commonize Processes Shared ServicesOne Organization One Location per Process Consolidate within Region Separate from Consolidate within Country Business Units Multiple Multiple Locations Organizations Major Types Description Sample Processes Handles routine transaction • Procurement Center of Scale based processes by leveraging • Accounts Payable Services economies of scale and • Payroll standardization. • Travel & Expenses Concentrates expertise to • ERP COEs Center of Expertise provide high-value services to • Tax/Treasury Services internal customers at • Benefits competitive cost. • Legal Establishes a partner • Internal Consulting Business Partner relationship between Services Services organizational units to achieve • Strategy common goals. • Reengineering • Government Provides a structure to support Corporate Steward central mission critical Relations Services • Compliance objectives. • Fiduciary Ramesh Krish Proprietary and Confidential P15
  17. 17. Future Vision – Other Dimensions Other design elements – technology, facilities, position definition, and management approach – are key elements that help define the organization. Assessments of these dimensions to date have uncovered no impediments to achieving this vision. Technology Facilities • Current financial and business systems are capable of supporting • We will physically consolidate activities to the maximum extent the future vision in the Country A possible and practical into four locations • Single Region A Financial Platform (PeopleSoft) facilitates the • We will maintain a commitment to our existing locations: implementation of the shared services center components of the - Location 1 future vision - Location 2 • Operational accounting is conducted primarily on three business systems (Bridge, WinBroker, and Project Accounting), and - Location 3 therefore the shared services vision supports a multiple platform - Location 4 situation • We will be mindful of selective concessions in centralizing and • Project is not dependent on upgrade and/or migration technology consolidating activities into these centers, including retention of initiatives key personnel and securing business area buy-in • Future movement of the organization to one global financial platform will enhance our ability to share information globally Position Definition Management Approach • As-Is Analysis and Detailed Design Phases will help us identify • Accounting Shared Services Leader will need to be identified the number of positions (e.g., AP clerks, AR clerks, field - Responsible for management, measurement, control accounting associates) that can be consolidated in order to procedures and accounting policies, and quality assurance facilitate operational flexibility and cross-training opportunities, within the shared services organization improved management, and reduced costs - Instrumental in negotiating and establishing Service Level • Job descriptions for Regional and Business Area personnel will be Agreements with the internal clients carefully defined - Direct reporting to Finance Controller - Business Area Financial Planning & Analysis roles will likely require the greatest clarity • Business Area functions continue to have primary reporting to Business Area management, with dotted line reporting into the - Recently updated job descriptions will facilitate this process accounting organization • Corporate functions continue to report to Finance Controller • Continue to outsource payroll Ramesh Krish Proprietary and Confidential P16
  18. 18. Implementation Approach Guiding Principles Implementation guiding principles are critical to establishing a common approach amongst management to designing and converting to an improved organization. • Balanced Approach – We will design the accounting shared services organization to: - Support business area strategies and needs - Balance service quality expectations with control, consistency, and cost considerations • Strong Business Area Working Relationships – We will actively, but judiciously, engage finance and accounting management to: - Create common business understandings and promote buy-in - Instill a collaborative approach that demonstrates an understanding of business area needs • Fact-Driven Analysis & Decisions – We will develop a detailed fact base that will enable: - Design and implementation decisions - Measurement of financial and operational success • Minimally Invasive During Close Periods – Design and implementation efforts must be sensitive to financial close process requirements of accounting areas • Aggressive But Realistic Timeframes – A successful implementation must proceed expeditiously to minimize implementation risk • Staged Implementation Approach – Tackle one business area at a time • Commitment to Project Management – Get it done right. Mitigate service quality reduction risk Ramesh Krish Proprietary and Confidential P17
