* dimension data 2 absa vehicle

April 12, 2023Dimension Data2

Absa Vehicle & Asset Financea Division of Absa Bank Ltd

A presentation to the

Corporate Performance Management

User Conference

Presented by: Roy D Martine

General Manager Finance - ABSA

The use of Extensity Planning in streamlining and improving the

AVAF Financial planning process


The use of Extensity Planning in streamlining and improving the AVAF Financial planning process

“The path to our destination is not always a straight one. We go down the wrong road, we get lost, we turn back. Maybe it

doesn’t matter which road we embark on. Maybe what matters is that we embark.”

-- Barbara Hall, Northern Exposure, Rosebud, 1993


Background & Objective

ABSA Vehicle and Assets Finance (AVAF) has undergone significant structural and organizational changes in recent years. To meet the changing

needs of business, the Finance department embarked on a project to improve their current planning process.

This presentation covers the financial planning process within the organization, the challenges being experienced and the opportunities presented to address some of their requirements using the Extensity

Planning tool.


Presentation Content

SA Banking industry and ABSA Vehicle and Asset Finance

Approach and methodology currently used in the AVAF financial planning process

Stakeholder expectations and challenges

Finance department structure to support the reporting and planning process

Requirements of a Financial Planning process

Conceptual solution

Impact of Extensity Planning to support and manage the financial planning process

Concluding statements


The South African Assets Finance Industry

FNB34%

FNB34%

Nedcor18%

Nedcor18%

StandardBank20%

StandardBank20%

ABSA25%

ABSA25%

OtherInstitutions

3%

OtherInstitutions

3%


Core Activities

ABSA Group Ltd

ABSA Bank Ltd

Retail Banking

Commercial Banking

WholesaleBanking

Other

ABSA Vehicle and Assets finance is a product SBU providing assets based finance products to ABSA Customers. It is a division within Commercial Banking but provides assets

finance products to all customer segments within the bank


•Aprox 75,000 Applications Monthly business (R 2.8bn)

General Ledger•800 Ledger Accounts•3960 Units

•Aprox 600,000 Customer Accounts (R 60bn)

22 Alliances Suppliers & Motor GroupsRequiring Ring fenced accounting & reporting

3 Joint Finance CompaniesRequiring separate accounting & reporting with different financial years

Core Activities


JointFinance

Companies

OfficeAutomation

ProcessingCentres

TradeCentres

RecoveryServices

Floorplans

Dealer Academy

VAPS

Internal Sales

Head Office

Small Business

MediumBusiness

LargeBusiness

Suppliers & Manufac

turers

Commercial Sales

Dealers

PersonalSales

Credit

LeasingServices

SPV’s

GroupSupport

Functions

The AVAF Business Operating Model


Idiosyncrasies in Banking that impact upon financial planning and reporting

Both month-end balances and average balances on balance sheet

Direct relationship between average balances on balance sheet and revenue on income statement

Modelling of advances growth & related revenue

Linking revenue forecast to interest rate forecasting

Linking bad debt forecasting to credit behaviour

Internal matched funds transfer pricing for funding the process

Central Bank regulatory requirements

Norms driven management (Ratios)

High proportion centralised costs that has to be re-allocated








Conceptual solution




Overview of planning process

Develop high level financial targets (aspirational)

Fine-tune using more accurate economic parameters

Mechanistically forecast on a Business-as-Usual basis (BAU)

Identify and quantify projects and initiatives

Adjust BAU for projects and initiatives (projected)

Gap analysis between aspirational and projected

Re-visit projects and initiatives

Finalise plan

First year of plan becomes the budget target


Details of the current Planning Process

AVAF

Steerco

Budget Timeline

Group Finance

Funding

Process

MPC MPC Planning MPC Planning

Prepare Alignment Approve Approved Prepare Approve/

with Group Forecast Budget 5 yr model Reject

AVAF Finance Planning Process

Repeated

Cost Centre

Managers

Alliances 6 FC 6 Act

MPC

ERM &

Group Finance

Submit for

approval

Submit to

ERM &

Group Finance

5 Year Plan

Contracting

Gap

Analysis

seeding

Budget &

Process

Funding

Forecast Budget

Load MPC

Provided

Sales & Volume focussed

Funding

Process

Model High

Bottom up

Forecast

(Full year)

Format

Receive

Level Plan per GM

ERM &

Group Finance

Review

Forecast

Submit for

approval

Submit to

Receive

Communicate

Timetable

Submit for

approval

Submit to


MTP Process Timeline (Example)

May J une J uly August September October November December*19/5 *17/6 *11/7-15/7 *3/8 *19/9 3/10-10/10 *8/11 *8/12

Stage 1 Stage 1 J uly Stage 2 Stage 2 October ExCo BoardThemes and Submissions QEDs Guidelines Submissions QEDs agrees MTP agrees MTPGuidelines to Group to Group & STP & STP

1 1

2 2 Evaluation of financial plan:* Vs In-year performance

3 * Key execution challenges* Productivity Improvements

4 3

5

Outputs:

