State of Digital Analytics: The Persistent Challenge of Data Access & Governance

Publié le par hanswillertbleuazurconsultingeu

Disjointed, inaccessible data is a major productivity inhibitor for analytics teams, diverting skilled resources from contributing to valuable business intelligence.

Analytics teams struggle with data access. In addition to listing data silos and data access among both their top data and analytics challenges, above, nearly three in five said it takes days or weeks to access all the data needed for their work or the work of the teams they manage. Only a third were able to access all their data in a day or less.

AMOUNT OF TIME FOR ANALYSTS AND ANALYTICS TEAMS TO ACCESS DATA

Nearly two in five analytics professionals are spending more than half of their work week on tasks unrelated to actual analysis. Forty-four percent of managers reported that more than half of their team’s work week is spent accessing, blending, and preparing data rather than analyzing it, while 31 percent of analysts said they spend more than half of their work week on data housekeeping.

TIME SPENT PREPPING DATA, RATHER THAN ANALYZING IT

As a result, the majority of analysts have found it necessary to learn programming languages specifically to help them access and/or prepare data for analysis. Outside of mandates from their employers, a full 70 percent of analysts reported taking it upon themselves to learn to code for this reason, and more than a quarter of those analysts have spent 80 or more hours learning to program.

ANALYSTS LEARNING PROGRAMMING SKILLS TO OVERCOME DATA ISSUES

It should go without saying that data professionals tasked with analyzing organizational information meaningfully and actionably cannot adequately perform their core job function without accurate data. Yet in addition to raising the data access challenges above, the industry is also split in terms of confidence in data accuracy. Nearly half reported that they question the accuracy of the data they or the teams they manage use regularly, while a little more than half said they are confident about their data.

Data Analysis

Click here to access TMMData’s detailed Survey Results

How digital reinventors are pulling away from the pack

Publié le par hanswillertbleuazurconsultingeu

Digitization is a long way from running out of steam, since the bulk of company revenues in most industries still come from traditional sources. Yet the results from McKinsey’s latest survey on digital strategy suggest that a digital divide is already taking shape. Companies competing in traditional ways (that is, without applying digital technologies and strategies in their businesses) have seen lower rates of revenue and earnings growth than have companies competing in digital ways—and those rates are tightly correlated with the level of digitalization, or digitization, in their respective sectors. But other players are seeing tremendous growth as digitization advances. The companies making digital moves—digital natives, industry incumbents competing in new and digital ways, and incumbents moving into new sectors—are out-performing their traditional-incumbent counterparts.

We call these companies digital reinventors. While most respondents say that their companies are making at least marginal investments in digital, we found last year that few had achieved top-quartile growth and high returns—not surprising, given the lukewarm response to digitization the average respondent reports in this year’s survey. Digital reinventors, in contrast, are embracing digital with both their investments and their strategic decision making. Our results indicate that companies in this group are not only investing more in digital but also investing and executing differently. The reinventors are investing at scale in

  • technology,
  • analytics,
  • and digital talent

—not just playing on the margins—and investing much more aggressively in business-model innovations or entirely new business models. They make more digital-related acquisitions and divestitures than traditional incumbents do; they are likelier to accelerate changes in their own businesses; and they are using more advanced, innovative technologies. The results indicate that their efforts are paying off: the reinventors are seeing larger gains in revenues and earnings than are traditional incumbents that have yet to embrace digitization.

Growing pressure on incumbents

As digitization continues to progress, its expected effects on revenues seem pronounced. When respondents were asked how much of their companies’ revenues would be at risk in the next three years if those companies took no further action to address digital pressures, they estimated that almost one-third could be lost or cannibalized. Consistent with our earlier research showing that increased levels of digitization produce shrinking profit and revenue pools at the industry level, the revenues at risk are even greater in the industries (high tech, as well as media and entertainment) experiencing the highest levels of digitization.

But the level of digitization is only part of the industry picture. Despite a common belief that digital natives are the greatest threat to an industry’s existing market share, the results indicate that incumbents competing in digital ways pose just as great a threat to other companies, if not a greater one.

