Companies are increasingly organizing themselves as corporate groups with multiple subsidiaries, investments, and cooperative arrangements, all characterized by complex internal organizational structures. For a large corporate group like Siemens, management has to deal with a network of far more than 1,000 subsidiaries and investments. It’s not easy to get a handle on such a large network, especially because the flood of data from various sources only increases with every investment.
At the same time, companies are obligated to follow a variety of external guidelines, like International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) or regulations on transparency like the Sarbanes-Oxley Act that increase the amount of information that forms the basis of reports. To meet such requirements, currency, exactitude, and reliability are indispensable.
Investment management creates competitive advantages
To control a network of investments, it’s no longer enough for a corporate group to look at its corporate data in a quarterly or annual report and simply rely on key financial figures. Corporate groups need active portfolio optimization that can determine investment risks and respond to them with the appropriate countermeasures. Such optimization must also be aligned with a company’s strategic direction, so the basis of information must be expanded to include unstructured and heterogeneous data in addition to the structured data provided by the accounting department. The data includes operative figures like market trends or a warehouse report along with qualitative figures, for example, those that show how well goals have been reached in terms of employee fluctuation or on-site security.
That’s how investment controlling turns into investment management. Because the number of a company’s investments will probably grow over time, a management instrument becomes a decisive competitive advantage. Each new investment that a company makes exponentially increases the number of queries that various divisions in the enterprise make at regular intervals. And ad hoc queries, such as those needed for corporate decisions, increase the number even more. The complexity within the individual investment structures is also a challenge because each company has its own structure. Various forms of investments – direct and indirect investments and majority and minority holdings – make controlling and management that meets requirements absolutely necessary. Even today, many of these forms are mapped quarterly with consolidation – but not all of them. For example, the key financial figures of nonconsolidated companies do not automatically flow into reporting for the corporate group; they must be captured separately.
The increasing number of stakeholders constitutes another challenge. Internal departments (tax, legal, accounting, the board of directors, and investor relations) and external interest groups (market oversight authorities or financial authorities) require current and reliable information. But they demand different perspectives and specific details, which means that the data must be organized differently for each audience. Segment reporting as part of operative management combines various legal units like sales and profit for a specific product group. But a national view combines the contributions to profit from all product groups and types of investments.
Nothing works without uniform data
The need for IT support to create uniform data is obvious. Much of the data is already present in some form – most of it from legal consolidation. Investment management software must synchronize the existing data sources, seamlessly secure process chains and workflows, and enable flexible reporting for various groups of users.
A uniform data basis is the precondition for informed decision making and information that remains usable across various areas. A high-performance and mature data warehouse plays the main role here as a central point for data collection. Uniform data also requires a variable model for the data flow. The heterogeneity and variety of investments requires the greatest possible flexibility in data transport. For large quantities of data, users should be able to tap into existing systems automatically and have the option to capture information manually. Three approaches are available here:
- Integration with an automated interface
- An import function for extracted data
- Web interfaces to assist the manual capture of individual key figures
The last item is important when estimating risks related to the warehouse figures in the annual report. To determine this data, corporate groups query existing risks, such as delivery problems with a specific business partner, in their subsidiaries. This information cannot be captured with key financial figures, but affects the corporate parent nonetheless.
Seamless integration in the SAP landscape
Because most large companies use SAP products as the basis of their software, a solution for investment management should integrate seamlessly into an existing SAP landscape. Without an application that communicates easily with the consolidation solutions from SAP – the business consolidation functionality within SAP Strategic Enterprise Management (SAP SEM) and enterprise consolidation within SAP R/3 – a uniform and reliable basis of data cannot exist.
Seamless process chains and workflows avoid media breaks and enable the automatic documentation of business flows. For example, they allow users to trace who changes a given data record and when. Companies can thus fulfill guidelines on transparency more easily. High-performance software for investment management also guarantees quality control. Departments can capture modified data records in a decentralized manner, but only a workflow from the central office can trigger the related release.
Investment management software should also automatically transfer data from an ERP application and simultaneously regulate manipulation of that data. Sugarcoated sales figures are impossible when data flows directly from the accounting system into the final reports. If all transactions are documented in the system, who knew what when or changed something can be traced at any time. Operative improvements like regular updates result from standard software functions and guarantee legal security with up-to-date reporting requirements. Personalized user interfaces simplify the creation and viewing of queries even for casual users.
The software should use flexible reports to meet all types of individual requirements and enable specific views of the data. For example, if a subsidiary does not need all the key figures of the corporate group for its balance sheet, role- and authorization-based security helps personalize appropriate Web-based reports and analyses for specific audiences, creating added value for all users. It allows the financial officers to sign an annual report in good conscience because faithful processes and an active reporting system guarantee legal security.
High-quality data and low costs
The requirements of investment management software are high. An appropriate IT solution makes it easier for companies to control their investments and supports them with better data for making decisions. Central data storage and maintenance lower costs because the investment controller is freed from performing routine tasks. It also responds to the central premises: integration into the SAP landscape, particularly into SAP applications for consolidation, concentration on master data, and a uniform data basis.