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Is Your Process for Certifying Financial Statements Putting You at Risk?

Addressing regulatory requirements with end-to-end data integration can ease the pain of financial preparation while facilitating speed, accuracy and efficiency.
By: | October 4, 2017 • 5 min read

For insurance organizations with millions of transactions, closing the books is no easy feat. Quarterly, half-year and annual 10-K reports — along with other forms required by regulatory agencies — keep the accounting team taxed year-round.

Insurers’ financial statements, filed for every line of business, face external scrutiny from regulatory agencies in every state where they operate. Internally, there are shareholders, boards of directors and in-house audit and compliance teams analyzing the numbers.

There is great pressure to avoid mistakes, and no one feels that pressure quite like the CFO who signs off on the books. By attesting to their veracity, he or she assumes a great deal of personal liability. If the numbers don’t match up, the company can face fines for non-compliance and tarnish its image in the market.

“The pressure to get financial reporting right comes from all sides,” said Renata Sheyner, Senior Product Manager for Financial Control Solutions at Fiserv. “And while companies may only publicly disclose financial information a few times a year, they are continually reconciling transactions to prepare those reports.”

Manual reconciliation compounds compliance risks because insurers house huge stores of disparate data. Data can come from internal departments or third-parties, in the form of text files, spreadsheets or PDFs, it can involve multiple currencies, and it can refer to a payment, policyholder information, or claims history. Different sources and different structures of data make manual reconciliation cumbersome and error-prone.

Additionally, manual intervention can lead to manipulation of data and a lack of audit trail, making it impossible to identify discrepancies in data.

“It’s the combination of the volume and complexity of the data that creates risk,” Sheyner said.

Finance and accounting teams are being pushed to reduce costs and hasten the close cycle without sacrificing accuracy. But accelerating the process can also drive up the risk of error — unless an organization has the right tools in place.

A fully automated and integrated end-to-end reconciliation and certification solution can ease the pain of financial preparation while facilitating speed, accuracy and efficiency.

Reconciliation + Certification: The Power of Integration

Renata Sheyner, Senior Product Manager

Reconciliation and certification are normally two separate processes. Integrating them as a single process is a crucial move that can significantly improve accuracy and confidence in the data being attested/certified.

Gathering and prepping all the data, matching data to transactions, managing exceptions and providing proof calculations and summary reports constitutes the bulk of the work in the reconciliation process. Certification provides the final seal of approval.

Some vendors offer an automated solution for certification, addressing only the public signature aspect of the financial close process. With a certification-only solution, reconciliation is still done manually. Final numbers are entered into the certification system for review and final approval.

But certification is just the last step in a 10-step process. Without the back-end infrastructure to connect certification to reconciliation, it remains vulnerable to error. Once financial leaders sign off, there isn’t an easy way to backtrack and gain visibility into the data they approved. Insurance companies that manage millions of transactions per day need an automated system that tracks, matches and archives all the data, and connects that data processing directly to certification.

“Certification is just verifying that the columns match, but there’s no data to show cash flows over time and no view into what comprises your assets and liabilities. There’s no way to know what exceptions emerged or how they were rectified,” Sheyner said. “If your data is not integrated on the back end, how can the CFO know that what he or she is certifying is correct?”

Centralizing data in one place and integrating automated reconciliation and certification processes allows the data to be traced to its source throughout the entire financial close lifecycle — from data ingestion through matching, exception management, reconciliation, certification and signoff. It becomes trackable and transparent.

Additional Risk Mitigation Benefits

Integrating these processes can also mitigate risks inherent in the financial close process.

Automated reconciliation, for example, can reduce the operational risk from fraud and write-offs by identifying exceptions that require investigation, such as payments or policy information that need review.

“When you’re dealing with tens of millions of transactions in a day, it’s critical to focus resources on the exceptions that need attention,” Sheyner said. “The pieces of data that are clean and match evenly are not where you need to spend your time.”

