Showing posts with label finance. Show all posts
Showing posts with label finance. Show all posts

Monday, November 13, 2023

How Accounts Payable Automation and Agility Drive Long-Term Business Productivity

Transcript of a discussion on why business leaders need to prepare now to optimize and automate accounts payable functions to elevate overall financial situational awareness.


Listen to the podcastFind it on iTunesDownload the transcript. Sponsor: Basware.


Dana Gardner: Welcome to the next edition of the BriefingsDirect podcast series. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator.



Today’s discussion focuses on how optimizing and automating accounts payable (AP) functions gives businesses the insights and levers to better transform. We’ll examine how improved control and management over cash flow, payables, and related fiduciary functions elevate overall financial situational awareness.


Stay with us now as we explore how adoption of intelligent automation joins the expected consolidation and convergence of financial operations and applications in the office of the Chief Financial Officer (CFO).


Soon, we may well see more shifts in the required skills and streamlined organization within financial operations at companies. So, leaders need to prepare now.

Here to share his insights as a business operations efficiency veteran and expert is our guest, Jason Kurtz, Chief Executive Officer (CEO) at Basware. Welcome, Jason.


Jason Kurtz: Glad to be here. Thanks for having me.


Gardner: Jason, before we begin, let’s put some context around our discussion. What are some of the major trends shaping the need for better accounts payable automation, and why is there an imperative to add intelligence and automation to overall back-office business operations?


Global change: Taking it all into account


Kurtz: The imperative is we’re dealing in truly unchartered waters here for a lot of CFOs. If you think about what’s going on in our world, if you think about the macro-environment, we have potential recessions in some areas of the world. We have higher inflation rates, higher interest rates, and all that affects us in our businesses in various ways. If you think about supply chains, for example, we still -- believe it or not -- haven’t fully recovered from supply-chain disruptions from the pandemic.


These trends impact CFOs, and what’s going on in our world. We still have people working in hybrid or remote environments. We still have companies that can’t fill the jobs they have open, including in AP. Then we also have countries such as France, Germany, Poland, and Spain that are adding regulatory requirements for how you should send and receive an invoice.  Countries like Mexico and Brazil are changing their regulations on a regular basis.

Never before have we seen so many things impacting CFOs at the same time. You think about people like me, I’m in my mid-50s, I’ve never worked in an environment where there’s a recession plus high interest rates, plus inflation. You throw that in, and we’ve never seen this before. For many of us in these roles, it’s a unique time in history -- and in our careers -- that we’re dealing with so many challenges at once.


Gardner: Because there’s so much that’s unprecedented happening at once, it’s hard to look at the historic record and say, “Okay, I know what’s going to happen next.” There’s very little clear visibility as to what we’re going to be dealing with in terms of our top-line and needed constraints on spending over the next six to 12 months.


Kurtz: That’s 100 percent right. We are living with uncertainty right now. Few companies have great data and information to help them navigate such uncertainty. But one of the key documents, key pieces of information and data, is the invoice. If you can get that right, and gather great data from your invoices, man, that makes your job as a CFO a lot easier.


Gardner: To get that look at the full record and all of the data, that usually means more intelligence and automation around vital business processes. So, on the micro-level, what are the challenges facing businesses to gain more tactical and strategic control over their finance operations?


Kurtz: There are some really interesting challenges that you wouldn’t believe are still challenges. For a lot of businesses, we want to improve profitability in uncertain times. We want to unlock working capital. What’s one of the biggest barriers to that? Over 90 percent of companies say they can’t pay an invoice on time because they don’t have it approved in time.

You need automation and tools that can embed your policies and procedures into your workflow and your processes. You can't do that in a manual world. This is the reality for a lot of the companies we deal with.

Because they have bad data, because they haven’t enabled their suppliers, and because they’re often dealing with scanning and optical character recognition (OCR) documents of poor quality --  and it takes time to manage difficult exceptions – those are all critical hurdles. So, it’s important to solve these to unlock lots of hidden value.


Another challenge we talked about; companies don’t have a full staff in AP -- sometimes people are working remotely. How do you make sure those new people are trained, are more efficient, and effective? How do you know they’re following the policies and procedures for your company? How do you quality check the work they’re doing via remote work?


Because you want to do more with newer and fewer employees, you need automation and tools that can embed your policies and procedures into your workflow and your processes. You can’t do that in a manual world. So those are just a couple of examples, but this is the reality for a lot of the companies we deal with. From an AP perspective, they need improvements because these really are barriers to their success right now.


Gardner: Jason, both you and I have been in this business long enough to have seen wave upon wave of new technologies and approaches. And that was great, to use the best-of-breed solutions as they came online. But it has left many organizations with a scattered and disruptive mix of apps and silos that come from different eras.


Invoice intervention imperative


Kurtz: Yes, without question. We joke a lot about an earlier era of scanning paper docs using OCR, right? That’s just one example of what you’re talking about. For a lot of companies, scanning and OCR checked the box on adopting electronic invoicing. “We’ve done it.” But you and I know that that’s not really the case, right? You don’t get any good data out of that.


You have to have manual intervention. It slows your processes down. It’s like using a pay phone, right? Or a fax machine. And no one uses those anymore. But there are still lots of people who have that as their e-invoicing solution, which is crazy.

Keep up with global compliance requirements using this interactive map.

