Finance 4 - EY · technology transparent, secure, ... information without filter), to refine the ... Accelerated SAP S / 4 HANA migrations

16. IFRS Kongress 2017

Finance 4.0

1. Overview of digital subjects

2. Digitalization of the Finance function

3. Focus on selected technologies

1. Overview of digitalsubjects

Main digital trends DigitalO

verview

Robotics Process AutomationRPA is the application of technologythat allows a computer software or a

“robot” to capture and interpret,process, manipulate data, triggerresponses and communicate with

other digital systems

Cognitive automationArtificial intelligence system able to acquire,

implement and communicate knowledge

Analytics & Big dataProvide statistical and

mathematical data analysis torestore the information and

provide data visualization

CloudAllows users to rent access to a

variety of virtual computingoptions. It provides users datastorage space and applications

available directly online

CybersecurityCybersecurity is the body oftechnologies, processes andpractices designed to protect

networks, computers, programs anddata from attack, damage or

unauthorized access

BlockchainThe blockchain is a storage, a

transmission and anauthentication of information

technology transparent, secure,and operating without central

control body

3D PrintingThe 3-D printing offers the

opportunity to reduce the marginalcost of production, reduce transportcosts, limit waste generation, offer a

wider product catalog and reducetime to market

APIAPI is the bridge between thetraditional IT architecture and

the Digital. It serves as aninterface between different

software programs andfacilitates their interaction

IoTThe Internet of connected objects offers the

opportunity for companies to establish adirect link with their customers (access toinformation without filter), to refine the

profile of their customers, to betterunderstand the reasons for the evolution oftheir needs, and to individualize the product

offer

Page 4 16. IFRS Kongress 2017

Digital change is affecting all organizations in fundamentalways as the speed of change becomes unknowable

DigitalO

verview

1980sWidespread localizedcomputing &infrastructureinventions

1990s and 2000sWidespread connectivityand productivity gainswith basic SW roboticsGlobal & organizationaldesign deficienciesbecome apparent

Now and into the FutureUbiquitous smartconnected technology fromthe shop floor to theaccountants deskBeware of Dunning-KrugerCross Industry BusinessModels

16. IFRS Kongress 2017Page 5

Digital Innovation is now moving beyond SMAC combiningemerging digital tech to produce new business models

DigitalO

verview

SMAC 1-4 years 5-10 years >10 years

*Data not available

Gamification Motivator

RPAImproved quality,productivity andcompliance 3D printing Supply chain disruptor

Quantified Self -Wearables / Nearables

Hyper personalized andIntuitive interactions

Internet of ThingsActionable Insights, DeeperIntelligence and optimized processes

Augmented and Virtualreality Contextual visualization

Artificial Intelligence Cognitiveautomation

Quantum ComputingComputingpoweraccelerator

BlockchainAutonomous trust and provenance

FutureComputational Life

Science*Convergence of modern biology, quantitativemodelling and high performance computing

Today


2. Digitalization of theFinance function

How Digital Trends impact the Finance function Digitalfor

Finance

Trend What it implies Impact on the Finance function

Growingdigitalization

► Technologies which replacelow value added human tasksand facilitate informationsharing

► Increased information sharing which enable astronger integration of the different internalactors (end-to-end process) and externalactors (collaborative platform)

► Changing processes and competencies

Increasing amountof available data

► More and more digitizedfinancial and operational,structured and nonstructured, internal andexternal information

► Information becoming acritical issue within theorganization

► A positioning regarding data sources anddatabases that needs to be confirmed /adapted in line with the IT Department

► A ‘Business Analyst’ finance functionorganization to reconsider in a more ‘datacentric’ manner

Increasing self-service capacitybuilding andartificialintelligencedevelopment

► Simplified access toinformation

► Constant evolution ofanalytical tools

► A risk of having ‘finance teams’ building upwithin other departments / businesses in theorganization that would transform thefinance function in a ‘bean counter’

Improvingaccessibility totechnological offer

► Cloud services enablingaccess to the latestapplications in a short time-span

► Development /implementation costs less andless significant

► Technology related knowledge within thefinance function becoming a strategicimperative; in order to make the mostappropriate decisions for technological issues

