CFOs within the insurance industry have the staff and resources to be successfully meeting financial reporting deadlines, but they have little time for anything else.
According to accounting firm WeiserMazars, which recently released its 2011 Insurance Finance Leadership Study, finance executives are so overwhelmed with new reporting requirements from international, state and local regulators, that they no longer have the bandwidth to help the CEO guide the business.
Finance's primary goal has long been to ensure timely and accurate reporting and filings, but a growing demand has been to deliver in-depth financial analysis. The WeiserMazars study suggests that more than 70 percent of respondents are tied to traditional reporting, rather than strategic or analytical activities.
"With all the anticipation for the regulatory rules that are coming out, it's sucking up a lot of resources," says Wayne Locke, a partner in the insurance practice group of WeiserMazars. "You look at the insurance industry right now and it's highly regulated. You have gap reporting, internal manager's reporting, plus regulatory requirements. There's no time for any kind of analysis or to look for trends."
Among the report's other findings is that leaders are managing many legal entities and multiple ledgers, which creates significant complexity in traditional processes; U.S. companies are stalled waiting for further directives on IFRS and Solvency II; insurance lags other industries in leveraging alternative sourcing solutions; and 87 percent of companies still rely on Excel in their planning, budgeting and other performance management processes.
Finding a more equitable ratio between reporting and strategic analysis requires two resources that are increasingly scarce for many Finance leaders: time and capital. Shortening cycle times of traditional reporting to create more capacity for value-added analysis isn't easily accomplished. Boosting staffing levels or finding better talent is difficult to come by in today's era of tightened budgets.
The report suggests an alternative solution for many Finance leaders is to develop strong business cases for process and technology improvement initiatives that can reduce both cycle times and headcount, such as transactional processing.
Another key finding from the study that IFRS and Solvency II remain highly pertinent topics. While respondents agreed that more will need to be done to prepare for global reporting and compliance, U.S. companies remain stalled waiting for further directives.
"They know they're going to eventually have to do it," says Locke. "But until they get more guidance and it becomes a mandate, companies are watching from the sidelines. At best, they've done high-level analysis of its impact – such as the type of data they have to capture – but they're not going anywhere near the execution or planning phases yet."
Perhaps one of the most surprising elements in the report was that 87 percent of respondents indicated a reliance on manual spread sheets. According to the research, this mainly is the result of performance gaps in the primary financial data architecture, coupled with the challenge of managing complex financial processes across multiple ledgers, geographies and business units leads many teams to perform key tasks with Excel.
For all its convenience, Excel has a knack for becoming the gateway to a quick-fix addiction within Finance, suggests WeiserMazars, that causes costly long-term deficiencies, including recurring manual efforts that balloon close cycle times, mistaking financials due to multiple versions of the truth flowing across units, and allowing marginal resources to becoming critical ones because they own a particular model.
"Excel is the duct tape of today," says Locke. "We're patching pipes, but we're not really fixing financial and operational infrastructure. We're concerned that the amount of investment to support that growth in infrastructure, whether it be technology or operationally or financial, may be a little bit behind. And it may be a bit too large."