Experience Study: Creating a Central Subledger for Finance Transformation

Executive Summary

The challenges financial institutions face today are beyond the scope of any single software solution. Even the role of the finance organization itself is changing – from a reporting factory to the core business unit that generates, preserves, and delivers enterprise-wide strategic value. The need for analytical insights and compliance with ever-changing regulatory standards drives the modernization of finance organizations, in which the integration, consistency, transparency, and real-time access to financial data are fundaments¹.

The desired end state entails a high-performing and scalable infrastructure with a self-service platform for financial professionals and decision-makers. However, companies are challenged to understand how to enable such technology while integrating the business processes and aligning interests of various stakeholders². Moreover, they find it difficult to simply champion the importance of the data and its long-term value.

This study is based on the experience of implementing a financial subledger as a core component of the financial transformation of a large insurance company. The goal of the transformation was to establish a harmonized, “thin” general ledger, and to integrate disparate accounting applications into a single platform for financial reporting. However, establishing common, enterprise-wide finance-data definitions, while harmonizing data sources, soon proved to be the most challenging task.

Regardless of which goal is imperative for — enabling analytical insights or ensuring compliance with regulatory requirements — setting up a centralized financial subledger can be the crucial starting point. A financial subledger as a data gatekeeper for business-critical processes will accelerate the financial close cycles, relieve the immediate pain points, and enable a staggered approach to its further utilization. The business and IT should collaborate to prioritize future initiatives based on the financial benefits and operational improvements gained with the financial subledger. Promoting the adoption of the financial subledger’s capabilities while minimizing operational disruptions will maximize its value. By gradually moving the focus from the basic business-essential capabilities to the ones with greater, strategic financial impact, the financial subledger can become the driving force behind the finance modernization and transformation initiatives of insurance companies.

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1 van Wensveen M., Kennedy C., Strkalj Z., Chu S., Bousles A., Kakiuchi H. (2018) ‘Impacts of IFRS 171 van Wensveen M., Kennedy C., Strkalj Z., Chu S., Bousles A., Kakiuchi H. (2018) ‘Impacts of IFRS 17insurance contracts accounting standard’, EY, Available at: https://www.ey.com/Publication/vwLUAssets/eyimpact-of-ifrs-17-for-insurers/$FILE/EY-ifrs-17-global-dsp-considerations.pdf (Accessed: December 2018).

2 Adams M., de Haan R., Honour D., Maher B. Mariani M. (2017) ‘Finance, risk, and actuarialmodernization: The benefits of an integrated approach’, PWC, Available at https://www.pwc.com/us/en/industries/insurance/library/integrated-modernization.html (Accessed: December 2018).