Analysis: The rise of financial analytics

Firms should not be afraid of using new analytics tools as they can bring a myriad of benefits.

By Tom Brewster, 4 May 2010 at 10:45

Being able to relay financial data to board members and investors is now, following the recession, as important as it ever has been.

The economic crisis saw many falling by the wayside and companies had to learn fast about the risks of being unprepared.

Now, increasing numbers of businesses are looking to analytics tools to understand where their money is going and to prepare themselves for any shocks in the future.

Growing in and out of the recession

However, analytics has not just seen a rise in popularity because of the downturn, even though it highlighted the value of such tech.

The segment is something that SAP has seen growth in for years, according to Andy Hirst, a senior director for financial services industry marketing at the business software giant.

“The analytics area has been growing consistently over the last five to ten years and we see it consistently growing throughout the recession and post-recession," he told IT PRO.

“Information has become more of a strategic asset and the way you can use that information to get business value or an economic advantage over another company is going to become increasingly important."

He added: “The more we can empower people with the information the better they can take a better business decision.”

SAP, with its analytics services, is trying to help customers make “less gut-based decisions, more fact-based decisions”, according to Hirst.

Rather than leaving it to chance, using analytics tools can provide firms with hard knowledge so they are prepared for any catastrophes in the future.

Time on your hands

Logica is one firm that has seen a myriad of benefits from the effective use of financial analytics. However, the recession was not the reason for the firm’s decision to work with IBM in this area.

What is interesting in this case is that Logica had drawn up a new strategy involving analytics prior to the economic collapse in 2008.

Jose Cano, an investor relations manager at Logica, told IT PRO: “The driver to think about changing the way we did things was the new strategy."

He added: “That strategy required the business to do different things and measure in different ways and what we had in place couldn’t do it.”

In a somewhat fortuitous turn of events, the new analytics strategy came before the crisis hit, but it still helped Logica get through the turbulent time of the financial meltdown. As a result, it was already prepared well before the chaos took hold.

Using a mix of Cognos 8, Cognos TM1 and Cognos Controller from IBM, Logica found that it was able to cut down by a week the time it took between closing its books and talking to the city about the data the firm had. The organisation took the spare time from this and reinvested it back into the business on other value-added tasks, Cano explained.