the 2nd annual cfo leadership conclave
DRIVEN: MAHINDRA XUV 500
CFO PROFILE RAJESH GHONASGI
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volume 02 Issue 10 Rs.50 OCTOBER 2011
CFO India
India
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WINNING
THE WAR ON
CARBON Organisations across the world are realising that reducing carbon emissions do not just help the earth it improves the bottom line too. India Inc needs to come on board quickly
volume
02
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CFO O ctob e r | 2 0 1 1
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12 COVer story
IN PRACTIcE 28 WHY BUSINESS NEEDS TO CARE Assimilating the two seemingly incompatible objectives: lowering carbon emissions while raising productivity and revenue, continue to dominate, C-Suite discussions
INSIGHT 46 GOVERNANCE SINCE THE ECONOMIC CRISIS Corporate directors must strengthen their capabilities and spend more time on board work: McKinsey survey
i THINK 10 SATHYA KALYANASUNDARAM The Finance Director of Texas Instruments discusses the challenges of cross-functional collaboration
CFO profile in pursuit of excellence
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Rajesh Ghonasgi, the CFO of Persistent Systems talks about moments and events that have challenged, inspired and moulded him in his two-decade-long career
WINNING THE WAR AGAINST CARBON Four leading organisations that have global presence, reveal how reducing the carbon count has helped both their image and profit margins
CASE STUDY
42 THE COMMODITY EXCHANGE CHALLENGE Jaimin Bhatt, CFO Kotak Mahindra Bank and his colleague TV Raghunath, Group Head of Strategy explain how they converted a regional exchange into a national one
Cfo lounge 54 ON WHEELS | MAHINDRA xuv500 58 TRAVEL | THE pyrenees
leader’s world 50 NICE IS OVERRATED Being the ‘nice guy’ may not always be a great reputation for a leader to have
56 GIZMOS | SONY BDP S380
Regulars 04 LETTERS TO THE EDITOR 06 O-ZONE 60 NOT JUST THE LAST WORD
THE 2ND ANNUAL LEADERSHI CFO P CONCLAVE
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DRIVEN: MAHINDRA
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XUV 500
CFO PROFILE RAJESH GHONASGI
p. 24 CFO I NDIA
VOLUME 02 ISSUE 10 Rs.50 OCTOBER
2011
INDIA
cfo-india.in
ILLUSTRATION & Cover design Anil T
WIN
NING THE WA
RON CARBON Organisa tions across are realising the world emission that s do not reducing carbon it improves just the bottomhelp the earth Inc needs line to come too. India board quickly on
Sricity IFC | Financial Executive 02 | Ace Data 05 | Microsoft 57 | Sodexo IBC | Ricoh BC
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from the
managing editor
dhiman chattopadhyay dhiman.c@9dot9.in
Managing Director: Dr. Pramath Raj Sinha
For a Greener World
Come to think of it, reducing carbon emission levels in your city is not that difficult a job. You probably have heard this before, but small things like switching off the car ignition at every traffic signal, setting the AC temperature just a degree higher, fixing all leaking taps or using a laptop instead of a desktop, can significantly reduce greenhouse gas emission levels in a large area. And if individual efforts go such a long way in making a city greener, imagine what an organisation or a large conglomerate can do if it tracks its carbon count and systematically reduces its emissions over the years. The question before CFOs however, is different, since at the end of the day, making money is also important for a commercial establishment. Till a few years back, the general feeling in India was that reducing carbon emissions would mean switching to more expensive or less efficient means of production, leading to rising costs and lower profits. Thankfully, that view is changing. In our cover package this time we have shared key findings of the Carbon Disclosure Project (CDP) global report for 2011 that reveal how companies that took the green route have not just improved their image but reduced costs and most importantly, reported higher profits. (Green is Profitable too, Pg 18) Surprised? Read the accompanying feature where C-suite executives of four large organisations tell us just how, after they reduced their carbon footprints, their organisations became more profitable. (Winning the War on Carbon, Pg 12) As the examples of SAP, the Tata Group, Suzlon Energy and MindTree reveal, some of the best practices are not that hard to follow. Among them are: using video conferencing instead of flying down for a meeting, rewarding those who use carpools, using laptops instead of desktops, tracking (and reducing) usage of paper and printouts and reusing waste-heat to generate energy. We believe the organisations that look at alternative and low carbon options now, will benefit the most in the years to come. Let us know what you think.
