Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

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July 31, 2013

Challenges in implementing KYC norms effectively

Guest post by
Harshil Dave, Senior Associate Consultant, Infosys

 

Close to 22 Indian banks were fined a total of Rs. 49.5 Cr. by the banking regulation authority Reserve Bank of India (RBI). These banks were found in violation of Know Your Customer (KYC) norms laid by RBI. The KYC norms that were violated were the ones aimed at preventing money laundering activities. KYC has 2 components Identity and Address, while Identity remains a constant, the address of customer might change over a period and hence banks are required to periodically update their records. Under KYC norms, all customers of the bank are expected to submit the PAN card details, address proof details and proof of identity issued by a government authority such as Passport authority etc. From recent events it seems to appear that these KYC norms have not been implemented and followed by several banks.

Recent allegations of money laundering and breach of KYC norms brings forth few key questions. In one of the most populous nations in the world, is it possible to effectively implement KYC norms across all bank branches? How can RBI effectively implement all its KYC norms for people who don't hold pan card and other address proofs? Are banks fully equipped to trace money laundering activities if a fully KYC compliant customer engages in such dubious activities?

Few may argue that just because PAN card details were not submitted during account opening, does not testify that these accounts engaged in malicious money laundering transactions. To reduce money laundering transactions in India, RBI can direct banks to automate the transaction chain monitoring. In order to effectively monitor the entire chain of transactions and to identify suspicious transactions, a better integration among all the banks and their branches is of pivotal importance.

I'm of the opinion that considering that since Indian Banking Industry is riding on Finance transformation driven by Information Technology; RBI should have a monitoring mechanism by way of periodic reports on dubious transactions submitted by banks. RBI should also encourage banks for a far deeper IT integration to share transaction chain data ensure that the chain of such suspicious transaction does not get lost because of policies or lack of integration of IT between banks.

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Net Stable Funding Ratio - An indispensable parameter from Basel III perspective?

Guest post by
Sukruti Suresh, Senior Associate Consultant, Infosys

 

Ever since Basel III regulations were introduced, inclusion of the parameter "Net Stable Funding Ratio" is a hotly debated topic.  Basel III Regulations aimed primarily at providing an outline for high quality capital, a well-rounded risk handling as well as build up reserves that institutions can fall back on in dire situations. This gave rise to the introduction of 2 standards of liquidity, which would enable banks to sustain the shocks due to sudden economic loss. These factors were the Liquidity Coverage Ratio (LCR) & Net Stable Funding Ratio (NSFR).

The implications of introducing NSFR as a factor to analyze the liquidity levels of the bank will be multi-folded. While NSFR encourages banks to depend on more stable long term funding instead of short term fund sources, it would translate into banks stimulating their risk appetite with respect to long term debt, face issues like higher funding charges which are generally associated with long term debt options as well as face the possibility of lower yields because of reduction in the dependence on short term funds. Most importantly, banks with a higher NSFR will be beneficial when it comes to pricing of assets at a market level. Smaller banks may find the sense of competition highly overwhelming, as their existence in the market may be greatly reduced.

Apart from these shortcomings, implementation of NSFR might see several other road blocks. Many banks are of view that instead of introducing 2 standards of liquidity, it would be preferred to have a single standard of liquidity. Since LCR has been in focus since the inception of the new guidelines and NSFR was an addition later on, many banks opine that LCR should be the prime focus. Also, there are concerns that changes made to the LCR recently in areas like a more extensive variety of assets being considered, more flexible terms of implementation and an extension of phase in period may have severely cut into the effectiveness of the implementation of NSFR. It is also possible that NSFR is considered to be unfavorable to a bank's interests as it is considered to be heavily interfering in the banks' methods of conducting business. It is also said that while NSFR guidelines provides guideline coverage on an overall basis, it fails to appraise the issues faced by banks on an individual level. Finally the general opinion of banks is that the issues being covered by NSFR are already being addressed in the Pillar 2 of Basel III Regulations. Hence, it is a highly likely possibility that after all these efforts, NSFR may fade into oblivion a few years after its introduction.