► Inevitable changes which must be taken intoaccount now in order to evaluate their impactand the way to tackle theses changes


Finance doesn’t fully take advantage of the huge amount ofthe available data

Digitalfor

Finance

Transactional data Payments, invoices, orders, travel records, cash flow, procurement

Public data Social Media, industry news, peer group performance, annual reports

Customer data Purchasing history and behaviors, claims, demographics/psychographics

Manufacturing Data Equipment and labor utilization, machine sensors, utility expenses, maintenancereports

90% of the world’sdata has been createdin the last two years

80% of data isunstructured,invisible totraditionalanalysis

Exponential decrease inthe cost of data storageand processing

18 months forcomputing power todouble


All finance processes are impacted by digital technologies Digitalfor

Finance

Process Impacts Tools

P2P

► Integration of suppliers andprocurement / financeprocesses

► Control of purchasing costs

► Integrated Platform► E procurement► Scanning/ OCR &

archiving

T&E

► Improvement of internalclients experience

► Compliance with thecorporate T&E policies

► T&E module► Self Booking Tool► Scanning & archiving

O2C ► Automatization of controls► Optimization of time factor ► Financial CRM

R2R

► Attributes and homogenizesthe financial close tasks

► Streamlines bankreconciliations

► Bank statementintegration module

► Closing tool

Controlling

► Reinforces analysis andforecasting capabilities

► Develops the self-serviceuse

► Big Data / Analytics► Data Visualization► Artificial Intelligence

Global

► Streamlines thecommunication between theCS and the internal client

► Develop a measurementtool contract service

► Service managementtool

► Electronic archiving

Analytics/Processmining

ArtificialIntelligence

Blockchain

Cybersecurity

RoboticProcess

Automation


1. Business Partner for growth:Strategy and decision support, levers for

performance improvement

2. Data Security matter expert:Risk management, cyber security,

data reliability and availability

3. Transformation project Lead:Back office functions performance improvement

4. Real time dashboarding Finance and nonFinance (CSR, HR, …):

Cost controlling, internal control and reporting toshareholders and Administration

… but if leveraged can bringnew opportunities

Digital exogenous factors arenew Challenges …

CFO

Digital: new challenges and levers for CFO Digitalfor

Finance

… impacting theDNA of CFO…

Big data

Analytics

Robotics

CognitiveAutomation

Cloud

CyberSecurity

API

Block-chain

Marketing

Legal &Tax

Shareholders

HRIT

SupplyChain

Which opportunities for my company?When and how to proceed with the technological shift?

How to prepare my team to be ready for change?Who are the market players?

• Productivity &efficiency gain

• Back-office costsreduction

• Time saved for addedvalue activities

• Real time informationupdate and sharing

• Highly volumetric datatreatment

• Tasks automation• Agile IT architecture• Quality Improvement• Continuous risk

monitoring• Continuous process

monitoring

New technologies(« all digital »)

New clientsneeds

- Real time informationavailability

- Multichannel development- Customer experience

improvement- Real time dashboarding

“Uberization” of economy transformingformer standard operating models

Increase of new risks linked to cyberactivities

Highly performing competitors


3. Focus on selectedtechnologies

Analytics /Process Mining

13

The technology allows to analyze processes in real time withmaximum transparency

Workflow Process MiningState of the art technique to reconstruct and evaluate IT-integrated processesbased on real performance dataProcess Mining workflow

► Source systems and event data locations needed are identified► Logging data is extracted from systems and transformed to create suitable data

sets► Data transformed are processed by the process mining tool► PM tool creates visualizations and further analysis

Advantages of Process Mining:

► No need to rely on outdated process description► No need for biased descriptions and interviews► Reduced extent of documentation► Increased speed and flexibility across services► 100% transparency be visualizing all actual

processes

► Identification of previously unknown processweaknesses

► Optimization, harmonization and standardization ofprocesses

► Accelerated SAP S / 4 HANA migrations► Improved process quality and reliability► Increased profitability

+

What can be achievedCompanies/ institutions which already implemented Process Mining

Source: Celonis, 2016

► Global Processtransparency by tool-based automatedprocess discoveryand analysis

