CFO’s Role in Corporate Management Keynote address for Aubrey Joachim FCMA; CGMA CIMA Global President 09/10

Transforming the Finance Professional The role of tomorrow’s finance professional must change from scorekeeper to value adding business partner.

What are business leaders expecting from their finance teams? Contributing to strategy and good decision making is vital (Leading Big4 research finding)

The pressures on the CFO & the finance function Transformation of finance is essentially driven by pressures on the CFO coming from two directions: Changes in the external environment such as new competitive success factors, the regulatory environment and shareholder demands. From managers within the business demanding for better information and support to cope with the challenges of a more competitive marketplace and changing customer needs. If finance professionals are not faced with these challenges, then it is cause for concern! But, the question is; Are they prepared?

The required shift in finance and accounting The roles of finance and accounting have changed over the last few years and will continue to change over the future. In place of the tradition scorekeepers and tabulators, both accounting and finance personnel now find themselves operating in cross-functional teams working to identify: new business opportunities streamlining operations contributing to decision making improving profitability This change in the finance space is described as a partnership between finance and operations. In other words the emerging role shift is from financial controller to financial business partner.

The expanding field of play in finance Reporting (Financial Accounting)

Finance transformation and the opportunity to take on a broader role

The challenges for finance What is preventing Finance moving to the front line? Too much Involvement in Detail!

The strategic role of the finance professional

Finance role in driving and influencing organisational strategy One of the core capabilities that finance professionals should acquire in order to move towards world-class performance is developing skills and competencies to provide strategic insights to the organisation. Business leaders are expecting this and the finance professional must move into this space.

Finance role in strategic management and corporate strategy As well as getting the numbers and controls right, finance should help to develop strategies for managing value and growth. Strategic involvement includes developing: robust strategic processes advising on major investments product developments asset and infrastructure investments working with operational and business managers advising on issues such as current and expected business mix, capital structure etc risk return profiles analytics

Finance professionals and decision making Decision making is key to superior organisational performance

The performance management role of the finance professional

Strategic questions that must be answered Which parts of the business are creating value? What are the real drivers of our performance? Which customers and products are profitable? How are we performing relative to the competition? Which customers are delivering the bulk of our profit? What is driving cash generation ?

What organisational decision makers are looking for Information to assess risk and uncertainty Better market analysis Better competitor analysis More accurate customer profitability analysis Improved understanding of cost behaviour and drivers Improved cost control and management More accurate cost information for product costing / pricing

Finance needs to provide more insight PAST What Happened? (Reporting) How / Why things happened (Modeling / Var) PRESENT What is happening now (Alerts) Next Best Action? (Recommend) FUTURE What will happen? (Extrapolation) Best / Worst that can happen (Predict/Optimiz / stimulate INFORM- ATION INSIGHT

The analytical role of the finance professional

Developing new skills and competencies within finance to deliver increased value If the finance function and the finance professional are to significantly transform to add value to organisations and become true business partners a new set of skills and competencies. It is essential to acquire the following: Excellent analytical skills using not just financial analysis but also customer and market analysis, statistical and also sophisticated modelling techniques Use of multi-disciplinary team approach to inform key decision making as well as the ability to integrate inputs from diverse non- financial sources Strong commercial acumen characterised by strong product, process and market knowledge

The concepts of business analytics WISDOM KNOWLEDGE INFORMATION DATA

WISDOM KNOWLEDGE INFORMATION DATA DATA CAPTURE & ANALYSIS MANAGEMENT REPORTING & DECISION MAKING The transition from data to wisdom

WISDOM KNOWLEDGE INFORMATION DATA SYSTEMS & PROCESSES, TECHNOLOGY HUMAN LEARNING, TOOLS & TECHNIQUES

WISDOM KNOWLEDGE INFORMATION DATA APPLICATION OF MANAGEMENT ACCOUNTING AND ANALYTICAL TOOLS & TECHNIQUES The transition from data to wisdom

Decision making is key to superior organisational performance Analytics & Performance improvement ANALYTICS

CFO’s / Analytics must provide a future view!

Finance professionals as business partners

Effective finance business partners Effective finance business partners are: Managers for value – those who understand how to deliver sustained shareholder value Keepers of the business model – ensuring that the whole organisation understands key performance drivers Pursuers of efficiency – from the investment base in areas of capex, working capital, brands, R&D etc Executors as well as strategists – understanding that flawless execution is as important as strategy Confidence providers to stakeholders They must: Understand the key business drivers Develop influencing skills Be proactive

The Management Accounting toolkit Finance professional today are moving out of their traditional finance roles and financial views alone and becoming analytical IT Software Digital space Social media Kaizen 6 Sigma Lean BPI Change Mgt Fin Management / Ratios ABC/ABM / Rolling Forecasts/ EVA / Costing

Moving up the finance value chain

‘Chartered Management Accountants are financially qualified business leaders’ ICMAB Members should also strive to become business leaders