Page 36 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes and there’s a cost to the company to run the unit. As such, human resources is typically
viewed as a cost centre.
z z IT departments traditionally were set up as cost centres. An IT organization would charge
back costs to a business unit. For example, IT would charge a commercial loan division of
a bank for monthly transaction processing costs or mainframe use costs. But it wouldn’t
bring in a profit because the division would be charged at cost. In some cases, those costs
may be absorbed by the company or as part of a business unit’s overhead.
z z However, it’s common for IT organizations to be set up as cost centres in highly-regulated
industries, such as financial services or electric utilities, “to show regulators where the
costs are” by charging IT costs to individual business units.
z z Other companies, such as The Hartford Financial Services Group in Hartford, Conn., have
elected to set up their IT organizations as profit centres with a goal of generating zero
profit.



Case Study Bank Hapoalim

ince its founding in 1921, Bank Hapoalim has played an important role in the rapid
growth of Israel’s economy. Today, it is the country’s largest bank with more than
S280 branches, US$94 billion in assets and operations in 20 countries.
Profitability analytics is the latest in a long line of data-based solutions which have enabled
the bank to precipitate faster response times to business changes—a critical advantage in
an unpredictable financial and regulatory environment. Teradata Magazine spoke with
Gilat Rottenberg, business project manager for Bank Hapoalim, about the benefits.
How Does Profitability Analytics Impact the Way Bank Hapoalim Operates?
Rottenberg: Our profitability system is heavily integrated into every management process
so the impact spans across the entire organization. It’s crucial in planning and managing the
bank; it’s the basis for our business and risk models, marketing campaigns, compensation
programs and much more.
do you Measure Return on Investment (ROI) for Your Profitability Analytics Solution?
Rottenberg: We don’t have ROI plans. ROI is difficult to quantify because it’s a data project
that enables many other projects and decision making. It opens up new possibilities. But
the business case isn’t built on ROI.
What You have Realized Improvements in the Responsiveness of Your Business?
Rottenberg: Yes. Because we have integrated financial, customer, marketing and general
ledger data, we can implement more projects faster and also respond to business changes
more quickly. Having access to all that information gives us much more flexibility and
ensures figures from our profitability system are accurate.
What’s an Example of How You use the data?
Rottenberg: When the bank comes up with a new plan—for example for a virtual branch—
we have to reflect those changes in the profitability system. That shows us whether we
need to make changes to the organizational structure to support those changes. We’re
also implementing a new project to calculate profitability data for derivatives, which are
complicated, volatile financial instruments. Detailed profitability data from every contract

Contd…

30 LOVELY PROFESSIONAL UNIVERSITY