Editorial EDITOR: Anuradha Das Mathur managing editor: Dhiman Chattopadhyay managing EDITOR(Copy Desk): Sangita Thakur Varma SUB EDITORS: Radhika Haswani, Mitia Nath Design Senior Creative Director: Jayan K Narayanan Art Director: Anil VK Associate Art Director: PC Anoop Visualisers: Prasanth TR, Anil T & Shokeen Saifi Senior Designers: Joffy Jose, NV Baiju, Chander Dange & Sristi Maurya DesignerS: Suneesh K, Shigil N, Charu Dwivedi Raj Verma, Prince Antony & Binu MP chief photographer: Subhojit Paul photographer: Jiten Gandhi The CFO Institute Executive Director: Deepak Garg National Head: Bindu Krishna ASSISTANT BRAND MANAGER: Nisha Anand SENIOR Manager: Shreya Pilani Associate: Deepika Sharma Sales & Marketing ASSISTANT REGIONAL manager (sales): Rajesh Kandari (+91-9811140424) National Manager (Events & Special Projects): Mahantesh Godi (+91-9680436623) Assistant Brand Manager: Arpita Ganguli Co-ordinator (Ad Sales, MIS, Scheduling): Aatish Mohite South: Vinodh Kaliappan (+91-9740714817) West: Sachin N Mhashilkar (+91-9920348755) For any customer queries and assistance please contact help@9dot9.in Production & Logistics Senior General Manager (Operations): Shivshankar Hiremath Manager Operations: Rakesh Upadhyay Asst. Manager - Logistics: Vijay Menon Executive Logistics: Nilesh Shiravadekar Assistant Production manager: Vilas Mhatre Logistics: MP Singh, Mohamed Ansari officE addrEss Nine Dot Nine Interactive Pvt Ltd Kakson House, A & B Wing, 2nd Floor 80 Sion Trombay Road, Chembur, Mumbai- 400071 INDIA. Published, Printed and Owned by Nine Dot Nine Interactive Pvt Ltd. Published and printed on their behalf by Kanak Ghosh. Published at Bungalow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Tara Art Printers Pvt ltd., A-46-47, Sector-5 NOIDA (U.P.) 201301 All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited. subscriber services: Call +91-120-4010999 Visit CFO India’s Website www.cfo-india.in
October 2011
CFO INDIA
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Letters
CFO INDIA
October 2011
GREAT ARTICLES
COVER STORY
I am a regular reader of your magazine. I find many of the articles and the opinion pieces very interesting. As an MBA who now specialises in commercial management, I use CFO India as a referral journal on many key issues. I would be happy to be a part of the magazine in any way possible. —Makarand Parkhi, Uhde India Pvt Ltd, Mumbai
10.11 KUDOS TO THE CFO CONCLAVE Thank you for the invitation to the CFO Conclave. I had a great time during the event though I couldn’t attend all the sessions due to the transaction we were completing. I had to miss the cricket match as well; but I received more than an animated review of the entire game. The theme of the event was perhaps the best way to encourage and provoke the community to think differently. I thoroughly enjoyed the sessions by Mr Durgashankar, Mr Sandeep Baldava, Mr Anup Vikal, Mr Devdutt Pattanaik and Mr Jaimin Bhatt. A fitting finale was the presentation by Mr Deosthalee. I would have liked to hear more from Dr Suman Bery, given that the subject matter was so vast and intriguing in the current scheme of things across world markets. I also want to thank your team who helped with the logistics. Please keep up the great work; and I look forward to seeing you again soon at the forthcoming sessions. — Sathya Kalyanasundaram, CFO, Texas Instruments, Bangalore
ENGROSSING SESSIONS It was a pleasure meeting the entire CFO India team at the CFO Conclave earlier in September. I
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Who’s Next:
Fixing The
Future
Succession planning is critical for the CFO role. CFOs who have mentored their successors or been part of such programmes, discuss why planning is so important and talk about best practices TEJEESH NS BEHL JOFFY JOSE
W
HEN SK JOSHI, the much-respected Director of Finance, Bharat Petroleum Corporation (BPCL), retired in August 2011, Executive Director, Treasury, S Vardarajan became the new finance chief. As if on cue, his deputy took Mr Varadarajan’s old job. No recruiters were called and no panic button was pressed. In a systematic manner, each executive is groomed for the next job as part of the PSU petroleum giant’s succession plan. Examples of such seamless transitions for the CFO function, however, are few in India Inc. Exceptions such as Larsen & Toubro and Infosys, which have set benchmark standards in succession planning, notwithstanding. Thankfully, the importance of grooming internal candidates to succeed the CFO, is dawning on many Indian corporations today. Which is why boardrooms are increasingly beginning to pay attention to the guardian of a company’s financial health, who occupies, what has become, the number two position in the corporate hierarchy.
