By David Brightman, Director of Product Marketing at BlackLine
The coronavirus pandemic has underlined the vital role that automation plays in the finance function. Manual tasks, inefficient processes and a lack of data insight are holding back finance functions that have not yet automated – and preventing them from competing effectively in a tumultuous market. For these organisations, the ongoing business challenges caused by the pandemic should be seen as an opportunity to ensure future projects have the best chance of success. This means facilitating standardisation and planning, as well as redesigning processes so that the same inefficiencies are not perpetuated.
Unfortunately, the finance function, like most aspects of business, are facing severe disruption as a result of the pandemic. Numerous projects relating to implementing or scaling automation have been delayed or cancelled, and many distributed teams are battling with an over-reliance on paper-based documents or office-bound tasks that are no longer feasible. Many of these issues would have been softened had companies already completed the move to digitise their processes before the pandemic, but research suggests that very few companies have fully addressed the automation gap.
The automation gap
In fact, a survey commissioned by BlackLine and conducted by FSN suggests that only 9% of organisations managed to completely transform their finance function through automation before the pandemic. This is despite the fact that digitally transformed companies are two and a half times less likely to report delays in their existing project timescales compared to companies that have not invested in finance automation – and 20% are less likely to report delays to future automation projects.
Having already experienced the benefits of automation, these companies are also less likely to have reduced their budgets for finance automation projects. Furthermore, the research found that finance and accounting (F&A) teams that entered this crisis further down the automation path were better positioned to weather the pandemic. This is because automation enabled these finance professionals to spend a greater amount of time on valuable, strategic tasks that could help guide the organisation through the changing business landscape. And when business was in flux, and teams had to transition to remote-working with little time to prepare, they had more resiliency to ensure the financial close ran like clockwork, without compromising financial statement integrity.
With such a strong case for automating, what is holding finance teams back?
Challenges to effective finance transformation
The majority of organisations are yet to jump on the automation bandwagon and there are a number of reasons why. Challenges include a lack of commitment to fully instigate automation across the business, a lack of resources, short timeframes for implementation, and pressure from executives who want to see a faster ROI, to name a few. With pandemic-related issues added to the mix, it’s understandable that there is some hesitancy when it comes to investing in automation.
However, from managing data, assessing risk factors, stress testing, to uncovering inefficiencies and budgeting, automation can and has been proven to help. For those organisations that still have reservations, looking at existing automation successes and learning from their peers is an excellent way to kick-start your own business automation strategy.
It’s important to remember that modernising your finance function can have a huge impact on business outcomes, producing real-time updates that can be used to guide decision making and risk management. However, moving to modern accounting means taking a unified approach. Integrating systems and data for a single source of truth, so you can standardise and control processes for consistency, efficiency, visibility, and change management is the only sustainable path forward.
Tips for initiating automation within your business
To begin with, businesses must have a clear understanding of the current state of their finances and where they stand within the industry landscape. What are the challenges? Where are the potential bottlenecks and opportunities for efficiencies to be created? This is a vital step in improving transparency. If businesses don’t have a clear view over what is happening within their own organisation, how can they expect to make important decisions that will improve business outcomes?
To achieve this, finance teams should look to migrate any on-premise applications to the cloud. This will enable easier access and control over how and where data is stored, while also integrating applications to function as one whole system that communicates with all necessary business departments. This will give a clearer, real-time overview of where the business is at and where necessary changes are most critical.
Next, CFOs need to look at simplifying and streamlining some of the tasks F&A teams face day-to-day. For example, when automating financial close and reconciliation processes, it’s essential that process owners, not technical staff, can make changes quickly. Updates like adding or changing accounts for reconciliation automation, or applying technology like artificial intelligence to transactional matching, modifying variance exception thresholds, changing standard or custom report fields, should all be within accounting’s span of control. Ensuring the right people have access to the right data and reports, as and when these are needed, reduces bottlenecks considerably. This in turn leaves more time for making sure reports are up to the highest possible standard and insights are used to make any necessary adjustments fast.
