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I process framework shared services

The document discusses creating intelligent and cost-conscious shared services processes. It outlines an approach to shared services that involves assessing the current state, formulating options, conducting feasibility analyses, and developing a low-cost model. Key objectives are discussed such as strategic alignment. A shared services vision and structure is presented using accounts payable as a pilot function. The rationale for a shared services center is described as providing a service-oriented and scalable infrastructure with appropriate accountability.

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Introduction to iProcess, focusing on creating intelligent, cost-effective processes for shared services.

Overview of value creation approach including assessment, model development, and governance for shared service implementation.

Defining key objectives and a structured approach to Business Support Services with a focus on the Accounts Payable pilot.

Vision for an Accounts Payable Service Center emphasizing process efficiency, service quality, and cost savings.

Different organizational models for shared services including centralized, hybrid, distributed, and hosted options.

Framework for assessing cost structures and benchmarking across sectors to determine shared service viability.

Strategies for effectively deploying shared services, focusing on outsourcing benefits and guiding principles.

Designing future organizational structures around shared services including function placement and governance. Assessment of risks in implementing shared services with mitigation strategies and a summary of key practices.

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iprocess creating intelligent and cost conscious processes for shared services
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
1 iProcess Value Creation Approach Ramesh Krish Proprietary and Confidential P2
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
2 Shared Services Vision Ramesh Krish Proprietary and Confidential P4
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
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
3 Shared Services Rationale Ramesh Krish Proprietary and Confidential P7
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
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
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
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
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
4 Shared Services Deployment Ramesh Krish Proprietary and Confidential P13
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
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
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
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
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.
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
5 Alternate Shared Services Models Ramesh Krish Proprietary and Confidential P20
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
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
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
6 Functional Placement Ramesh Krish Proprietary and Confidential P24
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
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
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
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
7 Finance & Accounting Process Design Ramesh Krish Proprietary and Confidential P29
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
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
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
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
Accounting Functions – Mapping Summary Corporate Regional Business Function/ Activity (Global) (Country Area General Ledger & Cost Accounting (continued) A) • Consolidations Accounting + + • Tax Documentation + + • Non-Trade Intercompany Eliminations + + Special Events Accounting • Litigation Accounting + • Mergers & Acquisitions Accounting + + Financial Accounting Financial Accounting Account Reconciliations • Account Reconciliations + + • Non-Trade Accounts Receivable & Collections + + Capital Expenditures Accounting • Capital Expenditures + + • Non-Capitalized Projects + + • Fixed Assets Accounting + + Corporate Financial Systems + Shared Services Centers - Existing • Payroll – Human Resources & Benefits + • Investment Accounting + • Vendors Payable + External Reporting + + Regulatory Reporting Regulatory Reporting Financial Statement Preparation + Financial & Financial & Financial Accounting Governance • Financial Accounting Policies & Procedures + + • Standards & Reporting Package + • Sarbanes-Oxley Compliance + Business Area Audit Regulatory Reporting + Ramesh Krish Proprietary and Confidential P34
Accounting Functions – Activities & Definitions Function/ Activity Definition Internal Performance Reporting Prepare reports comparing budget amounts to actual performance and current period performance to prior periods, reports projecting future performance, and reports for special or ad-hoc managerial needs Planning & Budgeting Operate and maintain budget tools, set up and populate assumptions, prepare planning guidelines, and produce budgets for review. Develop strategic planning process and forecasts for departments and overall corporation Client/ Broker Profitability Initially for fee and negotiated commission assignments – assist and challenge business areas in setting profitable pricing and reporting on profitability of individual agreements. Develop into reporting on revenue and expenses per client/ broker and related profitability Financial Planning & Analysis Financial Planning & Analysis Billing & Collections Assistance Assist business areas in following up on accounts receivable and collections owed to Company A Overrides from Carriers/ Suppliers Monitor and assess commission fee arrangements with carriers and suppliers that are based on previously selected criteria for volume or item counts. Ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Contingent Commissions from Carriers Monitor and assess commission payments from carriers and suppliers that are based on previously selected criteria for volume and underwriting results. Ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Incentive Compensation Monitor and assess incentive payment programs for personnel that are based on (1) revenue; (2) revenue and pre-tax income; (3) pre-tax income; or (4) commissions and incentives paid out as variable salary or as straight payouts. Ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Deferred Revenues Analysis Plan and analyze activity deposits and cash Company A receives prior to the completion of the sale service process and monitor proper income recognition/expense referral as appropriate Bad Debt Allowance Reserves Monitor and assess required reserves for Company A receivables Work in Progress Reserves Monitor and assess reserves for Company A unbilled consulting services Quality Assurance Through variance analysis, discussions, and review of Business and financial systems data evaluate reasonableness of results and identify unexpected or unusual items Fiduciary Payables Account and process distributions for premiums received from clients and owed to insurance carriers or Client- & Non-Client-Centric suppliers Client- & Non-Client-Centric Operational Accounting Operational Accounting Fiduciary Receivables Account for and process receipts of premiums due from clients that Company A must then remit to insurance carriers or suppliers and account for and process payments of service fee revenue owed to Company A Client Setup Establish contact, billing, credit, and tax information about clients new to Company A on appropriate systems and process changes when appropriate Client External Reporting Develop external reports for clients (e.g., Business Unit 1 maintains data to develop client’s Schedule F). This function resides in Client-Centric Operational Accounting only Premiums & Claims Receivable Monitor and track on accounts owed to Company A by clients for premium income or claims Premiums & Claims Collections Monitor, track, and report on past due accounts by following up with appropriate business areas on accounts owed to Company A by clients for premiums or claims. Ensure business areas are following Company A expense recognition policies Ramesh Krish Proprietary and Confidential P35
