The CFO Bangladesh I June'16 by CFO Connect Bangladesh

JUNE 2016

STRATEGIC MINDSET MASUD KHAN, CFO- LAFARGE SURMA CEMENT LTD.

Engagement in Business for Value Creation Chief Editor Md. Kausar Alam MBA(IBA), FCS, FCCA, FCMA

Editorial Pannel Khaled Mahmud Raihan, ACCA Mohammad Nazrul Islam, FCMA, FCA Mohammad Shakawat Hossain Bhuyan ACA, QIA(UK), CIMA(UK) Md. Anwar Hossain, ACA

Today’s CFOs are expected to be effective organizational leaders and key members of senior management team. In the developed world CFO role has evolved at its pick and many CFOs has elevated their role further to CEOs. Though in our part of the globe CFO role is largely at the evolution phase from compliance and reporting role to business partnering role, little bit of leadership role – long way to go to reach to the destination of this role evolution with a blend of stewardship, business partnership and business leadership role at the top of the organization. As a business partner CFO must create value through greater engagement in the business processes rather than remaining as a mere advisor or consultant, a back office man. In our context CFO role playing in organizational objectives, mission and vision achievement is gradually improving in the pace of increased governance and regulatory compliances and organizational internal challenges - treasury and risk management, tax management, strategic planning so on. Many businesses are gaining scales, evolved from SME to large and diversified conglomerate, business houses experiencing the transition to second generation owners from the founder owners. This should emerge corporatization of family run businesses a priority.

Ms. Farhana Sultana, ACA

Publishing Director Mohammad Akram Hossain Siblee FCMA, ACCA, CPA

Given the context, developing pipeline of qualified CFOs with right blend of skills, experiences professionalism is challenge at this transition phase. There is multi facet action need for successful transition – the business owners need to recognize that things like finance and accounts should be managed by the competent professionals to create greater value for all stakeholders. Finance people in the organizational pipeline needed to given adequate exposure to make them ready for taking the senior role as the home grown CFO. On the other hand prospective CFOs need to demonstrate their potential through getting out of silos, get engage in every aspects of business for value creation and deliver greater business value and earn the respect from board and all stakeholders. They need to blend their skills with communication, leadership, business insights, networking skills and so on. Further, government and regulator can further this process through enabling supports for professional accountants working in businesses, working in government and non-government organization and working in practicing firm.

Published by: CFO Connect Bangladesh

From the CFO Connect Bangladesh we are trying to get all relevant stakeholders connected to this transition to expedite the CFO role evolution process. This issue of “The CFO Bangladesh” covers story on Arif Khan - President of ICMAB, Masud Khan - Chief Financial Officer of Lafarge Surma Cement Ltd, Sanjida Kasem – Partner of A. Qasem & Co. and Gopal Ghosh – Chief Financial Officer of Anwar Group.

‘The CFO Bangladesh’ is the monthly publiation of CFO Connect Bangladesh. Copyright 2016 CFO Connect Bangladesh all rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

Correspondence Address: CFO Connect Bangladesh 18/6 Bashiruddin Road, Lake circus, Kalabagan, Dhaka. Contact: +8801726630038

Md. Kausar Alam MBA(IBA), FCS, FCCA, FCMA Chief Editor

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Future Finance Leadership

The advice from current CFOs on career planning for a future CFO role.

The President’s Remarks

ICMAB President Mr. Arif Khan, FCMA, CFA conveyed his views on cost & management accountancy profession as well as other related matters.

Corporate Treasury

The corporate treasury function has been described as the ‘heartbeat of the business’, and it can assist in various forms of improvements in the financial management of enterprises.

Strategic Mindset

Mr. Masud Khan, CFO of Lafarge Surma Cement, shares his views on CFO leadership beyond finance, corporate governance and other related issues.

Finance & Accounting Salary & Employment Report 2016

The most detailed and comprehensive report on Salary and Employment of Finance & Accounting profession in Bangladesh.

The Global Network

Sanjida Kasem, partner of A. Qasem & Co. discusses the growth and changes of the firm being the part of a global network of EY.

Risk Management & Internal Audit

Collaboration of risk-management and internal-audit functions is helping organizations to improve efficiency, decision-making and results.

Sustainable Governance

Gopal Ghosh, FCA, FCMA the CFO of Anwar Group of Industries shared his views regarding the role of CFO in local business houses.

Due Diligence in M&A

While many factors influence the success of a corporate merger or acquisition, the quality of due diligence is one of the most critical factors.

News

Finance Bill 2016

Some Key Proposals – Income Tax In relation to individuals: 1. Tax rates for individual and firm remain unchanged as follows:

Total annual income First Tk. 250,000 Next Tk. 400,000 Next Tk. 500,000 Next Tk. 600,000 Next Tk. 3,000,000 Balance amount

Income tax rate Nil 10% 15% 20% 25% 30%

Initial exemption limit is different for women Tk. 300,000, senior citizens Tk. 300,000 and physically challenged person Tk. 375,000. 2. Non-resident other than Bangladeshi non-resident shall pay tax @ 30% on total income. 3. Minimum tax payable:

Location Within Dhaka and Chittagong City Corporation Any other City Corporation Other than City Corporation

Minimum surcharge

Base amount for TDS has been defined for the following categories: a. Payment to contractors (section 52) b. Payment of royalties (section 52A) c. Payment for certain service (section 52AA)

8. Changes made in the definition of income; income includes: a. any income, receipts, profits or gains; b. any amount which is subject to withholding tax; c. any loss of such income, profit or gains; d. profit or gains of insurance business; e. any deemed income; f. any amount on which tax is imposed; and g. any amount which is treated as income as per ITO 1984 9. Tax burden relieved for listed company and bank to some extent

Tk. 4,000 Tk. 3,000

a. A listed company will not be required to pay 5% additional tax for declaring dividend of less than 15% b. A bank will not be required to pay 15% tax for showing profit in excess of 50% of its capital

Rate Nil 10%

Proposed net worth Rate Upto Tk. 22.5 million Nil Over Tk. 22.5 million 10% to Tk. 50 million 15% Over Tk. 50 million to 15% Tk. 100 million 20% Over Tk. 100 million 20% to Tk. 150 million 25% Over Tk. 150 million 25% to Tk. 200 million Over Tk. 200 million 30% Tk. 3,000 Minimum surcharge Tk. 3,000