Once transparency is instilled and time wasting bottlenecks are reduced, businesses can begin to regain control of their systems, through investing in new ERP systems and automating their budgeting, planning and forecasting (BPF) processes. Without transforming the BPF process that provide agility and insights, businesses would be forced to run in circles, producing forecasts that would become obsolete within days. In these uncertain times, companies need to be reforecasting daily and weekly, or at the very least monthly to have any sort of handle on the business. Where some organisations were getting by with minimal sophistication in their BPF, the unprecedented effects of lockdown have exposed significant weaknesses in these processes.
Finally, F&A teams should seek to connect with a community of experts dedicated to driving modern accounting and the automation journey, to achieve a more collaborative accounting experience. This could include networking, tapping into virtual best practices and finance transformation summits, and hearing from peers at other organisations about what has worked (or hasn’t) on their modern accounting journey. For automation to succeed, it’s also critical that F&A control their destiny. Ownership means F&A can take charge of process automation themselves, without relying on IT or technical consultants. This ensures that technology can be confidently owned and managed by end-users – those closest to reengineering the business processes themselves. If the technology creates friction to driving change, digitisation efforts will ultimately grind to a halt.
This has been a trying year, and businesses have a lot to learn from recent months – successes and failures alike. Taking a holistic approach to automation, understanding the benefits of automating each process, and identifying the competitive insight that can be generated through new techniques and technologies will enable CFOs to work their investment in automation harder and smarter. If you haven’t already decided what your automation plans are for the upcoming year, this is the time to begin.
Airbus CEO urges trade war ceasefire, easing of COVID travel bans
By Tim Hepher
PARIS (Reuters) – The head of European planemaker Airbus called on Saturday for a “ceasefire” in a transatlantic trade war over aircraft subsidies, saying tit-for-tat tariffs on planes and other goods had aggravated damage from the COVID-19 crisis.
Washington progressively imposed import duties of 15% on Airbus jets from 2019 after a prolonged dispute at the World Trade Organization, and the EU responded with matching tariffs on Boeing jets a year later. Wine, whisky and other goods are also affected.
“This dispute, which is now an old dispute, has put us in a lose-lose situation,” Airbus Chief Executive Guillaume Faury said in a radio interview.
“We have ended up in a situation where wisdom would normally dictate that we have a ceasefire and resolve this conflict,” he told France Inter.
Boeing was not immediately available for comment.
Brazil, which has waged separate battles with Canada over subsidies for smaller regional jets, on Thursday dropped its own complaint against Ottawa and called for a global peace deal between producing nations on support for aerospace.
Faury said the dispute with Boeing was particularly damaging during the COVID-19 pandemic, which has badly hit air travel and led to travel restrictions or border closures. He expressed particular concern about widening bans within Europe.
“We are extremely frustrated by the barriers that restrict personal movement and it is almost impossible today to travel in Europe by plane, even domestically,” he said.
“The priority no. 1 for countries in general is to reopen frontiers and allow people to travel on the basis of tests and then eventually vaccinations.”
The comments come as businesses increase pressure on governments to reopen economies as coronavirus vaccine roll-outs gather pace across Europe.
France has defended recently introduced border restrictions, saying they will help the government avoid a new lockdown and stay in force until at least the end of February.
Germany installed border controls with the Czech Republic and Austria last Sunday, drawing protest from Austria and concerns about supply-chain disruptions.
Berlin calls the move a temporary measure of last resort.
Poland said on Saturday it had not ruled out imposing restrictions at the country’s borders with Slovakia and the Czech Republic due to rising COVID-19 cases.
(Reporting by Tim Hepher; Editing by Kirsten Donovan)
Why a predictable cold snap crippled the Texas power grid
By Tim McLaughlin and Stephanie Kelly
(Reuters) – As Texans cranked up their heaters early Monday to combat plunging temperatures, a record surge of electricity demand set off a disastrous chain reaction in the state’s power grid.
