How to improve traditional financial habits and management habits

Dr. Li Shuhe, Director of China Financial Industry of p>SAP:

In the Internet age, China's four modernizations (agriculture, industry, national defense and scientific and technological modernization) are inseparable from informationization. Similarly, the modernization of service industry is inseparable from informationization. The modernization of financial services is inseparable from informatization, because it is the largest data (and risk) intensive industry. The information in the financial industry is highly intensive and asymmetric, so risk management and management modernization are highly dependent on informationization!

The financial industry is the largest data and risk-intensive industry, and it is the most important service industry opened to the outside world after China's entry into WTO. In order to be in line with international standards in technology, business and management, many financial enterprises in China (including banks, insurance and securities) are considering or have already selected and implemented international standard application software. Although their respective situations are different, most financial enterprises encounter the following seven common problems in the selection or implementation of application software: First, go to the system first, or do business process reengineering (BPR) first? Second, when local customs are inconsistent with international practice, who will rely on whom? Third, do you choose an enterprise-level suite or use multiple department-level software to combine? Fourth, what should be served first, and then what? Fifth, is it development-oriented or configuration-oriented? Sixth, who will lead the project, the business department or the IT department? Seventh, how much money and time will it cost? What are the rewards and risks? Apart from the second question, these are also the main problems that many financial enterprises in the world have encountered in the past decade or two and now. The first three questions mainly involve software selection, including consulting or selecting first, adopting domestic software or international software, and choosing enterprise-level software or department-level software. The fourth to sixth questions mainly involve software implementation or project management, including the management of time (schedule), content (task) and resources (personnel). The last question is the return on investment or project evaluation, that is, whether to invest in or how big the project is.

first, go to the system first, or do business process reengineering (BPR) first? A lot of experience at home and abroad has proved that the most effective way is parallelism, that is, according to the current situation, needs and software functions of enterprises, practical business processes are designed and implemented. In other words, BPR is completed in the process of software implementation.

In the past, many enterprises made separate BPR out of thin air, and as a result, the business process blueprint in the BPR report was drawn too far and too beautiful, like the moon in the sky, beyond our reach! This problem is more serious in China at present, because there is a big gap between China and the world in management practice. Although we now have the most open mind in human history, the content of management reform involves changes in management thoughts, management processes and management systems at the enterprise level, and changes in (personal) understanding, habits and interests at the employee level. These can only change gradually, not suddenly. About enterprise management ideas and personal cognitive habits, some of them can be solidified in the computer system, and the other part can be clearly defined in the business rules and procedures. Most of the rest are intangible and play a key role (such as intentionally or unintentionally inputting wrong data alone or in collusion, which can have serious consequences), but they cannot be forced to change overnight. The change of cognition is limited by the study and change of "conscious thinking", while the change of habit is limited by the study and change of "unconscious emotion". The former can be realized through ordinary learning and training (depending on the classroom and books), while the latter needs to be realized through repeated practical activities training; Both are influenced by interests. Interestingly, both "idea" and "software" belong to "indefinite durable goods" and will not be depreciated, so they should be adopted as soon as possible to reduce TCO and improve ROI. At the same time, it is necessary to constantly update ideas and software and upgrade versions. The international leading standard application software embodies advanced management ideas and best business practices. Through its implementation, training and application, management change and process improvement can be realized. The most effective way is to carry out unified planning and step-by-step implementation around the overall solution provided by the most mature international standard application software (industry or enterprise level). Consulting and planning out of thin air can only be air to air!

second, when local customs are inconsistent with international practice, who will rely on whom? In most cases, if we can approach international best practices, we should approach them step by step.

