Robert Kugel's Analyst Perspectives

Software Aims To Prevent Foreign Corrupt Practices

Posted by Robert Kugel on May 8, 2013 10:51:18 PM

In some parts of the world, bribing government officials is still considered a normal cost of doing business. Elsewhere there has been a growing trend over the past 40 years to make it illegal for a corporation to pay bribes. In the United States, Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977 in the wake of a succession of revelations of companies paying off government officials to secure arms deals or favorable tax treatment. More recently other governments have implemented anticorruption statutes. The U.K., for instance, enacted the strict Bribery Act in 2010 to replace increasingly ineffective statutes dating back to 1879. The purpose of these actions is to enable ethical and law-abiding companies to compete on a level playing field with those that are neither. A cynic might wonder about the real, functional difference between, say, Wal-Mart’s recent payments to officials in Mexico to accelerate approval of building permits and the practice in New York City of having to engage expediters to ensure timely sign-offs on construction approval documents. No matter – the latter is legal (it’s a domestic issue, after all) while the former is not.

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Topics: SAP, ERP, Governance, GRC, Operational Performance Management (OPM), bribery, Business Analytics, Governance, Risk & Compliance (GRC), IBM, Operational Intelligence, Oracle, Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), FPM, Oversight Systems

Investigate User-Friendly Spreadsheet Alternatives

Posted by Robert Kugel on Apr 18, 2013 10:11:35 AM

I’ve been using spreadsheets for more than 30 years. I consider this technology tool among the five most important advances in business management of the 20th century. Spreadsheets have revolutionized many aspects of running an organization. Yet as enthusiastic as I am about them, I know the limits of desktop spreadsheets and the price we pay if we fail to respect those limits. The essential problem arises when people use desktop spreadsheets for purposes beyond what they were originally designed to do. Desktop spreadsheets were designed to be a personal productivity tool, and they are good for prototyping models and creating analytics used in processes, performing one-off analyses using simple models and storing small amounts of data. They were not designed built to be used to manage or support repetitive, collaborative enterprise-wide processes. As a rule of thumb, when a spreadsheet is used by more than six people six or more times, it’s time to look for an alternative. Otherwise, errors and inconsistencies easily creep in and undermine the accuracy and value of important data.

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Topics: Office of Finance, Operational Performance Management (OPM), Reporting, enterprise spreadsheet, Analytics, Business Analytics, Business Intelligence, Governance, Risk & Compliance (GRC), Visualization, Business Performance Management (BPM), Customer Performance Management (CPM), Financial Performance Management (FPM), Information Applications (IA), Information Management (IM), Risk, Sales Performance Management (SPM), Supply Chain Performance Management (SCPM), Workforce Performance Management (WPM), benchmark, Financial Performance Management

How New Information Technology Will Transform Auditing

Posted by Robert Kugel on Apr 4, 2013 11:04:58 AM

A recent news release by Robert Half, a staffing company that specializes in accounting and finance personnel, covered what it sees as the most important attributes required for auditors in the 21st century. “7 Attributes of Highly Effective Internal Auditors” covers the people dimension of the profession and focuses on the non-technical requirements of the role, including relationship-building, teamwork, and diversity. No doubt these skills are a must for just about anybody working in a modern (Western) corporation. For me, though, the most important quality on the list is at the bottom: continuous learning. That’s because the role of internal and external auditors will be transformed radically by big data, in-memory processing and other advances in information technology that will make enterprise automated fraud discovery and mitigation a reality before the end of this decade.

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Topics: Fraud, Governance, GRC, Office of Finance, audit, Analytics, Business Analytics, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), compliance, Financial Performance Management (FPM), Infor, Risk, HANA, Oversight Systems

SAP’s New Fraud Management Analytical Application

Posted by Robert Kugel on Apr 2, 2013 11:20:35 AM

SAP recently announced its new Fraud Management analytic applications. Currently in “controlled” (limited) release, it’s a promising start for the product and a good example of the type of business process revolution that’s possible when companies can execute complex analytics on big data sets using in-memory and other advanced processing techniques. Over the next several years a wide swath of basic corporate processes will be transformed by the shift to in-memory processing and big data technology, two key foundational elements of my office of finance research agenda. HANA has been a consistent element of SAP’s product strategy and underlies many recent new releases, such as Business Suite on HANA.