WHY INTERNAL SUCCESSION PLANNING? CFO succession planning, says S Durgashankar, Executive Vice President, M&A, Mahindra and Mahindra, and former CFO at Mahindra Satyam, is crucial to ensure that relationships with the company’s stakeholders are not destabilised. “If you look at the position of a CFO, various people look up to him – the board, external shareholders and investors, all of them depend on his word and trust him to give a true picture of the company’s financial health. So planning for a successor to the CFO is important to maintain continuity and stability in fiscal management,” he says. Typically therefore, opine industry leaders, a CFO should be groomed from within the ranks, instead of foisting someone from outside the organisation. As with the evolution of the term, a CFO’s role too has evolved over the years – from being perceived as a glorified cost accountant to a fund manager for the company and a business partner to the CEO. The next logical step was becoming part of the company’s business strategy SEPTEMBER 2011
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Your voice can make a change: Share your viewpoint on what’s happening in the community and your feedback on the magazine at editor@cfo-india.in
must say the event was brilliantly organised and all the sessions were interesting (the cricket match was the icing on the cake). I would be delighted to meet you and contribute to the magazine in areas of mutual interest. — Neha Grover, Baring Private Equity Partners, Gurgaon
FRAUD DETECTION It was a pleasure to meet and interact with some of India’s leading CFOs at the CFO Leadership Conclave. Given the interest level among the CFO community on fraud detection and prevention, I feel it would be a good idea if you can think of preparing a package of articles on the subject in one of your future issues. I would be happy to exchange notes on such topics of interest and write something for CFO India. — Sandeep Baldava, Partner, Ernst & Young, Hyderabad
CFO ANNIVersary ISSUE Let me, at the outset, congratulate CFO India on its Second Anniversary. I am glad to note the special anniversary issue you are planning and it will be a pleasure for me to participate with an article on a challenge that I overcame and the lessons that I learnt from it. — S Varadarajan, Executive Director and CFO, V.A Wabag, Chennais
10.11 BUZZ
Prince antony
Decoding Aakash
6
CFO india
October 2011
The Indian government’s ultra low-cost tablet ‘Aakash’ has created quite a buzz on its launch. Previously nicknamed as ‘Sakshat’, Aakash is being touted as the ‘world’s cheapest tablet’. The tablet is considered to be a significant accomplishment for the government, which believes the device will bridge the technology gap between rural and urban India. Availability: The government will roll-out 100,000 units of Aakash tablet initially and will distribute the device to students through the institutions they are studying in. Commercially, the device will be launched in November. Pre-booking for Aakash tablet (retail version is known as UbiSlate) has already started. The tablet will be commercially available at Rs 2,999. It will come with an unlimited mobile internet at Rs 98 per month. Reports suggest it is the cheapest tablet. However, in reality there are a few other tablets available in the same price range and with arguably better specifications. A US-made 7-inch tablet Android 2.2 OS with an 800 MHZ Cortex-A8 processor, 256 MB RAM and 2 GB hard drive, built-in camera is available in the US at a price of $39.71(around Rs 1,900). Just slightly more expensive is the Maxtouuch 7-inch Tablet PC. There are also some Chinese companies offering tablets with Android $40-50.
