IFRS 17 Challenges – Part 3
Business Process and Versioning
In our last two articles we looked at the challenges involved in preparing data and defining the Unit of Account (UoA). These are the two things insurers tend to think about first when getting ready for 2022. But IFRS 17 is much more than an accounting and actuarial topic: it goes far beyond this, spanning the insurance industry’s entire operating model and affecting many other non-functional requirements.
Although most insurers should indeed be concerned with the accounting and actuarial challenges, in the end they will have to handle much more complex problems in relation to IFRS 17 – problems related to business processes, versioning data and various results, and meeting the legal audit trail requirements.
Workflow of your business process and proper documentation
Finding the right IFRS 17 methodology is a key initial challenge. But it’s also important to realize that the business process itself for upcoming reporting periods can become a burden. This is especially true if you want to shorten the time and effort required to publish your annual or quarterly reports. It’s crucial to find a comfortable way of handling the very strict requirements the new standard imposes in terms of things such as
- data lineage and interfaces: where and how data is generated and transferred
- auditability: who does what when
- data quality: maturity and validation
- ownership: approval, review and sign-off
- transparency: proper process documentation.
In our view, technology will play a major role in addressing these matters and will redefine most of the business processes in an insurance company. For example, there will be no more exchanging spreadsheets for reporting purposes by email, as this contravenes many of the principles. Systemorph’s solution enables you to handle all these kinds of activities easily. You can comment on each step without the need for a long explanation as to what in the system your comment refers to. You can ask questions related to specific numbers and results and answer them directly in the system. If you have additional information or files which are helpful for understanding, you can simply attach them. Not only does this assure correct auditing, but it enables you to easily retrace what you have done and why you performed certain tasks last year. All related comments, questions and answers, and files are in the right place for you to retrieve them.
Handling versioning in line with compliance requirements
Another annoying matter is keeping track of different versions of your results. This can create a mess when you save versions for test calculations and overall results in several spreadsheets. It’s not easy to properly track your version history and keep the latest spreadsheet up to date while different people are working on various linked tasks. So, it’s crucial to choose the right technology for IFRS 17. Not only should it allow accountants and actuaries to define their methodology, but it should also provide all the relevant infrastructure, flexibility and governance compatible with business processes completely redesigned to be compliant with IFRS17 reporting. This means that to reduce compliance errors and avoid messy version tracking, you need a fully operational system for exploring historical data or alternative scenarios concurrently. Systemorph’s solution offers a formal means of creating an audit trail that runs automatically in the background, without requiring any additional tracking effort from users.
We have worked on many Proof of Concepts (PoC) in the past few years, and have often seen that while in the beginning the main concern is calculation, as the PoC develops the focus shifts to non-functional hurdles.