Analytics beyond

Bank Analyzer

SAP Strategy Management for Banks

Stefanie Lawitzke & Philip Aliband

Global Banking Line of Business
Financial Services Analytics

August 28th, 2008

Wally and Dilbert strategize

© SAP 2008 – Strategy Management for banks

 Strategy Management for Banks
within AbBA
 part of project „Analytics beyond Bank Analyzer (AbBA) (project lead: Thomas Welke)
 All rollout material can be found here (via Field Intelligence Network Banking)

AbBA: Three „Financial Performance Management“ Topics

 Planning for Banks (contact: Thomas Schuler)

 Consolidation for Banks (contact: Thomas Börner)

 Strategy Management for Banks (contact: Stefanie Lawitzke)  Project team „Strategy
Management“: Stefanie
Lawitzke, Philip Aliband,
AbBA: Three „Business Objects Speed Boats“ Svend Kramer

 Operational Insight - Bankers Dashboard (contact: Inge Nickels)

 Operational Insight - HR Analytics (contact: Judith Röss)

 Risk Insight - Operational Risk (contact: Hermann Haaf)

Step 1: Business Objects Reporting & Visualisation (agnostic)

Step 2: GRC Risk Management only

Step 3: GRC Risk Management in combination with Business Objects

© SAP 2007 / Page 3

 Strategy Management as a part of Financial
Performance Management (FPM)
 Best of breed & differentiated
solution for the Office of the CFO
(especially Profitability and Cost
Mgmt, Strategy Mgmt, and
Integration with GRC)
 Superior user experience for FPM
Applications
 Integrated data model that provides
flexibility to change
 Superior solution for financial and
management reporting
While FPM makes its home in the
office of finance, its effects are
felt throughout the organization
© SAP 2008 – Strategy Management for banks
Financial Performance Management
World-class applications supporting all
financial processes enabling closed loop
financial performance management
Strategy Planning
Management
Define strategy and prioritize Gain insight to manage and
accordingly to help ensure measure business plans and
alignment with corporate enable proactive, rather than
goals reactive, business tactics
Consolidation Profitability
& Cost Management
Meet all legal and Drive enterprise profitability
management reporting through a real-time
requirements with automated,
robust consolidation
understanding of cost, capacity,
and revenue
processes
Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank strategy
3. SAP helps align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A
 The elephant in the room

Create a common understanding of our strategy

© SAP 2008 – Strategy Management for banks

 Strategy Pyramid

© SAP 2008 – Strategy Management for banks

 “Achieving the goal, before this decade
is out, of landing a man on the moon…”
“To be the best financial services organisation in the UK”

We will achieve this by:

Building strong customer franchises, that are based on deep customer
relationships
•that give value to the customer
•that give sustainable earnings growth to the shareholder
Executing brilliantly
•flawlessly for the customer
•doing what we say we are going to do

„Our vision is to become our customers’ bank for life, a trusted

friend and partner. Through a commitment to financial
education, innovation and community service, 1st Capital Bank
intends to become the premier local bank.“

Where we are headed to… our vision
We want to satisfy all of our customers' financial
needs, help them succeed financially, be the
premier provider of financial services in every
one of our markets, and be known as one of
America's great companies.

“To be the number one bank in Ireland with dynamic businesses growing
internationally”

© SAP 2008 – Strategy Management for banks

 Mission

MISSION STATEMENT
„Through caring, integrity, and unrivaled service, 1st Capital
Bank exists to promote the financial health and well-being of
our customers and community.“

"Bank of America helps build strong communities

by creating opportunities for people — including
customers, shareholders and associates — to fulfill their
dreams."

Wells Fargo mission statement:

“Our mission is to be the premier shareowner servicing agent in the
industry as defined by our clients and their shareowners”.

“Our mission is to maximise returns from our leading position in Ireland and substantially
grow our businesses in the UK. We want to grow our portfolio of niche, skill--based
businesses internationally.”