Accounting Functions – Activities & Definitions Function/ Activity Definition Billing Prepare and mail invoices to clients and underwriters Client Service Time & Expense Accounting Monitor work in progress to ensure timely client billings are being sent. This function resides in Non-Client- Centric Operational Accounting only Client- & Non-Client-Centric Client- & Non-Client-Centric Operational Accounting Revenue Accruals Accounting Calculate accruals for sales of products or services and record entries in the general ledger on a timely basis Operational Accounting based on Company A revenue recognition policies Commission Calculations Calculate commissions due from carriers Trade Intercompany Transactions Transactions that occur within Company A’s books and involve an outside client. These transactions involve one business area providing a service to another area that ultimately provides that service to the client or a transfer of service within one business area that is then provided to the client Journal Voucher Processing Manual entries in general ledger to adjust/supplement automated entries made at the business area/regional level Business Systems & GL Feeds Technical support for maintenance of the feeds to the general ledger system and balancing of interfaces General Ledger Processing Automated execution of journal entries into the general ledger either at the corporate or business area and regional level Journal Voucher Processing Manual entries in general ledger to adjust/supplement automated processing entries made at the corporate, regional, or business area level Shared Facilities & Expense Accounting Develop appropriate allocation and transfer pricing methods for the spreading of centrally shared costs that arise from activities spanning multiple business area (e.g., stock awards, rent, bank charges, check processing). Ensure transfer pricing is set on a fair and consistent basis with benchmarking to outside resources General Ledger Maintenance Maintain corporate chart of accounts, add new accounts, and modify existing accounts at the corporate or Financial Accounting Financial Accounting regional level Consolidations Accounting Complete final roll up of corporate financial statements into the parent company at the Corporate Level or into business area or regions on a regional level. Monitor period-end process to ensure all business areas are complying with corporate policy and procedures Tax Documentation Implement policies and procedures designed by corporate to process accounting entries that comply with tax preparation, planning and documentation retention policies to the greatest extent possible to eliminate duplicate efforts Non-Trade Intercompany Eliminations Transactions that occur entirely within Company A’s books; transactions in which one business area is providing a function, product, or service to another area or there is a transfer of service within one business area. Eliminations are the entries that back out these transactions. Litigation Accounting Account for the potential losses and gains associated with lawsuits filed against and on behalf of the organization Mergers & Acquisitions Accounting Prepare and process transactions that arise out of acquisitions of other organizations by Company A at parent or subsidiary level and coordinate and obtain concurrence on valuation work Ramesh Krish Proprietary and Confidential P36
Accounting Functions – Activities & Definitions Function/ Activity Definition Account Reconciliations Prepare reconciliations of general ledger accounts to balances reported on supporting documents and track out of balances, suspense, and unreasonable items Non-Trade Accounts Receivable & Monitor accounts owed to the company from outside parties that is not related to insurance premiums, normal Collections consulting services, or claims and follow up with business areas and report on overdue receivables Capital Expenditures Account for new projects that require investment of capital and will be capitalized on the company’s balance sheet Non-Capitalized Projects Account for new projects that will not be capitalized on the company’s balance sheet Financial Accounting Fixed Assets Accounting Account for property, plant, and equipment. Process includes depreciation, asset revaluation, and disposal and Financial Accounting scrapping calculations Corporate Financial Systems Coordination of interfaces and feeds from treasury systems, NAFP, financial operating areas and other systems as appropriate to ensure integrity of Region A database and corporate consolidation database Payroll – Human Resources & Benefits Prepare and process transactions for payroll and benefits for employees and contractors (Shared Services) Investment Accounting (Shared Services) Account for investment holdings (derivatives, buy, sell, investment income, and accruals) and record entries for insurance company, global, and Country A region investments. Improve coordination with the Treasury system and expand investment accounting to other regions as Treasury system expands Vendors Payable (Shared Services) Accounts Company A owes to third parties for the provision of general services (i.e., phone service) Corporate NAFP Region A Financial Platform. System at transactional level in PeopleSoft for Vendors Payable, Accounts Receivable, General Ledger, and Fixed Assets External Reporting Prepare and deliver documents and reports, other than financial statements, Company A must file with parties outside the organization on a regular and ad-hoc basis Financial Statement Preparation Create and present full set of financial statements and management discussion and analyses for Shareholders, the SEC, and other regulators Financial & Regulatory Reporting Financial & Regulatory Reporting Financial Accounting Policies & Procedures Create guidelines at the corporate or business area level that govern the application of financial accounting policies and procedures and the documentation personnel must maintain when recording transactions Standards & Reporting Package Define reporting formats and other requirements for the submission of reports to corporate level from all regional areas Sarbanes-Oxley Compliance Develop corporate policies and procedures for compliance with Sarbanes-Oxley and monitor and assess business area’s compliance with the policies. Update the policies and procedures when and where appropriate Specific Business Area Audits & Regulatory Audited financial statements submitted to some Country A states by certain business areas to comply with Reporting state laws and regulations Ramesh Krish Proprietary and Confidential P37
8 Risk Assessment Ramesh Krish Proprietary and Confidential P38
Appendix - Way Forward Risk Assessment Output – Illustrative Example Key INCREASE IN SHAREHOLDER VALUE Objectives not met Objectives fully met Client's LONG TERM STRATEGIC OBJECTIVES STOP FIX OUTSOURCE Decentralization of processes Effective streamlined Costs are tied to SLA and functions will result in implementation will deliver agreements with external service COST duplication of functions and headcount and service benefits provider against predefined levels therefore headcount of service SERVICE Decentralization will permit Internal SLA agreements can be Service levels are tied to SLA’s, dedicated local teams but restrict used to maximise the level of which penalise poor quality QUALITY common systems and their service to both internal and delivery related process benefits external customers Common systems will permit Common systems and processes Common systems and processes VISIBILTY centralised visibility but restrict across SBUs will maximize across SBUs will maximize common operating procedures financial and service level financial and service level visibility visibility Integration of new country entities A centralized approach will High level of flexibility possible AGILITY will be lengthened while local maximise the efficiency of tied to the negotiated structure of support is built subsequent acquisitions the SLA A decentralized approach will A centralized approach will A large amount of control is CONTROL limit the level of control maximize the level of control ceded to the service provider but possible at SBU level can be limited by the structure of the negotiated SLA NON-VIABLE VIABLE VIABLE Ramesh Krish Proprietary and Confidential P39
Implementation Risks & Mitigation Plans Implementation of any significant operational change exposes the organization to risk. These risks have been identified and addressed through mitigating strategies. Implementation Risk Mitigation Plans “You Don’t Understand My Business” • Unique business needs are not fully understood by • The project organization has been designed to leverage the future internal customers design team leading to degradation of service levels of the shared services organization in its design and implementation in future organization. Insufficient Support by Finance Organization • A clear and compelling rationale for change must be communicated and reinforced • Finance personnel fail to embrace the vision, by senior management preferring to “stick to what has always worked”. • The project organization has been designed to leverage the future internal customers of the shared services organization in its design and implementation Business System Complexities • The service centers will be designed considering business system access • Shared services employees will need access to • Business areas will need to migrate to a limited number of business system instances multiple versions of key business systems, • New products will be placed onto existing business platforms potentially adding complexity. Concurrent PeopleSoft Upgrade • Clean-up activities associated with the upgrade would improve standardization and • An upgrade to PeopleSoft vX.X in the Country A