Questionnaire Digital Transformation and Regulatory Requirements Successful Performance Management in Financial Industries March 2015 Competence Center Financial Industries
Introduction Need for Transformation in Financial Industries Banks, insurance companies and other financial service providers are currently facing a variety of challenges: increased regulatory requirements, low interest rate regime, intensified competition and immense cost pressure as well as constantly changing customer needs. In order to withstand competition and increase customer loyalty, financial institutions and insurance companies have to adapt their business model to the opportunities of the digital age. Additionally, internal processes have to be improved in terms of efficiency and flexibility to ensure long-term competitiveness. Based on the current market conditions, performance management and financial control have gained importance in the financial industry. A well-targeted management control system enables companies to navigate soundly through the transformation process, sets stimuli, and supports the decision making process. The topic of this year s study Digital Transformation and Regulatory Requirements: Successful Performance Management in Financial Industries reflects that even performance management and financial control itself is impacted by this transformation. It has to evolve into an economic and future oriented business management system that works as an early warning system and ensures the company stays on course to achieve its targets. Successful Performance Management should not be taken for granted Horváth & Partners directs this survey specifically to representatives of banks, insurance companies and other financial service providers regarding their performance management capabilities. This questionnaire allows a structured and comprehensive assessment of the current situation as well as a comparison with competitors and other companies in the finance industry. It facilitates the identification of strengths and weaknesses and derives needs for action. The participation in this study will provide you with additional arguments, why an upgrade of your performance management system at the interface between CFO and CRO, sets the basis for a successful future. The results of this questionnaire will be anonymized and aggregated. It is ensured that no information can be traced back to specific participants. All answers will be treated confidentially and no distributed to third parties The completion of this questionnaire takes about 20 minutes. In case you have any questions, please get in touch with us using the contact details listed below. We are looking forward to your participation and an interesting discussion. Dr. Frank Schindera Kristin Buettner Performance Management in Financial Indusries Questionnaire 2
1. Company Data and General Information 1.1 In which industry is your company operating? Banking Insurance Other financial services 1.2 Which sector is your company part of? Private Public Cooperative 1.3 Please provide your contact information: Company Legal form Name Phone E-mail 1.4 Please list your role: CFO (Chief Financial Officer) CRO (Chief Risk Officer) Head of Accounting Head of Controlling Head of Risk Management Performance Management in Financial Indusries Questionnaire 3
2. Business Model, Strategy & Performance Management Objectives The expression refers to the next 3 years. Business Model and Strategy 2.1 Please rate the relevance of the following external factors for your company: Uncertain Stable Not relevant Uncertain Future situation Stable Not relevant Market specific factors Exchange rates Purchasing power Interest rates Refinancing costs Demography/Mortality Independent factors / regulation Regulatory capital requirements Liquidity requirements Regulatory reporting requirements 2.2 Please assess influence and importance of performance management in your company: False True False True The performance management concept is in line with corporate strategy is the basis for selecting main key performance indicators (KPIs) is aligned with risk and liquidity management considers aspects of sales management Performance Management in Financial Indusries Questionnaire 4
False True False True The consistent implementation of the performance management concept enables the finance department being a strategic partner of the divisions allows company-wide identification of cost efficiencies The CFO resort adopts an independent and objective position towards divisions and other business functions focuses on analytic and strategic tasks, apart from providing of figures and KPIs is responsible to achieve specific performance targets Performance Management Objectives 2.3 Please assess the importance of different performance management concepts used: Financial (focus on accounting) Economic (focus on market value) Regulatory (focus on regulatory requirements) Sustainable / Ecological (sustainability reports) Low Very high Low Very high Performance Management in Financial Indusries Questionnaire 5
2.4 Please assess the impact of digitization on performance management: Digitization of the business model is part of strategic considerations (e.g. digital applications, mobile forms of communication, integration of distribution channels etc.) Digitization of the business model influences performance management and leads to a revised performance management concept Functional corporate control (sales, operations etc.) is improved by utilizing digital elements (e.g. statistical functions, predictive analytics) Increased and more frequent data availability (handling of large, complex amounts of data) adds value to corporate performance management Increased data availability leads to intensified controls (e.g. extension of controls to groups of customers, distribution channels etc.) Low Very high Low Very high Performance Management in Financial Indusries Questionnaire 6
