Faced with a tough market environment and obliged to comply with an ever-increasing number of new regulations, CFOs of insurance companies are under pressure like never before. Here we will look at their key priorities for 2016, and ways in which SAP is helping them to drive competitive advantage.
The job of an insurance company CFO just got harder. Significant resources are required to manage an increasingly complex regulatory landscape. Companies must ensure compliance with a wave of new regulations and industry standards such as the Solvency II Directive and the International Financial Reporting Standard (IFRS) 4, Phase 2. And with severe – and often legal – penalties for non-compliance, such regulations cannot be taken lightly.
Insurance CFOs must also help their companies to work out ways to stay competitive in a difficult market. The low interest rates that followed the financial crisis still linger on, significantly diminishing investment returns. This eats into profits and means that CFOs must focus on efficiency savings to boost the bottom line.
Added to this, in an industry whose business model has changed little in the last few hundred years, globalization and digitization are now forcing the industry to reimagine the way to do business. While this undoubtedly presents new opportunities, it also brings a threat of new market entrants that intensifies competition in the sector.
Meeting the challenge
Faced with these challenges, most CFOs have certain key priorities on their agenda for 2016:
1) How can we reduce the cost and risk associated with new financial reporting regulations?
2) How can we become more cost efficient, while providing more insights that help the business
to innovate and drive profits?
3) How can we overcome technological obstacles that get in the way of achieving our goals?
Supporting the CFO agenda
With an extensive software portfolio for the insurance industry, SAP has invested significantly in the development of innovative solutions that help CFOs address these priorities.
Data management is a key area where SAP solutions can help to streamline processes and improve efficiency. Innovative in-memory technology used by the new SAP S/4HANA Finance solution eliminates data redundancies due to data replication and aggregation. This significantly reduces costs and means that staff can run reports in minutes rather than days.
An integrated architecture for finance and risk eliminates redundancies in processes and data across the finance and risk management functions. Meanwhile, SAP provides targeted solutions for key areas, such as helping companies to manage their regulatory obligations for IFRS4 and Solvency II. These targeted solutions can help streamline the organization’s governance management efforts and help to minimize the risk of non-compliance.
In addition, solutions such as the SAP Cost and Revenue Allocation for Financial Products application help CFOs to analyze and understand performance implications of their financial operations. Powered by the SAP HANA platform, this application offers unprecedented insights into costs and revenues across their organization. Watch the video here.
Guiding the business
More and more insurance companies are implementing SAP solutions to help them adopt an integrated approach to finance and risk management. Recent projects range from small, targeted improvements – in data management or visualization, for example – to major multi-year financial transformation projects that include a redesign of processes, data functions, and IT systems.
By leveraging the in-memory technology and integrated finance and risk management architecture provided by SAP solutions, CFOs can simplify and streamline their operations. This helps them to dramatically increase efficiency, minimize risk, and cut costs.
What is clear as we head into 2016 is that insurance company CFOs will play a key role in helping to guide the business through troubled waters ahead. CFOs are becoming a key business partner for other departments, providing better insights and gaining more influence on business decisions.