'Global Supply Chain ' Mgmt. - Finance by wuyunyi

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									‘Global Supply Chain’ Mgmt. -
Finance
SAP American Insurance Forum
November 2007
Dr Juergen Ott
Agenda



Allianz Group
… at a glance

CFO Function
- Vision
- Challenges
- Our answer

‚Global Supply Chain‘ for Finance
- The journey
- Status
- Outlook

                                    2
Allianz at a glance (1/5)
One of the leading Financial Services Providers

Global Player
      Funded on 1890, with 116 years of experience in Insurance Services
      represented in approx. 70 countries
      over 1.200 legal entities worldwide


More than 75 million customers

Approx. 166‘000 employees worldwide

Core Business
      Non-Life Insurance
      Life and Health Insurance
      Asset Management &
      Banking                                                              ...

                                                                                 3
Allianz at a glance (2/5)

Performance 2006
                                EUR     +/- (rounded)

    Premiums                  91.1 bn      - 1%

    Total revenues           101.1 bn    +/- 0%

    Operating Profit          10.4 bn    + 30%

    Net income                   7 bn    + 60%

    Shareholder equity        50.5 bn    + 30%

    Market capitalization      74 bn*    + 30% ('06 over ’05)

    No. of shareholders     ~427.000*
                                                *updated
                                                                4
Allianz at a glance (3/5)
Our Board and Management Structure*
 CEO                                                              Regions                                                                   Programs
 M. Diekmann                                                      G. Rupprecht                                        W. Zedelius
 H1 - Chairman                                                    H4 - Germany                                        H8 - Growth Markets
 of the Board of Management                                       Insurance                                           Insurance
                                                                                                    Labor Director

                                                                  E. Cucchiani                                        C. Booth
                                                                  H5 - Europe 1                                       H9 - Anglo Broker Markets
 Functions                                                        Insurance                                           Insurance
                                                                                                               P/C
 H. Perlet                                                                                    Sustainability, OTP                              Reinsurance
 H2 - Controlling, Reporting,
 Risk                                                             J.-P. Thierry                                       H. Walter
                                                                  H6 - Europe 2                                       H10 - Banking
                                                                  Insurance
                                                                                               Life Sustainability,
                                                                                               Credit, Assistance
 P. Achleitner
 H3 - Finance                                                     J. Carendi                                          J. Faber
                                                                  H7 - NAFTA                                          H11 - Asset Management
                                                                  Insurance
                                                                                                          Customer
                                                                                                             Focus
* Until year-end 2007, new structure effective from January 2008 including Oliver Bäte as COO not yet available


                                                                                                                                                             5
Allianz at a glance (4/5)
Our Strategy: Tapping into the strengths of our global Group




                                                               6
Allianz at a glance (5/5)
Our People: All together a colorful, medium-sized city




                                                         7
H2/ CFO function: Our ‘Vision & Mission’




                                   Vision
                                   We want to be a best practice CFO function,
                                   trusted and recognized for its competence
                                   and excellence.



  Mission
  We build the methodologies, processes and talent pool to provide
  timely and reliable financial data and analyses in order to satisfy the
  needs of our customers:
    Optimal support of management decision making
    Transparent and relevant information to the market and regulators
  We define and adhere to strict integrity standards.

                                                                                 8
The changing role of a today’s CFO

… away from a         … towards


 ‘Chief Accountant’   Partnering with the Business:


                      -   Coordinating groupwide iniatives
                      -   Process ownership and inward transparency
                      -   Synchronizing external and internal
                          communication
                      -   Risk Management and Corporate Governance
                      -   Analytical support for field operations
                          (e.g. pricing)




                                                                      9
External pressure:
Moving targets & increasing complexity
Finance capability has increased but issues persist …

     By 2005 9.000 listed companies in Europe had to publish IFRS consolidated
     accounts – next to local GAAP, tax accounts and management reporting
     US GAAP will move closer to IFRS (‘Global Accounting Standard’) but only over
     the coming years
     Regulatory reporting for financial service companies is growing at highest
     speed (e.g. SOX, Basel II, Solvency II)

… and require strategic solutions in order to keep up with the increasing cost
and upheaval of global regulation

     Digesting the elephant – integrating regulatory, risk and finance reporting
                            – integrating reporting and analytics/ business intelligence
     Dealing with concerns on information quality and stewardship
     Further industry consolidation
     Strategic challenges: Value creation and risk management embedded in
                           day-to-day business processes

