A new world: how big data could transform Transfer Pricing · 2019-08-15 · A new world: how big...

A new world: how big data could transform Transfer PricingTransfer Pricing Special EventSeptember 22, 2016

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2© 2016 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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Session SpeakersShamus RaePartner, Central Solutions, KPMG in the UKKomal DhallPartner, Global Transfer Pricing Services, KPMG in the UKKirsty RockallDirector, Global Transfer Pricing Services, KPMG in the UK




Agenda Topics• Mapping the Journey• The Path to Cognitive Automation• Transfer Pricing and Big Data Today• The Art of the Possible


Thinking Forward

KAI


Mapping the Journey


Application of exponential perspective to the future


The Path to Cognitive Automation


Information technology is at another major inflection point: the digital revolution

“Tell me what to do”

Interactive learning/hypothesis generation

Organizations are experiencing a profound change due to the convergence of technologies:

Generation 1:Tabulating era

Generation 2:Programmable era

1890 2015

Machine counting

Punchcards

Generation 3:Cognitive era

The world of big data: 2.5 billion gigabytes of data each day, 80percent

ofwhich is unstructured

We are here:that “momentof opportunity”

Inflectionpoints

1960


The benefits of a digital labour forceWave 1: Labour arbitrage Wave 2: Labour automation

Source: The Outsourcing Institute, Three Secrets Your Traditional Service Providers Are Not Telling You, June 2014KPMG analysis

Social

Mobile

Cloud

Data/Analytics

CognitiveDigital

Business Models

Revenue/profit correlated to people Revenue/profit not correlated to people

15 – 30 percent Cost take out

40 – 75 percentCost take out for relevant functions

Model is scalable to the extent that you can scale labour

Model is scalable, and is largely independent of labour growth

Access to low cost labour necessaryto provide continuous value

Access to “rocket scientists” who can codify manual processes

Custom/complex, legacy: “Your Mess for Less” Transformative – new way of doing business


The spectrum of digital labour


Cognitive automation is evolving rapidly

Cognitive automation

— Artificial intelligence— Natural language recognition and processing— Self-learning (sometimes self optimizing)— Processing of super data sets— Predictive analytics/hypothesis generation— Evidence-based learning

— Built-in knowledge repository— Learning capabilities— Ability to work with unstructured data— Pattern recognition— Reading source data manuals— Natural language processing

— Macro-based applets— Screen level and OCR data collection— Workflow automation— Process mapping— Self executing

Basic process automation

Enhanced process automation

MachineLearning

Large-scaleprocessing

Adaptivealteration

Artificialintelligence

Big dataanalytics

Naturallanguageprocessing

Processing of unstructured data and

base knowledgeRules engine Visual Data

CollectionWork flow


The path to cognitive automationStrong market players are rapidly emerging

ExampleIPSoft’s Amelia™ utilizes Artificial Intelligence and advanced semantic reasoning to rapidly understand questions, provide answers, and escalate to humans if needed.

Sample Providers— IPSoft— Arago— Automation Anywhere — TCS ignio— Wipro

ExampleFirms are leveraging IBM Watson’s™ sophisticated ontologies, natural language processing, machine learning, pattern recognition and probabilistic reasoning algorithms to aid skilled employees and robots with complex decisions. Other firms are in beta or early stages.

Sample Providers— IBM Watson— Cognitive Scale— Chatterbox

ExampleBlue Prism® has automated tier-1 inquiries (e.g., address change) for a US-based online bank.

Sample Providers— Automation Anywhere — Blue Prism— UiPath— Interactive Media

Rules Learning Reasoning

Transactional acceleration Intelligence augmentation to support right decisions faster

Basic process automation

Enhanced process automation

Cognitiveautomation


Robotics and cognitive automation

Establishing an RPA roadmap Major financial services provider

Context/client challenge

— Completed several data center consolidation and virtualization projects, and was considering further optimization, including automation.

— Original focus was on traditional outsourcing, with hope that the service provider would achieve enhanced results with better economics.

— Lack of awareness of the potential efficiencies that can be gained through incorporation of RPA into their data center strategy.

Approach

KPMG provided:— Expertise in the RPA market and

offerings, and their applicability to the client’s environment, strategy and drivers.

— Development of a Request for Solution that asked the right service providers the right questions for the client’s specific situation.

— Facilitation of service provider responses and joint solutioning sessions with the client, helping to ensure that the client received the right information to execute and finalize its data center strategy.

Benefits

— Client now including RPA as part of its data center strategy.

— Dramatic reduction of human handling of incidents through use of thousands of “out-of-the-box” automated service solutions.

— Full integration with existing service management tools.

— Improved service levels with evidenced-based outcomes.

KPMG client case studies



RPA transformation Major telecom provider


— Ineffective business processes required “swivel chair” access to multiple systems and caused high degrees of errors or re-work.

— Lack of process and tool implementation capabilities.

— Traditional IT teams were not delivering solutions to match demand

— Business units were beginning to look at transforming customer experience beyond basic automation – Virtual Chat, Decision Support etc.

Approach

KPMG assisted the client to:— Define the strategy for the RPA

program, creating a roadmap for increasing the program’s maturity.

