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					                                                 Finance & Performance
                                                 Management




NYIIA - Close Process Improvement and Leading Practices
March 28, 2008

Presented by: Gerald R. Roop
          Discussion Outline



             CFO Finance Agenda –

                    What CFOs are Doing

             Leading Practices

                    Accounting and Reporting

                    Close Process Improvement

                    Performance Measurement & Management

             What Other Companies Have Done – Case Studies

             Getting Started – Close Process Assessment and Improvement Roadmap

             Contact Information




Confidential to Ernst & Young                                                     1
   CFO Finance Agenda - Transforming Finance to better serve the organization



                            Efficient
                             Efficient            Effective Systems
                                                  Effective Systems                  Right People and
                                                                                     Right People and
                            Processes
                            Processes                and Controls
                                                      and Controls                  Organizational Model
                                                                                    Organizational Model
                  Fast close                    Operationalized controls           Mission, vision and strategy
                                                                                   Organizational structure
                  Driver-based planning         Data governance
                                                                                   Talent management
                  and forecasting               One ERP, common COA                Shared services/center of
                  Web-based self-service        Centralized finance data           excellence
                  reports and analysis          warehouse and access tool          Outsourcing/co-sourcing



                                The Right Strategic Alignment, Services and Value
               Sources of earnings, variances, outliers              Risk-adjusted profitability and returns
               Key indicators, scorecards, dashboards                Multi-dimensional profitability and analysis
               Driver-based planning and forecasting                 Liability hedging programs
               Managing under multiple-reporting bases               Fair/economic value frameworks
               Capital management                                    Earnings and value-at-risk



Confidential to Ernst & Young                                                                                     2
    Leading Practices - First Things First – Accounting & Reporting

  Many CFOs have started along the Finance Transformation path by making significant
  Many CFOs have started along the Finance Transformation path by making significant
  improvements in accounting, financial & management reporting.
  improvements in accounting, financial & management reporting.


                   Characteristics                Current Practice                                Leading Practice
              1.       Level of detail      4 - 6 Segments / Divisions, 3 - 5 LOBs   Multi-dimensional profitability – Business Unit, LOB, program,
                                            per Segment, many P/Ls, but ltd
                                                                                     product, channel, region, customer segment
                                            product, channel, customer information

              2.       Timing / frequency   12 – 15 business days                    Fast actuals Day 3, Finalize Close & Reporting in 7 days


              3.       Accounting basis     GAAP and Regulatory are                  GAAP & Regulatory simultaneously, fair value reporting
                                            interdependent

              4.       Management basis                                              Actual / Plan / Rolling Forecast
                                            Actual / Plan


              5.       Source                                                        Integrated ERP (GL & data warehouse), common global
                                            GL, database + extensive spreadsheets    standards, standardized sources and accounting feeds

              6.       Performance                                                   Driver based measurement - metrics at each level (product,
                       measurement          5 – 10 metrics per LOB; business
                                            drivers                                  channel, customer), performance scorecard linked to Plan


              7.        Reporting and       Consolidation pckg based reporting /     Multi-dimensional reporting & analysis tool (OLAP), web-
                       analysis tool        database of reports avail to users       based, “pulled” by users based on individual needs




Confidential to Ernst & Young                                                                                                                   3
    Leading Practices – Close Process Improvement

