We Have Moved!

Your favorite blogteam has moved to www.cpm-view.com. The people behind this blog decided it was time to start their own business (this was before the worldwide economic slowdown!).

We started CPMview Consulting, a consultancy specializing in corporate performance management, SAP Business Planning & Consolidation (SAP BPC) and Tagetik.

You can read more about our CPM, SAP BPC or Tagetik services on our new website.

The blog will continue, so please feel free to drop in every now and then. Furthermore, we will be upgrading the blog to a fullblown online community focused on corporate performance management. The community will include a community builder, forum, blog and extended commenting. The target group are CPM users, CPM practitioners and CPM decison-makers. Check out the community on our new website.

Exposure Risks

In this turbulent time of exceptional falling down stock markets the whole world is wondering how this could have happened.

Every (financial) subject is already connected to the financial crisis, like the subprime markets, bonuses of bank officers, the trust of banks, the bank crisis of 1929 and today I heared a documentary on the radio which links the financial crisis to the behavior of animals in their animals kingdom and a couple of eminent people carry capitalism to the grave.

The rational causes behind the whole crisis are a little bit unlighted and sometimes even ignored by the media. In this article a closer look on one of the fundamental causes of the crisis: "hidden risks". But first something to laugh in this dark times….



Present Information

Dutch financial Minister Bos said: “The type of information could be better” and “Some posts on the balance sheet were ......... unclear”.

What can we learn of those statements? Why was the market governance not capable to prevent this crash? Why do we exactly collect this information and present it in the way we do?

The world of Corporate Performance Management covers the subject. Never the less it’s often common in our field that we have to deal “how to collect the right information” instead of “what information is right to present”. Sometimes that means that our job is to build in the exact way the reports existing for over twenty years including the formatting, the centre outlining and of course the scaling of the figures.
Maybe it’s a logic result of the fact that we don’t know the requirements of the decisions makers (and their unwillingness to change). The main issue about presenting information in exactly the same way over decades is that developments in the world are not represented by the figures.

Therefore a three steps to present forecast information which is still measurable:

1. Show the Risks.
2. Develop risk scenarios.
3. Classify risks in key-figures/indexes.

Show the Risks
The current financial statements show what happens in the past. Figures of last year are compared with a year before and with a little bit of luck a graph has been added.
It doesn’t explain what it means for the risks the company faces tomorrow. A lot of balance accounts and contingencies carry risks for the near future. You can make this visible by adding the follow items with additional exposures (information) on the balance sheet.










The risks to be measured depends of course on the kind of company.

Develop Risk scenarios
Risk scenarios are the second step to exposure risks. A simple variance analysis like the impact of 10% difference on the dollar exchange rate last year results in a higher/lower income of EUR 1.2 million (incl. translation differences).
This same analysis can be drawn up for all key environment variables, like interest rates, valuate, cost of raw materials (including oil, energy-rates, building materials), house markets and voluntary in the market of turnover (quantity and prices).

Classifies Risks in key-figures and indexes
Maybe it interest some analysts when this risks are included in the annual and Q- reports, although that’s doesn’t automatically influence the people from the street (normal stakeholder) in their behavior on the financial markets. Therefore it’s handsome to translate it in key-figures or indexes.

There are two ways to classify the exposures. First one is to develop some standards as:

• Exposure Dollar (Exp $): 10% variance in the dollar exchange rate against the reporting currency define by EBIDTA.

• Exposure Oil (Exp Oil): 10% variance in the fuel prices present define by EBITDA.

The second way is to classify the Exposures in an one risk-indicator with for example six levels and classify companies with a low- high risk profile.

Of course the new key figures have their own errors and uncertainties. Another objection could be the possibility of window-dressing. Although key-figures have a lower reliability (higher error-margin) in my opion it will still be enough to unmask risks and uncover some causes for a next financial crisis.

I am curious about your opinions on this matter. Please feel free to post your comments!