© SAP 2008 – Strategy Management for banks

Perspectives & Objectives

"The balanced scorecard retains

traditional financial measures. But
financial measures tell the story of
past events, an adequate story for
industrial age companies for which
investments in long-term
capabilities and customer
relationships were not critical for
success. These financial measures
are inadequate, however, for
guiding and evaluating the journey
that information age companies
must make to create future value
through investment in customers,
suppliers, employees, processes,
technology, and innovation."
-- Robert.S.Kaplan
Robert.S.Kaplan

© SAP 2008 – Strategy Management for banks

Why strategy management matters
for banks

• Banks operate in a constantly changing environment and are on the front line of macroeconomic
changes

• Financial institutions are one of the most people-based and people-centered industries.
The core of their business is defined trough a personal relationship to the customer and
therefore success depends greatly on the quality of these relationships.

• Credibility and consistency define and shape the long term strategic success within the banking
industry  You can only establish trust through consistency

The corporate strategy of a bank almost always includes the satisfying the needs of its
client base - making customer acquisition and retention a key element of the corporate
strategic goals.

Most banks secure their strategy on three essential pillars which all tie into the relationship
to the customer:

1. Superior customer service and satisfaction

2. Low cost delivery of services and operational efficiency
3. Growing sales and financial viability.

These areas are also key perspectives within a balanced scorecard system.

© SAP 2008 – Strategy Management for banks

Where the pain is…
 What problem are we trying to solve?
The gap between execution and strategy

Today, banks struggle to bridge the gap between strategy and execution
to optimize their business performance.

Decisions made Strategy disconnected

without context from operations
Strategy

Execution
Information locked Misaligned action
in silos across the bank

© SAP 2008 – Strategy Management for banks

 Why are banks facing this gap between
execution and strategy?

“60% to 80% of companies fall short of the success

predicted from their strategies”
– Harvard Business Review, Jan 2008 You can’t manage
something that
you can’t
 Lack of Automation describe!
 Most banks are executing strategy management manually
 Very often strategy is managed using inadequate tools that require much manual
tracking and updating e.g. spreadsheets, powerpoint, word documents, email
 Risk Exposure
 Performance along the corporate strategy is inaccurate
 Data is not timely and often of low quality
 Alignment
 Employees don’t understand how the strategy affects them, and how their decisions
impact others.
 It’s unclear as to who is accountable for ensuring execution of initiatives, projects, and
tasks.
 There’s no link between the budgeting process and strategy.
 There’s no link between pay and strategy.

© SAP 2008 – Strategy Management for banks

 Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank
strategy
3. SAP helps fully align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A

© SAP 2008 – Strategy Management for banks

 Visualize the strategy

gy Pat
How is strategy communicated Strate hwa
ys
maps
in the bank?

t
a u s e -effec Goal
C ms diagra
diagra ms

© SAP 2007 / Page 20

Goal Diagram
Pathway Diagram
Strategy Map
Cause & Effect Diagram
 Personalize the strategy

How is the strategy relevant to me?

© SAP 2007 / Page 25

 Strategy matters to everyone…

Vision
Strategic Goals Bank Group Goals
Bank group goals and
business unit goals

Business Unit Goals

Department and
Department and
Team Goals
Team Goals

Operational Goals (MBO)

At employee level Individual Individual
Compensation-relevant Goals Goals

© SAP 2008 – Strategy Management for banks

Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank strategy
3. SAP helps fully align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A
Mastering the Management System in
a bank

SAP Strategy
Management

SAP Strategy SAP Bank

Management Analyzer

SAP Strategy
SAP Business Planning and Management
Consolidation

Mastering
Mastering the
the Management
Management System
System by
by Robert
Robert S.
S. Kaplan
Kaplan and
and David
David P.
P. Norton
Norton
© SAP 2008 – Strategy Management for banks
Stage 1: Develop the strategy