The correlation between the market share owned by digital natives and revenues at risk is on par with that of incumbents playing digitally. This finding is consistent with other work suggesting that incumbents can have a strong effect on the market and on the pace of digital disruption in a given industry, and this effect is only magnified by the more powerful positioning of these incumbents. Since those competing in digital ways already own a larger market share than digital natives do, on average, they can also make larger shifts in the economics of their respective markets.

To date, the loss of revenues as digitization has expanded is already clear. Nearly 20 percent of all respondents report negative revenue growth in the past three years. But some companies can thrive in a more digitized landscape: specifically, those trying to reinvent themselves by embedding digital technologies in the core of their business models and by launching new digital businesses. Respondents at incumbents playing digitally are twice as likely as traditional incumbents to report exceptional financial growth (that is, an average compound annual growth rate of more than 25 percent) during this same period.

Digital Reinventors

Click here to access McKinsey’s detailed survey analysis

 

 

Creating a Data-Driven Enterprise with DataOps

Publié le par hanswillertbleuazurconsultingeu

Let’s discuss why data is important, and what a data-driven organization is. First and foremost, a data-driven organization is one that understands the importance of data. It possesses a culture of using data to make all business decisions. Note the word all. In a datadriven organization, no one comes to a meeting armed only with hunches or intuition. The person with the superior title or largest salary doesn’t win the discussion. Facts do. Numbers. Quantitative analyses. Stuff backed up by data.

Why become a data-driven company? Because it pays off. The MIT Center for Digital Business asked 330 companies about their data analytics and business decision-making processes. It found that the more companies characterized themselves as data-driven, the betterthey performed on objective measures of financial and operational success. Specifically, companies in the top third of their industries when it came to making data-driven decisions were, on average, five percent more productive and six percent more profitable than their competitors. This performance difference remained even after accounting for labor, capital, purchased services, and traditional IT investments. It was also statistically significant and reflected in increased stock market prices that could be objectively measured.

Another survey, by The Economist Intelligence Unit, showed a clear connection between how a company uses data, and its financial success. Only 11 percent of companies said that their organization makes “substantially” better use of data than their peers. Yet more than a third of this group fell into the category of “top performing companies.” The reverse also indicates the relationship between data and financial success. Of the 17 percent of companies that said they “lagged” their peers in taking advantage of data, not one was a top-performing business.

But how do you become a data-driven company? According to a Harvard Business Review article written by McKinsey executives, being a data-driven company requires simultaneously undertaking three interdependent initiatives:

Identify, combine, and manage multiple sources of data

You might already have all the data you need. Or you might need to be creative to find other sources for it. Either way, you need to eliminate silos of data while constantly seeking out new sources to inform your decision-making. And it’s critical to remember that when mining data for insights, demanding data from different and independent sources leads to much better decisions. Today, both the sources and the amount of data you can collect has increased by orders of magnitude. It’s a connected world, given all the transactions, interactions, and, increasingly, sensors that are generating data. And the fact is, if you combine multiple independent sources, you get better insight. The companies that do this are in much better shape, financially and operationally.

Build advanced analytics models for predicting and optimizing outcomes

The most effective approach is to identify a business opportunity and determine how the model can achieve it. In other words, you don’t start with the data—at least at first—but with a problem.

Transform the organization and culture of the company so that data actually produces better business decisions

Many big data initiatives fail because they aren’t in sync with a company’s day-to-day processes and decision-making habits. Data professionals must understand what decisions their business users make, and give users the tools they need to make those decisions.

DD Enterprise

Click here to access the ebook Data Driven Organizations

EIOPA Insurance Market Risk Dashboard October 2017

Publié le par hanswillertbleuazurconsultingeu

Key observations:

  • Risks for the insurance sector remain overall stable and some slight improvements are observed in the solvency ratios of groups and life solo undertakings.
  • Profitability of the sector has shown some positive signs both for life and non-life.
  • Despite these positive signs, the continuing low-yield environment and the observation that market fundamentals might not properly reflect the underlying credit risk, still represent important concerns for the EU insurance industry.
  • Underwriting risks remain of limited concern; however the impact of the recent nat cat events has not yet been reflected in this risk dashboard release and might affect (re)insurers exposed to the non-life business. At this stage no final conclusion can be made.
  • Market perception improved driven by the outperformances of the insurance stocks and the reduction of the CDS spreads. Ratings and rating outlooks remain stable.