  19. 19. Implementation High-Level Plan An aggressive, but realistic, implementation strategy must be affirmed to successfully design and implement the future vision. DESIGN DESIGN IMPLEMENT IMPLEMENT Implementation As-Is Assessment To-Be Design Detailed Design Implementation Planning • Formalize a detailed, • Translate vision into • Refine and expand • Develop practical work • Execute operational Objectives Objectives fact-based assessment preliminary design of blueprint for future plans and associated changes in phased of existing accounting future accounting accounting organization accountabilities to rollout operations operations; validate implement envisioned • Capture value outlined with key stakeholders changes in business case Project Management Office – Regular Communication, Service Level Monitoring, Status Reporting and Problem Resolution • Baseline/collect • Isolate opportunities to • Refine and expand • Compare existing state to • Implement people, process operational and financial consolidate, simplify detailed design; tailor to future detailed design to and technology changes data for existing operations, improve location operations, understand change required to realize operations: controls, and gain scale including: requirements transformed business − Cost economies − Process flows linked • Develop change strategy model − Headcount • Modify existing to systems and roll-out plan • Charter discrete projects Key Activities functional designs, − Business and - Select and prioritize that collectively deliver Key Activities − Transaction volume − Service Levels including: financial systems BA roll-out needed change − Systems − Standard processes linked to processes • Identify timing and • Establish Project − Standard jobs − Job designs linked to prioritization of required Management Office to • Identify and evaluate • Refine high-level business skills IT projects, if any track progress against inconsistencies among case • Project P&L for the - Evaluate IT capacity milestones and area: • Validate technology business post- given existing project dependencies − Process flows readiness: implementation portfolio • Enroll employees in − Job designs − Business systems • Identify communication • Develop detailed change efforts through • Enhance business and communication and − Financial systems requirements and create implementation plan with financial systems maps, by training • Validate To-Be design communication plan clear accountability for all area with key stakeholders • Begin negotiating service major milestones level agreements (SLAs) Timeline Timeline 5 months5 5 months5 Ramesh Krish 5 Proprietary and Confidential P18 Anticipates a November 1, 20XX start; timeline will be challenged as each phase is completed.
  20. 20. Project Organization Enrolling key stakeholders, business area management and Subject Matter Advisors in the project from design through implementation will be critical to project success. Roles & Responsibilities − CFO −Business Head • Provide active, visible and vocal leadership Steering Committee Steering Committee − Controller −[HR] • Champion Business Area buy-in − Business Area CFO 1 −[IT] − Business Area CFO 2 −[Tax] • Execute enterprise-wide communications/ recommendations Project Sponsor − TBD • Serve as main voice for project – change advocate/ opinion leader Project Sponsor • Set overall project direction, set priorities and allocate resources Project Manager Project Manager − TBD • Responsible for overall engagement execution and management • Identify issues & risks and ensure escalation/ resolution Business Area Teams Business Area Teams Program Management • Support Team Leads in project planning and delivery • Track status and manage issue identification and resolution BU 1 BU 1 • Design and deliver change management programs Team Rosters: BU 2 BU 2 − 1.0 Team Lead Team Leads • Manage collection and synthesis of data, internal benchmarks, and design elements − X.0 Business Area Lead BU 3 BU 3 − X.0 Analysts • Facilitate meetings with key executives, business areas, and functional teams Program Program − TBD SMAs • Participate in site visits, planning sessions and development of deliverables Management Office Management Office BU 4 BU 4 • Skill set needs: Operational performance improvement; Accounting process redesign; Benchmarking study design and execution; Implementation planning; Strong oral