► Post-Merger-Integration based onreal life processes

► Real synergyplanning and tracking

► One-time andcontinuous processimprovement

► KPI based processexcellence reporting


Combine three layers to transform your data into knowledgeand create value

• Various Process Mining tools, which develop fast,are available and deliver different advantages

• Process Mining tools need to be fed with relevantactivity logs

• The tool supplier deliver limited data extractionand preparation

• The transparency gained by Process Mining canhelp to unlock business value and reduce costs

• Same time the process mining results need to befiltered selected and to find the nuggets incomplex real-life processes

Key benefits & Challenges

ETL – Extract, Transform, Load

Layer 1

Process Mining Tool

Layer 2

Analytics and Services

Layer 3

Dat

aIn

form

atio

nK

now

ledg

e

Value creation


Facts and Assumptions

The different process variants inwhich the most common process isvisualized first.

“Textbook” process:Most simplified version of aprocess

No activity escapes the eye! Youcan zoom in detecting long-termor unusual process paths ordefects that would otherwiseremain hidden.

The reality:Actual complexity un-manageable without DataMining

What people think:Most commonly displayedand simplified process

++

+++++

See less common paths andactivities. Ideally suited to detectanomalies and inefficient processvariants.

20% data coverage 40% data coverage 100% data coverage


Robotic ProcessAutomation

17

“All the office work can be automated by RPA”

“RPA is primarily useful to cut operational costs”

“Robots will eventually replace the majority of myemployees”

“RPA can be implemented without the support andinvolvement of the CIO org.”

“RPA is the silver bullet for optimizing my admin. andoperational organization"

1

2

3

4

5

Myths about RPA


RPA is a computer software that runsrepetitive, rule-based processes. The softwareis trained based on functional specificationsand can be adjusted at any time.

The software robot has access to diverseapplications with an ID or a password. Therobot can gather information or change data.Consequently, business and administrativeprocesses can be fully automated.

RPA simulates an employee RPA is a software

As a renewal of the existing IT landscape is notrequired, a high level of automation can bereached without major effort. RPA usesestablished control mechanisms and cancommunicate with all systems. Therefore, nointerface has to be created.

RPA is integrated in an existingIT infrastructureWhat is

RPA? “Robots deliver repetitive, deterministic, high-volume tasks efficiently, quickly, and consistently.People build relationships, provide subjectivejudgement, deliver low-frequency tasks, andmanage change and improvement”

Robotic Process Automation (RPA) as an innovative solution for fullyautomating business processes with high volume and repetitive nature


Overview of benefits from RPA


Most sought wagearbitrage first

Simplification andstandardization optimizesprocesses/systems and

enables continuousimprovement for further savings

Roboticsautomation

complementswage arbitrage

Challenge Reduce cost-to-serve and improve perceived ‘value-for-money’ across lines of business, products and channels

People andorganization

► De-layer and simplify organizational structure, improvingaccountability and responsibility

► Remove low value tasks from knowledge workers

Process &policies

Standardize and automate activities, implementing straight-through-processing and lean methodologies

IT landscape Consolidate administration and rationalize applications,architecture and legacy systems

Projectportfolio

► Review in-flight projects and their business cases► Improve benefits tracking and portfolio management

Location /Geography

Maximize use of virtual workforce and optimize remainingwork among on/off-shore (i.e., high/low costs) resources

Sourcing Rationalize/re-negotiate with suppliers and increase scrutinyon discretionary spend

Governance Simplify internal governance and manage change portfolioacross the organization

Typically Save

15- 40% ofbaseline costsLabor cost

Technology

Overhead

Currentprocess

costs

Laborcost

Arbitrage

Robotics Simplification &Standardization

Futureprocess

costs

10%

15%

75%

30 -70%

30 -40%

20 -30%

65%

25%

10%

Opportunities in typical finance organizations

After previous focus on Labour Cost Arbitrage, Finance is focusing more onRobotics, Simplification and Standardization


Preliminary ideas for consideration

► Intercompany transfers

► Reconciliations

► Accruals

► Bad debt write-offs

► Month-end close heavy lifting

► Journal entry processing

► Entity updates and master accounts

► Allocations and adjustments

► Vendor and client on-boarding

People factors…► access and gather data from multiple systems► move data from one system to another► check data consistency in multiple systems► update the same info in multiple systems► remediate data across several accounts

Process factors…► well-defined, relying on rules rather than

judgment► time consuming, while being time-critical► frequent execution (i.e., daily or weekly)► multiple systems that are not fully integrated► necessary improvements in quality and

control

Robots do not generally replace entire roles.

