Interview with Dong-Hyung Cho, Director of Advisory Consulting at Samil PwC
From this year on, banks in South Korea are required to prepare their balance sheets according to the International Financial Reporting Standards (IFRS). This requirement is placing increasing pressure on banks there to find a suitable solution.
Faced with a number of challenges, including the consideration of new valuation methods; the use of specific valuation techniques for the exposure to structured finance and new formats in financial reporting and financial accounting, the bank chose to completely replace its national financial accounting practices and to operate in compliance with IFRS. To overcome the obstacles presented by the new accounting regulations, the Woori Financial Group opted for FERNBACH’s comprehensive FlexFinance IFRS solution. FERNBACH’s partner in South Korea, consulting firm Samil PwC, is advising Woori Financial Group, one of the largest banks in the country, in implementing IFRS.
We talked to Dong-Hyung Cho, Director of Advisory Consulting at Samil PwC, about the bank's IFRS project and what he has seen so far.
Should we start with a brief overview of your company?
PricewaterhouseCoopers is a group of auditing and consulting companies and is one of the so-called ‘big four accounting firms’. For more than 35 years, Samil PwC has provided industry-focused assurance, advisory and tax services for public, private and government clients in the areas of corporate accountability, performance and process improvement, financial advice and tax and transaction services. As the South Korean member firm of the global PwC organisation, we have access to the shared experience of over 142,000 professionals worldwide thanks to a number of knowledge management technologies. The same products, services and methodologies that are available internationally are used and applied by the professionals at Samil PwC. In addition, our knowledge and experience in the Korean market provide our international clients with a bridge to the local economy.
What would you say are three factors that are indispensable for successful IFRS project implementation? Why do you think these factors are so important?
It is important to get a head start on the switch-over to IFRS. Early preparation can provide a company with a number of sustainable benefits and opportunities. The organisational aspects (processes, structures, staff resources, coordination with auditors and other stakeholders, training and development as well as early involvement of key departments etc.) also play a decisive role. Successful, timely execution of the switch to IFRS also greatly depends on efficient project management. IT processes, implementing the right software, data flow etc. are all important for a successful switch-over to IFRS. While standardised solutions tailored to a bank’s individual needs are the best alternative in this context, the solution in question must also offer open interfaces that enable problem-free integration of existing banking modules. This can dramatically reduce the length of a project and enable quick, efficient solution activation.
Let’s have a look at the IT side of an IFRS change-over – Woori Financial Group is now using the FlexFinance IFRS solution. When did the bank decide to introduce a new solution and why did they decide on this one?
South Korean banks were required to prepare their balance sheets in accordance with IFRS by 2010. Like the other banks in the country, Woori Financial Group was under growing pressure to find the right solution. In early 2009 they were already well aware the IFRS switch-over presented them with a considerable challenge that could only be overcome with a suitable IT solution. The bank performed intensive market analyses and asked around in the industry for a well-known solution with an experienced supplier behind it. That solution had to come complete with all the necessary modules while remaining flexible enough to allow fast adaptation to their needs and specifications. Following their evaluations, they invited several vendors to participate in an IFRS benchmarking test. For this purpose, FERNBACH processed the bank’s entire sample portfolio and, with a best practice delivery using the solution’s business templates, won the contract. The bank realised that FlexFinance IFRS was the only integrated platform that could handle the entire scope of IFRS requirements. The solution provides a pre-configured financial repository based on Ready-to-Go business templates (one per financial instrument). These templates are unique in the market and have been developed using in-depth experience gained from managing multiple projects in a number of countries and covering even more auditing criteria. Today, these pre-defined templates can cover more than 150 financial instruments. The solution features all the functionalities necessary for IFRS-compliant valuation, accounting and disclosure of financial instruments.
It is also important to keep in mind that IFRS is a complex topic that requires experience, a solid track record and dedicated experts. FERNBACH has a strong accounting background and is the only vendor with an IFRS solution as part of its core business. FlexFinance even has its roots in financial accounting.
Which features in particular did the bank ask for and which areas had to be covered? How exactly does Woori Bank and its end-users benefit from the solution?
The bank needed a solution that would provide an accurate, modern financial accounting system and enable them to fulfil IFRS requirements efficiently and on time. A solution that combines pre-processing with all the features necessary for precise valuation and generation of accounting events including cash flow generation, parallel GAAP capability, securities positions building and product building/splitting. This pre-processing forms the basis for IFRS-compliant accounting entries and regulatory reporting while taking specific requirements such as hedge accounting and impairment into account.
The bank’s end users benefit greatly from well-proven IFRS compliance, solid implementation of all standards, fully auditable accounting entries and valuation figures, user-friendly browser-based interfaces with an integrated workflow-driven approval process. The solution also supports different user profiles and access rights respectively with different levels of authorisation and approval. Transparent audit trails for all user actions, flexible creation of customised reports according to the bank’s individual and regulatory reporting needs with easy data access are also benefits of central importance. All this is thanks to the FlexFinance IFRS solution and its components: The FlexFinance Data Management Suite (DMS), FlexFinance Accounting Generator, FlexFinance Hedge Manager and FlexFinance IFRS Reporter.
Implementation and training often require a lot of time – what has your experience been with FlexFinance IFRS?
We have worked on highly successful implementation measures with FERNBACH, especially where large volumes of transactions are involved, which increases complexity and requires experience, a solid track-record and dedicated experts. The departments involved in the implementation have reported that the project was successfully completed. FERNBACH, financial software provider KT FDS and Samil PwC collaborated very closely on the project and applied a standardised method – the so-called “FERNBACH Implementation Method” (FIM), which is the product of more than 20 years of customer project experience. We were impressed by the fact that it comprises all the relevant areas including workshops, support services, tools and best practices. It had a major impact on reducing the work that we put into implementation and also helped us limit project risk. The FIM also ensured quality, cost efficiency and timely delivery. At the beginning of the project, the staff involved took part in a special workshop that explained every aspect of implementation. This put everyone involved in a position to begin implementation immediately following project initialisation. The application is so user-friendly and intuitive that the employees easily adopted how to operate FlexFinance. FERNBACH-Software has a strong track record and is the only vendor that has an IFRS and risk solution as part of its core business. Working shoulder-to-shoulder with experts that have such in-depth accounting knowledge was a decisive factor throughout the entire project.
Mr. Cho, we would like to thank you for the interview.
It was my pleasure to give this interview and talk about our experiences. It gave us the opportunity to encourage readers to consider the solution. It is also important to add that this solution helps to keep the cost of such a change-over on a reasonable level and to create a strong sense of satisfaction all round.
