Driving Business Confidence 2022

Finding Time to Make a Difference


Inflationary pressures, rising interest rates and shifting FX rates are with us today. Additionally, other factors like labor and product shortages driven by lower staffing mobility levels combined with lower retention rates, fluctuating higher than normal employee sickness levels at both customers and suppliers, the war for talent, plus continued supply chain disruptions are also adding operational complications. A perfect storm!


Timeliness and quality of data are the major underpinnings of strong business management, but getting to that position of extreme efficiency across the board will still take many years, so digital priorities need to be set to get systems working for you and not vice versa. It is therefore important to understand how the latest technologies can support your ever changing business goals to create value.


Digital enablement is already underway, and there are many examples of what can be achieved through its deployment. FinTech, Insurtech and Retail are often used to illustrate the possibilities, but these same technologies are now being leveraged more generally across all business functional areas and sectors..


According to Gartner, digital enablement can be categorized into Digital Optimization and Digital Transformation, the former more about describing iterative changes, and the latter the more radical re-engineering of business processes that are more likely than not to be customer facing (FinTech, Insurtech, and Retail etc).


Digital Transformation can be a disruptive force not only to your competitors, but also to your own internal operations. Looking deeper, changes of this type are more likely to be x-department, as well as being x-functional / domain area. Optimization, on the other hand, is more likely to be executed in a single departmental environment or functional area to drive iterative improvements.


Worthy of note here is that many digital projects actually fail due to their implementation teams not having representation from all of the required relevant stakeholders to make it a success, as transactions flow from their start to completion.

Typically challenges come down to 1) lack of systems integration expertise, especially where older legacy solutions are involved in a project, as these skills rarely sit within one single person, nor organization and 2) underestimating the required depth of change management required, as processes become re-engineered across functional areas, particularly where domain expertise is focused slightly differently; for example within operations and finance when it comes to the detailed points re monthly sales cut-off.


More holistically digital enablement (including Transformation and Optimization) equates to the intersection that sees Apps + your Applications + your unique Digitally Enabled Processes (DEP’s) coming together with full and comprehensive levels of compliance. This combination of technologies is very flexible and powerful and is suitable for both quantitative and qualitative data sets (surveys, appraisals, employee self-service etc).


Looking deeper at another level of detail reveals that DEP’s can be created ultra-granularly, thereby enabling you to deploy them as needed to fully achieve your operational goals.


Functionality enables very flexible end to end process design; from data collection (including RPA, if required for document onboarding that can be with or without AI), through all required data transformations / enrichments to contextual actionable reporting / visualizations +/or workflows @anywhere @anytime + API’s @anywhere to other applications or ecosystems (including the leverage of Open Banking API’s w/payments @anywhere) + simulations. The above is a bit of a mouthful for sure, but you get the gist regarding its flexibility.


Also note that these process steps are not fixed in number (parallel or concurrent), nor fixed in any position within any end to end business flow. The roles and responsibilities, validations etc are driven by the process owner for the process user(s), the latter who benefit from operational simplicity. At a more detailed technical level other options do exist if needed, including “defined” processor tasking and cloud bursts.


A little more on API’s. These are digital connectors that enable processes to work seamlessly end to end, and can be executed as x-application and / or x-ecosystem. Typically the latter are well established services i.e. TransUnion for credit checking etc, CEB SHL for employee development, and Open Banking for global treasury cashflow planning (or used for tighter customer / supplier cash process integration etc).


Integrated visualizations @anywhere @anytime and compliance that is built alongside process creation are very important takeaways here, as typically operational bottlenecks are not necessarily within one application, but occur when combining relevant data points across multiple sub-applications to drive a single view for decision making. These views may be further used for actionable contextual alerts, authorizations and approval processes, where only relevant material information need be presented to the user etc. Before this would have required the extensive use of inefficient spreadsheets in core processes that corporates are now replacing for purposes of convenience and compliance.


Quote from Gartner: “However, only 16% of decision makers feel financial data can be easily leveraged for decision making.” https://www.gartner.com/en/finance/trends/top-4-data-analytics-trends-finance?


