In the past, investment banks responded to financial and regulatory reporting demands by creating a bespoke solution—which, in the long run, has resulted in a number of systems, processes and workarounds. It’s expensive, inefficient and labour intensive, and industry consensus is that the finance function has to make some changes.
Challenges facing the finance community
The finance community has a number of key priorities to consider, especially IFRS conversion, the Dodd-Frank Act, Basel III and liquidity rules. Beyond that, there are ten major challenges to finance transformation:
1. Lack of common terminology between finance and other functions.
2. Absence of a consistent source of transactional data between finance, risk and operations.
3. Absence of a single source of reference to ensure that front- and back-office information is consistent.
4. Proliferation of manual adjustments.
5. An over-reliance on end-user developed spreadsheets (often referred to as a “spreadsheet jungle”).
6. Inflexible legacy systems.
7. Lack of standardised processes.
8. Dependency on key team members, creating potential for a single point of failure.
9. Knowledge silos that limit visibility and understanding across the enterprise.
10. An inability to align finance and risk functions on key requirements.
Recommendations
At Accenture, we recommend three key strategies for finance transformation:
- Remove the need for risk and finance reconciliation with a single source of data for the two separate groups. This requires strong data management practices, a shared data warehouse and well-managed transaction data underpinned by solid reference data.
- Increase transparency while reducing risk with a single downstream risk and finance data warehouse. This would enable banks to respond to increasing regulatory pressure, and be able to track data and prove consistency between reports.
- Increase workforce engagement in meeting regulatory requirements by sourcing data straight through to daily profit and loss (P&L) and risk-weighted asset (RWA) calculations. This also has the benefit of empowering the workforce to deliver value-added activities.
We believe that finance transformation can help banks reduce costs and make better decisions. More important, we believe that banks that do not take these steps will find themselves held back with slow and inaccurate financial reporting.
To learn more, download Financial Reporting Challenges in Investment Banking: A Practical Guide to Reducing Risk in the Financial Reporting Process (pdf; opens in a new window).