and BU 5 BU 5 written skills; Visioning Sessions; and Group facilitation Business Area Leads Other Other • Act as liaison with represented Business Area Tax Team Tax Team • Deep business area/ technical knowledge and familiarity with its accounting roles Human Resources/ Human Resources/ • Participate in data gathering, visioning, and planning − 1.0 Team Lead − TBD SMAs Facilities Team Facilities Team Analysts − 1.0 Team Lead • Perform selected benchmarking, business case, process & organization analysis − X.0 Analysts activities Treasury Team Treasury Team − TBD SMAs • Assist with deliverable development − 1.0 Team Lead Subject Matter Advisors (SMAs) − TBD SMAs Technology Team • Help anticipate, identify and resolve issues Technology Team • Provide accounting and shared services center subject matter expertise and support, − 1.0 Team Lead as needed − X.0 Analysts • Reference applicable best practices − TBD SMAs Ramesh Krish Proprietary and Confidential P19
  21. 21. 5 Alternate Shared Services Models Ramesh Krish Proprietary and Confidential P20
  22. 22. Outsourcing - Approach 4 Performing processes/services utilizing internal human and technology resources 4 Improvements in processes/services leverage techniques such as process redesign, service center implementation, technology infrastructure improvement and role redesign Insourcing Enterprise Enterprise Infrastructure & labor cost Process, Transition savings Process Service or Service or Function Function 4 Utilizes a combination of insourcing and outsourcing solutions, with a third party vendor providing human and/or technology resources as an extension of the employer’s resources 4 Business process redesign typically accompanies the transition to a co-sourcing arrangement 4 Additional improvements leverage service center implementation, technology infrastructure improvement and role redesign Hybrid/Co- Sourcing Infrastructure & Enterprise labor cost Enterprise Service Provider savings Process, Process, Service or Service or Function Transition Function 4 Typically, a pure outsourcing arrangement called full outsourcing is the final phase in the transition to an outsourcing strategy 4 Outsourcing is where an organization transitions human and technology resources related to non-core competency processes/services to a service provider with expertise in administering the particular process or processes 4 New responsibilities emerge for the organization to manage the service levels of the service provider Total Outsourcing Enterprise Enterprise Service Provider Process, Infrastructure Process, Service or Transition and labor cost Service or Function savings Function Ramesh Krish Proprietary and Confidential P21
  23. 23. Outsourcing – Options Assessment Technology Typical Functions For Off shoring Deutsche Bank IT Development in Bangalore (JV) Historical Low 4 Transactional sourcing environment, 4 DB established an IT development centre in 1992 / Typical C 4 Single transaction technology projects restricted to specific IT processes / O to provide services across banking and finance Off T M 4 Application development and infrastructure E P functions shoring C L management E 4 Limited risk profile H X 4 Infrastructure development and 4 The facility spans 50,000 square feet with 450 Starting I T management professionals and is supported with dedicated Point 4 Maturing global market place Y 4 Full enterprise technology delivery high-speed satellite communication links High Number of Functions Illustrative ABN-AMRO Card Processing in Chennai Business Process (BP) Typical Functions For Off shoring (Outsourced) 4 Strategic sourcing opportunity Low 4 ABN outsourced card processing functions as part Expansio C of a 10 year deal to a facility in Chennai n Area / 4 Rapidly growing market of O M Alternativ processes to offshore, enabled by P Customer Finance 4 Initially 60 software professionals will manage maturing service providers, global IT B L application hosting, data and back office e Starting P E Relation- & Human Card and telecoms infrastructure X ship processing Point I Admin- Resource Services 4 Evolving focus for many firms due to T Manage- istration s 4 ABN estimate that they will increase card services Y ment the potential for significant cost cost efficiencies by 15-20% High Number of Functions savings Standard Chartered Asia Pacific Hub (Multiple Hub Possible Structures For Off shoring Models) Building 4 Creation of a regional / global 4 SC has developed an extensive hub network Significan shared services organisation Low within the region, which is managed centrally t Scale 4 Single function regional hub through a business hub in