“First, estimate the degree of difficulty;

second, assess the scope of operation;
third, calculation of own forces; fourth,
数 五 一
comparison of forces; and fifth, 生 曰 曰
establish the chances of victory. 称 胜 度
称 地 二
Based on the characteristics of the
terrain, the degree of difficulty is
生 生 曰
estimated. Based on the degree of 胜 度 量
difficulty, the scope of operation is 度 三
assessed. Based on the scope of 生 曰
operation, the calculation of own forces
is made. Based on the calculation of 孙 量 数
own forces, comparisons are evaluated 子 量 四
against those of the enemy. Based on 兵 生 曰
the evaluations, the chances of victory 法 数 称
can then be established”

Sun Tzu “Art of War”

© SAP 2008 – Strategy Management for banks

Stage 2: Translate the strategy
Scorecard – KPI View
Initiatives
Stage 3: Plan operations

 The bank develops an

operational plan to accomplish
the strategic objectives

 Sales planning is used to plan

the financial products to be sold
via which sales channels by
which branches in which regions

 The sales plan impacts the

Capex/resource plan which
affects the bank’s bottom line
(P&L planning)
The latest release of BPC allows both read and write
functionality to Netweaver BI 7.0
This ties in with SSM release 7.0 enabling data to be read
real-time in SSM from BI via BI Connector or from SSM
cache

By 2010 Strategy Management will be fully integrated

with SAP Business Planning and Consolidation
Stage 4: Monitor and learn

 The leadership team in the bank

must meet on a regular basis to
review the progress of the
strategy

 Tofacilitate preparation for these

meetings, a briefing book can be
created in SAP Strategy
Management and sent to
participants as a pdf attachment

 The Operational Reviews section

allows you to select the screens
you require and make screen
annotations in your briefing book
Stage 5: Test and adapt the strategy

 Theprofit and loss of each

product line, customer group,
channel and region are extracted
from Profitability Analysis in the
Bank Analyzer IFMA Scenario

 Anassessment is made whether

the existing strategy is
succeeding or failing

 Thestrategy map and underlying

objectives may need to be
modified – the management
system loop is closed
(The dashboard functionality in the current release of
SSM will be expanded in SSM release 7.5 in first half
of 2009 to include BusinessObjects Dashboard
Builder and XCelcius Enterprise)
Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank strategy
3. SAP helps fully align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A
A quick glimpse at a day in the professional
life of Bernd Stromberg

 Home Tab: Overview

Status of objectives: Do I need to act?
Look at the corresponding KPI

We need to improve the value of the KPI

 We need a new initiative
 Create the initiative, milestones and
sub-milestones
 Mail out an operational review to team
members
Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank strategy
3. SAP helps fully align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A
 Product Roadmap: SAP Strategy
Management
SSM 7.0: Current Plan FPM 7.5: Initial Product Integration FPM 8.0
Existing Solutions

Business Objects BI Integration

SAP-Strategy

NetWeaver BI Integration
Mgmt SEM-BSC

Next-Gen
Strategy SAP-Strategy Mgmt SAP-Strategy Mgmt FPM Suite

Mgmt
IDM
Business Objects Business Objects
-PM -OM

SAP Business Objects Day 1 Q 3 2008 1 H 2009 1 H 2010

BOBJ
SAP Key Points
 SAP Strategy Management with extensive NW support released to customers by Q3 2008
 SAP Strategy Management integration to Business Objects BI Tools and Business Objects
Enterprise by end of 2008
 Migration tools and services to Strategy Management from the other offerings are currently
being evaluated – Confirmed for SEM BSC and Strategy Management 2007 to Strategy
Management 7.0

© SAP 2008 – Strategy Management for banks

Strategy Management and GRC

Deloitte
Deloitte Review
Review –– The
The two
two Faces
Faces of
of risk
risk

 Risk factors and value drivers are two sides of the same coin.