1 J uly QEDs 1 Oct QEDs

2 Agreed targets and execution priorities 2 Agreed 3 year financial plans

3 High level guidance for financial plan 3 Specific guidance for next year "budget" (STP)

Review of strategic investments required

Actions from J uly QEDs are baked into financial and business plans

Evaluation of execution capabilities and initiatives

High-level financial commitments

Evaluation of plan and targets

Assessment of plan against the market context

Evaluation against CEO priorities(Things That Need To Go Right" Initiatives)

Stage 1Strategy Assessment

Stage 2Detailed Plan Assessment


Characteristics of the Process

Follows Group planning timetable

Moving from high level plans to detailed budget

Check-points for approval during the process

Establishing authority levels and mandates

Adjust for new information

Final plan is a performance contract


Financial planning / management design philosophy

Decompose the balance sheet and income statements of existing branches into :-

• Specialized cost centers per activity for cost management

• Restructure balance sheet and revenue items into manageable components – related to

business drivers


Tools/ Systems used in the current Planning Process

High Level Strategic Financial Plan

Forecast

Middle down allocation to

Business Units

Bottom Up Input & Contracting

Middle Up submission to Group

Board Presentation

Annual Budget

Excel environment

Prism

MPC

Prism


Challenges

No automatic link between processes (strategy, high level 5Yr plan, budget, forecasting)

Unable to effectively spread high level targets

Organization structure too complex

One size does not fit all (large number of specific rules in models)

Difficult to apply constant change to different applications (time consuming)

Large volumes of data to manage and control

Usual risks associated with spreadsheets

Changes in line management roles & responsibilities


Challenges (Continued)

Number of entities growing

Meeting group deadlines whilst simultaneously setting detail budgets

Need to shorten & Streamlining the planning cycle

Need to improve efficiency and manage costs

Existing “dated” planning tool (Prism)








Conceptual solution




Stakeholder expectations and requirements place pressure on the system

SBUFinance

Department

SBUFinance

Department

GroupFinance

Planning Office

GroupFinance

Planning Office

BusinessUnit

BusinessUnit

UltimateHolding

Company

UltimateHolding

Company


Expectations from our stakeholders

Ultimate Holding company

•Realistic medium & short term goals

•Support the overall process

•Supply relevant required information

•Ability to predict business as usual and impact of initiatives on results


Group Finance Planning Office

Deliver results within the timeline

To cope with multiple parameter changes

Multiple iterations of interdivisional recoveries

Late Adjustments following executive review and approval




Business Unit

Direction and guidelines

Relate strategic objectives of business to strategic financial plans

Prepare financial plans for evaluation

Convert strategic financial plans into detail budgets for business unit

Intellectual involvement rather than process administration

Determine impact of changes in macro-economic environment








Conceptual solution




AVAF Finance Structure

AVAF Finance

Department

Statutory Reporting

Management Planning &

Control

Joint Ventures &

Alliance Reporting

Investment &

Subsidiaries

Pricing &

Sales Support


AVAF Finance Planning & Control Structure

Management Planning &

Control

Financial ConsultantRetail Sales

Financialconsultant Corporate

Sales

Activity Based

Costing

MPC administration

Financialconsultant

CommercialSales


Enable a small team of staff to manage large volumes of data with a high degree of complexity

Simulate the complexity of the lower level detail in a summarised environment i.e. results are more realistic

Planning models that meet unique need of different parts of the business

Centralised version control of planning components

Alignment of the various planning components

Shorten the planning process by generating first cut for review, eliminating initial data capture at cost centre level

To meet expectations, our main requirements

are ….








Conceptual solution




Generally, the financial planning process should :

Link top down strategies and targets with bottom up operational plan

Convert high level strategic financial statement projections into quantifiable units to measure and manage performance.

Present a realistic view of the future to support decision making

Provide a bench-mark for measuring performance

Provide aspirational targets for continued improvement

Requirements of the financial planning

process


Strategy Formulation:Enterprise Goals and Strategies

Execution:Operational Targets & Budgets

Transaction Systems:Process Transactions

Communication

CorrectionImprovementFeedback

PerformanceMeasurement

Components of effective CPM


To position ourselves in order to fulfil all the stakeholders needs

• Support the operating model

• Streamline the planning process

• Easily control & manage data (multiple version control)

• Fully integrated planning application

• Multiple models to support the complexity of different business units

• Improve and shorten the planning process


High Level StrategicPlanning

MPCData-base

Actual/Budget/Forecast

Seeding Chartof Accounts

Seeding Branches

Sales AnalysisDatabase

Cost CenterBudgetReview

Gap

An

alys

is

Target SettingMarketers

AVAF Components of effective CPM


HighLevel

MechanisticPlan

Strategy&

Initiatives

TrendAnalysis/ Action

Plans

RollingForecast

BottomUp Inputs

DetailedBudget

Monitoring& Control

Actual/Budget

OfficialForecast

Seeding

Gap

SeedingBottom

Up Input

OperationalPlan

Bi Monthly

Process flow of planning components








Conceptual solution




GeneralLedger

Prism

GroupReports

MPC Planning

ExcelServices

FundingModule

DataWarehouse

Existing Data Flow

between different systems

Existing Data Flow

between different systems

From this…..