why? This is because the western economic and financial markets have accumulated mature management experience for more than a hundred years, while our market economy is being established, and "market finance" has just started. Without market, there is no market management; Without a mature market, there is no mature market management, including management experience, ideas, models and algorithms. This determines the upper limit of the management level contained in domestic software at present. On the other hand, due to the Internet, WTO and Basel II, the business and regulatory norms of the global banking industry are increasingly converging. Therefore, in order to participate in and become a qualified competitor in the international financial market, we must abide by the international rules of the game and absorb international best practices. Due to the gradual change principle analyzed in the first question, the integration should be carried out step by step. Compared with Europe and America, our financial products, prices and channels are very single and simple. What we have now has long existed abroad, but many foreign countries have it, and we don't have it now (such as derivatives and asset securitization). Therefore, there is no need to worry that international standard application software can not meet the existing domestic business needs. At the same time, our financial processes, regulations and institutions are very extensive and imperfect; We need to learn from it boldly, gradually improve it and finally improve it. This is a problem that domestic software can't solve in a short time. On the other hand, not all international software can be successfully adopted in China due to local specific language, regulations, habits and support requirements. The most important thing is to choose "software that is highly internationalized and fully localized". A high degree of internationalization requires all kinds of practices in Europe, North America and Asia-Pacific, while full localization requires all four aspects: local language, local laws and regulations, local business practices and local service support. Take the HR system of SAP as an example. It supports the personnel system and wage accounting system of more than 4 countries in Europe, America and Asia-Pacific. It has a simplified Chinese version in China, which conforms to the national and local labor laws and regulations, and meets the wage and welfare accounting and political and economic personnel management system in China. In addition, SAP has dozens of local support and HR localization development and implementation teams in Shanghai and Beijing, and SAP HR has been successfully adopted by more than 4 users in China.

third, do you choose an enterprise-level suite or use multiple department-level software to combine? The international trend is: if possible, choose one or a few enterprise-level suite suppliers, as few as possible. No matter whether you choose one or more, you should make unified planning and realize it step by step.

why? Because in the current computer industry, the standardization of application software is far less than that of hardware, database and operating system, a large number of data interfaces are usually needed between application software from different manufacturers, and more importantly, they contain different industry business processes, rules and terms. Therefore, with the increase of suppliers and historical systems, the difficulty of data interface, project management and system maintenance will increase geometrically. In the end, we have to replace, transform and integrate a large number of old systems at a great cost, just like the demolition of old houses. Just like housing or urban construction, unified planning and phased implementation are very necessary for the construction of management system (no matter how many manufacturers you choose). Because all parts of the information system are highly complementary and centralized management is the general trend, unified planning is very necessary. Because enterprise resources and employees' learning ability are limited, it takes time for employees to change their understanding and habits, and the redistribution of benefits will encounter resistance, so it should be realized in stages, including step by step promotion in functional scope and geographical scope. The general practice is to choose a consulting service company after determining the software supplier, which will implement and train in the head office (head office) and a branch (branch), and then the consulting company and users will promote it in the whole bank (company). There is a concern that there may be a monopoly problem if only one application software supplier is selected. In fact, this problem is not as serious as it seems. For example, aren't all of us using Microsoft's Windows and Office suites (including Word, Excel, Power Point and Access)? Why don't we worry about Microsoft monopoly? Because there are existing or potential Microsoft competitors. If the price or service of Microsoft is too unreasonable, it will lose a large number of existing customers, and it will be difficult to attract new customers, and will eventually be replaced by existing or potential competitors. What is important is that as long as there are potential competitors, there will be no real monopoly. In fact, Gates often reminds himself and his employees that Microsoft may only be 18 months away from collapse. If you really need to change suppliers one day, it is much easier to replace an old system than to replace multiple sets. There are three types of enterprise application software systems in the market: division-level, entraprise-level, and industry-level or enterprise-level application software. For example, Siebel only provides management software CRM for customer service departments, which belongs to department-level software; PeopleSoft and Oracle provide ERP and CRM, but do not provide the core business system of the bank, which belongs to enterprise-level software; SAP provides core business systems of ERP, CRM, banking and insurance at the same time, and supports Basel II, which belongs to industry-level software. Industry-level solutions in the Internet era not only provide business processing within a single enterprise, but also provide business transaction realization across enterprises. This is collaborative e-commerce; It is achieved by establishing standardized industry business processes (rules and terms) and e-commerce trading platforms. Transactions include intra-industry transactions such as inter-bank (inter-bank) transactions and inter-bank (inter-industry) transactions. The core business system of a bank A needs to be connected with the internal financial system of the bank, with the core business system of other banks B (indirectly), and with the financial system of enterprise C (whose customer is A). If A and B adopt systems such as SAP core banking and C adopt systems such as SAP finance, then A, B and C can realize full real-time integration and achieve straight-through process (STP). This is a great advantage of industry-level standard software.