What’s AROUND ZONE GE, NISSAN JV for Electric Cars......................... Pg 08 Jargon Decoded: Alpha Pup................................. Pg 08 Nobel Time............................................................Pg 09 50 Alien Worlds?...................................................Pg 09
THE CFO POLL result
Should the govt step in to control spiralling food prices?
6% No 15% Maybe
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current POLL question
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Vote now at www.cfoinstitute.com/poll
HEALTH
AVIATION
indiandefence.com
Hypersonic missile A hypersonic version of BrahMos missile that can fly at Mach 7 (seven times speed of sound) is being evaluated and companies in India and Russia are working overtime to design and develop various components for it, reports the Economic Times. Dr A Sivathanu Pillai, CEO and MD of BrahMos Aerospace said that the Indian Institute of Science and Moscow Aviation Institute would be involved in Research and Development of critical components for the hypersonic version. However, details on bilateral investment and financing the project is yet to be arrived at, he said, adding that integration of BrahMos into Sukoi-30MK-I is very much in progress with aircraft structural modification going on at HAL.
Researchers at Washington University School of Medicine in St Louis have suggested a possible link between inadequate sleep and the increased risk of Alzheimer’s disease. They have found that a marker for Alzheimer’s disease rises during day and falls with sleep in the spinal fluid, and the pattern is strongest in healthy young people than the older counterparts, whose sleep periods are often shorter and more prone to disruption. In the new study, scientists report that the normal highs and lows of amyloid beta levels in the fluid that surrounds the brain and spinal cord begin to flatten in older adults. “In healthy people, levels of amyloid beta drop to their lowest point about six hours after sleep, and return to their highest point six hours after maximum wakefulness,” said Randall Bateman, MD, Associate Professor of Neurology. Bateman’s laboratory conducted the study in partnership with Washington University’s Sleep Medicine Centre. Stephen Duntley, MD, Professor of Neurology and Director of the Centre added, “We’ve known for some time that significant sleep deprivation has negative effects on cognitive function comparable to that of alcohol intoxication. But it’s recently become apparent that prolonged sleep disruption and deprivation can actually play an important role in pathological processes that underlie diseases.” The study has been published online in Archives of Neurology. October 2011
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photos.com
Less sleep could mean trouble
O-ZONE cfobook
JARGON DECODED
THE PHRASE: ALPHA PUP
Kamal Pande Wall
Info
Boxes
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What’s on your mind? Attach
Share Kamal Pande Still enjoys listening to the Beatles whenever there is a chance October 22 at 10.30 pm · Comment · Like
March 2010 to Present – CFO, Personal Netambit. Dec 2008 – Feb 2010 – CFO Zodiac: Leo Bothli PoliticalChemicals Views: Liberal & Mining 2006-2008 – National WORK Commercial Manager, Spencer's Retail Sept 2011 to Present – Group CEO – Spa2006 India Group 1999 – Sr Manager, 2007-11 – CFO Genesis Colors Seagram 1993-2007 – CFO Timex Watches First Job: Modi Xerox Ltd
Kamal Pande thinks stray dogs are a menace to civil society October 19 at 9.05 pm· 2 people Commented · 1 person likes this
Kamal Pande feels the Spa group will enter the education space October 17 at 11.00 pm · 5 people commented · Like
I Read...
September 16 at 6.26pm · Comment · 4 people Like this
EDUCATION Institute of Cost & Work Accountants of India 1985 LLB, Delhi University
To kill a Mockingbird
I Listen... Beatles! October 14 at 7:14pm · Comment · 1 person likes this Recent activity Kamal Pande likes CFO India, SnapDeal and 2 others
SnapDeal, CFO India, Civil Lines School October 17, 8.55 pm · 2 Comments · 7 people Like this
The meaning: It refers to trendsetting young people, the ones marketing guys love to target The Usage If the marketing team seeks funds to get ‘six alpha pups in the room for a focus group’, they are really trying to figure out if that new product you have spent your money on, will sell with the hip young crowd. No fear – you won’t hear ‘woof’ at work.