Connecting the exception management process to certification allows auditors to access all the data that lead to the final numbers. It provides transparency with traceable and trackable data, and shows exactly how an organization adheres to internal compliance controls. This reduces regulatory risk of hefty fines and reputational damage in the marketplace.

“Reputational risks associated with restatement can be far-reaching,” Sheyner said.

Providing a view into the data matching and exception management steps of reconciliation also reduces the personal liability assumed by finance executives when they sign their names on the bottom line. “Now the executives can see for themselves that the data is accurate, comprehensive and complete,” Sheyner said.

The End-to-End Answer

Finance teams have been evolving to act as strategic partners in their organizations, helping to drive business results. They should be working with tools that can do some of the number-crunching for them, allowing them to focus on the tasks that provide the most value for the bottom line, like exception investigations and other strategic projects such as mergers and acquisitions and transformation initiatives.

In addition to freeing up time for those high-value tasks, end-to-end automation and integration can also save costs by reducing labor hours and saving resources like paper and ink.

But the biggest difference between a certification-only product and an integrated end-to-end reconciliation and certification solution is that integration provides transparency and risk control.

“Merging those two processes makes them simpler, more transparent and traceable, so the same data system is being used throughout the entire reconciliation and certification lifecycle,” Sheyner said. “Frontier™ Reconciliation from Fiserv is an end-to-end solution, starting with detailed data and tracking it all the way through to final certification.”

With an integrated solution like Frontier™ Reconciliation, insurers have the tools they need to address the high-stakes and cumbersome financial filing process while reaping the benefits of boosted efficiency and lower costs.

“Integrating all back-end processes and centralizing all data in one location provides true risk management,” Sheyner said.

To learn more, visit http://www.fiserv.com/FrontierForInsurance.



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Fiserv. The editorial staff of Risk & Insurance had no role in its preparation.

Fiserv, Inc. enables clients worldwide to create and deliver financial services experiences that are in step with the way people live and work today. For more than 30 years, Fiserv has been a trusted leader in financial services technology, helping clients achieve best-in-class results by driving quality and innovation in payments, processing services, risk and compliance, customer and channel management, and insights and optimization.

Risk Report: Marine

Crewless Ships Raise Questions

Is a remote operator legally a master? New technology confounds old terms.
By: | March 5, 2018 • 6 min read

For many developers, the accelerating development of remote-controlled and autonomous ships represents what could be the dawn of a new era. For underwriters and brokers, however, such vessels could represent the end of thousands of years of maritime law and risk management.

Rod Johnson, director of marine risk management, RSA Global Risk

While crewless vessels have yet to breach commercial service, there are active testing programs. Most brokers and underwriters expect small-scale commercial operations to be feasible in a few years, but that outlook only considers technical feasibility. How such operations will be insured remains unclear.

“I have been giving this a great deal of thought, this sits on my desk every day,” said Rod Johnson, director of marine risk management, RSA Global Risk, a major UK underwriter. Johnson sits on the loss-prevention committee of the International Union of Maritime Insurers.

“The agreed uncertainty that underpins marine insurance is falling away, but we are pretending that it isn’t. The contractual framework is being made less relevant all the time.”

Defining Autonomous Vessels

Two types of crewless vessels are being contemplated. First up is a drone with no one on board but actively controlled by a human at a remote command post on land or even on another vessel.

While some debate whether the controllers of drone aircrafts are pilots or operators, the very real question yet to be addressed is if a vessel controller is legally a “master” under maritime law.


The other type of crewless vessel would be completely autonomous, with the onboard systems making decisions about navigation, weather and operations.

Advocates tout the benefits of larger cargo capacity without crew spaces, including radically different hull designs without decks people can walk on. Doubters note a crew can fix things at sea while a ship cannot.

Rolls-Royce is one of the major proponents and designers. The company tested a remote-controlled tug in Copenhagen in June 2017.

“We think the initial early adopters will be vessels operating on fixed routes within coastal waters under the jurisdiction of flag states,” the company said.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.”

