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.

Walker says a lot of accounting is based upon judgment. The CIO should provide an application that can capture management judgment throughout the organisation, focusing on the treatment of revenues and expenses and the risks for the business into the future, he says.

"So for example, if I'm a manager at a plant in Taiwan, and my business is dependent on a major contract with a Japanese auto company in Tokyo and I'm concerned that I may not be able to renew my contract, for whatever reason, that needs to be captured, because that is a risk. There needs to be some portal that captures that knowledge," Walker says.

Once the application has the data the CIO can program it to automatically sift through it to detect patterns and ring alarm bells as appropriate. The software must be smart enough to minimise false positives and alarm alerts.

Meta Group suggests IT executives can enhance strategic value by establishing an IT controller role. As organisational growth and financial complexity become more critical, the research company expects this role to grow from 20 per cent of Global 2000 companies currently, to 40 per cent plus by 2005.

"In smaller organisations, the CIO often owns this function. By 2005, the IT controller role will expand from a tactical, internal IT budget watchdog, to a strategic business collaborator and liaison, often with dotted-line reporting to the corporate CFO," Meta Group notes. "An empowered IT controller can better align IT initiatives and budgets with business objectives and metrics, ensuring compliance with financial and accounting practices, reporting and visibility."

That can only be for the good, in an era where companies will find visibility a most attractive option.

SIDEBAR: Economies of Scale

Locally HIH may have got it wrong, but in the US mega insurer MetLife has dedicated two years to getting its financial house in order

By Stephanie Overby

MetLife's status as the US's second largest insurer ($US2.1 trillion worth of insurance in force) came from an aggressive acquisition strategy that saddled the 134-year-old company with a plague of dissimilar systems.

Last year, the MetLife companies served 9 million US households, 4.1 million customers abroad, and 64,000 companies and institutions. It has 46,154 employees, and last year it amassed $US32.5 billion in operating revenue. On the technology front, the company has five CIOs, one CTO and an executive vice president of technology who oversees them all. During its 134-year history, MetLife has grown not only in size but also in complexity, becoming so broad that Chuck Johnston, vice president of insurance information strategies at Meta Group (US), describes it as the "GE of the insurance industry".

Much of MetLife's scale is the result of its aggressive acquisition strategy - it has bought everything from billion-dollar enterprises to distribution channels across all its lines of business. Because of its rapid expansion, MetLife was saddled with a plethora of disparate systems and processes - in addition to its own legacy systems, some already decades old. In 1998, a new CEO, Robert H Benmosche, came on board looking to transform the company's reputation as a staid insurance company to that of a nimble, full-service financial services firm. To that end, he had MetLife look at its millions of customers from an enterprisewide perspective and start taking advantage of its enormity to cut expenses. At the same time, MetLife executives decided to take the company public, meaning it needed to respond to public-reporting requirements dictated by the US Securities and Exchange Commission. All these changes meant one thing for MetLife's technology team: it was time to get integrated.

Daniel Cavanagh knew big changes were ahead when he took over as executive vice president in charge of operations and information technology in March 1999. The message from "the chairman", as most of the IT execs call Benmosche, was that the IT staffs supporting MetLife's business units needed to rein in the subsidiaries so that the huge insurer could start reaping economies of scale. "When MetLife started testing its value proposition with the Street, the big sentiment was that it's time to harvest some of that scale you've got," says Tony Candito, senior vice president and CIO of MetLife's individual business unit. "At that point, everything changed."

Cavanagh began by "integrating" his five business unit CIOs and his CTO into an IT governance board. They meet monthly to discuss IT and integration strategy and specific projects, both enterprisewide and within each business unit.

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