Data and legacy IT are mounting pressure on reporting effectiveness

14 November 2016

CFOs globally are increasingly struggling to deliver effective corporate reporting in the face of the increasing volume of data, the limitations of legacy IT and the growing expectations from executives to provide meaningful insights at speed with no errors. A bold strategy for advancing the reporting process, innovative and agile technologies and striking the right talent mix are key elements for staying on top of the game.

According to a new study, conducted by EY, based on a survey of 1,000+ CFOs and heads of reporting of large organisations (>$500 million revenues) across 25 countries, the effectiveness of reporting is coming under increasing pressure. 66% of respondents worldwide say the increasing volume and pace of big data is having a significant impact on effectiveness, while 68% highlight that the complexity of the regulatory environment is also being felt. Both aspects are up more than 10% compared to last year’s study.

Organisational factors are also adding to reporting complexity. Organisations today have more legal entities, business units, and reporting systems than was the case last year, according to the study, and 64% of the CFOs highlight that the demand for financial reports has increased. At the same time, the fast changing world as well as the fears to be disrupted out of the market means that many executives are upping their corporate reporting expectations, expecting to receive advanced and granular reporting information more quickly, with more insight and with less room for error. CFOs too are expected to protect and secure their company’s data, amidst the regulatory and reputational costs that follow from cybercrime and data breaches.

Reporting effectiveness increasingly challenged

EY’s report finds that CFOs are wrestling to keep pace. “CFOs worldwide are struggling to make the most of the increased volume and speed of data available to them. Many are encumbered by legacy systems that do not allow reporting teams to extract forward-looking insight from large, fast-changing data sets. The result is an increasing expectation gap between what boards now look for from corporate reporting and what CFOs can deliver”, explains Peter Wollmert, EY’s Global and EMEIA leader for its Financial Accounting Advisory Services (FAAS) arm.

Operating model change

As it stands, a third (32%) of CFOs surveyed rank their reporting operating model as “average”, therefore, it is not surprising that 56% say transforming their model is a major focus of their role. Realising the ambition however does not come easy, a feat which is widely acknowledged by the CFOs and heads of reporting. Half of them say that the complexity and cost of tackling their legacy IT environment is a major bottleneck on the route to successful change. This is, according to Nadeem Shafi, EY FAAS Leader for the MENA region, mainly due to regulatory requirements (“the changing regulatory environment has contributed to systems complexity”) and the fact that firms have introduced manual workarounds in a bid to quickly pave the way for new functionalities. However, the effect of ageing is kicking in: “On average, systems have been implemented some years ago,” Shafi says.

Just under half (42%) highlight the difficulties they have with striking the balance between central control versus the need for tailored reports for local operations. 36% believe that there is a lack of resources – in terms of money and resources – while 27% note that change fatigue within the finance function is slowing, or even blocking, change for the better.

IT challenges for corporate reporting

Three investment areas

To address the operating model transition, respondents highlight three key investment areas: process and tool transformation, more focus on agile technologies and investment in reporting skills.

According to respondents, updating IT and financial data analytics tools is the stand-out priority in corporate reporting, with 84% of organisations worldwide expecting to increase investment in reporting technologies over the next two years. Close to a third (29%) expect significant investment increases of more than 10%. Other factors that rank highly as corporate reporting priorities are driving process efficiency (33%) and harnessing the power of data analytics to create forward-looking insights.

From a technology perspective, going agile is the new paradigm. The study shows that the largest share of investments freed up for technology will flow to big data technologies, cloud computing and data infrastructure, with data visualisation and data mining closing the top five – all investments which, according to Karsten Füser, a leader within EY’s FAAS service line, mirror the growing need to quickly and effectively deal with data. Although artificial intelligence (AI) was ‘only’ mentioned by 16% of the participants, Füser says AI will gain terrain on the back of the value it can add to data analysis techniques.

Advancements should be made with caution, Füser adds, taking the migration to cloud as an example, he says: “While cloud technologies are an attractive proposition for driving agility, reporting leaders should be mindful of the key risks that need to be managed, including the need to check that cloud-based systems provide data security and are compliant with different regulatory regimes.”

Agile technologies in reporting

The struggle for top talent

With improved operating models and technologies in place, reporting leaders highlight that they need to have people with the requisite skills within their ranks. When asked for which skills are top of the agenda for improving reporting processes, IT infrastructure and financial data analytics lead the pack, followed by business analysis and risk management.

The key constraint in this respect is that there is intense competition for the best people. Organisations across the globe are struggling to find the right technology talent – a report by A.T. Kearney for instance found that 72% of leading companies are finding it difficult to find the analytics talent they need. Looking ahead the struggle is set to deepen: CEOs globally have earmarked data analytics (together with the likes of innovation and cybersecurity) as a key investment priority for the coming three years, a development which will only add more heat to the talent marketplace.

