Robert Kugel's Analyst Perspectives

Software to Fend Off Earnings Restatements

Posted by Robert Kugel on Mar 15, 2013 9:51:03 AM

I’m wondering whether the rapid rise in earnings restatements by “accelerated filers” (companies that file their financial statements with the U.S. Securities and Exchange Commission that have a public float greater than $75 million) over the past three years is a significant trend or an interesting blip. According to a research firm, Audit Analytics, that number has grown from 153 restatements in 2009 to 245 in 2012, a 60 percent increase. What makes it a blip is that the total is still less than half the number that occurred in 2006 as the Sarbanes-Oxley Act began to take effect. As well, the number of companies restating is still less than one percent of the total. Yet it’s a blip worth paying attention to, since the consequences of a restatement pose a serious professional challenge to finance executives. The right software can help address some of the underlying causes that lead to the need to restate earnings.

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Topics: Customer Experience, Governance, GRC, Office of Finance, Reporting, audit, close, Consolidation, Controller, Tax, XBRL, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), FPM, SEC

Addressing Key Operational Risk Requirements

Posted by Robert Kugel on Mar 13, 2013 10:00:22 AM

I’ve frequently commented on the artificiality of the emerging software category of governance, risk and compliance (GRC). The term is used to a cover a combination of what were once viewed as stand-alone software categories, including IT governance, audit documentation and industry-specific compliance management, to name three examples. While it’s still common for specific types of software to be purchased piecemeal by different departments, these disparate areas have started a long convergence process. Since just about all controls and risk management efforts require a secure IT environment to be effective, there is a growing interdependence between effective IT governance and everything else connected with enterprise GRC.

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Topics: Big Data, Performance Management, Predictive Analytics, Customer Experience, Governance, GRC, Operational Performance Management (OPM), Management, Analytics, Business Performance Management (BPM), compliance, finance, Financial Performance Management (FPM), Risk, financial risk management, IT Risk Management, Sarbanes Oxley, SOX

Using Maturity Assessments to Improve Performance

Posted by Robert Kugel on Oct 30, 2012 11:04:07 AM

The idea of devising and using maturity assessments to improve business performance has been a staple of management, functional and strategic consultants for decades. It’s based on two unassailable principles. One is the general assertion that companies differ in their ability to do anything along a range from nonexistent to advanced. The second is that at any time it’s possible for a knowledgeable individual to construct a scale of competence for some business function from least to most mature based on the important characteristics about how an organization designs and executes that function. Using maturity scales is a handy way for executives and managers to size up where they lie on a continuum of capabilities and an easy way to define the steps necessary for improvement. Maturity assessments have the advantage of being straightforward, but there’s the danger that they can be overly simplistic.

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Topics: Performance Management, Social Media, Customer Experience, Governance, Operational Performance Management (OPM), Business Analytics, Business Collaboration, Business Intelligence, Cloud Computing, Governance, Risk & Compliance (GRC), Operational Intelligence, Business Performance Management (BPM), Customer Performance Management (CPM), Financial Performance Management (FPM), Information Applications (IA), Information Management (IM), IT Performance Management (ITPM), Sales Performance Management (SPM), Supply Chain Performance Management (SCPM), Workforce Performance Management (WPM), benchmark, FPM

Encountering New Bottlenecks with Oracle’s Breakthrough Technology

Posted by Robert Kugel on Oct 3, 2012 11:43:24 AM

Two key themes that emerged from Larry Ellison’s Sunday night keynote at this year’s Oracle OpenWorld were faster processing speed and cheaper storage. An underlying purpose to these themes was to assert the importance of Oracle’s strategic vertical integration of hardware and software with the acquisitions of Sun. I try to view technology keynotes like this from the perspective of a practical business user. Advancements such of these are important because enhancing the performance and cost-effectiveness of IT infrastructure can drive substantially improved business capabilities. As I’ve noted in the past, the ability to rapidly process large amounts of data provides business users with significant new capabilities in areas such as complex event processing, social media analytics and the ability to analyze unstructured or semi-structured data. In planning, it has the potential to change how companies perform a wide range of analytics-driven processes, especially in areas such as planning, budgeting and forecasting. It makes it feasible to more fully explore the impact of different courses of action, because rather than having to wait hours or days for answers to questions that start with “What happens if we…” the answers come back in seconds. Review and planning sessions can focus more on what’s next rather than rehashing history.