                                                                                           10
Internal reaction: ‘Finance Transformation’…

  1       1992-1996                  2     1997-2002              3     since 2002

‘Laying the foundation‘             Performance based           Risk Management
  – Allianz AG as Management        Group Controlling             – Financial conglomerate
    Holding (role)                    – EVA, risk capital         – Limit systems
  – ‘RoE‘ steering approach             allocation                – Inconsistent Accounting
  – Internal reporting governance                                   Standards (Asset/Liability)
          ‘materiality‘             Consistency of internal &
          ‘duty of information‘     external reporting:
                                                                Quality Management
          ‘nothing is wrong‘          – IFRS
                                                                 – R R R as guiding principles
          ‘comparability‘             – US Listing
                                                                   (reliable, relevant,
  –   1st MIS roll-out                                             ‘real time‘ data)
  –   Quarterly Reporting incl.     Corporate Governance         – SOX maintenance
      Forecasting                    – Compliance Standards
  –   Strategic and mid-term         – German Corporate         Complexity Management
      planning                          Governance               – Internal ‘Standard setting‘
                                     – SOX (per 2005/2006)
                                                                 – ‘Global Reporting‘ roll-out




                                                                                           11
…and ‘Finance Supply Chain’ Managements as our answer


Best Practice Sharing                 Process & System Harmonization
   Finance Best Practice                Re-engineering of financial
   sharing across the Group             processes in line with best
   Re-engineering of accounting/        practices
   controlling/ reporting processes     Pre-configured, standard
                                        Financial Application
                                        (‘SAP Template’)
                                        Further ‘industrialization’ of     called
                                        closing/ reporting processes       ‘Global
   based on key principles                                               Reporting’
                                                                          Initiative
    IAS leading, Multi-GAAP data stream, full posting of IFRS
    Standard CoA (‘7+3‘ digits)/ Standard Cost Accounting
    Algebraically coherent Balanced Scorecard KPIs
    Integration of risk and financial reporting
    Rework/ consolidation of core applications/ operational subledgers
    (if needed)


                                                                                    12
   Main elements of our ‘Finance Supply Chain’

                                                                                                                                                                                     Systems
              Data                                    Processes                                              Financial                                                                                                                                                          Back-end
                                                                                                                                                                    Infrastructure
                                                                                                            Applications                                                                                                                                                       integration

  Standardized                             Continuous Process                                                SAP Template                                                   Set-up &                                                                                                     Back-end
 operational CoA/                          Improvement & Best                                               Implementation                                              consolidate the                                                                                                 Integration
   Master Data                                   Practice                                                                CO
                                                                                                                         CO
                                                                                                                                                                         Infrastructure
  Group              Segment MDFs                                                                            R
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Include relevant                           Enhance process                                                 Implement the                                          Set up the technical                                                                                 Enable the feeder
controlling data                           efficiency in line with                                         Template according                                     infrastructure in line                                                                               systems to deliver
                                           implementation of                                               to central policies.                                   with central technical                                                                               required data in a
Integrate legal and                        Template, standard CoA                                                                                                 policies. Consolidate                                                                                Multi-GAAP
Mgt Reporting (Profit,                     and Data Governance.                                                                                                   wherever possible.                                                                                   environment.
Risk, Regulatory)                          Implement all other Best                                                                                                                                                                                                    Streamline/
                                           Practice processes                                                                                                                                                                                                          Consolidate Feeder
                                           accordingly.                                                                                                                                                                                                                Systems wherever
                                                                                                                                                                                                                                                                       possible.

                                                                                                                                                                                                                                                                                                                                                             13
Main ‘Finance Processes’ covered




                              -        Risk aggregation to Report

                                       -           Statistics to Report      Core
                                                                          SAP Template
                                               -     Post to Report          scope
                                  -        Record to Value to Post



                      -               Cash & Liquidity Management

                                           -        Purchase to Pay
                                                                          SAP Standard
                                               -     Order to Cash

                          -           Collection and Disbursement



                                                                                   14
What exactly does ‘Industrialisation’ mean?

Key to Success

   Proper Master Data Management
     -   Harmonizing master data; aligning reporting requirements; eliminating overlaps

     -   Strict and comprehensive change control over reporting requirements

     -   Bringing quality controls and data enrichments brought forward to data entry point