Once autonomous ships are a reality, “the entire current legal framework for maritime law and insurance is done,” said Johnson. “The master has not been replaced; he is just gone. Commodity ships (bulk carriers) would be most amenable to that technology. I’m not overly bothered by fully automated ships, but I am extremely bothered by heavily automated ones.”

He cited two risks specifically: hacking and fire.

“We expect to see the first autonomous vessel in commercial operation by the end of the decade. Further out, around 2025, we expect autonomous vessels to operate further from shore — perhaps coastal cargo ships. For ocean-going vessels to be autonomous, it will require a change in international regulations, so this will take longer.” — Rolls-Royce Holdings study

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty, asked an even more existential question: “From an insurance standpoint, are we even still talking about a vessel as it is under law? Starting with the legal framework, the duty of a flag state is ‘manning of ships.’ What about the duty to render assistance? There cannot be insurance coverage of an illegal contract.”

Several sources noted that the technological development of crewless ships, while impressive, seems to be a solution in search of a problem. There is no known need in the market; no shippers, operators, owners or mariners advocate that crewless ships will solve their problems.

Kinsey takes umbrage at the suggestion that promotional material on crewless vessels cherry picks his company’s data, which found 75 percent to 90 percent of marine losses are caused by human error.


“Removing the humans from the vessels does not eliminate the human error. It just moves the human error from the helm to the coder. The reports on development by the companies with a vested interest [in crewless vessels] tend to read a lot like advertisements. The pressure for this is not coming from the end users.”

To be sure, Kinsey is a proponent of automation and technology when applied prudently, believing automation can make strides in areas of the supply chains. Much of the talk about automation is trying to bury the serious shortage of qualified crews. It also overshadows the very real potential for blockchain technology to overhaul the backend of marine insurance.

As a marine surveyor, Kinsey said he can go down to the wharf, inspect cranes, vessels and securements, and supervise loading and unloading — but he can’t inspect computer code or cyber security.

New Times, New Risks

In all fairness, insurance language has changed since the 17th century, especially as technology races ahead in the 21st.

“If you read any hull form, it’s practically Shakespearean,” said Stephen J. Harris, senior vice president of marine protection UK, Marsh. “The language is no longer fit for purpose. Our concern specifically to this topic is that the antiquated language talks about crew being on board. If they are not on board, do they still legally count as crew?”

Harris further questioned, “Under hull insurance, and provided that the ship owner has acted diligently, cover is extended to negligence of the master or crew. Does that still apply if the captain is not on board but sitting at a desk in an office?”

Andrew Kinsey, senior marine risk consultant, Allianz Global Corporate & Specialty

Several sources noted that a few international organizations, notably the Comite Maritime International and the International Maritime Organization, “have been very active in asking the legal profession around the world about their thoughts. The interpretations vary greatly. The legal complications of crewless vessels are actually more complicated than the technology.”

For example, if the operational, insurance and regulatory entities in two countries agree on the voyage of a crewless vessel across the ocean, a mishap or storm could drive the vessel into port or on shore of a third country that does not recognize those agreements.

“What worries insurers is legal uncertainty,” said Harris.

“If an operator did everything fine but a system went down, then most likely the designer would be responsible. But even if a designer explicitly accepted responsibility, what matters would be the flag state’s law in international waters and the local state’s law in territorial waters.


“We see the way ahead for this technology as local and short-sea operations. The law has to catch up with the technology, and it is showing no signs of doing so.”

Thomas M. Boudreau, head of specialty insurance, The Hartford, suggested that remote ferry operations could be the most appropriate use: “They travel fixed routes, all within one country’s waters.”

There could also be environmental and operational benefits from using battery power rather than conventional fuels.

“In terms of underwriting, the burden would shift to the manufacturer and designer of the operating systems,” Boudreau added.

It may just be, he suggested, that crewless ships are merely replacing old risks with new ones. Crews can deal with small repairs, fires or leaks at sea, but small conditions such as those can go unchecked and endanger the whole ship and cargo.

“The cyber risk is also concerning. The vessel may be safe from physical piracy, but what about hacking?” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]