Singapore 4 Due to their complexity, hubs require C And / Or O significant levels of commitment but M 4 The Chennai facility was consolidated in 2002 into Global 4 Multi-functional regional hub HP a global multi-functional hub, dealing with both are potentially the most rewarding U L Diversity back-office processing and IT development option B E 4 Multi-functional, multi-entity global Of X hub requirements 4 Hub strategy can be established as I 4 Multi-hub network with central Operation T the aspirational goal towards which Y management control point 4 SC are investing $40 million into a second back- s technology and business process High Number of Functions office processing hub in Kuala Lumpur, primarily strategy can evolve for their Asia Pacific businesses Ramesh Krish Proprietary and Confidential P22
  24. 24. Outsourcing – Execution Risk Assessment Split …Or …Or Here Here Here………....................... Or Lift In Its Entirety Advice / Customer Customer Support Execution / Operations Technology Facing Service Services Transaction Key Criteria For Off shoring And Organisational Considerations 4 Physical access to clients is required 4 The current resources supporting the Requires activity are viewed as irreplaceable Competitive Physical 4 Physicalaccess to other staff or Advantage or 4 Currentresources represent a competitive G Proximity or departments is required on a regular basis Irreplaceable advantage to the bank, will not relocate O Similar Time 4 Physical access to an external entity is Resource and cannot be allowed to go to a / Zone required on a regular basis competitor N O 4 Regulatory or compliance statutes dictate 4 Labor pool at new site does not contain a G Regulatory or a location for the activity Skill Set regular supply of required skill set AND O Compliance 4 Internal audit or risk policy requires (at Deficiency of skill set requires uncharacteristically high Requirement least given current process) that activity New Site lead time to train, posing an unacceptable remain in current location level of risk GO 4 Strategic priorities C 4 Specialist vs. commodity O 4 Client interaction channels 4 Short-term vs. long-term N 4 Product / service mix driven by business S 4 Internal vs. external I requirements D 4 Complimentary roles and skill Skill Sets & Organizational 4 Mapping of business and technical E categorisations / combinations Types of Structure & requirements R 4 Mix of types of resources / alternate A Resources Processes 4 Timing of delivery sources T 4 Manner of interaction with vendors I 4 Resource sharing opportunities O 4 Organisational interdependencies N 4 Resource costs vs. benefits S 4 Migration requirements for alternative 4 Flexibility of access resourcing model Ramesh Krish Proprietary and Confidential P23
  25. 25. 6 Functional Placement Ramesh Krish Proprietary and Confidential P24
  26. 26. Future Vision – Functional Placement In order to determine which accounting functions and activities could be included in a shared services environment, a selection framework was designed and applied across Company A Country A Shared Services Selection Criteria Value to Business Area Applicability Screen Screen Client-Centric Attributes Content Governance High Volume Risk Strategic Value Specialization Transactional Common Potential Accounting Shared Functions Services Candidates •Is the function •Does the function •Is the function •Is the function Key critical to require unique skills or related to discrete performed by or for Enablers business and/or knowledge? areas of work? multiple business business areas with little area(s)? customization? •Does the function •Is the function •Are significant •Would the risks of directly touch the related to policy or volumes of the function execution client or client stewardship? transactions be increased? systems in a handled? material manner? Is there high-risk effect on the Ramesh Krish client? Proprietary and Confidential P25
  27. 27. Future Vision – Functional Placement The degree of consolidation was determined by defining three levels of the envisioned organization and establishing principles to help determine functional placement. Levels Functional Placement Principles Implications • Corporate governance and policy-setting • Global activities remain at a corporate level that functions serve as a governance or policy-setting entity • Compliance tracking functions • Some global functions could be “outsourced” to Corporate Corporate • External regulatory relationship functions: the regional shared services center (Global) (Global) - Reporting & regulatory compliance - Shareholder relations • Enterprise-wide financial