is could facilitate centralization; however, its implementation would likely follow this being considered. This upgrade could result in a “re- initiative implementation” of PeopleSoft in the region. • Upgrade would enhance consistency and possibly allow for broader regionalization Transformation Hangover • Steering Committee members must assume active, visible leadership roles • Corporate and business areas may be weary and/or • Comprehensive detailed design and realistic, practical implementation plans must be skeptical of transformative initiatives based on developed and actively supported by senior management results of recent unsuccessful, strategic projects. Standard Functional Job Design • Business area financial support must remain decentralized even if it results in over- • Low-scale, decentralized accounting operations staffing in the near term likely have integrated position descriptions that may • Clear, standard definitions of accounting positions will help bring clarity to be difficult to segregate. integrated roles and headcount Service Quality Degradation • Existing business area service levels will be documented during the design phase • Business areas perceive loss of control and/or and will serve as benchmarks for tracking performance and/or implementing service level degradation. Service Level Agreements (SLAs) with internal customers Ramesh Krish Proprietary and Confidential P40
9 Organizational Design & Governance Ramesh Krish Proprietary and Confidential P41
Future Vision – Organization Design This represents a design option that consolidates the regional accounting shared services organization under the Enterprise Controller. Certain functions remain in existing areas consistent with design principles. Finance Controller Finance Controller ILLUSTRATIVE Management Management Business Area Corporate Financial Corporate Financial Financial & Financial & Global Financial Global Financial Accounting Shared Accounting Shared Insurance Company Insurance Company Business Area Management Planning & Analysis Planning & Analysis Regulatory Reporting Regulatory Reporting Accounting Accounting Services Management Services Management Operations Accounting Operations Accounting Management Locations: Locations: Locations: Locations: • Utilize Payroll, • Anytown, Country A • Anytown, Country A • Anytown, Country A • Anytown, Country Vendor Payables, and Functions: Functions: Functions: A Investment Business Area Business Area Accounting Shared • Internal Performance • External Reporting • General Ledger & Functions: Services Centers Financial Planning Financial Planning Reporting Cost Accounting • Standards • Financial Statement & Analysis & Analysis • Analysis & Preparation • Special Events Development • Utilize Corporate Locations: Forecasting Accounting • Accounting & NAFP • Financial Accounting • As Appropriate • Quality Assurance Governance • Account Control Policies Functions: Reconciliations • Financial Systems • Internal Performance • Cap-Ex Accounting Reporting • Corporate Financial • Analysis & Systems Forecasting • Shared Services Regional Financial Non-Client Operational Client Operational Regional Financial Non-Client Operational Client Operational Centers (Investment • Billing & Collection Accounting) Accounting Accounting Accounting Accounting Accounting Accounting Assistance, as required Locations: Locations: Locations: • Overrides from • Anytown, Country A • Anytown, Country A • BU 1 – Anytown, Carriers/ Suppliers • Anywhere, Country A • Anywhere, Country A Country A • BU 2 – Anywhere, • Contingent Functions: Functions: Country A Commissions from • General Ledger & • Fiduciary Accounting Carriers Cost Accounting • BU 3 – Anycity, Country • Client Receivables A • Limited Revenue & • Special Events • Revenue Only • BU 4 – Anyvillage, Accrual Analysis Accounting Accruals & Country A • Quality Assurance • Account Commissions Reconciliations Functions: • General Ledger • Cap-Ex Accounting • Fiduciary Accounting • Shared Services • Client External Centers (Vendors Reporting Payable & Payroll) • Client Receivables • Revenue Only Accruals & Commissions Ramesh Krish • General Ledger Proprietary and Confidential P42
Best in Class Practices - A/P Operations Sample of recommendations Sample of key success factors for optimizing A/P operations when implementing a Shared Service Center Conduct Education & Training: An executive sponsorship should stress the importance Encourage consistent and appropriate use of the buying process by and value of moving towards an SSC. educating internal clients on the “How to Buy” policy. Involve the entire set of stakeholders in the project. Decrease exceptions in the ERS process by educating vendors to Do not underestimate the amounts of time, resources stop sending invoices and verify they will be able to apply payment and energy needed to change corporate operations and based on the new information on the check stub. culture. Improve awareness of all SAP functionality by training A/P Assemble cross-functional project teams with members department (e.g., automatic invoice reduction capability). chosen for their skill and experience. Ensure complete “buy-in” process understanding through cross- Consider the language skills of the SSC personnel to training of A/P and Purchasing personnel. provide an optimal service to internal or external Enforce Appropriate Accountability: customers. Encourage Purchasing to enter accurate and necessary data by Evaluate/Select candidates for new functions based increasing their understanding of the impact on A/P’s processes. upon specific competency profiles. Improve vendor invoice quality by returning incomplete invoices. Cross-training and shared capabilities facilitates Designate process champions to enforce appropriate accountability replacement during holidays/illness and allows job People where users are left to make their own process decision. rotation that may improve employee morale and productivity. Improve invoice approver accountability by implementing the deadline monitoring feature in workflow, which notifies individuals when an Identify the process owners that will have to deal with invoice is not approved in a timely manner. all the process-related accountabilities. Identify a key contact person for each client group. Build Effective Organisation: Manage clearly expectations of internal stakeholders Improve communication with Purchasing to foster an understanding and customers as a service “degradation” may be of the interrelated nature of the groups and encourage quick inquiry expected during the kick-off period of the “go-live”. response time. Using performance measure, create incentives and Enforce consistency and process analysis by creating and enforcing rewards to motivate people and continuously improve guiding policies and procedures. their efforts. Align the A/P support group with the Purchasing support group. Define governance agreements, coordination standards and establish a communication culture. Ramesh Krish Proprietary and Confidential P43
Best in Class Practices - A/P Operations Sample of recommendations Sample of key success factors for optimizing A/P operations when implementing a Shared Service Center Increase Simplification: Measure the potential benefits of an Partner with vendors to consolidate remit-to addresses, where implementation and even compare them with appropriate. some alternatives. Eliminate steps in the non-PO process and x% of A/P Use a business case to identify costs & benefits exceptions by enabling the client to enter the invoice in SAP, but also as communication tool to convince the route it for approval and post it. people involved of the necessity of the SSC (buy- Reduce manual processing by defining a clear and efficient in). process for handling freight. Focus on removing transactions before making Increase Process Effectiveness: them more efficient. Provide input to Purchasing on the ERS process, simplification Harmonize first the policies, then move to one of remit-to vendor selection and establishing a “How to Buy” common process. policy. Set clear measures for customer satisfaction and Reduce cycle time by enabling A/P processors to change the communicate to the entire customer organisation. Set performance measures to evaluate the value, Process vendor at invoice time. level of service and cost of services provided i.e. Minimize costly payments by eliminating manual checks and decreasing number of wire transfers. using the balanced scorecard approach. Reduce indexing time and improve look-up capability by linking Gain upfront consensus on Service Level the imaging system to SAP. Agreements (SLAs) which formalize commitments between the SSC and the customer/BUs and Eliminate inter-office mailing of payments and reduce cycle provide an ongoing forum for communicating time by printing A/P checks at the same physical location as expectations. the A/P department. Develop a pricing policy and establish direct and Analyze entry of invoices via ESS (Employee Self Service) by indirect cost allocations through time reporting end-users. and internal audit controls to ensure the validity of Analyze entry of invoices and look-up capability via Vendor the SSC charges and performance. Self Service (e-Procurement system or Internet front-end) by Compare the performance of the SSC to a true vendors. external market (i.e. outsourcing) and/or to benchmarks. Ramesh Krish Proprietary and Confidential P44
