IASA 86TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

Transforming FP&A: Combining Process Redesign & Technology to Deliver Insights

Session 602

The Hanover Insurance Group (THG) is undergoing a finance transformation within their organization initially

focused in FP&A

THG is dependent on extensive, manual Excel spreadsheets and fragmented data sources to perform critical

business functions

There has historically been a limited investment in infrastructure and back office systems

THG has invested in the Oracle EPM and BI set of tools support the business functions

Three key threads that have been identified; Segment P&L Reporting, Financial Planning and Forecasting, and

Expense Planning and Forecasting.

Preview of challenges • Inefficient process, Segment P&L & Planning process

development time lengthy

• Modest accuracy realized to date

• Lack of transparency of key business information to management

• Analysis activities secondary to development & consolidation of

results

• Lack of enabling technology and data architecture to empower

the FP&A team functions

Process Technology

Organization Data & Information

Project Overview

Current State Architecture and Data Flows

• Number of Processes - decreases the

overall flexibility of the solution

• Process Complexity - causes inability

to leverage more strategic data sources

• Limited Analytical Capability - heavy

reliance on Microsoft Access and Excel

for reporting and analysis

• Data Manipulation - Majority of

analysts time is spent on data

transformation and validation

• Data Complexity - underlying

complexity results in an environment

that does not provide transparency

Opportunity to simplify the business process, better align data sources

and improve reporting, planning and analytic capabilities

Expense Planning

Segment P&L

Financial Planning

Project Goal

THG’s goal is to address identified deficiencies with the current financial and expense planning, forecasting and

reporting processes by designing and delivering improved capabilities while leveraging new enabling technology.

These new applications will provide immediate benefits to deliver on the vision outlined by the FP&A organization.

Project Objectives

• Improve efficiency and development time for Segment P&L by 50%

• Reduce planning cycle time by 50% across Personal and Commercial lines

• Increase Planning and Forecasting accuracy to within +/- 5% across Personal and Commercial lines

• Provide visibility and transparency of key business information to management

• Improve the allocation process

• Provide visibility to understand key outcomes and why they occurred

• The solution will be flexible to model and integrate acquisitions

• The FP&A team is empowered and leverages the enabling technology and applies it to their business functions

Goals and Objectives

Objective: Design and deliver iterative solutions that provide immediate benefits, minimize risk for implementation success, and that

are flexible to support ongoing enhancements

1 Segment P&L Reporting

2 Financial Planning and

Forecasting

3 Expense Planning and

Forecasting

4 Reporting and Analysis

5 Chaucer

Deliver improved transparency and control of

Segment P&L information, validate

methodologies and improve financial

controls

Goals

Improved efficiency reducing development

time by 50%, eliminate key-man reliance,

alignment control standards

Scope

Improve underwriting planning capabilities,

harmonizing methodologies and tools where

appropriate. Scope includes P&L, key

operating metrics, balance sheet and cash

flow statements

Shorten planning cycle-time by 50% and

improve transparency of information.

Improve accuracy of plans/forecasts to within

+/- 5%

Stable, efficient and actionable expense

planning capability. Focus will include an

aligned vision for expense management

Shorten expense planning timeline to 3

weeks (excluding review). Remove

allocation pain points. Improve expense

process integration

Work Stream

Drill-down and drill-through ad hoc analysis

capabilities. Right Information, Right

Person, Right Way, Right Time.

Harmonized reporting strategy

Enable integrated reporting framework

supported by ad hoc analysis flexibility,

linked to key business decisions (e.g. scorecard, dashboard, and KPIs)

To be determined after review of current processes and alignment

of targeted future state capabilities

Work Streams

15,938,688

14,384

237

108

92

85

14

6

Number of records in Hyperion

Number of development team hours

Defects Resolved

Business Rules

Adjustment Accounts in FINPLAN

Requirements Workshops

Dimensions

Planning/Essbase Applications

Six

Applications

Designed,

Built and

Deployed

within an 8

Month

timeframe

User Rollout 75

Project by the Numbers

Workstream Delivery

Date

Highlights of Deliverables

Original Scope Additional Value Added

Segment P&L • Hyperion Essbase reporting application

• Simplified Segment allocation logic (assignment

logic performed in data staging layer)

• GAAP and STAT reporting

• Detailed P&L account build-up

• Standard reporting and ad hoc analysis, final plans

and forecasts stored for actual/plan reporting

Region/Branch P&L capability and Chaucer

Potentially supports external financial

reporting

Added free capacity up to 40% of FP&A

resources related to reporting and planning

Data cube of meaningful information for

decentralized use across organization

Expanded CL available-to-renew and in force

premium data with new driver methodology

Full P&L planning capability for Technology

Enhanced plan methodology for PL losses

Financial

Planning

Workforce /

Expense

Planning

Expense

Allocations

PL 9/23

CL 11/6

PL 9/23

CL 11/6

Plan 9/23

Enhancements

delivered 11/6

Plan 11/6

Actuals planned

for a Feb 14

delivery

Data Staging /

Sync Layer

• Hyperion Planning application

• Full driver based premium and loss methodology

• Data feeds from Segment P&L and Expense Alloc

• Standard reporting and ad hoc analysis

• Hyperion Planning applications (2)

• Employee level planning

• Detailed account level direct expense planning for

non-employee related expense categories

• Standard reporting and ad hoc analysis

Time saving plan / forecast seeding logic for

non-employee related expense accounts

Enhanced transfer logic to streamline

employee level planning

Billing assignment logic improving Allocations

performance

• Hyperion Planning application (1)

• Segment/LOB/Geographic allocation logic

• Claims allocation

• Direct expense assignments

• Improved reporting transparency; standard

reporting and ad hoc analysis

Two applications for plan / actual,

respectively, to support varying detail

Streamlined customer billing logic simplifies

allocation methodology

• Data layer to insulate the Hyperion application from

future data source changes

Delivered revised scope, moving Segment

assignment logic to the Segment P&L

application

11/10

What’s Been Delivered ?

