Changes, Clutter, Uncertainty

Transcription

1 Changes, Clutter, Uncertainty Challenges of a Global CFO Rajesh Bang 17-Oct 2012

2 I m sure most of you have read this news Unpredictability and Uncertainty are the order of the day 2

3 Balancing act.as a Global CFO Growth People Risk Business Transformation Quality Growth, Reward, Consolidation, Retention 3

4 Balancing immediate crisis and long term growth of business has become the single-most challenge for many global CFOs 1 Cutting cost while maintaining the edge to grow in post recession environment Andy Halford, CFO Vodafone Revamped the commercial decision-making processes and used that to optimize cost across the organization. During Vodafone reduced its vendor base from 50,000+ to <15,000 using a well designed framework and implemented a clear hurdle rate driven approach for any investments. For large organization such as Vodafone making sure that the consistency with the way that commercial decisions were being taken was applied across the whole of the business. 2 Waiting is not an option jump without all the facts to support a decision Steve Spooner, CFO Mitel Technologies Mitel took bold decisions to offshore their internal IT, strategically outsource the whole Print function (a $25Mn spend annually) in the process terminating their 20 year old print vendor and replace their closest contract manufacturing partner with a scaled-up global major. Despite strong internal opinions against these decisions and not having all the data, the CFO spent time seeing where the market is headed 3 Balancing the Balance Sheet Anthony Massetti, CFO Avaya Mid 2009 Avaya was faced with one its worst financial performance with sagging sales when it was presented with a $300Mn acquisition opportunity. Avaya went for it with and did everything it could to squeeze cash out of its balance sheet a second round of unplanned downsizing, drastic reduction in administrative costs to minimize leverage of the balance sheet 4

5 With growing complexity of needs many companies have started outsourcing CFOs to bring specialized skills needed at specific points With rapidly changing business models and dynamics, the outsourced CFO model has become very popular with many companies in the US & Europe Typical instances where we have seen an outsourced CFO model at work Post a Private Equity investments. Examples: Avaya (TPG), Mitel Technologies (Francisco), Ideal Standard (Bain Capital), Readers Digest (Silverlake) When a company is going through multiple cross-border acquisitions complex merger integration, multiple compliances, multiple system integration needs a set of rare skills High stress environments, especially a shakeout Highly specific projects a sale or a merger, a major project in a new geography demanding large % of the company s attention and resources We have seen situations where 2 CFOs co-exist with clear demarcation of roles and reporting Do we see it happening in India in next 5 years on a large scale? How is it going to impact the Indian corporate ecosystem? 5

6 Real time visibility & insights for CFOs: Big Data Conventional accounting and MIS are lag measures and CFOs today need more real-time insight into how and where money is being spent in order to be able to respond to rapidly changing market conditions Big data promises to solve this problem by providing real time granular information However the size as well as unstructured ('messy') and distributed character of data are major challenges to reckon with With finance function is evolving from its reactive role to proactively aid decision-making, CFOs are increasingly adopting Big Data technologies Opportunities and challenges: Opportunities: proactive risk mitigating, compliance management, cutting costs, and improving operational efficiencies Challenges: finding the proper technologies that can provide data quality and harmonization, deliver desired insights at the right cost and usability 6

7 Managing increasing complexity in new markets business portfolio Familiar or Unknown Markets? Choice of investment destinations is becoming more diverse The increasing importance of rapid-growth markets to their future prospects is encouraging multinationals to look beyond the first-tier rapid-growth markets, such as the BRIC countries, into less familiar economies. Many finance leaders interviewed in a recent E&Y survey say that their companies are increasingly looking further afield, to countries including Indonesia, Africa and Ukraine. What to base the decision on? Challenges to build a robust and objective rationale for allocating resources to rapid-growth markets Two-thirds of CFOs interviewed agree that inadequate data and poor transparency mean that it can be difficult to build a robust evaluation model for investing in rapid-growth markets. This puts added pressure on the CFO when addressing tough questions from investors seeking evidence for a rationale that shifts resources to rapid-growth markets. Balancing interests of multiple stakeholders Increased allocation to rapid-growth markets could change the investor profile 84% of CFOs and 63% of investors expect that the higher risks and more volatile returns associated with investing in rapid-growth markets will trigger a churn in the investor base and attract investors with different risk appetites 7

8 The questions for us to answer are perhaps. How much of these global trends do we see manifesting in the Indian environment? What changes therefore would CFOs in Indian organizations need to imbibe to deal with the changes in business environment? How to best prepare the organization for risks that are not controllable and foreseeable? How to build a multi skilled finance organizations with growing complexity of business environment and expanding role of Finance? Is there scope to develop a greater collaborative environment among organizations to leverage capabilities and explore synergies? 8

9 All answers begin with the right questions, let s discuss.. 9