Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via Gartner is a registered trademark of Gartner, Inc. or its affiliates. Financial Governance FEI John Van Decker Research VP

The Scope of the CFO The CFO has responsibility over an organization's end-to-end financial management, including: -Managing financial transactions -Establishing performance management plans -Ensuring accuracy of financial processes and financial reporting Transactions Performance Governance

Technologies Supporting the CFO The array of technologies supporting the CFO is vast, with minimal integration. ERP is the most well- established of the technologies, but CPM is often treated as an afterthought/bolt-on. Financial governance is emerging as a market, segmenting GRC for the CFO. ERP PM, BI Financial Governance

Key Issues 1.Why is there a market direction toward financial governance? 2.What are the components of financial governance? 3.How do you take advantage of the developing financial governance market?

CPM Suites Market Has Matured Rapidly Significant consolidation occurred in the past year: -Hyperion was acquired by Oracle. -CorVu was acquired by Rocket Software. -Cartesis was acquired by Business Objects. -OutlookSoft was acquired by SAP. -Applix was acquired by Cognos. -Longview was acquired by Exact. -SAP acquired Business Objects. -IBM acquired Cognos. Increasingly, companies are looking for CPM outside of finance. BI and PM are evolving toward common platforms, and it is expected that BI and CPM will converge within the next three to five years. Source: "Magic Quadrant for CPM Suites, 2007" 19 December 2007 challengersleaders niche playersvisionaries completeness of vision ability to execute As of December 2007 Oracle Hyperion Cognos Business Objects SAP SAS Clarity Systems Exact Longview Lawson Software Microsoft Tagetik Rocket CorVu Board International Infor

Where Are People Today? Already UsingPlanned (<12 months)Considering (12-24 months) No PlansDon't Know

How Well Have CPM Applications Met Requirements? Far ExceededExceededMet Mostly MetDid Not MeetNot Answered

CPM Deployment Patterns CPM is dominated by financial reporting … … and finance drives the implementation.

Financial Governance Evolves From CPM … Business Intelligence and Performance Management Framework $1.5 billion market in 2006; 20% growth rate with large unaddressed market BP&F, scorecards, profitability modeling have proved valuable to improve performance management initiatives Financial consolidation and reporting, while they contribute to PM, address the accuracy, auditability and disclosure of external results Business Strategy People Process Analytic Applications BI Platforms Information Management Infrastructure Performance Management Budgeting, Planning and Forecasting Budgeting, Planning and Forecasting Profitability Modeling and Optimization Profitability Modeling and Optimization Scorecards Financial Consolidation Financial Consolidation Financial and Statutory Reporting Financial and Statutory Reporting

… and FG Is Adding Components From GRC Markets Market Category

The Enterprise GRC Platform Can Be a Starting Point for a Financial Governance Solution FG = The EGRC platform integrated with BI, financial apps. and controls automation Risk Management and Compliance Professionals Process Owners AuditorsBoard Executives Business Applications Business Intelligence Specialized GRC Applications Enterprise Content Management Controls Automation and Monitoring Enterprise GRC Platform Risk/Controls Matrix Policy Management Compliance Management Risk Management Audit Management Preventive Detective Corrective ContentManagementContentManagement CertificationCertification MetadataManagementMetadataManagement Collaboration&WorkflowCollaboration&Workflow AnalyticsAnalytics SurveySurvey VisualizationVisualization ReportingReporting PolicyMappingPolicyMapping Remediation Management IntegrationIntegration

FG — Emerging Market "GRC for the CFO" Parallel path for CPM, along with BI/PM and a subset of GRC market Includes applications that provide control, analysis, reconciliation and risk/compliance management Not a holistic market at present, but clearly developing Includes: -Financial consolidation -Intercompany transaction management -Reconciliation management -Financial controls and compliance -Financial close management ("the last mile of finance") -Access and segregation of duties controls -Financial risk management -Financial and audit analytics

Typical Flaws in Financial Reporting and Disclosure Processes -Lack of control in consolidated reporting processes Auditability -Disconnected budgeting systems -Lack of audit trail from stakeholder information to source data Data quality -Inconsistent financial and operational data Lack of visibility and transparency Overreliance on spreadsheets

FG Components — Financial Consolidation Best-Practice Approach Regional, financial consolidation system implementations with direct links to local GLs Shared dimensions (typically legal entity and account) between consolidation models Full visibility from group to BU to source data, plus local analysis capability Traditional Approach Single, central financial consolidation system Spreadsheet/flat-file transfer Time-consuming, labor-intensive No visibility from group to business units