5. Investment tax rebate Total income Investment tax rebate Up to Tk. 1 million 15% of Eligible Amount (EA) Over Tk. 1 million to Tk. 3 million 15% on first Tk. 200,000 of EA; and 12% on rest EA Over Tk. 3 million 15% on first Tk. 200,000 of EA; 12% on next Tk. 400,000 EA; and 10% on rest EA

Eligible investment amount is the lowest of: a. Actual investment; or b. 20% of total income (previously it was 30% of total income); and c. Tk. 25 million 6. Statement of assets, liabilities and lifestyle An individual assessee is mandatorily submit the statement, if he a. has a gross wealth over Tk. 2 million; or b. owns a motor car; or c. has made investment in house property or apartment in the city corporation area if any individual assessee except a shareholder director, has income from salary, business or profession does not exceed Tk. 0.3 million, he may not opt to submit the statement.

12. TDS – Base amount

7. No major changes proposed in corporate tax rates except for the RMG companies. Rate has been proposed as 20% as compared to 35% for the assessment year 2015-16

Minimum tax Tk. 5,000

4. Surcharge is payable by an individual assessee on total tax payable if net worth: Current net worth Upto Tk. 22.5 million Over Tk. 22.5 million to Tk. 10 million Over Tk. 10 million to Tk. 20 million Over Tk. 20 million to Tk. 30 million Over Tk. 300 million

In relation to corporate:

10. Real estate sector – deductions Tax to be collected at the following rates at the time of registering any document for transfer of any land or building or apartment by the transferor who is engaged in real estate or land development business. Area Dhaka South, Dhaka North and Chittagong City Corporation Any other city corporation Any other area

Residential Tk. 1,000 per square metre

Non-residential Tk. 3,000 per square metre

Tk. 700 per square metre Tk. 300 per square metre

Tk. 2,500 per square metre Tk. 1,200 per square metre

However, tax in respect of a residential apartment shall be 20% and 40% lower if the size of the apartment including common space is not more than 70 and 60 square metres respectively. 11. Changes in section 30 a. Withholding VAT requirement on any payment for the purpose of inadmissible deductions has been removed b. Salary expenses will be disallowed if the employer fails to obtain twelve digit TIN by the employee c. Excess perquisite limit has been proposed to TK.475,000 from TK.450,000. For a person with disability Tk. 25K will be increased d. Foreign travelling expenditure threshold increased to 1.25% from 1% of disclosed turnover.

The base amount means the higher of the following and inclusive of VAT: a. Contract value, or b. Bill or invoice amount, or c. Payment 13. Collection of tax from export of certain items Tax is required to be collected by banks at 1.5% instead of 0.6% on export proceeds received on account of exports of knit wear and woven garments, terry towel, carton and accessories of garments industry jute goods, frozen food, vegetable, leather goods and packed foods. 14. Collection of tax from export of any goods except certain items Tax is required to be collected by banks at 1.5% instead of 0.6% on export proceeds received on account of exports of any goods except knit wear and woven garments, terry towel, carton and accessories of garments industry jute goods, frozen food, vegetable, leather goods and packed foods. 15. Amendment in return of withholding tax Withholding tax return u/s 75A shall be submitted by following dates: a. First return: by 31 January of the year in which the deduction or collection was made; and b. Second return: by 31 July of the next year following the year in which the deduction or collection was made DCT shall select the withholding tax return for audit within 4 years from the end of the year in which the return was filed. 16. Amendment in exclusion from total income – Sixth schedule (Part A) a. Any payment from WPPF up to Tk. 50,000 received by a person (earlier it was fully exempted income for all WPPF beneficiaries) b. Income up to Tk. 500,000 received by an assessee from Pensioners’ savings certificate (earlier income from wage earners bond was also tax exempt) c. Income derived from SME up to Tk. 3.6 million d. E-commerce and on line shopping are now excluded from ITES definition e. Digital archiving and physical records are now included in ITES definition

News

Workshop on CG Compliance Audit & Cost Audit at ICMAB October 30 Tax Day The government declared October 30 as Tax Day, setting a fixed deadline for individual taxpayers to submit their income tax returns for the year. Individuals will have to file returns on or before that date. This is a measure that the finance minister proposed in the budget speech as a means to end the culture of deadline extension that the tax authority has had to oblige to every year amid demands from various quarters.

The Institute of Cost and Management Accountants of Bangladesh (ICMAB) organized a workshop on two topics: “Corporate Governance Compliance Audit” and “Cost Audit” on Friday, June 03, 2016 at ICMAB Ruhul Quddus Auditorium, ICMA Bhaban, Nilkhet, Dhaka.

M. Abul Kalam Mazumdar FCMA, Past President, ICMAB presented the second technical paper of the workshop on “Cost Audit”. In the day long workshop speakers emphasized for effective implementation of Cost Audit for better Corporate Governance of listed companies.

Mr. Mohammad Iqbal, Chairman, Bangladesh Chemical Industries Corporation (BCIC) graced the workshop as Chief Guest and Mr. Arif Khan FCMA, President of ICMAB presided over the program. Mr. Jamal Ahmed Choudhury FCMA, Vice President, ICMAB presented the first technical paper on Corporate Governance Compliance Audit and Mr.

The speakers of the workshop mentioned that cost audit is an essential tool to find out real cost of production in manufacturing organizations. They mentioned that Cost Audit has been successfully been implemented in India and Pakistan. Its implementation in Bangladesh can help establish good governance and transparency.

ACME Laboratories entered in the stock market Acme Laboratories Ltd, the country's oldest pharmaceutical company, made debut on the Dhaka and Chittagong stock exchanges recently. The company, which raised Tk 409.6 crore from the public by using the book building method, be the 28th listed firm in the pharmaceuticals and chemicals sector that accounts for about 16 percent of the Dhaka bourse's market capitalisation.

Key Stats

The drug maker floated two crore ordinary shares of Tk 10 each with a premium of Tk 67 through an initial public offering for the general and affected investors, and non-resident Bangladeshis. Before the IPO, Acme offloaded 2.5 crore shares through bidding for the institutional investors and 50 lakh for mutual funds at Tk 85.2 each.

