Business Intelligence Tools on Financial Reporting - Research Proposal Example

The impact of enterprise-wide Business Intelligence Tools on Financial Reporting at First National Bank Introduction Business intelligence is one of the most important aspects of doing business in the current competitive scenario. The existing situation in the financial markets as well as other markets of the world indicate that there must be a proactive approach by the management of the firms to gather business intelligence in a manner that can allow them to create and sustain their competitive advantage. In any business settings, business intelligence plays a significant role in achieving the profitability targets of the firm as well as maintains and improves the operational efficiency of the firm. Business Intelligence therefore shall not be viewed as an operational necessity for the firm but rather it shall be viewed with a holistic approach so as the same must fit into the overall organizational strategy of the firm.(Fuld, 1991,13). Despite such strategic significance, managers are still finding it difficult to fully understand the relevance and significance of business intelligence. The implementation of the business intelligence infrastructure as well as subsequent use of the business intelligence is still a significant challenge for the managers. Improving financial reporting is one of the most aspects for the organizations and as such the use of enterprise- wide Business Intelligence tools in financial reporting can play a significant part in achieving more transparency as well as correct reporting of the financial affairs of the any firm. Within this context, this research study therefore will attempt to analyze and explore the impact of enterprise- wide business intelligence tools on financial reporting at First National Bank. Aim of the Study Recent turmoil in financial sector has necessitated that the banks and other financial institutions must improve their financial reporting mechanism in order to provide comprehensive information to their shareholders as well as other stakeholders. Thus in an increasingly complex business scenario, business managers must constantly look for more innovative and unique ways of maintaining and sustaining their competitive advantage in the market. Considering the strategic importance of business intelligence and its role in achieving the strategic objectives of the firm, this study will attempt to investigate the benefits of implementing enterprise-wide Business Intelligence tools like a Data Warehouse supplemented by appropriate front-end tools in a retail bank and recommend looking at business intelligence generally, not specifically, and view BI on an enterprise wide basis. The overall purpose is to explore as to how the business intelligence can be integrated with the existing systems and procedures at First National Bank to understand as to how the regulatory financial reporting mechanism can be improved at the Bank and what benefits can be passed on if the similar infrastructure is properly implemented within the Bank. Since, it is also expected that the financial reporting requirements will be further strengthened by the regulatory authorities therefore the overall need for effective financial reporting will increase. In such scenario, the implementation and development of business intelligence tools will play critical role. This study therefore will also important because adapting BI solutions, firms basically can provide organizations an entirely new ways of achieving the competitive advantage and resultantly increasing the overall competitiveness of the whole industries to a point where resources will be utilized more efficiently. Apart from this, it is also critical to understand that this study will provide a readymade solution to the new managers planning to switch towards availing any model of business intelligence to gain first hand knowledge about the different benefits which are offered by respective business intelligence models. Besides, due to outsourcing phenomenon, most of the firms attempted to outsource their non-core activities to the firms located outside their boundaries thus on-demand business intelligence- which is dominated by the firms from West, can provide an effective alternative to the firms to stop their outsourcing services and avail such business intelligence services which can be used at significantly lower cost and without creating any socio-political debates within their local environment for allegedly transferring jobs outside of their countries. This study therefore will attempt to explore the actual dynamics behind the implementation of the business intelligence solutions within the retail bank i.e. First National Bank and how different front end and back end tools can provide an enterprise wide view of the firm. Research Objectives As discussed above, the overall aim of this research is to understand the process of business intelligence and how it can be used for the purpose of financial reporting. However, underlying this broader theme of research, there are sub-themes which this research will attempt to explore. One of the research objectives of this study will therefore be to investigate the benefits of the data warehouse for a retail bank and how it can be utilized for the purpose of financial reporting. Further, this research study will also investigate as to how the implementation of data warehouse can really improve the financial reporting process of the firm besides making recommendations in terms of how the single front end view of the single data warehouse can offer necessary tools to the management of First National Bank to gain more information about the actual financial performance of the bank. Research Questions This research study attempt to explore and raise following research questions: 1. Whether a retail bank can benefit from the implementation of an enterprise wide data warehouse. 2. What are some of the current financial reporting problems faced by the Banks in general and First National Bank in particular and how the implementation of data warehouse can help overcome such issues. 