Getting value from data & analytics - EY
The analytics-driven CFO Using advanced predictive analytics to drive financial success
1 of 5
Getting value from data & analytics
1
5 Article series: The analytics-driven CFO Using advanced predictive analytics to drive financial success
1
Getting value from data & analytics
The role of Chief Financial Officer (CFO) continues to evolve in Asia-Pacific as the demands from the business shift and change, almost daily it seems. The CFO must become a futurist; must rise above transactional responsibilities and use data and advanced analytics to forecast and shape the future. Determining the impact of different strategic directions, enabling better risk management and driving financial success will be the bastion of the successful CFO and their highly-skilled finance team. Sophisticated predictive analytics will allow the CFO to generate value from data insights and change outcomes based on that insight. But the journey will challenge the status quo… For instance, the belief that humans are the most effective way to analyze and process data is now obsolete. The human brain can only cognitively cope with a handful of data dimensions, whereas a computer can knead through hundreds, if not thousands of dimensions in a fraction of the time. Organizations must forego the idea that data needs to be structured in a way that allows the human brain to process it. Data must now be aligned to computer querying or as it is often known in the big data world, machine learning. With machines doing the analysis and generating the insights, people in the business are freed up to spend their time focusing on higher value activity - working out what to do next to change the outcome for the better. The machines provide the insight; humans provide the action to change the future.
Machines analyze and generate insight from the data; humans consume those insights and design actions to change outcomes. This gives the CFO the predictive power to understand and interpret patterns across huge swaths of data, well beyond anything the human brain has been able to do in the past. What it also does is make the predictions off this big data all the more granular; the resolution of the prediction just went
There were five exabytes of information created between the dawn of civilization through 2003, but that much information is now created every 2 days.
—Eric Schmidt, Google, 2010
up one hundred or one thousand fold. In big data terms, this is known as signal engineering. What is possible now is to process absolute floods of data from almost endless sources around one single target entity of interest. That entity might be a customer, an employee, a supplier, a student, or a citizen. But it could just as easily be an abstract concept such as a digital entity or indeed, an asset in the case of the CFO. Imagine fine-grained predictions around a specific entity such as your balance sheet, your tax position or your P&L. Predict what is most likely to happen next and intervene to improve the outcome. As with predictive analytics allowing the CMO to understand next best offers and then be able to create campaigns that maximise sales, the CFO now has the power to be the predictive indicator of financial success across the organization. The CFO could add considerable future value with a fully functional decomposition of the P&L. This could be used to shape future customer, asset, supplier, and employee interactions to improve the outputs. Using a mass market predictive analytics model would allow the CFO to overlay external factors on the millions of internal interactions and transactions to understand influences from market conditions, interest rate fluctuation, public economic sentiment, and political factors. 2
Internal Data
Internal Transaction
> Assets > Liabilities
> Account > Location > Time
> Date > Product > Price
> Tax code > Profit margin
External influences
Business-critical information Internal and external information is fed into a timebased predictive model highlighting critical patterns.
> Cyber attacks > Credit position > Interest rate fluctuations
Interventions can then be prescribed to change future outcomes
Balance Sheet
P&L
P&L
Assets > Item n
Expenses > Cost n
Revenue > Sales n
Liabilties > Item n
Net Position
> Interest rates > Market position > Economic conditions
Profit
Highly Granular View Now Data & analytics provides a highly granular view of the P&L & balance sheet by individual category, cost centre
PREDICT & CHANGE THE FUTURE Use data and analytics to predict your future P&L and Balance Sheet with a high degree of accuracy.
Anticipate what is going to happen, and respond by prescribing actions that change the future.
We are already seeing big data analytics being used during tax audits to show how transactions have run through internal systems.
1
2
3
Design your data structures to allow machines to analyze data both internal and external to your organization.
Install an advanced analytics technical capability – tools, platforms, solutions - that can cope with huge amounts of data.
Set your people up to consume the insights generated by your technical capability to shape future actions and change outcomes for the better.
3
The analytics driven CFO 1
Getting value from data and analytics
2
The key to success for the analytics-driven CFO
3
Barriers to becoming an analytics-driven CFO
4
Three steps to becoming an analytics-driven CFO
5
Driving change to an analytics-driven culture
EY | Assurance | Tax | Transactions | Advisory About EYC3 EYC3 creates intelligent client organizations using data & advanced analytics. Our team of data scientists, analysts, developers, business consultants and industry experts work with clients at all stages of their information evolution. We implement information-driven strategies and systems that help grow, optimize and protect client organizations, and create a lasting culture that encourages people to use information creatively and intelligently to improve business outcomes. eyc3.com | ey.com/analytics Contact details: [email protected]
About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2016 Ernst & Young, Australia. All Rights Reserved. APAC No. OC00000476 This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. Liability limited by a scheme approved under Professional Standards Legislation.