FG Components Intercompany transaction management: -Post-ERP consolidation, ensuring that interentity transactions are accurate and meet approval, often at the voucher level Reconciliation management: -Ensure that monthly routine account reconciliations are managed and that exceptions are highlighted and handled Financial controls and compliance: -As required by SOX, document and access financial management controls, and communicate their status across enterprise

FG Components Financial close management: -Ensuring that the last mile of finance is managed and that all the close activities are completed Access controls/segregation of duties: -Ensuring that, in transactional and reporting processes, there is control over who has access and who contributes to and approves financial processes Financial risk management: -Documenting and accessing financial risks, including the use of strategy maps/scorecards to understand causal relationships between risk items/activities

FG Components Financial and audit analytics: -Integrated with BI and CPM stack -Aggregated financial and operational information -Results in front of those who need to know -Flash reporting prior to month-end -Details and OLAP -Identification of out-of-tolerance conditions and alerts -Segmentation of reporting into material/significant elements

Sourcing for Financial Governance — 2008 Market is developing. Best-of-breed applications attempt to target specific pain points. Some suite-based solutions are emerging. ERP vendors are beginning to accumulate many of the components in "Office of Finance." Organizations should choose point solutions where they can achieve pragmatic value to improve FG initiatives.

FG Examples CPM VendorsFG Specialists Financial Consolidations and Reporting All CPM vendorsNone Interentity Transaction Management ERP vendors (SAP, Oracle, Lawson) None Reconciliation ManagementMost offer intercompany reconciliations only Trintech, Movaris Financial Controls and Compliance ERP vendors (SAP, Oracle, Lawson) Some CPM vendors considering offerings Axentis, OpenPages, Paisley, BWise, MetricStream

FG Examples CPM VendorsFG Specialists Financial Close Management Oracle, SAP Some CPM vendors have limited offerings Movaris Access Controls, SODSAP, OracleApprova Financial Risk ManagementSAS, SAPAlgorithmics Financial AnalyticsCognos, SAP, Oracle,ACL

Sourcing for Financial Governance — 2012 Financial governance will have emerged as a critical management pillar of financial management applications. Much FG functionality will be consolidated in megavendor/ERP offerings. ERP vendors will combine CPM and EGRC platforms and add modules for financial governance, including modules from FG ISVs. Service providers will offer financial governance as part of financial BPO.

XBRL Continues Its Progress U.S. Securities and Exchange Commission September 2007 announcement: completion of all work on developing data tags for the entire system of U.S. GAAP Newly created "Office of Interactive Disclosure" SEC report is expected in spring 2008 which should lead to a course of action being laid out in the fall of 2008 Mandatory XBRL filing likely within 3 years Other Developments Deloitte Australia: Using XBRL to reduce costs of preparing tax and account returns Singapore: Mandated full or partial XBRL filing for financial statements ending on or after 30 April 2007 Belgium: Filing accounts in XBRL format possible from April 2007 onwards

RSS feed XBRL Brings Web 2.0 to Financial Reporting Managers are fed latest financial performance data as soon as it is available Key financial data for store or business unit based on GPS proximity Mashups of finance and other relevant information

Using CPM and BI to Improve Compliance Initiatives Aggregated financial and operational information Results in front of those who need to know Flash reporting prior to month-end Details and OLAP Identification of out-of-tolerance conditions and alerts Segmentation of reporting into material/significant elements

Recommendations (1) As FG emerges, understand how point solutions can add pragmatic value to reporting and control initiatives … … and how those point solutions are integrated into CPM and EGRC platforms. Develop a target architecture for FG within your enterprise. Understand how your ERP vendor is providing additional FG capabilities and if you can leverage these. Make FG an architectural consideration in any CPM and EGRC acquisition or BPO. Monitor the FG improvements from your CPM vendor.

Recommendations (2) Monitor market developments closely: -Consolidation will continue -Battle of the vendor road maps Balance tactical needs against longer-term vendor promises Consider smaller vendors alongside established names Plan for XBRL adoption within three years

New Gartner Research: CFO Special Report - Themes Four main themes: Managing corporate performance: How applications that support Corporate Performance Management (CPM) enable the CFO and finance function to understand the drivers of performance and deliver real strategic business value to the CEO and management team. Technology for finance: The technologies that will impact the way companies manage and report financial and management information, and why should CFOs care Governance & compliance: Where SOX went next and how emerging trends in financial governance will change the way CFOs ensure that financial information is free from material weaknesses. Finance organization and processes: How CFOs can optimize operating efficiency and realize cost savings in the finance function while delivering a higher quality of service

CFO Special Report Content