Case Studies

Guotai Juan Securities Gets a Platform for the Future with Oracle and Hand

With Oracle E-Business Suite at the core, Guotai Junan built a practical, systematic enterprise resource management system that offers the kind of complete functionally that is crucial to securities enterprises such as ours.

"With Oracle E-Business Suite at the core, Guotai Junan built a practical, systematic enterprise resource management system that offers the kind of complete functionally that is crucial to securities enterprises such as ours. The combination of secure transactional and professional accounting management ensures effective audit and surveillance for the enterprise's financial system." -- Wang Weijie, Financial Director, Guotai Junan Securities Co., Ltd.

Competitive Pressure Spurs Quest for Technological Edge
Formed through a merger in 1999, Guotai Junan Securities Co., Ltd. is one of the biggest securities companies in China. In all, Guotai Junan has nearly 4,000 employees, one subsidiary, five sub-companies, and branch offices scattered among 28 provinces, municipalities, and autonomous regions throughout China. The company has net assets of CNY165 million (US$19.9 million), placing it first among all securities dealers in China by asset value.

Guotai Junan operates in an emerging sector in China that goes back to the 1980s when China set out to establish securities companies and securities markets. Since then, the brief history of China's securities industry has been characterized by rapid development and exploding market capacity. After China was admitted to the World Trade Organization in 2000, competition among the 100-plus companies in China's securities industry intensified.

Guotai Junan regards advanced IT applications and effective financial management as a source of power in fueling the innovation and development essential to giving Chinese securities enterprises an edge in the twenty-first century. But before 2001 Guotai Junan did not take full advantage of technology. Like other businesses in the industry, Guotai Junan had been relying on conventional financial management systems--in this case Anyi software and Langchao Huaqiang financial systems--and bumping up against the limitations. "Such software cannot meet the requirements of information sharing in a modern enterprise," said Wang Weijie, financial director of Guotai Junan Securities Co., Ltd. "Nor can it help management obtain full, accurate, and timely reporting. As a result, it makes it difficult to adjust financial strategy in light of the actual situation. Adaptable financial management is crucial to the internal management of a securities enterprise."

Spurred by intensifying competition, Guotai Junan signed an agreement in 2001 with Shangai-based Oracle partner Hand Enterprise Solutions Co., Ltd. to deploy Oracle E-Business Suite.

High-Level Project Goals

  • Install a secure, stable, scalable ERP system that lays the foundation for growth
  • Gain a technological edge in a fiercely competitive market
  • Get up-to the minute financial reporting to improve financial analysis and support managerial decision making
  • Jettison sluggish and outdated bookkeeping and reporting practices

Why Oracle?
Guotai Junan was prepared to reject any system that could not help it meet three specific business objectives: create dynamic, centralized management for tracking information; provide the kind of information its financial managers need to conduct more effective planning; and establish control over resources to help Guotai Junan optimize business flows to promote orderly, efficient operations throughout the company. After assessing several major financial management systems available on the market, Guotai Junan picked Oracle E-Business Suite and Oracle Database in support of these objectives.

Oracle's tenure in the industry also helped win over Guotai Junan. "Oracle's lengthy industry experience was the key to ensuring the smooth implementation of our project, helping the enterprise overcome our complex management structure," Weijie said. "And the modularized, customized solutions offered by Oracle are an important means of saving money. An enterprise does not necessarily need a big, all-inclusive infrastructure, so it's important to give priority to deploying modules that can best bring profits for the enterprise." For Guotai Junan, those strategic modules were Oracle General Ledger, Payables, Assets, and Cash Management.

Why Hand Enterprise Solutions?
Established in Shanghai in 1996, Hand Enterprise Solutions was China's first ERP consulting company and first Oracle's certification solution partner. Hand provided Guotai Junan with implementation services for Oracle E-Business Suite and related consulting, as well as technical support and training services.

Guotai Junan credits the professional, in-depth studies Hand conducted of its operations for the rapid, six-month implementation of the project. Implementation began in June 2001 and was fully operational on Jan. 1, 2002. During that time, Guotai Junan management provided strong support to the implementation efforts by adapting its workflows and processes to the new system. "Efforts made by Guotai Junan management and employees to facilitate the implementation were the key to the success of the project," Hand officials said.