Robotics selection criteria

Robots add value to Finance in many different ways


ArtificialIntelligence

23

Easy to implement using core platforms, Web or Robotic ProcessAutomation:§ Fast to define and implement§ Built-in rules or linked to natural language rules engine§ Targets back-office automation

Apply statistical models or machine learning to a very specifictask:§ Link between Robotics and Analytics/Specialist tool§ Model risk management and compliance

The Cognitive Robot uses a Machine Learning or statisticalmodelling approach to understand a need and optimizing therequired action

The three tiers of Robotic Process Automation


Key features of Intelligent solutions:Cognition Capabilities► Ability to review existing, completed work and build

models to drive future decisions

► Ability to learn and adapt over time

► Robots deliver repetitive, deterministic, high-volume tasksefficiently, on business processes that previously were notgood candidates for robotic automation

► People build relationships, provide subjective judgement,deliver low-frequency and exception tasks, and managechange and improvement

► Intelligent Automation is unique amongst the roboticautomation spectrum for its ability to learn and makecertain cognitive decisions

Intelligent Automation (Cognitive RPA) allows the capture, interpretation, and automation of a businessprocess, in a repetitive, audited and controlled manner, including the ability to form, learn, and refinesome cognitive decisions and adapt these decisions over time

Understandingof legal and

ethicalconsiderations

Statistical /machinelearning

Optimized processthrough

automation

Improvedworkflow

SocialRobotics

IntelligentAutomation

RoboticProcess

Automation(RPA)

Structureddata

interactionIncr

emen

talv

alue Mimics human

actions

Mimicssome

humanintelligence

Mimics humanintelligence

What is “Intelligent Automation”, aka “Cognitive Robotics”?


Organizations should… Organizations should not…

Use an agile and business-ledapproachAn agile approach allows rapid benefitdelivery, incremental improvement,and rapid response to change.

Over-document the existingprocessTraditional IT development is based onthorough requirements definition anddocumentation.

Act now, go fast and staynimbleEstablish metrics but solve for theobvious first, breaking up largersolutions into manageable pieces.

Overthink where to startautomatingAvoid solving problems that nobody caresabout; Pick an issue that, once solved,will generate excitement.

Focus on scale and frequency,not just end-to-endThink like a Robot – it’s ok to automateonly parts of a process and then moveonto the next activity.

Forget to start preparing for longterm successPilot makes the case but is not theobjective. Need to prepare for rapidchange and to sustain the capability.

Succeeding in robotics adoption means that:


Blockchain

27

Blockchaintechnologyis the re-inventingthe mostbasicworkload inthe world ofmoderncomputing:transactionprocessing

A blockchain is essentially just a record, or ledger, of digital events — one that’s“distributed,” or shared between many different parties. It can only be updatedby consensus of a majority of the participants in the system. And, once entered,information can never be erased.

E.g.: the bitcoin blockchain contains a certain and verifiable record of everysingle bitcoin transaction ever made.

The Blockchain

Smart Contract Platforms

Asset Creation/Exchange

Crowdsales/Crowdfunding

NotarizationPrediction Markets

Sidechains/Interoperable chainsSupply chain management

TransportationStorage

Social NetworksInternet of Things

Digital Identity

GovernanceBlockchain representation and voting

Legal services

Healthcare and LifesciencesArt

Reviews and Endorsements

Bitcoin

Blockchain technology threatens to revolutionize businessmodels in a number of different ways


Siloed systemsTrading, order management, andsettlement processes are housed inseparate systems, in addition to multiplecopies of shared ledgers, leading to time-consuming and expensive reconcilliationprocesses

Lack oftransparencyThe mixture of manual, siloedsystems and disorganized datacreates databases with fewactionable insights and analysisparalysis

ManualprocessesA great number of processesare still in paper form,opening the door tounnecessary operational risks