analysis and planning • Common, homogenous functions • Consolidation of transactional activities with • Scalable, transactional processes common processes promote: • Accounting activities that do not require - Consistent and standardized processes and controls Regional Regional intimate client involvement - Higher data integrity (Country A) (Country A) - Greater operational flexibility and scalability - Lower cost structure • Increased visibility into enterprise-wide financial information • Activities that require proximity to client personnel • Reduced focus on low-value transactional or specialized knowledge of local markets processing increases focus on sales and service • Activities that produce direct accounting inputs • Increased financial analysis capacity Business Business into financials of clients and/or underwriting Area Area • Client-centric activities remain close to clients partners • Business Area Financial Planning & Analysis activities Ramesh Krish Proprietary and Confidential P26
  28. 28. Future Vision – Functional Placement Accounting activities are divided across five functional groups and classified according to the organization level at which the activities will be performed (slides 8-9). Activities2 classified as “Regional” are strong candidates for centralization into an accounting shared services center. Financial Planning & Client-Centric Non-Client-Centric Financial & Regulatory Analysis Operational Accounting Operational Accounting Financial Accounting Reporting • Translate business strategy • Record operational transactions • Record operational transactions • Record general ledger • Prepare accurate, valid into operational and capital and prepare accounting data and and prepare accounting data transactions at the corporate reporting to meet statutory, plans for parent company and reports and reports (global) level and at the SEC, and Shareholder needs Description Description business areas • Produce direct accounting inputs • Primarily for internal use; no regional level in shared • Support operations with into financials and/or access clients rely significantly on service centers reporting analysis and advice financial systems of clients function for external reporting • Monitor and maintain general and/or underwriting partners; ledger accounts key part of sales and service process • Possible Shared Services Center All Activities Reside at • Fiduciary Accounting • General Ledger • Specific Business Area Audits & to support Business Area Business Area Level − Fiduciary Payables − GL Processing Regulatory Reporting, if any Analysis − Fiduciary Receivables − Journal Voucher Processing − Client Setup − Shared Facilities & Expense • Client Receivables Accounting − Premiums & Claims − GL Maintenance Receivable − Consolidations − Premiums & Claims − Tax Documentation Collections − Non-Trade Intercompany − Billing Transactions Regional − Client Service Time & Expense • Special Events Accounting Regional • Revenue Only Accruals & − Mergers & Acquisitions Commissions • Account Reconciliations − Revenue Accruals − Account Reconciliations − Commission Calculations − Non-Trade Accounts Receivable • General Ledger & Collections − Trade Intercompany • Cap-Ex Accounting Transactions − Capital Expenditures − Journal Voucher Processing − Non-Capitalized Projects − Business Systems & GL Feeds − Fixed Assets • Shared Services Centers – Existing − Payroll – HR & Benefits − Vendors Payable Ramesh Krish Functions mapping and definitions are located in the Appendix. 2 Accounting Proprietary and Confidential P27
  29. 29. Future Vision – Functional Placement Activities3 classified as “Business Area” and “Corporate” will not be consolidated into the accounting shared services center. Financial Planning & Client-Centric Non-Client-Centric Financial & Regulatory Analysis Operational Accounting Operational Accounting Financial Accounting Reporting • Internal Performance Reporting • Fiduciary Accounting All Activities Reside at All Activities Reside All Activities Reside • Analysis & Forecasting − Fiduciary Payables Regional Level at Regional or at Corporate Level, except − Planning & Budgeting − Fiduciary Receivables Corporate Levels Specific Business Area Audits − Client / Broker Profitability − Client Setup & Regulatory Reporting • Billing & Collection • Client External Reporting Assistance, as required • Client Receivables − Premiums & Claims Receivable Business Area Business Area • Overrides from Carriers/ − Premiums & Claims Collections Suppliers − Billing • Contingent Commissions from • Revenue Only Accruals & Carriers Commissions • Limited Revenue & Accrual − Revenue Accruals