Integration of industry and finance, practice and experience of digital transformation of finance and accounting of Agricultural Bank of China

Agricultural Bank of China's digital transformation of finance and accounting

(1) Promote the integration and linkage of "business, technology, and data" to realize the integration of industry and finance

1. Based on the principle of separation of transaction and accounting, promote the new seamless integration of business and accounting in the system architecture. In order to solve the outstanding problem that product innovation is subject to the change of accounting rules and the front-end trading system, the Agricultural Bank of China started to build a system architecture that separates transaction and accounting, developed and launched the accounting and reporting system, and released the accounting and reporting function from the trading system to realize the hierarchical processing of business transactions and accounting, thereby changing the traditional combination logic of business and accounting front and back office, effectively reducing the burden of the trading system and tellers, and greatly improving the ability of the trading system and refusing to serve customersIt fully adapts to the transformation of the front-end system from "accounting-centric" to "customer-centric", and at the same time, through the comprehensive innovation of traditional accounting and reporting functions, it has improved its adaptability to changes in accounting standards and the quality of information disclosure.

2. Take the construction of the integrated financial and accounting management platform as the starting point to promote the new integration of all kinds of data at the system level. In order to meet the requirements of refined management, improve the efficiency of the use of financial and accounting information, and better support management decision-making with flexible, all-round and three-dimensional financial and accounting information, Agricultural Bank of China started to build a comprehensive financial and accounting management platform. The platform is aimed at eliminating the operation of the modern accounting system, based on financial accounting, with management accounting as a tool, integrating public application system, data mart system, accounting system, financial control system, management accounting system, fixed assets system, financial review system, budget management system, performance evaluation system, tax management system, monitoring and analysis system, accounting valuation system in one of the financial and accounting management business application information system, and is committed to promoting the integration, data and process of financial and accounting management.

In terms of integration, through the comprehensive combing and integration of the financial and accounting management process, the overall functional architecture of the platform is reasonably designed based on the business process, and the modularization of the internal structure of the platform is realized, which ensures that the business boundaries between the system modules are clear, the business processes are connected, the business processing is linked, and the business flow is smooth, and the overall coordination and comprehensive control of the system functions are strengthened.

In terms of digitalization, in accordance with the digital thinking of "data is value", we made full use of the massive data accumulation and collected the operation and management data of the whole bank by improving the "integration of business and finance", promoted the transformation of the financial and accounting system from "island" to "platform", established a data-based panoramic view of financial and accounting management, improved the ability to transform data into management information, comprehensively supported financial and accounting management and financial decision-making, and strongly supported strategic management and operational decision-making.

In terms of process, we implement the concept of whole-process management, strive to create a closed-loop online management of the whole process covering before, during and after the event, form an information system covering the whole life cycle of financial and accounting management, realize the close connection, full sharing and restraint control between system modules, and comprehensively improve the level of financial and accounting risk prevention and control and management efficiency.

The construction of the integrated financial and accounting management platform marks the fundamental transformation of financial and accounting informatization from accounting support to management support, so as to have the conditions from traditional data analysis to advanced analysis based on big data.

3. Take the independent accounting measurement of "valuation + impairment" as a breakthrough to promote the new and in-depth integration of financial and accounting data and business data in the system logic. In order to meet the requirements of accounting standards on fair value measurement, Agricultural Bank of China has developed an accounting valuation system. The system adheres to the advanced concepts of all-round product coverage, precise model system, independent alarm design, personalized system management, etc., and carries out accounting valuation independently of the front office department. According to the risk and return characteristics of financial instruments, the system constructs more than 100 accounting valuation models based on four models: discounted cash flow, binary tree, Black-Scholes/BAW (standard European option price explicit solution) and Monte Carlo simulation, which takes into account the calculation efficiency and accuracy, reflects the fair value of financial instruments day by day, and warns of risk changes in time. At the same time, the Agricultural Bank of China has developed a credit asset impairment system. The system comprehensively covers all types of businesses that bear credit risks, such as on- and off-balance sheet credit assets, bond investment, and interbank business, and embeds impairment measurement models such as discounted cash flow models and risk parameter models, improving the level of informatization, standardization and refinement of impairment measurement. The launch of the valuation and impairment system has enabled the financial and accounting data to be highly integrated with the business data at a deep level, and the process data of business management has been quantified from the perspective of financial accounting.

