"No more easy money for criminals, just hard time." With those words, President George Bush signed into law the most sweeping corporate reform legislation since the New Deal of the 1930s.Under the new law, the stakes for white-collar crime have increased dramatically, with the CEOs and CFOs of America's corporations now required to attest under oath to the accuracy of their financial statements under the threat of million-dollar fines and prison sentences.
Insurers are not immune to this increased scrutiny by financial regulators and investors. Carriers need to create world-class finance organizations, adopt trustworthy accounting processes and provide real-time financial data to CEOs and CFOs, and to interested parties outside the corporate walls.
A daunting challenge
Insurance companies face a particularly daunting challenge when it comes to making real-time, accurate financial data available to all stakeholders.
First and foremost, providing accurate, timely, consistent financial information requires systems that empower employees with real-time financial information, not data that is two weeks out of date.
Most legacy systems are not designed to render financial information in real-time. Exacerbating this problem, insurance companies tend to have large pools of data stored in legacy systems that don't integrate easily with the new technologies that companies are adding, such as analytics for customer relationship management (CRM) systems.
In addition, many insurers have too many IT systems that can't communicate with one another-a problem that often stems from acquisitions or mergers of companies with different ledger systems, especially if the companies are from different countries. When CFOs ask for a report that pulls data from these disparate financial systems, they may get five different answers.
Inconsistent information can make even the simplest decision difficult. Poor integration between IT systems quickly erodes trust in the accuracy of a company's financial systems and reporting capabilities. Because accurate, real-time information is not available, CEOs and CFOs are also severely hindered in their ability to modify corporate performance goals in light of a constantly changing business environment.
Making the problem more complex is the fact that IT budgets in the insurance industry are continuing to tighten. But the stark reality is: If insurance carriers are not able to get a grip on financial reporting, they are apt to find themselves in trouble.
To reduce the time and effort required to gather and report its financial results, an insurance company needs to create a single reporting system that pulls accurate, consistent information from its various ledgers. Given the great variety of ledgers in the insurance industry, the system must run on any platform.
Fortunately, today's technology providers have created solutions for consolidating information across ledgers, even for multinational companies. By collecting all of a company's financial data into a single warehouse, the company is then able to report a single version of financial truth-the very foundation of corporate accountability.
By starting with one set of numbers, a company can then empower its employees with role-based access to the same type of information, insight, and decision support tools used by CFOs and senior finance executives. With this type of access, employees are given the responsibility to help drive accountability throughout the organization.
Today's progressive companies are delivering this type of financial information through role-based portals, meaning the information that is delivered to the employee is customized for what that specific person wants or needs to see based on his or her responsibilities.
In an effort to address growing public concern over potential financial mismanagement, companies are also using this portal technology to deliver financial information to investors.
To help restore investor confidence, CFOs need to go beyond regulatory compliance and provide additional disclosure of financial information. Using portals designed for investors, companies can provide key performance indicators, industry benchmarks and modeling tools to help inform and educate investors.
Investors can use the expanded information and analysis tools to evaluate a company's historical, current and potential performance. If necessary, insurance companies can also modify goals in light of a dynamic business environment, cutting the "ties that bind" and helping them articulate realistic, achievable goals no matter what unexpected events the market brings.
Research shows that a large number of investors believe questionable accounting is widespread. Yet, in reality, only a small percentage have violated accounting standards. This perception has made restoring investor confidence a top priority in boardrooms around the world-and carriers must do their part.
When insurers invest in solutions that address this perception externally, they will discover the internal strategic benefits of streamlined cash management and real-time visibility of financial information across the enterprise.
Frank Siderio is financial services industry strategist for PeopleSoft Inc., Pleasanton, Calif.
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