IBM Journal of Research and Development

Issue 4 • July-Aug. 2014

Smarter Finance
Enterprise finance organizations have traditionally focused on financial planning and budgeting, financial consolidation, and audit and compliance activities, with relatively little emphasis on the application of advanced analytics. Compared to marketing organizations, for example, which have long made use of predictive modeling and optimization to improve customer relationship management and marketing effectiveness, finance organizations have generally been slower in their use of data-driven models for improving the effectiveness and/or efficiency of their processes. This issue of the IBM Journal of Research and Development emphasizes new analytic methods, tools, and case studies that are foundational to transforming enterprise finance organizations to become the center for decision-making for corporate performance management.

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  • [Front cover]

    Publication Year: 2014, Page(s): C1
    IEEE is not the copyright holder of this material | |PDF file iconPDF (1404 KB)
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  • [Front inside cover]

    Publication Year: 2014, Page(s): C2
    IEEE is not the copyright holder of this material | |PDF file iconPDF (13 KB)
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  • Table of contents

    Publication Year: 2014, Page(s):1 - 2
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  • Preface: Smarter finance

    Publication Year: 2014, Page(s):1 - 3
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  • A framework for strategic financial risk management

    Publication Year: 2014, Page(s):1:1 - 1:11
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (1224 KB)

    Strategic risks represent the largest challenge for corporate risk management, often due to lack of data or incompatibility with existing financial modeling frameworks. Indeed, industry surveys found that from 2002 to 2012 strategic risks accounted for over 80% of the cases of significant shareholder value loss among Top 1000 companies. To meet the challenge, we propose a practical framework that ... View full abstract»

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  • Evaluating risk: IBM's Country Financial Risk and Treasury Risk Scorecards

    Publication Year: 2014, Page(s):2:1 - 2:9
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (2262 KB)

    IBM is a global enterprise operating in more than 160 countries and therefore needs to constantly monitor the risks that could affect its business. Changes in a country's regulatory, macroeconomic, and socioeconomic environments are all factors that could affect business opportunities. It is important to have an aggregated view of these indicators and be able to combine this data with internal, co... View full abstract»

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  • New approaches to operational risk modeling

    Publication Year: 2014, Page(s):3:1 - 3:9
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (365 KB)

    Estimation of economic capital of a financial institution requires modeling of operational losses of the business units of the organization. Operational losses of the financial institution are usually represented as an aggregate sum of the losses incurred by the operational events of the business units. Simulation of these events requires the introduction of a co-dependence structure for a more re... View full abstract»

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  • Middleware for financial risk data aggregation

    Publication Year: 2014, Page(s):4:1 - 4:10
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (1028 KB)

    The ability of Global Systemically Important Banks—those banks whose failure would materially affect the global financial system—to identify risk concentrations and to aggregate their risk exposures in a timely fashion is now recognized as an important step for safeguarding the stability of the financial system and avoiding future crises. Regulators representing the G20 countries are... View full abstract»

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  • Computing equal risk contribution portfolios

    Publication Year: 2014, Page(s):5:1 - 5:12
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (807 KB)

    For institutional investors, optimizing the trade-off between risk and reward poses significant modeling and computational challenges. Notably, small errors in the estimated returns of financial assets can lead to optimized portfolios that incur far too much risk for the returns they actually deliver. Given these adverse effects, portfolio construction techniques that are based exclusively on risk... View full abstract»

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  • The role of effective corporate decisions in the creation of efficient portfolios

    Publication Year: 2014, Page(s):6:1 - 6:11
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (820 KB)

    Chief executive officers and chief financial officers seek to implement corporate financial decisions that maximize the stock price and stockholder wealth. Real assets may be tangible, such as machinery or factories, or intangible, such as technical expertise or patents. These real assets must be paid for. To finance the real assets, the financial manager makes decisions regarding the magnitude of... View full abstract»

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  • Analytical support for predicting cost in complex service delivery environments

    Publication Year: 2014, Page(s):7:1 - 7:10
    Cited by:  Papers (1)
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (696 KB)

    Within larger and ever-more complex global service delivery networks, forecasting and managing cost becomes an increasing challenge. While manifold interdependencies and transactions between individual delivery centers can still be captured ex post, forecasting the spending and income and expense (I&E) impacts of management decisions becomes tedious. We propose a business-analytics-based appro... View full abstract»

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  • Workforce management: Risk-based financial planning and capacity provisioning

    Publication Year: 2014, Page(s):8:1 - 8:10
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (895 KB)

    We propose a principled risk-based framework that enables organizations or complex systems to jointly perform financial planning and human-resource management functions in an environment characterized by uncertainty in demand and supply and by other exogenous factors. This framework consists of a set of risk-based capacity planning models and methods that, first, allow for a rigorous quantificatio... View full abstract»

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  • An approach to enterprise revenue forecasting as a decision support system

    Publication Year: 2014, Page(s):9:1 - 9:7
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (179 KB)

    Successful competitions in the marketplace require the ability to make accurate management decisions, which often call for a decision support system. In the finance function of an enterprise, a significant portion of decision-making involves quarterly revenue forecasts and corresponding gap analyses updated on a weekly basis. This paper describes a statistical framework based on an enterprise quar... View full abstract»

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  • Smarter Financial Life: Rethinking personal financial planning

    Publication Year: 2014, Page(s):10:1 - 10:10
    IEEE is not the copyright holder of this material | Click to expandAbstract |PDF file iconPDF (2577 KB)

    An increasingly complex landscape of financial products, in combination with a falling provision of social security, increased life expectancy, and persisting financial illiteracy, calls for a reevaluation of personal financial planning. Currently, personal financial advice is offered predominantly from an institution's point of view, neglecting the personal point of view. We introduce a comprehen... View full abstract»

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  • [Back inside cover]

    Publication Year: 2014, Page(s): C3
    IEEE is not the copyright holder of this material | |PDF file iconPDF (13 KB)
    Freely Available from IEEE

Aims & Scope

Meet Our Editors

Editor-in-Chief
Rachel D'Annucci Henriquez
IBM T. J. Watson Research Center