Taking a different tack, any automation can be increasingly sophisticated in design, ie full, partial, augmented, or even more simply an eyeball review by designated experienced personnel, in order to strike that balance between time savings and confidence levels in underlying numbers ie doubling down on ensuring that each process step is operating exactly as required by the process owner.


Note that in any deployment, all underlying process steps should be fully transparent to the business flow design person / team, although not necessarily to the person using the process. There should be no black box i.e. all process steps should be fully transparent and auditable. All of the above saves time when trying to understand various data points or trends.


See within the section “Other notes below. Quote:- “In fact, according to Gartner research, the average CFO loses almost eight hours — roughly one business day a week — to the wrong activities”.


You might also be interested in why project team structures are critical to success https://flexsystemhk.wordpress.com/2018/10/09/digital-in-2019-is-still-about-technology-but-more-about-organisational-structure/ and also as to why you might be better off working through various end to end process iterations over a longer period of time ie smaller iterative steps, as an alternative approach to that of a big bang.  https://flexsystemhk.wordpress.com/2021/06/11/business-automation-within-finance-operations-and-hr/


Moving through 2022, you will need to find even more time. As is normal within any year, there will be other key initiatives in play, including additional compliance checks and controls for operations and finance. For example, working through the details of BEPS 2.0 that is currently aimed at larger corporations (e.g. handling the specifics surrounding contractors, segment analysis etc), sustainability initiatives (making it core to strategy and capital-allocation) with the other more detailed ramifications associated with any ongoing x-year KPI measurements for ESG / DEI including property portfolio valuations (more below), and also potentially some higher level ground changing initiatives surrounding sovereign digital currencies and crypto based assets / valuations.


This requires additional time and is of course on top of reacting to the changes mentioned earlier above. For example, inflationary pressures will require actions from your functional teams to protect profits (inflation was 7.5% annually in the US for the 12 months to January 2022, accelerating at the highest rate in 40 years. The UK for the same period was 5.5%, the highest in 30 years).


For these macroeconomic changes, other detailed initiatives will be required in parallel. These will be around increasing productivity, increasing or changing pricing models, reducing costs and where relevant undertaking hedging. All have an impact on underlying numbers and all changes need to be put into context for your understanding. Time will have to come from somewhere, noting the typical operational dynamics of what seems to be a constant downward pressure on resourcing levels across the past years to increase productivity, despite the increased demands of the business.


Operational Compliance should always be an integral part to all process design activities including for segregation of duties, multi-tiered approvals etc. Worthy of note and thinking more broadly, there is still a lot of confusion within the “C suite” about how to best drive ESG initiatives forwards. This is due to there being 1) different sets of reporting legislation & drivers for various types of stakeholder 2) the fact that there is often no single point of internal ownership for these initiatives within a corporate and 3) continuing ongoing legislative changes, particularly where each change requires a more detailed review to identify the underlying actions that will be required to fulfil them.

Adding to this urgency is that there are many other external, as well as internal stakeholders seeking guidance and answers to their questions, that also includes the more detailed and challenging conversations around a corporation’s Digital Ethics.


Examining this further, consider your property portfolios. ESG reporting requirements are particularly relevant here according to McKinsey, as your various internal and external stakeholders (including your customers) will continue to base their decision making around how you position yourselves around this at a corporate level. McKinsey actually breaks this down to a very granular level to position that  it is  important for management  to think through at an individual property and combinations thereof, “both the transitional risks and physical risks, and within these both the indirect and direct impacts for each property”. See the table presented as Exhibit 1: https://www.mckinsey.com/industries/real-estate/our-insights/climate-risk-and-the-opportunity-for-real-estate?


Also see below within the section “Other notes. Comments from a Deloitte global survey re the gaps in climate governance and oversight among organizations.


Data management compliance should also be high on your radar. The fine tuning of GDPR requirements depending on your reporting timeframes (if required at all),  roll out immediately or before 27th December 2022. Additionally, the China Network Data Management law has been published on 14th November 2021, and has had a public review period that finished 13/12/2021, with the final effective date being close.

Both of the above protect privacy. There are many similarities between them, but at a practical level the subtle differences need to be fully understood on an ongoing basis to ensure compliance. Typically, using broad generalisations, PII data should be seen as being stored “within country”, and only used internally for normal corporate activities. Additionally, PII data collection should be as minimal as possible and deleted when no longer legally required.