Tk. 240 million

NBR will have to raise in every hour to meet its budgetary target in 2016-17

ICB Capital Management managed the IPO, the proceeds of which are going to be used to set up three new plants in Savar. The company's expansion plans are expected to increase revenue and profit. As of March this year, its net profit was Tk 72.41 crore with basic earnings per share of Tk 4.48. However, the company's post-IPO basic EPS was Tk 3.42 and a net asset value per share of Tk 73.85 as of March. Bangladesh Securities and Exchange Commission approved the final IPO prospectus of Acme in February, and the twin bourses recently gave a go-ahead to its listing. Acme was the second firm that used the book-building method after the stock market regulator modified the pricing rules following the market crash in 2011.

5.8%

Goverment’s forecast of inflation in FY 2016-17

25%

Taxpayers will have to pay a penalty if they fail to submit returns on or before the expiry date. The fixed deadline will apply to all taxpayers, other than companies; if October 30 is a public holiday, Tax Day will be the next working day. The current September 30 deadline to submit individuals' income tax returns is extended almost every year in the face of demands from various trade bodies and professional groups, which some taxmen believe causes delays in scrutiny and audit of the submitted returns. Since deadline extensions have become the norm, taxpayers are not compelled to file their returns within the original timeframe. Subsequently, the volume of submitted returns tends to be low until September 30. Last year, the NBR extended the deadline for income tax returns by two months to November 30. In 2014, the deadline was extended twice, and the year before, thrice to December 31. Through the introduction of tax day the government will get the revenue in time, which will also bring fiscal discipline. Currently, there are nearly 20 lakh taxpayers identification number (TIN) holders, including companies and firms. The number of return submissions, although gradually increasing, continues to remain low in view of the size and growth of the economy. The NBR recorded about 11.5 lakh returns in fiscal 2014-15, up 14 percent year-on-year and the highest growth since fiscal 2008-09. Still, the total number of people who file taxes continues to remain less than 1 percent of the total population of 16 crore -- a figure that creates doubts over the efficacy of the tax authority's continuous awareness and motivation campaigns.

Banks will cap down funded single borrower limit by Dec’16

43%

Ten companies grab turnover of DSE

Five Minutes on Future Pathways to Finance Leadership 1 PLAN A - KNOW YOUR FINANCE FUNDAMENTALS Future CFOs will need a strong financial understanding and should target career experiences that provide them with that understanding across various points in the finance value chain. It is important that future CFOs have experience in the core finance areas of financial and management accounting. As the breadth of the role increases, it’s unrealistic to expect future CFOs to deep dive into every aspect of the finance organisation, but critically they must be able to ask the right questions across the organisation. That’s a skill that best comes from experience gained across multiple finance roles. Experience in specialised roles will continue to be beneficial, but experience in mainstream roles in finance remains essential. Plan A” should be to build this broad foundation of finance experience through the career.

2 SEE STRATEGY AND BUSINESS EXPERIENCE AS THE NEW BASELINE The future CFO role in supporting strategic growth will be increasingly valued. Strategy formulation and execution are the most important area in which to have experience for future CFOs. Over the next decade the business landscape will be reshaped by a combination of market volatility, globalisation and transformational innovation. In an environment where “commercials” will change quickly, deep business experience will be highly valuable. Future CFOs should seek out greater mobility in and out of the finance organisation, building the commercial qualities needed, and of course the internal relationships. Establishing commercial credentials early on in the career journey will be advantageous, but routes to and from the finance organisation must be planned carefully.

3 CAREER PLAN FOR THE NEXT BIG THING IN FINANCE: INSIGHT AND ANALYTICS

How organisations regress, correlate, and extrapolate data to drive better decision making is the next “big opportunity” for tomorrow’s finance team as data grows and the multiplicity of information presents new challenges to business decision making. The business will be more demanding on the insights needed from the finance organisation because the requisite technology should be in place to provide this. Future CFOs should plan experience in the area and actively seek out analytics roles, so they understand its value and application.

4 GET RISK EXPERIENCE UNDER THE BELT

Future CFOs will operate in a business environment that’s high risk. From traditional financial risks to emerging risks such as on line reputational risk or cyber risk, the risks business face will grow, change, and in some cases become more difficult to calibrate and manage. The future finance organisation will have a significant role to play in balancing carefully the investments that need to be taken against potential risk impacts, and plan out the different scenarios. Experience in risk management is one of the most important areas in which future CFOs need to gain. It should be said that this isn’t a play for being risk averse. Rather it’s about being prepared to take calculated decisions having a better understanding of the risk implications. Risk experience is a must-have on the CV of future CFOs.

5 BECOME A DEAL MAKER

With the rebalancing of global economic wealth, more businesses will look south or east to drive growth longer term. Some growth will be organic, but much is likely to be through acquisition and merger and other forms of business tie -ups, tapping into already established businesses to ease market entry and leverage expertise and market knowledge. Merger and acquisition activity is an important area of experience for future CFOs to obtain. It gives specific technical finance experience in structuring deals, but also can help develop wider skills in change and project management. More broadly funding, capital market experience and investor relations to remain core finance capabilities in the future for CFOs of larger businesses too.

6 GET CLOSER TO STAKEHOLDERS, BECOME CUSTOMER FOCUSED

The range of stakeholders with whom future CFOs will have to engage will be significant. The future finance leader will need to “talk the same language” across a wide range of traditional finance and non-traditional finance relationships. CFO aspirants need to plan for roles that increase their breadth of stakeholder engagement and cultivate strong relationship management skills. But the emerging powerhouse stakeholder that future CFOs need to mindful of in an age of brand disloyalty is customers of the business. The future finance organisation will need to be attuned to the needs of different consumers and develop a culture which is customer centric. This will be an important milestone on the transition from back to front office for the finance organisation. The future CFO needs to be customer savvy and taking roles which provide greater customer understanding will be key.