3. How the implementation and design of a new data warehouse can help the decision makers in taking a holistic view of the financial performance of the Bank at any given point in time. The above research questions will be raised keeping in context the overall requirements of a retail bank for the data warehousing requirements as well as how such efforts can enhance the ability of the management to assess the financial performance of the firm from a broader perspective. Problem Statement Despite its reputation for innovation and excellence in financial services, FNB still uses business intelligence in a compartmentalized manner. Each business unit has its own business intelligence tools which often reports different versions of the truth. The business currently does not have one system that presents a holistic view of the bank’s financial and non-financial performance. Owing to the disparate systems in each business unit, IT budgets are spent yearly on departmentally focused data and interrogation tools instead of a single point of contact to Business Intelligence expertise and enterprise-wide knowledge repository. The purpose of this study is to emphasize the need to eradicate the inconsistencies of working with disparate systems and recommend the implementation of Business Intelligence tools that present a holistic view of the bank’s financial performance. LITERATURE REVIEW This literature review will be divided into two parts i.e. part 1 will be discussing the role of financial reporting in current context of financial meltdown whereas the second part will be discussing how the business intelligence and development of data warehouses may allow banks to take a more holistic view of their financial affairs. Implementing data warehouses is one of the most costly options to be exercised by the firm. In order to avoid such costs, firms often tend to improve the productivity of their warehouses through different means.(Min,2009,271). Thus designing of data warehouses largely depend upon the exact requirements of the firms tailored in such a manner that they become necessarily different strategic alternatives for the firms to achieve and maintain superiority over the gathering of business intelligence and successfully converting the same into effective information. The overall issue of financial reporting is also significant from the fact that it not only provides effective information to the internal stakeholders of the firm but also its external shareholders. External stakeholders therefore will be able to get better and more transparent information if a comprehensive data warehouse is implemented catering the business intelligence needs of the bank. However, before discussing the issue of business intelligence and how implementation of single data warehouses with efficient front end tools can result into better efficiency for the Bank, it is important that a comprehensive look at the current financial meltdown as well as its impact on the ability of the management of the firm to make more informed decisions by using the data and business intelligence extracted through using the proposed data warehouse. Financial reporting is becoming critical owing to the recent financial meltdown as well as the large scale corporate scandals such as Enron and World Com. Advances in technology made it possible for the financial institutions to make investments at more rapid speed and across the border. This characterization of the financial markets not only increased their depth and flexibility but also increased their overall risk because of the unique risks being faced by each investment made into respective geographical areas. The so called globalization of the financial markets not only weakened the grip of regulators over the financial institutions, but it also brought fundamental changes into the business models being used by the financial institutions over the period of time.(Mishkin,2007,260). Globalization thus provided more opportunities to the financial institutions by advocating the culture of equity i.e. the basic thrust of managers was to improve upon the share price of the stocks rather than managing risks. (Wignall et.al, 2008). This fundamental shift into the perspectives of the financial institutions therefore caused a new phenomenon of booms and busts into overall industry cycles. Such increased volatility therefore, this resulted into more risk into the overall financial system of the developed world. (Wignall et.al, 2008). According to IMF, the response from the regulatory authorities towards the so called innovation into financial markets brought through the introduction of various derivative transactions was basically slow and non-existent. This lack of interest or capacity of the financial regulators either in US or UK allowed financial institutions to take extended risks which proved beyond their capabilities. Most of the financial institutions went to a level where the leveraged exposure reached to a level where it was not only unmanageable but was also beyond the capacity of the financial institutions to absorb such huge losses. This trend had been written off in the positive and in the interest of the market by way of the complex financial techniques that were used by the banks. However, little did the regulators and the bosses within these banks to realize that borrowing results in more depends on additional borrowing that fuels an artificial price increase of the financial assets that have been invested in. These include almost all the financial instruments that are used by banks such as equity, property, infrastructure and debt (Liebowitz, Stan 2008). Such large scale changes in the financial markets therefore also necessitated fundamental changes into the way financial reporting was used to be done. The overall need for having comprehensive information to make more informed decisions therefore means innovation not only in the processes but also into the systems of the organization. Many organizations despite having installed all the systems and procedures often fail to obtain the strategic value from the use of Business Intelligence. (Ranjan, 2008). Businesses therefore often do not get the value that