SSC and corporate reporting

At the same time as competition for the best people intensifies, the talent pipeline into finance and corporate reporting is being disrupted by the increased use of arrangements such as shared services centres (SSCs) and outsourcing, say 52% of respondents in EY’s research. In the coming years this pressure is forecasted to rise. Today 45% of the organisations surveyed use shared services centres, onshore or near-shore, but looking ahead 67% CFOs say that the use of outsourcing arrangements will increase in the next two years and 61% say that the use of shared services centres will increase.

Wollmert concludes by saying: “Corporate reporting is a foundational capability of the finance function. And, in our view, reporting will look very different in the future – smarter, highly automated and digitised, more streamlined, and increasingly forward-looking. By focusing on a bold strategy and vision for advancing the reporting process, innovative technologies, and a more flexible and nimble operating model, CFOs and reporting leaders can design and deliver the responsive reporting capability required for a world that will continue to accelerate.”

Another recent by EY, released in the summer, found that organisations are not reaping full benefits of forensic data analytics, while a deeper dive into the use of operational analytics, conducted by Capgemini Consulting, found that the maturity in the field is relatively low, leaving billions of optimisation potential in operations untapped.


How data insights helped Network Rail improve the South-East route

11 April 2019

Amey Consulting has leveraged data insights to assist Network Rail with the improvement of its South-Eastern route. Using the Quartz tool, which monitors train movement, Network Rail will now be able to commit to data-enabled interventions to quickly improve underperforming train stations.

With rail services in the UK coming under strain from the demands of modern commuter life, while the infrastructure and service delivery of the nation’s railways has come in for sustained criticism in recent years, a period of regeneration is on the cards at last. Network Rail is the owner and infrastructure manager of most of the railway network in Great Britain, and has subsequently tapped the consulting industry on a regular basis to help find areas of improvement.

The group recently drafted in consultancy BearingPoint to conduct a thorough organisational evaluation and advise Network Rail (High Speed) on attaining a ‘fit for purpose’ organisational standard – for which the consultancy was nominated at the 2019 MCA Awards. Meanwhile, ArupArcadis and Aecom have been contracted to help Colas Rail and Babcock Rail implement a decade-long framework for Network Rail, aimed at supporting the delivery of the next generation of rail systems, with the contracts said to be worth as much as £5 billion

How data insights helped Network Rail improve the South-East route

As Network Rail further aims to improve its performance and customer service offering, another area it has sought help from the consulting sector for is its South-East route. The network of railways connects London with the southern parts of the country, as well as with Europe, making it the busiest in the country, with more than 500 million passenger journeys per year. This crucial expanse of rail was plagued with small minute delays, which were impacting millions of passengers every day, while reducing the efficiency and capacity of the overall network – something Amey Consulting was selected to help solve.

Amey Consulting soon determined that with the sub-threshold delays to services only lasting for 1 or 2 minutes, most were not the subject of detailed root cause analysis, and this made their corrections almost impossible – with dire consequences. Without addressing these delays, passenger satisfaction would fall, while the capacity and efficiency of the network would be reduced, stinging the income of Network Rail even before a host of delay-related fines would hit the company.

In order to help the client gain a better understanding of where, how, when and what these small delays occur, Amey Consulting looked to demonstrate the value of data-led consulting, with a significant reduction in delays within the first month of rolling out changes to key stations. The consultants embedded themselves in Network Rail’s team, helping them learn the key skills needed to support and apply data-driven solutions.

Agile transport

This involved the deployment of the Quartz tool. The system utilises to-the-second train movement data to present the performance of individual stations across the South-East route. It allows users to effortlessly understand station performance with a high level of detail, and use this information to identify losses caused by small-minute delays. The granular data allows for targeted actions to drive efficiency savings and performance improvements. More importantly, it allows users to understand the impact of small process changes on performance. 

Steve Dyke, an Executive Partner at Amey Consulting, said of the project, “We looked to identify the physical root cause on the infrastructure, building a case for change then managing that project implementation and tracking the benefit/value.  In doing so we are working to define a data performance improvement service to the operational and infrastructure owners.”

Just as important for the project as the technology, however, was teaching the Network Rail team how to leverage it after the consultants were gone. The Amey Consulting team worked to develop an agile working culture within Network Rail’s South-East division, helping staff to be confident in using data to improve the journeys of millions of people per year by attacking the problem from the ground up.

Dyke concluded, “This is less about the tools and about the approach to managing performance.  It meant using by-the-second analysis, data science, and then agile development to visualise and identify areas where improvements can be made.  We then worked with NR to change the way they approached the management of the infrastructure changes.  So rather than pass the information down the value chain, any of which could have been missed, we managed the change end-to-end.”

The project was so successful that Amey Consulting was also among those honoured at the recent MCA Awards. The firm scooped the Performance Improvement in the Public Sector prize for its work with Network Rail, at the 2019 ceremony in London.