CFOs focused on big data

Organizations have long understood that there is value in data but the data capture processes and technologies involved often overlap completely different departments. Tom Bogan of Adaptive Insights argues that the CFO is taking, or at least should be taking, an expanded role in this area. Since organizational risks and financial planning have very large data analysis needs this would strengthen those business needs. 

He references a 2016 report by Adaptive Insights that says, “76% of CFOs say they are currently tracking non-financial KPIs.” Organizations might also compare this information along with the KPMG Finance Benchmark Reports of 2015 and 2016 which show that many finance executives feel their organizations are not producing “insightful” information from the data. 

The article goes on to say, “Ultimately, CFOs need to embrace the role of “chief data officer” and elevate their focus from tracking, reporting, and static planning to continual gathering and prioritizing, ongoing management, and active planning.”

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What if flight hacking goes mainstream? 

‘Power Users’ in the consumer vacation travel market have known about ways to hack airline pricing for quite some time. But now, modern technology like Google flight search has made the process very easy. While vacation travelers are often very price conscious, travel procurement professionals can manage tens of millions of dollars in category spend. It stands to reason that as airline pricing strategies become even more complex then companies will also seek out technologies that better manage this complexity. Tnooz recently outlined a few of these enterprise travel ‘hacking’ aspects like controlling the user’s IP address or breaking group bookings into single people. 

While clever in theory, it creates a far larger hurdle in organization change management and end user training. At some point technology will identify and automate the end user’s decision process by directing them along the appropriate path. Until then these strategies are best kept for the travel agencies within your managed travel programs of large enterprises. Those in the SMB or the lower end of LME adopt some of these practices, especially since they don’t run the risk of upsetting established vendor contracts. 

New 2017 Kroll Report on Bribery and Corruption – Reputation Risks

Kroll Report: only 37% of CFOs maintain active role in developing their anti-bribery and corruption programs. 

Big investments into anti bribery programs is showing a decrease in company’s perceived ABC regulatory risks (Anti Bribery & Corruption) but as the very title of the report indicates the reputational risk to a firm still remain high. A company’s reputation can be at risk even if all practical compliance was met and it is this risk that will be top of mind among the board of directors. Goldman Sachs estimated that reputational risks far outweighed the regulatory aspects. 

As Matt Kelly from Radical Compliance points out, “boards now see compliance risk as a component of the reputation harm they want to avoid at all cost” 

Find the 2017 ABC Kroll Report here

PwC reports – 20 years inside the mind of a CEO

What’s on the mind of 1,379 CEOs around the world? This is the question PwC seeks to answer in their new report. Here are few highlights 

  • 38% are very confident in their company’s 12-month revenue growth prospects
  • 55% are looking for M&A opportunities 
  • 52% plan to increase headcount, but can’t find people with the right skills

    The Enterprise Spend perspective is that revenue growth will lead to more consumption and the related spending. Establishing effective cost controls is much easier during a time of slow consumption. Having that foundation will make the period of growth easier to manage and the data coming out will help future CEOs better plan and predict. 

    New EU Rules Present Risks for US Businesses 

    In just a few more months on May 25th, The European Union General Data Protection Regulation (EU GDPR) will go into effect and put at risk every organization that processes data of EU citizens regardless of that organization’s size, industry, and location. 

    Fines for violations can be up to 4% of the company’s global turnover. 

    The European Commission defines personal data as, “any information relating to an individual, whether it relates to his or her private, professional or public life. It can be anything from a name, a home address, a photo, an email address, bank details, posts on social networking websites, medical information, or a computer’s IP address.”

    The intention of the new GDPR rule was to unify individual data rules across the European Union, especially regarding social networks. But corporations store all sorts of personal data about employees. Think of the HR feeds going into T&E tools like Concur or being sent over to global travel agencies. These will soon all be at risk. 

    This will result in substantial costs of implementation. So CFOs and CIOs should make sure they have planned these costs into the budgets. 

    Bribery: The Hidden Risk Inside Business Travel Programs

    The following article was published as a 2017 industry trend to watch by the Business Travel News.

    We all know that travel can create tremendous value for organizations. It promotes business relationships, helps companies establish new markets and brings key people closest to the customer – traits that are all essential for having a competitive edge in today’s dynamic market.

    But, despite many company’s best intentions, some business trips are hiding a darker side.  Bad actors within some organizations use corporate travel and expenses to win business at all cost, even if it means bribery and corruption.

    Per the World Bank, “about $1 trillion is paid each year in bribes around the world.” Due to this, governments and trade groups have created hundreds of laws, rules and regulations on bribery and corruption. The US Foreign Corrupt Practices Act (FCPA) is the most well-known.

    The FCPA allows for “reasonable and bona fide expenditures, such as travel and lodging expenses” in limited situations like demonstrations or site visits. However, using travel to hide bribes is a common theme in FCPA investigations. I am personally aware of nine different FCPA cases in 2016 that specifically involved fraudulent trips; two involved domestic travel.

    Despite the global complexity of all these rules governing business expenses, it takes only a single employee for an entire company to be at great financial and reputational risk (see September 2015 Yates Memo). Posting a travel policy that bans bribery isn’t enough. In a case from December 2016 the Securities & Exchange Commission (SEC) stated a company “failed to prevent such payments or detect red flags” despite having a clear policy in place.  

