Global Business Services could be the right pill for Pharma industry, according to KPMG report

Global Business Services could be the right pill

KPMG in the UK has worked with a large UK health insurer to improve the servicing of critical illness claims, cutting the claims payment process from 30 days to 15 minutes, through the use of predictive analytics.

Also on KPMG.com

  • Pharmaceuticals have a lot to learn from companies in other industries that are more advanced in Global Business Services
  • Automating business processes and operations can reduce labour costs by upto 75 percent, more than double the savings from shifting operations to cheaper labour markets
  • Companies have saved 30 percent to 40 percent of their costs through process simplification, automation, economies of scale and labour arbitrage.

As international life sciences companies seek ways to transform their operations in the midst of wrenching change, they are establishing global business services (GBS), a cross-functional, globe-spanning model that integrates resources, capabilities and systems throughout the entire enterprise. GBS includes shared services and outsourcing and extends operational improvements considerably further into every corner of the organisation. The benefits of GBS are outlined in a new report by KPMG International, Global business services in life sciences: A window to the future (www.kpmg.com/lifesciences).

“Outsourcing has been going on for a long time, but it was fragmented and decentralised,” says Shamus Rae, KPMG partner in the UK’s Life Sciences team. “Now, companies are taking it to the next level to support core business processes in a way that is cross-functional, centralised, global and integrated.” The report is based on years of advisory work by KPMG subject matter experts, advising companies on how to implement GBS to transform their operations.

Pharmaceuticals is a key industry that has lessons to learn from companies in other industries that are more advanced in GBS. KPMG in the UK is currently advising a number of large, global banks in the UK, as they create or improve their GBS organisations. The scale of GBS is large: up to half the total workforce of these organisations provides back- and middle-office services to the front office. For some organisations, this involves more than 100,000 people. “By including technology services and call centres in their model, not only do they create end-to-end ownership of the bank’s processes, but they are complying with stringent, new regulatory requirements, driven by the fall-out of the global financial crisis,” says Claudio Altini, GBS Advisory director for KPMG in the UK.

A key element of GBS is the focus on processes that span the entire enterprise. As the report explains, the orientation of end-to-end processes as part of GBS can enable the enterprise to adopt new technologies more rapidly and benefit from them faster. An example of this is cognitive automation, a continuum of technologies that companies can use to automate business processes and operations. The research shows that when cognitive automation is part of GBS, labour costs are reduced by 40 to 75 percent, more than double the savings derived from shifting operations to cheaper labour markets.

KPMG in the UK has worked with a large UK health insurer to improve the servicing of critical illness claims, cutting the claims payment process from 30 days to 15 minutes, through the use of predictive analytics. The firm collected and processed a variety of structured and unstructured data, developing a proof of concept that applied machine learning algorithms and various models to test their effectiveness. The company’s claims capability was transformed, potentially saving up to half the cost of claims processing, as well as achieving big improvements in the customer experience and in the consistency of claims processing.

The report explains five key benefits of global business services:

Cost savings. By centralising core functions, companies can continue to extract savings long after companies have exhausted other avenues for achieving efficiencies. By consolidating fragmented services, companies have saved 30 percent to 40 percent of their costs through process simplification, automation, economies of scale and labour arbitrage. “Almost all life sciences companies have reduced the workforce, and yet cost reduction remains at the forefront of executives’ minds. GBS takes cost reduction to the next level,” says Shamus.

Stronger compliance. Organisations are able to build more robust structures to comply with growing demands for better business conduct, from regulators around the world.

Faster implementation of corporate transactions. Completion of mergers and divestitures can be accelerated, shortening time-to-market and time-to-benefit. One pharmaceuticals company bought 11 businesses within two years and its GBS organisation was able to help disentangle and integrate them into the central organisation.

Increased flexibility. The recent acceleration of corporate transactions in the industry is creating the need for a flexible and adaptable platform for the back and middle office, enabling it to scale up quickly to meet new business needs.

Global reach. By incorporating all key services worldwide into a single GBS organisation, companies can fully realise economies of scale. “This is a particular asset for Japanese pharmaceutical companies where the English language is not widely spoken and there is a need to standardise processes globally,” says Hideki Machida, Manager, KPMG in Japan.

Despite these benefits, many companies have not yet taken full advantage of the effect of establishing GBS for their organisation. Once they see the wide-ranging gains from GBS and implement it fully, they will be able to realise the value. But they should not underestimate the scope of the changes required and the degree of resistance they might be met with in the company. The roles and responsibilities of many people at all levels of the organisation will be affected, as one would expect with any profound alteration in governance and processes.

ENDS

For further information please contact :

Helen Jackson, corporate communications,KPMG UK

T: +44 (0) 77 292 090 29

E: Helen.jackson@kpmg.co.uk

 

About KPMG
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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