7 FOCUS ON THE MANAGEMENT SKILLS THAT MATTER

While next generation CFOs will need to call into play a wide range of skills to perform the role successfully, there are a number of standout management capabilities that will be needed. The top four skills identified in our survey were leadership skills, communication skills, strategy skills and change management skills. Strong leadership skills will be essential because the success of the future finance organisation is very dependent on a strong united leadership vision and an engaged and skilled finance team, particularly as the finance organisation become more diverse. Businesses will continue to evolve and reengineer their operations and activities, so experience in transformation and change management for future finance leaders will also be a priority

8 PREPARE FOR MORE REGULATION AND BROADER REPORTING.

It’s no surprise that future CFOs are likely to face more regulation. Future finance chiefs need to be confident operating in a regulated environment and should be adept at putting in finance structures and processes that manage legislative requirements effectively. Alongside more regulation, on-going changes in reporting requirements – growing interest in the concept of integrated reporting, more involvement of the finance organisation in reporting on different corporate performance measures, increasing use of financial and nonfinancial data, recalibrating investment assessments to account for environmental or social impacts and so on. Future CFOs need to track carefully developments in these areas and think about how their career plans help develop understanding here.

9 GET CONNECTED

Technology transformation in the finance team hasn’t quite delivered on its promise to date. But there are developments on the horizon that may well shape the role of the future organisation and role of the CFO. The growing interest in the coming together of social, mobile and cloud technologies may revolutionise day to day business practices. For many future finance chiefs, real time business information in the palm of their hand on mobile devices will be a reality. Tomorrow CFOs needs to be technologically adept and understand the significant role technology can play in driving better finance delivery. They should also target roles which develop and utilise their technology understanding.

10 EXPAND YOUR “FOOTPRINT”

The footprint and construct of many future finance teams will continue to change. The future CFO will need to be able to manage carefully the different demands between mature and emerging markets and align their finance strategies accordingly. They will need to be adept at working in the global business environment, leading finance teams which are diverse and virtual across mature and emerging markets. From managing new reporting requirements to driving financial insight into new markets and new consumer sectors, or raising capital, the finance organisation of the future must be entirely aligned to the business’s needs. Future CFOs that can bring cross cultural, cross market business and finance experience to the table will be highly valued. Source: ACCA & IMA

Interview

ICMAB President

Interview

ICMAB President

THE PRESIDENT’S REMARKS Institute of Cost and Management Accountants of Bangladesh (ICMAB) is the national body of the professional Cost and Management Accountants of Bangladesh. In an interview with The CFO Bangladesh, ICMAB President Mr. Arif Khan, FCMA, CFA conveyed his views on cost & management accountancy profession as well as other related matters.

“ICMAB has already opened cost audit and management consultancy cell which may be a strong selling point for this profession. This cell may be used to create bondage between ICMAB and corporate sectors by selling professional services.”

In your tenure of ICMAB presidency, what are your key priorities to bring qualitative change in CMA profession? Change is a continuous process. Circumstances give the direction and we encapsulate it. The issue is whether you can feel and hear the demand. May be ‘time’ is the right word which guide us in practical life. As a president, my goal, like my predecessors, will be to take a holistic approach to bring ICMAB in an international standard. Every stakeholder of ICMAB is the recipient of this initiative including me. Quality of education and examination will be the core of our developmental goal for the current year, as we all know, in this extremely competitive landscape, without cutting edge educational standard the profession will not be able to alive up to the expectations of the stakeholders. In this connection, ICMAB has already taken an attempt to bring its curriculum into a global standard through a MoU with CIMA. This is a very successful cost-effective and timely attempt taken by the then council. We have already started to reap the benefit. I will try to capitalize every opportunity of the MoU throughout the year. Members’ capacity development will be another area where we believe that the

institute should give continuous emphasis. We all know, without being updated with fast changing environment in the whole eco system of accounting and finance, it is difficult to remain in the leadership position. I believe that without upgrading our knowledge, and mentally being ready to adapt with the changing environment we can not remain competitive for long time. For this purpose, I will try to arrange more workshops and seminars on various contemporary topics where our members can enhance their expertise. ICMAB has already opened cost audit and management consultancy cell which may be a strong focus point for this profession. This cell may be used to create bondage between ICMAB and corporate sectors by selling professional services. We need to ensure that the long cherished desire of cost audit should not be limited to circulars only. This will create opportunities for our members apart from corporate management activities. I will also try to offer placement facilities to our young members who need jobs, even to other members who need a change. Technological innovation and enhanced digitization shall be another priority area as we have seen how every aspects of life and corporate management is changing with the advent of continuous technological change. ICMAB has

Interview

ICMAB President

“ICMAB has inaugurated its students’ and members’ e-management module so that both of this group can avail the maximum benefit from its digitized platform without coming to the institute physically.”

already inaugurated its students’ and members’ e-management module so that both of this group can avail the maximum benefit from its digitized platform without coming to the institute physically. This journey will continue in coming days to bring more facilities including all the benefit of a virtual campus. In addition, I have a plan to develop specific module in selective areas including correspondence course system, internship program, ethical code of conduct for ICMAB members, professional experience requirements to avail membership of the institute, mentorship program etc. Your website will be single most important point to remain connected with the institute and also to upgrade your knowledge base on a continuous basis.

desh and lot of countries are joining to this drive. In FRC, ICMAB can exercise its professional expertise and commitments to ensure sound accounting and reporting system of the country. It will surely bring public confidence on public accounting and reporting.

Why the collaboration between ICMAB and CIMA is significant? How cost & management accountancy profession is impacted with this strategic tie?

What initiatives does ICMAB currently have and will be lunching soon in terms of further fostering cost & management accountants and other finance roles?

The collaboration changed the life of ICMAB significantly. Such collaboration becomes inevitable to align ICMAB with a global institute from every respect. The benefit that ICAB availed joining with ICAEW under the ROSC project as suggested by World Bank, ICMAB also availed such benefit though it missed such twining arrangement before. As an immediate impact, ICMAB has successfully incorporated world class curriculum in its structure, brings maturity to its assessment system, establishes governance in its management etc.

ICMAB is in the verge of uplifting the profession from every respect. Locally, ICMAB is preparing itself with all the rich documents that a professional institute should need. At the same time it is increasing its visibility in a global arena through accreditation and mutual recognition process.

How important is the newly enacted FRA in BD's accounting & auditing industry? What is the scope of ICMAB to contribute in FRC?

It would be better if all the institutes can come together and identify their own area of work. Surely, it will give an added impetus for professional development. Look at the example of Canada and in some other countries the same process is under discussion. However, in Bangladesh, we are lagging behind as we put more emphasis on individual interest over common interest. As long as we cannot come out from this type of narrowness, the profession will suffer seriously. In that case, we have to give up our rights and professionalism to others that may be a big threat in the days ahead.