And, to your point, lots of companies have layered different technologies onto their environment over time. Maybe it was a procurement solution, or a sourcing solution, or their enterprise resource planning (ERP) suites, and they’re trying to figure out, at least in AP, “How do I make all of that work? My invoices come and originate in different places.”


They ask, “How do I put something on top of that that is modern, usable, and purpose-built for me in that kind of an environment that’s very fragmented and has lots of different offerings and capabilities?” They need something that sits on top of that to make it all more efficient and effective for the AP department. So, again, you hit the nail on the head. There’s a lot of complexity in the companies that we work with.


Gardner: Part of the good news, as you alluded to earlier, is that the modern invoice has a beneficial role to play. When you go fully digital, you can layer into that resource lots of metadata, you can bring added processes to bear, and you can use that asset as a powerful tool to usher in benefits across other applications, data, and processes. When you do this right, and you unlock the superpowers with your invoice workflows, how does that set off cascading benefits?


Invoice data insights reap rewards


Kurtz: One that we haven’t talked about yet, when you get that invoicing data right and you have good data from across your suppliers, that gives you aggregate insights into what you bought from whom, how much you paid, and what the commerce trends are. That gives you the basis for accurate spend analytics.


In the current uncertain macro-economic environment, we’re trying to save money and use that money to fund growth where we can find it, or put it away in the bank for profitability, then spend analytics is a great place to start to optimize, right? But you have to have that invoice data first to fully understand what it is you bought from whom, the pricing, and all the added details. So that’s one.

Two, the other part of the invoice data goodness, comes from unlocking working capital. Many companies now discount payment terms so the buyer receives a two percent discount on the net invoice amount if they pay within 10 days. Otherwise, the full invoice amount is due within 30 days. But, if they can’t pay something in 10 days, they can’t get the benefit.

But imagine if we could unlock literally billions of dollars in potential early-payment discounts or working-capital benefits that we could then use to invest in our growth or direct to areas where our acute business needs are. But, again, you must have a working invoice with good data, well-structured and in a timely manner, to be able to handle that management of working capital optimization. Yet, lots of companies still can’t do that.


I think those are a couple of examples where the modern invoice can unlock a lot of economic benefits for companies in these uncertain times.


Gardner: It has only gotten more important to best manage cash flow now that we’re up to five percent or more on overnight interest rates. The imperative to get fast and detailed cash flow data, and bring that organizational efficiency and agility to bear in real time, is higher than at any time in at least the last 15 years, right?


Kurtz: That’s 100 percent correct, and so intelligence is more valuable for us as an organization, and for our large customers. That’s because, in many cases, they have billions of dollars in spend, so that they can unlock millions – even hundreds of millions -- in working-capital dollars due to those higher interest rates.

Such intelligence is also important for our customers' suppliers because their cost of capital is going up, too. When supply chains are still disrupted, who gets what when and at what terms? 

But that intelligence is also important for their suppliers because their cost of capital is going up as well. In this world, where we still have some limited supply chains, suppliers can’t always deliver 100 percent of what they did three years ago. They may still be at only 85 or 90 percent.


Who then gets what when and at what terms? Who gets that 85 or 90 percent instead of the requested 100 percent? I would hypothesize -- and our customers are telling us this -- those good payers, the people who pay on time for timely delivery, become the customers of choice. If there’s a limited supply, they may get more of their fair share. There are a lot of benefits for doing this well, being able to pay when you and your suppliers want to pay for the right reasons.


Gardner: You’re teeing up some of the changes needed in CFO-required skills. Whereas due diligence, operational integrity, and process efficiency may have been top of mind when it came to bringing new people into the office of CFO, now you’re talking about more analytical, entrepreneurial, and innovative skills. We need a different kind of person in these strategic thinking and data analysis roles, right?


CFO role encompasses more analytics 


Kurtz: Yes, absolutely. In almost every role in the finance department now, comfort with data and analytics is becoming more critical. Those are the skills that help with automation and gaining insight into how you best manage your resources and capital. Those two skill sets -- comfort with technology and proficiency with data and analytics -- are probably two of the most important.

The other thing we’re seeing is the office of the CFO is broadening its responsibilities, too. They’re taking on more operational responsibilities and further impacting their organizations. So, that means being consultative and being good influencers and educators. Those are all part of the skill sets that a good finance organization has to have right now.


Gardner: There is no closing the door to the back office and then only coming out once a quarter with an audit or report anymore, right?


Kurtz: That’s right, you can’t do that. You just can’t do that.


Gardner: Let’s put some meat around some of these solutions in practical terms. How are these AP automation solutions paying off in brass tacks?


Productivity, processing, profits -- all up


Kurtz: We’re seeing incredible benefits. When we see automation in the AP function, you go from a company on average processing maybe 5,000 to 7,000 invoices per full-time annual employee equivalent (FTE) to companies processing, 30,000 to even 50,000 invoices a year per FTE. So, that’s a massive productivity benefit. You see the level of electronic invoices from your suppliers going from, on-average for most companies at 34 percent to some of Basware’s best-in-class customers attaining 99 to nearly 100 percent.

OCR is no longer the answer to processing PDF invoices, but AI-powered solutions are.

So, again, that plays into the benefits of accessing great structured data around an invoice. If, for example, you examine invoice processing time, most companies average around 11 days for AP functions. But Basware’s best-in-class AP customers are looking at hours or minutes, certainly less than a day, for processing. And that’s part of what you need to do to unlock the working-capital benefits. And you see companies with 20 to 30 percent of their invoices being touchless -- meaning you never physically have to manually have an intervention into an invoice from receipt through payment – are up from formerly around 21 percent. But again, Basware best-in-class customers are gaining with more than 90 percent being touchless.