The result: Guotai Junan realized seamless integration between Oracle's financial system and its original business systems. In the process, it built a standard, systematic, practical ERP management platform that offers complete functionality for the securities company that focuses on general accounting management and business flow optimization with Oracle financial management at the core. "E-Business Suite successfully integrated data on the entire system," Weijie said.

'Major Step for the Industry'
In Hand's view, Chinese securities brokerages have several specific needs to consider when selecting an information system, with security and reliability at the top of the list. These are essential, Hand officials note, because Chinese securities businesses typically have numerous branch offices scattered over a wide region. The securities industry also has heavy deadline demands. For instance, it must conduct daily accounting of fund positions and regularly calculate interest payable. That is why companies such as Guotai Junan are rushing to introduce accounting principles such as trading day, trading day balance, and average balance of cycle into their financial accounting model.

When it comes to deploying an ERP system, Hand officials contend, the Chinese securities industry is distinctive in that it takes the securities accounting model as the bridge between business systems such as trading systems and dedicated financial accounting systems. By employing a layered management model to introduce an online work flow mechanism, a securities company can expedite the flow of funds and reduce arbitrary financial management. Moreover, it is able to conduct internal readjustments and control through the independent accounting model.

This is not the way most Chinese domestic securities dealers function, however. Instead, the financial systems are based on a three-tier structure: headquarters, local headquarters, and branches. Branches set up a separate financial system and build financial systems by consolidating statements at the end of a month. They usually set up an independent audit system, with automatic data connection to business systems. Data are integrated and analyzed in light of specific requirements on audit and risk control. The majority of securities dealers continue to conduct extensive management of customer resources. On the front of IT application process, most securities dealers still run servers set up dispersedly with the branches as unit. Statements are consolidated at the end of a month. At the same time, the finance departments of most securities dealers still focus on bookkeeping, devoting inadequate efforts to financial management and financial analysis and offering little decision support for top management.

That's why Guotai Junan's move to Oracle was so significant. "The project marks a major step by a securities enterprise in a bid to gear itself toward the international arena and lays the foundation for Guotai Junan to seek future development," Weijie said.

Integration Streamlines Operations, Saves on Costs
Since it deployed Oracle E-Business Suite, Guotai Junan has seen several improvements in its business processes. At the top of the list, management has been able to work out an effective financial strategy in the context of a unified financial management system, helping the enterprise develop more rapidly. The combination of modules allows various departments to share financial data, and an intensive management system has been set up.

The powerful integration functionality of E-Business Suite made it possible for Guotai Junan's finance department to set up a new securities accounting management mechanism. Previously, each accounting unit handled actual gains and losses from its own operations and any financing business commissioned to them. Now, each unit is in a position to manage the gains and losses of any portfolio on the previous day. This lets the financial executive grasp the company's financial position in the shortest time possible. Also, introducing a contract management mechanism, powered by Oracle Contracts allows inquiries or analysis of the cost--or potential cost--of a fund contract at any time, laying the foundation for the company to further improve fund management efficiency.

Guotai Junan has improving the efficiency of its financial operations and reduced costs by moving to a single accounting structure for the entire company. Having one set of accounting items for the 120-plus accounting units in the company gives the staff at headquarters control. Furthermore, automatic interbranch reconciliation has eliminated time-consuming manual processes. The centralized source of up-to-date information speeds the finance department's reporting, improving management efficiency.

Thanks to the security and reliable of Oracle's financial system, Guotai Junan believes it has gained an edge in the fiercely competitive market environment. "The combination of secure transactional and professional accounting management ensures effective audit and surveillance for the enterprise's financial system," Weijie said. "The security of customers' transactions and fund data is the basis for the survival of securities dealers."

Future Plans
Guotai Junan sees the deployment of Oracle E-Business Suite as a first step in refining its business practices and envisions adding a variety of systems, including those aimed at managing personnel and customer relationship management (CRM). Guotai Junan believes that further improvements in its management mechanism will help it avert risks and mobilize for expansion. It also looks forward to fully incorporating the management best practices embodied in E-Business Suite. In this way, Guotai Junan expects to realize better information interaction, improve work efficiency, and have fully integrated financial management--all springboards for expanding into new markets. "Because Oracle's financial management technique is built on internationally accepted financial management models, it provides an important means for Guotai Junan to bring its financial management in line with international practices and vie with international competition," Weijie said.

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