Using Your ERP System to Weather the Bailout Economy

By Sharon Ward, Green Beacon Solutions

Most financial services companies rely on information in their enterprise resource planning (ERP) systems for financial reporting, yet the regulations and reporting requirements resulting from government bailouts are too new to have been built in to existing ERP systems. It's likely that regulations will take effect quickly once the final bailout bills take shape. Whether a bank is looking for a new ERP system or continues to use an existing application, there are five important characteristics that an ERP system will need to allow organizations to react quickly to new regulations.1. A flexible infrastructure: Some ERP systems utilize older architectures that make it difficult to change data structures or to present real-time information in accessible formats. This can make compliance reporting a real chore as every change in the rules may require a great deal of programming effort to ensure compliance. In some cases, real-time reporting may never be achieved.

If existing ERP applications are running on older generation architecture, companies should investigate whether it's possible to upgrade to a newer version that will allow them to respond more rapidly to compliance concerns. Financial services companies evaluating new ERP systems should take pains to investigate the system's infrastructure. Many companies consider the choice of IT architecture a minor point, best left in the hands of IT alone. On the contrary, this is actually one of the most strategic decisions a company can make since it affects the day-to-day transactional speed, business process flexibility, user interface, training requirements, cost of maintenance and the architecture's flexibility to adapt as business processes change.

2. Simulation capabilities: As the financial services industry continues to implode, companies need to be positioned to take advantage of unexpected opportunities. One possible opportunity is the option to acquire new companies, lines of business, facilities or equipment. Each of these potential opportunities may have a profound effect on the financial results of the acquiring company. It will be essential to have the ability to run simulations to gauge the possible results before in-depth investigation of acquisitions or divestitures. Guidelines may provide for different ways of reporting transactions and results, and simulations allow a company to easily make the right decision for optimum results.

3. Multi-entity financials: When they are finalized, different lines of business may be eligible for varying types of aid. If the financial results for each line of business can be easily segregated, it can make qualifying for bailouts simpler. It can also prevent burdening a business entity with reporting requirements for bailouts in which they didn't actually participate simply because the financials couldn't be reported separately. Multi-company financials also enable a company to more easily assess the results of potential acquisitions or divestitures as discussed in the preceding paragraph.

Financial services organizations with existing ERP systems should investigate whether multi-company financials are available to them if they are not already utilizing them. Those looking for a new ERP system should ensure that the chosen system includes multi-company financials. Care should be taken during the implementation process to ensure that no steps are taken that preclude easily turning this capability on if it is not needed up front.

4. Compliance Workbench: This tool is a recent addition to some ERP applications that allows a company to monitor its employees' compliance with regulatory requirements. This type of functionality was introduced in response to Sarbanes-Oxley and Basel II, but properly designed workbenches will be equally as useful when responding to bailout regulations.

A properly designed compliance workbench allows a company to define the business processes subject to regulations and ensure that sign-offs and other important steps are mandatory. Variations from accepted processes require override approvals and are captured for later reporting. Companies looking for new ERP systems should add this functionality requirement to the short list of strategic requirements.

5. User definable workflows: Working hand-in-hand with the compliance workbench, user definable workflows allow a company to quickly and easily adapt the existing business processes to whatever has been defined by the bailout committee. Workflows can also ensure that employees adhere to the procedures and flag exceptions for review and approval. Workflows can cut down on the amount of retraining employees require to ensure compliance since the proper procedures are inherent to the workflow.

There's no way to predict exactly what the final bailouts will look like, but by adopting these techniques, banks can help ensure that their ERP systems are ready to respond to whatever the regulations require.

Sharon Ward is director of software strategy with Boston-based Green Beacon Solutions, a provider of business strategy and product implementation services for CRM, ERP and marketing automation.