FRA becomes a regulatory requirement to bring trust and confidence on general financial statements. Who will audit the auditors? – becomes a legible question during last couple of years when corporate failure becomes a commonplace and in most of the cases public accountants are found related with. Such situation strengthens the question again. And a solution comes out when US Senate passed SOX Act in 2002. FRA is a similar drive in Bangla

Are there any initiatives in place to promote CMA profession by leveraging the equal participation with CA in proposed FRC? ICMAB is happy that the regulators have treated CMA profession with CA through equal participation and recognition in proposed FRC. It gives CMA profession an extra height to perform its professional responsibilities for the overall benefit of accounting profession.

There are severe disjoints among the local accounting institutes (ICAB, ICMAB & ICSB). Doesn't it impair the development of accounting industry in Bangladesh?

Interview

ICMAB President

â&#x20AC;&#x153;FRA gives CMA profession an extra height to perform its professional responsibilities for the overall benefit of accounting profession.â&#x20AC;?

How do you think digitalization can impact the management accountants segment?

statutory audit, What opportunities do you see for practicing cost & management accountants?

Decision making process becomes speedy due to the digitization process in this information era. The organizations become prey to wrong decision when it is being done by inaccurate and lengthy process of information generation based on which decisions are made. More and more organizations are implementing ERP due to digitization. Todayâ&#x20AC;&#x2122;s management accountants are smarter to handle the digitization process to supplement the decision making process.

Management accounting profession does not conduct financial audit, however, cost and management audit is much bigger than financial audit. It is very important that financial auditor should not be involved with cost and management audit. If our regulation can finalize the respective skill and capacities of different professional accounting group, it will reduce the divergences and professional rivalry. We expect that the regulators will take this issue seriously and make stringent laws so that financial auditor cannot do non-audit services which fall within the jurisdiction of cost and management accountants. In that

Companies Act does not allow cost & management accountants to do

case, cost and management accountants scope of work will me much bigger than other professionals. We like to appreciate the initiatives taken by regulators recently to open some areas for cost and management accountants like corporate governance certification, transfer pricing certification, requirement of cost audit for IPO etc. Such initiative will offer a level playing ground for professional accountants and we strongly believe that we can discharge our duties with reputation and create positve image in the market. Is there any activity from ICMAB to engage CFOs with institute and what can a CFO gain from working with ICMAB? You will be happy to know that ICMAB for the first time in the history of Bangladesh organized CFO Conference in the year 2014 where CFOs from home and abroad joined and discussed the role of CFOs in corporate management. ICMAB always appreciates any such move from the corporate sector. ICMAB regularly maintains networking with corporate sector through its targeted activities and thus I believe that there is a huge opportunity of reciprocity between CFOs and ICMAB.

Feature

Corporate Treasury

CORPORATE TREASURY The corporate treasury function has been described as the ‘heartbeat of the business’, and it can assist in various forms of improvements in the financial management of enterprises. Harunur Rashid, FCMA CFO - Rahimafrooz Superstores Limited

orporate treasury plays a critical function in most businesses, though many are unaware of how broad a scope it covers. It can incorporate a number of different aspects relating to providing finances for an organisation. These could include cash and liquidity management, corporate financial management, funding, gainful investment of temporary surplus funds, currency exchange and treasury risks management, etc. Over the last few years, treasurers’ roles have become even more complex and challenging as they try to source and secure funds for their organisations in a volatile economic climate. The Association of Corporate Treasurers (ACT) is the leading professional body for international treasury has identified several issues on the increasing significance of corporate treasury under

Feature

Corporate Treasury

five broad divisions i.e. Governance, Corporate Funding, Cash Management & Liquidity, Risk Management and Treasury Operations & Control. GOVERANCE 1. Treasury’s role and objectives Treasury plays a key role in determining the organisation’s financial strategy, working out how to finance the business strategy and how to manage the risks that follow from this. Treasury therefore needs to contribute to the mix of business and financial strategy, namely the corporate strategy, by setting out what is possible financially, at what cost and with what risks as the business and the environment develop. 2. Treasury policy All properly managed treasuries have a written treasury policy with a process to manage regular updates. Treasury policy is a mechanism by which the

Board and management can delegate fundamental financial decisions about the business in a controlled manner. It should give treasury staff written guidelines on what they are responsible for, how they should go about their responsibilities, what their boundaries are and how their performance will be measured. 3. Qualified personnel Treasury differs from other finance roles, with an emphasis on cash, risks and markets. The complexity of instruments, systems and interactions with the business, both operationally and strategically mean some of the skills needed for treasury are specialised and demanding. In smaller organisations, or where treasury is more decentralised, staff may carry out treasury functions on a part time basis. Emphasis may then be on training in treasury procedures rather than wider education.

CORPORATE FUNDING 4. Capital structure It is the corporate treasury role to get the Board agreed a target gearing for the organization. Organisations raise capital externally or generate it internally. The choice is between debt and equity capital, though there can be hybrids. The proportion of debt is called gearing or leverage and the optimum level depends on risk and return. 5. Funding Organisations need to plan for required fund raisings ahead of need, to diversify sources of funding and to “warm up” potential investors and lenders in advance. Corporate treasurer needs to work harder than ever on their funding relationships – not just bank relationships, but all potential sources of funding such as private placement debt and asset based finance. Funding plans need to explore all options and think outside the box.