    Typical Reductions (Additions) to the Close Cycle = 12 – 25 days
    Typical Reductions (Additions) to the Close Cycle = 12 – 25 days
  Close Cash Basis Books in 1 Day = 1 - 5 Days                                  Complete Consolidations in < 1 Day = 2 - 4 Days
        Enforce cutoff - no holding books open beyond 1 day                           Implement ERP or consolidation package
        Revise transaction flow and posting                                           Use affiliate code to identify intercompany items
        Implement early cutoff only where necessary (week, days, last Friday)         Clean up consolidations COA and entities
        Automate postings to GL                                                       Consolidation process owner - enforcement of process and schedule
        Eliminate spreadsheet processing and JE support
                                                                                      Pre-close confirmation of eliminations
  Streamline Accruals and JE Posting = 2 - 5 Days
                                                                                Streamline / Prioritize Analysis = 1 - 2 Days
        Automate / standardize accruals
        Inventory and track accruals - all accruals booked                            Eliminate / defer analysis not essential to close
        Enforce cutoff                                                                Enforce data and trial balance requirements
        Enforce materiality limits based on timing                                    Specify analysis and MD&A requirements
        Automate postings to GL                                                 Implement Standard Reporting Template = 1 - 3 Days
  Reduce Estimation Time for Reserves & Judgmental Items = 3 - 5 Days                 Specify reporting requirements and hold steady
        Enforce deadlines                                                             Implement tool or package to consolidate reporting requirements
        Top-down and bottom-up reserve / judgmental items process                     Conform report line items to trial balance level of detail
        Rationalize analysis before and after loan loss, reserves and                 Eliminate differences between management views and public
        judgmental item postings                                                      company views of data
        Enforce materiality limits based on timing
                                                                                      Incorporate plan and forecast requirements into reporting template
        Automate postings to GL
                                                                                      Implement web-based reporting tool
  Streamline GAAP Accounting = 2 - 4 Days
                                                                                Increase Plan & Forecast Info. And Reporting = (0 - 3) Days
        Routininze GAAP accounting / journals
        Clean-up recurring GAAP adjustments and opening balances                      Specify plan & forecast reporting requirements and hold steady
        Standardize FAS 157 data, processes, analysis & disclosures                   Implement tool to determine plan & forecast and align drivers used in
        Implement analysis and tools to capture GAAP data and prepare                 estimating to actual results
        adjustments                                                                   Deploy review process that incorporates performance scorecards and
        Separate GAAP GL from Regulatory GL                                           executive and business unit report outs



Confidential to Ernst & Young                                                                                                                          4
    Leading Practices - Performance Measurement and Management

  As a result, many CFOs have implemented significant improvements and upgrades to their
  As a result, many CFOs have implemented significant improvements and upgrades to their
  performance management & measurement capabilities
  performance management & measurement capabilities
                 Capability       Historic Practice                      Leading Practice

                                Detail expense budgeting;    Driver-based planning provides useful detail around sales,
      1. Planning / Budgeting                                producer productivity, retention, loss & exp mgt, etc.; Simplified exp
                                Plan = Last year + uplift;
                                Multiple iterations (5-10)   budgeting with tighter accountability; No more than 3 iterations

                                                             Driver-based rolling forecasts (6 – 8 quarters) are the primary
                                Annual process with
      2. Forecasting                                         results mgt vehicle; Fast actuals (day 3 - 4); Forecasts next day
                                absolute financial targets
                                                             using trends and driver-based models – all linked to business plan
                                                             Multi-dimensional profitability analysis across LOB, product,
      3. Multi-dimensional      LOB P/Ls are most            channel, producer, region, customer segment; “Show me profitability
                                granular results reporting   for A product, sold by B producer, in C region to D customer
         Profitability
                                                             segment”

      4. Performance            Unit by unit measurement     Enterprise wide dashboard tool and process; Consistent
         Dashboards             and metrics, not tied to     measurement / metrics linked to driver-based plan and forecast;
                                plan                         Metrics available on a comparable actual – plan – forecast basis
      5. Performance                                         Documented management plan and results review process with
         Management Review      Focus on explaining actual
                                                             focus on forecast, drivers and “What has to go right at all levels in
         Process                to plan variances
                                                             the business to realize forecast”

                                Focus on complicated         Rigorous discipline around managing spend and ROI; Capital
      6. Capital Management                                  and major initiatives require ROI, cost / benefit, payback period &
                                capital allocation to LOBs
                                                             value added delivery measurement