Controls in Corporate Performance Management

Drive value in Corporate Performance Management with business controls

Wikipedia defines control objectives at the organisational level as: "objectives that relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations".

We know that Corporate Performance Management is about faster and more accurate reporting. We know that CPM relates to the successful execution of strategy linking strategic goals to performance measures. We also know that CPM relates to external stakeholders and accountability bringing compliancy into the game. Hence, controls are an important part of effective Corporate Performance Management!

This blog is about setting up flexible process and application controls in Close, Consolidate and Reporting projects. Flexible in the way that your process and application controls can grow with new requirements and application developments. Findings are based on our real-time experiences as CPM consultants with numerous multinationals over the years. It shows how incorporating the right controls help organisations to improve data integrity, shorten the close cycle and streamline compliance.

Here are some of the key lessons we’ve learned along the way:

1. Start thinking about data integrity from the start

Corporate Performance Management should be about analyzing data for added value and not validating data. Reliable data is the critical success factor for any CPM application. The design of the application should harvest data integrity from the start by categorizing all data input in unique classifications.

Collect data input from source systems in a unique data source. Build in automated or manual controls to validate this input with the source systems. Classify specifications and adjustments in the application in unique data sources. Set up the application to append data and never overwrite data. Build in comment fields to know not only who and when a user made an adjustment, but also why!
A logical audit trail of data enrichments will reduce the amount of time organisations spend trying to identify whether or not their data is reliable.

2. Not only describe, but realize segregation of duties

Segregation of duties is an important requirement of many control frameworks. It is important to distinguish the responsibilities forthcoming from system and functional maintenance of CPM applications from the end users, mostly being employees from Finance departments. The segregation from the IT function (system administrators) is in most organisations not an issue. Issues mostly occur in separating the functional adminstration of the application from the Finance function. This is to be explained firstly by the fact that mostly Finance employees are involved during the implementation of the application, as owners of the business case. After Go-Live these employees are most qualified to fulfill the administrator function while having their Finance responsibilities. Secondly convenience and flexibility has a big part in it. If an incident or change request occurs it is the functional administrator with a Finance background who can most easily combine knowledge of the functional requirement with the application parameters.

Realize from the start that implementing a CPM application requires a unique administrator function. Involve this person(s) from the start in the development of the application and make sure that no conflict of interest can occur along the way. Realize that the administration of a CPM application is not something to do aside, but is an integral part of effective Corporate Performance Management.

3. Set up and manage application- and process controls

Table 3.1 presents an overview of some best - practice application- and process controls in Close, Consolidate and Reporting implementations. Please contact CPMview for more information.



Table 3.1: Application- and Process controls

4. Describe and manage the Change Management Process

In order to ensure the continuous and reliable operation of the CPM application after Go-Live, maintenance processes must be defined and implemented prior to the transition to the business. These processes, combined with appropriate training, must enable organisations to seamlessly take over the responsibility for the maintenance and support of the CPM application and configuration. Moreover, these processes must enable organisations to comply with the accountants’ compliancy and control demands regarding the segregation of duties and management of application changes.

Describe the change management process taking into account change-, incidents-, security-, service level- and configuration management.

5. Think about effective administration

Keep an administration of Request for Changes, Maintenance Orders and Application Users. Make sure that these forms are timely approved by the owner of the application or the Change Advisory Board and enclosed by supporting documentation.

6. Authorize and document duties and responsibilities

Make sure to describe and document all functions and responsibilities regarding the CPM application.

7. Set up an Audit trail

Initiate activity and data audit in your CPM application to record transactions or communications related to a person, period, account or entity.

8. Manage your IT environment

Set up your server park to include a development server, test server, acceptance server and production server. Make sure that decent back up and fallback scenarios are in place. Provide single global web based login capabilities taking into account adequate authorization and security controls.

That "being in control" is not always easy to accomplish is demonstrated in this week’s pick from YouTube. Enjoy and please be sure to give your comments on this blog!