Objective

Using a cost allocation model to provide transparency on cost drivers leading to optimization of strategic operational decision making

Challenge

Large investment fund wanted to understand the value chain of the organisation and identify the cost of relevant process steps and service relationships.

The aim was to provide transparency on operational interdependencies, level of managerial influence and drivers of operating cost.

Resources in middle and back office were perceived to be excessive and relevance of functions were unquantified to stakeholders. Resource benchmarking with relevant peers also suggested the need for optimization

Solution

Introduction of a cost allocation model reflecting the organisation’s value chain based on functional business drivers and relevant consumption across the organisation.

This included ● analysis and documentation of service interdependencies ● definition of non-monetary performance indicators and drivers of functional work ● leveraging existing service performance data for allocation and reporting ● multiple stakeholder discussions to validate service provision and consumption ● determination of level of influence with regard to existence and consumption of services

Benefits

The solution allowed for optimisation of organisational set up, make or buy decisions and optimisation of operational and strategic decisions.

Transparent reporting of service production and consumption based on business drivers allowed for constructive discussions amongst stakeholders to identify areas of redundancy, further optimization and synergies.

Certain services were outsourced, eliminated or automated. Achieved significant improvement of collaboration between functions on different levels in the organization.

Technologies utilised

Oracle EPM Cloud – Profitability and Cost Management Cloud Services (PCMCS) &  Oracle EPM Cloud – Enterprise Performance Reporting Cloud Services (EPRCS) – Oracle SmartView Excel Add-In