(2) Build multi-scenario application practices through big data analysis and data insights

1. Support "precision marketing" with customer performance information. The first is to support customer segmentation marketing management, and the business department can use the customer dimension information of the accounting system to divide customer attributes, analyze customer behavior, tap customer needs, understand customer preferences, and formulate targeted marketing strategies; The value contribution information of sub-products provides a solid basis for reasonable prediction of customer contributions, and the business department can take measures to improve quality and efficiency for customers with insufficient contribution in the future;

2. Support scientific pricing management with the information of "volume-based price risk". The first is to support internal capital pricing management, by providing the asset and liability management department with basic data of the yield curve and the personalization of strategic customers and core products, to help it optimize the FTP dynamic adjustment mechanism;

3. Support refined performance management with benefit distribution mechanism. The internal benefit distribution mechanism (revenue sharing and cost allocation) under the integration of industry and finance is refined to the account level, which lays a solid foundation for building a more comprehensive and scientific performance appraisal mechanism: first, it realizes the evaluation of product performance, and supports marketers to find the focus of product marketing by showing the value contribution of each product; Third, the evaluation of account managers has been improved, and the value contribution information of customer products, products and accounts has been included in the performance evaluation of account managers, which has strengthened the incentive and constraints on account managers.

4. Support a dynamic resource allocation mechanism with multi-dimensional value analysis. The multi-dimensional value analysis under the integration of industry and finance has transformed the resource allocation from a simple "layer-by-layer" model to a dynamic resource allocation system for customers, products, regions, etc. The first is to improve the allocation of resources at the customer level, so that marketing resources are inclined to strategic customers with higher value contribution, and change the situation of one-sided pursuit of customer status and scale and ignoring value contribution in the past;

5. Support refined risk management and control with multi-dimensional risk information. Regional, industry products under the integration of industry and finance, Multi-dimensional data analysis such as customers supports risk disclosure in different dimensions and promotes the strengthening of risk management and control: first, it reveals areas with high levels of continuous risk, and supports business authorization and differentiated policy adjustment in these regions; second, it reveals industries with serious overcapacity, and supports the adjustment of risk exposure and credit scale of the industry; third, it reveals the risk cost of products, and supports the management department to reflect the risk cost into product pricing and make product compression and exit decisions; fourth, it reveals the level of customer insurance, integrates the relevant provision costs and economic capital occupation of customers, supports customer access and exit decisions, and avoids high-risk customers or counterparties。

Key lessons learned from the digital transformation of finance and accounting

(1) Standard co-construction

The finance and accounting department, science and technology department, business management and operation department, and support and guarantee department of Agricultural Bank of China have coordinated and coordinated the promotion of the whole bank, established a unified data standard for the whole bank, and strengthened the internal connection between financial and accounting data and business data. By building an enterprise-level big data platform, the source, granularity and caliber of data are unified, and the efficiency of cross-system data integration and data exchange between finance and accounting and business is improved.

At the bank-wide level, the formulation and implementation of standards for institutions and customer products have been completed, and each data is standardized from the aspects of standard number, Chinese name of information item, business definition, naming rules, coding rules, information sources, attributes, etc. Continue to increase the frequency of use of standardized data, and form a benign interaction of "data standards, data collection, and data application". Banks should strictly implement data standards in the construction of information systems and the realization of data value to ensure the consistency and accuracy of data generation, exchange, processing, and use, and continuously improve data standards based on practical applications to ensure that data standards come from the same source and are produced in one mouth.

(2) Data sharing

As an important data source of the bank's big data platform, the finance and accounting platform is committed to data sharing with other source systems in accordance with the requirements of "same source and homogeneity, centralized processing, and unified release", and has established data interfaces between business systems and accounting systems to automatically transmit transaction-level information data, so as to realize the interconnection of industry, finance, and teaching data. On the one hand, the accounting system integrates data from more than 10 systems, such as the bank's core system (operation management department), internal capital valuation system (asset and liability management department), provision system (risk management department), customer relationship management system (business operation and management department), etc., to form a big data information collection. On the other hand, after the financial and accounting system completes the integration and processing of data, the data is fed back to the business department through the business and financial data interface for its decision-making.

(3) Benefit sharing

Based on standard co-construction and data sharing, finance and accounting and business have realized the sharing of benefits in management. On the one hand, thanks to the business system data, the accounting system can integrate multiple information including profitability, business volume, asset quality, capital occupation, etc., build a bank-wide value management platform, comprehensively evaluate the value contribution of responsible entities in various dimensions, and carry out all-round and multi-level business operation analysis, so as to provide a more detailed basis for strategic decision-making. On the other hand, thanks to the processing and integration of data by the accounting system, business departments can integrate business and financial information and carry out in-depth reprocessing of data. In order to more comprehensively and objectively evaluate the effectiveness of its own operation and management and the level of value return, it is conducive to grasping the key to the problem and implementing precise policies, improving its own operation and management level and risk prevention and control capabilities, and better implementing the core concept of value.

Source: Finance & Accounting, Issue 24, 2023

Author's Affilications:Department of Finance and Accounting, Agricultural Bank of China