Risk Dashboard Oct 2017

The macroeconomic environment characterised by enduring low-yields remains fragile. Inflation rate forecast is decreasing inverting the positive trend observed till March 2017, whereas unemployment rates continued to decrease. Despite slightly increasing policy rates in some jurisdictions, the balance sheets of central banks are still expanding (even if the increasing trend is reducing) with potential effects on the pricing of risk premia.

Credit risk is still not properly reflected in market prices where the observed spreads are close to the historical low. The investment portfolio of the undertakings, largely composed of investment grade assets, remains stable in terms of credit quality.

Market risks remain at a medium level. The slight increase of the volatility in the bond markets is counterbalanced by the reduction of the volatility in equity markets. Insurance specific indicators confirm the stable risk exposure.

Risks relating to liquidity and funding remain constant in Q2 2017. However, the increase of the average coupon/maturity indicator, despite affecting a minority of the market, shows an increased challenge for insurers to raise debt funding. Q2 2017 reports a material increase in the cat bond issuance to back potential effects deriving from the hurricane season. Nevertheless the overall assessment of the risk category shows that liquidity is not a major issue for the insurance industry.

Indicators of profitability and solvency signal slight signs of improvement. SCR ratios slightly increased for groups and life solo undertakings whereas non-life solo undertakings reported stable values. Profitability of the sector has shown some positive signs both for life and non-life business.

Insurance risks remain unchanged. Concerns rise from the potential impact on the industry of the recent nat cat events observed in the US and in some European countries. Those events are not yet reflected in the specific metrics and any conclusive change on the impact is premature.

Click here to access EIOPA’s detailed dashboard

 

Bank to the future: Finding the right path to digital transformation

Publié le par hanswillertbleuazurconsultingeu

Customers are changing the way they buy financial services. That means that firms can’t afford to sit on the sidelines when it comes to their digital capabilities. But a bank shouldn’t think of a digital transformation as only a way to stay ahead of the competition. A bank should make sure its transformation fits its strategy, because transformation is really all about strategy.

  • What makes sense for your bank?
  • Where are you succeeding with customers?
  • What can help you keep going down that road?

While it’s important to keep up with competitors, your digital transformation should be tailored to your bank’s particular needs. Each institution has its own footprint, legacy infrastructure, customer demographics, and so on. Let’s explore the three most common approaches to digital transformation in more detail (see Figure 1). Each option creates a different customer experience, has a varying effect on profitability, and comes with its own set of challenges. From there, we’ll discuss how you should weave in digital transformation as part of your overall strategy and what you can do to get started now.

The simplest approach is to modify the front end only, focusing on the primary ways a customer interacts with a bank (website, app, etc.). Largely a cosmetic fix, the bank designs an appealing mobile app and web interface but keeps the organization’s workflows, culture, and back-end infrastructure intact. We understand the appeal of this approach. For an organization that needs a quick win, it’s certainly the fastest route. In fact, this approach may be a quick interim step for banks that have real client-facing issues. It’s a solid stop on the road of transformation, but for most banks, it won’t be the destination.

DigitalBank

Click here to access PWC’s report

Insurance Global Trends in 2017

Publié le par hanswillertbleuazurconsultingeu

A brief summary of the key regional trends :

  • Analytics, Customer Centricity and Digital Innovation achieve similar scores across all our regions.
    • Customer-Centricity trails marginally in North America.
    • Noteworthy is the perfect score of 60 attained for Digital Innovation in Asia-Pacific, which indicates that this was the number-one priority here in all four measures underlying the priority score (money, time, staffing and training).
  • Underwriting and Risk Management both score considerably higher in North America than they do elsewhere – as we saw in the first priorities table, Underwriting is 3rd in the list of priorities in North America, despite not getting above 7th place in any other regions, and its Risk Management score is more than 80% higher than the runner-up’s (Europe).
  • There is a step-up in focus on Claims in Europe and North America compared to Asia-Pacific.
  • With Distribution Diversification, we have the exact inverse scenario, with Asia-Pacific leading the pack, possibly a reflection of the emerging markets within it necessitating high-scale low-cost distribution, which traditional models cannot provide.
  • Fraud is also a marginally higher priority in Asia-Pacific.
  • Europe and Asia-Pacific lead North America with their focus on Internet of Things.
  • Cybersecurity and Mobile achieve similar (lowish) scores for all regions; Product Development is relatively high across the board.
  • Regulation is the biggest deal in Europe, where respondents quoted in particular Solvency II and the Insurance Distribution Directive (IDD) as being causes for concern.