GroupReports

GeneralLedger

MPC Planning

DataWarehouse

To this !


Of all the features of planning, the main ones

we identified were…

• Integrate with MPC’s and strategy Management’s Structure and data with two-way transfer

• Combine MPC functionality and power with Excel functionality and ease• Use a dimension in multiple places and only update it in one using Model

Manager • Combine data from multiple sources without recapture • Respond quickly to updates from higher levels in the company • Quickly build models based on other models • Real time multidimensional database with Excel front end • Goal seek as well as lock and spread functionality• Ability to seed the detailed budget from the high level financial plan


High Level StrategicPlanning

MPCData-base

Actual/Budget/Forecast

Seeding Chartof Accounts

Seeding Branches

Sales AnalysisDatabase

Cost CenterBudgetReview

Gap

An

alys

is

Target SettingMarketers


New Data Management

Multiple Versions

MPC Data Base

Planning

MultipleUsers

MultipleUsers

DetailedSales

Targets per Marketer

Web based Inputs








Conceptual solution




Support the operating Model

Re-organise the duties & responsibilities of Finance staff

•Investigate variances of monthly results

•Predict future trends (Rolling Forecast)

•Engage in action plans/corrective measures

•Gather bottom up inputs to adjust anomalies of rolling forecast

•Prepare and discuss high level financial plans with business partner

•Spread financial plans as detailed budgets and manage gap discrepancies


Streamline the planning process

Focus

Sales staff focus on market potential, sales targets and cost of sales

Back office/Operations focus on productivity and cost efficiency

Set targets by spreading forecast & budget data

Determine operations capacity requirements from sales activities

Focus on controllable items

Reduce the level of detail input

Focus on drivers to calculate budgets


Streamline the planning process

Performance monitoring

Variance

Analysis

Rolling Forecast

“What If”

Final

Forecast

Publish

Strategy

Set Strategic

Goals

Evaluate

options

Scenario

Modelling

Operational Management

Strategic

Planning

Target Setting


Ease of Control & management of Data

•Snapshot versions on MPC

•Write back access controlled centrally

•Control over submissions & approvals


Fully integrated planning application

• Business drivers and rate views managed centrally on MPC

• Centrally managed schedule & unit rules on MPC

• Planning models linked to MPC with version & periodic control

• Reports based on central data base

• Group “Excel” submissions dynamically linked to MPC data base (CBR)

• Funding process done simultaneous while modelling data• Single version of the truth• Monitor individual progress of budget submissions• Ensure completeness of budget components


Multiple Models to support the complexity of

different business units

• Organisational structure grouped to support generic and non generic business entities

• General rules applied to models for generic business units

• Unique rule used in specific models for non generic business rules

• Different funding models for different business rules


Improve & Shorten the Planning Process

Link strategic planning / feasibility studies with budgets and forecasts

Development rolling forecast and dynamic planning methodology

To manage & Control middle-up/middle-down budgets & forecasts (multiple versions)

Gap analysis between different versions

Allow data input from spreadsheets

Centralised monitoring of the process.

Centralised budget drivers to accommodate economic and rate view changes

Easy Top/Down adjustments if necessary








Conceptual solution




Obstacles and Considerations

• Where do we start

• Defining perfect solution vs getting started

• Consider company technology policies

• Technical support requirements

• Hardware and software capability

• Computer Literacy

• Specialised Training

• Resistance to change


Benefits – our highlights

Data stored in a controlled server environment

• Improved data integrity

Setting of budget targets at various levels

• Change in budget approach - setting of targets

Web-based delivery of reports

• immediate availability of actual results after month-end closure to all users

Ease of data integration to Excel for fine tuning

Simultaneous existence of alternate reporting structures

Ease of comparison of units in the same business unit

Eliminate manual re-capture and balancing between sheets

Ease of top down adjustments when necessary

Focus on analysis and planning rather than admin functions


Our Future Intentions

Executive Dash Board

Drill through facility to identify detailed transaction per account balance

Automated executive management financial reports

Automated executive management presentations

Enhance automated alerting ability

Expand web based analysis capability

IFRS Requirements


Conclusion

Planning together with MPC provides us with the ability to integrate Strategy, Budgets and Forecasts, whilst simultaneously combining financial and non-financial reporting into the same data-base.

This project is not an event, but rather as a journey to improve the financial reporting and planning process until such time as the Business Unit is able to operate dynamically re-plan on a continuous basis.

Past Performance + Strategic Objectives + Initiatives + Market Conditions ===> Business Plans


Thank You

Questions ?

Don’t be afraid to take a big step if one is indicated. You can’t cross a chasm in two small jumps.

-- David Lloyd George

* dimension data 2 absa vehicle

Documents

planning process requirements

overview of planning

use of extensity planning

extensity planning tool

group planning timetable

assets finance avaf

absa vehicle asset finance

assets finance products