 Every bank understands that risk-taking is required to generate earnings, while

retained earnings generate capital, which is needed to buffer risk.

Both solutions monitor, measure and automate specific business processes for
specific reasons—GRC to mitigate risk and ensure regulatory compliance;
Strategy Management to align corporate strategy and execution in order to
achieve specific business goals.

Deloitte
Deloitte Review
Review –– The
The two
two Faces
Faces of
of risk
risk

© SAP 2008 – Strategy Management for banks

 Strategy Management
Deliver on a risk-intelligent strategy with enterprise-wide alignment

SAP Strategy Management (SSM) helps banks align resources

quickly to carry out their corporate strategy by communicating
strategic plans clearly, translating them into priorities and tasks,
and rapidly monitoring and reporting on their progress

 Risk-intelligent strategic execution: SSM and SAP GRC Risk

Management integration provides a bank powerful business advantage to
understand and control their business performance. It creates awareness
and demonstrates that your bank considers safety and risk assessments
a top priority and manages them well.

 Better performance, increased productivity, and greater employee &

customer satisfaction: Understand and incorporate the relationship
between strategic objectives and associated risks into the corporate bank
strategy and integrate a risk-based focus in all Lines of Business.

 Cascade strategy across the bank and intelligently manage

resources:
Ensure that all employees understand how they can influence strategic
goals and how they impact others