These are the kind of metrics and value that AP automation solutions, and in particular Basware, customers are able to achieve.


Gardner: Can you apply these tactical metrics to also measure improvement in overall business productivity and financial returns?


Kurtz: Sure. Take a look at a customer of ours like Heineken. They implemented Basware’s AP automation solution. It streamlined invoice processing, reduced manual efforts, and improved data accuracy and efficiency. All of that resulted in greater than 40 percent reduction in their cost to process invoices within their function as a whole. So more than 40 percent reduction in overall AP team and organization costs by implementing an AP automation solution.

We can be really impactful. The same kind of thing happened at Toyota Industrial, another customer of ours, where they saw similar benefits from streamlining the invoice processing, reducing manual work, and getting suppliers to send invoices electronically. They attained better data, but also significantly reduced cycle times and earned invoice processing time savings. And that lead to better spend visibility and access for a well more than 50 percent reduction in the cost of processing within accounts payable as a whole.

Those are some of the benefits. I think the order of magnitudes are really incredible and transformational. We’re talking about literally millions of savings in hard dollar savings and then tens of millions of dollars in potentially in working-capital benefits as well.


Gardner: You can’t define productivity much better than that, right?


Kurtz: I like to think so.


Gardner: Okay, we have those direct, hard number AP improvement benefits. But as we alluded to earlier, there are some burgeoning types of benefits that come from having the data analytics and capability to innovate on larger strategies for buying, spending, and paying. Let’s talk a little bit about some of the ancillary benefits that come when you automate, when you go truly digital, and when you explore innovations around how the business itself operates.


Tech-savvy, budget-aware people thrive


Kurtz: Yes, there are a bunch of benefits. Let’s not underestimate the people benefits, right? So many of us are working in hybrid working patterns and remote working environments. I think one of the real benefits is to be able to onboard our people faster and have better productivity from them that much faster than you can in a non-automated world. So that’s one.


Two, you can attract a higher level of quality of candidate, particularly -- not to stereotype -- younger generations who are attracted to the technology that we need to incorporate into finance functions over time. They’re attracted to great technology and purpose-built technology. So, that’s another interesting example of ancillary human capital benefits of modernizing AP operations.

So many of us are working in hybrid working patterns and remote work. A real benefit now is to be able to onboard people faster and gain better productivity from them much faster by being in an automated environment.

Another one is clearly the savings visibility, right? And we have customers who are using that spend data that you get from invoices that we talked about to identify tens of millions of dollars in savings from having better data associated with invoices.


Toyota, again, is a good example. If you think about the overall finance function, one of the things they use our AP solution for and can gain from improved invoices data is the capability to rapidly monitor budgets. By improving their budget awareness, and having better conversations sooner in their fiscal quarters, they get a head start on performance metrics to know where they stand relative to budgets -- and being able to then act swiftly. They tell us that’s one of the really big benefits.


Again, that fits in with the overall CFO theme of being more consultative, being more of a business partner. That comes in large part from being able to see data, gain insights, track trends – all much earlier in the process. You simply can’t do that if it takes you 11 days to process an invoice, or you retain only 50 percent of the data, or you get garbage for data because it’s scanned, and then you have to go back and manually figure out what it is.


All of those are some of the ancillary yet impactful benefits that we’re seeing.


Gardner: Given the ongoing tight labor market, it sounds like the role of the finance people can now better help innovate for other parts of the organization, such as human resources. Better tracking payments and processes can help exploit a gig economy of contractors or use different forms of labor while tracking the costs in full.


So, is there an elevation that we should expect to see in terms of the status and impact that the finance office can have across the business?


CFO: From counter to consultant


Kurtz: Without question that’s the case. Here at Basware, our CFO is becoming more of a consultant, business partner, and adviser to other functions within the organization. That is a very common trend and theme we’re seeing as CFOs have broad influence and more operational span of control. They are changing from being the counter to being the financial consultant.


These new types of CFOs are bringing the insights from all of that data that we’ve talked about and helping the whole business operate better and deliver on expectations of profitability, growth, or whatever it is that that function is focused on.

Move from manual ways of working to the most automation AP processes possible.

And then, if we want to be really provocative about where this leads, you might have AP organizations that become profit centers. Because of the cost-reduction elements that they can take out, the working-capital benefits that they can unlock, and the ability to attract more supply -- all of those things help with investment, innovation, and growth. We might someday be looking at finance functions that are profit centers instead of cost centers.


Gardner: Interesting! Well, that’s a good segue to the last part of our discussion, which is what can we expect next? What’s in the future when we exercise true and pervasive AP automation? When will we be able to further avail ourselves of tools like machine learning (ML), artificial intelligence (AI), and instill an analytics culture within our businesses? What does your crystal ball show you coming for the modern accounts payable impact when we do it right?


Kurtz: We’re going to see a world in the not-too-distant future where in 95 percent-plus of the time, an AP person won’t ever have to touch an invoice. We will have better data from an invoice. Using AI, we will gain the capability to match and handle nearly all exceptions. We already have this today, but it’s going to keep getting better and better.

