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The path to finance transformation: enlightenment in the back office

By Max Drannikov | October 28, 2021

Max Drannikov shares his views on the role of finance transformation in easing the pressure on actuarial and finance teams and systems, and how it can save money in the longer term.
Insurance Consulting and Technology
Insurer Solutions|IFRS 17 Solutions

Insurers around the world typically have more to do in less time to meet regulatory and financial reporting obligations and to undertake the modelling requirements they entail. Max Drannikov, Senior Director, focusing on Business Process Excellence at Willis Towers Watson shares his views on the role of finance transformation in easing the pressure on actuarial and finance teams and systems, and how it can save money in the longer term. The firm’s recent discussion with Finance Leaders at Manulife, including CFO, Phil Witherington and Chief Actuary, Steve Finch, highlighted many shared views on finance transformation, which are included below as examples of how finance teams can approach transformation.

So, what exactly is finance transformation, and how is it conceptualised for insurers grappling with the issues described above?

Finance transformation is a program of work to manage complex finance and actuarial change. Within it, all aspects of the operating model - process, technology, data, organisational design and governance – flow out of the business strategy and vision, all the way to solution testing and deployment.

Why are business processes and business process automation important?

Organisations need to treat their business processes as a corporate asset, just like any other asset. Therefore, if insurers are going to transform and enhance the value of that asset, they’ll need a recognised process taxonomy running through the parts of the business that contribute to the overall objective. On one level, the taxonomy defines business functions and key business areas when you are in the strategy and vision phase. On another, it provides detailed workflows for each high-level process that will make up the detailed system design and build phase. This detail is also essential to help identify where automation can make a difference, by saving time, saving repetitive effort and – ultimately – money. There’s also the potential for a large impact on roles and job satisfaction for people released from certain recurring, manual tasks.

At Manulife, the global finance and actuarial vision to establish a highly impactful, datacentric and decision-driven global team, and transformation efforts align with the company’s strategic priorities. Its key objectives and drivers of transformation include playing a proactive role in managing the business with one source of truth, timely information, forward-looking estimates and opportunity analysis, and increasing efficiency to drive effective business decisions to progress on its strategic priorities.

What are the implications of finance transformation on business systems architecture?

The aim here should be to match finance and actuarial architecture to the future capabilities the systems need to deliver to the business. Unfortunately, many insurers’ IT departments jump straight into a specific technology or a provider before the business needs are fully understood and a strategy set. More often than not, these programs go off track because there is a massive disconnect between the various stakeholders. That’s another reason why a holistic business integration approach must be at the core of any transformation program.

A holistic business integration approach must be at the core of any transformation program.”

Within their projects, Manulife embraces the agile way of working, so that benefits are achieved faster and there is a greater ability to course correct design decisions throughout the programme.

Manulife’s substantial investments in infrastructure enable highly effective processes, enhanced data and systems that produce quality financial packages, consistent straight-through processing, and comprehensive training and data governance. Specifically, the finance team is leveraging technology to build a comprehensive management system framework that institutionalizes growth, efficiency and build capabilities to support proactive management of the business with actionable data and insights, including forecasting and other business-oriented outcomes.

How to deal with data?

Many insurers still have a suboptimal data management approach and processes. For example, customer-facing parts of the business operate separate data infrastructure from the back-office functions (such as finance and actuarial), and data is frequently not shared or even necessarily consistent between them. Data is a very topical area at the moment, in the context of the IFRS 17 reporting. Meeting this new accounting standard requires a complex and transformative program of work, and demands a robust data management capability. The true transformative value of data comes not just from what data you have, but also having a well-established data governance capability, effective data monitoring and control.

Ideally, firms are striving to achieve straight through data processing from policy admin systems to their consolidated group results. Often, data governance gets overlooked, resulting in a lot of reconciliation issues and inevitable so called ‘true ups’: high level, plug-in financial journal entries that are required to mask the underlying data issues. An approach that is unlikely to be tolerated in the industry in the longer term. The concept of data lineage was introduced as part of the Basel Accords after the banking crisis, and the regulators expect the banks to adhere to this practice. There is anecdotal evidence that insurance regulators will expect the same adherence to the data lineage principles in the not-too-distant future.

Investments in data and system infrastructure have positioned Manulife well to be able to leverage finance transformation for upcoming regulatory changes. The impact of IFRS 17 is broad and far-reaching and includes significant changes to Manulife’s financial reporting and KPIs, as well as accounting, actuarial and technology processes. Navigating these changes requires strong collaboration at all levels, and with stakeholders across the company. In the true spirit of getting it done together, the IFRS 17 program has been structured to ensure that leaders from key areas of Manulife’s business participate in decision making, and directly oversee the program's progress. A centralized program team works hand-in-hand with about 25 specialized workstream teams from accounting, actuarial, reinsurance, finance, investments, risk, and other business areas, to lead their IFRS 17 implementation.

What about cloud-hosted solutions?

Should we do it ourselves or use third-party offerings? There’s no hard and fast rule, but cloud definitely has to be considered when looking for an optimal balance between better, cheaper and faster business solutions.

Cloud definitely has to be considered when looking for an optimal balance between better, cheaper and faster business solutions.”

Specific to the actuarial function, Manulife’s Valuation System Transformation (VST) program was a global digital initiative where actuarial models and data moved to a cloud platform on Azure. This resulted in automated processes, faster processing times and scalable compute and storage resources. All key functional components for the future vision were established and the best-in-class software was chosen from a combination of third-party vendors and Manulife’s in-house solutions, with an aim to continue identifying manual processes while building capabilities and tools with consistent guiding principles and objectives.

What are the potential stumbling blocks in delivering finance transformation?

One of the common delivery problems is a so called ‘Big Bang’ delivery approach, when each stage of the program often takes many months if not years! Aside from that, common pain points include systems limitations, data quality, lack of clarity in roles and responsibilities, and overcoming a prevailing business culture of “this is how we do it here”. Whatever the actual or perceived difficulties though, remember we live in a very different world right now, where agile methods of delivery are commonplace, both from the software and the business perspective. We certainly adopt this approach in developing our own software at Willis Towers Watson and in our client delivery work.

At Manulife, transformation initiatives are driven through a central finance transformation committee. The company ensures it has strong collaboration and partnerships with key stakeholders, aligned on the objectives, deliverables progress, and prioritization of initiatives.

With an Agile way of working, Manulife pivots through roadblocks more efficiently, with flexibility and speed. Collaboration and partnerships with other functions within the company, such as technology, ensure key initiatives include consistent, foundational digital structures, capabilities and governance.

To date there has been full alignment between Willis Towers Watson’s views on how to deliver successful finance and actuarial transformation, and Manulife’s vision and implementation. And the team at Willis Towers Watson eagerly await news of Manulife’s ongoing progress and their new success stories.


Senior Director, Insurance Consulting and Technology

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