— Execute the strategy and roadmap to manage the program.

Key activities in the approach included:— Establishment of an RPA Center of

Excellence to build a delivery and operating model focused on scaling implementations and enabling benefit realization/management.

— Identification of functional opportunities to leverage RPA solutions.

— Creation of a model to enable business units to build and implement RPA solutions to address their respective process pain points.

— Thought leadership on Cognitive automation and vendor landscape

— Development of use case selection criteria for cognitive automation

Benefits

— Deployed 200+ robots over the last 12 months

— Generated annualized savings of $15million+

— Pipeline of 300+ automation opportunities

— Trained over 400 business users on the tool

— Reduced errors and rework, and improved operations consistency.

— Improvements in overall employee and customer experience

— Cognitive Automation Value Assessment (CAVA) underway to identify potential usecases




Cognitive Automation strategy and roadmapLarge healthcare provider


— Client was interested in applying advanced cognitive technologies in a shared services environment; needed help in identifying opportunities and conducting a market study of available solutions.

— Client was piloting basic automation for a limited number of P2P, H2R, and R2R processes.

Approach

KPMG assisted the client to:— Conduct a detailed assessment to

identify candidates for cognitive automation; prioritized the opportunities based on value proposition, complexity of solution, and organization readiness.

— Conduct a market scan to develop a vendor/capability matrix for 100+ vendors and service providers and identify high potential cognitive automation solutions.

— Create an implementation roadmap to develop and sustain cognitive automation capabilities, including the supporting CoE org structure.

Benefits

Client evaluating KPMG’s recommendations, which are expected to deliver: — Significant reduction in existing and

future human labor needs.— Improved service levels and user

experience with evidenced-based outcomes.

— Integration with existing enterprise systems and basic automation technologies.

— Ability to expand into new markets and rapidly add new customers.



Transfer Pricing and Big Data Today


Where we are todayReturn on investment

Complexity

Benchmarking platforms

ERP analytical solutions

Legislative update tools

Automated risk assessments

Data management

Document writers

Work flow tools

Raw public data platforms

CBCR software

Forensic data mining Big Data

Analysis?Cost allocation tools


The Art of the Possible


How do we get there

To prepare, you need to identify the content you will need in the next 4 years and consider:

How can I reduce the cognitive load on my business to utilise my

content?

What are the ethical and moral values that inform the content

produced?

What is the data required to produce the desired content?

Data Cognitive load Values

Content strategy


DataWhat are the data sets for tax?

Structured Unstructured

Internal

External

Existing data used for transactional purposes is not the focus of today’s session


Cognitive loadTransfer Pricing Framework

Pricing Methods

Comparability

Documentation

Deadlines

Disclosures

Audit Rigour

Double Tax Implications

Advanced Pricing Arrangements

Single Jurisdiction

Domestic Tax Legislation

Relevant Rules and Regulations

Judicial Interpretation

Local Industry

Company Information

Corporate Structure

Value Chain Analysis

Commercial Strategy and Stakeholders

Multiple Jurisdiction

Global Industry

IFRS

International Tax Landscape

Relevant Rules and Regulations (OECD)

Inputs

What is the framework for contextualizing the data?


Where we could be Enriched analysis before we humans make the decisions

CognitiveBenchmarking

Report production

Value Chain Engine

Full cognitive analysis

Case law and legislation

tailored analysis

Working capital/ interest

deductibility calculator

Complexity

1 – 2 years 3 – 5 years


Example - cognitive benchmarking

Intrinsic Germane

Inherent difficulty of the content that will enable the business to decide

and act

Framework for contextualising and processing data to produce content, including sources of data and their

relationships to each other

Extraneous

Complexity of the content required to provide the information for the

business to decide and act

Benchmarking strategy

Prior usage data and profit trends

Macro economic data

Company websites

Publically available financial data of peers

Industry data

Commercial regulatory data

Local tax rules and regulations

Tax authority: “why are your benchmarked comparables

appropriate for your intra-group transactions. I disagree with your

analysis”

Shortened list of most appropriate comparables

Validate with qualitative data

Feed back into the Germane feed as learnings


Example – full cognitive analysis

Intrinsic Germane

Inherent difficulty of the content that will enable the business to decide

and act

Framework for contextualising and processing data to produce content, including sources of data and their

relationships to each other

Extraneous

Complexity of the content required to provide the information for the

business to decide and act

Location of CEO

Current Transfer Pricing policy

Categorisation of decisions made by the CEO

Value of decisions made by the CEO

Future strategy of the business

Industry outlook

Effective Tax Rates

Profit profile of the business

Local tax rules and regulations

What would the impact be if I moved my CEO from the UK to

Germany?

Considerations

Tax authority challenge

ETR

TP adjustments

Commercial impact

Outcome


Points To Leave WithIs your tech strategy for tax taking into account:• The drive for efficiencies• The commercial strategies you may need to support in the future and

therefore enriched and evidenced analysis• Defence against technologically advanced tax authorities• The need to simplify your key messages with facts


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© 2016 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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A new world: how big data could transform Transfer Pricing · 2019-08-15 · A new world: how big...

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