InsuranceNexus

Click here to access Insurance Nexus detailed survey analysis

The new dynamics of financial globalization

Publié le par hanswillertbleuazurconsultingeu

Since the global financial crisis began in 2007, gross cross-border capital flows have fallen by 65 percent in absolute terms and by four times relative to world GDP. Half of that decline has come from a sharp contraction in cross-border lending. But financial globalization is still very much alive—and could prove to be more stable and inclusive in the future.

  • Eurozone banks are at the epicenter of the retreat in cross-border lending, with total foreign loans and other claims down by $7.3 trillion, or by 45 percent, since 2007. Nearly half has occurred in intra-Eurozone borrowing, with interbank lending showing the largest decline. Swiss, UK, and some US banks also reduced their foreign business.
  • The retrenchment of global banks reflects several factors:
    • a reappraisal of country risk;
    • the recognition that foreign business was less profitable than domestic business for many banks;
    • national policies that promote domestic lending;
    • and new regulations on capital and liquidity that create disincentives for the added scale and complexity that foreign operations entail.
  • Some banks from developing and other advanced economies—notably China, Canada, and Japan—are expanding abroad, but it remains to be seen whether their new international business is profitable and sustained.
  • Central banks are also playing a larger role in banking and capital markets.
  • Financial globalization is not dead. The global stock of foreign investment relative to GDP has changed little since 2007, and more countries are participating. Our new Financial Connectedness Ranking shows that advanced economies and international financial centers are the most highly integrated into the global system, but China and other developing countries are becoming more connected. Notably, China’s connectedness is growing, with outward stock of bank lending and foreign direct investment (FDI) tripling since 2007.
  • The new era of financial globalization promises more stability. Less volatile FDI and equity flows now command a much higher share of gross capital flows than before the crisis. Imbalances of current, financial, and capital accounts have shrunk, from 2.5 percent of world GDP in 2007 to 1.7 percent in 2016. Developing countries have become net recipients of global capital again.
  • But potential risks remain. Capital flows—particularly foreign lending—remain volatile. Over 60 percent of countries experience a large decline, surge, or reversal in foreign lending each year, creating volatility in exchange rates and economies. Equity-market valuations have reached new heights. Financial contagion remains a risk. The rise of financial centers, particularly those that lack transparency, is worth watching.
  • Looking forward, new digital platforms, blockchain, and machine learning may create new channels for cross-border capital flows and further broaden participation.
    • Banks need to harness the power of digital and respond to financial technology companies or fintechs, adapt business models to new regulation, improve risk management, and review their global strategies.
    • Regulators will need to continue to monitor old risks and find new tools to cope with volatility, while creating a more resilient risk architecture and keeping pace with rapid technological change.

Financial Globalization

Click here to access McKinsey’s detailed study

 

Solvency II : First experiences with SFCR reporting – Germany, UK, Ireland

Publié le par hanswillertbleuazurconsultingeu

In May 2017, all German solo insurance companies were required for the first time to publish selected reporting forms as part of Solvency and Financial Condition Reporting (SFCR) – insurance groups followed at the end of June. These reports did not only include a huge amount of data on specific Solvency II risk figures but also comprehensive information about

  • general business development,
  • qualitative explanations on the presented figures and on the financial, solvency and business situation.

Aside from the obligation to publish own Solvency II results, insurance companies now for the first time have the opportunity to compare their Solvency II results with direct competitors.

The publication of SFCR reports also gives stakeholders access to Solvency II reports who did not have insight into these results before, for instance

  • rating agencies,
  • sales partners,
  • customers,
  • media
  • and creditors.

