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Vision 2011 Day 1: The keynote recap, part 2 of 2
Delaney Turner 270003RQ8K Delaney.Turner@ca.ibm.com | | Tags:  business_analytics vision11
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At the time, Christopher Cox didn’t know why as recently appointed Chairman of the SEC he’d been asked by an enthusiastic woman to sign her son's football.
Nevertheless he obliged, pleased that his recent appointment had made waves within such an unlikely audience.
It was only afterwards, he said in his opening anecdote, that he realized she’d mistaken him for the chair of that other SEC. That would be the NCAA Southeastern Conference.
But the distance between football and financial governance and risk management is shorter than it may appear, said Cox. Take for example, that Peter Walsh, the Dallas Cowboys’ head of technology, has a background that includes stints at Nokia, Lockheed Martin, Rockwell and United Space Alliance.
Truth is, said Cox, “there is nowhere in today’s fast-paced, global tech-driven economy that business analytics aren’t driving progress.”
In a captivating address that held attendees’ attention in an iron grip, Cox outlined the tremendous benefits that await Finance organizations willing to embrace business analytics – in particular their unparalleled ability to meet the increased and increasingly complex regulatory requirements in the U.S. and abroad.
First though, he presented a murderer’s row of massive and interconnected challenges staring CFOs and their teams straight in the eye. They included increased regulatory scrutiny, exchange rate uncertainty, political turmoil in global financial capitals and shifts in global market power.
Take, for example, this passage: “If I convey no other message to you this morning, as a former regulator, it should be that there will be, indeed, more government scrutiny. You can bet on it. And if I can leave you with just one clear takeaway from my 17 years in Congress, it should be to confirm that there will indeed be continued abnormally high levels of political turmoil in Washington and indeed in capitals around the world.”
Here are some other highlights of Cox’s address:
Shifts in global market power – for example, the rise of China – will force companies to integrate their global operations more closely than ever before.Uncertainty is the new normal.
It’s no longer safe to look at any of these issues – as separate issues. Each influences and is interdependent with all the others. There are many dynamics at play and It’s the job of Finance to keep on top of these changes.
Finance must rely on its governance, risk and compliance systems and processes to manage all of these changes. The good news is that technology has been evolving just as fast as these changes have been multiplying. As a result, GRC isn’t just about playing defense. It’s about using this data to gain new insights into performance. Business analytics is really about combining compliance and strategic functions into one discipline.
Businesses are getting back to basics: The “tender green shoots” of a modest recovery are actually a renaissance of a “back to basics” school of management. Businesses are focused on cost efficiencies and stronger value propositions to the customer. Competition is tougher, but what’s rising from the ashes is stronger, leaner and much wiser about risk.
Business analytics are driving smarter decisions about risk: the predictive power of advanced analytics can turn the data generated by the compliance function into actionable intelligence that can be quickly translated into business decisions. Entire organizations are in turn becoming more productive and more efficient, and more responsive to the constant changes of the new normal.
The days of communicating through spreadsheets are coming to a close. That way of communicating needlessly exposes organizations to risk and error, wastes time and resources and degrades confidence in the reporting process itself. There is a better way.
Complying with new regulations will be anything but easy. The Dodd-Frank Act totals more than 2,300 pages. It’s estimated that the resulting rulemakings will generate 30,000 more. Regulators are still smarting from being burned so badly when the metrics they relied on to warn of coming disasters proved wholly inadequate. There are many unsolved problems and there is still uncertainty about what governments will do next.
Risk is the new lens through which the SEC will view disclosures. But fatter proxy statements and more new disclosures won’t be the most significant result. What the SEC will be looking for - and what Finance must be concerned about – is a substantive focus on the factors in your company’s governance structure that contribute either to managing risk or to creating it. This new focus will show up in new disclosure requirements and enforcement priorities and compliance exams.
An integrated approach to GRC can ensure that your compliance and disclosure procedures stand up to external scrutiny. It can also ensure that your company succeeds in risk oversight by providing the right information to the people who need it. Effective risk management depends on the flow of information between your board and corporate risk managers. Directors need sufficient info about your company’s external and internal risk environment, risk exposures, assessment and prioritization methods and response strategies. Management and Directors must collaborate to understand and act on high-quality, timely and credible information to drive effective responses and decision-making.
XBRL is becoming the “lingua franca” for global regulators. One of the remarkable features of XBRL tags are translations from English to Chinese to Hebrew or any other language. China, Japan and most of the 27 member states of the EU are now using it. In moving to XBRL Belgium’s national bank cut filing fees for businesses by 35 percent and generated annual savings of 17 million Euros. The bank also sees XBRL as a way to harmonize data exchange with other regulators. In a similar vein in the U.S. the SEC, Federal Reserve, FDIC and OCC have all discovered that using XBRL in their regular data calls from banks has resulted in cleaner data, higher accuracy, higher inflow and access and increased productivity in their systems.
In closing, Cox did leave the audience with an optimistic note. Not surprisingly, he said, companies want to know how else they can leverage their investments in GRC solutions to capitalize on this smarter information.
“There is every reason in the world to mine this XBRL-tagged data yourselves,” Cox said. “You should pull it from everywhere within your organization. When you do this, several good things will happen: you’ll get more accurate and complete results than with the old manual methods; you’ll leave behind all the errors that are inherent in manual processes, and better yet, you’ll eliminate the wasted time that this used to consume. Finding answers and insights is no longer much of a chore.”
Some pretty powerful arguments for the adoption of integrated GRC solutions, (especially coming from a mistaken football administrator).