Analysis − Commission Calculations − Incentive Compensation • General Ledger − Deferred Revenues − Trade Intercompany − Bad Debt Allowance Transactions Reserves − Journal Voucher Processing − Work in Progress Reserves − Business Systems & GL Feeds • Quality Assurance • Internal Performance Reporting All Activities Reside at All Activities Reside at • General Ledger • External Reporting • Analysis & Forecasting Business Area Level Regional Level − GL Processing • Financial Statement − Planning & Budgeting − Journal Voucher Processing Preparation − Client / Broker Profitability − Shared Facilities & Expense Accounting • Financial Accounting • Quality Assurance − GL Maintenance Governance − Consolidations − Financial Accounting − Tax Documentation Policies & Procedures − Non-Trade Intercompany − Standards & Reporting Eliminations Package • Special Events Accounting − Sarbanes-Oxley Corporate Corporate − Litigation Compliance − Mergers & Acquisitions • Account Reconciliations − Account Reconciliations − Non-Trade Accounts Receivable & Collections • Cap-Ex Accounting − Capital Expenditures − Non-Capitalized Projects − Fixed Assets • Corporate Financial Systems • Shared Services Centers – Existing − Investment Accounting4 Accounting Functions mapping and definitions are located in the Appendix. 3 Ramesh Krish 4 Investment Accounting is already in a shared services center. Proprietary and Confidential P28
  30. 30. 7 Finance & Accounting Process Design Ramesh Krish Proprietary and Confidential P29
  31. 31. Accounting Functions The following is a list of all accounting activities separated into the five functional groups. Functional Groups Financial Planning & Client-Centric Non-Client-Centric Financial & Regulatory Analysis Operational Accounting Operational Accounting Financial Accounting Reporting •Internal Performance •Fiduciary Accounting •Fiduciary Accounting •General Ledger •External Reporting Reporting − Fiduciary Payables − Fiduciary Payables − GL Processing •Financial Statement •Analysis & Forecasting − Fiduciary Receivables − Fiduciary Receivables − Journal Voucher Preparation − Planning & Budgeting − Client Setup − Client Setup Processing − Shared Facilities & •Financial Accounting − Client / Broker •Client External Reporting •Client Receivables Governance Profitability − Premiums & Claims Expense Accounting •Client Receivables − GL Maintenance − Financial Accounting •Billing & Collections Receivable Policies & Procedures − Premiums & Claims − Consolidations Assistance, as required − Premiums & Claims − Standards & Reporting Receivable − Tax Documentation Collections Package •Overrides from Carriers/ − Premiums & Claims − Non-Trade Intercompany − Billing − Sarbanes-Oxley Suppliers Collections Eliminations − Client Service Time & Compliance − Billing •Contingent Commissions Expense •Special Events Accounting from Carriers •Revenue Only Accruals & − Litigation •Specific Business Area •Revenue Only Accruals & Audits & Regulatory Commissions − Mergers & Acquisitions •Limited Revenue & Accrual Commissions Reporting, if any − Revenue Accruals Analysis − Revenue Accruals •Account Reconciliations − Commission Calculations − Incentive Compensation − Commission Calculations − Account Reconciliations − Deferred Revenues •General Ledger − Non-Trade Accounts •General Ledger − Bad Debt Allowance − Trade Intercompany Receivable & Collections − Trade Intercompany Reserves Transactions •Cap-Ex Accounting Transactions − Work in Progress − Journal Voucher − Capital Expenditures − Journal Voucher Reserves Processing − Non-Capitalized Projects Processing − Business Systems & GL − Fixed Assets •Quality Assurance − Business Systems & GL Feeds Feeds •Corporate Financial Systems •Shared Services Centers − Payroll – HR & Benefits − Investment Accounting − Vendors Payable Ramesh Krish Proprietary and Confidential P30
  32. 32. Business Area Financial Planning & Analysis – Functional Description Internal Performance Reporting responsibilities: Prepare reports comparing budget amounts to actual performance and current period performance to prior periods, reports projecting future performance, and special or ad-hoc financial and operational reports based on managerial needs Review established strategic and business performance targets, assess and support business performance reporting, balancing between internal and external information, historical and predictive (leading) information and financial and non-financial information Partner with operating management and act as business advisors; regularly attend operational staff meetings Analysis & Forecasting responsibilities: Operate and maintain budget tools, set