From fragmented systems to unified CPM – preparing for today’s finance challenges
March 2016 | EXPERT BRIEFING | BANKING & FINANCE
The finance function is undergoing massive change. Shifting business models, rising tax complexities, expanding global operations and evolving regulation are putting a strain on finance departments. Layer on the rise of Big Data and the growing influence of social and digital media, new technologies have completely changed the way finance departments operate.
Take the case of UniCredit, a leading European banking group operating in 50 countries globally, with a total of more than 7000 branches and over 126,000 employees. Following a series of big acquisitions, the company now runs the largest international banking network in Central and Eastern Europe, with over 1300 branches (as of 30 September 2015).
Managing such a complex entity requires standardisation. In 2005, the company therefore started looking for a unified solution that would provide financial consolidation and budgeting in the first phase, then in time provide planning, reporting (including segment) and multi-year forecasting.
The solution was implemented within the CFO function in 2009. Until then, the company had been utilising a solution for financial consolidation and budgeting combined with in-house systems. At that time, a total of eight different consolidation applications were used and they were more planning than accounting solutions. Roberto Monachino, now the company’s group chief data officer, but then working in the CFO function, collaborated in finding a solution. This led to UniCredit agreeing to invest medium to long term in CPM technology. “We were already using a platform for financial consolidation and budgeting and we therefore felt that CPM was the obvious next step to continue our journey,” says Mr Monachino.
The main objective at this stage was to replace the company’s fragmented legacy solutions with a standalone CPM suite to modernise and unify key financial processes, as well comply with the impending International Financial Reporting Standards (IFRS) accounting standards. Fundamental to UniCredit’s approach to CPM in support of its expansion plans was the implementation of a new solution that would meet the group’s financial consolidation and regulatory reporting needs, but also simplify and rationalise the data collected for budgeting, planning, reporting, including segment and FRS 8 (Related Party Disclosures), and multi-year plan forecasting.
Implementation happened over 10 months, with the initial six months dedicated exclusively to project planning and to the analysis of service models, semantics and the chart of accounts. It was decided that the company should go into the new without shutting down the old completely. At least initially, the old systems would run in parallel with the new solution.
By the end of September 2009, financial consolidation (starting with the actual vs. budget comparison) was implemented and the first budgeting process, the full year-end balance sheet and the first segment reporting launched. During the final phase of the overall plan at the end of 2009, UniCredit was ready to execute the long-term vision of unifying all CPM applications and the CFO processes. This latest stage of the implemented financial consolidation solution focused on the rebuilding of the previous year’s statutory reporting and on building the current year’s budgeting model. It also brought to the adoption of a single solution for the end-to-end CPM needs.
UniCredit has since made enhancements to the CPM solution that have enabled different approaches and created opportunities both at legal entity and at holding level. These include cost allocations and transfer pricing for UniCredit Business Integrated Solutions (the group global services company, launched in 2012); profitability analysis by customer, channel and product in Fineco Bank (the group’s direct multichannel bank, launched in 1999); regulatory reporting for the European Banking Authority (EBA); weekly KPI monitoring and processing (to provide top management with relevant data); credit risk consolidation (to collect all risk data in one single place at aggregated level); regional planning for Italy (to collect all numbers and accounts for Italy in one place for reporting); and finally risk assessment at both group and at subsidiary level (to comply with UniCredit’s golden rules of profitability).
Ultimately, implementing a standalone CPM solution provided multiple measurable and transparent results, from single definitions for the identification of UniCredit’s perimeter of consolidation (legal entities active in both euro and non-euro markets which means the added complexity of foreign exchange issues) to a unified product catalogue (in terms of planning, a standalone CPM enables UniCredit to analyse and explain processes more easily and in line with top management requirements).
Other results were full group consolidation of all legal entities and regulatory compliance with Italian Generally Accepted Accounting Principles (GAAP), IFRS and support for Extensible Business Reporting Language required by the Italian central bank.
Additionally, thanks to CPM technology, different regional legal entities, which are obliged by law to submit sub holding budgets, can now open a sub-consolidation within the same platform.
Other results were adaptation to high organisational change, reduction of the time needed for the entire consolidation process, delivery of statutory, financial, planning and management reporting via dashboards and subsequent reduction of the overall costs.
Monachino underlined that UniCredit has benefited from the use of CPM technology in terms of implementation processes, which have been shortened, and reduction of third parties for execution. The journey continues.
Nick Nesbitt is consulting services director at Tagetik UK. He can be contacted on +44 (0) 870 8510540 or by email: firstname.lastname@example.org.
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