CARS
GE and Nissan have signed a two-year research collaboration to speed up the development of a reliable, robust smart charging infrastructure to fuel mass market adoption of electric cars like the Nissan LEAF. The two corporations have identified two key focus areas for the research efforts — firstly, how to integrate electric vehicle charging with homes and buildings, and secondly how charging infrastructure fits with the electrical grid once millions of electric cars are on the road. The R&D agreement will mean the two companies working together to increase adoption of electric cars like the Nissan LEAF. Several projects around the two focus areas already are underway. 8
CFO india
October 2011
PHotos.com
GE, NISSAN JV for electric cars
O-ZONE ECONOMICS
snippets
NOBEL TIME The 2011 Nobel Prize for economics went to Thomas Sargent and Christopher Sims. Here are a few interesting facts and trivia about the prize that you may want to know or find useful. The prize was not part of Alfred Nobel’s original will and was established only in 1968 by Sweden’s central bank in memory of Nobel. The prize is based on a donation received by the Royal Swedish Academy of Sciences, Stockholm from the central bank, on the occasion of the bank’s 300th anniversary. Since then, 42 people have been awarded the Nobel Prize in Economics. Of these 22 times the award has
ONGC’s New CMDL
gone to one laureate. On 15 occasions the award has been shared by two economists and on five occasions by three scholars. The first winners (in 1969) were Ragnar Frisch and Jan Tinbergen for having developed and applied models for the analysis of economic processes. The youngest winner so far is Kenneth J Arrow, who was 51 when he received the honour in 1972. The oldest winner till date, is Leonid Hurwicz who was 90 when he received the award in 2007. The first female laureate in economics was Elinor Ostrom who got the award in 2009.
SCIENCE
PHotos.com
Fifty alien worlds? Astronomers have announced the discovery of 50 (yes, five-zero) exoplanets, the largest group of alien worlds announced at one time. Sixteen of these worlds are ‘super-Earths’ — exoplanets that possess masses larger than Earth, yet much smaller than the gas giants. This time, however, the announcement doesn’t come from NASA’s orbital exoplanet hunter, the Kepler Space Telescope, it comes from the European Southern Observatory’s (ESO) High Accuracy Radial Velocity Planet Searcher (or HARPS for short). As with any exoplanet announcement comes the question: are any of these newly discovered worlds suitable for life? And, in this case, the answer is: maybe. HD 85512b for instance, is an exoplanet with a mass 3.6 times that of the Earth. This ‘super-Earth’ is exciting in that not only can it be considered a jumbo-sized Earth, it also orbits its sun-like star (HD 85512) on the inner rim of the star’s habitable zone. “This is the lowest-mass confirmed planet discovered by the radial velocity method that potentially lies in the habitable zone of its star, and the second low-mass discovered by HARPS inside the habitable zone,” said Lisa Kaltenegger, of the Max Planck Institute for Astronomy, Heidelberg.
After months of wait, the government has appointed Sudhir Vasudeva as the Chairman and Managing Director (CMD) of state-owned Oil and Natural Gas Corporation (ONGC). Mr Vasudeva, 57, is currently Director (Offshore) of ONGC. A Chemical Engineer and a management graduate, Mr Vasudeva joined ONGC as an executive trainee in 1976. He steadily worked his way up, with majority of his assignments in offshore oil-fields. He took over as Director (Offshore) of ONGC on February 1, 2009. ONGC has been without a head since January end when RS Sharma retired on attaining superannuation at the age of 60.
Salmonella to Be Tracked
The Institute of Food Research, which is strategically funded by the Biotechnology and Biological Sciences Research Council (BBSRC), is collaborating with the University of Sheffield to investigate how Salmonella survives during its lifecycle within our bodies, as a way of finding chinks in its armour that can be exploited to develop new therapies. Salmonella is the most common cause of food poisoning in the EU, and worldwide some of its variants are responsible for 800,000 deaths each year due to contaminated food and water. There is a clear need to have more knowledge of how it survives and replicates within the host, a BBSRC spokesperson told Reuters.
