Financial Governance FEI

1. Financial GovernanceFEI John Van Decker Research VP

2. The Scope of the CFO • The CFO has responsibility over an organization's end-to-end financial management, including: • Managing financial transactions • Establishing performance management plans • Ensuring accuracy of financial processes and financial reporting Performance Transactions Governance

3. Technologies Supporting the CFO • The array of technologies supporting the CFO is vast, with minimal integration. • ERP is the most well-established of the technologies, but CPM is often treated as an afterthought/bolt-on. • Financial governance is emerging as a market, segmenting GRC for the CFO. PM, BI ERP Financial Governance

4. Key Issues 1. Why is there a market direction toward financial governance? 2. What are the components of financial governance? 3. How do you take advantage of the developing financial governance market?

5. challengers leaders ability to execute niche players visionaries completeness of vision CPM Suites Market Has Matured Rapidly • Significant consolidation occurred in the past year: • Hyperion was acquired by Oracle. • CorVu was acquired by Rocket Software. • Cartesis was acquired by Business Objects. • OutlookSoft was acquired by SAP. • Applix was acquired by Cognos. • Longview was acquired by Exact. • SAP acquired Business Objects. • IBM acquired Cognos. • Increasingly, companies are looking for CPM outside of finance. • BI and PM are evolving toward common platforms, and it is expected that BI and CPM will converge within the next three to five years. Oracle Hyperion Cognos SAP Business Objects Infor SAS Clarity Systems Exact Longview Board International Lawson Software Tagetik Microsoft Rocket CorVu As of December 2007 Source: "Magic Quadrant for CPM Suites, 2007" 19 December 2007

6. Where Are People Today? Already Using Planned (<12 months) Considering (12-24 months) No Plans Don't Know

7. How Well Have CPM Applications Met Requirements? Far Exceeded Exceeded Met Mostly Met Did Not Meet Not Answered

8. CPM Deployment Patterns CPM is dominated by financial reporting … … and finance drives the implementation.

9. Budgeting, Planning and Forecasting Profitability Modeling and Optimization Scorecards Financial Consolidation Financial and Statutory Reporting Financial Governance Evolves From CPM … Business Strategy Performance Management • $1.5 billion market in 2006; 20% growth rate with large unaddressed market • BP&F, scorecards, profitability modeling have proved valuable to improve performance management initiatives • Financial consolidation and reporting, while they contribute to PM, address the accuracy, auditability and disclosure of external results People Process Analytic Applications BI Platforms Information Management Infrastructure Business Intelligence and Performance Management Framework

10. … and FG Is Adding Components From GRC Markets Category

11. The Enterprise GRC Platform Can Be a Starting Point for a Financial Governance Solution Auditors Board C o l l a b o r a t i o n & W o r k f l o w V i s u a l i z a t i o n A n a l y t i c s M e t a d a t a M a n a g e m e n t C o n t e n t M a n a g e m e n t Audit Management S u r v e y R e p o r t i n g Executives C e r t i f i c a t i o n Risk Management Risk Management and Compliance Professionals Business Intelligence Compliance Management I n t e g r a t i o n Remediation Management Business Applications FG = The EGRC platform integrated with BI, financial apps. and controls automation Policy Management P o l i c y M a p p i n g Process Owners Specialized GRC Applications Risk/Controls Matrix Enterprise Content Management Preventive Detective Corrective Controls Automation andMonitoring Enterprise GRC Platform

12. FG — Emerging Market "GRC for the CFO" • Parallel path for CPM, along with BI/PM and a subset of GRC market • Includes applications that provide control, analysis, reconciliation and risk/compliance management • Not a holistic market at present, but clearly developing • Includes: • Financial consolidation • Intercompany transaction management • Reconciliation management • Financial controls and compliance • Financial close management ("the last mile of finance") • Access and segregation of duties controls • Financial risk management • Financial and audit analytics

13. Typical Flaws in Financial Reporting and Disclosure • Processes • Lack of control in consolidated reporting processes • Auditability • Disconnected budgeting systems • Lack of audit trail from stakeholder information to source data • Data quality • Inconsistent financial and operational data • Lack of visibility and transparency • Overreliance on spreadsheets

