Digital Financial Reporting

Kurt Cagle's article in Forbes, Why Knowledge Bases Are The Next Big Thing, help you better appreciate knowledge bases.

There is a difference between a "business process" and a "business decision".  This 50 minute video explains the difference between the two.

In a prior blog post I brainstormed about workflow and mentioned the Business Process Model Notation (BPMN) which is an OMG standard.

There is another OMG standard, Decision Model And Notiation (DMN). Decision Model and Notation (DMN) is a standard established by the Object Management Group (OMG) for describing and modeling operational decisions. This article explains DMN.

The DMN standard can be used together with the BPMN standard for designing and modeling business processes and workflows.

The Decision Model and Notation (DMN) defines a Friendly Enough Expression Language (FEEL). FEEL is the default expression language for DMN.  S-FEEL is a simple subset of FEEL, for decision models that use only simple expressions, mostly or only using decision tables.

You can get a free 30 day trial of a software product Signavo that creates BPMN and DMN.

So, once you have all these rules; how do you process the rules?  The answer is using a rules engine. What is a rule engine? A rules engine basically processes rules.  (See this article on Drools.)

For example, Drools is rules engine or a "Production Rule System" that uses the rule-based approach to implement and Expert System. Expert Systems are knowledge-based systems that use knowledge representation to process acquired knowledge into a knowledge base that can be used for reasoning.

A Production Rule System is Turing complete with a focus on knowledge representation to express propositional and first-order logic in a concise, non-ambiguous and declarative manner.  The brain of a Production Rules System is an Inference Engine that can scale to a large number of rules and facts. The Inference Engine matches facts and data against Production Rules – also called Productions or just Rules – to infer conclusions which result in actions.  A Production Rule is a two-part structure that uses first-order logic for reasoning over knowledge representation. A business rule engine is a software system that executes one or more business rules in a runtime production environment.

And that is why you WANT to look at a financial report as a logical sytem.

As I said, artificial intelligence, structured information, distributed ledgers, and Lean Six Sigma are a match made in heaven and will have a significant impact on accounting, reporting, auditing, and analysis in a digital environment that will prevail during the Fourth Industrial Revolution. Lots of synergy! You can add one additional thing to that equation: workflow.  Here is a review of electronic workflow standards.

Right now, this is confusing but I will figure it out.  This is what I know.

Business Process Model and Notation (BPMN) is an OMG standard that is designed to "bridge the gap" between process design and process implementation.  BPMN is described as follows:

Business Process Model and Notation has become the de-facto standard for business processes diagrams. It is intended to be used directly by the stakeholders who design, manage and realize business processes, but at the same time be precise enough to allow BPMN diagrams to be translated into software process components. BPMN has an easy-to-use flowchart-like notation that is independent of any particular implementation environment.

It appears to be the case that BPMN is focused on creating precise human-readable diagrams.  BPMN has an XML Schema. There are several schemas that are imported.  The most important schema for me is this semantics schema.  This PDF documents BPMN.  Here is an example provided by OMG related to the process of ordering a pizza: Human readable; Machine readable (XML).

Business Process Management (BPM) is described as:

Business Process Management (BPM) is a discipline involving any combination of modeling, automation, execution, control, measurement and optimization of business activity flows, in support of enterprise goals, spanning systems, employees, customers and partners within and beyond the enterprise boundaries.

BPM appears to explain the process and management of the process that BPMN models.

XML Process Definition Language (XPDL) is the serialization format for BPMN and is described as:

BPMN is a visual process notation standard from the OMG, endorsed by WfMC, and broadly adopted across the industry. But the BPMN standard defines only the look of how the process definition is displayed on the screen. How you store and interchange those process definitions is outside the scope of the standard, and this is where XPDL comes in. XPDL provides a file format that supports every aspect of the BPMN process definition notation including graphical descriptions of the diagram, as well as executable properties used at run time. With XPDL, a product can write out a process definition with full fidelity, and another product can read it in and reproduce the same diagram that was sent.

Business Process Execution Language (BPEL) is an OASIS standard executable language for specifying actions within business processes with web services.  It is describe as:

BPEL (Business Process Execution Language) is an XML-based language that allows Web services in a service-oriented architecture (SOA) to interconnect and share data.

Programmers use BPEL to define how a business process that involves web services will be executed. BPEL messages are typically used to invoke remote services, orchestrate process execution and manage events and exceptions.

BPEL is often associated with Business Process Management Notation (BPMN), a standard for representing business processes graphically. In many organizations, analysts use BPMN to visualize business processes and developers transform the visualizations to BPEL for execution.

BPEL was standardized by OASIS in 2004 after collaborative efforts to create the language by Microsoft, IBM and other companies.

There are a number of BPEL engines including Microsoft BizTalk, one from Oracle, SAP, and IBM.

The creation of a financial report is a process.  Auditing a financial report is a process.  Putting the report into digital form begs for other tasks and processes to also be digitized.  Once things are digitized and therefore assessable, Lean Six Sigma principles, techniques, and philosophies can be leveraged to monitor, manage, and maintain quality.  Digital distributed ledgers helps to eliminate the boundaries between organizations, enabling orchestration across entities.

Here is another way to put this.  The entire supply chain can become an expert system! This is WAY beyond former SEC Chairman Cox's vision.

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Business Process Management and Business Decision Management

The Optimization of the Internal and External Financial Reporting Adopting International Standard