ISACA Systems Implementation Assurance – Lessons Learned

1. ISACASystems Implementation Assurance – Lessons Learned February 2009

2. Agenda – Lessons Learned1. Project Phase 1- Planning / Mobilization2. Project Phase 2 – Design / Blueprint 3. Project Phase 3 – Realization / Build & Test 4. Project Phase 4 - Pre Go-live / Deliver Phase 5. Project Phase 5 - Post Go-live / Maintenance Phase6. Example Project Discussion Document

3. Phase 1- Planning/Mobilization Careful planning, particularly in the early stages of a project, is necessary to coordinate activities and manage project risks effectively. The depth and formality of project plans should be commensurate with the characteristics and risks of a given project. • Outline Project Plan • Define Roles and Responsibilities • Define Project Communication and Reporting Requirements • Define Deliverables and Expectations – Involvement of all Key Players • Outline Risk Acceptance - Manage Internal and External Risks • Define Project oversight activities – Definition of Standards • Define Tollgates and Requirements • Define Budget and estimated Project Costs • Define Project Change Procedures

4. Phase 1 Planning/ Mobilization – Lessons Learned • Putting a proper project governance structure in place with sufficient "checks and balances". • Proper Executive and Senior Management buy-in and involvement in project and milestones reached • Projects are often comprised of international teams and must consider both cultural issues and compliance with local laws and regulations • Broader industry and business issues must be taken into consideration

5. Phase 1 Planning/Mobilization – Lessons Learned cont. • Underlying Data Model Consideration (e.g. US GAAP versus IFRS) • Downstream impact on support functions such as internal audit and security administration • Additional Considerations to be aware of during the planning stage: • 41% of projects fail to meet management’s objectives • Only 28% of project fulfill management's expectations • Only 16% of IT projects hit all their targets • 50% of projects end up late or over budget

6. Planning/Mobilization – Lessons Learned cont. Reasons for project failure in the planning stage: • Bad estimates • Scope changes • Change in environment • Insufficient resources • Change in strategy • Imprecise goals/ Insufficient budget • Poor communication • Insufficient support • Wrong project management • Insufficient motivation • Stakeholders not adequately defined • Poor quality of deliverables

7. Project Phase 2 - Design/Blueprint The design phase involves converting the informational, functional, and network requirements identified during the initiation and planning phases into unified design specifications that developers use to script programs during the development phase • Application Control Standards • Designing appropriate security, audit, and automated controls • Standards should be in place to ensure end users, network administrators, auditors, and security personnel are appropriately involved during initial project phases. • Application control standards enhance the security, integrity, and reliability of automated systems by ensuring input, processed, and output information is authorized, accurate, complete, and secure. • Automated input controls help ensure employees accurately input information, systems properly record input, and systems either reject, or accept and record, input errors for later review and correction (e.g. Check Digits, Completeness Checks, Duplication Checks, Validity Checks, Reasonableness Checks, etc.)

8. Project Phase 2 - Design/Blueprint cont. • Processing Controls - Automated processing controls help ensure systems accurately process and record information and either reject, or process and record, errors for later review and correction. • Batch Controls • Error Reporting • Transaction Logs • Run-to Run Totals • Sequence Checks • Output Controls - Automated output controls help ensure systems securely maintain and properly distribute processed information

9. Phase 2 Design/Blueprint – Lessons Learned • Avoid excessive customization - companies desire to "re-invent the wheel" • Many key controls are application driven (e.g. controls which depend on system generated reports, configuration settings such as for the three-way match in the procurement cycle) • Effective process to prioritize all the business "wish-lists” • Decision Making from “Middle Management” – Timely Decisions

10. Project Phase 3 - Realization/Build & Test Development Development standards should be in place to address the responsibilities of application and system programmers. Application programmers are responsible for developing and maintaining end-user application. • Library Controls - Libraries are collections of stored documentation, programs, and data. Program libraries include reusable program routines or modules stored in source or object code formats. • Automated Password Controls – Management should establish logical access controls for all libraries or objects within libraries • Automated Library Applications – When feasible, management should implement automated library programs, which are available from equipment manufacturers and software vendors

11. Project Phase 3 - Realization/Build & Test – cont. • Version Controls • Software Documentation • System Descriptions – System descriptions provide narrative explanations of operating environments and the interrelated input, processing, and output functions of integrated application systems • System Documentation – System documentation includes system flowcharts and models that identify the source and type of input information, processing and control actions (automated and manual), and the nature and location of output information. • System File Layouts – System file layouts describe collections of related records generated by individual processing applications • Naming Convention - critical part of program documentation • End-User Instructions – Organizations should establish end-user instructions that describe how to use an application.

