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Market Opportunity – Structured Reporting

Depending on the audience, the format for business reporting runs the gamut from rigidly structured to free-form.

When the data is for internal consumption – management reporting, for instance – the structure is often unique to a single document. By way of example: think of a business memo or slide deck which is presented at a strategy meeting. Compiling such a report can be highly involved, and the output has a low degree of standardization..

 

On the other end of the spectrum – for example, tax filings such as 1099s or W2s – the dynamic is reversed. The format is identical across companies as an external audience seeks to examine standardized data. Completing the report itself, while often time consuming, is relatively straightforward.

 

Plotting these two examples visually:

 

A chart showing the format for business reporting runs the gamut from rigidly structured to free-form.

The market for software addressing these bookend use cases is relatively mature. On the one hand, old-line solutions by industry heavyweights such as Microsoft (Office suite) and Google (G Suite) dominate the landscape for free-form business reporting. On the other hand, the market for rigid solutions features a slew of providers which maintain a library of common, ready-to-complete, standardized forms.

 

Distinct from these two sit the type of structured reports that share the challenges of both. This category – high complexity, highly-structured – presents challenges which are not solved by current fixed-form software solutions as:

 

  • The format can be a mixture of numerical data, diagrams, and rich text.
  • The reporting requirements are variable: completion of certain fields may trigger additional disclosures in the same filing or in another filing.
  • The framework is not standardized across the entire economy, but rather is unique along one or more dimensions (by industry, by company type, by business activity, or otherwise).
  • The output is highly prescribed and may be proprietary (i.e. a machine-readable data file that is stored and analyzed in a regulator’s database).

Similarly, these reports are also not well-served by free-form reporting solutions:

 

  • The format is prescribed, parallels a form-based environment in key ways, and must follow rules that change over time.
  • The audience is decidedly external. These reports are consumed by regulators to enforce standards of compliance; errors in consistency, completeness, and quality may result in penalties.
  • The output must conform to a prescribed (and sometimes proprietary) format dictated by the regulatory body.
  • The cadence of the reports – quarterly or annual filings, for example – creates a living document framework where data is rolled forward to facilitate cross-period history and comparisons.

This creates a thorny business problem which spans vertical markets and, to date, has lacked an established software solution. Addressing this opportunity presents unique engineering challenges.

 

Technology – Challenges and Solution

The key to building a complex yet structured document is a layered approach. The core is an un-editable document outline with item-types such as tables, rich text, and static content. On top of this core are layers of user-entered data that overlay, but do not modify, it.  Each document is unique to the customer involved, but retains the core structure that keeps it compliant with requirements for format, completeness, and consistency.

 

Combining outline and customer data to build a complete document

Including groups of fields together in sub-outlines, it becomes possible to create an adaptable outline, capable of representing any complexity, to suit a variety of needs. By producing a unique tree for each document type, the system is malleable, but every tree offers the same guarantees about its abilities. Additionally, as each of the outline’s items conforms to a known-type, it is possible to provide guarantees about the outline; in some cases this might look like integrity checks or validations, and, in other cases, analytics or usage patterns.

 

All outlines, by nature, have a hierarchical order connecting the entities together: this lays the document out as you see it on the printed page or in a web browser. The data in complex documents, however, often form directed graphs of relationships unrelated to their printed layout.

 

The dynamic connection when attaching rules to outlines

 

Outline Connector with Rules

To associate entities together in a different pattern – say to provide calculations, references, formulas, validations and other complex relational operations – requires another layer.  Adding a powerful rules system produces a multi-layered complex network of related entities which allows for automated behavior and verification of its content and data.

 

These documents often have relationships to other documents, time periods, reporting requirements, or associated business units.  By extending the rule graph further, separate documents can be connected, aggregated, and validated across the entire organization with strong guarantees, measurable analytics, and observable data flows.

 

Layering all three of these systems together – outline, rules graph and user-entered data – an incredibly powerful complex and structured document is possible.

 

layering rules, outlines, customer data to build a powerful document

The output can further be tailored to the audience, often with a combination of a human-readable format, such as a PDF, and machine-readable deliverable in industry-specific formats such as XML, XBRL, or proprietary schema.

 

Practical Application – NAIC Reporting

Gain Compliance has built an extensible platform to support complex and structured business reporting. The company has leveraged its proximity to Iowa’s insurance industry to design and build the first customer-facing solutions for its technology platform around the reporting challenges faced by carriers for their regulatory financial filings.

 

A chart showing the opportunity for a structured and complex document

Insurance, in addition to being one of the largest segments of the U.S. economy, is also one of the most highly regulated. Among the myriad requirements faced by carriers, the Statutory Financial Reports filed through the NAIC (National Association of Insurance Commissioners) fit squarely into the highly structured + highly complex classification within the matrix as:

 

  • The audience is external: these reports are consumed by insurance regulators to assess the health and practices of carriers.
  • The filings are not only unique to the industry, but there are also variable reporting requirements based on factors such as company type (i.e. line of business), geography (i.e. states where operating), and internal operations (i.e. investments owned, pension obligations, financing structure, corporate structure, and types of liabilities).
  • The format is heavily structured; it includes a mixture of rich text, diagrams, and numerical values which must conform to a complex and regimented data model to enforce consistency.
  • The output is a proprietary format which is designed and maintained by the NAIC for programmatic analysis.

This set of structured reports utilizes approximately three dozen rigidly-structured formats to create an interconnected set of filings; not only does the data roll-forward from period to period to facilitate historical comparisons, but data are also re-used on related reports within the same time period. Accordingly, there is a strong network effect for the data: the reporting platform becomes more valuable as data are repurposed both across reporting periods as well as in other filings.

 

Gain introduced its first support for a portion of NAIC filing library in the first quarter of 2018, has rolled out additional support continuously since that time, currently supports hundreds of carrier filings each quarter, and is finalizing 100% use case coverage in mid-2021.

 

Conclusion

Financial and regulatory reporting comes in a wide variety of formats, complexity, and consumers. Currently, no software solution adequately addresses the challenges of documents with complicated layouts and heavily-prescribed formats; reporting teams are stuck with point solutions with limited functionality that solve only a portion of their needs. Gain Compliance’s success demonstrates that a platform that is both flexible and extensible significantly improves outcomes in data quality, efficiency, and compliance for reporting teams.