Best in Class Practices - A/P Operations Sample of recommendations Sample of key success factors for optimizing A/P operations when implementing a Shared Service Center Increase Flexibility: Systems play an important role in achieving a Reduce check processing by increasing the use of electronic successful and sustainable SSC implementation. payments. Ensure that shared services design is flexible and Decrease the number of invoices by increasing the use of ERS scalable to support future acquisitions and once the vendors establish they will be able to apply payment divestitures easily. with a bill of lading number. Utilize technologies based on business needs. Minimize manual handling through implementation of workflow Use technologies that can be leveraged and to route documents electronically for further processing. supported throughout the organisation. Limit manual processing by increasing the use of P-Cards and Rationalize first the different systems/used forcing users to charge their default account assignment. functionalities, then move to one system/to a Decrease processing time by using the Invoice Verification common use of optimal functionalities. transaction for processing PO invoices and / or upgrading to Incorporate self-service as a critical component in last SAP release. a shared services environment. Technology Partner with banks to create a plan to enable processing of EDI payments larger than € x million. Develop a migration plan that eases the transition from the “as-is” to the “to-be” environment. Partner with vendors to increase the use of ERS and EDI, both Address security for facilities, data and for inbound invoices and outbound payments, in order to applications both from an internal and external reduce manual invoices. perspective. Evaluate maturity and cost / benefit (if appropriate) of emerging Maintain adequate backup facilities and disaster technologies for A/P data input and validation. recovery plans. Analyze and implement new P-Card program to enable Make a motivated choice between a greenfield automated account distribution at the line item level. (new) and a brownfield (extended existing) location for the SSC. Ramesh Krish Proprietary and Confidential P45
Outsourcing and Contract Management Phases Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 Identification of Business Case Evaluation and Implementation and Contract Contract Migration Outsourcing Selection Transition Management Opportunities 1.1 Document / Confirm 2.1 Identify Service 3.1 Develop Evaluation 4.1 Develop 5.1 Liaise with User 6.1 Evaluate Options Strategic Direction Providers Mechanism Implementation Groups 6.2 Retain Existing 1.2 Identify Candidate 2.2 Examine 3.2 Issue Request for Plan 5.2 Manage Service Service Provider Services Outsourcing Viability Tender 4.2 Negotiate Contract Levels 6.3 Select 1.3 Document Service 2.3 Consider 3.3 Conduct Service Profile Reorganization Provider 4.3 Prepare for 5.3 Monitor Replacement Options Evaluations Handover Performance Service Provider 1.4 Prepare Scoping Report 2.4 Develop Business 3.4 Select Preferred 4.4 Transition to 5.4 Administer Contract 6.4 Migrate to In- Case Service Provider(s) service provider House Services Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Identification of those Identification of those Comparison of internal Comparison of internal Evaluation of Evaluation of Finalization of the Finalization of the Proper management of Proper management of Effective planning and Effective planning and areas to be considered areas to be considered operations with operations with alternative service alternative service outsourcing contract so outsourcing contract so the day-to-day the day-to-day management through management through for outsourcing and to for outsourcing and to external options both external options both providers and the providers and the as to ensure aasmooth as to ensure smooth outsourcing outsourcing the conclusion of the the conclusion of the document the current document the current from aacost and service from cost and service selection of aapreferred selection of preferred transition to the transition to the arrangements to ensure arrangements to ensure outsourcing contract outsourcing contract and required services and required services perspective to perspective to service provider(s) in service provider(s) in outsourcing outsourcing that they operate as that they operate as and the implementation and the implementation provision. provision. determine whether to determine whether to accordance with the accordance with the arrangements. arrangements. planned and meet planned and meet of arrangements for of arrangements for proceed forward proceed forward acquisition strategy. acquisition strategy. required standards. required standards. future service delivery. future service delivery. Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Are there services that Are there services that Are there potential Are there potential Will the evaluation Will the evaluation Do the implementation Do the implementation Are the service Are the service Has the current service Has the current service could be outsourced? could be outsourced? service providers who process withstand the plans contain realistic requirements of provider delivered service providers who process withstand the plans contain realistic requirements of provider delivered Is outsourcing relevant could deliver the required could deliver the required test of probity? test of probity? dates which permit an dates which permit an business units being business units being satisfactory services? satisfactory services? Is outsourcing relevant services? orderly transition? met? in the context of the in the context of the services? Which service provider orderly transition? met? Should consideration Department or Agency’s Which service provider Should consideration Department or Agency’s Are there reorganization is preferred? Does the contract Have the service be given to alternative operations? operations? Are there reorganization is preferred? Does the contract Have the service be given to alternative possibilities that offer possibilities that offer properly define the properly define the requirements requirements service providers? service providers? Should the option of viable options to Does the scope of the Does the scope of the service requirements? changed? Should the option of viable options to services to be service requirements? changed? Has the provision of outsourcing be outsourcing be outsourcing? services to be Has the provision of considered further? outsourcing? outsourced meet the Are the Government’s Is the service provider services been fully considered further? outsourced meet the Are the Government’s Is the service provider services been fully Does aabusiness case Does business case real requirements? real requirements? interests protected by interests protected by providing the services providing the services migrated from the migrated from the Have the staffing issues Have the staffing issues exist to proceed with the contract? in aasatisfactory previous contractual been considered? exist to proceed with Are the Tender Report the contract? in satisfactory previous contractual been considered? outsourcing? Are the Tender Report manner? arrangements to aanew outsourcing? recommendations Has the provision of manner? arrangements to new Are there strategic Are there strategic recommendations Has the provision of or revised set of or revised set of opportunities from the Has an acquisition Has an acquisition acceptable? acceptable? services been fully services been fully Are all outsourcing Are all outsourcing arrangements? opportunities from the strategy been developed transferred to the issues being arrangements? adoption of outsourcing adoption of outsourcing strategy been developed transferred to the issues being for one or more for one or more and approved? and approved? service provider? service provider? addressed in aatimely addressed in timely processes? processes? and effective manner? and effective manner? Outsourcing Outsourcing Business case for Business case for Evaluation process Evaluation process Contract signing and Contract signing and Performance Performance Outsourcing options Outsourcing options candidate services candidate services outsourcing outsourcing findings and findings and service transition service transition monitoring and monitoring and assessment and assessment and identified identified documented documented recommendations recommendations review review change management change management implementation implementation Ramesh Krish Proprietary and Confidential P46
i process Thank You Ramesh Krish Cell: 917-971-9701

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I process framework shared services

  • 1.
    iprocess creating intelligent andcost conscious processes for shared services
  • 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.