Feature

Corporate Treasury

6. Own credit risk Presenting and explaining own organisation’s credit standing to external parties will influence their willingness to do business with you and the terms they will demand. This applies to suppliers, lenders and lessors. Even customers will want to assess the likelihood that you will still be in business to honour your commitments in the months and years ahead. CASH MANAGEMENT AND LIQUIDITY 7. Liquidity and cash forecasts Liquidity management is the most fundamental element of treasury management — if it fails, the organisation cannot continue to function, and all other decisions, no matter how important, cannot proceed. Liquidity is an organisation’s ability to pay its obligations where and when they fall due and its ability to source additional funds to meet its obligations. Cash forecasts are therefore a key component of a liquidity strategy, with the treasurer often looking forward over several timeframes to manage liquidity properly. 8. Cash management Cash management is a tool of liquidity management – it being the physical day-to-day management of cash – so that those obligations can be met. It is a treasurer’s task to ensure that cash flows (receipts and payments) throughout the business are processed as efficiently and as safely as possible. 9. Counterparty risk Credit risk could not only be arising from an organisation’s sales but also from exposure to banks and other financial counterparties due short term and long term investment. When managing credit risk in investing, the treasurer’s mantra is ‘SLY’: Security first, Liquidity second, Yield last. 10. Working capital management Working capital investment is part of doing business, which treasury needs to factor into its cash forecasts and funding plans. Higher working capital may ensure supply and boost sales and service levels, but at a cost. Lower working capital can reduce dependency on borrowing. Treasurers essentially need to know about working capital for cash and financing planning. Their knowledge of the various ways of financing different elements of working capital mean they are able to play a positive role in this process.

RISK MANAGEMENT 11. Risk management framework The treasurer must be aware of the overall approach of the organisation to risk management, and be able to answer: Is there capacity to take certain risks? If so, is there an appetite? How much of this appetite can be taken in treasury? Having established a budgetary approach to treasury, a risk management framework will provide a mechanism to develop an overall approach to financial risks across the entire group by creating the means to discuss, compare, evaluate and respond to risks. 12. Risk reporting A treasurer’s role is partly as a risk manager with delegated authority. Treasury must report on its management of those, usually financial, risks. The treasurer also contributes to external reporting where both policy and performance are communicated to investors. 13. Currency/commodity transaction risk Treasury has to ensure that organisation has a mechanism to capture its explicit exposures to currency/commodity transaction risks? Transaction risk is the risk that committed cash flows in a foreign currency are worth less or cost more than expected, due to changes in FX rates. It arises from, for example, sales or purchases made or contracts entered into in a foreign currency. 14. Foreign exchange translation risk Treasury has to provide the analysis and advice whether translation risk is significant for the group or not. Foreign exchange translation risk arises from exchange differences arising on consolidating foreign assets and liabilities into the group accounts. 15. Interest rate risk It is one of the functions of treasurer to monitor what interest rate risk does the organisation have in its cost of capital and how the organisation’s performance will be affected by a movement in interest rates? TREASURY OPERATIONS AND CONTROL 16. Internal controls In carrying out its function, treasury is exposed to particular risks around its operations, relating to issues such as

Harunur Rashid, FCMA CFO - Rahimafrooz Superstores Ltd.

fraud, errors, market and systems failures. Treasury is particularly susceptible to these issues because of the large numbers in money terms, its ability to make payments and the potential complexity surrounding its necessary activities. 17. Business operations In managing capital structure, funding and liquidity, and financial price risks, crucial considerations are the level and nature of business risks, and their impact on cash flows. It is important that the treasurer has a good understanding of the business and the industry sector within which it operates, and that treasury supports and enables the business operations and strategy of the organisation. 18. Systems For treasury, technology in areas such as automating processes, performing sophisticated calculations, communicating with internal and external partners and monitoring risk is of growing importance. All treasury transactions should be recorded and managed within the Treasury Management Systems (TMS), the heart of most corporate treasury technology infrastructures. 19. Treasury accounting A feature of accounting standards is how quickly they change, and in almost no other area as quickly as in the treasury arena. IFRSs are being increasingly adopted as the global standards. There are three major International Standards which particularly affect treasury: IAS 32 covers financial instrument presentation and disclosure, IAS 39 covers financial instruments (recognition and measurement), IFRS 7 covers financial instrument presentation and disclosure and IFRS 9 covers Financial instruments which will eventually replace IAS 39.

Cover Story

CFO - Lafarge Surma Cement

STRATEGIC MINDSET Lafarge Surma Cement is the only state of the art dry process cement plant in Bangladesh. Mr. Masud Khan, a seasoned finance professional having around four decades experience in leading multinational companies, is the Chief Financial Officer (CFO) of the Company . With â&#x20AC;&#x2DC;The CFO Bangladeshâ&#x20AC;&#x2122; magazine he shares his views on CFO leadership beyond finance, corporate governance and other related issues.

Cover Story

CFO - Lafarge Surma Cement

'Lafarge Surma Cement' is the only company in Bangladesh which came into IPO as 'green field' project in BD's capital market history, is it really a risky venture to bring 'green field' project in capital market? Definitely, it is. Normally when we talk about green field projects, it refers to those companies which do not have any track record. Now, if we take an example, a local company without any track record and a multinational company without any track record; you can easily identify the differences between them. MNCs operate in other parts of the world. Though their operations may be new in Bangladesh, their track record in other country may be followed here. But for a local company without any track record, this is quite risky because ultimately you don’t know what is going to happen and interest of the innocent investors might be jeopardized. In that sense it is absolutely risky to bring green field project in capital market. Regulators should be very cautious in approving ‘G’ category project. So long as the case of Lafarge Surma Cement is concerned, the project was the largest FDI in Bangladesh at that time having a very unique business model i.e. the only company in Bangladesh making clinker with limestone imported from India through a 17km long belt conveyor. This is a flagship project between India and Bangladesh. Considering the merit, BSEC approved the project in ‘G’ category. BSEC's corporate governance guideline prescribes companies to appoint 1/5th of its director as independent which is relatively new in BD, you are also acting as independent director in different companies, - is the effectiveness of independent director has established in BD's corporate culture? The concept of independent director is actually nothing new; globally the concept is there for a long time. In India there is a requirement for having one third of its director as independent. I think the important thing is the quality of independent directors as well as their independence. I would say in general, if you can select a person who