Soon more than 95 percent of the time an AP person won't ever have to touch an invoice. And we will have better data from that invoice. Using AI, we'll handle nearly all exceptions ASAP.

And you’re going to see these AP teams become much less, “How do I manage this exception? How do I go track down who the buyer was; what happened?” and all of that, to more of, “Hey, now I can think about what’s the best way to deploy my working capital. How do I take this data that we’re getting and spot impactful trends in it?”


As we become more touchless and automated, it’s going to free up value-added time to enable CFOs to be the business optimization partners, to spot trends, to understand better what’s happening in the business, and to bring ideas, solutions, and creativity to the rest of the organization. That will, in turn, fund the innovation that we want, fund the growth that need, and not just be a cost of doing business that we’ve been in the past.


Gardner: Yes, no better way to get a sign-off on something then when you can tell them it’s going to pay for itself, right?


Kurtz: That’s right. That’s exactly right.


Gardner: Jason, where can people go to learn more about these trends and solutions? Where do you look for good analysis and information about these trends, markets, and solutions?


Kurtz: At Basware, we do our best to be educational and share what we see happening in the industry as well as track industry trends and benchmarks. You can go to to see that or follow us on LinkedIn. We post a lot of content on our LinkedIn page.


I like to read a lot of the industry analyst content that comes out. I think there is some really good stuff. I know recently I’ve done some good reading on benchmarks from Ardent Partners. They’d done some really interesting studies. Forrester has interesting studies that I’ve been reading about as late. So, those are two great examples.


Basware is also a founder and innovator around EESPA, one of the leading associations of invoice and AP automation providers across Europe. We’re constantly working together to bring forth ideas and innovation on how to bring more automation to the industry.

See how your organization stacks up on the top AP metrics comparisons.

And then frankly, Dana, most folks joke about me being a Chief LinkedIn Officer, and I’m a LinkedIn addict. I think there’s all kinds of great data that I find around LinkedIn and I’m constantly looking on there and finding interesting articles and information. So, just a few thoughts on where we can find some interesting insights.


Gardner: I’m afraid we’ll have to leave it there. You’ve been listening to a sponsored BriefingsDirect discussion on how optimizing and automating AP functions gives businesses the insights and levers to better transform.


And we’ve learned how improved control and management over cash flow, payables, and related functions elevates the overall financial situational awareness and sets the stage for better shaping the office of the CFO for the future.

So, please join me in thanking our guest, Jason Kurtz, CEO at Basware. Thanks so much, Jason.


Kurtz: Thank you, Dana.


Gardner: I’m Dana Gardner, principal analyst at Interarbor Solutions, your moderator for this ongoing series of BriefingsDirect discussions. A big thank you to our sponsor Basware for supporting these presentations.


And a big thank you as well to you, our audience, for joining. Please pass this on to your business communities. LinkedIn is an excellent way to do it, as Jason pointed out, and do come back next time.


Listen to the podcastFind it on iTunesDownload the transcript. Sponsor: Basware.


Transcript of a discussion on why business leaders need to prepare now to optimize and automate accounts payable functions to elevate overall financial situational awareness. Copyright Interarbor Solutions, LLC, 2005-2023. All rights reserved.

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Tuesday, October 26, 2021

How More Industries Can Cultivate a Culture of Operational Resilience

A transcript of a discussion on the many ways that businesses can reach a high level of assured business availability despite varied and persistent threats.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: ServiceNow and EY.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions and you’re listening to BriefingsDirect.

In our last sustainable business innovation discussion, we explored how operational resiliency has become a top priority in the increasingly interconnected financial services sector.

We now expand our focus to explore the best ways to anticipate, plan for, and swiftly implement the means for nearly any business to avoid disruption.

New techniques allow for rapid responses to many of the most pressing threats. By predefining root causes and implementing advance responses, many businesses can create a culture of sustained operations.

To learn more about the many ways that businesses can reach a high level of assured business availability despite persistent threats, please join me in welcoming Steve Yon, Executive Director of the EY ServiceNow Practice. Welcome back, Steve.

Steve Yon: Thanks so much, Dana.

Gardner: We’re also here with Andrew Zarenski, Senior Manager and ServiceNow Innovation Leader at EY. Welcome, Andrew.

Andrew Zarenski: Thanks, Dana, for having me.

Gardner: Steve, our last chat explored how financial firms are adjusting to heightened threats and increased regulation by implementing operational resiliency plans and platforms. But with so many industries disrupted these days in so many ways, is there a need for a broader adoption of operational resiliency best practices?

Yon: Yes, Dana. Just as we discussed, the pandemic has widened people’s eyes -- not only in financial services but across other industries. And now, with hurricane season and those impacts, we’re continuing to see strong interest to improve operational resiliency capabilities within many firms. Being able to continuously serve clients is how the world works – and it’s not just about technology.

Gardner: What has EY done specifically to make operational resiliency a horizontal capability, if you will, that isn’t specific to any vertical industry?

Resilience solutions for all sectors

Yon: The platform we built the solution on is an integration and automation platform. We set it up in anticipation of, and with the full knowledge that it’s going to become a horizontal capability.

When you think about resiliency and doing work in operational models, it’s a verb-based system, right? How are you going to do it? How are you going to serve? How are you going to manage? How are you going to change, modify, and adjust to immediate recovery? All of those verbs are what make resiliency happen.