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Topics: SAP, Fraud, Governance, GRC, Office of Finance, audit, Analytics, Business Analytics, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), compliance, Financial Performance Management (FPM), Risk, HANA

Public XBRL Vendors Should Go the Extra Mile

Posted by Robert Kugel on Mar 27, 2013 8:02:00 AM

This is annual report season, the time of year that a majority of European and North American corporations issue glossy paper documents aimed at investors, customers, suppliers, existing and prospective employees as well as the public at large. (Some countries have different conventions; in Japan, for instance, most companies are on a March fiscal year.) In reviewing some of the annual reports that are available on the Web, I was struck by the absence of advanced reporting technology used on investor web pages and in online annual reports of vendors of advanced reporting technology. (One notable exception is Microsoft, which uses Silverlight on its investor web pages.) Adobe Acrobat (introduced 20 years ago) is the presentation method of choice for the annual report. It would be great if publicly traded vendors that sell tools that automate the process of assembling investor documents (such as Exact SoftwareIBMInforSAP and Trintech) would demonstrate their value beyond simple compliance. These companies’ tools support and automate the processes that are part of what some call “the last mile of finance,” referring to their use in the final steps of a stream of activities that starts with closing the books and performing statutory financial consolidations and ends with publishing and filing financial documents to satisfy regulatory or contractual obligations. (I prefer to use the term “close-to-disclose cycle” because it’s a more accurate description.) These vendors should go the extra mile and redesign their investor sites to show how XBRL-tagged financial documents can be used to communicate more effectively with shareholders.

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Topics: Office of Finance, extended close, US-GAAP, XBRL, Analytics, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), financial reporting, SEC, Digital Technology

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

Happy Birthday XBRL

Posted by Robert Kugel on Feb 8, 2013 8:44:59 AM

To mark the fourth anniversary of the Securities and Exchange Commission’s (SEC) interactive data mandate, Columbia Business School (my alma mater) and its Center for Excellence in Accounting and Security Analysis (CEASA) published a review of the current state of eXtensible Business Reporting Language (XBRL) that notes the manifold issues that plague this promising technology. From its perspective, three key issues hamper greater use of XBRL. The first is the high error rate in the tagging process and the tendency of companies to use too many non-standard tags, both of which substantially reduce the usefulness of the data to practitioners. Second, they believe technologists, not regulators and accountants, should be more involved in developing software that makes it easier to consume XBRL-tagged data. Third, companies should spend more effort improving the quality of their data than on trying to kill the mandate.

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Topics: Office of Finance, extended close, US-GAAP, XBRL, Analytics, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, compliance, Financial Performance Management (FPM), financial reporting, SEC, Digital Technology

Vertex Enterprise Advances Tax Management

Posted by Robert Kugel on Feb 1, 2013 6:35:07 AM

Taxes – both indirect (sales or value added taxes, for example) and direct (income taxes) – are one the largest expense items on the corporate income statement. In recent years it has become common for large and even midsize companies to automate their indirect tax management process, but direct tax management has remained a bastion of manual processes built on a heap of desktop spreadsheets. In previous blog posts I discussed this issue and the role of the tax data warehouse as a necessary foundation for automating the direct tax process. Addressing an important need, Vertex is currently providing a limited release of its Enterprise offering, a single-platform approach to managing all types of taxes (direct and indirect) across the entire tax life cycle (from analysis through provisioning to audit defense) using a single data source.

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Topics: ERP, GRC, Office of Finance, audit, finance transformation, Tax, Analytics, Business Analytics, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), CFO, Financial Performance Management (FPM), Information Management (IM), Vertex, FPM

Hewlett Packard Charges Fraud at Autonomy– Lessons Learned?

Posted by Robert Kugel on Nov 23, 2012 11:13:52 AM

Many people enjoy mystery stories or crime thrillers; in the same vein of savoring the whodunnit and howdunnit, I like a good accounting scandal. My fascination with cooking the books started when I was young with the “great salad oil swindle”, which wound up causing losses in excess of $1 billion in today’s money and even threatened a Wall Street collapse. This disaster was averted by the assassination of President Kennedy, which kept markets closed on Monday, November 25, 1963, and gave the parties involved an extra day to resolve the matter. Nowadays I look forward to receiving FIRST, a compendium prepared by IBM’s Risk Analytics group of the previous month’s financial shenanigans. So, the recent Hewlett-Packard-Autonomy imbroglio fascinates me.

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Topics: Fraud, Governance, GRC, Office of Finance, audit, IFRS, Governance, Risk & Compliance (GRC), Business Performance Management (BPM), Financial Performance Management (FPM), Hewlett Packard, Meg Whitman, SEC

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