Reduce Error & Fraud in your Organization
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SSON: What are the main pain points you have seen in the financial and insurance industries to date?
Nolan Gesher : I would say that a big pain point that organizations are dealing with involves trying to stay ahead of the compliance and the regulatory curve. That seems to be driving a lot of work, so for financial institutions it would be things along the line of Sarbanes-Oxley and Basel II. For security firms specifically, hedge fund regulation is another big driver on the buy-side. On the insurance side of things, Solvency II is driving quite a bit of this work. What this all ties into is putting controls around financial governance, and specifically around the financial close process within these organizations. The interesting thing we have seen is that this sort of pain point is occurring not just because of the demands placed on these organizations by regulatory requirements or from internal audit groups, but also from the investors and clients of these organizations. Investors are looking to our clients to proactively show control around financial governance in reaction to the regulatory mandates that exist today, and those that will take shape in the future.
SSON: What are the benefits for such organizations who are implementing the Fiserv solution?
Nolan: Could I clarify that while Fiserv has hundreds of solutions sets, I am focused on solutions that attend to the reconciliation and financial governance needs of an organization – specifically; reconciliation, exception management arising from reconciliation, account certification and control of the use of spreadsheets and governance of that use.
Within this area we really see three main benefits. These are increased efficiency, the mitigation of operational risk, and the ability to enable compliance with internal and external mandates. We surveyed our client base on this question, and they pretty much said that these are the areas where they are deriving benefits from the solutions that Fiserv offer. Interestingly, when we prompted them further to help us to prioritize which is the most important, they came back with a view that said they couldn’t put a priority on just one of those benefits - as they are all of equal importance and all should be addressed in order to warrant or justify an investment.
So, in terms of increasing efficiency, our customers are looking to us to say that they can use these solutions to standardize the processes that they support. So, things like the reconciliation process, reporting, standardization around how and what’s derived from the output of reconciliation or account certification processes. That ability to standardize really generates a lot of the efficiency and it also helps them to plan for the increased capacity they are going to need as their transaction volumes increase down the road.
In terms of operational risk, or the ability to mitigate that risk, our solutions are of value because they provide rules driven capability to identify risk -and to escalate those issues that are causing the risk- within a workflow of environment. In essence, to allow our solutions to define specific business processes based on the different types of risk that they are dealing with and different types of processes that underlie those risks.
And then the third benefit, which is to enable increased control of compliance risk. To address this customers are using our tool as a mechanism for developing internal controls. And, as a result of that, making sure that they have a level of transparency that they need in their processes and operations.
I can sum that up by saying that organizations need solutions that allow them to demonstrate that they have a repetitive, demonstrative, auditable process, all leading to a faster monthly close.
SSON: So what are the challenges when integrating your software, your solution into these organizations?
Nolan: Again, within the context of the solutions that we offer (which are reconciliation, account certification and spreadsheet control) the biggest challenge that we face is being able to formalize the institutional knowledge that exists but may not be documented anywhere. As an example, data is a key ingredient to the use of any of those solutions and we need to establish where that data is and the format it is in. And, ask if it is accessible? All those things that a customer takes for granted we need to really understand and, in turn, help the customers understand at a detailed level within their environment. When it is written down, we can objectively evaluate it – that’s not to say that we need to re-engineer that process every time, but we will question if there is an opportunity to perhaps re-engineer it or just tweak it. As a vendor we need to ensure that technology a customer just purchased can be leveraged in the most effective way. In addition, the organizations that we deal with need to make sure that they have got buy-in for this new solution -perhaps for changes in the processes that it will touch. That really relates back to the customer – you have to have senior management as a driving force behind these changes.
A final challenge for us and our customer is to ensure that they avoid the ‘big bang’ approach where you collectively try to take on too much at once. The vast majority of successful projects that I have been involved with are really good at picking high value targets within the overall organization, addressing those first, and demonstrating that you are getting that payback as soon as possible. Once you have got that proven success then look to rolling it to other groups, other processes and other parts of the organization; that’s really the best practice approach.
SSON: Can you share some details Nolan of some of the successful cases that you have worked on, and give us an idea of the timelines it takes to integrate your solution within the organization?
Nolan: A few that jump to mind would be Fifth Third Bank, Virgin Media and Butterfield Bank. All of these have taken our solutions, brought them in house and are using them within a shared service or centralized environment.
In terms of organizations that use our solutions to address issues of compliance and regulatory mandates - and have done so quickly and very successfully – I could cite Spectrum Global Fund Administration and Dubai Islamic Bank. In terms of the length of implementation time - that varies. I think we need to put it into context that for the sorts of solutions that we offer we are looking on average at a four to six month project perhaps. And then you start to see our return within twelve maybe eighteen months. But that return is extremely meaningful - we are often talking about returns of hundreds of thousands if not millions of dollars. Our experience shows that organizations that have automated reconciliations with our solutions have been able to reallocate or reduce head count by 79%. In terms of taking the next step and automating their exception management process, the reallocation/reduction headcount there has been nearly 18%. So there’s considerable payback that justifies our solutions - OK, it feels like it’s taking a little bit of time to get it implemented, but the return is going to be significant.
