Beyond XBRL Business Challenges for Financial Reporting

1
Beyond XBRLBusiness Challenges for Financial
Reporting

• Erik Brown
• Unisys Corporation
• December 6, 2006

2
Introduction

• Erik Brown
• Program Manager for CDR at Unisys Corporation
• Central Data Repository (CDR)
• A Web-based solution built to improve the
  definition, analysis, and management of financial
  data collected by the FFIEC agencies, using XBRL
  and Microsoft .NET technologies.
• Entered Production in September 2005
• Sponsored by U.S. FFIEC Agencies (3 of 5)
• Federal Financial Institutions Examination
  Council
• Federal Deposit Insurance Corporation (FDIC)
• Federal Reserve Board (FRB)
• Office of the Comptroller of the Currency (OCC)

3
Motivation

• The Regulatory Process
• Government agencies regulate institutions
• Regulations require information (data)
• Regulated institutions provide data
• Government agencies collect, analyze, publish
  data
• XBRL Can Help
• Taxonomy (dictionary) enables collection and
  sharing
• Standard enables auto display, validation, and
  analysis
• Talk about Business Challenges
• Lessons learned from CDR
• Topics for consideration

4
Business Challenges

• People, Technology, and Process

5
Regulatory Reporting Challenges

• High-Level Process is quite simple

• Business Challenge Areas
• People organizing and preparing people and
  acquiring the appropriate skills for a project.
• Process redesigning business processes or
  procedures to support the interaction with
  external and internal entities.
• Technology adopting or integrating new or
  complex technologies to realize business
  improvements.

6
Discussion Areas
Director / Chairman Project Manager Architects Sys
tem Experts Users
Institutions Legal Dept. Publication
Group Analysis Group IT Department
7
People

• Resistance to Change
• Lack of Skills
• Antagonists

8
People Resistance to Change

• Issue Change is Hard
• Most people do not like change, so careful
  training and preparation is required to ensure
  the success of a project.
• Solution Agency Change Management Group
• Established role or group to own task.
• User group meetings (agency and institution)
• Regular publications to educate users

9
People Lack of Skills

• Issue Inexperience with New Technologies
• New technologies present new challenges and
  solutions. Since XBRL is both new and complex, it
  is hard for the user community to feel
  comfortable with a solution based on an unknown
  technology.
• Solution 1 Find a Champion
• Find a solution advocate within the agency that
  is either the expert or chief proponent (or both)
  for the new solution. Have them be the champion
  internally or externally to get users excited
  about the upcoming changes.
• Solution 2 Training

10
People Antagonists

• Issue Some Folks Never Convinced
• No matter how hard you try, some people will
  believe that the new solution should not be used.
  The reasons will vary, but such antagonists are
  often vocal and can disrupt the success of the
  project.
• Solution Allow Them to Prove It
• Put such antagonists in charge of verifying or
  otherwise testing the new system based on an
  agreed-upon set of criteria. They will find
  problems no one else can and thereby benefit the
  overall project.

11
People CDR Solutions

• Overcoming Resistance to Change
• CDR Change Management Team
• Formal User Groups (institutions, software,
  agency)
• Developing Skills
• XBRL expertise within FDIC
• Business units active during development
  (implicit training)
• Leveraging Antagonists
• FFIEC management sponsored overall effort
• Executive oversight team met regularly to voice
  issues
• Skeptical technical folks made excellent testers

12
Technology

• XBRL Taxonomy Creation
• XBRL Taxonomy Management
• Database Document Storage

13
Technology Taxonomy Creation

• Issue Who Owns the Taxonomy?
• A taxonomy must be created in order to use XBRL.
  Should the XBRL community or agency define this
  taxonomy?
• Option 1 XBRL Community (public)
• Existing experts with the interest and passion
• User community has more control over content
• Data labels are consistent with other taxonomies
• Option 2 Agency Personnel (private)
• Business control over naming conventions and
  structure
• Agency has more control over content
• Potential issue with data label reconciliation