12. Project Phase 3 - Realization/Build & Test Build & Test The testing phase requires organizations to complete various tests to ensure the accuracy of programmed code, the inclusion of expected functionality, and the interoperability of applications and other network components. Thorough testing is critical to ensuring systems meet organizational and end-user requirements. • Acceptance Testing – to assess the overall functionality and interoperability of an application • End-to-End Testing - to assess the interoperability of an application and other system components such as databases, hardware, software, or communication devices • Functional Testing - to assess the operability of a program against predefined requirements • Integration Testing - to assess the interfaces of integrated software components

13. Project Phase 3 - Realization/Build & Test – cont. • Parallel Testing - to compare the output of a new application against a similar, often the original, application • Regression Testing - to assess functionality after programmers make code changes to previously tested applications • Stress Testing - to assess the maximum limits of an application • String Testing - to assess the functionality of related code modules • System Testing - to assess the functionality of an entire system • Unit Testing - to assess the functionality of small modules of code

14. Phase 3 Realization/Build & Test – Lessons Learned • Project streams reporting 99% completion of tasks which, if subject to deeper analysis, does not hold water • Incomplete testing which can have a devastating post go-live impact when "too lightly" tested configurations fail and disrupt the business • Data conversion is a task which many times are under-estimated

15. Project Phase 4 - Pre Go-live/Deliver Phase • The implementation phase involves installing approved applications into production environments. • Primary tasks include… • announcing the implementation schedule, • training end users, and • installing the product. Additionally, organizations should… • input and verify data, • configure and test system and security parameters Management should circulate implementation schedules to all affected parties and should notify users of any implementation responsibilities.

16. Phase 4 Pre Go-live/Deliver Phase – Lessons Learned • Training is a key area where projects tend to cut corners: • Insufficient training can be disastrous for the morale of users, acceptance of the new application and company productivity which can seriously hamper the pre-go-live promises of more efficient post go-live environment. • Strong personalities, ego's, compensation structures and a mentality of "nothing will stop us from going live on x-date" can mean that pre-determined exit factors for the deliver phase such as successfully completed testing and completed cut-over activities can be compromised

17. Project Phase 5 - Post Go-live/ Maintenance Phase • Management should… • conduct post-implementation reviews at the end of a project to validate the completion of project objectives and assess project management activities. • interview all personnel actively involved in the operational use of a product and document and address any identified problems. • analyze the effectiveness of project management activities by comparing, among other things, planned and actual costs, benefits, and development times. • document the results and present them to senior management. • The maintenance phase involves… • making changes to hardware, software, and documentation to support its operational effectiveness. • making changes to improve a system’s performance, correct problems, enhance security, or address user requirements.

18. Phase 5 Post Go-live/Maintenance Phase – Lessons Learned • PwC was able to categorize post go-live issues in the following 35 buckets, sorted by number of incidents, highest number first: • Locked user/UID validity date required resetting • Abend related issues • Report generation • Authentication • Batch processing/upload issues

19. Phase 5 Post Go-live/Maintenance Phase – Lessons Learned cont. • Interface processing issues • Transaction Processing issues - mostly FI, FI-AP, SD • PO/EBP GR IR Processing issues • Access - General • SAP Mail/Inbox/Workflow Issues • Process Chain Issues • Authorization Issue • Shopping Cart PTP • Master Data issue

20. Phase 5 Post Go-live/Maintenance Phase – Lessons Learned cont. • HR Transaction Processing Issue • Non - PROD access issue - to DEV,QA etc • ABAP Error • Miscellaneous • BW/BI/Related Reports Issues • Cannot access ESS • Missing Data/Unable to display issues

21. Phase 5 Post Go-live/Maintenance Phase – Lessons Learned cont. • Backup Issues • Project Systems/WBS Issue • Data Entry / Update / Delete Request • Runtime Error • User error/Training Issue • Extracting/Downloading Data from SAP • SAP GUI Access Issues • Financial Period End Consolidation

22. Phase 5 Post Go-live/Maintenance Phase – Lessons Learned cont. • File error/File copy requests • Network Issue • Foreign language/Unicode • MSS Data Display Issues • Transport request / issues • Operating System Issue

23. Independent Project Assurance February 2009

24. Understanding Your Objectives The company is making a significant investment to implement a single pricing, billing, invoicing, accounts receivable and cash management and collection system, utilizing SAP as the core technology. With Business Blueprint of Phase II of Project SAP complete, Executive Management would like to gain the appropriate assurance that the project achieves it’s stated objectives: • Realize the tangible and intangible business benefits outlined in the business case with the priority to increase customer satisfaction with billing and an enhanced ability to efficiently and effectively launch new products and services in the future. • Deliver the project on time, within budget, with agreed critical functionality for the business as quickly as possible. • Leverage standard SAP business process design and core infrastructure to reduce risk and cost. • Provide a standard platform to allow for ease of integration and reporting. • Deliver a compliant system that addresses key stakeholder requirements, including financial and regulatory reporting requirements.

