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Learning From Disaster | Part Two - Transparently Obvious

Learning From Disaster | Part Two - Transparently Obvious

Months before Enron declared bankruptcy an unidentified employee sent the company's top executive an unequivocal message.


Top-Down, Bottom-Up Information

Of course transparent business means having many users of information. That is why some vendors are pushing enterprise planning and performance management software, claiming it is already changing the way enterprises operate by imposing collaborative top-down, bottom-up planning practices, business transparency and far-reaching accountability.

Enterprise planning and performance management is a methodology and practice based on company-wide collaboration and participation that allows hundreds of employees to become involved in the collection of data and planning future performance. This helps prevent people from any position within the company from massaging or misplacing financials.

"CEOs and CFOs are under enormous pressure from the threat of potential legislation and intense market scrutiny to demonstrate financial stability and reporting accuracy in the wake of recent corporate collapses," Adaytum global CEO Guy Haddleton says. "Their first port of call to achieve this is generally the CIO and finance department to establish a system that will provide them with job security by being able to adequately demonstrate: financial accuracy, business transparency and executive and employee accountability.

"Enterprise planning and performance management achieves these key criteria because it drives the collection and analysis of realtime data. It provides CIOs and their CEOs with greater confidence in predicting future operating performance. So, there's much less likelihood of the business missing its bottom-line numbers, or of having to issue reforecast profit warnings."

Haddleton, whose company provides enterprise business planning solutions, says enterprise planning and performance management replaces outdated technology - commonly Excel spreadsheets which are not suited to planning and data collection on a multi-user basis - and in doing so eradicates the common issues of data integrity.

Enterprise planning and performance management also provides senior management with the flexibility to track business against plan and allows them to take proactive steps to change the outcome of the business on a quarterly basis. This means that warning about missing profit or revenue targets comes early enough for CEOs to be able to take steps to readjust business strategy in order to try to meet original targets.


Capture and Analyse

Forrester Research says CIOs can help corporate officers and their auditors rebuild trust by building an electronic audit application. The application should intelligently capture and analyse enterprise and business segment data providing a daily audit of the firm. This application should siphon electronic data to monitor profitability drivers and alert the CFO to problems; provide a repository to manually log material events and provide pattern recognition algorithms to detect fraud.

Jim Walker, a senior analyst with Forrester, says companies need to fully digitise the business. "Companies tell us that while 80 per cent of their volume is done electronically with EDI, 80 per cent of their customers (20 per cent of their volume) still use phone and fax. If you're going to manage your business with an electronic audit committee application, you need to have the data in electronic form before you can even start that.

"That's the first thing: the data needs to be electronic, it needs to be sitting in a data warehouse, across the enterprise," Walker says. "The next thing that needs to be done is that the CIO needs to work with the CFO and the outside auditors, to ask the types of questions financial analysts would ask the company. Before you can program this electronic app you need to ask the questions that a financial analyst would look at when they're evaluating the business. And then the third thing that you need to do is that you need to have a portal to capture information that's not readily captured in the numbers."

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More about ACTAdaytumBIASBillionDeloitte Touche TohmatsuDeloitte Touche TohmatsuEnronFedExForrester ResearchGartnerHISMeta GroupMetlifeOraclePeopleSoftPLUSSAP AustraliaSecurities and Exchange CommissionWebster

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