    1 iProcess Value Creation Approach Ramesh Krish Proprietary and Confidential P2
  • 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.
    2 Shared Services Vision Ramesh Krish Proprietary and Confidential P4
  • 6.
    Key Objectives We understandthat: - 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.
    Shared Services Structure Indefining 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.
    3 Shared Services Rationale Ramesh Krish Proprietary and Confidential P7
  • 9.
    Vision for anA/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.
    Why a SharedServices 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.
    Alternative Shared ServicesModels 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.
    Alternative Shared Servicesmodels 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.
    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.
    4 Shared ServicesDeployment Ramesh Krish Proprietary and Confidential P13
  • 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.
    The Shared ServicesAssessment 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.
    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.
    Implementation Approach GuidingPrinciples 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.
    Implementation High-Level Plan Anaggressive, 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.
    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.
    5 Alternate SharedServices Models Ramesh Krish Proprietary and Confidential P20
  • 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.
    Outsourcing – OptionsAssessment 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.
    Outsourcing – ExecutionRisk 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.
    6 Functional Placement Ramesh Krish Proprietary and Confidential P24
  • 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.
    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.
    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.
    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.
    7 Finance & Accounting Process Design Ramesh Krish Proprietary and Confidential P29
  • 31.
    Accounting Functions The followingis 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.
    Business Area FinancialPlanning & 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.
    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.
    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
  • 35.
    Accounting Functions –Mapping Summary Corporate Regional Business Function/ Activity (Global) (Country Area General Ledger & Cost Accounting (continued) A) • Consolidations Accounting + + • Tax Documentation + + • Non-Trade Intercompany Eliminations + + Special Events Accounting • Litigation Accounting + • Mergers & Acquisitions Accounting + + Financial Accounting Financial Accounting Account Reconciliations • Account Reconciliations + + • Non-Trade Accounts Receivable & Collections + + Capital Expenditures Accounting • Capital Expenditures + + • Non-Capitalized Projects + + • Fixed Assets Accounting + + Corporate Financial Systems + Shared Services Centers - Existing • Payroll – Human Resources & Benefits + • Investment Accounting + • Vendors Payable + External Reporting + + Regulatory Reporting Regulatory Reporting Financial Statement Preparation + Financial & Financial & Financial Accounting Governance • Financial Accounting Policies & Procedures + + • Standards & Reporting Package + • Sarbanes-Oxley Compliance + Business Area Audit Regulatory Reporting + Ramesh Krish Proprietary and Confidential P34
  • 36.
    Accounting Functions –Activities & Definitions Function/ Activity Definition Internal Performance Reporting Prepare reports comparing budget amounts to actual performance and current period performance to prior periods, reports projecting future performance, and reports for special or ad-hoc managerial needs Planning & Budgeting Operate and maintain budget tools, set up and populate assumptions, prepare planning guidelines, and produce budgets for review. Develop strategic planning process and forecasts for departments and overall corporation Client/ Broker Profitability Initially for fee and negotiated commission assignments – assist and challenge business areas in setting profitable pricing and reporting on profitability of individual agreements. Develop into reporting on revenue and expenses per client/ broker and related profitability Financial Planning & Analysis Financial Planning & Analysis Billing & Collections Assistance Assist business areas in following up on accounts receivable and collections owed to Company A Overrides from Carriers/ Suppliers Monitor and assess commission fee arrangements with carriers and suppliers that are based on previously selected criteria for volume or item counts. Ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Contingent Commissions from Carriers Monitor and assess commission payments from carriers and suppliers that are based on previously selected criteria for volume and underwriting results. Ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Incentive Compensation Monitor and assess incentive payment programs for personnel that are based on (1) revenue; (2) revenue and pre-tax income; (3) pre-tax income; or (4) commissions and incentives paid out as variable salary or as straight payouts. Ensure appropriate monthly accruals are recorded on a timely basis based on Company A revenue recognition policies Deferred Revenues Analysis Plan and analyze activity deposits and cash Company A receives prior to the completion of the sale service process and monitor proper income recognition/expense referral as appropriate Bad Debt Allowance Reserves Monitor and assess required reserves for Company A receivables Work in Progress Reserves Monitor and assess reserves for Company A unbilled consulting services Quality Assurance Through variance analysis, discussions, and review of Business and financial systems data evaluate reasonableness of results and identify unexpected or unusual items Fiduciary Payables Account and process distributions for premiums received from clients and owed to insurance carriers or Client- & Non-Client-Centric suppliers Client- & Non-Client-Centric Operational Accounting Operational Accounting Fiduciary Receivables Account for and process receipts of premiums due from clients that Company A must then remit to insurance carriers or suppliers and account for and process payments of service fee revenue owed to Company A Client Setup Establish contact, billing, credit, and tax information about clients new to Company A on appropriate systems and process changes when appropriate Client External Reporting Develop external reports for clients (e.g., Business Unit 1 maintains data to develop client’s Schedule F). This function resides in Client-Centric Operational Accounting only Premiums & Claims Receivable Monitor and track on accounts owed to Company A by clients for premium income or claims Premiums & Claims Collections Monitor, track, and report on past due accounts by following up with appropriate business areas on accounts owed to Company A by clients for premiums or claims. Ensure business areas are following Company A expense recognition policies Ramesh Krish Proprietary and Confidential P35
  • 37.
    Accounting Functions –Activities & Definitions Function/ Activity Definition Billing Prepare and mail invoices to clients and underwriters Client Service Time & Expense Accounting Monitor work in progress to ensure timely client billings are being sent. This function resides in Non-Client- Centric Operational Accounting only Client- & Non-Client-Centric Client- & Non-Client-Centric Operational Accounting Revenue Accruals Accounting Calculate accruals for sales of products or services and record entries in the general ledger on a timely basis Operational Accounting based on Company A revenue recognition policies Commission Calculations Calculate commissions due from carriers Trade Intercompany Transactions Transactions that occur within Company A’s books and involve an outside client. These transactions involve one business area providing a service to another area that ultimately provides that service to the client or a transfer of service within one business area that is then provided to the client Journal Voucher Processing Manual entries in general ledger to adjust/supplement automated entries made at the business area/regional level Business Systems & GL Feeds Technical support for maintenance of the feeds to the general ledger system and balancing of interfaces General Ledger Processing Automated execution of journal entries into the general ledger either at the corporate or business area and regional level Journal Voucher Processing Manual entries in general ledger to adjust/supplement automated processing entries made at the corporate, regional, or business area level Shared Facilities & Expense Accounting Develop appropriate allocation and transfer pricing methods for the spreading of centrally shared costs that arise from activities spanning multiple business area (e.g., stock awards, rent, bank charges, check processing). Ensure transfer pricing is set on a fair and consistent basis with benchmarking to outside resources General Ledger Maintenance Maintain corporate chart of accounts, add new accounts, and modify existing accounts at the corporate or Financial Accounting Financial Accounting regional level Consolidations Accounting Complete final roll up of corporate financial statements into the parent company at the Corporate Level or into business area or regions on a regional level. Monitor period-end process to ensure all business areas are complying with corporate policy and procedures Tax Documentation Implement policies and procedures designed by corporate to process accounting entries that comply with tax preparation, planning and documentation retention policies to the greatest extent possible to eliminate duplicate efforts Non-Trade Intercompany Eliminations Transactions that occur entirely within Company A’s books; transactions in which one business area is providing a function, product, or service to another area or there is a transfer of service within one business area. Eliminations are the entries that back out these transactions. Litigation Accounting Account for the potential losses and gains associated with lawsuits filed against and on behalf of the organization Mergers & Acquisitions Accounting Prepare and process transactions that arise out of acquisitions of other organizations by Company A at parent or subsidiary level and coordinate and obtain concurrence on valuation work Ramesh Krish Proprietary and Confidential P36
  • 38.