14. FG Components — Financial Consolidation Traditional Approach • Single, central financial consolidation system • Spreadsheet/flat-file transfer • Time-consuming, labor-intensive • No visibility from group to business units Best-Practice Approach • Regional, financial consolidation system implementations with direct links to local GLs • Shared dimensions (typically legal entity and account) between consolidation models • Full visibility from group to BU to source data, plus local analysis capability

15. FG Components • Intercompany transaction management: • Post-ERP consolidation, ensuring that interentity transactions are accurate and meet approval, often at the voucher level • Reconciliation management: • Ensure that monthly routine account reconciliations are managed and that exceptions are highlighted and handled • Financial controls and compliance: • As required by SOX, document and access financial management controls, and communicate their status across enterprise

16. FG Components • Financial close management: • Ensuring that the last mile of finance is managed and that all the close activities are completed • Access controls/segregation of duties: • Ensuring that, in transactional and reporting processes, there is control over who has access and who contributes to and approves financial processes • Financial risk management: • Documenting and accessing financial risks, including the use of strategy maps/scorecards to understand causal relationships between risk items/activities

17. FG Components • Financial and audit analytics: • Integrated with BI and CPM stack • Aggregated financial and operational information • Results in front of those who need to know • Flash reporting prior to month-end • Details and OLAP • Identification of out-of-tolerance conditions and alerts • Segmentation of reporting into material/significant elements

18. Sourcing for Financial Governance — 2008 • Market is developing. • Best-of-breed applications attempt to target specific pain points. • Some suite-based solutions are emerging. • ERP vendors are beginning to accumulate many of the components in "Office of Finance." • Organizations should choose point solutions where they can achieve pragmatic value to improve FG initiatives.

19. FG Examples

20. FG Examples

21. Sourcing for Financial Governance — 2012 • Financial governance will have emerged as a critical management pillar of financial management applications. • Much FG functionality will be consolidated in megavendor/ERP offerings. • ERP vendors will combine CPM and EGRC platforms and add modules for financial governance, including modules from FG ISVs. • Service providers will offer financial governance as part of financial BPO.

22. XBRL Continues Its Progress U.S. Securities andExchange Commission • September 2007 announcement: completion of all work on developing data tags for the entire system of U.S. GAAP • Newly created "Office of Interactive Disclosure" • SEC report is expected in spring 2008 which should lead to a course of action being laid out in the fall of 2008 • Mandatory XBRL filing likely within 3 years Other Developments • Deloitte Australia: Using XBRL to reduce costs of preparing tax and account returns • Singapore: Mandated full or partial XBRL filing for financial statements ending on or after 30 April 2007 • Belgium: Filing accounts in XBRL format possible from April 2007 onwards

23. RSS feed XBRL Brings Web 2.0 to Financial Reporting • Managers are fed latest financial performance data as soon as it is available • Key financial data for store or business unit based on GPS proximity • Mashups of finance and other relevant information

24. Using CPM and BI to Improve Compliance Initiatives • Aggregated financial and operational information • Results in front of those who need to know • Flash reporting prior to month-end • Details and OLAP • Identification of out-of-tolerance conditions and alerts • Segmentation of reporting into material/significant elements

25. Recommendations (1) • As FG emerges, understand how point solutions can add pragmatic value to reporting and control initiatives … • … and how those point solutions are integrated into CPM and EGRC platforms. • Develop a target architecture for FG within your enterprise. • Understand how your ERP vendor is providing additional FG capabilities and if you can leverage these. • Make FG an architectural consideration in any CPM and EGRC acquisition or BPO. • Monitor the FG improvements from your CPM vendor.

26. Recommendations (2) • Monitor market developments closely: • Consolidation will continue • Battle of the vendor road maps • Balance tactical needs against longer-term vendor promises • Consider smaller vendors alongside established names • Plan for XBRL adoption within three years

27. New Gartner Research:CFO Special Report - Themes Four main themes: • Managing corporate performance: How applications that support Corporate Performance Management (CPM) enable the CFO and finance function to understand the drivers of performance and deliver real strategic business value to the CEO and management team. • Technology for finance:The technologies that will impact the way companies manage and report financial and management information, and why should CFOs care • Governance & compliance:Where SOX went next and how emerging trends in financial governance will change the way CFOs ensure that financial information is free from material weaknesses. • Finance organization and processes:How CFOs can optimize operating efficiency and realize cost savings in the finance function while delivering a higher quality of service

28. CFO Special Report Content