has been doing well in his own role in his own company, he can definitely add value as independent director of other company in terms of best practices, leveraging on his strengths and his profile of networking also. What I have seen in practice is that the intention is not very good because in many cases independent directors are chosen merely to comply with regulatory requirement. So in many cases the purposes of independent director i.e. looking for independent view on the operation, diversity from the current management etc. are ignored. If you find an independent director with the right profile and right skills he can add a lot of value. I have done this in the three companies while performing my duties as an independent director. As a finance professional I can add a lot of value because finance is not industry specific, it comes across all the industries. We can add value in any discussion relating to sales, marketing, supply chain, production or HR. Do you think seasoned finance professionals should get priority in appointment of independent director? I always strongly feel that you can add value only when you are a part of the decision making process of the organization. Your focus should not only be in finance, you should know much more beyond finance and you should be very actively involved in any business decision making process. To my mind, good finance people are those who are working much beyond their boundaries of finance. We are master in core finance; but we should not spend much time on it. As the Head of Department, my role is to develop my people to whom I can depend and delegate the job. If it happens, I do not need to spend that much time in finance; I can leverage my other skills by working with other departments. In Lafarge, I spend 20% of my time with finance and 80% of time with other functions. So, in that sense if you take people who are independent director with finance background they can add lot of value to other organization rather taking from a specialist background like marketing or from production background. The seasoned finance person can add value in any function. In UK, 55% of FTSE 100 CEOs are from finance background, while in BD we hardly see any CEO of listed

company (except financial institutes) from finance background, what do you think the reason behind? When you talk about a CEO of an organization, what profile you are looking for? Obviously, you are looking for a person who has multi-skills but at the end of the day whoever the CEO is, he must have strong financial background also otherwise he would not be a good CEO. Other than multi-skills and financial background, CEO should have very good networking skills, should be articulated in terms of written and verbal communication with good presentation skills. Above all, a CEO should be a visionary leader having capacity to see strategic big picture of industry as well as economy. When we start talking about finance people, especially in overseas, we observe these attributes among most of them. The CEOs, who have finance background, are very articulated and they can present themselves well and they can market themselves well also. The CEO must have the skill of selling himself. Now if we come in Bangladesh context, the scenario is different. Irrespective of profession both from CA and CMA, we are very good in our field; we are masters in financial reporting, management accounting, tax etc. But in terms of marketing and presenting ourselves, we are lagging behind. We are mostly back office men having significant deficiencies in strategic mindset and capability of making a point well. Most CEOs in Bangladesh are from marketing background because they can sell themselves well, they have got the network and they have got the profile also. When companies appoint CEO they try to assess how visible is the person to the external community, how visible he is to the government also, how well he can speak, how well he can present his ideas and how aggressive he is in terms of pushing his agenda. I think most of the accountants are lacking of these qualities. Should CFO eye on the CEO position as the ultimate destination? What is your view in this regard? CFO is head of a department and CEO is the boss of the organization. Everybody wants to be boss and that should be the objective also, you should not be satisfied in CFO position. You are specialist in your line but to be the CEO you need to be good at everything. To

Cover Story

CFO - Lafarge Surma Cement

me targeting the CEO position should be ultimate destination and should not being satisfied with the CFO position. I donâ&#x20AC;&#x2122;t think about any downside to aiming the CEO position by the CFO. In CFO role I actually have two hats where the first one is my department; I have to ensure that the objective of finance department is fully met. Second part is my networking with my peers and how I interact with my other fellow departments, where I can add value. In that sense, if I am doing well in my role, then I can get lots of time to talk to other departments and work with them. You cannot sacrifice your core role just to want to be the CEO. If you want to be CEO, you have to work much beyond your role of CFO. But this is not easy because you have to be really good in your job before thinking about the bigger boundaries. Globally M&A is a common phenomenon, your company Lafarge is also merged with Holcim. In BD promoters as well as regulators are also reluctant in M&A, why our mindset has not moved in this direction? Why does M&A occur? It is mainly because of synergies otherwise M&A would not work. But there are behavioral issues also. When we talk about M&A, i.e. when a company acquires another company, the power of CEO and Board of acquired company will be abolished. Power is something people donâ&#x20AC;&#x2122;t like to give up easily; unless the company is near to die. In Bangladesh, companies are operating under a group structure where promoters maintain a portfolio and support the weaker concern from group level. So here urge for M&A is lesser. Moreover, most of the entrepreneurs have the penchant for power, he wants to be the own master and why should he merge with somebody and give up his power. So, these two things work very strongly against M&A in Bangladesh. How is the role of CFO very different in a multinational company as opposed to local company? I have been working in MNCs in all my life, so I can talk about MNC, although I have limited knowledge about local companies. I think working as CFO in MNC has got lesser challenges because systems are laid down and if someone left the CFO position today, other person could easily take over the position. In that sense, we work in systems but we

have lesser empowerment because everything goes to the top/regional level for approval. There are also lesser stresses in MNC for example when we talk about financial statements; we talk about only one set of accounts and we are very transparent in the process. In contrary, I guess the empowerment is much more in private companies, the CFO is automatically exposed to other functions in larger scale and he is much more reactive since systems will not work there. Ultimately you are involved fire fighting in lot of time and stress is much higher due to lack of transparency in general. In this sense, challenges of CFO in a private company are much more as opposed to private company. How important is it for CFOs to meet peers? I think it is extremely important, because there many common issues where CFOs

can work together. They can discuss about industry specific issues, fiscal issues and best practices about their companies. What do you like best about your job? What makes you want to get out of bed in the morning? To my mind, itâ&#x20AC;&#x2122;s up to you to make the job interesting. I proactively choose to work with other departments. Almost every day I talk to my plant people, quality people, sales & marketing and even logistic guy also. I have joined in this company in 1999; since then there have been lots of challenges to bring this cross border project to reality. So there was never a dull moment. Even today, we face unique challenges that require out of the box thinking.

Survey

Salary and Employment Report 2016

Finance & Accounting Salary and Employment Report 2016

CFO Connect Bangladesh is delighted to publish the most detailed and comprehensive report on Bangladesh Finance & Accounting Salary and Employment Report 2016. In the begening of year 2016, we lunched the survey and over 250 finance professionals across the industries participated in the detailed survey. The demograhphics of participatnts show that 54% of the participants fall under the age group of 30-39 years, 43% having higher professional qualifications, 25% from manufacturing sector and 96% are male. The survey result shows 2015 was very positive year for the employees and their expectation is even more optimistic in 2016. In 2015, 94% of the participants got salary raise whereas 98% of the participants expect to get pay raise in 2016, with 52% expecting more than 10% salary hike and 30% expecting 6%-10% pay increase. The survey result shows the positive outlook in the coming months. 46% of the respondents expect permanent staff level will increase in their department and 49% plan to look for a new role in 2016. While considering a new role 50% of the participants consider ‘career development opportunity’ is the most influencial factor. Among the respondents, 34% said they are facing difficulty in getting skilled candidates in the area of ‘financial management & control’ while 26% consider ‘delivering effeciency and growth’ is the greatest pressure in finance & accounting function. In terms of qualification in Finance & Accounting discipline, CA and CMA dominate the market. We all know that larger salary shouldn’t be the only or primary driving factor in seeking new employment but there is no doubt that it plays a part in securing the interest of the new hire. We publish in the following pages the full salary and employment survey report for your reference.