Wind turbines in the state’s northern Panhandle locked up. Natural gas plants shut down when frozen pipes and components shut off fuel flow. A South Texas nuclear reactor went dark after a five-foot section of uninsulated pipe seized up. Power outages quickly spread statewide – leaving millions shivering in their homes for days, with deadly consequences.
It could have been far worse: Before dawn on Monday, the state’s grid operator was “seconds and minutes” away from an uncontrolled blackout for its 26 million customers, its CEO has said. Such a collapse occurs when operators lose the ability to manage the crisis through rolling blackouts; in such cases, it can take weeks or months to fully restore power to customers.
Monday was one of the state’s coldest days in more than a century – but the unprecedented power crisis was hardly unpredictable after Texas had experienced a similar, though less severe, disruption during a 2011 cold snap. Still, Texas power producers failed to adequately winter-proof their systems. And the state’s grid operator underestimated its need for reserve power capacity before the crisis, then moved too slowly to tell utilities to institute rolling blackouts to protect against a grid meltdown, energy analysts, traders and economists said.
Early signs of trouble came long before the forced outages. Two days earlier, for example, the grid suddenly lost 539 megawatts (MW) of power, or enough electricity for nearly 108,000 homes, according to operational messages disclosed by the state’s primary grid operator, the Electric Reliability Council of Texas (ERCOT).
The crisis stemmed from a unique confluence of weaknesses in the state’s power system.
Texas is the only state in the continental United States with an independent and isolated grid. That allows the state to avoid federal regulation – but also severely limits its ability to draw emergency power from other grids. ERCOT also operates the only major U.S. grid that does not have a capacity market – a system that provides payments to operators to be on standby to supply power during severe weather events.
After more than 3 million ERCOT customers lost power in a February 2011 freeze, federal regulators recommended that ERCOT prepare for winter with the same urgency as it does the peak summer season. They also said that, while ERCOT’s reserve power capacity looked good on paper, it did not take into account that many generation units could get knocked offline by freezing weather.
“There were prior severe cold weather events in the Southwest in 1983, 1989, 2003, 2006, 2008, and 2010,” Federal Energy Regulatory Commission and North American Electric Reliability Corp staff summarized after investigating the state’s 2011 rolling blackouts. “Extensive generator failures overwhelmed ERCOT’s reserves, which eventually dropped below the level of safe operation.”
ERCOT spokeswoman Leslie Sopko did not comment in detail about the causes of the power crisis but said the grid’s leadership plans to re-evaluate the assumptions that go into its forecasts.
The freeze was easy to see coming, said Jay Apt, co-director of the Carnegie Mellon Electricity Industry Center.
“When I read that this was a black-swan event, I just have to wonder whether the folks who are saying that have been in this business long enough that they forgot everything, or just came into it,” Apt said. “People need to recognize that this sort of weather is pretty common.”
This week’s cold snap left 4.5 million ERCOT customers without power. More than 14.5 million Texans endured a related water-supply crisis as pipes froze and burst. About 65,000 customers remained without power as of Saturday afternoon, even as temperatures started to rise, according to website PowerOutage.US.
State health officials have linked more than two dozen deaths to the power crisis. Some died from hypothermia or possible carbon monoxide poisoning caused by portable generators running in basements and garages without enough ventilation. Officials say they suspect the death count will rise as more bodies are discovered.
THIN POWER RESERVE
In the central Texas city of Austin, the state capital, the minimum February temperature usually falls between 42 and 48 degrees Fahrenheit (5 to 9 degrees Celsius). This past week, temperatures fell as low as 6 degrees Fahrenheit (-14 degrees Celsius).
In November, ERCOT assured that the grid was prepared to handle such a dire scenario.
“We studied a range of potential risks under both normal and extreme conditions, and believe there is sufficient generation to adequately serve our customers,” said ERCOT’s manager of resource adequacy, Pete Warnken, in a report that month.
Warnken could not be reached for comment on Saturday.
Under normal winter conditions, ERCOT forecast it would have about 16,200 MW of power reserves. But under extreme conditions, it predicted a reserve cushion of only about 1,350 MW. That assumed only 23,500 MW of generation outages. During the peak of this week’s crisis, more than 30,000 MW was forced off the grid.