    Failure comes at a hefty cost. Government fines can reach millions of dollars, in addition to the disgorgement of ‘illicit profits.’ One large global retailer has already spent $612 million on internal FCPA compliance costs since 2013, and is now tracking towards a daily cost of $1M.  These are costs the shareholders certainly don’t welcome!  But, worse, it’s the reputational risk that costs the most – this impact can reach 9% of a firm’s total profits for a period over three years’ according to reports from Goldman Sachs and the Economist.

    The risk looks even higher in 2017. Bribery ‘tips’ increased 62% last year, in large part to million dollar rewards from Dodd-Frank’s whistleblower protections. To investigate the influx of leads the FBI launched 3 new “International Corruption Squads” and the Department of Justice doubled the number of corruption prosecutors.

    Domestic travel programs face bribery and corruption risks as well.  In the U.S., 36 states have laws specifically prohibiting commercial bribery, while the Travel Act makes violations of those local state laws a federal crime if the bribery involved travel. The commercial bribery aspect of the Travel Act is a major part of the ongoing case against the world football association FIFA because commercial bribes in connection to New York business trips violated state penal codes. Last month news broke of domestic corruption involving a New York state pension fund manager and a domestic trip to Utah.

    The complexity and global scope of the problem needs a cross-functional approach. A holistic tactic brings together compliance, finance, travel, analytics and even sales functions from within a company. Putting more spend under management and digitally transforming manual processes is critical to establishing what the SEC calls “program effectiveness.” This means fully automating everywhere, not just primary systems in major markets.

    Bribery is a risk that carries a heavy cost. Effectively managing this risk can create a competitive advantage for your organization’s growth.

    Isaac Bowman is a principal at Infosys Consulting, and runs extensive work for his clients in the areas of travel and expense strategy, administration and governance.  He can be reached on LinkedIn or Twitter @isaacbowman where he posts daily on topics of enterprise spend management.

    Coupa Acquires Spend360 to Increase Enterprise Visibility

    This acquisition brings machine learning and artificial intelligence to the Coupa platform to help companies better analyze the large sets of complex spend data. Pilots of the new solution should begin later this year. 

    From the Coupa Press Release: 

    Coupa Software (NASDAQ:COUP), a leader in cloud-based spend management, today announced that it has acquired substantially all of the assets of Spend360 International Ltd. to help companies digitize antiquated processes for data classification. Based outside London, Spend360 is an analytics solution that uses deep machine learning and artificial intelligence to structure and cleanse data in a format that finance and procurement can actually use.

    With the addition of Spend360, Coupa will help transform outdated data classification processes that rely on humans for accuracy with a modern, digitized system that uses innovative technologies to classify data more quickly and accurately. Embedding Spend360 intelligence in the Coupa platform will make it easier for businesses to reduce risks in their supplier base, grow savings opportunities, and increase efficiency and agility.

    Together, Coupa and Spend360 will comprise a data warehouse that has, to date, processed or analyzed more than a total of $1.3 trillion in spend – and counting – with a global category-level benchmarking and analytic capability that is competitively distinguished.

    “Today, Coupa’s acquisition of Spend360 provides an invaluable offering to customers and partners. Tomorrow, it will drive an artificial intelligence and machine-learning capability to mine all the spend going through Coupa’s platform, guiding users to better decisions,” said Jason Busch, Founder of Spend Matters and Azul Partners. “When the dust settles from the announcement, customers will love this deal and competitors will cringe. Spend360 has quietly emerged as the gold standard for spend analysis classification and our recent analysis showed that they are the vendor to beat in that market.”

    Spend360 increases the accuracy and precision of data classification while also decreasing the time and effort required to gain insights into spend management analysis. For its market leadership, Spend360 was one of only 22 organizations in the United Kingdom (UK) to win a coveted “Innovate UK” grant in 2015.

    “When we created Spend360, we set out to automate the complex task of accurately classifying business spend data using the power of deep learning technology,” said Paddy Lawton, founder of Spend360. “Coupa gives us an opportunity to share our innovations with more customers and even larger data sets with a focus on network insights. We’re thrilled to be a part of the team.”

    Understanding how money is spent is critical for the effective operation of any business. Yet, many businesses still lack clear visibility into spend. This obscurity is often caused by items such as disparate systems across the globe, employees spending outside of hard-to-use systems, and spend occurring in different languages or currencies. Coupa’s cloud platform for business spending is a full solution that drives high adoption from employees and suppliers and provides power applications for expert users across finance, procurement, and accounts payable.

    “Spend360’s innovations around machine learning and artificial intelligence have dramatically improved results for their customers and will take Coupa to the next level,” said Rob Bernshteyn, CEO of Coupa. “Embedding Spend360 into our unified platform is a perfect way for us to increase value for customers through insights from their own spend data. However, it is the power of our customers’ combined spend, or the network effect, that will give them even more business value over time.”

    Coupa expects the capabilities from Spend360 to be made available to select Coupa customers later this year. As part of the acquisition, the Spend360 team has joined Coupa to continue developing forward-thinking approaches for data classification and predictive insights. This team will be instrumental in helping Coupa drive even more value for its customers. The transaction closed at the end of December 2016 and financial terms were not disclosed. Coupa is not updating its guidance for its fourth quarter or fiscal year ending January 31, 2017, which it provided on December 5, 2016. The acquisition is not expected to have a material impact on Coupa’s results of operations or financial condition for its fourth quarter or fiscal year ending January 31, 2017.