   Eliminating „waste“ (unnecessary IT layers, unused reporting items, process
   interruptions etc.) through continuous improvement
     -   Installing ‘end-to-end‘ process/ ‘supply chain management‘ process view

     -   Benchmarking of quality, speed, productivity and costs

   Optimizing overall performance of Finance ‘supply chain‘:
     -   Standardizing processes based on standard IT applications

     -   Simplifying operations through consolidating infrastructure, IT applications and
         functions
                                                                                            15
Target: Enable ‘straight-through processing’ (STP) …

                    Local Entities (OEs)                         Group Center (GC)


 Technical and non technical     Operational accounting/    GC Departments/ Systems
  Businesses/ Departments/       controlling Departments/
          Systems                         Systems




                         Common & congruent Master Data (MD) Mgmt.
                          Straight-through (downstream) processing



                              Data production & delivery
                        Straight-through (upstream) processing




                                                                                     16
… on the basis of ‘preconfigured’ systems…

                Local Entities (OEs)                                                                       Group Center (GC)
  Technical and non              Operational accounting/                                         GC Departments/Systems
  technical Business             controlling processes &
 processes & systems                     systems
                                   Common & Congruent Master Data
                                                                                                       Group Master Data
                                    Management
                                   • Common Accounting & Controlling etc. manuals
                                   • Congruent Chart of Accounts (single)
                                                                                                           Standard CoA/
                                   • Recurring update cycles aligned with Group
                                                                                                           Cost Accounting
                                          MySAP: SAP Template

                       Straight-through                                  BW/         One dimensional
                          processing       Rules Engine                  BPS            mapping
                                                                  GL
                                                          Multi-GAAP
                                                           FICO &                  No further processing
                                                          Subledgers                 (e.g. calculation/
                                                                                       reconciliation/
                                                                                        enrichment)
                                                                                                             Value Driver
                                                                                                              Dashboards
                                                          ERP 2005                                                KPIs
                                                                                                              Value Drivers


                            Straight-through
                               processing
                                                                                                              Other statistics
                                                                       BW BI 7.x




                                                                                                            Group SAP BW/
                                                                                                                EC-CS            17
… driven by ‚Finance Best Practices‘

   Work in progress                                     In preparation
  Standard Chart of Accounts                           Risk reporting
   - Common     Operational CoA                        Integration Actuarial with Financial
   - Standard   Cost Accounting                        Reporting
             UOP Processes
   - Automated                                         Template add-ons
    (Management Accounting)
                                                                   Accounting in the Template
                                                         - Investment
   - Accounting   rules/ Business event library           (CFM/ FAM)
  Value Drivers / Performance Scorecard                  - Cost   Accounting in the Template
   - RoE    Tree/ Bal. Scorecard                          (CO)
   - Dashboards                                                   & Forecasting in the Template
                                                         - Planning
                                                          (BPS/ BW)
  Master Data Management & Tool
                                                            Reporting in the Template
                                                         - BI
  SAP Template                                            (BW/ BI 7.x)
   - General   Ledger, Subledgers                        - StandardRules Engine
   - MIS/   Data warehousing                              (Microgen Aptitude; J Rules)
      •   Reporting/ BW in the Template
          (pre-configured reporting cubes)
      •   Master Data Integration
          (Actuarial, Risk, Marketing, IT, HR, etc.)

                                                                                                  18
  Overview: Status of the Go-Lives


                         Special cases due to high complexity:
                            Dresdner Bank (1st implementation)             Dresdner Bank (full compliance)
                            AGF (1st implementation)                       AGF (full compliance)



                                                                                 Wave III Roll-out:

                                                                                Bratislava (Wave 3, Slovakia)
                                                  Wave II Roll-out:             Belgium
                                                                                Greece
                                                  Italy (RAS, Subalpina,
                                                  Lloyd Adriatico)              Mondial Group
   Pilot OEs:                                     Euler (Wave 1)                Euler (Wave 2)
                         Wave I Roll-out:
    AZ Elementar                                  Bratislava (Wave 2)           AGC&S
    Euler Germany        Bratislava (Wave 1)      AZ Australia                  ADAG (Wave 2)
    AGI GER              Spain                    AGI GER                       AGI US
    AZ Leben             Portugal                 ADAG (Wave 1)                 FFIC/AZ Life US/Mexico
    AGF                  Netherlands              DEGI                          Cornhill + Ireland
                         Switzerland                                            AZ Korea/SSC Asia/ Middle East
    Dresdner Bank                                 AZSE



1/2005          1/2006     1/2007                    1/2008                          1/2009
                                                                                                        19
What is in for our people?
Motivation/ Challenges for international project teams


  Baseline: ~7.000 people in “Finance” and ~1000 legal entities to be
  consolidated (thereof about ~ 600 with own finance operations today)



                       Cross-country best practice task forces

                           Bottom-up driven best practices

                                  Group governance

                           Common principles/ framework



                 Logistics due to different languages, time zones etc.

