Operational & Financial Controls: Business Rules Engine & Transaction Processing Control Development

Client Project

  • The Client engaged PPI to identify, assess, and strengthen the operating and financial controls for Immediate Participation Guarantee (IPG), Closeout and Par Closeouts related to five primary work streams; bulk check reconciliation, payment disbursement for bulk and direct pay, flow-through accounting, suspense accounting, and financial approvals.

  • A major component of this initiative was automating the bulk check reconciliation of Client participant payment accounting with the Client or Third Party Administrator (TPA) accounts. Although the need had been identified, a concurrent tactical initiative was underway, and the climate for funding was favorable, no resources had been assigned to lead the business in designing a strategic solution.
Business Challenges
  • A SBU experienced a breakdown in operational controls for a certain type of transaction processing. The result was a material financial impact and a qualified SAS70 audit report. Both of these ramifications can negatively impact client relationships and brand perception.

  • The risk of similar shortcomings came to light, since many transactional procedures were implemented over a number of years in response to each client's customized requirements.
Specific Recommendations
  • Development of a Business Rules Engine (BRE) to provide control over the transaction environment by embedding preventive controls early in the process, while remaining responsive to changing business needs and avoiding the need for expensive, wide-scale overhaul of embedded IT systems.

  • A BRE would meet all the requirements and centralize key operational controls within the business unit, rather than dispersing and duplicating them among IT systems.

  • Implement end to end automation of annuity payments, beginning with the originating problem transaction.

  • Eliminate the multiple manual hand-offs required to complete a payment process.

  • Embed preventive controls in the system.

  • Establish automated, activity driven escalation of errors, exceptions, flagged activity (fraud controls), also launching alerts to multiple desktops.

  • Achieve significant cost reductions and risk mitigation by:
    • Automated internal reconciliation of units and dollars as transaction activity passes between systems and applications, with priority alerts driven to multiple desktops and based on business configured rules for escalation.
    • Automated reconciliation between Client systems and Client/TPA inputs, with alerts for variances, and supported by automated reporting and messaging to internal (phase 1) and external (phase 2) contacts.

  • Configurable rules engine, managed and maintained by the business, providing flexibility to implement immediate operational changes based on corporate, market or operational imperatives, sharply reducing the time and recurring expense of multiple IT work requests for routine operational support.

  • Establish clear business ownership of process, initiating model-driven workflows to support business rules directing activity across multiple systems and product lines, and support ownership with:
    • Transparent, auditable, accessible business rules, written in plain English, rather than code.
    • Full management responsibility and oversight of controls
Outcomes and Benefits to Date
  • Client leadership has accepted PPI recommendations and is in the process of implementing them over a 2-year period.

  • Client is able to communicate across legacy systems with new web technologies. By integrating legacy systems with web services, Client is able to leverage the existing IT environment and increase functionality for modest cost compared with the time and effort required to replace embedded technology.

  • Projected transformational gains have been achieved.

  • Fast implementations improved ROI.

  • Client is the first SBU to implement a business rules engine.

  • Other business units have leveraged the technology first used by Client SBU. The technology is extensible across all US Business units.

  • The BRE is aligned with other key strategic initiatives in Client's 2-year strategic plans.

  • Client SBU will realize material cost savings & risk reduction through bulk check automation and the BRE.

  • Reduced operating costs.

  • Lowering known risks (previously expressed in undesirable audit reports). Automated, built-in controls enable Client not only to perform operational processes correctly, but factually prove they have done them correctly.

  • Operational risk reduction through automated controls reduces market risk with respect to both new and existing customers.