14
Technology Taxonomy Management

• Issue Changing Reporting Requirements
• At many agencies, the reporting requirements for
  institutions change over time due to
  modifications in regulations or governing laws.
  How should XBRL taxonomies represent these
  changes over time? If a taxonomy changes, how is
  new and old data reconciled against the taxonomy?
• Solution Taxonomy Management Process
• Option 1 New Taxonomy Publication
• Publish a new taxonomy for each reporting period
  or as required so both old and new data can be
  represented.
• Option 2 Extend Taxonomy Definition
• Embed date-based reporting requirements within
  the taxonomy to establish different structure for
  different periods.

15
Technology Document Storage

• Issue Storing Submitted Data
• How should electronic XBRL submissions be stored
  to optimize the data collection as well as later
  retrieval and analysis of the information.
• Option 1 XML / XBRL Database
• Data is stored essentially as submitted
• Pushes validation and organization onto database
• May require new or custom XBRL tools for analysis
• Option 2 Relational Database
• Data is processed (shredded) before storage
• Validation and organization external to database
• Allows established commercial solutions for
  analysis

16
Technology CDR Solutions

• Collaborative Taxonomy Creation
• FFIEC Agencies collaborate to create custom
  taxonomy
• Taxonomy definition extended to handle
  requirements
• Formula Linkbase and Data Reporting Rules
• Presentation Elements (columns)
• Quarterly Taxonomy Management
• New taxonomy published each reporting period
  (quarterly)
• Relational Document Storage
• Original submission stored separately
• Documents shredded into relational database
• Commercial business intelligence tools utilized

17
Process

• Submission
• Validation
• Review

18
The Regulatory Process
19
Process Submission

• Issue Receiving Submitted Data
• Most regulated institutions do not understand
  XBRL, but need to submit their data based on a
  published XBRL taxonomy. How do institutions
  understand their reporting requirements and
  submit their data to the agency?
• Solution Offer Submission Software
• Option 1 Provide Web-based interface.
• Option 2 Provide PC-based software package.
• Option 3 Permit external submission via Web
  Services.

20
Process Validation

• Issue Enforcing Reporting Requirements
• While an XBRL taxonomy allows an agency to
  define the reporting structure and rules, how
  should agencies ensure that institutions comply
  with these requirements?
• Solution Data Collection Workflow
• Option 1 Do nothing (trust)
• Option 2 Automated electronic validation on
  receipt
• Calculation linkbase and/or formula linkbase
• Option 3 Automated electronic response (email or
  other)
• Lots of options for content of response
• Option 4 Process for resubmitting errant data

21
Process Review

• Issue Approving Submitted Content
• How should an agency review and approve
  XBRL-based submissions for accuracy before making
  content available for public consumption and
  downstream processing?
• Solution Data Review Workflow
• Option 1 Do nothing (just publish)
• Option 2 Review data (some or all institutions)
• Use taxonomy to show formatted data
• Assign analysts to specific institutions
• Enable electronic interaction between analysts
  and institutions

22
Process CDR Solutions

• Third-Party Submission
• Secure web services enable external software
  vendors
• Automated Validation
• Incoming data electronically validated against
  formulas
• Institutions notified via email of any problems
• Resubmissions are accepted and re-validated
• Full Review of All Data
• All institutions assigned to an analyst
  electronically
• Analysts directed to assigned institutions
• Institutions provide text explanations of errant
  data (failed formulas) along with submission for
  analyst review
• All submissions reviewed and approved by analysts

23
Conclusion
24
Conclusion

• XBRL may enable great reporting solutions
• Standard becoming mature
• More and more success stories such as CDR
• But business challenges still exist
• Consider challenges related to
• People
• Processes
• Technology
• Define and document solutions for each area and
  topic

25
The End

• Erik Brown
• Unisys Corporation
• erik.brown_at_unisys.com