fourth, what should be served first, and then what? The mainstream in the world is to adopt advanced standard application software to update and transform the management (analysis) system first, and then gradually replace the core business (operation) system. The process of application system standardization is generally divided into three stages: business support system standardization, analysis system standardization and processing system standardization. First, we usually start from the standardization of business support systems, namely ERP, and establish or update standardized business support systems, including the management of people, finance and materials, namely human resource management, financial management and fixed assets (and procurement) management. Most of them start with the establishment of standardized financial systems (including financial accounting and management accounting). Secondly, on the basis of ERP, establish a standardized financial analysis system, including profitability analysis (such as FTP), risk analysis (such as ALM) and performance (value) analysis (such as EVA). Most of them start with profitability analysis. Third, establish or update centralized standardized customer information and relationship management system, standardized deposit system and loan system, standardized fund transaction and payment system and other business processing systems. Because the human resource management system is relatively independent from the business line, it can be advanced or postponed.

the reason behind this is what I call the "four lines" and "three standards" of modern financial management. Four lines refer to customer line, product line, employee line and financial line. The management is concerned about how much each customer, each product and each employee earns (or spends), that is, the contribution of the first three lines to the fourth line. The three criteria refer to (accounting) profit, (comprehensive) performance and (economic) value. The goals that shareholders care about are: the company's current profit, future potential and value in the market. The company's current profit is the accounting profit realized by the company's past performance now. The future potential of the company depends on the situation of the four lines, such as customer satisfaction and market share, product innovation and business processing ability, employee training and organizational development, cash flow and investment return and risk. How to turn future strategic goals into actual actions now? Use balanced scorecard to establish incentive mechanism, unify the four lines, and realize comprehensive performance evaluation and risk management. The value of the company in the market is equal to the total net present value of the company's current profit and future expected profit (risk-adjusted profit). The risk-adjusted return on capital is RAROC. Furthermore, from the perspective of shareholders' return on investment, we should consider economic profit, that is, accounting profit MINUS opportunity cost (for example, money invested in a bank can also be invested in securities or real estate). On the other hand, some traditional accounting expenses may actually be investment projects, for example, the training of bank employees should be regarded as human capital investment. In fact, the most important assets of banks or other financial enterprises are human capital (not land and machinery), so human capital investment (such as training) is very important. Ignoring or distorting such projects will seriously affect long-term development. Through these (risks, opportunity costs and investment expenses) and other adjustments, accounting profits will become economic added value, namely EVA. How to turn shareholders' value goals into concrete actions of management and employees? Use the balanced scorecard of EVA index to realize value management. Corresponding to the four lines of customers, products, employees and finance, there are CRM, core business, HR and finance department management systems and (the whole) enterprise strategic management system. Enterprise strategic management system is an inter-departmental (enterprise level) management system, which realizes unified management of the four lines. How to realize profit management, performance management and value management through these systems? The following discussion takes the construction of modern commercial bank management system as an example.

a. Through the implementation of financial accounting, cost accounting and capital transfer pricing system, profitability analysis and basic financial budget control are realized, and the goal of profit management is achieved. Financial accounting, cost accounting and FTP constitute the bank management accounting system. Financial accounting is used to record, collect and report income and expenditure, assets and liabilities, cash flow, etc. Cost accounting is used to allocate (non-capital) expenses; FTP is used for internal fund pricing, namely "fund cost allocation". Limited by the function of the existing core banking system and the specific requirements of internal and external statements, the general ledger system in financial accounting can be gradually separated from the core business system and become the hub to unify and connect the business system and the expense system. Limited by data, norms and interests, cost accounting can gradually transition from the traditional "departmental cost method" to "activity-based cost method". Similarly, limited by data and other factors, FTP can start from the single-warehouse method, transition to the multi-warehouse method and single transaction method, and gradually realize the profitability analysis according to customers, products, business units and channels, and classify them according to different degrees.

B. by implementing asset-liability management system (ALM) and credit risk management system, etc.