Cyber security riskLegacy systems give rise to cybersecurity risk as a result of segmentedIT infrastructure. A hack into just onebackdoor can compromise the wholeorganization

DisorganizedcompliancedataData is not transferredbetween departments andorganizations efficiently,resulting in unreliablecustomer due dilligence

Finance specific challenges addressed by blockchain


Treasury

Costallocation

Intercompany

Contracting

Property andasset

management

Identitymanagement

The ideal application of blockchainfor intercompany would allow forinstant transactions withimmutable documentation. Thiswould simplify the intercompanytransaction process, automatingdispute resolution, and eliminatingmanual invoicing and process

Using a digitized contracting system,two anonymous parties can tradeand transact without theinvolvement of a middleman or atrusted party. This, in turn, helpsreduce or eliminate costs associatedwith monitoring and enforcement.

By using a distributed ledger,tracking the provenance of aproperty can be simplified andstrengthened by transacting adigital token through the blockchainsystem, eliminating the chances ofcorruption in transaction trail. Thisestablishes the authenticity of thecertificates, enabling buyer trustand eliminating provenance checks.

Blockchain provides an idealplatform to manage vulnerable peer-to-peer assets such as identities.The inherent fraud managementcapabilities of blockchain, throughhardened cryptography anddistributed ledgers, allow for an easyand secure way to share digitalidentities.

Corporate Treasury function can betransformed by implementing ablockchain- based clearing andsettlement function within thecompany’s financial network. Theimmutable nature of such anetwork lends huge credibility tofinancial risk management whileeffectively managing cash flowbased on up-to-date financialnumbers.

Blockchains with inbuilt smartcontracts capability enable financialapplications to allocate costs on areal-time basis eliminating the long,manual and error- ridden process,thus improving efficiency andsignificantly reducing cost of theoverall function.

Blockchain use cases in Finance should be explored


Cyber Security

Cybercrime threatens and impacts a firm’s sales, valueand processes

Missed sales Loss of value

Intrusion outlets

Internal threat: insider tradingand abuse of privileges

Errors that compromise thesecurity of a system

Cyber-espionage

Attacks on web applications

Skimmers credit cards

Crimeware

Theft or physical loss

Denial of Service

Degradationof production

Social mediarumors

Strategicmanipulation

Threats

Impacts


Focuson

technologies

Intrusion into point-of-sales

Computers and servers runningpoint-of-sales applications arecompromised to retrieve paymentinformation

Cyber-espionage

Phishing attacks targetingintellectual property data

Malicious software

Systems compromised throughthe use of malicious software

Internal threats: insidertrading and abuse of

privileges

Abuses by employees, outsidersor partners

Attacks from webapplications

Use of Stolen IDs or exploitationof vulnerabilities identified in theapplications

Theft or physical loss

Laptops, USB sticks, printeddocuments and other lost orstolen information assets

Other errors

Errors compromising the securityof the system

Credit cards skimmers

Installations of systems to readcredit card data on a cashmachine, payment systems at aservice station or other point-of-sales terminals

Attacks by denial ofservice

Affectation of a firm’s activitiesthrough the use of « botnets »generating malicious traffic

96% of accidents fall within 9 attack schemes

Frequent attack schemes


Blockchain technology threatens to revolutionize businessmodels in a number of different ways

Smart Contract Platforms

Asset Creation/Exchange

Crowdsales/Crowdfunding

NotarizationPrediction Markets

Sidechains/Interoperable chainsSupply chain management

TransportationStorage

Social NetworksInternet of Things

Digital Identity

GovernanceBlockchain representation and voting

Legal services

Healthcare and LifesciencesArt

Reviews and Endorsements

Bitcoin

DHL Finance Meeting

Future of Audit

FutureofA

uditAccountants and Auditors

93.5% Financial Analysts

23.3%

Budget Analysts

93.8% Agents

24.3%

Financial Examiners

17.0%61.3%

Job’s will beAutomated






Market Research Analysts

Source: Uschi Schreiber, “How professional services can disrupt its way out ofautomation?”

90% of some accounting and auditing job’s will be automated within the next 15 - 30 years

What is the Future of Audit?


Documents

Finance 4 - EY · technology transparent, secure, ... information without filter), to refine the ... Accelerated SAP S / 4 HANA migrations