      7.     Financial          Mgt & fin’l info. requires   Finance data, information & reports professionally managed;
            Information         extensive reconciliation;    Integrated GL & data warehouse; Automated reporting & analysis
            Management          spreadsheet reporting        tools; Transparency between internal and external data is
                                                             sacrosanct; “One version of the truth”
Confidential to Ernst & Young                                                                                                      5
          Discussion Outline



             CFO Finance Agenda –

                    What CFOs are Doing

             Leading Practices

                    Accounting and Reporting

                    Close Process Improvement

                    Performance Measurement & Management

             What Other Companies Have Done – Case Studies

             Getting Started Close Process Assessment and Improvement Roadmap

             Contact Information




Confidential to Ernst & Young                                                   6
          A Recent Ernst & Young Study of the Close Cycle in Financial Services


                                          16 Financial Services Companies
                                                                         Leading Practice   Average
                                      Activities                             (Days)          (Days)
                      Close cash basis books                                     1            2
                      Accruals and other adjustments                             3            5
                      Actuarial valuation results available                      3            6
                      Actuarial review and analysis completed                    3            8
                      First close of GL / TB                                     3            8
                      First pass financials, review, analysis                    4            8
                      Second close of GL / TB                                    6            9
                      Production of primary financial statements                 7            9
                      Review and analysis of financial statements                7            11
                      Adjustments                                                7            11
                      Final close of GL / TB                                     7            13
                      Production of plan variance & forecast reporting           7            13
                      Production of management reporting                         8            11
                      Production of external reporting                          13            19


Confidential to Ernst & Young                                                                         7
          Close Process Controls Focus


                                                                                            Reconciliation Substantiation,                  Ownership and
                                                                                                                             Monitoring and                Review and
                                                                              IT Controls        and       Evaluation, Fraud                Segregation of
                                                                                                                               Reporting                   Approvals
                                                                                              Balancing        Detection                       Duties
                                Key Activites / Processes
         Transaction processing (revenues, expenses, etc.)                        X              X               X              X               X              X
         Accounting information interface (automated, manual to GL, DW)           X              X                              X               X              X
         Suspense account processing                                              X              X               X              X               X              X
         Close process schedule and preparation                                                                                 X               X
         Close cash basis books                                                   X              X                              X               X
         Accruals, judgmental items (reserves, OTTI, etc.), taxes, etc.                                          X              X               X              X
         Consolidation, FX, Fair Value, Disclosures, Accounting Policy                                           X              X               X              X
         General ledger maintenance, chart of accounts, DW, reporting tools       X              X                                              X              X
         Management review and analysis                                                                          X              X               X              X
         Production of financial and management reports                           X              X                              X               X              X
         Business continuity planning and maintenance                             X                                             X               X




Confidential to Ernst & Young                                                                                                                                      8
 Case Studies – Co. A - Improved and Accelerated Close

                                                                                                              Reduction to close cycle of
                                                                                                                       10 days
    Before Close Process Improvement



    Bus. Days - XX                                        0                 5                   14                 18                      25
                                      First Close                                   Analyze,                             SEC, Regulatory /
                                                                                                     F/S Review
                                                                GL Accounting        Adjust,
                            (Cash, Transaction Processing &                                           & Finalize        Regulatory Reporting
                                                                   & Close          Forecast,
                                       Reserves)                                                     Reporting                & Filings
                                                                                     Finalize

 After Close Process
 Improvement


    Bus. Days -2                                          0                     2               5                  < 10                   15

         Current transaction processing                       Standardized accruals                           Automated consolidation
         Daily balancing and backlog mgmt                     Automated GAAP & adjusting journals             Standardized reporting
         Laser focus on suspense items                        Simplified allocations                          Standard reporting / analysis tool
         and reconciliations                                  Consistent GLs and COAs                         Streamlined / prioritize reporting
         Enforced cutoff                                      Separate GAAP from Regulatory
                                                                                                              Rolling forecasts
         Strict cash close                                    Top-down / bottom-up reserves
         Automated interfaces to GL, DW                       Eliminate / defer analysis                      Data warehousing
         Pre-close reserve analysis                           Limit top-sides and adjustments                 Multi-dimensional data
         Limit top-sides and adjustments                      Daily close meeting                             Enforced deadlines
         Close process ownership / mgmt                       Management review process                       Limit top-sides and adjustments
         Confirm close process                                Business unit and actuarial sign-off            Management review process
         Organizational realignment to
         reduce handoffs