Planning

Data Source Data Integration Analytical Layer Presentation Layer

FinPlan ExpPlan

FDR

Other

Data Sync

ET

L Oracle | Hyperion

Financial

Reporting

Smart View

Orchid

Hyp

erio

n Lo

ad R

ules

/ O

utlin

e lo

ad U

tility

Planning

Templates

Wor

kspa

ce

WrkForce Alloc EDW

SegPL

DRM

Alloc

Rpt

Solution Architecture

Strategic Shifts

Transparency

Simplification

Process Improvement

Data Alignment

Advanced Analytics

Enabling Technology

From … To …

Limited visibility, lack of understanding of key P&L development metrics. Tactical discussion focused on the

process & reconciliation

Business has full visibility & ownership to allocated & calculated costs. Foster strategic discussions

Multi-level, layered allocations with an overly complex process

Clear, simplified allocation methodology that is aligned to value driven business discussions

Data stored in multiple systems, databases and spreadsheets with numerous permutations

Data to support financial processes is organized, complete and structured to align to business needs

Excel based solution, leveraging legacy systems that create process complexity

Best of breed technology enables flexibility and scalability for future planning and analysis

Process fragmentation, the number of processes, and manual intervention has created inefficiencies

Linear process flows supported by automation and more robust calculation flows increases accuracy, timeliness and

efficiency

Existing reporting environment provides limited functionality to drive timely business insight

Robust reporting and analysis capabilities that provides business rapid insight

Culture Data gathering Data analysis driven organization. Finance leveraged as

trusted business advisors

Realized Solution Benefits

Process

Efficiencies

and

Automation

Planning

Accuracy

Planning and

Analysis

Level of Detail

Allocation

Methodology

Transparency

Budget

Accountability

Application

Flexibility

• Significantly reduced the number of steps in

the planning process

• Automated highly leveraged processes while

providing “checks” within the overall process

• Solution leverages metadata management

tools, automated application builds, and

dynamic calculations, forms, and reports

• Lower level of detail than what

was available in the prior

solution

• Segment level available for

management reporting

• Accuracy of allocations

• Streamlined the allocation

methodology

• Aligned actual and plan

allocation methodology

• Reduced the number of

allocation steps

• Transformed the planning

process across the company

• Process is repeatable and

produces consistent results

• Highly leverages a driver-

based planning model

• Budget owners were heavily

leveraged during the design,

build, and test of the

application

• Increased visibility to data and

processes

Process Efficiencies and Automation Segment P&L – Process Transformation

Future State: 7 Steps - 4 Automated (57%)

Monthly

Maintenance

Activities

Load Manual

Adjustments

Load Staging

Data to

Essbase

Load Source

Data to Staging

Area

Load Expense

Plan &

Financial Plan

data to Essbase

Calculate and

Aggregate Data

Administrator

Validates Data

Availability

Automated Process Manual Intervention

Current State: 53 Steps - 6 Automated (9%)

Planning and Analysis Level of Detail

Ability to plan and report on a

full Income Statement by:

• Segment

• Line of Business

• Risk State

• Branch

Customer Dimension: Ability to distribute expenses within the organization based on an internal

customer for more accurate expense allocations

Data & Automated reporting at a Segment Level

Branch & Risk State expense data available at a granular level

The additional level of detail provides insight and visibility to key performance drivers and allows

for detailed analytics

Allocation Methodology Transparency

Provides transparency and visibility to the underlying allocation logic, data, and specific steps

throughout the allocation process

Reduced the number of allocation steps from thousands to ~200

Consistent methodology across Plan & Actual Allocations

2014 Future Years

Phase II

Specilaty Lines

Chaucer

Mobilization

Stabilize Technology & Enhance Reporting & Analysis Leading Practice Points of View

Program Goal:

Future Stages

Strategic Financial Modeling

Hyperion Strategic Finance

Rolling Forecast

Hyperion Planning/Essbase

Jan Feb Mar April May Jun Q3 Q4 2015 & Beyond

Consolidation & Close

Hyperion Financial Management

Enhance & Grow

Develop and act upon a long-term strategy and approach to support the Finance organization by

providing improved availability and transparency of information to enable better decision making

Actual Allocations

Financial Statement Integration

Hyperion Planning/Essbase

Extended Support

Phase III

Chaucer integration

Continued Platform

Optimization

Financial Planning & Reporting Roadmap

Keys to Success

• Sourcing data is the main priority

• Focus on historical data than on plan data

• Plan for data movement across applications

Data Integration

• Consistent meeting schedule

• Weekly status

• Project leadership reviews

• BAM Sessions

Project Rhythm

• Communicate early and often

• Consistent communication across the team

Communication

• Design and development decisions focused on scope

• Culture of ‘give and take’ between the business and development team

Project Discipline

• Create a collaborative environment

• Business and IT working together to build a solution

• One team, one goal

Team Integration

IASA 86TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

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