3. Harmonized Performance Management Model KPI and Performance Management / Reporting 3.1 Please assess your KPI and performance management: There is a convergence between internal and external financial reporting Performance Management Concepts for Group and operational subsidiaries are aligned Key figures and reporting of functional areas (accounting, controlling, risk management etc.) are aligned Non-financial key performance indicators are systematically used in performance management Low Very high Low Very high 3.2 Reporting 3.2.1 Please assess your management reporting: Integrated financial, liquidity and risk reporting sets the basis for corporate performance management Standardized reports exist to address different management levels There is an adequate number of different performance indicators and reports Comments support analyses and do not only describe content New media and tools (e.g. tablets, smartphones etc.) are broadly used False True False True 3.2.2 Please assess the maturity of reporting processes: False True False True Standard reports are created centrally Standard reports are created automatically Ad-hoc reports are created fast and efficiently Self Service Reporting and BI systems are available for individual analyses Performance Management in Financial Indusries Questionnaire 7
Planning & Forecasting 3.3 Please assess the following aspects of Plan and Forecast: Targets exist at the beginning of the planning process Plan and Forecast are prepared on a more aggregated level than Actuals Simulation-based planning is used for modeling scenarios False True False True Forecasts can be generated automatically A (partially) rolling forecast is used as a future oriented performance management tool Plan and Forecast are closely integrated with risk and liquidity management Performance Management in Financial Indusries Questionnaire 8
4. Target Operating Model 4.1 Please assess the following organizational aspects: A central unit responsible for financial, liquidity and risk reporting (concerning methods, processes and standards) exists The finance organization is future-oriented and efficient (e.g. organizational structure is rigorously oriented to processes and roles) An organizational separation between analytical and transactional tasks exists Run (operations) and Change (projects) organizations exist separately Standardized processes are centralized or organized in shared service centers CFO resort has access to process and capacity management tools to allocate resources effectively and efficiently A function responsible for coordinating and supervising change and project tasks of the CFO resort exists (e.g. Finance Project Portfolio Manager) False True False True 4.2 Please assess the maturity level of processes in the following areas: Low Very high Low Very high Closing processes and external reporting Controlling and internal reporting Financial and liquidity management Risk management Performance Management in Financial Indusries Questionnaire 9
4.3 Please assess the maturity of the available IT systems: IT and data management systems in Finance are integrated and reconcilable IT systems are flexible regarding the integration of new requirements IT systems are capable of handling traditional and economic accounting standards in parallel One integrated and reconcilable data storage / data warehouse exists for risk and finance data Low Very high Low Very high Performance Management in Financial Indusries Questionnaire 10
5. Closing Section Thank you for completing our questionnaire. All participants will receive an individual evaluation of the results once the study is finished. The team executing this study will contact you shortly after having sent back the questionnaire. Please return the completed questionnaire as follows: By mail Horváth & Partner GmbH Kristin Buettner Ganghoferstraße 39 80339 München Or by E-Mail finrex@horvath-partners.com Performance Management in Financial Indusries Questionnaire 11
The study Digital Transformation and Regulatory Requirements - Successful Performance Management in Financial Industries! is an initiative of Horváth & Partners. Horváth & Partners is an independent, international management consultancy headquartered in Stuttgart. The company employs over 600 highly qualified employees in locations in Germany, Austria, Rumania, Switzerland, Hungary and United Arab Emirates. The membership in the international consulting network Cordence Worldwide which strengthens our ability to undertake consulting projects in important economic regions of the world with the highest professional expertise and profound knowledge of local circumstances. The core competences of Horváth & Partners are Corporate Performance Management and Performance Optimization both for the entire company and for the business and functional areas of Strategy, Organization, Sales, Operations, Controlling, Finance and IT. Horváth & Partners stand for project results which create sustainable benefit. This is why we accompany our clients through the entire process from developing the business concept to anchoring via integration into processes and systems. Do you have any questions? We are looking forward to hearing from you soon! Heads of study Dr. Frank Schindera Head of Banking Controlling Horváth & Partner GmbH Königstraße 5 70173 Stuttgart Germany Kristin Buettner Managing Consultant Horváth & Partner GmbH Ganghoferstr. 39 80339 Munich Germany Phone: +49 711 66919 1381 Phone: +49 89 544625 1290 Mobile: +49 162 2886 007 Mobile: +49 162 2886 087 fschindera@horvath-partners.com kbuettner@horvath-partners.com Horváth & Partners offices in: Abu Dhabi Berlin Bucharest - Budapest Düsseldorf Frankfurt - Hamburg Munich Stuttgart - Vienna Zurich Member of Cordence Worldwide with offices in: Australia - Belgium - Brazil - China - France - Italy - Japan - the Netherlands - Singapore - Spain - UK - USA Performance Management in Financial Indusries Questionnaire 12