Oracle-built COMPAS Points to Shareholder Value for First Union

With more than 80 acquisitions since 1985 and 15 million clients being served by 2,200 financial service centers, First Union encountered a problemcommon to many fast-growing companies-an inability to accurately track profitability across the organization.

This made it difficult to meet business goals such as determining how different segments within First Union are contributing or not contributing to shareholder value, said Beth Gibson, senior vice president of profitability measurement at Charlotte, N.C.-based First Union. The bank also wanted "more discipline around our capital allocation process and around the way we allocate our resources," she said.

First Union determined the best way to accomplish these tasks was to install an integrated platform for reporting profitability by organization, product and customer. "We wanted a single source for profitability information throughout First Union that was comprehensive with financial integrity," Gibson said.

But integrating such a platform is no easy task, especially in an organization that's seen its assets skyrocket from $16.6 billion in 1985 to more than $254 billion today. Indeed, as First Union acquired banks, it came to have multiple information systems. "There was no one consistent platform throughout the organization. Some things had been inherited from other organizations we merged with," said Gibson.

So in 1998, Gibson's group set out to build an integrated system that allowed the bank to pull disparate information from across all levels. The system had to be credible, consistent, provide controls and be able to reconcile data. "We wanted to spend very little time reconciling numbers that were different from one internal organization to another," said Gibson.

Flexibility was also a key criterion, especially when it came to fund transfer pricing and risk capital attribution. Few vendors can provide an integrated environment from account to products to organization, noted Gibson.

The bank turned to Oracle to help build a cost measurement and profitability analysis system called COMPAS, which gives executives broad access to financial information across the entire organization. Oracle was selected for its experience in delivering profitability analysis solutions.

The system calculates customer account level profitability for more than 15 million accounts, plus captures and analyzes transactional volumes and statistical customer data, processing more than 35 million records each month. The end result: a better understanding of what drives profit. "We can take the data and stratify it in a way that not only lets you see the end result of the profitability, but gives you tremendous insight into what's driving that profitability. We're always striving to make that data actionable," said Gibson.

"One of the huge benefits of this for First Union," she added, "is a much more in-depth understanding of what it costs us to service our accounts, make the sales and to track where the costs are going in a disciplined way."

COMPAS went live in January for the February reporting period. Although the launch wasn't error-free, "we've been able to overcome almost any technical challenge that presented itself," said Gibson, who declined to put a price tag on the project.

In addition to technical difficulties, COMPAS also had to navigate a host of perceived and real operational hurdles. For example, there was concern the system could not process vast amounts of data in time to meet First Union's board and quarterly reporting schedules. But this hasn't been a problem. "We've been pleasantly surprised...with the speed of processing," said Gibson.

Then there was the challenge of training people to use COMPAS. "Financial information is part of every organization and to change the way that information is looked at, analyzed and delivered requires a lot of education and training," Gibson said.

Yet another challenge was deciding on new methodologies and cost redesign. "There are many steps before you actually implement the software," Gibson said, adding that a steering committee was established to foster best practices for managing financial information, "to make sure we got the cart before the horse."

It helped, Gibson noted, that the members of the profitability measurement group-many of whom had joined First Union from other organizations-were experts in the area.

---

FAST FACTS

Institution

First Union Corporation

assets

$254 billion

business challenge

To build an enterprise-wide cost measurement and profitability analysis system.

solution

Oracle Financial Services Applications

KEY QUOTE

"One of the huge benefits of this for First Union is a much more in-depth understanding of what it costs us to service our accounts and to track where the costs are going in a disciplined way."