Scribd
Upload
33 views24 pages

Financial Data Mining: Presentation by

Financial Data Mining aims to discover patterns and relationships in large financial data sets through data mining techniques to improve business decision making. Modern finance requires intelligent analysis of complex and incomplete financial data. Data mining can help financial institutions become more "smart" by revealing hidden insights. It transforms finance teams from record keepers to strategic advisors by spending more time on analysis and less on data collection. Proper data integration, business rules, and consistent metrics are needed to deliver a finance-friendly data warehouse that empowers analysts and aligns the business.

Uploaded by

rachan90
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
33 views24 pages

Financial Data Mining: Presentation by

Financial Data Mining aims to discover patterns and relationships in large financial data sets through data mining techniques to improve business decision making. Modern finance requires intelligent analysis of complex and incomplete financial data. Data mining can help financial institutions become more "smart" by revealing hidden insights. It transforms finance teams from record keepers to strategic advisors by spending more time on analysis and less on data collection. Proper data integration, business rules, and consistent metrics are needed to deliver a finance-friendly data warehouse that empowers analysts and aligns the business.

Uploaded by

rachan90
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 24

Financial Data Mining

Presentation By:
Alvina Roy Raj Saxena Rachan Thomas Rajesh

Why?
Modern Finance Needs:
Smart financial institutions need intelligent activities Mass, complex and incomplete financial data information Smart thinking, deep analyzing and reasoning

CEO

CFO

Imagine!

VP of Finance

Comptroller

Financial Analyst

The Ultimate Finance Challenge


Improve Efficiency and Effectiveness Simultaneously

Business Acumen

Effectiveness

Profile of World-Class Finance


individuals are expected to provide more insightful information for decision-making and contribute to process excellence.
The Hackett Group

Strategist Business Partner

Management Analyst
Reporting Specialist Clerk
Task Focused Manual Processing

Efficiency
Automated Processing

Finance Evolving the Role


Traditional: Statutory reporting Management reporting Close books Budget Compliance Treasury Tax Cash Capital New: Identify value drivers Reengineer processes Suggest new investments Dashboards/scorecards Do continuous planning Improve forecasts Calculate profitability Predict customer churn

Accountant. or advisor? Bookkeeper or savvy strategist? Cost center or profit center?

CFO Quotes
We need to change from being a financial record keeper to a proactive partner with the business. I want the finance group to do more than accounting. I want them to help the company make profitable decisions. We need to collaborate with the business if we are going to improve the financials. Showing them actuals and targets isnt enough; we need to help them reengineer fundamental processes.

Partners with the business


Should we change our pricing? Should we change our assortment? What customers are profitable? Should we extend store hours? Should we source parts from a new supplier?

How?
Applying Innovative Technologies
Artificial intelligence & Intelligent agents Data mining & Knowledge discovery Modeling Service oriented computing & Web services Knowledge management

Converging Two Worlds


Financial Information Business Information

Single Version Of Truth


*************************************************************

Data Warehousing Business Intelligence

Our finance team now spends 80% of its time analyzing data and providing value to the business and 20% collecting it, instead of the other way around. -- Bobby Ghoshal, BI Director, Freescale

All business becomes information driven.


The concept of Data Mining is becoming increasingly popular as a business information management tool where it is expected to reveal knowledge structures that can guide decisions in conditions of limited certainty. Competitiveness: How you collect and exploit information to your advantage? The challenges Most corporate data systems are not ready.

Can they share information? What is the quality of the input information
Most data techniques come from the empirical sciences; the world is not a laboratory.

A visualization of a Naive Bayes model for predicting who in the U.S. earns more than $50,000 in yearly salary. The higher the bar, the greater the amount of evidence a person with this attribute value earns a high salary.

Financial Data Mining


Data Mining is used to discover patterns and relationships in financial data records with an emphasis on large observational data bases. Many organizations have large transaction oriented data bases used for inventory billing accounting, etc. These data bases were very expensive to create and are costly to maintain. For a relatively small additional investment DM tools offer to discover highly profitable nuggets of information hidden in these data. Data, especially large amounts of it reside in data base management systems DBMS. Conventional DBMS are focused on online transaction processing (OLTP); that is the storage and fast retrieval of individual records for purposes of data organization. They are used to keep track of inventory payroll records, billing records, invoices, etc.

Data Mining Techniques


Data Mining as an analytic process designed to explore data (usually large amounts of - typically business or market related - data) in search for consistent patterns and/or systematic relationships between variables. to validate the findings by applying the detected patterns to new subsets of data. The ultimate goal of data mining is prediction - and predictive data mining is the most common type of data mining and one that has most direct business applications. The process of data mining consists of three stages: the initial exploration. model building or pattern identification with validation and verification. deployment (i.e., the application of the model to new data in order to generate predictions).

Best Practices
Sponsorship Partnership Empower financial analysts Deliver finance-friendly DW Consolidate and harmonize Manage Excel

Sponsorship
Chicken and egg dynamic Find the pain Fund the program avoid shortcuts CFOs use and certify the data
Once our CFO started certifying the metrics, sales and marketing were forced to use the same numbers. If they didnt, they would have to explain why their numbers didnt match the CFOs numbers and that is a discussion they dont want to have. Dave Whittington, AT&T Mobility

Partnership
Respect Proximity Recruit from finance
In my group, we are joined at the hip with the BI team and have come to respect the abilities of each other. In the beginning, there was uncertainty, but the BI team has learned a lot about finance and what we need, and weve learned a lot about systems and to prioritize what we do so we only ask for what we really need at the time. Gregg Thompson, director of financial systems at Office Depot.

Empower financial analysts


Value as subject matter experts Recruit onto the BI Treat spreadmarts as requirements Empower with analytical tools

You need to recognize that financial analysts are in the BI business so make them part of the team and support them. Otherwise, theyll go off and do their own thing, says J. Piscioneri, a former BI director at Corbis.

Deliver finance-friendly DW
Apply financial business rules Link financial and business hierarchies Detailed, timely data Enterprise scope

Our data wasnt very accurate when we started building the data warehouse. We had teams shore up countless business rules and transformations so the metrics wouldnt leak [i.e. generate errors.] But now we have a tightly wound process. Dave Whittington, AT&T Mobility

Consolidate and harmonize


After the fact
DW via data integration tools Reporting tools that query multiple GLs Spreadsheets Financial consolidation and reporting tools

Deploy single data warehouse and chart of accounts Harmonize key metrics

Manage Excel
Coexist with Excel as front-end to BI server Convert to BI tools Coopt spreadmarts Coerce

For a year we patiently reconciled our reports with theirs and we were always right because we had an automated process while they had humans entering data into spreadsheets. After that, the director of operations at my suggestion issued a mandate saying we would no longer reconcile reports and everyone who had been creating manual cost reports would be redeployed. Director BI, major US bank

Upshot
Saves time
Analysts spend less time massaging data

BI Benefits

Improves analysis
Better models, forecasts, scenarios

Aligns the business


Consistent definitions, rules, metrics

Improves understanding
Profitability of each customer, product, etc.

Fewer surprises
Proper controls in place for financial data

Applications in Management
Operations management e.g., model uncertainty in demand, production function... Decision models portfolio optimization, simulation, simulation based optimization... Capital markets understand risk, hedging, portfolios, beta's... Derivatives, options, ... it is all about modeling uncertainty Operations and information technology dynamic pricing, revenue management, auction design, ... Data mining... many applications

THANK YOU

Questions??

You might also like