Other U.S. grid operators maintain a capacity market to supply extra power in extreme conditions – paying operators on an ongoing basis, whether they produce power or not. Capacity market auctions determine, three years in advance, the price that power generators receive in exchange for being on emergency standby.
Instead, ERCOT relies on a wholesale electricity market, where free market pricing provides incentives for generators to provide daily power and to make investments to ensure reliability in peak periods, according to economists. The system relied on the theory that power plants should make high profits when energy demand and prices soar – providing them ample money to make investments in, for example, winterization. The Texas legislature restructured the state’s electric market in 1999.
Since 2010, ERCOT’s reserve margin – the buffer between generation capacity versus forecasted demand – has dropped to about 10% from about 20%. This has put pressure on generators during demand spikes, making the grid less flexible, according to North American Electric Reliability Corporation (NERC), a nonprofit regulator.
That thin margin for error set off alarms early Monday morning among energy traders and analysts as they watched a sudden drop in the electrical frequency of the Texas grid. One analyst compared it to watching the pulse of a hospital patient drop to life-threatening levels.
Too much of a drop is catastrophic because it would trigger automatic relay switches to disconnect power sources from the grid, setting off uncontrolled blackouts statewide. Dan Jones, an energy analyst at Monterey LLC, watched from his home office in Delaware as the grid’s frequency dropped quickly toward the point that would trigger the automatic shutdowns.
“If you’re not in control, and you are letting the equipment do it, that’s just chaos,” Jones said.
By Sunday afternoon about 3:15 p.m. (CST), ERCOT’s control room signaled it had run out of options to boost electric generation to match the soaring demand. Operators issued a warning that there was “no market solution” for the projected shortage, according to control room messages published by ERCOT on its website.
Adam Sinn, president of Houston-based energy trading firm Aspire Commodities, said ERCOT waited far too long to start telling utilities to cut customers’ power to guard against a grid meltdown. The problems, he said, were readily apparent several days before Monday.
“ERCOT was letting the system get weaker and weaker and weaker,” Sinn said in an interview. “I was thinking: Holy shit, what is this grid operator doing? He has to cut load.”
Sinn said he started texting his friends on Sunday night, warning them to expect widespread outages.
‘SECONDS AND MINUTES’
Early Monday morning, one of the largest sources of electricity in the state – the unit 1 reactor at the South Texas Nuclear Generating Station – stopped producing power after the small section of pipe froze in temperatures that averaged 17 degrees Fahrenheit (9 degrees Celsius). The grid lost access to 1,350 MW of nuclear power – enough to power about 270,000 homes – after automatic sensors detected the frozen pipe and protectively shut down the reactor, said Victor Dricks, a spokesman for the U.S. Nuclear Regulatory Commission.
About 2:30 a.m. (CST), the South Plains Electric Cooperative in Lubbock said it received a phone call from ERCOT to cut power to its customers. Inside the ERCOT control room, staff members scrambled to call utilities and cooperatives statewide to tell them to do the same, according to operational messages disclosed by the grid operator.
Three days later, ERCOT Chief Executive Bill Magness acknowledged that the grid operator had only narrowly avoided the calamity of uncontrolled blackouts.
“If we hadn’t taken action,” he said on Thursday, “it was seconds and minutes (away), given the amount of generation that was coming off the system at the same time that the demand was still going up.”
(Reporting by Tim McLaughlin and Stephanie Kelly; additional reporting by Nichola Groom; editing by Simon Webb and Brian Thevenot)
UK could declare Brexit ‘water wars’ – The Telegraph
(Reuters) – Britain could restrict imports of European mineral water and several food products under retaliatory measures being considered by ministers over Brussels’ refusal to end its blockade on British shellfish, the Telegraph reported.
Senior government sources pointed to potential restrictions on the importing of mineral water and seed potatoes, the report said.
(Reporting by Maria Ponnezhath in Bengaluru; Editing by Daniel Wallis)
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