June 17, 2003

The Whole Truth And Nothing But

With their personal integrity now on the line, CEOs, CFOs, and other corporate officers mean business when they demand "confidence in the numbers." With a better understanding of the issues and the software features required, you'll be on your way to solving the crisis of financial visibility

by Stewart McKie

After the Enron, Arthur Andersen, and WorldCom scandals, world confidence in corporate financial reporting hit an all-time low. In the United States, a spate of earnings restatements dented the performance of financial markets all over the world and resulted in the Sarbanes-Oxley Act of 2002, a law that established records retention requirements for audit papers, created an oversight board for accounting firms that audit publicly traded companies, and addressed financial disclosures at publicly traded companies. But the lack of confidence in corporate reporting wasn't just a problem in the United States — even the European Commission admitted it couldn't explain certain black holes in its financial affairs.

Today there's a demand for more transparent financial information or, put another way, for improved financial visibility. Financial analytic software (available from vendors such as Cognos Inc., Comshare Inc., Hyperion Solutions Corp., and Microsoft) is used to report, analyze, and manage a business's financial information and is a key contributor to improved financial visibility.

Financial analytics depends on a range of applications, including budgeting and planning, financial consolidation and reporting, and performance management. These applications operate across an information domain that encompasses most core business management systems, including CRM, ERP, and supply chain management (SCM). (See Figure 1.)

I'll explain how financial analytics can improve six facets of financial visibility and note the software features that visibility demands in each case.

Stakeholder Visibility

As Table 1 indicates, most businesses interact with a wide range of internal, external, and partner stakeholders — individuals or organizations with an interest in the financial management of the business. The first step in empowering financial visibility is simply to identify who these stakeholders are, what financial information they need, when they need it, and how they need it packaged.

Supporting stakeholder visibility is easier when your financial analytic software uses a publish-subscribe information distribution model. This model ensures that each subscription to the information can be configured to suit the subscriber's needs. Ideally, subscribers would be able to manage their subscriptions via a Web-based self-service function.

The software should also let you package (or repurpose) financial information to deliver it to subscribers in the format they want, such as row/column reports, multidimensional analytic cubes, spreadsheets, message alerts, or key performance indicators (KPIs). Today, mobile stakeholders such as salespeople may also need financial information to be repurposed for delivery to handheld PCs, cell phones, or other mobile devices.

Controlled Visibility

Control over the visibility of sensitive financial information is vital. And control doesn't just mean restricting who can get financial information or what kind they can get, it also means restricting what they can do with it.

To date, financial analytic software vendors haven't served this aspect of controlled visibility well. But that situation is changing as information rights management (IRM) technology becomes more pervasive.

IRM licenses information to users based on predefined business rules that determine who can get it and how it can be used. Until recently, IRM was expensive and complex to apply to financial reporting. However, now that IRM technology is embedded in Microsoft Windows Server 2003 and will be accessible from various Microsoft desktop applications, it's likely that more financial analytic applications will leverage this embedded IRM to improve the control of access to financial information.

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