Survey

Salary and Employment Report 2016

SURVEY FINDINGS 2015 Review

At a glance: Employee responses

2015 was a positive year for the employees in Bangladesh. Now Bangladesh economy is underpinned by political stability, declined inflation, balance of payment surplus, reduced lending rates, strong reserve and stable exchange rate. Our survey shows the attitude of employees has grown positive and confident. 91% of our respondents cited their work in ‘interesting and engaging’ and more than 80% said their line manager supports in ‘career development’.

35%

Received more than 10% pay raise in 2015

52%

Intended to receive more than 10% pay raise in 2016

Stable economic growth and expanding industing boosted the salaries of employees. 69% of the respondents received 6% to more than 10% salary raised in 2015 and 62% of the respondents received additional bonus other than fixed festival bonus.

62%

Received bonus other than fixed festival bonus

63%

Respond as their workplace allows flexible work practice

2016 Expectations & Intentions In 2016, employee expectations are much higher than last year. 71% of the respondents expect 6% to more than 10% pay raise. 49% of our respondents strongly consider to look for a new role in 2016 whether in within the company or outside.

50%

Consider ‘Career Development Opportunity’ is the most important factor when considering new role

49%

There is positive sign in employment also, 46% of the participants expect that permanent staff level in their department will increase in 2016.

Plan to look for a new role in 2016

DEMOGRAPHICS of PARTICIPANTS Industry

Gender

Manufacturing

25%

Banking/Financial Services

19%

FMCG

10%

40-49 Years

Other

10%

50-59 Years

IT/Telecommunications

Service

Energy

Age

20-29 Years 30-39 Years

29% 54% 96%

60+

Male Female

Education Masters/MBA 3%

17%

43% 37%

Bachelor degree Higher professional qualiﬁcation (CA, CMA, ACCA, CFA etc.) Other

Professional Service

NGO

Automotive

Retail

Engineering

Construction/Real Estate

RMG/Textile

Government

Helthcare

Survey

Salary and Employment Report 2016

EMPLOYEE SURVEY RESULTS

SALARIES, BENEFITS & BONUSES

Other than festival bonus, which bonus did you receive in 2015?

Averge percentage of salary increased in 2015?

10%

35%

More than 10% From 6% to 10%

Employee performanc Employer performance None Other

43%

34%

From 3% to 6% Less than 3%

SALARIES, BENEFITS & BONUSES

22%

38%

4% 9%

Nil

Intended averge percentage of salary increase in 2016?

In next 12 months do you expect permanent staff levels in your department to.... Increase

52%

More than 10% From 6% to 10% From 3% to 6% Less than 3% Nil

Remain the same

30%

40%

Decrease

14%

12% 5%

Does your workpalce allow flexible work practices?

Other than salary which benefit you are receiving?

35%

Providend Fund / Gratuity

36%

Life Insurance

No Yes

63%

Paid overtime/Earned Leave

If yes, which practice does your employer currently offer?

4% 7%

Hospitalization/Health check-up 3%

Flexible leave options

30 days or more holiday

Job sharing

Access to Event/Corporate tickets

2% 2%

48%

Flexible working hours

Paid incentive

Tax Equalization

37%

Company car

Club/Professional membership fee

46%

Flexible places

27% 13% 4% 6%

Other Part time employment

Survey

Salary and Employment Report 2016

EMPLOYEE SURVEY RESULTS SALARIES, BENEFITS & BONUSES Over the last 12 months, has overtime/extra hours in your organization...

25% 49% 26% Increased

Over the same

CAREER CHALLENGES Which of the following is important to you when considering a new role?

50% 19% 14% 10% 5% 3%

Career Development Opportunity

Challenging Role/Projects

Corporate Culture

Higher Salary

Work-life Balance

Location

Decreased

Skilled candidates are most difficult to find in.... How does employee compensate for these additional hours?

Financial Management/Control

32% 8% 60% Paid

Leave in lieu

Unpaid

34% 27%

Business/Financial Analysis Taxation

13%

Accounting

10%

Audit/Compliance Treasury

To which degree do you agree with this statement: “The job is interesting, engaging work”?

29% 62% 9% 0% Strongly Agree

Agree

Disagree

Strongly Disagree

9% 7%

Greatest pressure facing the accounting and finance function.... Delivering eﬀeciencies and growth

26% 24%

Audit, risk and compliance initiatives

To which degree do you agree with this statement: “I plan to look for a new role in 2016?

49% 43% 7% 0% Strongly Agree

Agree

Disagree

Managing workloads

24%

Recruiting skilled talent

19%

Retaining ﬁnance employees

Strongly Disagree

Which one is the preferred professional qualification? To which degree do you agree with this statement: “My manager supports my development?

32% 51% 12% 5% Strongly Agree

Agree

Disagree

Strongly Disagree

38%

CA 27%

CMA 13%

MBA ACCA CIMA CFA Other (CS, CPA)

9% 5% 4% 5%

Survey

Salary and Employment Report 2016

The projected salaries for each position reflect a range only. Performance bounuses and other forms of reward are not taken into account. We recognize that salary ranges may vary by industry and are influenced by hard-to-find skill sets.

SALARY GUIDE

ACCOUNTING AND FINANCE SALARIES J ob T itle Finance Director/CFO

Head of Finance & Accounts

Financial Controller

Head of Internal Audit/Compliance

GM-Finance & Accounts

GM-Cost, Budget & Reporting

GM / Head of Taxation

GM-Treasury & Banking

Senior Finance Manager

Manager - Finance & Accounts

Manager - Internal Audit/Compliance

Manager - Business Planning & Analysis

Manager - Cost, Budget & Reporting

Asst. Manager/Sr. Executive - Finance & Accounts

Graduates/Entry Position

C ompany

S ize/T ype

S alary R ange 2016 Monthly B DT

MNC

300,000 to Above 500,000