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Topics: Big Data, Customer Experience, executive, Business Analytics, Data Management, In-Memory Computing, Information Management, Business Performance Management (BPM), Business Process Management, Data, Financial Performance Management (FPM), IT Performance Management (ITPM), FPM

Midsize Companies Find ERP in the Cloud Increasingly Attractive

Posted by Robert Kugel on Aug 23, 2012 11:55:22 AM

Midsize businesses “pay” for their use of entry-level accounting systems by not having the essential information they need readily available and by using up valuable time that could be better spent generating business, finding issues or responding to opportunities sooner or simply enhancing the efficiency of the organization. Nevertheless, the transition from an entry-level accounting package such as QuickBooks to an on-premises system can be daunting for companies whose entry-level software no longer addresses their needs. Usually, the shortcomings start off as minor annoyances for companies that have between 100 and 500 employees and grow over time, and usually the pain grows with the number of employees and the volume and complexity of the underlying business. As business volumes expand and complexity grows, entry-level accounting systems are increasingly less able to support the underlying business. Yet finance executives usually don’t want to migrate to a new system until their old software threatens the orderly management of the business or becomes an overwhelming burden on finance operations. I know this firsthand, since not all that long ago I worked at a company where the CFO thought his biggest IT challenge was finding spare parts for the ancient Burroughs mainframe on which our financial system ran.

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Topics: Customer Experience, ERP, Office of Finance, end-to-end, finance cloud, Cloud Computing, Business Performance Management (BPM), Business Process Management, CFO, finance, Financial Performance Management (FPM), Sales Performance Management (SPM), accounting software, business process execution, financial systems, FPM

Put a Smile in Your Last Mile of Finance

Posted by Robert Kugel on Aug 15, 2012 12:08:06 PM

People used to use the phrase “the last mile” solely to refer to a condemned prisoner’s path to execution. Then the telecommunications industry picked it up to describe that part of a circuit between a major trunk line and a subscriber. Later still a defunct software company, Movaris (now part of Trintech), used the phrase in an analogy to refer to the set of activities that take place between when a company closes its books and the point where it finishes its external reporting activities, such as disclosing periodic earnings and financial conditions to investors or filing financial statements with regulators or lenders. It was an attempt to focus attention on the need to automate and better coordinate the multiple, disparate but interconnected threads that have to be orchestrated to complete the external reporting tasks accurately and on time. Personally, I’ve never cared for the phrase being used in this context; there are really multiple “last miles,” with multiple and sometimes overlapping destinations. I prefer “the close–to-report cycle” because it’s more precise in its description, and because rather than pointing to finality, “cycle” defines it for what it is – a repetitive periodic activity. And because it is periodic and repetitive, it benefits from process optimization and automation, which can substantially reduce the effort required to complete a cycle and alleviate the stress certain departments often feel as deadlines loom.

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Topics: Customer Experience, Governance, GRC, Office of Finance, Reporting, audit, close, Consolidation, Controller, XBRL, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), FPM, SEC

Companies Need Unified Approach to GRC for IT

Posted by Robert Kugel on Jul 12, 2012 11:55:22 AM

One of the most important trends in business over the past 20 years has been the broadening use of information technology to manage and support activities. In the early decades of business computing, companies developed islands of automation for largely numeric functions such as billing, inventory management and accounting. Each ran on a proprietary system and engaged the time of a relative handful of employees. Today, just about everyone works with an IT system for at least some of their operational or administrative tasks. They rely on these systems to support many of their daily routines, from recording transactions to using analytics to provide alerts, insights and decision support.