Data compromises need to be disclosed as required to the relevant authorities and regulatory bodies, noting that in the case of China that different actions are required based on the number of employees etc (if that specific text is retained in the final version).


As always, a good operating practice is to think through the logical, legal, physical and taxable location of data, and consider for the purposes of cybersecurity building a zero trust architecture


Worthy of note is that in 2022 you will be extending the breadth and depth of your own internal compliance. This will see tighter controls surrounding the onboarding and off boarding of your own customers and suppliers, including ever more frequent requests from you to others for cyber insurance, in the event that your data is breached.


The reverse is also true for your organisation, so you should expect more requests of this type from your external stakeholders, which will require more time to handle. Another example that will also need to be sorted at various times across the world, relates to the tagged filing of statutory reports, including tax with governments, using electronic means eg iXBRL.


Cybersecurity, as part of your risk management, compliance and privacy strategy is also very important and should not be thought of as simply an IT problem. The threat of  Business Process Compromise sees larger corporates adding extended and more comprehensive validation processes around larger cash payments i.e. suppliers, treasury functions and executive bonuses.


Threat actors can be highly sophisticated, and it is now relatively easy for them to have a conversation with you by impersonating your boss or your boss’s boss etc with the intent of hijacking your funds. Video calls can also be compromised in the same way, but as it is expensive (at least today) they tend to be highly targeted. No less important is having initiatives in place to help 100% of your staff (especially the C suite) understand how threat actors might compromise your system through ransomware or other means i.e. gain entry at any system weak spot and then move across to your more valuable assets.


What about internal configuration issues? You may be interested in controls failing, when one customer received a cheque for over STG 2 Trillion in February 2022  (not deposited in this case by the customer), noting that in errors of this type not every corporate manages to successfully retrieve their cash. https://www.theguardian.com/business/2022/feb/13/northern-powergrid-accidentally-compensation-cheques-trillions-of-pounds-storm-arwen

More generally re general compliance you may be interested in: Driving value creation, and compliance, should be thought about at the same time. https://flexsystemhk.wordpress.com/2021/03/25/value-creation-with-compliance/


Positioning the building blocks as mentioned above ie Apps + your Applications + your unique Digitally Enabled Processes (DEP’s), enables all required processes to be tackled on a fully or semi-automatic basis to free time within finance and operational teams. This is very relevant as the detailed information required for decision support, controls, and management activities comes from the putting together of various data points from your other internal sub-systems, from one or multiple entities, operating across a variety of locations, e.g. reconciliations, intercompany movements, multi-currency balance sheet movements etc.


From this, an environment for Value Creation is enabled through individuals and teams being able to bring together various data points for increased efficiency. For example, at any particular point in time being able to review the required workforce planning resource levels for a specific function, in the context of the current and foreseeable economic environment.


As processes are at a granular level they are to a large extent ready for next actions. Examples:- Artificial Intelligence (AI) can be added when needed, and where it makes sense ie slotted into a process; IoT data for ESG management purposes can be presented at a summary level ie segments; ESS processes can be extended to handle different internal initiatives such as appraisals, training etc.


Current technologies will benefit users in their digital enablement and sustainability initiatives, but it is important to recognise that success will ultimately depend on three things: i) your ability to design and deploy compliant value-added ultra-granular transformational processes for an increasing number of data types, which should also fully leverage your other core systems to protect your past investments; ii) having the required all round project team representation to ensure success as transactions flow end to end; and iii) access to relevant systems integration skills to enable smooth actionable contextual business flows. This provides an agile controlled business environment to drive revenues, costs and productivity in the right logical direction, as well as a firm basis to start tackling other important initiatives, such as sustainability together with the required KPI’s surrounding ESG and DEI. A competitive game changer!

FlexSystem is a financial, human resources, and operations business software vendor to 1 in 10 Forbes Global 2000 (May 2020), and 1 in 5 Global Fortune 500 (August 2020), operating at the intersection of new digital process and payment technologies, whether on-premise or cloud, to provide you with iterative opportunities for value creation.

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