Ever since the debate regarding introduction of NSFR has raged on, regulators have been tightlipped regarding the continuation of its implementation. It remains to be seen if they deem it fit to go ahead with its implementation and thereby substantiate its importance or if they will ease the regulatory burden of bankers and scrap this initiative. In my opinion, regulators should focus more on the shortcomings that have been brought to light by banks and duly address their concerns, instead of solely focusing on the implementation deadline of 2018. I feel that NSFR can be further refined by monitoring it across time buckets. Short term and medium term time buckets can be considered for priority in case there is a negative liquidity gap. Also, we need to consider that sustainability of funding sources is also subject to many qualitative factors such as overall level of trust among bankers and macroeconomic perception of different bankers.

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Meet Infosys experts at Oracle OpenWorld 2013, Booth No. 1411, Moscone South

Explore more at http://www.infosys.com/oracle-openworld

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July 26, 2013

Upgrade to Fusion: An approach to a successful PoC

 

Recently we were working on Proof-of-Concept for one of the largest Global Banks, who was evaluating the roadmap to transition to Fusion from the legacy PeopleSoft landscape. While we spent lots of time in carefully analysing the requirements and arriving at a feasible solution which can be demonstrated, what actually transpired is that the User Interface and the Performance are probably the two most important things to captivate the potential users, whenever we talk about any change in platform or technology.

However, in the haste of functional requirement mapping, we often tend to be oblivious of these two facts. While without any doubt the ERP products are designed to meet the key functional requirements, probably the two areas under discussion worth more attention.

And Fusion scores high on both these counts....

If you see a Fusion screen, it is all-in-one. Various fragmented information strewn across various screens are now in a single screen; users do not navigate to multiple screens either to enter data or a get a quick snapshot of information.

And, of course, the graphical capabilities and Dash Boards Fusion offers... they are so fundamental, yet so different and appealing... Any demonstration with strong focus on sound graphical capabilities is bound to hypnotize the users.

While we can keep on praising Fusion on these counts, one common question asked in various forums is that of its performance...how does it rate against the traditional ERP packages? A pretty obvious question, I shall always wonder how long it takes a batch to finish, before I take those last minute print-outs for that all-important meeting.

Hence, a good amount of statistics justifying processing speed and examples of implementation of similar size will always be handy.  Our team's satisfactory response on Fusion performance requirements actually made the PoC successful.

So the key learning is: do not always get fascinated by the glam of functional charm; if you really want to reach out to the end users' heart, please plan the other areas well, as those will definitely be something they want responses to.

As the objective of a PoC is to quickly impress your customer with your demonstration, here is the quick tool: Impress with a fascinating user interface coupled with flexible Reporting and analytics capability, and then be prepared with some solid responses around the areas of performance; and you have struck the deal!

July 19, 2013

Cost Effective And Flexible Shared ERP solution for SME Segment (Part 1)

Guest post by
Ajay Ashok Verekar, Senior Consultant, Infosys

 

This blog is about ERP system for SME (Small and Medium Enterprise) and business opportunity for IT companies. Small and Medium Enterprises still feel ERP as jargon and not useful to their routine business. SMEs are not showing interest in the ERP products like SAP, Oracle due to limitation of IT spending and not much good option available in the market for low cost.

Why SME

Small scale industries are most important for growth of any economy. They play a vital role in changing and support of industrial sector development. The role of small scale industry is recognized throughout the world irrespective of level of economy developed.  They help the employment of assets for productive purposes with minimal initial resources. SMEs have contributed like catalyst in development private enterprise and in accelerating the economic development by generating employment, exports, and reducing local discrepancy.

Based on trends available on SMECHAMBER portal and some of SME SUMMIT reference documents, SME contribution in developing nations like South Africa and India is enormous. SMEs contribute by producing thousands of quality products, employing millions of people. In India, SME role in industrial output and exports is also remarkable as well as It is expected that millions of job will be created by SME. In addition if you have noticed, all governments across different countries are developing reform policies considering SME.

