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The Power of Convergence: EPM, GRC, and BI: How SAP Equips Finance Professionals to Become Strategic Advisors

by Nenshad Bardoliwalla | SAPinsider

October 1, 2008

Finance professionals have traditionally lacked the tools necessary to perform their job to the best of their ability; error-prone spreadsheets and transaction-focused processes prevent finance teams from delivering the value they know they’re capable of. Find out how the union of SAP and Business Objects gives finance organizations the tools they need to become strategic advisors to the business.
 

It hasn't been easy for finance professionals to deliver the value they know they are capable of. Until now, software capabilities simply haven't kept pace with the speed of finance dynamics and market change.

Challenges Facing Finance Today

On the software side, finance teams have often been forced to use (or, frequently have opted to use) traditional systems that are inflexible, unfriendly, and unintegrated. Consider the classic Microsoft Excel spreadsheet. Though finance users often default to this tool out of habit or system familiarity, they recognize its limitations: It's inconsistent, inauditable, unreconciliable, and excessively manual. But finance professionals have become "Excel whizzes," and the tool's relative flexibility and comfort make Excel difficult for them to give up. Ultimately, it is this flexibility and comfort that sets the bar for usability in enterprise financial systems.

For financical system users to warm up to more adequate systems and extract their potential value, these systems must provide interfaces that users are comfortable with and functionality that reduces a major soft cost for any business: the price of data reconciliation. Consider how many times two users have pulled the "same" report only to discover conflicting data, and then scurried back to their desks to find out which information is right.

And when it comes to market change, the business world has never been more complex or moved faster, and industry boundaries are shifting constantly. In terms of complexity, it's not uncommon for say, car companies to have thousands of potential product variants. Regarding speed, a new consumer product gets launched every 3.5 minutes,1 and it would seem that a new merger and acquisition (M&A) agreement is consummated every 20 minutes. Finally, consider shifting industry boundaries, where companies like Nokia and Apple are completely redefining market segments at warp speed.

These changes are undoubtedly exciting, as they create myriad business opportunities. But they also put enormous pressure on finance professionals. Our customers are asking us to help them solve challenges, including:

  • Poor strategy execution, stemming from a lack of performance measures and murky visibility into performance drivers

  • A reactive approach to risk, caused by manual internal controls and poor risk management processes

  • The high cost of finance due to inefficient processes, often the result of lengthy, labor-intensive close cycles, costly accounts receivable and accounts payable functions, and high audit costs

With inflexible systems and less time to react to constant business change, how can finance professionals tame the chaos and truly add value to the business?

SAP and Business Objects: Unmatched Solutions for Finance Teams

We believe the combination of SAP and Business Objects, an SAP company, will significantly improve the efficiency and effectiveness of finance professionals.2 The Business Objects division of SAP offers market-leading product sets in three of the most important categories relevant to a finance professional: enterprise performance management (EPM) for finance; governance, risk, and compliance (GRC); and business intelligence (BI; see Figure 1).

EPM for Finance

Functionality

Use Case for Financial Professionals

SAP Strategy Management

Goals, initiatives, metrics

Track strategies through balanced scorecards; align resources with strategies through financial initiatives and metrics management

SAP Business Planning and
Consolidation

Planning, budgeting, forecasting,
management and legal consolidation, financial reporting

Manage the process of generating and tracking annual budgets, monthly forecasts, monthly close reports, financial statements (P&L, cash flow, balance sheet), and variance analysis

BusinessObjects Financial
Consolidation

Management and legal consolidation, financial reporting

Meet strict regulatory consolidation and reporting requirements when completing monthly close and financial statements
BusinessObjects Profitability and Cost Management Activity-based costing Generate P&L statements and understand cost drivers by individual customers, products, and channels, even at the line-item level
GRC Functionality Use Case for Financial Professionals
SAP GRC Access Control Secure segregation of duties (SoD) and integration with SAP NetWeaver Identity Management Automate proactive and preventive controls to block users from gaining unauthorized system access that would cause an SoD violation
SAP GRC Process Control Manual and automated business process controls Automate manual controls; monitor financial processes and sign-off
SAP GRC Risk Management Aggregated detection of risks and control monitoring across the enterprise Proactively monitor risk thresholds on market credit and financial process risk; automatically monitor the risk mitigation process
SAP GRC Global Trade Services Export management, import management, trade preference management, restitution management Assign, print, and monitor letters of credit; manage export refunds
Business Intelligence Platform Functionality Use Case for Financial Professionals
Crystal Reports Pixel-perfect formatted reporting Produce finished, publication-quality financial statements; distribute them to large numbers of users
BusinessObjects
Web Intelligence
Query and analysis Query financial data and provide simple, intuitive analytic capabilities for end users
Crystal Xcelsius Dashboarding and visualization Create dashboards with rich, high-impact graphics for visualizing financial information
BusinessObjects Voyager Multidimensional OLAP analysis Slice and dice financial data for analysts
Figure 1
SAP and Business Objects' products link enterprise performance management, GRC, and business intelligence to create a powerful, holistic solution for finance users

 

For quite some time now, customers have equated performance management with basic planning, consolidation, and financial reporting functionality. However, new challenges in business require new solutions that go well beyond these capabilities. With SAP's bolstered portfolio of EPM, GRC, and BI products, customers can now attend more to strategy and performance management, all laced with a focus on risk and compliance management. No other vendor can offer this depth and breadth of solutions.