4
1 of 5
Getting value from data & analytics
1
5 Article series: The analytics-driven CFO Using advanced predictive analytics to drive financial success
1
Getting value from data & analytics
The role of Chief Financial Officer (CFO) continues to evolve in Asia-Pacific as the demands from the business shift and change, almost daily it seems. The CFO must become a futurist; must rise above transactional responsibilities and use data and advanced analytics to forecast and shape the future. Determining the impact of different strategic directions, enabling better risk management and driving financial success will be the bastion of the successful CFO and their highly-skilled finance team. Sophisticated predictive analytics will allow the CFO to generate value from data insights and change outcomes based on that insight. But the journey will challenge the status quo… For instance, the belief that humans are the most effective way to analyze and process data is now obsolete. The human brain can only cognitively cope with a handful of data dimensions, whereas a computer can knead through hundreds, if not thousands of dimensions in a fraction of the time. Organizations must forego the idea that data needs to be structured in a way that allows the human brain to process it. Data must now be aligned to computer querying or as it is often known in the big data world, machine learning. With machines doing the analysis and generating the insights, people in the business are freed up to spend their time focusing on higher value activity - working out what to do next to change the outcome for the better. The machines provide the insight; humans provide the action to change the future.
Machines analyze and generate insight from the data; humans consume those insights and design actions to change outcomes. This gives the CFO the predictive power to understand and interpret patterns across huge swaths of data, well beyond anything the human brain has been able to do in the past. What it also does is make the predictions off this big data all the more granular; the resolution of the prediction just went
There were five exabytes of information created between the dawn of civilization through 2003, but that much information is now created every 2 days.
—Eric Schmidt, Google, 2010
up one hundred or one thousand fold. In big data terms, this is known as signal engineering. What is possible now is to process absolute floods of data from almost endless sources around one single target entity of interest. That entity might be a customer, an employee, a supplier, a student, or a citizen. But it could just as easily be an abstract concept such as a digital entity or indeed, an asset in the case of the CFO. Imagine fine-grained predictions around a specific entity such as your balance sheet, your tax position or your P&L. Predict what is most likely to happen next and intervene to improve the outcome. As with predictive analytics allowing the CMO to understand next best offers and then be able to create campaigns that maximise sales, the CFO now has the power to be the predictive indicator of financial success across the organization. The CFO could add considerable future value with a fully functional decomposition of the P&L. This could be used to shape future customer, asset, supplier, and employee interactions to improve the outputs. Using a mass market predictive analytics model would allow the CFO to overlay external factors on the millions of internal interactions and transactions to understand influences from market conditions, interest rate fluctuation, public economic sentiment, and political factors. 2
Internal Data
Internal Transaction
> Assets > Liabilities
> Account > Location > Time
> Date > Product > Price
> Tax code > Profit margin
External influences
Business-critical information Internal and external information is fed into a timebased predictive model highlighting critical patterns.
> Cyber attacks > Credit position > Interest rate fluctuations
Interventions can then be prescribed to change future outcomes
Balance Sheet
P&L
P&L
Assets > Item n
Expenses > Cost n
Revenue > Sales n
Liabilties > Item n
Net Position
> Interest rates > Market position > Economic conditions
Profit
Highly Granular View Now Data & analytics provides a highly granular view of the P&L & balance sheet by individual category, cost centre
PREDICT & CHANGE THE FUTURE Use data and analytics to predict your future P&L and Balance Sheet with a high degree of accuracy.
Anticipate what is going to happen, and respond by prescribing actions that change the future.
We are already seeing big data analytics being used during tax audits to show how transactions have run through internal systems.
1
2
3
Design your data structures to allow machines to analyze data both internal and external to your organization.
Install an advanced analytics technical capability – tools, platforms, solutions - that can cope with huge amounts of data.
Set your people up to consume the insights generated by your technical capability to shape future actions and change outcomes for the better.
3
The analytics driven CFO 1
Getting value from data and analytics
2
The key to success for the analytics-driven CFO
3
Barriers to becoming an analytics-driven CFO
4
Three steps to becoming an analytics-driven CFO
5
Driving change to an analytics-driven culture
EY | Assurance | Tax | Transactions | Advisory About EYC3 EYC3 creates intelligent client organizations using data & advanced analytics. Our team of data scientists, analysts, developers, business consultants and industry experts work with clients at all stages of their information evolution. We implement information-driven strategies and systems that help grow, optimize and protect client organizations, and create a lasting culture that encourages people to use information creatively and intelligently to improve business outcomes. eyc3.com | ey.com/analytics Contact details: [email protected]
About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2016 Ernst & Young, Australia. All Rights Reserved. APAC No. OC00000476 This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. Liability limited by a scheme approved under Professional Standards Legislation.
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