is expected from such business intelligence solutions therefore managers need to understand and evaluate the different benefits and harms that these business models can incur to the firms. Over the period of time, the relative complexities of doing business has emerged with new dimensions and firms are now focusing more on utilizing the information in a manner which can be easily and effectively utilized in such a manner that the firm not only maintain and sustain its existing competitive advantages but also develop new sources of competitive advantages in order to survive and excel in an environment which is largely volatile and complex. Business intelligence is one such tool which can provide firms really visible and measurable financial benefits in terms of revenue increase (this means an actual increase in the sales of the firms generated after the implementation of BI solutions) as well as control of the cost which therefore ultimately result into the development of long term and sustainable future for the business. However, in order to effectively manage the implementation and execution of an effective business intelligence solution, it Is really critical that the firms must deploy an enterprise wide infrastructure within the firm which can lead to the development of the dedicated teams to manage such systems in most optimized manner. The relative complexities of the modern business world, the need for having access to more information therefore requires that the firms must have an access to such analytical tools which can help them to predict certain future events with relatively stable probabilities of success so that managers can really make effective and informed decisions. Such requirements therefore can only be met by the implementation and deployment of the effective business intelligence systems which increase the predictive as well as data manipulative capabilities of the firms in a manner that they can a consistent competitive advantage within the market. Business intelligence systems therefore not only serve for the purpose of achieving the strategic insight into the future but also allow firms to frame their strategies at tactical as well as functional level. Greater access to information as well as systematic manipulation of the data allow managers to note only get an insight into large amount of data but effectively convert that data into information and hence into knowledge also. (Business Week, 2006) It has also been argued that in this economic situation where the importance of gaining information has relatively increased, the suppliers of business intelligence services also need to stretch themselves to attain the level of sophistication and advancement that can effectively fulfill the requirements of the firms in these troubling times. This also means that the firms have to look for those solutions which provide them better risk versus reward options and as such future will largely depend upon how the managers anticipate the changes that are going to take place and the subsequent requirements for the business intelligence solutions. The existing solutions for the most emerging problems faced by the firms are mostly fulfilled through two types of business intelligence models i.e. on-demand and on-premise business intelligence solutions. The current trends in the market indicate that the more and more managers prefer to use on-demand business intelligence models because of the perceived cost advantages provided by the on-demand business intelligence models. The available literature confirms that the managers now prefer this model more because it does not involve extra start up costs as well as initial investment into information technology infrastructure. The power of cloud computing 1is such that it is believed that it is going to shake up the very foundations of the information technology industry and expand knowledge based economy.(Kambil,2009). On-Demand BI solutions are also called software as service solutions (SaaS) because firms often use the services of third party suppliers which offer the software as services which can be enjoyed over the given period of time. On-demand BI solutions are also popular because they reduce the traditional complexities such as lack of I.T. expertise, complex legal documentation and contract writing, choosing right kind of hardware etc, that are associated with the use of technology. (Peters, 2009). On-Demand BI solutions also provide a cheaper, efficient and flexible solution to all the requirements of the modern day business and as such they are more preferred over the traditional solutions offered. (Trident Capital, 2009) On-Demand BI solutions are also preferred because they provide easy access, quicker return on investments because of the low cost involved specially at the start up, more technological sophistication, flexibility as well as the greater visibility of the benefits accrued due to the implementation of on-demand business intelligence solutions. (Birst, 2009). Lack of maintainance as well as ease with which on-demand BI solutions can be implemented are some of the most critical aspects as to why more modern managers are preferring to deploy more of on-demand BI solutions. (Wise,2009) However, it is also critical to note that managers may face significant challenges in terms of exporting large amount of data through the cloud computing i.e. the transmission of data over the hosted servers therefore may be a significantly difficult task. Security is another critical issue which needs to be undertaken very seriously in order to allow the managers to continue to enjoy the same benefits. (All, 2009). Another important alternative to on-demand BI Solutions is On-Premise BI Solutions which provide customized in-house solutions to the Business intelligence needs of the firm. This model is relatively more easy for the firms to use because it is often developed in-house and company develop the required degree of expertise to operate such system. However, the start up and running costs for maintaining this model are relatively more and firms often have to invest certain resources to keep enjoying the benefits of such