What's more, SAP has remained sensitive to the fact that customers run diverse systems from multiple vendors. Existing Business Objects customers should feel completely secure knowing that they will not be forced to migrate to SAP-specific technologies, but will in fact observe and enjoy Business Objects' long-standing commitment to an open product stack.

For existing SAP customers, the products from the Business Objects division provide an unparalleled set of capabilities, allowing customers to plug in these solutions on top of their existing investment in SAP Business Suite and extract even more value (for example, by adding highly intuitive query and analysis capabilities on top of SAP ERP financial data to do accounts payable analysis).

The combination of SAP and Business Objects unites the world of making decisions with the world of executing them.

A Key Ingredient for Increasing Shareholder Value? An Integrated Management System

The true power of our vision goes well beyond having the best products in each category — our vision is to converge SAP and BusinessObjects solutions into a holistic, integrated management system. The combination gives customers their first opportunity to simultaneously assess and remediate levers like risk and performance, control and freedom, cost and revenue, and profit and loss. By delivering an integrated management system, SAP and Business Objects give decision makers visibility into their businesses from every angle, the prescriptive guidance to manipulate all of its levers, and the ability to simultaneously optimize shareholder value.

Consider a scenario (likely similar to one in your company) where the chief risk officer (CRO) and the chief strategy officer (CSO) — who both work for the office of the CFO — meet with the CEO to discuss the company's future goals. As the CEO turns to the topic of expansion into a new market, the CRO shouts: This initiative will kill the company! Simultaneously, the CSO bellows: This is the only initiative in our portfolio that will allow us to meet our aggressive 2010 goals! With traditional software solutions, both of these executives' analyses would be completed in isolation: the CRO with her risk management system and the CSO with his strategy management system. There would be no common criteria to assess and compare the relative upside and downside of opportunity and risk. Meaning? The CEO would be at a stalemate and would have insufficient information to make a decision. Naturally, the CEO would dismiss his executive staff and tell them to return when they've reached a consistent, reconciled answer — one which they could never ultimately achieve using independent risk and strategy systems.

But after installing SAP Strategy Management and SAP GRC Risk Management, the CRO and the CSO could see, in the same system and at the same time, the relative tradeoffs between the upside opportunity and the downside risk (see Figure 2). In our example, it turns out that the CSO had overlooked risks associated with the project and underestimated the cost. Thus, the CSO and CRO needed to work collaboratively on mitigation plans to ensure the company achieves the upside results the CSO had projected while mitigating the downside risk. If they had continued with their fragmented approach, they never would have taken this risk because the potential upside would have remained unknown. That's the power of the convergence of EPM, GRC, and BI.

Organizational
Function

Directive

Question the CFO Must Ask

Products That Must Be Linked to Facilitate Optimization

Risk Management and Compliance Office

"We need to minimize our exposure to risk at all costs."

"What about the risks that we need to take to be successful?" SAP GRC Risk
Management and
SAP Strategy
Management

Line of Business (LoB)
Managers

"We need business processes that give us the freedom to innovate to maximize profit."

"How do I let individual business units assign the right controls on the business processes to generate the highest value?" SAP GRC Process
Control and
BusinessObjects
Profitability and
Cost Management

Finance Office

"We need tight access controls for all of our financial information."

"How do I assign appropriate controls while also distributing information to the people who need it?" SAP GRC Access
Control and
BusinessObjects
Financial Consolidation
Figure 2
Examples of tradeoffs for optimized shareholder value

 

We could do this analysis for any one of a set of interlinked variables like risk, control, and alignment. Optimizing one variable without assessing its impact on the others greatly increases the likelihood of suboptimizing shareholder value (see Figure 3). Only SAP and Business Objects provide a system that allows CFOs to predict the impact of changing any one variable on every aspect of their business and making the tradeoffs that lead to shareholder value.

