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Welcome to my nightmare

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13th May 2008
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Photo of Martin PotkinsMartin Potkins, financial controller with Resolution, was given the task of teaching some of the UK's largest life assurance firms how to use a 21st century consolidated financial system - all in six months.

It has been a busy two years for Martin Potkins since he took on the role of group financial controller at Resolution. On joining he was summoned to see the group finance director and given the brief of introducing a technology system for financial management and statistical reporting across the whole group.

"It was a case of this is what we need, here's the ideal format and this is your timetable, now off you go," recalls Potkins.

For some finance directors this might sound like a relatively straight-forward exercise, but this was Resolution. The group, led by Clive Cowdrey, was formed in 2004 with an eye on the UK's 'zombie sector', the growing pool of UK closed funds which insurers were keen to get rid of.

Cowdrey and Resolution went trawling through the UK's life assurance industry like a Spanish fishing fleet.

It started reeling in companies, and not just minnows. First on the line was Swiss Life, then it merged with the Britannic Group in a £1.8bn deal in 2005. Royal & Sun Alliance and the entire UK and offshore life businesses of Abbey National followed, after an abortive attempt to buy Standard Life.

"The problem was that everyone had their own system and to be honest where we were consolidated in reporting it was on Excel spreadsheets," admits Potkins. The board knew that as the company in the elite FTSE 100 division, this would no longer suffice.

"The interim 2006 accounts were from spreadsheets - it worked, but demonstrating to the auditors that all the inter-company balances netted out was tough."

"The interim 2006 accounts were from spreadsheets - it worked, but demonstrating to the auditors that all the inter-company balances netted out was tough and we were reliant on individuals pulling it all together," he says. For future analyst presentations to investment banks and asset management houses, the home-spun feel of Excel would not do. Then there was the increasing burden of accounting and regulatory compliance.

Demonstrating that numbers were complete in the accounts and balances depended on getting a highly disciplined way of tracking versions and maintaining a reporting format across the group. "Knowing which version you had was difficult, any changes or updates made had to be told to all the parties in the process or you could be working off different sets of numbers," he explains.

The actuarial nature of the businesses Resolution had acquired, had a habit of looking backwards to past figures, rather than forecasting future effects. "If we changed gilt yields to see the impact on the businesses, it wasn't possible to do using the old system or at least it was implausibly labour intensive," says Potkins.

Short time-frame influences options

So having joined in early 2006, the brief demanded something up and running by the year-end, a feat that no UK government department has managed. He began the process by listing eight products that could provide a company-wide integrated financial reporting package.

"The criteria we listed were quite straight-forward. Speed out of the box was one and since we started in July aiming for year-end, that cut the options to three companies – Cognos, Hyperion and Cartesis. Other factors were cost and quality, obviously," summarises Martin Potkins.

"I do have to say that given an unlimited time to implement, I might have gone a different route."

In the end the choice was made to go with Cognos which, according to Potkins had 95% of the functionality of Hyperion and beat Oracle in the time stakes. "I do have to say that given an unlimited time to implement, I might have gone a different route," he admits, adding that he still thought the implementation so far had been well done by Cognos.

Choice was one thing, but fully implementing the application to specification and to brief would prove another matter. "So initially it has to be a working tool across an insurance industry with all the arcane rules and formats it requires, but it has to have embedded the capability for forecasting and planning," describes Potkins. The forecasting of financial performance was for three years into the implementation.

By the end of 2007 the business intelligence datamine was about 80% there. "Developing it proved to be quite a challenge and not as straight-forward as I was led to believe, but now we're seeing measured enhancements but without all the bells and whistles for management information," explains Potkins. The extravagance of claim he says he can live with and that in spite of everything the Cognos team worked hard on pulling it all together.

Paradoxically and in spite of all the work, he does not think that the board has noticed a lot of change in the way information is presented. "That'll come with time as we can dig into the figures but the reality is that while the reports remain a challenge we can do them faster. We have the time to open a window and ask 'what does that actually mean?'" he says.

Getting staff on-board

But the board was fully behind the new system and that was crucial in rolling it out across the group. "There were difficulties in selling the system to some parts of the group and it wasn't a breeze," relates Potkins. "The Abbey people had seen two or three ownership changes in five years and were able to deal with change in a pragmatic way and they just wanted to know what the data requirements were and to be provided with training."

Elsewhere in the group it was a different matter with staff asking why should they change and the old way had always worked, hadn't it? "It could be tough and there was complexity in the process of introducing the system and getting it up and running, but I could show benefits to staff too," he says.

He found the system had been developed to be intuitive and introducing training days and a helpline, initially ran by Cognos, started pulling the moaners into line. As the system got into its stride, he found many of the sceptics marvelling at what it allowed them to do and with much less pressure and a substantial reduction of operational risk.

Impressive improvements

"The improvements were impressive, we could consolidate figures for each of the divisions in half a day at most – it used to be a week," he reveals. This, he says, will give departments and the central office time in the future to dig behind the figures when the BI system is fully functioning. For the future, with the system operating from a central server, it also meant any new acquisitions could be integrated in a plug-and-play way.

"The thing is that it works and allows us to share figures and data directly with the FSA and auditors," Potkins points out. But away from issues like cost of multiple licences for multiple systems in the group (in his research he found bits of Oracle, SAP, Walker and JD Edwards applications), the most crucial part of the implementation was having the board behind the development.

"Such a project definitely requires a top-down approach and has to be seen as a strategic move for the group as a whole," concludes Potkins.

The sting in the tail for him has been perhaps the financial transparency developed by the new system. Its clarified reporting system certainly made it easier for the latest deal: Resolution was bought out by Pearl, its long-time rival in the market. There is no news as to whether the system will be retained or ditched in favour of the new parent's approach.

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