    Accounting Functions –Activities & Definitions Function/ Activity Definition Account Reconciliations Prepare reconciliations of general ledger accounts to balances reported on supporting documents and track out of balances, suspense, and unreasonable items Non-Trade Accounts Receivable & Monitor accounts owed to the company from outside parties that is not related to insurance premiums, normal Collections consulting services, or claims and follow up with business areas and report on overdue receivables Capital Expenditures Account for new projects that require investment of capital and will be capitalized on the company’s balance sheet Non-Capitalized Projects Account for new projects that will not be capitalized on the company’s balance sheet Financial Accounting Fixed Assets Accounting Account for property, plant, and equipment. Process includes depreciation, asset revaluation, and disposal and Financial Accounting scrapping calculations Corporate Financial Systems Coordination of interfaces and feeds from treasury systems, NAFP, financial operating areas and other systems as appropriate to ensure integrity of Region A database and corporate consolidation database Payroll – Human Resources & Benefits Prepare and process transactions for payroll and benefits for employees and contractors (Shared Services) Investment Accounting (Shared Services) Account for investment holdings (derivatives, buy, sell, investment income, and accruals) and record entries for insurance company, global, and Country A region investments. Improve coordination with the Treasury system and expand investment accounting to other regions as Treasury system expands Vendors Payable (Shared Services) Accounts Company A owes to third parties for the provision of general services (i.e., phone service) Corporate NAFP Region A Financial Platform. System at transactional level in PeopleSoft for Vendors Payable, Accounts Receivable, General Ledger, and Fixed Assets External Reporting Prepare and deliver documents and reports, other than financial statements, Company A must file with parties outside the organization on a regular and ad-hoc basis Financial Statement Preparation Create and present full set of financial statements and management discussion and analyses for Shareholders, the SEC, and other regulators Financial & Regulatory Reporting Financial & Regulatory Reporting Financial Accounting Policies & Procedures Create guidelines at the corporate or business area level that govern the application of financial accounting policies and procedures and the documentation personnel must maintain when recording transactions Standards & Reporting Package Define reporting formats and other requirements for the submission of reports to corporate level from all regional areas Sarbanes-Oxley Compliance Develop corporate policies and procedures for compliance with Sarbanes-Oxley and monitor and assess business area’s compliance with the policies. Update the policies and procedures when and where appropriate Specific Business Area Audits & Regulatory Audited financial statements submitted to some Country A states by certain business areas to comply with Reporting state laws and regulations Ramesh Krish Proprietary and Confidential P37
  • 39.
    8 Risk Assessment RameshKrish Proprietary and Confidential P38
  • 40.
    Appendix - WayForward Risk Assessment Output – Illustrative Example Key INCREASE IN SHAREHOLDER VALUE Objectives not met Objectives fully met Client's LONG TERM STRATEGIC OBJECTIVES STOP FIX OUTSOURCE Decentralization of processes Effective streamlined Costs are tied to SLA and functions will result in implementation will deliver agreements with external service COST duplication of functions and headcount and service benefits provider against predefined levels therefore headcount of service SERVICE Decentralization will permit Internal SLA agreements can be Service levels are tied to SLA’s, dedicated local teams but restrict used to maximise the level of which penalise poor quality QUALITY common systems and their service to both internal and delivery related process benefits external customers Common systems will permit Common systems and processes Common systems and processes VISIBILTY centralised visibility but restrict across SBUs will maximize across SBUs will maximize common operating procedures financial and service level financial and service level visibility visibility Integration of new country entities A centralized approach will High level of flexibility possible AGILITY will be lengthened while local maximise the efficiency of tied to the negotiated structure of support is built subsequent acquisitions the SLA A decentralized approach will A centralized approach will A large amount of control is CONTROL limit the level of control maximize the level of control ceded to the service provider but possible at SBU level can be limited by the structure of the negotiated SLA NON-VIABLE VIABLE VIABLE Ramesh Krish Proprietary and Confidential P39
  • 41.
    Implementation Risks &Mitigation Plans Implementation of any significant operational change exposes the organization to risk. These risks have been identified and addressed through mitigating strategies. Implementation Risk Mitigation Plans “You Don’t Understand My Business” • Unique business needs are not fully understood by • The project organization has been designed to leverage the future internal customers design team leading to degradation of service levels of the shared services organization in its design and implementation in future organization. Insufficient Support by Finance Organization • A clear and compelling rationale for change must be communicated and reinforced • Finance personnel fail to embrace the vision, by senior management preferring to “stick to what has always worked”. • The project organization has been designed to leverage the future internal customers of the shared services organization in its design and implementation Business System Complexities • The service centers will be designed considering business system access • Shared services employees will need access to • Business areas will need to migrate to a limited number of business system instances multiple versions of key business systems, • New products will be placed onto existing business platforms potentially adding complexity. Concurrent PeopleSoft Upgrade • Clean-up activities associated with the upgrade would improve standardization and • An upgrade to PeopleSoft vX.X in the Country A is could facilitate centralization; however, its implementation would likely follow this being considered. This upgrade could result in a “re- initiative implementation” of PeopleSoft in the region. • Upgrade would enhance consistency and possibly allow for broader regionalization Transformation Hangover • Steering Committee members must assume active, visible leadership roles • Corporate and business areas may be weary and/or • Comprehensive detailed design and realistic, practical implementation plans must be skeptical of transformative initiatives based on developed and actively supported by senior management results of recent unsuccessful, strategic projects. Standard Functional Job Design • Business area financial support must remain decentralized even if it results in over- • Low-scale, decentralized accounting operations staffing in the near term likely have integrated position descriptions that may • Clear, standard definitions of accounting positions will help bring clarity to be difficult to segregate. integrated roles and headcount Service Quality Degradation • Existing business area service levels will be documented during the design phase • Business areas perceive loss of control and/or and will serve as benchmarks for tracking performance and/or implementing service level degradation. Service Level Agreements (SLAs) with internal customers Ramesh Krish Proprietary and Confidential P40
  • 42.