Figure 3
The dynamic levers affecting shareholder value; if you moved the control lever to the left, for example, risk might increase and alignment might decrease, ultimately changing the value to shareholders

The Stepping Stones to Financial Excellence

With robust SAP and BusinessObjects tools at their fingertips, finance professionals have the foundation they need to achieve a more strategic seat on the CEO's advisory board. At the highest end of the spectrum, financial professionals could even find themselves privy to such vital information, at such a high level, that they can completely transform finance to become a key strategic partner to the CEO. There are four stages to this transformation (see Figure 4).

Figure 4
Finance's four steps to becoming a strategic advisor to the business

Stage 1: Transaction Focus

This first stage is all about reacting — getting things done no matter the circumstances or consequences. The technology that supports Stage 1 includes documents, spreadsheets, and emails. If you're here, your goal should be to get to Stage 2 as quickly as possible: It won't be long before one of these manual processes turns into a material issue that can incur terrible consequences.

Stage 2: Process Focus

The second stage invokes a much more process- centric focus, which allows companies to anticipate bottlenecks in their financial processes by putting the right foundation in place. Customers at this level need to plan, close, and distribute high-quality information in a compliant fashion.

In a finance context, this involves ensuring there are no segregation of duties (SoD) violations in the system, which can be accomplished by implementing a product like SAP GRC Access Control; producing formatted reports for the business and distributing tailored yet consistent information to hundreds of end users in the organization, which can be accomplished with a product like Crystal Reports; establishing a repeatable process to acquire data securely, which can be accomplished by implementing a product like BusinessObjects Data Integrator; and producing financial reports and forecasts, which can be accomplished with products like SAP Business Planning and Consolidation and BusinessObjects Financial Consolidation.

Stage 3: Business Partner

The third stage involves becoming a true partner by collaborating with the business. Customers expect to be able to monitor, model, and control resources and processes.

In a finance context, this involves setting up pro-active, manual, and automated control monitoring, which can be accomplished with SAP GRC Process Control; crafting rich, multidimensional P&Ls by customers and products, which can be accomplished with BusinessObjects Profitability and Cost Management; providing value-added insight into the business through query and analysis, which can be accomplished with BusinessObjects Web Intelligence; and using comprehensive metadata management to supply common business definitions of key concepts throughout the enterprise, which can be accomplished with BusinessObjects Metadata Management.

Stage 4: Strategic Advisor

The fourth stage involves becoming a strategic advisor to the business by being able to simulate and optimize tradeoffs between strategic risks and opportunities and predict future outcomes.

In a finance context, this requires proactive risk assessment and management, which can be accomplished by implementing a product like SAP GRC Risk Management; comprehensive strategy management support for goals, initiatives, and metrics, which can be accomplished with a product like SAP Strategy Management; advanced visualization techniques to spot outliers, which can be accomplished by implementing a product like Crystal Xcelsius; and ultimately the ability to foresee future outcomes with predictive analytical techniques, which can be accomplished with a product like BusinessObjects Predictive Workbench.

While most companies today might find themselves somewhere between the transaction-focused and process-focused steps (stages 1 and 2), the goal for finance is to ascend the staircase and ultimately become that key strategic advisor to the business.

With the right tools in place, finance professionals can chart the organization's strategic course while keeping risk and compliance in check.

Conclusion

Though challenges abound for today's finance professionals, SAP and Business Objects are providing compelling solutions to help our customers cope with these issues and turn them into strategic advantage. Only the combination of SAP and Business Objects can provide the solution capabilities that offer finance professionals visibility into all the levers of their business — and how pulling one can affect the others.

Through this staged, four-step approach, SAP and Business Objects can help finance teams navigate from today's tactical focus of managing through emails and spreadsheets to becoming a strategic arm of the business. We invite our customers to join us for what promises to be an incredible ride.

Additional Resources

  • The Financials 2008 conference in Amsterdam, November 4-7, 2008, for advanced techniques for better financial reports and analysis, as well as coverage of Business Objects (www.sapfinancials2008.com)

  • Discover SAP ERP Financials by Manish Patel (SAPinsider, http://store.sapinsider.wispubs.com/products/H3265)

  • The Business Process Management 2008 conference in Marseilles, October 28-30, 2008, and Las Vegas, November 17-19, 2008, for crucial tips and tricks on business process design, evaluation, and optimization (www.sapbpm2008.com)

Nenshad Bardoliwalla (nenshad.bardoliwalla@sap.com) is the Vice President and Head of Enterprise Performance Management for Finance products at Business Objects, an SAP company. He is responsible for the product strategy and product management of Business Objects' strategy management, planning, consolidation, and profitability management products. This includes responsibility for SAP's recent acquisitions of Pilot Software and OutlookSoft, along with the former Business Objects EPM product lines acquired from ALG, Cartesis, and SRC.

 



1 Mintel GNPD, www.mintel.com (2005). [back]

2 SAP acquired Business Objects in January 2008. [back]


 

 

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