Confidential to Ernst & Young                                                                                                                      9
 Case Studies – Co. B – Self-service Reporting, Data Warehouse, Reduced Close
                                                                                                                                  •   IT processing window
                                                                                                                                  •   Strict cash cut-off
                                                                                                                                  •   Pre-close reserve analysis
                                                                                                                                  •   Investment accounting
      Step        Work Day            Process                      Prior                                    Current                   accelerated
                                                                                                                                  •   Reserve postings
                                                                                                                                      enforced
      1           1 - 6 = Prior       Close         – GL / Accounting Close in 6 days      – GL / Accounting Close in 3 days      •   Accruals and allocations
                  1 - 3 = Current                                                          (Close reduced by 3 days)                  streamlined


      2           7 - 8 = Prior       Reporting,    – Data warehouse downloads,            − Web reports, dashboards, scorecards, alerts available;
                  4 - 5 = Current     Forecasting    multiple queries, Excel                generated/distributed from centralized group by Day 4
                                                     workbooks and PowerPoint              − Forecast update and variance analysis
                                                     presentations                         − Selective drill-downs based on alerts
                                                                                           (Reporting reduced by 4 days; Forecasts done by Day 5)

      3           9 - 10 = Prior      Reporting &   – Create / send standard and some      − Collaborative analysis/consulting focused on business
                  5 - 7+ = Current    Analysis       ad-hoc reports                         unit/field decision making and reducing management cycle
                                                    – Multiple / redundant analysis and     time
                                                     reporting efforts                     (Management cycle time cut in half)

      4           11 - 15 = Prior     Analysis      – Data query, analysis create / send   (Ad-hoc reporting minimized in favor of standard reports)
                                                     ad-hoc reports with written           (Analysis and drill-down on a self-service basis, coordinated by
                                                     analysis                               Finance in a collaborative fashion)

      5           15 - 20 = Prior     Plan,         – Update existing models using         – Predictive model and “auto forecasting” based on detailed
                  8 – 12 = Current    Forecasting    previous month / recent periods        business drivers and alerts for early warning
                                                     and historical data                   (Forecasting automated and cycle time cut in half )

      6           12 – 20 = Current   Plan,         N/A                                    (Early warning reports, dashboards, and rolling forecast
                                      Forecasting                                          update)

Confidential to Ernst & Young                                                                                                                           10
 Case Studies – Co. C – Reduced Close, Org Alignment, Self-service Reporting,
 Data Warehouse                                                   • Results finalized & locked
                                                                                                                   • Parent Co. reporting completed
                                                                                                                   • External reporting cycle started
   Before Finance Transformation

      Bus. Days            -10                            0               5              14                15                     24 = 34 days
                                    Cash Close                                  Analyze,
                                                                                                F/S Review
                                                              GL Accounting      Adjust,                        Regulatory Reporting
                                   (Accounting &                                                & Parent Co.
                                                                 & Close        Forecast,                             & Filings
                                 Reserve Estimates)                                              Reporting
                                                                                 Finalize                                                - 12 days
  After Finance Transformation