SSON: We are apparently coming out of a recession, but I wondered if it had any implications on your organization? In other words was it a help or was it a hindrance?
Nolan: What has changed is that organizations don’t necessarily have funding approval. As we know that process is often a separate initiative from getting business case approval and it’s becoming more and more of an intensive initiative for them and in turn for us being involved with them. It changes a lot of the dynamics of the situation. Once we have established a clear business case together with our customer sponsor it is not always as clear cut a path as it once was to secure funding. Our job is to work with our sponsor to ensure that the project gets the required funding once we are past the initial hurdles.
Beyond that I would say that the financial crisis that we have been through has definitely focused organizations on what some might consider neglected areas. For instance, there is a renewed focus on governance, control and transparency. We have seen in the last few months that budgets are starting to open up in this area. You still have that hurdle I spoke about of funding approval, but it is becoming a bit easier in that firms and organizations recognize that they have got to make an investment at some point to satisfy auditors, investors, regulators and internal operating procedures – and of course to stay ahead of the curve. Organizations increasingly come to us wanting this kind of ethos at the heart of what they do – both to show the market that they take this seriously and also to know that their operations and finance reporting is accurate, controlled and transparent.
SSON: Nolan can you identify some quick wins that an organization can put in place to reduce error and prevent fraud?
Nolan: Spreadsheet governance is a blossoming industry. Increasingly, organizations are reviewing their operational processes and are starting to realize how widespread spreadsheets are in supporting key business processes and maintaining ‘mission critical’ data. We are seeing growing interest, and this really is worldwide, in looking for solutions that can place control across the spreadsheet universe. As it happens, spreadsheet governance works well into the question that you asked. The spreadsheet control solution that we offer can realize a return on your investment in as short as two months or so from the point that implementation begins. So – we are talking around six to eight weeks before you start to see a return and the quickness is because you are getting control of what was otherwise a very uncontrolled process.
SSON: Following on from Quick Wins do you believe organizations are really safeguarding themselves against error and fraud?
Nolan: I think that more and more are starting to. There are lots of different types of control solutions out there to safeguard against error and fraud, in addition to spreadsheet control. We are seeing a lot of customers leveraging existing technology in place to further safeguard themselves. For example, extending our reconciliation solutions with the ability to automate an integrated exception management process would definitely fit into that category. More organizations are also looking at the account certification or general ledger attestation processes as ripe for automation and enhanced controls,- that’s again something that can extend from our core reconciliation technology and fit into that context of a six months or so implementation with returns being reaped a year or so after that.
SSON: In the current climate, no-one is putting all of their eggs into one basket, do you see Fiserv as an organization that may diversify its current solution offering, and if so how?
Nolan: We’re really pretty well diversified today. We’ve got solutions that range from electronic fund transfers to core banking systems, to portfolio management solutions, to the reconciliation and financial governance solutions I have been talking about. Within the Risk & Compliance competency within Fiserv we also have risk and performance solutions, fraud prevention and AML compliance solutions. So, we are pretty well diversified. Interestingly, we see our customers going in the other direction - they are looking to consolidate vendors as opposed to looking to diversify and utilize different vendors for different things. For example, if an organization is working with four vendors, they may want to reduce that number to two vendors, thus reducing costs by working with a fewer number of vendors and de-risk the vendors that maybe not quite as stable as the other ones. You can see how a company like Fiserv suits this model – with the breadth and depth of solutions we offer. Of course there will always be organizations we deal with that just want a point solution but the trend we see, perhaps linked to the size of organization we deal with, is to offer a one stop shop for all their needs.
SSON: What changes do you see on the horizon for Fiserv?
Nolan: Within the area of reconciliation and financial governance there has been a definite shift in the way that reconciliations are viewed. It used to be that the reconciliation process was viewed as the end game. So you had a transaction (whatever type it was) - it cleared, it settled, it reconciled and it was considered complete and done. Now reconciliation is also being viewed as the beginning of the financial close process. So, it’s the reconciliation and the results of that reconciliation that feed into an organization’s need to make sure accounts are in balance and put through a certification process to ensure they are reviewed and signed off or approved by multiple layers of the organization. All of that leads to the period or financial close process. And so that has got us kind of excited. It is really good news for this space because it means that we are not relegated to the back office as a necessary evil. We are much more viewed as something that an organization has to get right, because if it’s not right then the financial close won’t be right.