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Updated: December 8, 2010 16:15 IST

On automating compliance-driven work

D. Murali
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Introduction of any new business solution is most often aimed at modernisation of the existing ones or transformation of how business processes are managed; generally, the goal is to improve the overall business outcome, reduce cost and increase the value delivered to customers. Thus begins Venki Muthanna, CEO, AppPoint Software Solutions Pvt Ltd, Bangalore (http://bit.ly/F4TAppPoint), during a recent interaction with Business Line.

“This is usually achieved by the adoption of the latest technology, and methodology (model-driven approach eliminating the need to invest on highly-skilled resources and reducing the time to develop and change), and/or newer business models (such as the adoption of cloud-based infrastructure and delivery models) which not only help in reducing the cost associated with such transformation, but also in mitigating risks associated with it,” Venki explains. Our conversation continues over the email.

Excerpts from the interview in which Venki also speaks about his work for the National Stock Exchange (NSE).

In what ways can automated business management solutions help financial institutions?

While there is nothing very unique about the advantages of automation or adoption of business management solutions in a financial institution, what we have noticed is that in financial institutions the adoption of software happened much earlier than in any other segment for managing core processes, while the peripheral processes were managed manually using ad hoc processes.

So there are two challenges we see here –

a) Legacy systems: These result from financial institutions having numerous applications/ systems which have been developed using legacy technology and most often addressing point functions and being disconnected. Given the maturity in technology and change in business dynamics, most of these systems have been either rendered inefficient in terms of their capabilities or are not being cost-effective.

b) Manually managed processes: A lot of the processes which were seen as non-core were manually managed. With the change in business dynamics and competition, organisations are realising how these processes impact overall business performance. This has resulted in organisations wanting to not only automate these processes, but also to integrate them with the core processes to improve people and process efficiency. For example, in the case of the NSE, we had the compliancy and inspection management system which was manually managed.

Automated business management solutions being considered by organisations such as the NSE are to address one of these challenges and, in the process, to achieve improvements such as, but not limited to –

a) Improving visibility to mission-critical data which enable timely and informed decision.

b) Improving quality of data by eliminating manual intervention to synchronise/ manage data across disconnected systems.

c) Improving policy and rules-driven automated decision-making – for instance, short-listing a member for inspection, based on various criteria.

d) Enhancing people efficiency – for instance, automated generation of reports leveraging data sourced from disparate systems which earlier was done manually.

e) Consistent enforcement of business policies improving predictability and reliability of business outcome – e.g. controlled approval workflows or consistent evaluation of fines based on various parameters, etc.

f) Establishing a unified and collaborative system eliminating the need for paper-based process – e.g. allowing NSE staff, brokers and SEBI/ regulatory members to work with the compliancy system all through the audit process.

On the possibility of automating tax audit and other compliance-driven work.

Given the latest developments we have seen in the industry, in terms of violation of corporate governance and the enormous impact it has had, continuous monitoring, auditing and taking timely corrective actions are an absolute must. The process of ensuring compliancy or audit is all about –

a) Establishing policies (e.g. export/ import rules, timelines for submitting tax filings, etc.).

b) Capturing or identifying relevant data required for enforcing the policies (transaction details, bank account details, and so on).

c) Monitoring relevant data either on a continuous basis (e.g. fraud management requires continuous monitoring) or on a scheduled basis (e.g. tax audit is done at specific intervals, such as quarterly, annually or monthly).

d) Identifying any violations in the data being monitored (e.g. export revenue records as registered with the RBI do not match with what has been recorded either by the STPI or as submitted in tax records filed by the company, etc.).

e) Reporting and review of violations (e.g. automatically generating reports which get routed to appropriate authorities for review, approval or further change).

f) Initiation of appropriate actions (e.g. notify any violation suggesting corrections steps or notify other departments/ authorities for follow-up action, etc.).

The complexity associated with accounting and audit originates from the enormous volume of information to be sourced from disparate systems and analysed for varying compliancy rules. But for this, everything that we have done at the NSE would be applicable to a solution which would enable auditing for taxation compliancy.

What skills and competencies should auditors be equipped with in today’s business context?

In the context of new regulatory rules and the need to improve turnaround times for auditing and reporting on the same, auditing firms would have to adopt automation and business management solutions. From the auditors’ perspective while this would enable them to focus more on their core expertise such as improving policies which would enhance auditing outcome, and so forth, they do need to develop skills to work with computerised systems and understand how they could translate their domain expertise to improve these systems.

On the other hand, with some minimal skills development around some of the latest methodology to develop business management solutions, auditors could leverage their expertise to automate some of the tasks they perform and possibly provide this as a service/ solution to other auditors and customers.

**

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