    9 Organizational Design & Governance Ramesh Krish Proprietary and Confidential P41
  • 43.
    Future Vision –Organization Design This represents a design option that consolidates the regional accounting shared services organization under the Enterprise Controller. Certain functions remain in existing areas consistent with design principles. Finance Controller Finance Controller ILLUSTRATIVE Management Management Business Area Corporate Financial Corporate Financial Financial & Financial & Global Financial Global Financial Accounting Shared Accounting Shared Insurance Company Insurance Company Business Area Management Planning & Analysis Planning & Analysis Regulatory Reporting Regulatory Reporting Accounting Accounting Services Management Services Management Operations Accounting Operations Accounting Management Locations: Locations: Locations: Locations: • Utilize Payroll, • Anytown, Country A • Anytown, Country A • Anytown, Country A • Anytown, Country Vendor Payables, and Functions: Functions: Functions: A Investment Business Area Business Area Accounting Shared • Internal Performance • External Reporting • General Ledger & Functions: Services Centers Financial Planning Financial Planning Reporting Cost Accounting • Standards • Financial Statement & Analysis & Analysis • Analysis & Preparation • Special Events Development • Utilize Corporate Locations: Forecasting Accounting • Accounting & NAFP • Financial Accounting • As Appropriate • Quality Assurance Governance • Account Control Policies Functions: Reconciliations • Financial Systems • Internal Performance • Cap-Ex Accounting Reporting • Corporate Financial • Analysis & Systems Forecasting • Shared Services Regional Financial Non-Client Operational Client Operational Regional Financial Non-Client Operational Client Operational Centers (Investment • Billing & Collection Accounting) Accounting Accounting Accounting Accounting Accounting Accounting Assistance, as required Locations: Locations: Locations: • Overrides from • Anytown, Country A • Anytown, Country A • BU 1 – Anytown, Carriers/ Suppliers • Anywhere, Country A • Anywhere, Country A Country A • BU 2 – Anywhere, • Contingent Functions: Functions: Country A Commissions from • General Ledger & • Fiduciary Accounting Carriers Cost Accounting • BU 3 – Anycity, Country • Client Receivables A • Limited Revenue & • Special Events • Revenue Only • BU 4 – Anyvillage, Accrual Analysis Accounting Accruals & Country A • Quality Assurance • Account Commissions Reconciliations Functions: • General Ledger • Cap-Ex Accounting • Fiduciary Accounting • Shared Services • Client External Centers (Vendors Reporting Payable & Payroll) • Client Receivables • Revenue Only Accruals & Commissions Ramesh Krish • General Ledger Proprietary and Confidential P42
  • 44.
    Best in ClassPractices - A/P Operations Sample of recommendations Sample of key success factors for optimizing A/P operations when implementing a Shared Service Center Conduct Education & Training: An executive sponsorship should stress the importance Encourage consistent and appropriate use of the buying process by and value of moving towards an SSC. educating internal clients on the “How to Buy” policy. Involve the entire set of stakeholders in the project. Decrease exceptions in the ERS process by educating vendors to Do not underestimate the amounts of time, resources stop sending invoices and verify they will be able to apply payment and energy needed to change corporate operations and based on the new information on the check stub. culture. Improve awareness of all SAP functionality by training A/P Assemble cross-functional project teams with members department (e.g., automatic invoice reduction capability). chosen for their skill and experience. Ensure complete “buy-in” process understanding through cross- Consider the language skills of the SSC personnel to training of A/P and Purchasing personnel. provide an optimal service to internal or external Enforce Appropriate Accountability: customers. Encourage Purchasing to enter accurate and necessary data by Evaluate/Select candidates for new functions based increasing their understanding of the impact on A/P’s processes. upon specific competency profiles. Improve vendor invoice quality by returning incomplete invoices. Cross-training and shared capabilities facilitates Designate process champions to enforce appropriate accountability replacement during holidays/illness and allows job People where users are left to make their own process decision. rotation that may improve employee morale and productivity. Improve invoice approver accountability by implementing the deadline monitoring feature in workflow, which notifies individuals when an Identify the process owners that will have to deal with invoice is not approved in a timely manner. all the process-related accountabilities. Identify a key contact person for each client group. Build Effective Organisation: Manage clearly expectations of internal stakeholders Improve communication with Purchasing to foster an understanding and customers as a service “degradation” may be of the interrelated nature of the groups and encourage quick inquiry expected during the kick-off period of the “go-live”. response time. Using performance measure, create incentives and Enforce consistency and process analysis by creating and enforcing rewards to motivate people and continuously improve guiding policies and procedures. their efforts. Align the A/P support group with the Purchasing support group. Define governance agreements, coordination standards and establish a communication culture. Ramesh Krish Proprietary and Confidential P43
  • 45.
