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Processes and Finance Architectures for Financial Service Providers

Besides the impact that accounting and regulatory changes have on pure technical requirements, they almost always also have an impact on banks' finance processes. New requirements introduced by standard setters are usually, but not always – due to time pressure – implemented on time with optimal processes aligned to the organization as a whole. Furthermore, the constantly increasing and changing reporting requirements are a challenge for banks as they must have high-performing financial architectures that are also efficient in terms of their usage of time and resources. These structures should also support the bank's success over the long term and satisfy the economic and regulatory requirements of the Basel Committee on Banking Supervision as well as Standard BCBS 239.

Financial Processes at Banks and Financial Service Providers – Producing Results from Technical Requirements

Processes in general link technical requirements with the organization, the data, and systems. They have defined procedures that lead to recurring results such as reports, financial statements, and regulatory reports. This means that a process must typically be designed for each technical requirement or the requirement must also be integrated into a process, and changes in the requirements also usually entail changes in the process. The pure fact that a requirement is met or a desired result is achieved, such as the preparation of financial statements, does not necessarily mean that the process is perfectly designed.

  • Processes are often documented incompletely or even not at all, or the documentation is outdated. As long as all involved parties know what to do and nothing changes on the technical side, this is not usually a major problem. If process staff is absent at short notice or there is an organizational or technical change, this lack of documentation can become a risk and a cause of expenses. In finance processes, the requirements of the auditors must also be taken into account, since for their audit they need a complete overview of the processes and must be able to evaluate how they work.
  • A lack of controls in individual process steps or unnecessary manual activities also increase the process risk and reduce reliability or the timely delivery of the results. Integrating a sensible, internal control system (ICS) in processes is essential for a quick delivery of reliable results and a smooth check. The key factor is not the integration of as many ICS steps as possible, but rather the efficient use of the ICS in the right places. A reduction in manual activities usually simultaneously reduces the necessary control steps and increases process speed.

Efficient Finance Architectures – Possible Competitive Advantage

Besides the content requirements, the two most important determining factors for processes are data and systems. Furthermore, systems define possibilities for preparing individual analyses over the short term and efficiently making changes to the process. High-performing finance architectures can offer a competitive advantage for the bank or, on the contrary, represent a competitive disadvantage. In an ideal case, a good finance architecture allows for quick, flexible reporting that can be undertaken with the efficient usage of resources and simultaneously delivers reliable, decision-relevant data across various areas.

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 Andreas Huthmann Partner