The extension of the target group has two main consequences for insurance companies:

  1. Firstly, Solvency II results need to be explained to an audience that has little experience with Solvency II – unlike insurance supervisors who had exclusive access to Solvency II results until now.
  2. Secondly, the solvency ratio becomes increasingly important as a material piece of information from SFC reports.

Due to the flood of information available in the SFC reports and the lack of experience of many market participants, it can be expected that processing Solvency II results will be mainly restricted to the evaluation of the solvency ratio as the core result of Solvency II. In particular, it was revealed that individual insurance companies are already actively using the solvency ratio in sales.

The attention given to the solvency ratio by the public will increase even further in the future if ratios approach the critical 100% threshold due to reduced interim measures.

Due to its increasing importance, the solvency ratio is no longer regarded as a pure reporting figure but as a value that requires active management. A variety of degrees of freedom and options in the calculation of Solvency II results allow insurance companies both to adjust their business policies and to influence SII results through suitable calculation methods. Due to the short history of Solvency II, there is little understanding of the impact mechanisms “behind” the solvency ratio at the moment, which is why not all optimization potentials are currently leveraged and insurers are still actively searching for solvency ratio levers.

In light of the extended information basis, decisions about

  • the use of interest rate measures,
  • an internal model (instead of the standard model),
  • simplified calculation methods
  • and the use of company-specific parameters

can be reassessed.

SFCR Germany

Click here to access Zeb Control’s detailed report

In a survey of the Solvency and Financial Condition Reports (SFCRs) and public Quantitative Reporting Templates (QRTs) for 100 of the top non-life insurers in the UK and Ireland the aim of the review was twofold – to analyse the numbers disclosed by firms for the first time and to consider how well firms have dealt with the narrative reporting required of them under Solvency II.

The survey team has also drawn upon our Pillar 3 roundtables with insurers and reinsurers across the market to understand how the first year of submissions has worked in practice.

Their key conclusions are:

  • Insurers are generally sufficiently capitalised, but the buffers firms have in place to protect against balance sheet volatility may not be enough to prevent them from having to recapitalise over the short term.
  • Motor insurers typically have the least financial headroom, compared with other insurers.
  • Brexit is on the agenda for many insurers, with some firms setting up internal steering groups to ensure they are well placed to access the European Market after the UK leaves the EU.
  • Uncertainty around the Ogden discount rate used to calculate personal injury compensation payments poses a material risk to some insurers, with two firms disclosing that the recent change required them to recapitalise significantly.
  • Firms must work harder to publish better quality QRTs, with over a quarter of the firms we reviewed disclosing QRTs containing obvious errors.
  • Some firms’ SFCRs are not fully compliant with the Solvency II regulations, with particular areas of weakness including disclosure around sensitivity testing of the SCR and uncertainty within technical provisions.

SFCR UK IRL

Click here to access LCP’s detailed survey analysis

Digitizing IT

Publié le par hanswillertbleuazurconsultingeu

Digital transformation is the new strategic imperative—no longer just a handy source of competitive differentiation but a must-do for every company, in every industry, and across every geography.

The challenges involved, however, are testing leadership teams to their limits: how can they best

  • wrap digital services around existing products and services,
  • launch new ones that capture customers’ hearts and wallets,
  • and find innovative ways to interact digitally, both internally and externally?

And how can they achieve their goals against a backdrop of stretched budgets and competing priorities ?

In the eye of the storm sit the chief information officer (CIO) and the IT team.

As digital technology becomes embedded in almost every aspect of doing business, IT is increasingly called upon to advise the C-suite

  • on the feasibility of new approaches and to deliver new applications and services,
  • while continuing to perform the day-to-day tasks that keep existing systems up and running.

This report explores both the challenges and the opportunities facing IT in an era of digital transformation. Written by The Economist Intelligence Unit (EIU) and sponsored by SAP, it is based on a survey of more than 800 business and IT leaders across Europe, North America, Latin America and Asia-Pacific, along with desk research and interviews with C-level executives at major international organisations.