    Best in ClassPractices - A/P Operations Sample of recommendations Sample of key success factors for optimizing A/P operations when implementing a Shared Service Center Increase Simplification: Measure the potential benefits of an Partner with vendors to consolidate remit-to addresses, where implementation and even compare them with appropriate. some alternatives. Eliminate steps in the non-PO process and x% of A/P Use a business case to identify costs & benefits exceptions by enabling the client to enter the invoice in SAP, but also as communication tool to convince the route it for approval and post it. people involved of the necessity of the SSC (buy- Reduce manual processing by defining a clear and efficient in). process for handling freight. Focus on removing transactions before making Increase Process Effectiveness: them more efficient. Provide input to Purchasing on the ERS process, simplification Harmonize first the policies, then move to one of remit-to vendor selection and establishing a “How to Buy” common process. policy. Set clear measures for customer satisfaction and Reduce cycle time by enabling A/P processors to change the communicate to the entire customer organisation. Set performance measures to evaluate the value, Process vendor at invoice time. level of service and cost of services provided i.e. Minimize costly payments by eliminating manual checks and decreasing number of wire transfers. using the balanced scorecard approach. Reduce indexing time and improve look-up capability by linking Gain upfront consensus on Service Level the imaging system to SAP. Agreements (SLAs) which formalize commitments between the SSC and the customer/BUs and Eliminate inter-office mailing of payments and reduce cycle provide an ongoing forum for communicating time by printing A/P checks at the same physical location as expectations. the A/P department. Develop a pricing policy and establish direct and Analyze entry of invoices via ESS (Employee Self Service) by indirect cost allocations through time reporting end-users. and internal audit controls to ensure the validity of Analyze entry of invoices and look-up capability via Vendor the SSC charges and performance. Self Service (e-Procurement system or Internet front-end) by Compare the performance of the SSC to a true vendors. external market (i.e. outsourcing) and/or to benchmarks. Ramesh Krish Proprietary and Confidential P44
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    Best in ClassPractices - A/P Operations Sample of recommendations Sample of key success factors for optimizing A/P operations when implementing a Shared Service Center Increase Flexibility: Systems play an important role in achieving a Reduce check processing by increasing the use of electronic successful and sustainable SSC implementation. payments. Ensure that shared services design is flexible and Decrease the number of invoices by increasing the use of ERS scalable to support future acquisitions and once the vendors establish they will be able to apply payment divestitures easily. with a bill of lading number. Utilize technologies based on business needs. Minimize manual handling through implementation of workflow Use technologies that can be leveraged and to route documents electronically for further processing. supported throughout the organisation. Limit manual processing by increasing the use of P-Cards and Rationalize first the different systems/used forcing users to charge their default account assignment. functionalities, then move to one system/to a Decrease processing time by using the Invoice Verification common use of optimal functionalities. transaction for processing PO invoices and / or upgrading to Incorporate self-service as a critical component in last SAP release. a shared services environment. Technology Partner with banks to create a plan to enable processing of EDI payments larger than € x million. Develop a migration plan that eases the transition from the “as-is” to the “to-be” environment. Partner with vendors to increase the use of ERS and EDI, both Address security for facilities, data and for inbound invoices and outbound payments, in order to applications both from an internal and external reduce manual invoices. perspective. Evaluate maturity and cost / benefit (if appropriate) of emerging Maintain adequate backup facilities and disaster technologies for A/P data input and validation. recovery plans. Analyze and implement new P-Card program to enable Make a motivated choice between a greenfield automated account distribution at the line item level. (new) and a brownfield (extended existing) location for the SSC. Ramesh Krish Proprietary and Confidential P45
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    Outsourcing and ContractManagement Phases Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 Identification of Business Case Evaluation and Implementation and Contract Contract Migration Outsourcing Selection Transition Management Opportunities 1.1 Document / Confirm 2.1 Identify Service 3.1 Develop Evaluation 4.1 Develop 5.1 Liaise with User 6.1 Evaluate Options Strategic Direction Providers Mechanism Implementation Groups 6.2 Retain Existing 1.2 Identify Candidate 2.2 Examine 3.2 Issue Request for Plan 5.2 Manage Service Service Provider Services Outsourcing Viability Tender 4.2 Negotiate Contract Levels 6.3 Select 1.3 Document Service 2.3 Consider 3.3 Conduct Service Profile Reorganization Provider 4.3 Prepare for 5.3 Monitor Replacement Options Evaluations Handover Performance Service Provider 1.4 Prepare Scoping Report 2.4 Develop Business 3.4 Select Preferred 4.4 Transition to 5.4 Administer Contract 6.4 Migrate to In- Case Service Provider(s) service provider House Services Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Objectives Identification of those Identification of those Comparison of internal Comparison of internal Evaluation of Evaluation of Finalization of the Finalization of the Proper management of Proper management of Effective planning and Effective planning and areas to be considered areas to be considered operations with operations with alternative service alternative service outsourcing contract so outsourcing contract so the day-to-day the day-to-day management through management through for outsourcing and to for outsourcing and to external options both external options both providers and the providers and the as to ensure aasmooth as to ensure smooth outsourcing outsourcing the conclusion of the the conclusion of the document the current document the current from aacost and service from cost and service selection of aapreferred selection of preferred transition to the transition to the arrangements to ensure arrangements to ensure outsourcing contract outsourcing contract and required services and required services perspective to perspective to service provider(s) in service provider(s) in outsourcing outsourcing that they operate as that they operate as and the implementation and the implementation provision. provision. determine whether to determine whether to accordance with the accordance with the arrangements. arrangements. planned and meet planned and meet of arrangements for of arrangements for proceed forward proceed forward acquisition strategy. acquisition strategy. required standards. required standards. future service delivery. future service delivery. Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Key Questions Are there services that Are there services that Are there potential Are there potential Will the evaluation Will the evaluation Do the implementation Do the implementation Are the service Are the service Has the current service Has the current service could be outsourced? could be outsourced? service providers who process withstand the plans contain realistic requirements of provider delivered service providers who process withstand the plans contain realistic requirements of provider delivered Is outsourcing relevant could deliver the required could deliver the required test of probity? test of probity? dates which permit an dates which permit an business units being business units being satisfactory services? satisfactory services? Is outsourcing relevant services? orderly transition? met? in the context of the in the context of the services? Which service provider orderly transition? met? Should consideration Department or Agency’s Which service provider Should consideration Department or Agency’s Are there reorganization is preferred? Does the contract Have the service be given to alternative operations? operations? Are there reorganization is preferred? Does the contract Have the service be given to alternative possibilities that offer possibilities that offer properly define the properly define the requirements requirements service providers? service providers? Should the option of viable options to Does the scope of the Does the scope of the service requirements? changed? Should the option of viable options to services to be service requirements? changed? Has the provision of outsourcing be outsourcing be outsourcing? services to be Has the provision of considered further? outsourcing? outsourced meet the Are the Government’s Is the service provider services been fully considered further? outsourced meet the Are the Government’s Is the service provider services been fully Does aabusiness case Does business case real requirements? real requirements? interests protected by interests protected by providing the services providing the services migrated from the migrated from the Have the staffing issues Have the staffing issues exist to proceed with the contract? in aasatisfactory previous contractual been considered? exist to proceed with Are the Tender Report the contract? in satisfactory previous contractual been considered? outsourcing? Are the Tender Report manner? arrangements to aanew outsourcing? recommendations Has the provision of manner? arrangements to new Are there strategic Are there strategic recommendations Has the provision of or revised set of or revised set of opportunities from the Has an acquisition Has an acquisition acceptable? acceptable? services been fully services been fully Are all outsourcing Are all outsourcing arrangements? opportunities from the strategy been developed transferred to the issues being arrangements? adoption of outsourcing adoption of outsourcing strategy been developed transferred to the issues being for one or more for one or more and approved? and approved? service provider? service provider? addressed in aatimely addressed in timely processes? processes? and effective manner? and effective manner? Outsourcing Outsourcing Business case for Business case for Evaluation process Evaluation process Contract signing and Contract signing and Performance Performance Outsourcing options Outsourcing options candidate services candidate services outsourcing outsourcing findings and findings and service transition service transition monitoring and monitoring and assessment and assessment and identified identified documented documented recommendations recommendations review review change management change management implementation implementation Ramesh Krish Proprietary and Confidential P46
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    i process Thank You Ramesh Krish Cell: 917-971-9701