IBM Cognos FSR gives LV= one version of the truth

A combination of rapid growth and the company’s efforts to transform itself to meet the rapidly changing environment that insurers and asset managers must operate in had a profound impact on the Group Finance department at LV=. It commissioned an extensive report from auditors Ernst & Young to review the then-current financial environment and identify areas for improvement. Year-end reporting, reports to the Board of Directors and the efficiency of the interfaces between financial systems were investigated, encompassing the 30-odd subsidiary finance departments and the overall Group (Corporate) Finance department, and the results were a mixed bag.

“On the plus side, we were found to be ‘error free’ in our reporting but there were concerns about the control the department had over the numbers, with our manual processes for gathering and creating reports, as well as over-exposure to numerous and complex spreadsheets,” said Andy Young, Group Financial Controller, LV=. “So we hopped right on it, setting up a working party to review the Ernst & Young report and identify where we could improve our controls – and therefore our efficiencies – and mitigate our risks in the process. We chose a phased approach; basically Phase 1 being a year-end 2008 review of processes – primarily our reporting processes – and a Phase 2 in 2009 that would build on the year-end changes and integrate other financial processes.”

Solutions
Phase 1 – Improving controls where needed
Finance determined that they had good control over the policy and source systems, the interface to the general ledger and the ledger itself. In general, it was a well-controlled process until the team had to report out from the general ledger. Not surprisingly to Young, control became more difficult to maintain when multiple Microsoft® Excel® and Microsoft Word files came into play, along with the transformation of a consolidated spreadsheet into Adobe® InDesign® to produce the ‘glossy’ accounts.

“Our subsidiary Statutory Accounts were prepared in Word and were produced from Excel files from our trial balances (TB). These Word documents were rekeyed into our consolidated spreadsheet. That got us our subsidiary information, with a fair amount of pain, and then that consolidated spreadsheet had to be put into a Group Accounts template, which was then copied into a desktop application – Adobe InDesign – to produce our reports for filing,” said Young.

The whole process had many issues. Transfer of data between sources was complex; manual amendments were needed to keep the numbers ‘right’; there was scarcely any audit trail available and amendments to accounting policies and notes which occurred at the subsidiary level sometimes resulted in consistency problems. “But the biggest single issue was that changes came from the subsidiaries – from the bottom up – at the ninth-hour, always a critical time, when we had to get the reports done and filed, limiting our review and checking time, which in turn put pressure on us not to miss key changes to the information,” said Young. “In effect, it was the ‘last mile’ in producing reports that was exposing us.”

So LV= went shopping for a solution that would improve the process around control of its numbers and, according to Young, “…get away from the onus on our highly qualified financial staff to be production experts, and free up their time to add true value in accordance with their training and expertise, to our operations.”

LV= found very little on the market that fit the bill, until it reviewed the IBM Cognos FSR financial governance solution. “We saw a few supposed competitive products but from what we could tell, they really didn’t compete against FSR. We weren’t aware of any other solution on the market that did what FSR does,” said Young.

The IBM solution also fit neatly into and was in fact the keystone of a new process that Group Finance rolled out, which concentrated on routing subsidiary GL, Microsoft Excel and Microsoft Word files into the Group GL, and from there into the IBM Cognos FSR database (or ‘cube’), where it could be automatically summarized and mapped to a template, for passing to the design application.

“During the demo and as borne out by experience, it was apparent that IBM Cognos FSR gave us the signoffs checklist and overall control such as the tracking feature that keeps everyone aware of what is happening to our reports as changes occur, and also provides a paper trail.”

“Simply put, IBM Cognos FSR gives us one version of the truth. Since FSR pulls straight from our trial balances, rather than pushing stuff through Excel, we have that assurance that key data is coming straight from our General Ledger. The old, laborious and error-fraught method was to pull information into multiple spreadsheets, move it about in these spreadsheets, and then into Word to produce the accounts. So IBM Cognos FSR cuts out many stages of re-processing information that characterized our mainly manual, past processes,” confirmed Young.

The activities of Phase 1 in 2009 were numerous but well worth it. More than half of LV= subsidiaries were set up to report using IBM Cognos FSR and they all reported substantial control improvements and user acceptance of the solution. All Group Finance reporting was accomplished via FSR (although consolidation and output to the Adobe tools were earmarked for Phase 2) and, between LV= staff and IBM’s service people, no expenditures were necessary for consultants. “Existing Word and Excel formats were easily copied into FSR and our auditors loved that they, and ourselves, were able to track changes between versions, to the point where we had a single version of the truth when we produce our Company Annual Accounts,” said Young.

Phase 2 - All statutory reports produced and filed with IBM Cognos FSR
In Phase 2, which roughly covered 2009, the successes of Phase 1 were exploited and new processes integrated. These included monthly management reports, the weekly MI and reconciliations.

“It was a frantic time, but we’re seeing the benefits now as we simply roll over our categories and fields for our February 2010 reports and they are automatically populated with the latest figures, with a bit of oversight.

Any changes to our General Ledgers are quickly reflected in FSR, so the process wraps up our numbers neatly at its end, with no need to work it through the process, changing spreadsheets, etc.,” said Young.

Weekly and monthly Management Information (MI) ‘Packs’ produced by IBM Cognos FSR
All of the accounting information from both the subsidiaries and the corporate Finance Group are done by accountants based in the LV= Head Office and satellite offices. Young has also used FSR to combine this information into a weekly Management Information (MI) ‘Pack’ and, along with a Forecast and Budget Package, into a monthly Management Reporting Package. His Management Reporting team provides these to LV= middle-and-upper management.

“We’re pulling all the accounts into FSR now and we built our FSR/cube solution so that it refreshes quickly, straight from the underlying data, and then reviewers and management can look at our results a lot quicker than previously,” said Young.

“Before, we were producing eight separate packs, which overall totaled 200-250 pages. We’ve pushed that all into FSR so when we now issue our monthly packs they’re all created from the same place, with consistent data appearing across the whole package, rather than having people pulling different information from different areas across the company, in different ways.”

Benefits
As is required by all registered limited companies, LV= files its annual financial statements, statutory accounts, with Companies House. “Currently that’s done via paper copies but at some point in the next year or so we’ll be filing those in XBRL, which will be done with IBM Cognos FSR,” said Young “and we also have to file our accounts and tax returns to HM Revenue and Customs (HMRC), so although the 2009 accounts we’ve currently filed didn’t have to be in XBRL format, the 2010 submissions will need to be in an XBRL variant; iXBRL. Our aim is to tag all of our annual accounts in XBRL this year, ensure that they work and then file them for 2010 in 2011, to the HMRC in the XBRL format, using IBM Cognos FSR,” Young concludes.

Almost 70 people are using FSR at the moment and Young is trying to push it out across the organization because he realizes that it’s best to have everyone knowing what everyone else is doing with FSR and ensure that everyone who is designated as the keeper of a data source “…actually does the keying in of any data, and everyone else knows it,” said Young.

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