The key findings are as follows:

  • Digital transformation lacks strategic co-ordination. Digital transformation is firmly on the agenda for the majority of companies, and they are busy with a variety of digital initiatives. They are investing in a range of technologies and pursuing a wide array of objectives, most commonly improving products and services and boosting the customer experience. But only a minority of organisations have devised and implemented a digital transformation strategy to direct these initiatives. Those that have done so are substantially more likely to see their digital initiatives as being effective (93%) than those that have not (63%).
  • The way in which digital transformation is implemented varies considerably between firms—and even between departments. The CIO is the most likely executive to take ownership of digital transformation (37%), but CEOs (20%) and chief operating officers (15%) are also likely owners—and 16% say that digital transformation is not owned by one individual member of the C-suite. Meanwhile, 29% report that digital initiatives are led by individual business units, 24% say they are led by a dedicated digital unit, and 22% say they are led by IT. Interestingly, respondents from IT are more likely to believe their digital initiatives are centrally coordinated than those in other functions, revealing a distinct lack of “joined-up thinking” on the matter.
  • Both IT and non-IT executives believe that the IT department should take a more active role in digital transformation. Executives both inside and outside the IT function consistently report that IT should ideally play a more active role in key capabilities that support digital transformation than is currently the case. The biggest discrepancy concerns innovation—just 7% of executives say that IT leads their organisation’s attempts to identify opportunities to innovate, while 35% believe that it should. The fact that IT executives agree shows that it is not for want of ambition that they do not currently lead these capabilities. Instead, the data suggest that they are constrained by the obligations of their current role.
  • Digital transformation is a test of the IT department’s ability to collaborate. Digital products and processes require input from multiple departments. As a result, digital transformation is a test of an organisation’s ability to work across departmental lines. The majority of executives of all stripes agree that collaboration between IT and non-IT management will provide the greatest opportunity for success in digital business initiatives. “Everyone has to succeed together,” as one digital executive puts it.
  • IT departments are evolving for the era of digital transformation, but there is much more to be done. IT departments have begun to adapt their working practices to meet the needs of digital transformation—and their peers in other functions are noticing. Almost half (45%) of non-IT executives say the IT department has changed the way it works “completely” or “significantly” to support digital transformation, while 40% report “limited” changes. However, IT executives themselves report limited adoption of key methodologies associated with digital delivery, such as Agile software development (17%) or DevOps (15%). These new ways of working are by no means easy to adopt, but this implies a degree of inertia that few companies can afford.

Digitize IT

Click here to access the Economists Intelligence Unit’s detailed report

The Digital Business Imperative

Publié le par hanswillertbleuazurconsultingeu

Don’t Build A Digital Strategy; Digitize Your Business Strategy

Digital fundamentally changes your relationship with your customers. You can’t address this change with a bolt-on digital strategy that adds an app here or a site there. To remain competitive, you must re-engineer how your business creates value for your customers in the digital age.

Digital Has Changed Your Markets
Your customers aren’t who they used to be — they haven’t been for quite some time now. Digital touchpoints permeate every aspect of your customers’ lives — how they watch TV on Netflix, how they research new products on their smartphone, how they check their balance on PayPal, or how they review their stay on Airbnb. Business buyers expect automated service, tap communities for insights, and want services with apps attached; they’re even more digital than consumers are. Digital has transformed the market context for every business, and the pace of change is accelerating.

Digital Has Changed The Way That You Operate
Digital has transformed more than your channels and customers. It also disrupts you from within, changing the way that you do business. Digital not only accelerates the pace of change but also brings new opportunities for firms that can embrace the technology fast enough. It speeds time-to-market, reduces costs, and unlocks new revenue streams. There’s a reason why manufacturers ABB, Schneider Electric, and Siemens spent a combined €8 billion on acquiring software assets to help clients design, manage, and optimize complex industrial operations like power grids more effectively.

Use Digital To Help Customers Get To The Outcomes That They Desire

Re-envision your business not as a set of products and services but as part of the personal value ecosystems that your customers assemble according to their needs and desires. Learn to increase value by expanding your company’s role in your customers’ personal value ecosystems.

Digital Operational Excellence Increases Business Agility

Digital business isn’t just about customer experience — it’s also a way to drive operational agility. Digital operations can increase speed-to-market, make employees more productive, promote leaner processes, and maximize asset utilization.

Digital Dimensions

 

Click here to access Forresters’ detailed study