systems. Thus, On-Premise business intelligence solutions are relatively less in use now due to the fact that new and independent suppliers such as SaaS, salesforce.com as well as Birst are offering more unique and innovative solutions to the business needs of the frim as compared to the existing on-premise model of BI. Having discussed two different options of how a firm can design its business intelligence system, it is also important to note that the next step may involve the designing of a data warehouse at an enterprise level where the organization can actually access its various resources to make more informed decisions. It is argued that a corporate wide enterprise data strategy of the firm allow it to transform data into information for the purpose of future decision making. However, the front end tools that may be required to accomplish this take may require the designing and implementation of a single data warehouse with front end tools in order to achieve such flexibility. What is however, also important to discuss that the implementation of such data warehouse may result into higher costs and it is because of this reason that most of the organizations avoid to implement a proper data warehousing infrastructure for gather business intelligence.(Preston & Brohman,2002,207). Research Methodology This research study will be qualitative as well as quantitative in nature as it is the intended aim of the researcher to study business intelligence solutions. An effective and critical aspect of conducting this research will therefore be a review of the existing literature on the subject so that a critical insight into the overall trends in the market can be measured besides studying the overall attitude of the managers. Survey of existing literature as a research technique can be useful when the intended aim of the research is not to find any causal relationship between any two or more factors but rather look at some of the qualitative relationship between the variables. This therefore can be achieved through a thorough study of the existing literature on the subject so that an insight can be made into the future trends that can take place in the market. Quantitative side of the research methodology will include development of a questionnaire that will be circulated among the I.T. managers of firm. The questionnaire developed will contain questions which will be both general and specific close ended questions. Data gathered through this method will be analyzed and meaning full interpretations will be made to present the existing literature and its relevance to the intended aims of the research. This will be achieved by studying the overall preferences of the managers towards on-demand or on-premise BI Solutions i.e what are the key benefits which managers are getting that make them to prefer one model over another. Quantitative data will also be analyzed through descriptive statistics to understand the various trends such as average spending on both models, the number of companies employing such models etc. Finally, a set of recommendations will also be provided in order to ascertain whether one model is preferred by mangers over other so that if future reference is made from this study, managers can be able to easily identify the requisite solutions for their problems. These recommendations will be constructed after careful review of the literature as well as through interpretation of the results obtained from quantitative study. RESEARCH IMPLICATIONS This study will provide a practical insight into the management of information within First National Bank and will emphasize on the strategic importance of the data management. Though this study will be qualitative as well as quantitative in nature however, the focus will be on determining the use of data warehousing for financial reporting purposes and how management of the Bank can get a more holistic view of the overall financial performance of the firm. In a sense this study will attempt to provide new practical tools to the managers to monitor the performance of the firms in real time situations. References 1. All, A. (2009). Pros and Cons of Business Intelligence in the Cloud. Retrieved November 21, 2009, from IT Business Edge: http://www.itbusinessedge.com/cm/blogs/all/pros-and-cons-of-business-intelligence-in-the-cloud/?cs=35060# 2. Birst. (2009). Why On- Demand BI? Retrieved November 21, 2009, from Birst: http://www.birst.com/pdf/birst_why_on_demand_BI.pdf 3. Business Week. (2006, May). Seizing the BI Opportunity. Retrieved November 21, 2009, from Business Week: http://mediakit.businessweek.com/pdf/research/Seizing_the_BI_Opportunity_Whitepaper_20061.pdf 4. Blundell-Wignall, Adrian, Atkinson, Paul and Lee. Se Hoon (2008). The Current Financial Crisis: Causes and Policy Issues. Available: www.oecd.org/dataoecd/47/26/41942872.pdf. 5. Fuld, Leonard. (1991). A Recipe for Business Intelligence Success. Journal of Business Strategy, 12(1), 12 - 17. 6. Kambil, A (2009) A head in the clouds. Journal of Business Strategy. 30 (4) 58-59 7. Mishkin, Frederic S. (2007). Is Financial Globalization Beneficial. Journal of Money, Credit and Banking. 39 (2/3), p.259-294. 8. Liebowitz, Stan (2008), The Real Scandal - How feds invited the mortgage mess. New York Post. 9. Peters, B. (2009). On-Demand Business Intelligence Takes Off. Retrieved November 22, 2009, from Information Management: http://www.information-management.com/specialreports/2009_150/business_intelligence_bi-10015655-1.html 10. Preston, D & Brohman, K (2002) Outsourcing opportunities for data warehousing business usage. Logistics Information Management. 15 (3) 204 – 211 11. Ranjan, Jayanthi. (2008). Business justification with business intelligence. VINE, 38(4), 461 - 475. 12. Trident Capital. (2009). The Case for On-Demand BI solutions. Retrieved November 23, 2009, from Trident Capital: http://blog.tridentcap.com/2009/04/the-case-for-on-demand-bi-solutions-part-1.html# 13. Wise, L. (n.d.). Expansion Of SaaS-Based BI Solutions. Retrieved November 24, 2009, from 2009: http://www.dashboardinsight.com/articles/new-concepts-in-business-intelligence/expansion-of-saas-based-bi-solutions.aspx Read More