What differentiates one business sector from another aren’t those verbs. Those are immutable. It’s the nouns that change from sector to sector. So, focusing on all the same verbs, that same perspective we looked at within financial services, is equally as integratable when you think about telecommunications or power.

With financial services, the nouns might be things around trading and how you keep that capability always moving. Or payments. How do I keep those seems going? In an energy context, the nouns would be more about power distribution, capacity, and things like that.

With our solutions we want to ensure that you don’t close any doors by creating stove pipes -- because the nature of the interconnectedness of the world is not one of stove pipes. It’s one of huge cross-integration and horizontal integration. And when information and knowledge are set up in a system designed appropriately, it benefits whichever firm or whatever sector you’re in.

Gardner: You’ve created your platform and solution for complex, global companies. But does this operational resiliency capability also scale down? Should small- to medium-size businesses (SMBs) be thinking about this as well?

Yon: Yes. Any firm that cares about being able to operate in the event of potential disruptions, if that’s something meaningful to them, especially in the more highly regulated industries, then the expectation of resiliency needs to be there.

How to Build Resiliency into Operations

We’re seeing resiliency in the top five concerns for board-level folks. They need a solution that can scale up and down. You cannot take a science fair project and impact an industry nor provide value in the quick way these firms are looking for.

The idea is to be able to try it out and experiment. And when they figure out exactly how to calibrate the solution for their culture and level of complexity, then they can rinse, repeat, and replicate to scale it out. Your comment on being able to start small and grow large is absolutely true. It’s a guiding principle in any operational resiliency solution.

Gardner: It sounds like there are multiple adoption vectors, too. You might have a risk officer maturity level, or you might just have a new regulatory hurdle and that’s your on-ramp.

Are there a variety of different personas within organizations that should be thinking about how to begin that crawl, walk, run adoption for business continuity?

Yon: Yes. We think a proper solution should be persona-based. Am I talking to someone with responsibilities with risk, resilience, and compliance? Or am I talking to someone at the board level? Am I talking to a business service owner?

And the solution should also be inclusive of all the people who are remediating the problems on the operational side, and so unifying that entire perspective. That’s irrespective of how your firm may work. It focuses broadly on aligning the people who need to build things at the top level, to understanding the customer experience perspective, and to know what’s going on and how things are being remediated. Unifying with those operational folks is exceptionally important.

The capability to customize a view, if you will, for each of those personas -- irrespective of their titles – in a standard way so they are all able to view, monitor, and manage a disruption, or an avoidance of a disruption, is critical.

Gardner: Because the solution is built on a process and workflow platform, ServiceNow, which is highly integratable, it sounds like you can bring in third parties specific to many industries. How well does this solution augment an existing ecosystem of partners?

Yon: ServiceNow is a market-ubiquitous capability. When you look under the hood of most firms, you’ll find a workflow process capability there. With that comes the connectivity and framework by which you can have transparency into all the assets and actors.

ServiceNow is a market-ubiquitous capability. When you look under the hood of most firms, you'll find a workflow process capability there. With that comes the connectivity and framework to gain transparency into all the assets and actors.

What better platform to then develop a synthesis view of, “Hey, here’s where I’m now detecting the signal that could be something that’s a disruption”? That then allows you to be able to automatically light up a business continuity plan (BCP) and put it into action before a problem actually occurs.

We integrate not only with ServiceNow, but with any other system that can throw a signal -- whether it’s a facilities-based system, order management system, or a human resources system. That includes anything a firm defines as a critical business service, and all the actors and assets that participate in it, along with what state they need for it to be considered valid.

All of that needs to be ingested and synthesized to determine if there’s an issue that needs to be monitored and then a failover plan enacted.

Gardner: Andrew, please tell us about the core EY ServiceNow alliance operational resilience offering.

Detect disruptions with data

Zarenski: Corporations already have so many mitigation policies in place that understanding and responding to disruptions in real time is obviously essential. Everyone likes to think about the use case of plugging cybersecurity holes as soon as possible to prevent hackers from taking advantage of an exploit. That’s a relatively easy, relatable scenario. But think about a physical office service. For example, an elevator goes down that then prevents your employees from getting to their desks or people in a financial firm getting to their trading floor.

Understanding that disruption is just as important as understanding a cybersecurity threat or if someone has compromised one of your systems or processes. Detection today is generally harder than it’s been in the past because corporations’ physical and logical assets are so fragmented. They’re hard to track in that or any building.

Steve alluded to how service mapping, to understand what assets support services, is incredibly difficult. Detection has become very complicated, and the older ways of picking up the phone just isn’t enough because most corporations don’t know what the office is supporting. Having that concrete business service map and understanding that logical mapping of assets to services makes a solution such as this help our operators or chief risk officers (CROs) able to respond in near real time, which is the new industry standard.

Gardner: So, on one hand, it’s more difficult than ever. But the good news is that nowadays there’s so much more data available. There’s telemetry, edge computing, and sensors. So, while we have a tougher challenge to detect disruptions, we’re also getting some help from the technology side.

Zarenski: Yes, absolutely. And everyone thinks of this generally as just a technology exercise, but there’s so much more to it than the tech. There is the process. The key to enterprise resiliency is understanding what the services are both internally to employees as well as externally to the customers.

We find that most of our clients are just beginning to head down the journey of what we call business service mapping to identify and understand the critical services ahead of time. What are my five critical services? How can I build up those maps to show the quick wins and understand how can I be resilient today? How can I understand those sensors? What are the networks? What objects let me understand what a disruption is and have a dashboard show services that flip from green to red or yellow when something goes wrong?