SMEs are the foundation of several inventions in manufacturing and different sectors. SMEs are major linkage in the supply chain of corporate and government organisations. SME business is still unexploited by major ERP vendors. ERP majors still not able to gain much SME market.

Challenges for ERP implementation for SME

  1. Cost - Cost of ERP implementation is substantially high from SME point of view. Considering ERP as expensive, SME suffer with financial constraints, the operational and financial risk become more apparent than the advantage. Cost of Elements in ERP implementation.
    • Hardware -Server, Storage, Networking etc.
    • Software - ERP licence , Upgrading cost , AMC , Database management
    • Project - Implementation cost from Implementation partner, Resource training and project management
    • Service - Support service cost, Maintenance activity cost etc.
    Considering these direct/ indirect cost, every implementation seems to be very expensive.
  2. Organisational Fitment - In most common practice, SMEs are opting for small or customised ERP software which are less costly. By this SMEs try to overcome cost constraint issue but organization losses flexibility. SME need to react faster to new changes or process to match client requirement or sudden changes in demand. But small or customise ERP package fails to meet such changes.
  3. Resource (Manpower) requirement -Good ERP system need support team which also need extra cost and more manpower requirement. Both these requirements are major constraints to SME. Climbing cost of IT manpower which causes salary difference between Cores business workforces compare to IT team.  This develops conflicts of interest in employee and cause failure of ERP system.

In Part 2 of this blog, we will talk about ERP Solution for SME.

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Meet Infosys experts at Oracle OpenWorld 2013, Booth No. 1411, Moscone South

Explore more at http://www.infosys.com/oracle-openworld

Follow us on Twitter -  http://twitter.com/infosysoracle  

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Oracle Financial Accounting Hub (FAH): Multi Level Drilldown

Guest post by
Ashish Gupta, Principal Consultant, Infosys

 

One of the latest buzzwords in FSI Industry is Financial Accounting Hub (FAH). FAH replaces the legacy accounting systems/programs and provides a rule based accounting engine to generate accounting entries. FAH integrates the Product Systems to Oracle General Ledger (GL).

Oracle standard FAH provides linkage from GL to SLA Journals i.e. the standard drilldown works from GL to SLA. Users can drilldown from GL to SLA journal Lines that provides additional sub-ledger details like Event model details, Supporting References, Identifiers and Descriptions etc. These details are useful enough to reconcile the transactions/records between GL and SLA.

Based out of our FAH implementation experiences we felt that the industry and the business users needs more in addition to this FAH standard drilldown from GL to SLA. Users' needs another layer of drilldown to the transaction data wherein they can easily reconcile the GL data with SLA data and then to transaction data. The view to the transaction data enhances Users supports function to reconcile, view the raw data, error handling etc.

We've built a custom solution that provides additional drilldown layer in FAH beyond SLA Journal. A custom form was built that present the view of the Transaction Object/Staging Table in FAH (wherein the transaction data is placed for FAH accounting entry generation). This form was linked with the SLA Journal form and with the selection of the SLA Journal line this form provides the number of the transaction object lines in the staging area. This way it links the GL data to SLA and SLA data to Transaction data. It provides multilevel drilldown views.

There could be different types of solutions in FAH like Pass through, Account derivations, Mappings and combinations of these. Based on the solutions the usability and importance of this custom drilldown can be enhanced. This Custom Drilldown not only helps business support functions like Reconciliations, Error & Suspense handling but also provide end to end view of how a product system transaction is transformed to a Journal. When used in conjunction with standard drill down this solution provides multi-dimensional view and presents summarized data view in GL, detailed accounting view and transaction Data view in FAH.  It brings in short and long term benefits to an organization.

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Meet Infosys experts at Oracle OpenWorld 2013, Booth No. 1411, Moscone South

Explore more at http://www.infosys.com/oracle-openworld

Follow us on Twitter -  http://twitter.com/infosysoracle  

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