25. Issues on Your Mind

26. Project Governance Project Management FunctionalReadiness BusinessCase Technical Readiness ProjectOutcomes Organizational Readiness Implementation Methodology BusinessOutcomes BenefitsRealizationPlan DataQuality ControlsOutcomes Interfaces Project Structure ITGCs BusinessProcesses Project Assurance – A Suggested Approach • Ongoing review of the project, control and businessoutcomes focusing on the stated Project SAP business objectives, risks, and priorities. • Provide Executive Management with ongoing project assurance reporting. • We would work along side the project identifying potential issues as early as possible and hence allowing Executive Management adequate time to consider, and if necessary address such issues. This is critical if the independent project assurance role is to add value to the project and help assist in its successful outcome. To this end we believe the independent assurance function should: • Attend and provide input to key project team meetings • Provide a rolling progress report on issues identified through our work • Brief key program stakeholders on the status of our work and issues arising on a regular basis

27. Our Value Proposition to the company • Flexible, tailored approach to focus on management’s priorities for assurance regarding the achievement of Project SAP objectives. • Efforts embedded in and integrated with overall Project SAP approach with a focus on value-add • “One touch” integration of effort with external audit requirements to minimize disruption to project and avoid surprises • Evaluate and leverage work performed by others (e.g., Parent Company Internal Audit, SAP, etc.) • “Hub and Spoke” deployment of world class functional and technical capabilities from PwC to the project: • SAP Risk Management, Security, and Control • Transportation & Logistics • Business Process • Data Assurance • Program/Project Management • Internal Control and Financial Reporting • Distinguished history of providing independent project assurance services to the company and the parent company. • Experience navigating the Demand and Supply IT Model • Invested in relationships throughout the service center and the company. • Teams deployed alongside of the company in Houston, Scottsdale, and Plantation.

28. Go-live & support Realization Blueprint TIMETABLE Security and Access Control As greater use of system based controls are built into the control environment, the reliance upon the proper allocation of access increases. Getting this right from day one both for business and support users reduces the risk that gaps are found post live that affect our strategy. Control Design/Gap Analysis Agreement of expected key controls within the draft documentation during the Blueprint and Realization phases of the project allows maximum opportunity to correct any issues within the design. Business Process/ IT General Controls Management Reporting Testing Framework Data Conversion/ Cleansing Security and Access Control Integrating our Audit into Project SAP Testing Framework Our experience of large implementations has found that the proving of the system is complex and difficult to manage effectively. A key factor are the controls around the remediation of issues reported during the testing phase. Management Reporting Many key business process controls rely upon system generated data. The requirement to manipulate this data as part of its use adds additional risk. Effective design and implementation of system reports maximises process efficiency and reduces the audit risk. Data Conversion and Cleansing Data integrity is a key risk within any environment; this risk is increased during periods of changes such as a system replacement.

29. Example Workplan • Business Process • /IT General Controls • Review proposed business process control documentation containing the following types of controls: configurable, reports, manual procedures, automated, and interfaces. • Evaluate key controls over financial reporting (selected by the company) for completeness, accuracy, validity, restricted access, efficiency, resilience, and evidence of duplication. • Review of SAP screens to confirm settings of configurable controls. • Walkthrough of business process controls to confirm existence/operation of the automated and manual controls. • Assess SAP ITGCs • Management Reporting • Assess process to define key financial and management reporting requirements and assess the effectiveness of the reporting designed to meet these requirements. • Baseline key custom reports used to support the operation of manual controls for financial reporting (completeness, accuracy). • Testing Framework • Ensure requirements for unit testing, integration testing, system testing, UAT, interface and performance testing are adequately considered with a focus on testing of key controls. • Assess whether an adequate testing monitoring system is in place. • Assess coordination of testing between business and IT. • Review configuration management and change control strategy and plan. • Review sample of testing scenarios and results focusing on consistency in approach and compliance with policy in relation to key controls. • Data Conversion/Cleansing • Review scope, approach, and requirements for data cleansing and conversion. • Assess quality controls within the conversion, setup and cleansing processes to ensure data integrity. • Review controls over the data cleansing and conversion process. • Review sample of data cleansing and conversion results. • Review strategy for master data maintenance. • Security/Access Controls • Review proposed SAP access related controls for sensitive access (SA) and Segregation of Duties (SOD) rule set; role maintenance; and user provisioning. • Assess SAP user roles against SA and SOD rule sets. • Walkthrough user provisioning and role maintenance process. • Assess existence of processes to manage access during implementation and during early stages of live operation.

30. Questions • Contact Information • Peter Harries, Partner 213 – 356 – 6760 • Charles Lewis, Partner 602 – 364 – 8290 • Pablo Hernandez, Senior Manager 602 – 364 – 8064 • JJ Marais, Senior Manager 602 – 364 – 8232