There's so much signal out there to let you know what's going on. But to be bale to cut through and synthesize those material aspects of what's truly important is what makes this solution fit for duty and usable. And it does not take a lot of time to get done.

Yon: And, Dana, there’s so much signal out there to let you know what’s going on. But to be able to cut through and synthesize those material aspects of what’s truly important is what makes this solution fit for duty and usable. It’s not a big processing sync and does not take a lot of time to get done.

A business needs to know what to focus on, from what you imprint the system with to how you define your service map and how you calibrate what the signals represent. Those have to be the minimal number of things you want to ingest and synthesize to provide good, fast telemetry.  That’s where the value comes from, knowing how to define it best so the system works in a very fast and efficient way.

Gardner: Clearly, operational resiliency is not something you just buy in a box and deploy. There’s technology, business service mapping, and there’s also culture. Do you put in the technology and processes and then hope you develop a culture of resiliency? Or do you try to instill a culture of resiliency and then put in the ingredients? What’s the synergy between them?

Cultural shift from reactivity

Zarenski: There is synergy, for sure. Obviously, every corporation wants to have a culture of resilience. But at the same time, it’s hard to get there without the enabling technology. If you think about the solution that we at EY have developed, it takes resiliency beyond being just a reactive solution.

How to Build Resiliency into Operations

It’s easy for a corporation to understand the need for having a BCP or disaster recovery plan in place. That’s generally the first line of enabling a resilient culture. But bringing in another layer of technology that enables investment in the things that are listening for disruption? That is the next layer.

If you look at financial institutions, they all have different tools and processes that look at things like trade execution volume, and so forth. One person may have a system looking to see if trade execution volume has a significant blip and can then compare that to prior history. But to understand if that dip means something is wrong is not an easy process. Using EY’s operational resilience tool helps understand the patterns, catalog the patterns, and brings in technology that ultimately further enables that culture of resilience.

Yon: Yes, you want to know if something like that blip happens naturally or not. I liken this back to the days when we went through the evolution from quality control (QC)-oriented thinking to quality assurance (QA)-oriented thinking. QC lets you test stuff out, and lets you know what to do in the event of a failure. That’s what a BCP plan is all about -- when something happens, you pick up and follow the playbook. And there you go.

QA, which went through some significant headwinds, is about embedding that thought process into the very fabric of your planning and the design to enable the outcomes you really want. If there is QA, you can avoid disruptions.

And that’s exactly the same perspective we’re applying here. Let’s think about how continuity management and the BCP are put together. Yes, they exist, but you know what when you’re using them? You’re down. Value destruction is actually occurring.

So, think about this culture of resilience as analogous to the evolution to QA, which is, “Be more predictive and know what I’m going to be dealing with.” That is better than, “Test it out and know how to respond later.” I can actually get a heck of a lot better value and keep myself off the front page of the newspaper if I am more thoughtful in the first place.

That also goes back to the earlier point of how to accelerate time to value. That’s why Andrew was asking, “Hey, what are your five critical business services?” This is where we start off. Let’s pick one and find a way to make it work and get lasting value from that.

The best way to get people to change is quickly use data and show an outcome. That’s difficult to disagree with.

Gardner: Andrew, what are the key attributes of the EY ServiceNow resilience solution that helps get organizations past firefighting mode and more into a forward-looking, intelligent, and resilient culture?

React, respond, and reduce risk

Zarenski: The key is preventative and proactive decision support. Now, if you think about what preventative decision support means, the capability lets you build in thresholds for when a service maybe approaching a lag in its operational resilience. For example, server capacity may be decreasing for a web site that delivers an essential business service to external customers. As that capacity decreases, the service would begin to flash yellow as it approaches a service threshold. Therefore, someone can be intelligent and quickly do something about it.

But you can do that for virtually any service by setting policies in the database layer to understand what the specific thresholds are. Secondly, broad transparency and visibility is very important.

We’re expanding the usefulness of data for the chief risk officer (CRO). They can log into the dashboard two or three times a day, look at their 10 or 15 critical business services, and all the subservices that support them, and understand the health of each one individually. In an ideal situation, they log in in the morning and see everything as green, then they log in at lunchtime, and see half the stuff as yellow. Then they are going to go do something about it. But they don’t need to drill into the data to understand that something is wrong, they can simply see the service, see the approaching threshold, and – boom – they call the service owner and make sure they take care of it.

Yon: By the way, Andrew, they can also just pick up their phone if they get a pushed notification that’s something’s askew, too.

Zarenski: Yes, exactly. The major incident response is built into the backend. Of course, we’re proactively allowing the CROs and services owners to understand that something’s gone wrong. Then, by very simply drilling into that alert, they will understand immediately which assets are broken, know the 10 people responsible for those assets, and immediately get them on the phone. Or they can set up a group chat, get them paged, and any number of ways to get the problem taken care of.

The key is offering not just the visibility into what's gone wrong, but also the ability to react, respond, and have full traceability behind that response -- all in one platform. That really differentiates that solution from what else is in the market.

The key is offering not just the visibility into what’s gone wrong, but also the ability to react, respond, and have full traceability behind that response -- all in one platform. That really differentiates the solution from what else is in the market.

Gardner: It sounds like one of the key attributes is the user experience and interfaces that rapidly broaden the number of appropriate people and to get them involved.