© SAP 2008 – Strategy Management for banks

Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank strategy
3. SAP helps fully align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A
 Strategy Management at a glance
Target Audience:
 Progressive Financial institutions with diffused and/or
complex spans of control
Opportunity Identifiers:
 You are competing with Cognos, Business Objects, Hyperion,
Siebel Analytics or PerformanceSoft (Actuate).
 You hear the prospect mention Scorecards, Dashboards,
Strategy, Key Performance Indicators (KPIs), Balanced
Scorecard, Performance Management, Analytics, CPM, or
Performance Measurement.
 You are looking to increase the value of your GRC, PLM, SRM,
xRPM or enterprise deal.
 You need to show something that looks “pretty”.
Implementation Strategy:
 SAP Strategy Management can be implemented as a
standalone solution
Pain Points:
 Most employees do not fully understand the banks
strategy and therefore do not recognize how their decisions
impact other areas within the bank
 Employee incentive systems are seldom linked to the banks
strategy; consequently, individuals’ personal goals are not
aligned with those of the bank
 Financial Institutions lack systematic approach or tool for linking
strategic objectives with the budgeting, planning,
and reporting processes
 Inability to integrate unstructured data such as commentary with
structured data like KPIs and metrics
Key Benefits:
 Motivates all stakeholders by communicating key long-term and
short-term objectives using relevant functional goals
 Manages operational activities within the context of strategy,
while encouraging accountability and collaboration focused on
the milestones central to achieving organizational objectives
 Monitors progress toward goals with a consolidated, cross
functional view of execution towards strategic objectives
 Determines status and projects future performance
High-Level Description:
SAP Strategy Management integrates goals,
initiatives and metrics to align all levels of a
Financial Institution. Unlike the 90% of
organizations that are unable to execute on their
strategy, banks with alignment will have better
performance, increased productivity, and greater
employee, constituent and customer satisfaction.
Reference Customers (Non-Banking):
General Services Administration (GSA)
Provides the buildings, products, and services
required to operate federal agencies, supporting
1M+ federal workers worldwide
Impact: Discovered +$300 million in lost revenue
in the first 18 months by tying initiatives to
objectives
Health Net
One of the nations largest managed healthcare
companies
Impact: Reduced administrative overhead by
25%, achieving leanest operating margins of all of
its competitors
KLA Tencor
One of world’s largest makers of semiconductor
production equipment — surpassing $1 billion in
revenue, with thousands of employees.
Impact: Reduced the cost of the monthly
reporting cycle by +66%, while adding weekly and
daily information
Novo Nordisk
Manufacturing and marketing the broadest
diabetes product portfolio in the industry,
employing 15,000 people in +60 countries
Impact: Achieved third-party verified 889% ROI,
primarily based on productivity enhancements
from better alignment
 Strategy Management at a glance
Scorecards
Operational Review
The scorecard component provides a personalized
SAP’s Strategy Management (SSM) Operational
view of progress toward specific outcomes. With the
Review component enables a bank to formalize the
flexibility to support almost unlimited views of
operational review process by making it easy to
performance, SAP Strategy Management includes a
capture, consolidate, and present certified
readiness scorecard to determine when to move to
information on goals, initiatives and metrics. With
the next phase of your performance management
structured operational reviews, employees can
implementation, an objective scorecard to monitor
consolidate information captured from anywhere
performance toward goals, and a KPI scorecard to
within SAP into a unified story of performance. In
consolidate key financial and operational indicators.
addition, operational reviews can be published
externally to distribute valuable performance insights
to key stakeholders.
Dashboards
SAP Strategy Management’s role-based dashboards
allow organizations to monitor critical input and output
Strategy Component
metrics for a given function, organization, or role.
As managing goals requires more than simply
Unlike static dashboards that provide only summary
displaying current objectives, the strategy
information, Strategy Management can be linked to
component helps provide the often missing
underlying analyses, allowing deeper investigation to
motivational aspect of strategy. Consisting of
isolate and understand the drivers of performance.
pathways, process and goal diagrams, and cause &
Dashboards also can be expanded beyond functional
effect analysis, the strategy component makes the
groups and made public for everyone to view or kept
strategic plan more than just a static document.-it
private to be viewed only by the individual who
provides a collaborative environment to visualize,
created it.
discuss, and update objectives.
Reports
Initiatives Management
SAP Strategy Management reports and ad hoc
SAP Strategy Management goes beyond simply
analysis component covers the needs of all
tracking project resources and activities to help
stakeholders, from the CEO to operational managers
stakeholders prioritize and focus resources and
or analysts. An easy-to-use interface enables users of
support the milestones most critical to organizational
diverse functional backgrounds to quickly measure
objectives. Rooted in the knowledge that ownership
ongoing progress toward objectives. For analysts
fosters productivity, the initiatives component
seeking additional information, Strategy Management
provides summary views of initiatives supporting
ad hoc analysis capabilities provide virtually
overall objectives, as well as the milestones
boundless analysis options to measure and uncover
supporting each initiative, interdependencies
the root of performance issues. Integrated forecasting
between them, and schedule and budget status.
capabilities help analysts project future performance
and plan ahead based on current reality.
 Architectural Enhancements
Strategy Management 7.0

SAP NetWeaver Portal

Single Sign On and
Ability to launch from
the SAP NetWeaver
Portal

 Leverages NetWeaver for:

 Scalability and Failover
 UME for User Creation

 Simplified application
maintenance and
configuration

 Improved performance

SAP NetWeaver BI
Pass-through approach
leveraging time-intelligence
capabilities of PAS, whilst
directly accessing SAP
NetWeaver 7.0 BI

© SAP 2008 – Strategy Management for banks

 For more information

See the LoB Banking Portal – Field Intelligence Network

https://portal.wdf.sap.corp/irj/go/km/docs/corporate_portal/WS%20PTU%20Industry%20Solutions/PTU%20IS%20Units/ISM%2
0Financial%20Services/Banking/Public/FieldIntelligenceNetwork/SAPSolutions_Analytical_Banking.html

Contacts:

© SAP 2008 – Strategy Management for banks

Agenda

1. What is strategy and why does it matter?

2. SAP helps visualize and personalize bank strategy
3. SAP helps fully align bank strategy
4. Demo
5. Roadmap – integration with GRC
6. Wrap-up information
7. Q&A
Thank you!