Driver Based Planning

Executive View

Top Level Objectives

The current economic downturn is placing incredible pressure on a bank's capital position. Historically high levels of bad credit and increasing regulatory constraints mean that banks have to be particularly careful in choosing the types of business in which they deploy their capital. Banks are distracted with addressing the current credit situation which makes finding and keeping profitable customers even more difficult when there is so much uncertainty about the economy.

Driver based planning can highlight how a bank's capital is being used and how that is expected to change over time. It can allow the bank to quickly assess the financial impact of decisions on where to invest and also how the current difficult credit situation will affect profits in the future.

By understanding the underlying business which drives future performance, Rolta provides a driver based planning solution to these complex issues which improves a banks profit.

Solution - Innovation

Rolta's solutions provide clarity and confidence in making and communicating decisions which will change a bank's performance. Bank executives are under increasing pressure from shareholders, customers and regulators to explain the decisions they make as to the type of business pursued and how that business will affect profits.

The Rolta solution has been developed specifically to address the planning challenges in financial services. Its planning models are designed for projecting the financial impact of changes in different types of loans, deposits and fees at a granular level.

Advantage - Insight

The challenges faced by banking executives are daunting. To manage effectively in this environment requires access to information that enables a deep and wide understanding of the products and services with the ability to project future performance. Rolta's solution delivers these capabilities through a better understanding of the source and quality of earnings. Transparency to portfolio analysis at a detailed level is achieved across the organization, thus removing barriers to intelligence that is often lock away in institutional data and system.

Benefit - Impact

The information delivered by Rolta's solutions enables a robust level of insight that is otherwise unavailable. Use of this insight drives management action that provides tangible impact to organizational performance. Various methods of achieving performance improvements can be realized.

Improved visibility and decision-making - with insight into the drivers of business, executives can easily determine each business line's contribution to profits and assess the impact of changes in the business environment.
Mitigate risk - reduces the risk of being unprepared for changing business conditions and provides the ability to respond quickly to movement in rates
Improved efficiency - reduce the time it takes the organization to prepare a plan, allowing more time for analyzing results
Improved regulatory compliance - with a better understanding of future capital requirements and one, automated source for capturing driver information, banks can improve compliance with Sarbanes Oxley and other industry regulations
Improved efficiency and resource allocation - through the intelligence gained particularly from forecast modeling, management is able to plan for the use of resources appropriately. Whether it is capital and reserves, human resources or fixed assets, management is prepared to make the best decisions on the use of company resources to maximize profitability.

Management View

Business Objectives

The recent financial crisis has rapidly forced change on the business practices of the financial services industry. As the optimal business models are evaluated, an organization's need for information to support alternative analysis and decision has never been greater. The Rolta solutions help organizations with this need by delivering information in a meaningful way thus eliminating barriers of the past such as:

Not having enough or the right information about the bank's businesses to know what is improving profit and what is causing a drain on earnings
Too much time spent in the planning process on meaningless manual tasks due to lack of automation
Managers not understanding how financial market conditions can affect their business or managers inconsistently forecasting the impact

By employing our solutions a bank is able to change this dynamic of the past and deliver real value to the organization through:

Transformation of the planning process towards a useful exercise in providing deeper business insight into how current decisions will impact future results
Driving distributive ownership of financial results; With driver based planning, the business lines and departments can see how their operational plans change earnings, thus creating ownership and a sense of responsibility at the levels of the organization that can impact performance.
A single, rich solution that can be used by all planners and managers; This allows for quick updating when assumptions change, better understanding of why and how each business line is expected to perform as forecasted and consistency in business planning models according to defined business rules.

Solution

The Rolta driver based planning solution is designed to provide insight to an organization that exposes the drivers of success. Through this understanding an organization can react and plan for performance as quickly as the market changes. This challenge is met through the Rolta solution that provides:

A single source for corporate wide planning
The ability to quickly consolidate planning results
The ability to change global assumptions about future economic measures, such as interest rates
Planning models for loans, deposits and fees that combine the expected future run-off of business and its associated margins with new business and its profit impact
Pre-built planning models to meet unique calculation needs of banks
Cash flow intelligence that integrates concepts such as FTP, new volume, run-off and re-pricing into balance sheet forecasts
Balance Sheet and Income Statement linkage which greatly simplifies the process of margin planning

Approach

One of the underlying concepts of the Rolta solution is that elevating and exposing the drivers of performance across the organization will serve to increase awareness, ownership and decision making. This solution provides the foundation for these improvements. Sharing driver information generates a more meaningful understanding of planned results achieved by all stakeholders in the bank. This promotes a link between finance and the business lines towards a common goal.

Business Value

Driving the common understanding of the performance delivers gains in many ways. Not the least of which is allowing for more time to be spent on meaningful analysis, something that is a common complaint. These solutions allow business lines to get back to what they do best; address the needs of their customers, competing in the market and driving profitable growth rather than collecting data and crunching numbers.

Technical View

Technical Issues

Historically the technology of choice for planning in the industry has been spreadsheets. Most banks have some form of driver-based planning, but it is generally done on spreadsheets in some lines of business or departments. Largely this is a result of the need for the lines of business to customize a planning model. The Rolta solution solves this issue by configuring solutions packaged to the specific needs of the banking industry.

Unfortunately the spreadsheet solution ultimately fails for a variety of reasons such as consistency, scalability, flexibility, reporting constraints and integrity concerns. The major driver of these issues is that the spreadsheet solution results in a web of templates distributed throughout the organization. Control is often lost as users make modifications to customize the spreadsheets for their needs. Once distributed there is no consistency in assumptions and business models plus there is no transparency in how financial results are developed. Data integrity is jeopardized as users modify data. System maintenance becomes nearly impossible as simple changes often break the spreadsheet system.

Rolta's driver based system is centralized and modeled to address all the technology challenges. A centralized system delivers many benefits. Control of the system and data is returned to the administrator. There is one point of system maintenance so as business conditions drive model or assumption changes, they can be accomplished in one location. Application and data security are used to protect company data and maintain the integrity of the system. No more user modification of system models. Process management allow for systematic tracking and management of financial planning process.

Solution Components

The Rolta driver-based planning solutions are delivered through packaged software applications. These multi-tier solutions are designed to handle anywhere from small and mid-size organizations to large enterprise class deployments with hundreds of users. The major components consist of and ETL function, database layer, application layer and web layer that provides for easy access for reporting and ad hoc analysis.

Implementation

Rolta's implementations consists of sound systems development lifecycle methodologies supported by IT and business expertise of our consultants. This blend of knowledge is a characteristic of Rolta consultants who enable solution delivery where data and IT standards are combined with business functionality. The result is a deployment that satisfies users needs while promoting common data, business rule definitions, and IT standards of the organization.

How Does it Fit and Why is it Different?

The Rolta driver-based planning solution delivers the best of both worlds in regards to satisfying the business and technology challenges. The centralized system returns control back the organization as a whole. Planning methodologies, business rules and process management are all standardized to provide consistency and control. At the same time the system is nimble and flexible enough to allow for management of rapid business changes that are a given in today's markets.