Smarter Governance

1. Smarter Governance Combining Compliance and Performance Optimisation Levine Naidoo – IBM Business Analytics and Optimisation 17 June 2013

2. Smarter Governance – a new paradigm • Finance & IT continue to face challenges, in the public and private sectors • Past approaches to governance are inadequate in both design and implementation • Executives get fragmented views of their true business performance, and inefficiencies drive up costs. • A new paradigm is required, that • takes a value integrator approach to driving finance transformation • uses standards for financial outperformance • reuses common capabilities across risk, compliance and performance optimisation

3. The new normal economic environment Global Financial Crises Market Pulse New Economic Environment October 2012 World Economic Outlook (WEO) • Liquidity driven crises • Real estate bubble burst • Failure of collateralized debt obligations • Drop in global commerce • Cost reduction pressures • Rising unemployment • Drop in commodity values • Dramatic drop in consumer demand • Increased risk, volatility and uncertainty • Subdued growth • Continued cost pressures • Continued high un-employment • Reduced global commerce and demand • End-to-end stimulus and government hand in business • Sovereign debt concerns • Industry restructuring and consolidation • Continued uncertainty, elevated volatility and risk March 2013: Economic Sentiment in Euro Area Source: IMF World Economic Outlook Update, European Commission: economic Sentiment Indicator

4. A CFO study in the midst of severe economic uncertainty CFO Study Provocative Topics The impact of the New Economic Environment on the CFO’s role ! What Finance model achieves the optimal mix of capabilitiesneeded to outperform? ? What can CFOs do to enable timely and informed decision-making? ? How can the CFO help the enterprise anticipate and shapeits environment? ? Source: IBM Institute for Business Value, The Global CFO Study 2010

5. CFOs aspiring to evolve their Finance Model to higher capability should address performance gaps with specific action plans Paths to Higher Value High efficiency enabled by process and Finance data standards suggests Disciplined Operators focus on maturing business insight and partnering capabilities Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value with Data Standards, Information Integration and Analytics High Finance Efficiency Scorekeepers can attempt a direct path to become Value Integrators. This will involve establishing Finance efficiency while simultaneously building business insight capabilities. Alternatively, a staged approach can be taken Constrained Advisors have good business insight, constrained by structural complexity, therefore address process and data standards to improve efficiency, accuracy and speed Low Low High Business Insight Source: IBM Institute for Business Value, The Global CFO Study 2010

6. Those who excel outperform financially and are more effective against their agenda Finance Efficiency and Business Insight High Corporate philosophy of information standards Standard Chart of Accounts Finance Efficiency Standard data definitions Standard processes Low Low High Business Insight Driving Integration of information across enterprise Managing Enterprise Risk & Compliance Measuring & Raising Business Performance Source: IBM Institute for Business Value, The Global CFO Study 2010

7. What should we be doing? How are we doing? Why? Casual Users Statistical Analyst The Scorekeeper’s dilemma Transaction Systems Warehouses (Relational & OLAP) Flat, Legacy or Modern ExternalSources

8. Scorekeeper to Value Integrator Risk Models Trading Models Prudential Analytics Model Balance Sheet Model Treasury Models • Past • Analysis • Reporting • Data Mining • Drill Through • Root Cause Analysis • Present • Monitoring • Variance Analysis • Collaboration • Commentary • Workflow • Guided actions • External Data integration • Unstructured Data integration • Future • Statistical Projections • Regression, Extrapolation • Tolerance, Confidence • Forecasting, Planning • Decision Support • Stress Testing • What-if Modeling • Hypothesis Testing • Scenario Modeling • Performance Optimisation • Resource Optimisation • Change Management

9. Scorekeeper to Value Integrator PRUDENTIAL ANALYTICS MODEL Risk Models e.g. London Branch of Bank for Telecom Customers Risk or Profitability Trading Models Prudential Analytics Model Balance Sheet Model Bank Group Treasury Models Directorate Subsidiary BANK ENTITY • Past • Analysis • Reporting • Data Mining • Drill Through • Root Cause Analysis • Present • Monitoring • Variance Analysis • Collaboration • Commentary • Workflow • Guided actions • External Data integration • Unstructured Data integration • Future • Statistical Projections • Regression, Extrapolation • Tolerance, Confidence • Forecasting, Planning • Decision Support • Stress Testing • What-if Modeling • Hypothesis Testing • Scenario Modeling • Performance Optimisation • Resource Optimisation • Change Management Branch All Company Parent Company Product Group Economic Sector Product Type Geography Maturity All ASSET OR INSTRUMENT Contract CUSTOMER OR OBLIGOR At each intersection, all configured risk or profitability calculations are performed in real-time

10. Casual Users Statistical Analyst Common capabilities underpinning compliance and performance Analytics enabled compliance and performance Interactive & Collaborative across Silos Real-time and Dynamic Predictive Data Provisioning Common Definitions & Standards Internal & External Information Integration Transformation & Business Rules Aggregation, Enrichment & Augmentation

11. Business scenarios - optimising decisions & raising performance • Operational risk • Credit risk • Market risk • Capital adequacy • Liquidity • Customer profitability Deliver optimal answers at the point of impact

12. Value integrator approach across the enterprise External Financial Reporting Business Performance Management Planning, Budgeting, Forecasting Risk and Compliance Management Treasury and Investments Tax Management Reporting Compliance Monitoring KPI Monitoring Budget/Forecast Model Design Risk and Compliance Monitoring Bank Account Reconciliation Tax Compliance Monitoring Business Performance Review/Impact Assessment Budget Policy Monitoring Controls Monitoring FX Exposure Management Financial Statements Approval Plan Approval Fraud Management Portfolio Performance Monitoring Financial Statements Preparation Management Reporting Budget Preparation Risk Scoring and Evaluation Cash Forecasting Tax Return Preparation Business Analysis and Modelling Board Reporting Preparation Cash Mgmt Operations Portfolio Management Risk Reporting Regulartory Reporting Production Investment Modelling Tax Enquiries Handling Forecast Preparation Scorecard/ Dashboard Creation Equity/Debt Management Compliance and Controls Reporting Regulatory Enquiries Handling Business Case Preparation Capital Acquisition and Securitisation

13. Summary • Traditional solutions based on traditional system delivery lifecycles will not rise above the change challenge faced by business today. • A new paradigm is required. A business owned self service capability to rapidly turn information into insight to enable quality decisions, and ultimately optimise performance. • Seek to extend investments in compliance solutions to cover performance optimisation • Use standardised data and standardised processes • Integrate information across the enterprise to eliminate silos • Provide a self service data provisioning for business to analyse and generate compliance reporting with full auditability and controls