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CPM 2.0 Platforms – Enabling Risk Management Through Data Analysis

Data continuity is one of the greatest challenges in the Finance department. Many hands touch the data, enrich it, modify it, push it from one system to another until the end of the financial reporting process. The problem is that those breaks in data continuity have a cost: you lose the audit trail and also valuable information along the way. It is so normal that most Finance departments take it for granted that it is just the way it has to be. But does it still have to be that way?

CPM 2_0 Blog

When working in Account Payables and Account Receivables and then later in a GL department, I was exposed to the realities of the world, I knew the challenges of the delivery of goods, the manufacturing problems, the cash flow issues, etc. Individually, those problems often did not have a material impact on the company, so most of those facts were never shared with the financial reporting team.

When I worked as an FP&A manager, I only had limited information and visibility into the context of the actuals; the main focus was on structuring the financial view of the business for the future. We only ever considered the mainstream issues in our planning.

Finance Should Identify Risks and Opportunities in the Data

Obviously, something is missing. Today’s figures, risks and decisions define tomorrow’s financial results. Individual problems may not be relevant, but a pattern of issues or an accumulation of problems in one area can certainly impact future financial results. For example, multiple issues with subsidiaries of a client, a product or a supplier may not be relevant individually but could be business-critical globally.

Volumes of data about products, operations, customers and suppliers flow through the accounting processes as AP & AR transactions and journal bookings yet identifying the underlying risks they could represent is not the main focus of the accounting team. These factors remain in the background, present all the time, yet not necessarily easy to extract, report on, or glean information from. Although these factors are at the heart and soul of operating the company, they are often not even documented.

Most companies will plan their business based on a specific model focused on clients, suppliers or products; in fact, the Financial Services sector typically has a pure risk focus driven by products. When looking at planning the future and how you need to structure your organisation to achieve your goals, wouldn’t you like to know what issues are impacting your business today? Wouldn’t you like to know now if you have a client or supplier at risk?

Ideally, you want to see current risks you are facing to assess whether you need to de-risk the business, or you can develop some mitigation strategies to account for those risks. If you do not have a clear view into the risks you are experiencing today, there’s a chance you could create a 3-year plan that may be difficult to implement and deliver on.

CPM 2.0 Solutions and Risk Management

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Corporate performance management (CPM) 2.0 solutions, with built-in analytic capabilities, give you the ability to capture risk information at a transactional level, then categorize it based on defined criteria that drive your business. You can document the resolution of the issue or the opportunity it represents and enable reporting at a global customer/supplier or risk level.  As the reporting goes up the management chain in the organisation, management can use analytic capabilities to slice and dice the transactions, categorize and comment on the risks, and define the action plan accordingly.

For senior management, you need to automatically highlight where the risk issues may be and provide contextual documentation explaining the nature of the risk. The ability to drill down into those issues to better understand them is critical for the executive team to assess the best way forward. The ability to drill from a summary account – even down to a single invoice if it is material enough, is required.  For the FP&A team, this enables them to develop plans that make sense based on the past as well as today’s knowledge about the future.

Pulling It All Together - Intelligently

The main challenge for any company is having the ability to intelligently blend summarized financial data with detailed operational data in a way that provides enhanced business insight. It is about providing the relevant information at the right time, at the right level of detail, to the right users, in the right context.

To achieve this, you need these 4 key capabilities in your CPM platform:

  1. Access to the right data. The ability to read and process transactional information from GL, ERP, CRM and other systems. You need to capture data at the level that is relevant, often at the lowest level possible and link it to summarized financial results.
  2. Ability to convert transaction data into business information. You need to use a multi-dimensional model to aggregate that data following the structure of your business - the entities/the products/the clients or the risks. You need to categorize the risk issues at multiple levels of the hierarchies and have a process for the individual and executives to comment on them.
  3. Applied financial intelligence - You need to link risk data to the finance processes of Account Reconciliations, Financial Consolidation, Reporting and Planning. The reporting of business risk only makes sense if you can align it with financial data, otherwise you may understand the issue, but you have no sense of materiality or ownership regarding how to fix it.
  4. Blend financial and transaction together in one view. You need to be able to plan your business using models that makes sense to your business units. Those models can pull the financial and non-financial data to support the managing of your business risk.

This is why the concept of data continuity in a single solution is relevant.  Financial data continuity represents the ability to establish a flow of financial data from transactions to aggregated data and throughout all finance processes while maintaining the relationship between transaction data and resulting financial data from start to finish. If you are using multiple software tools, any contextual information will be lost as transaction level data is aggregated or exported to different tools.  This is the main reason data continuity has been such a challenge for finance teams in the past.

The OneStream Difference

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OneStream’s unified SmartCPMTM platform supports the core financial management processes of consolidation, planning, reporting, and data quality while also capturing relevant operational transaction-level information and linking it to financial results.  Applying OneStream’s financial intelligence to the operational data creates the financial relevance needed to use operational data to steer your company through opportunities and risks.  OneStream’s unified platform allows the finance team to focus on this strategic steering of the company during the planning, consolidation and close processes rather than at the end of those processes so you can adapt to new challenges sooner (during the month rather than at month-end) and more impactfully than your competition can.

OneStream’s unified approach removes all the noise hindering your capability to see where the issues are so you can react sooner and with confidence.  It helps eliminates the silos and challenges in adapting to business conditions, so you can respond more rapidly to new opportunities and reduce risk by more quickly identifying and responding to new threats.

Learn More

Your business is different than it was 3 years ago, and it will be very different 3 years from now. No longer can you wait patiently for your ERP or CPM vendors’ strategic roadmap to take shape.  Your CEO wants finance to be more strategic now, not 3 years from now.  Learn why your peers are are choosing OneStream to get there sooner, more efficiently and more effectively than they ever thought was possible.

Built-In Analytics Solution Brief

Nicolas Courtial

Nicolas Courtial of OneStream is a finance professional with 20 years of experience working in finance and IT for major corporations in Europe and Australia. His background is in accounting for Cisco Systems and the SSC of NCR as well as FP&A Manager for AstraZeneca in the Netherlands. For the last 10 years he worked at Trintech, Hyperion and Prevero, supporting organizations in automating their financial processes.