                   Identifying what is common and implementing it

                                Change management
                                                                         20
             What is in for our shareholders?

                                           today
                                                    Time

                     2002 - 2005              2006 – 2008                2008 - …


              Upfront investment at
              Group Center/ Pilots
                                          Self-financing
               Benefits:                  Roll-out at OEs
               • Data Governance                                  Consolidation into
                                          Benefits:               cost-efficient hubs,
Investment




               • Best Practices
               • SAP Template
                                                                  Shared Service Centers
                                          • Quality of data
                                          • Speed of closing        Benefits:
                                          • Efficiency gains:       • Cost savings
                                            more time spent         • Flexibility
                                            on analysis instead
                                                                    • Finance as a ‘utility’
                                            of transactions



                      Finally significant cost savings via consolidation …                     21
… but also immediate qualitative benefits

Quick wins



     Faster closing/ higher frequency (monthly reporting, rolling forecast,
     rolling planning)

     Higher internal service standards – higher data quality

     Identification of internal weaknesses, process inefficiencies (SOX)

     Data input for internal/ external benchmarking (Hackett Group)




                                                                              22
Roll-out synergies to be realized – Next Steps (1/2)

 Central IT development/customizing/production
  Today:                                             Tomorrow:
  Central development of Template (H2/HIT) but:      Full standardization with one central
                                                       environment:
  OE individual developments, each OE
   programming their own ‘’ABAPs’’                     Standardized system
                                                       (programming/customizing)
  OE individual production systems
                                                       Central hosting and maintenance

  Issue: Risk of double work/cost despite of           Reduced total cost of IT:
           standard Template:
                  local OE dev.      local OE prod
                     systems            systems
                                                          One Central System Landscape

Template Dev.                                        Template


  (H2/HIT)
                                                     (H2/HIT)
                                                                                        …
                                                                   OE dev.              OE prod.
                      …                  …                         system                system

                                                                                                   23   23
Roll-out synergies to be realized – Next Steps (2/2)

    Central ‚Finance Transactional‘ Organization

.
                                                                              Sponsors’ sug
                                                                        Come back w          gestion:
                                                                                      ith decision cri
                                   „One Accounting Center“              and ‘step-by-s                terias
                                                                                       tep’ migration
                                                                                                       plan:

                                                                                   - Which processes to be
                                                                                     centralized ?
                                                                                   - ‘One’ SSC or more ?
                                                                                   - Location ?
                                                  ? SSC Germany
                                                                                   - Target cost ratio for
                                                    SSC Bratislava
                                    ? SSC Paris                                      Finance and IT for Fin. !
                                                   ? SSC Milan
                                                                                   - Timeline, etc
              SSC America


                                                                     SSC Asia/ Middle East




                            Reduced total cost of Finance function
                                                                                                             24   24
Summary

Our ‘Global Reporting‘ initative stands for




             A new operating model + change in governance




                 in an attempt to change CFO functions
              from ‘manufacturing’ towards ‘industrialization’




 … but remember: It’s not autotelic – you only aim for a better
                 measurement system at lower costs


                                                                  25
And ultimately a bit of an outlook

Short- and mid-term horizon


  Short-term challenges
    -   integrating financial/ regulatory reporting with Risk & Actuarial analysis/
        simulations → ‘Phase II‘ IFRS accounting & Sovency II

  By ‘2015‘
    -   Accounting: ‘Global Accounting’ Standard (IFRS ~US GAAP) and common Master
        Data (‘XRLM’)?
         • ‘Real-time’/ ‘event’ accounting → actuals are becoming a public information?!

    -   Analytics/ Business Intelligence (BI)
         • customer centric & product life cycle reporting linked to financial reporting
         • unstructured (e.g. mails) and external data more integrated into management
           reporting?!
    -   Finance as a ‘utility’: More buy than make?!
          • Global ERP delivery outsourced
          • Reporting production outsourced?!

                                                                                           26

								
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