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Topics: Big Data, Performance Management, Predictive Analytics, Customer Experience, Governance, GRC, Operational Performance Management (OPM), Management, Analytics, Business Intelligence, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), compliance, finance, Financial Performance Management (FPM), IT Performance Management (ITPM), Risk, financial risk management, IT Risk Management

Operational Risk Management Is a New Imperative

Posted by Robert Kugel on Jun 29, 2012 12:36:45 PM

Risk has always been an integral part of business, but our recent Governance, Risk and Compliance (GRC) benchmark research shows that companies deal with risk with varying degrees of effectiveness – especially operational risk. A majority of companies lag in their overall GRC maturity, as I covered in a recent blog post. Operational risk management should be of greater interest to executives today because they can have greater control of it than before. The expansion of IT systems to automate and support most business processes has made it easier than ever to measure, monitor and report on what’s going on in a company. It’s now practical to expand the scope of operational risk management and improve companies’ effectiveness in handling risk events when they occur.

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Topics: Big Data, Performance Management, Predictive Analytics, Customer Experience, Governance, GRC, Operational Performance Management (OPM), Management, Analytics, Business Analytics, Business Collaboration, Business Intelligence, Governance, Risk & Compliance (GRC), Operational Intelligence, Business Performance Management (BPM), compliance, Customer Performance Management (CPM), finance, Financial Performance Management (FPM), Information Applications (IA), Information Management (IM), IT Performance Management (ITPM), Risk, Sales Performance Management (SPM), Supply Chain Performance Management (SCPM), Workforce Performance Management (WPM), financial risk management

Companies Are Lagging in GRC Maturity

Posted by Robert Kugel on Jun 7, 2012 10:51:48 AM

Ventana Research recently completed benchmark research on governance, risk and compliance (GRC), three business activities that are naturally linked. Although managing them requires separate and sometimes very different processes, on the whole these activities affect each other: Effective corporate governance ensures compliances with laws, regulations and company policies, and without governance, there’s no way to control risk. Separately or considered together, managing governance, risk and compliance is increasingly important.

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Topics: Big Data, Customer Experience, Governance, GRC, Operational Performance Management (OPM), Management, Business Analytics, Business Collaboration, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), compliance, Financial Performance Management (FPM), Information Management (IM), IT Performance Management (ITPM), Risk, Workforce Performance Management (WPM), financial risk management

JDA’s Revenue Recognition Issues Have Lessons for Finance

Posted by Robert Kugel on May 11, 2012 9:58:59 AM

JDA Software is an established vendor of (among other categories) accounting software for the retail sector. So it is a bit ironic that the company is in the process of restating its earnings for 2008 through 2010 because of revenue recognition practices that led it to book some revenue sooner than it should have. The issue centers on certain transactions the company linked to service agreements and license revenue. As well, in 2009 and 2010 some of its license contracts included a clause protecting customers if certain products were discontinued, which can be construed as promising a future deliverable that would have required a delay in recognizing some or all revenue from those license contracts. Also, JDA is re-evaluating vendor-specific objective evidence (VSOE) for its Cloud Services in 2008 through 2010 to determine whether it met the appropriate requirements to recognize revenue at the start of those contracts; otherwise revenue would have to be prorated over the life of the contract. For a public company, any accounting restatement is serious, and JDA’s stock price has declined since the start of the year, but this seems to be due more to a fourth-quarter 2011 revenue shortfall relative to expectations and a downward revision in earnings expectations than to the restatement. The changes it is likely to make are more optics than substance, which accounts for the muted response from the market.

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Topics: Performance Management, Customer Experience, Human Capital Management, Office of Finance, end-to-end, IFRS, JDA Software, Business Analytics, Governance, Risk & Compliance (GRC), Financial Performance Management (FPM), GAAP