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Information led transformation in action - Old Mutual's journey towards optimisation

11 November 2009

Gaining agility within a financial institution is never a simple and straight forward task. However, the ability to transform business processes using information; adopting tools,  methodologies and disciplines for Financial Performance Management, Business Intelligence and business optimisation makes this possible - delivering immense value through the ability to respond quickly to situations, sense opportunities and discover issues before they become major problems.

Old Mutual's journey of information-led transformation began in January 2004 with the formation of Old Mutual Services, Technology and Administration, known by the  acronym OMSTA. OMSTA was launched to enable more defined focus on servicing, administration and technology by optimising costs and cost drivers, product and process allocations, and by introducing a "cost per policy" concept. This need was driven by the potential for inaccurate charging to internal clients due to historical assumptions,  transfer of cost centre budgets and so on.

Midway through the same year, OMSTA conducted a benchmarking exercise to test the "cost per policy" methodology against international best practice.

"This exercise led to a return to the basics in 2005, changing the cost centres to profit centres by allocating revenue per business unit," says Tony Sterrenberg from Old  Mutual's OMSTA division. "The structure of financial reporting was also altered, to better integrate with the operational management structure. Standardised, user friendly monthly financial reports were designed and produced for all business units. The year 2005 was all about going back to basics and getting to know the numbers."

OMSTA's first attempt at optimisation began in 2006 with a two dimensional Excel version of Cost Allocation by Client and Product per Business Unit.

"This attempt was manually intensive and not sustainable on an ongoing basis," adds Sterrenberg. "We discussed our vision with Cortell Business Solutions at the end of the year and were introduced to IBM's TM1 application, which enabled us to automate our financial performance management processes across various functional areas and business units."

In 2007 Old Mutual used to power of TM1 to develop the OMSTA Costing Cube, a model for financial performance management that incorporates all dimensions of business, including clients, products, process and cost pools as well as allocation rules. This helps Old Mutual to understand what activities drive the volumes and metrics in each Business Unit and match the volumes and metrics from legacy operational systems to the financials.

The Cube also introduced capacity calculation, in terms of actual activities multiplied by standard times as well as productive head count multiplied by standard available minutes. Monthly reporting became more detailed, with cost per process and transaction as well as cost per client or product by cost pool or business unit.

In 2008 the Cube was further developed to provide automated, sustainable and robust monthly reports and updates. This also allowed Old Mutual to gain a single source of information for use in business case calculations, negotiations with internal clients, elimination of cross subsidisation between clients and the identification of available capacity within each business unit. TM1 also provided Old Mutual with trend analysis and tracking, such as volume trends per transaction, unit costs per transaction and cost per transaction by cost component and dimension.

In conjunction with TM1, the OMSTA Costing Cube enables Old Mutual to drive information-led transformation throughout the organisation and streamline processes. It provides a cost and time effective alternative to manual spreadsheets; reducing errors, centrally managing business hierarchies, and enabling "what if" scenario modelling for improved business optimisation. By  offering effective collaboration, TM1 allows Old Mutual to automate financial performance management processes and provides immediate feedback to drive better decisions at all levels. The Cube can also be readily adapted for rapid growth and change, and enables reports to be generated quickly and easily.

"Our journey towards information-led transformation has not been an easy one, and it is not over yet. We have seen great benefit from our implementations already and hope to continue this into the future," concludes Sterrenberg. "To this end we are looking towards introducing operational dashboards by business are to identify Key Performance
Indicators and include these KPIs into operational performance contracts, as well as business modelling, forecasting and scenario planning. We are also exploring the potential of rolling out the OMSTA Costing Cube to other operational areas within Old Mutual."

For further information or to reach a representative: www.ibm.com/cognos

IBM
David McWilliam
Regional Manager A & PM
IBM Software Group - Sub-Sahara Africa
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Tel: (011) 302 5921

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