      Bus. Days             -2                            0         2                       7         12                          20 = 22 days
      Enablers            • Automate estimates        • Monthly close                  • Standard reporting          • Enforce deadlines
                          • Limit top-sides           • ERP based GAAP ledger            package                       for report
                          • Automate interface to       separate of Regulatory         • Report rationalization        production &
                            GL, DW, IBNR                ledger                         • Financial information         analyst info
                                                      • Top-down reserves with           management / DW
                          • Reduce backlog < 10                                                                        package
                                                        focused bottom-up              • Automate FX
                            days                                                                                     • Minimize use of
                                                        validation                     • Automate consolidation
                          • Cash & A/R mgmt unit      • Automate interface to GL,      • Enforce deadlines for         spreadsheets –
                            – focused collection        DW                               review & sign-off             automate
                          • Automate billing          • Minimize use of                • Limit top-sides               accounting
                          • EDI                         spreadsheets – automate        • Driver based planning and     calculations,
                          • Strictly observed cash      accounting calculations,         forecasting                   entries & interfaces
                            close                       entries & interfaces           • Actual – plan – rolling     • Management review
                          • Minimize use of           • Automate accruals                forecast data aligned         and sign-off
                            spreadsheets              • Rolling forecast process       • Multi-dimensional data –      process
                                                      • Close “Czar”                     LOB, customer, channel,
                          • Report rationalization
                                                      • Enforce deadlines for review     contract type, geography
                          • Automate wire
                                                        & business unit sign-off       • Self-serve analysis &
                            transfers                 • Organizational re-alignment      reporting through DW
                                                        to reduce hand-offs and
                                                        streamline workflow
Confidential to Ernst & Young                                                                                                                  11
          Discussion Outline



           CFO Finance Agenda –

                  What CFOs are Doing

           Leading Practices

                  Accounting and Reporting

                  Close Process Improvement

                  Performance Measurement & Management

           What Other Companies Have Done – Case Studies

           Getting Started Close Process Assessment and Improvement Roadmap

           Contact Information




Confidential to Ernst & Young                                                 12
          Getting Started - Close Process Assessment and Improvement Roadmap
                                                                                                                                      Planning & Launching
     Charting the Current Close Cycle,                      Identifying Improvements to the Close Cycle,
                                                                                                                                 Improvements to the Close Cycle,
            Process & Controls                                            Process & Controls
                                                                                                                                       Process & Controls
  Review subsidiary and corporate closing               Prepare an overall Close map and timeline with identification of          Prepare work plans for the specific
  processes with focus on -                             possible contributors to the current cycle time                           initiatives to realize the improvements
        Process map – inputs, outputs, controls         Determine / summarize management’s objectives for improvement as          identified -
        Timing of activities                            expressed in –
                                                                                                                                       Scope, resources and timing
        Information requirements                             Acceleration / reduction of XX days
                                                                                                                                       Work plan (activities / task level)
        Transmission of information from                     Improvement in the process (data, quality, management of the
                                                             process, reporting, analysis, timeliness, controls, etc.)                 Impact on cycle time
        subsidiaries to Corporate
        Consolidation and elimination activities             Allowance of XX days for management review of the results, etc.           Impact on control environment
        Analysis and reporting requirements and         Conduct workshop with select participants to identify adjustments that         Interdependencies on existing or
        tools                                           can be made to the process with the intent of achieving management’s           planned initiatives
        Current Close process calendar,                 improvement objectives, reducing cycle time and improving the                  Technology requirements to develop
        instructions, monitoring and responsibilities   process and control environment; focus on -
                                                                                                                                       and implement
        Persons involved                                     Activities prone to or causing delay
                                                                                                                                       Parties involved and responsible
        Technology utilized                                  Activities which can be moved or shifted in the close cycle to
                                                             accelerate / reduce the timeline                                          Value / benefit
  Map major closing activities and their timing                                                                                        Implementation timing - second
  during the Close cycle with focus on -                     Revision of activities performed by subsidiary operations and
                                                             Corporate                                                                 quarter, third quarter, year end, etc.
        Pre-close activities
                                                             Revision of activities performed by non-Finance groups that          Prepare a revised process and control map
        Activities with multiple start and check /           provide key data                                                     and time line that incorporates agreed upon
        process points
                                                             Improved utilization of technology                                   changes
        Process and timing differences between
        subsidiaries                                         Revision of accounting and reporting processes related to the        Coordinate proposed changes with close
                                                             close                                                                calendar and schedule
        Activities which span several days (e.g.,
        close of cash basis books, production of the    Summarize improvements to the close, timeline and related processes       Launch improvement initiatives
        trial balance, accruals, allocations,           and controls and the specific improvement objective with a focus on
                                                        accuracy, timeliness, efficiency, quality, data, controls, technology     Establish process to monitor, evaluate and
        consolidation, reserve analysis and posting)                                                                              adjust close process for continued
                                                        enablement & cost
  Interview participants in the Close cycle and                                                                                   realization of reduced cycle time based on
  review related material                               Review improvements with management and document specific
                                                        achievement of management’s objectives                                    interim changes


