The Quest for Transparency: How CFOs Can Tackle Increasingly Complex Standards

by Thorsten Hein

Working toward regulatory compliance deadlines against the backdrop of the pandemic has inspired collaboration in novel ways.

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As deadlines loom for intricate initiatives like International Financial Reporting Standards (IFRS) 9 and 17, pressure is mounting for banks and insurers the world over. The landscape for CFOs has gotten particularly perilous – and COVID-driven obstacles only add further complication. The clock keeps ticking, leaving less and less time for CFOs to implement the transparency, tools, processes and practices required for accurate, holistic reporting.

SAS recently hosted a global CFO Roundtable, examining the impact of shifting financial reporting standards and the associated challenges. The consensus amongst the CFOs in attendance? Getting ahead of deadlines is paramount. And while most organizations are well into the process, there is much work yet to be done.
To be clear, regulatory compliance exercises are no small undertaking, whatever the approach. That said, there are tools and services that can be instrumental in meeting these complex standards head-on. And, for those who succeed, enhancing the organization’s risk management framework and capabilities in the process can yield competitive advantages.

Achieving an organizational mind-shift

Facing a global pandemic against the seemingly constant barrage of morphing regulations has wrought a host of hardships. Among the biggest hurdles, according to one CFO, is motivation. Keeping teams motivated in the face of shifting requirements and constant delays is tremendously challenging. Another CFO cited ownership as their organization’s most significant obstacle.

Particularly for global organizations, motivation and ownership are two sides of the same coin. The absence of travel and in-person meetings has made it hard for CFOs to impart the ownership that helps spark wider buy-in and ultimately build momentum.

As forthcoming standards (like IFRS 17 and LDTI) fast-approach, there’s a lot at stake – and some degree of uncertainty and ambiguity is unavoidable. This is where education comes in. CFOs must not only prepare their organizations from a technological standpoint. They must also ensure the entire organization, across business units and geographies, is aligned and working from the same playbook.

As the CFO of one multinational insurer stated, “With IFRS 17, there will be a lot more volatility. And the impact on the business will need to be explained. Boards, management, external parties – all need to know what’s going on.”

CFOs play a vital role in ensuring the company is well-educated and well-equipped to handle what lies ahead. This is particularly important for global companies, which must comply with diverse reporting and/or financial and accounting standards that vary by region. Whatever the landscape, juggling multiple balance sheets according to various financial standards at the same time in terms of local and consolidated reporting – plus keeping everyone informed and on the same page – is no easy feat.

The good news? CFOs don’t have to go it alone. Outside consultancies and vendors can help equip them and their teams with the technologies and expertise needed to support such labyrinthine initiatives, from start to finish or at any point in between.

AI and analytics to pave the way

Analytic approaches – from data orchestration and scenario-based analytics to machine learning and artificial intelligence – are becoming more and more indispensable. On the right platform, they can enable the risk-aware CFO to confidently face change and achieve sustainable compliance. The key, CFOs agreed, is tackling compliance headlong. Don’t wait.

CFOs also shared these tips for success:

  • Standardize and simplify forecasting. The ability to forecast in a simple way – for instance, to predict what the quarter will look like without running the full machinery – is crucial for both timely and efficient compliance.
  • Align processes. Processes supporting various (but similar) initiatives must be aligned to avoid divergence, unless absolutely necessary. By bringing such processes into a shared services environment, organizations can minimize reconciliation and support as much automation as possible.
  • Integrate teams and reporting. The larger the company, the more heterogeneous the IT landscape, the bigger the data issues. It is essential to integrate actuarial, finance and IT departments to centralize reporting, eliminate data and interpretation issues, and provide a consistent, holistic view across the organization.
  • Upgrade data competency. Data management strategies – for data storage, data quality, and data access and integration – are the bedrock of any analytically driven regulatory compliance program. Getting them right helps boost efficiency, support automation, improve transparency and inter-departmental communication, and deliver more consistent analyses and results.
  • Select a true business partner. As one CFO stated, “There is value in working together with a vendor as a partner.” CFOs can get a leg up by choosing one with a proven track record for addressing similarly complex regulatory challenges.

Applying these tips can help firms beyond a single initiative or specific compliance effort. Approached strategically, today’s compliance and modernization investments can set a long-term foundation for all financial decision-making processes, end to end. A shared services environment for reporting, for example, can deliver a competitive edge through greater operational efficiency and cost savings. Choosing a platform that is both adaptable and highly scalable by deploying it in the cloud will help to meet enterprise-wide needs today and well into the next decade, positioning the firm for future growth.

Staying ahead of regulatory compliance programs

The past year has posed tremendous challenges – but also opportunities. According to one CFO, working toward regulatory compliance deadlines against the backdrop of the pandemic has inspired collaboration in novel ways. “COVID-19 has reinforced the fact that we don’t need to sit next to one another all the time,” he said. “It’s actually helped to bring our teams together virtually.”

Whether employees stay remote or return to offices, technology is at the heart of that collaboration – amongst teams and between teams. By investing in the right analytic tools and capabilities, CFOs can help bridge the gaps between departments and business functions. That will help employees keep pace with regulatory compliance changes and so much more. The time to start – or accelerate – is now.

Thorsten Hein is the Principal Product Marketing Manager for Risk Solutions at SAS.