Zarenski: You’re spot on. Another extremely important part is the direct log and record of what people did to help fix the problem. Regulations require recording what the disruption was, but also recording every single step and every person who interacted with the disruption. That can then be reported on in the future should they want to learn from it or should regulators and auditors come in. This solution provides that capability all in one place.

Yon: Such post-disruption forensics are very important for a lot of reasons.

Zarenski: Yes, exactly. A regulator will be able to look back and ask the question, “Did this firm act reasonably with respect to its responsibility?”

Easy question, but tough to answer. You would need to go back and recreate your version of what the truth was. This traps the truth. It traps the sequence, and it makes the forensics on answering that question very simple.

Gardner: While we’re talking about the payoffs when you do operational resiliency correctly, what else do you get?

Yon: I’ll give you a couple. One is we don’t have to get a 3 am phone call because something has broken because someone is already working on the issue.

Another benefit impacts the “pull-the-plug test,” where once a year or two we hold our breath to determine if our BCP plans are working and that we can recover. In that test, a long weekend is consumed with a Friday night fault or disconnection of something. And then we monitor the recovery and hope everything goes back to normal so we can resume business on the following Tuesday.

How to Build Resiliency into Operations

When we already understand what the critical business services are, we can quickly hone down essential causes and responses. When service orientation took hold, people bragged about how many services they had, perhaps as many as 900 services. Wow, that seems like a lot.

But are they all critical? Well, no, right? This solution allows you to materially keep what’s important in front of you so you can save money by not needing to drive the same level of focus across too wide of a beachfront.

Secondly, rather than force a test fault and pray, you can do simulations and tests in real time. “Do I think my resiliency strategy is working? Do I believe my resiliency machinery is fit for duty?” Well, now you can prove it, saying, “I know it is because I test this thing every quarter.”

You can frequently simulate all the different pieces, driving up the confidence with regulators, your leadership, and the auditors. That takes the nightmare out of your systems. These are but some of the other ancillary benefits that you get. They may seem intangible, but they’re very real. You can clean out unnecessary spend as well as unnecessary brand-impacting issues with the very people you need to prove your abilities to.

Gardner: Andrew, any other inputs on the different types of value you get when you do operational resiliency right?

Zarenski: If you do this right and set up your service mapping infrastructure correctly, we’ve had clients use this to do comparisons for how they might want to change their infrastructure. Having fully mapped out a digital twin of your business provides many more productivity and efficiency capabilities. That’s a prime example.

Gardner: Well, this year we’ve had many instances of how things can go very wrong -- from wildfires to floods, hurricanes, and problems with electric grids. As a timely use case, how would an organization in the throes of a natural disaster make use of this soluiton?

Prevent a data deep freeze

Zarenski: This specific use case stemmed from the deep freeze last winter in Dallas. It provides a real-life example. The same conditions can be translated over to hurricanes. Before the deep freeze hit back in the winter, we were adjusting signals from NOAA into the EY operational resiliency platform to understand and anticipate anomalies in temperatures in places that normally don’t see them.

We were able to run simulations in our platform for how some Dallas data centers were going to be hit by the deep freeze and how the power grid would be impacted. We could see every single physical asset being supported by that power grid and therefore understand how it might impact the business operations around the world.

There may be a server there that, in turn, supports servers in Hong Kong. Knowing that, we were able to prepare teams for a failover preemptively over to a data center in Chicago. That’s one example of how we can adjust data from multiple sources, tie that data to what the disruption may be, and be proactive about the response -- before that impact actually occurs.

Gardner: How broadly can these types of benefits go? What industries after power and energy should be considering these capabilities?

Yon: The most relevant ones are the regulated industries. So, finance, power, utilities, gas, and telecom. Those are the obvious ones. But other businesses need to ensure their firm is operational irrespective of whether it’s a regulatory expectation. The horizontal integration to offset disruption is still going to be important.

We’re also seeing interdependency across business sectors. So, talking to telecom, they’re like, “Yup, we need to be able to provide service. I want to be able to let people know when the service is going to go up when our power is down. But I have no visibility into what’s going on there.” So, sometimes the interdependencies cross sectors, cross industries and those are the things that are now starting to highlight.

Understanding where those dependencies on other industries are, can allow you to make better decisions on how you want to position yourself for what might be happening upstream so you can protect your downstream operations and clients.

It’s fascinating when we talk now about how each industry can gain transparency into the others, because there are clear interdependencies. Once that visibility happens, you’ll start to see firms and their ecosystem of suppliers leverage that transparency to their mutual benefit to reduce the impacts and the value disruption that may happen anywhere upstream.

Gardner: Andrew, how are organizations adopting this? Is it on a crawl-walk-run basis?

Map your service terrain

Zarenski: It all starts with identifying your critical services. And while that may seem simple at face value, it’s, in fact, not. By having such broad exposure in so many industries, we’ve developed initial service maps for what a financial institution is, or what an insurance institution looks like.

That head-start helps our clients gain a baseline to define their organizations from a service infrastructure standpoint. Once they have a baseline template, then they can map physical assets, along with the logical assets to those services.

Most organizations start with one or two critical services to prove out the use case. If you can prove out one or two, you can take that as a road show out to the rest of the organization. You’re basically setting yourself up for success because you’ve proven that it works.