Confidential to Ernst & Young                                                                                                                                            13
          Contact Information

                                  Gerald R. Roop        Relevant Experience
                                         Partner        Multiple Financial Services Cos. - Gerry led multiple initiatives major financial process & systems, including -
                                         Finance &         Management information / business intelligence strategy and requirements
                                       Performance         General ledger design, development and implementation
                                       Management
                                                           Improved and accelerated close cycle to enable reporting in line with leading practice public companies
                                        212-773-4550       Global financial information strategy and process design
                                gerald.roop@ey.com         Internal and external reporting packages for a public company environment
                                                           Management reporting package for product profitability and performance management
                                                           Multi-dimensional profitability reporting and performance scorecards
   Background                                              Driver-based planning and rolling forecasting process, including: top-down target setting, identification of
                                                           metrics and drivers, management performance review process
   Gerry is a Partner in the Finance &                     Design of performance dashboard & process, including: KPIs, dimensions, tool & data strategy
   Performance Management practice. Gerry has
   directed numerous engagements to implement              Report rationalization to target report reduction, standardization & prioritize analysis
   financial & performance management process              Consolidation and reporting system design, development and implementation
   and systems, streamline and transform process           Investment accounting reporting (Statutory & GAAP) system and process implementation
   and information flows, evaluate and enhance
   productivity. Gerry is a CPA and was the CFO            Simplified expense, investment and capital allocation processes
   & Director of Investor Relations for a NYSE             Reduction of actuarial reporting cycle and consolidation of valuation systems
   insurer. Gerry received his B.S. from Villanova         Employee training, process and system assimilation and process scorecards
   University.
                                                        Insurance & Capital Markets Cos. - Led evaluation & establishment of outsourcing & shared services,
   Gerry has deep industry experience of leading
   practices in performance measurement and has            including -
   extensive knowledge of how many successful,             Development of vision, business case and cost/benefit analysis to support migration to shared services or
   large P&C and Life companies measure their              alternate sourcing strategy (outsourcing, venture, alliance)
   business via scorecards and dashboards linked
   to strategy and plan, as well as their forecasting      Analysis and selection of units/functions for inclusion in alternate sourcing
   capabilities. He has designed and built                 People, process and application migration to new service
   performance dashboards and related executive            Improved quality and service levels of functions and processes
   performance management processes for
   several companies leveraging ERP data stores         Large Insurance Cos. - Led the Finance strategy and transformation, including –
   and sophisticated business insight tools.
                                                           Definition of vision statement, mission, strategy and value proposition
   Gerry has implemented accounting and                    Establishing an operating baseline, benchmarking key Finance metrics & comparing Finance with leading
   reporting packages at several companies. He             practices to identify gaps and opportunities for improvement
   has deep industry experience of leading
   practices in accounting, reporting, close and           Implementation of new & revised processes, along with change management & training requirements for
   consolidation processes and has assisted                reporting, analysis & business unit consulting, capital management, planning & forecasting, talent
   several companies in shortening the close and
                                                           management
   reporting process with typical objectives of a 5 –
   10 day complete closing and reporting cycle.            Development of performance standards, objectives, metrics & scorecards for critical Finance capabilities

Confidential to Ernst & Young                                                                                                                                    14

				
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