up and populate assumptions, prepare planning guidelines, and produce budgets for review Prepare strategic (multi-year), operational and capital Budgetary Business Plans (1 year) Develop rolling forecast, collect and consolidate forecasts, perform reiterations focused on identifying ways to meet operational targets (e.g., “what-if” scenarios and sensitivity analyses) Prepare reports analyzing clients and staff area profitability, as appropriate Assess opportunities for strategic alliances, acquisitions and divestitures Overrides from Carriers/Suppliers and Contingent Commissions from Carriers responsibilities: Monitor and assess commission fee arrangements with carriers and suppliers that are based on previously selected criteria for volume or item counts and ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Monitor and assess commission payments from carriers and suppliers that are based on previously selected criteria for volume and underwriting results and ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies; challenge reasonableness of reported underwriting results factor Limited Revenue & Accrual Analysis responsibilities: Monitor and assess incentive payment programs for personnel that are based on factors such as revenue and pre-tax income, and ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Analyze revenue and expense recognition for long term service and sales contracts to ensure deferred revenue/ expense reserves are recorded on a timely and appropriate basis based on Company A policies. Monitor contract for any long term potential profitability deficiencies Monitor and assess required reserves for Business Area or company receivables and unbilled consulting services Quality Assurance responsibilities: Evaluate reasonableness of business area results through variance analysis, discussions, and review of business and financial systems data and identify unexpected or unusual items The Business Area’s Financial Planning & Analysis resources will focus on business area-driven analysis and reporting. The following broadly describes the envisioned responsibilities of the future FP&A position in the Business Area. Ramesh Krish Proprietary and Confidential P31
  33. 33. Accounting Functions – Mapping Summary The following matrix (on slides 20-22) maps all accounting activities to their “future” organizational placements. Those activities listed in the “Regional” column are the initial targets for a shared services center. All other functionality remains unchanged from current positioning. Corporate Regional Business Function/ Activity (Global) (Country A) Area Internal Performance Reporting + + Analysis & Forecasting • Planning & Budgeting + + Financial Planning & Analysis Financial Planning & Analysis • Client/ Broker Profitability + + Billing & Collections Assistance + Overrides From Carriers/ Suppliers + Contingent Commissions From Carriers + Limited Revenue & Accrual Analysis • Incentive Compensation + • Deferred Revenue Analysis + • Bad Debt Allowance Reserves + • Work in Progress Reserves + Quality Assurance + + Fiduciary Accounting • Fiduciary Payables + • Fiduciary Receivables + Operational Accounting Operational Accounting • Client Setup + + Client-Centric Client External Reporting Client-Centric Client Receivables • Premiums & Claims Receivable + • Premiums & Claims Collections + • Billing + Revenue Only Accruals & Commissions • Revenue Accruals Accounting + • Commission Calculations + Ramesh Krish Proprietary and Confidential P32
  34. 34. Accounting Functions – Mapping Summary Corporate Regional Business Client-Centric Function/ Activity (Global) (Country Area A) Client-Centric Operational General Ledger Accounting Operational Accounting • Trade Intercompany Transactions + • Journal Voucher Processing + • Business Systems & GL Feeds + Fiduciary Accounting • Fiduciary Payables + • Fiduciary Receivables + • Client Setup + Client Receivables Operational Accounting Operational Accounting • Premiums & Claims Receivable + Non-Client-Centric Non-Client-Centric • Premiums & Claims Collections + • Billing + • Client Service Time & Expense Accounting Revenue Only Accruals & Commissions • Revenue Accruals Accounting + • Commission Calculations + General Ledger • Trade Intercompany Transactions + • Journal Voucher Processing + • Business Systems & GL Feeds + General Ledger & Cost Accounting Accounting Accounting • General Ledger Processing + + Financial Financial • Journal Voucher Processing + + • Shared Facilities & Expense Accounting + + • General Ledger Maintenance + + Ramesh Krish Proprietary and Confidential P33

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