Yon: This goes back to the earlier point about scale. You can put something together in a simple way, calibrating to what service you want to clear as resilient. And by calibrating what that service map looks like, you can optimize the spread of the service map, the coverage it provides, and the signals that it ingests. By doing so, you can synthesize its state right away and make very important decisions.

The cool thing about where the technology is now, we’re able to rapidly take advantage of that. You can create a service map and tomorrow you can add to it. It can evolve quickly over time.

How to Build Resiliency into Operations

You can have a simplistic view of what a service looks like internally and track that to see the nature of where faults enter the system and predict what might materialize in that service map, to see how that evolves with a different signal or an integration to another source system.

These organizations can gain continuous improvement, ensuring that they consistently raise the probability of avoiding disruptions. They can say, “I’m now resilient to the following types of faults,” and tick down that list. The business can make economic choices in terms of how complex it wants to build itself out to be able to answer the question, “Am I acting in a reasonable way for my shareholders, my employees, and for the industry? I’m not going to cause any systemic problems.”

Gardner: You know, there’s an additional pay back to focusing on resiliency that we haven’t delved into, and it gets back to the notion of culture. If you align multiple parts of your organization around the goal of resiliency, it forces people to work across siloes that they might not have easily forded in the past.

So, as we focus on a high-level objective like resilience, does that foster a broader culture of cooperation for different parts of the organization?

Responsible resiliency collaboration

Yon: It definitely does. Resiliency is becoming a sound engineering principle generally. It can be implemented in many different ways. It can be implemented not only with technology, but with product, people, machinery, and governance.

So many different people participate in the construction of an architectural capability like resiliency that it almost demands that collaboration occur. You can’t just do it from a silo. IT just can’t do this on their own. The compliance people can’t do this on their own. It’s not only a horizontal integration across the systems and the signals for which you detect where things are -- but it’s an integration of collaboration itself across those responsibility areas and the people who make it so.

Gardner: Andrew, what in the way the product is designed and used helps facilitate more cultural cooperation and collaboration?

Zarenski: Providing a capability for everyone to understand what’s going on is so important. For me to see that something going wrong in my business may impact someone else’s business gives a sense of shared responsibility. It gives you ownership in understanding the impacts across all the organizations.

A lot of this rolls up with being compliant to different regulations. We're providing a capability for virtually anyone to support risk and compliance activities -- without even knowing that you're supporting risk and compliance activities. It makes compliance easy to understand.

Secondly, a lot of this all rolls up to being compliant in different regulations. We’re providing a capability for virtually anyone to support risk and compliance activities -- without even knowing that you’re supporting risk and compliance activities. It makes the job of compliance visual and easy to understand. That ultimately supports the downstream processes that your risk and compliance officers must perform -- but it also impacts and benefits the frontline workers. I think it gives everyone an important role in resiliency without them even knowing it.

Gardner: How do I start the process of getting this capability on-boarded in my company regardless of my persona?

Yon: The quick answer is to turn on the news. Resiliency and continual operation awareness are now at the board level. It’s one of the top-five priorities firms say are important for them to survive through the next 10 years.

Witness all the different things that are being thrown at us all -- whether it’s weather, geopolitical, and pandemic-related. The awareness is there. The interest is definitely there. Then the demand comes from that interest.

Based on the feedback and conversations were having with so many clients across so many industries, it is resonating with them. It’s now obvious that this needs to be looked at because turning your digital storefront off is no longer an option. We’ve had too many people see the impact of that over the past year.

And the nature of disruptions just keeps getting more complex. We’ve had near-death business experiences. They’ve had the wake-up call, and that was enough of a motivation to have awareness and interests in it that’s now moving us toward how to best fulfill it.

Gardner: A nice thing about our three-part series is we first focused on the critical timing around the financial industry. We’re talking more specifically today about the solution itself and its wider applicability.

The third part of our series will share the experiences of actual customers and explore how they went about the journey of getting that germ of operational resilience planted and then growing it within their company. Meanwhile, where can our audience go for more information and to learn more about how to make operation resiliency a culture, a technology, and a company-wide capability?

Yon: For those folks who already have responsibilities in this area, their industry trade shows, conversations, and dialogues are actively covering these issues. Second, for those who are EY or ServiceNow customers, talk to your team because they can lead you back to folks like Andrew and myself to confer about more specifics based on where you are on your journey.

Gardner: I’m afraid we’ll have to leave it there. You’d been listening to a sponsored BriefingsDirect discussion on how more industries can reach a higher level of assured business availability -- despite persistent threats.

And we’ve learned some of the best ways to anticipate, plan for, and swiftly implement the means for nearly any business to avoid disruption, thanks to a holistic cultural approach to sustained operations.

Please join me in thanking our guests, Steve Yon, Executive Director for the EY ServiceNow Practice. Thank you, Steve.

Yon: Thank you.

Gardner: And we’ve also been joined by Andrew Zarenski, Senior Manager and ServiceNow Innovation Leader at EY. Thank you, Andrew.

Zarenski: Thank you, Dana.

Gardner: And a big thank you as well to our audience for joining this BriefingsDirect operational resilience innovation discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of ServiceNow- and EY-sponsored BriefingsDirect interviews.

Thanks again for listening. Please pass this along to your business community and do come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: ServiceNow and EY.

A transcript of a discussion on the many ways that businesses can reach a high level of assured business availability despite varied and persistent threats. Copyright Interarbor Solutions, LLC, 2005-2021. All rights reserved.

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