October 2011
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cfo
i think
Facts & Trivia EDUCATION: MBA, University of Hartford, Connecticut,CPA, Virginia, US PREVIOUS JOB: CFO, MosChip Semiconductor; CFO, Alliance India, & VP, Global Operations at Alliance Consulting
THE PERENNIAL CONUNDRUMS that a CFO goes through are around whether to invest or not, how much and where, and if investments need to be redeployed immediately or after reviewing business conditions a little longer. Texas Instruments (TI) is no different from any other organisation in this regard. The significant growth potential offered by the Indian electronics market has only made these questions more complex. With the intent to be close to our customers at all times and coinnovate with them to develop sustainable solutions for the Indian and global markets, TI has invested in establishing a strong infrastructure of sales and applications support across India and has the largest presence amongst all semiconductor companies in the country. Growth as a measure is the only constant for all organisations and thus makes decision-making and implementation of future plans very challenging. The current global economic and fiscal metrics point towards a period of weak10
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Sathya Kalyanasundaram The Finance and Operations Director at Texas Instruments feels investing in the right personnel and enabling effective collaboration between different departments are his biggest challenges
nesses probably prolonging in some markets. While the projections for electronics and particularly semiconductor TAM (Total Available Market) in India are fairly robust, they have softened significantly in the last quarter as manufacturers across industries foresee
“The continuing challenge that exists is the identification of the right personnel who can ably support business growth”
lower demand from customers. I categorise investments into three broad categories — people, infrastructure and support structures. Investment in people tends to be the most thought through aspect at TI and has always been most impactful. However, the big challenge facing us is whether to continue the same level of rapid investment in personnel to drive growth at an accelerated level, especially since the gestation period of a successful sales person averages 12 months from the date of hiring. Infrastructure investments to capture and gain share for a market such as India, are significant from a spend perspective. More importantly, these investments lay the foundation for cultures to be built and relationships with customers, employees, communities, etc., to be established for the long term. A simple decision on office space in a key customer region can have long term implications on business growth. A plethora of options will need to be
RadhaKrishna
evaluated to determine the size of the space, the specific information technology (IT) model, investments in customer labs, and so on. Growth can be ably supported only by investing in the right support structures. The continuing challenge that exists is the identification of the right personnel who can support
business growth. All of these require significant investments in time, talent and spend. These investments are critical as they are the pillars upon which growth is built. The complex business environments have clearly required that these investments be done quickly and effectively. The greatest challenge I have is to
enable effective collaboration across all my teams to help drive the company’s growth. While overall success of any company can only be achieved through effective teamwork and coordination between all the entities, I believe that Finance has a very challenging role to play and it is rewarding when the results speak for themselves. October 2011
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cover story
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cover story
WINNING
THE WAR ON
CARBON Corporations have finally realised that lowering their carbon count is not just good for the earth, but also helps the company’s bottom line. CXOs of four organisations talk about how business looked up after they reduced their carbon footprints in a systematic manner Dhiman Chattopadhyay Anil T
he new world war is on. However, this is one war where most countries are on the same side, since this is a battle against carbon emissions to secure the lives of future generations. And while individuals and groups have initiated significant initiatives to reduce global greenhouse gas emissions at the local and community levels, the onus really is on the thousands of large and mid-sized corporations across the world, who together generate more carbon footprints than any community. Even as a decade ago many coprorations and their boards felt going green was synonymous to “looking good but becoming poorer”. Maybe the global economic crisis changed the way business now looks at carbon emissions. Maybe it is also partly fear that there may not be a world fit to live in unless matters changed soon. But as the Global Carbon Disclosure Project Report for 2011 observes, that for the first time, “commercial interests are
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driving organisational efforts to reduce carbon footprints.” This collective realisation was clearly visible when I recently interacted with 20 CXOs of some of the world’s largest and greenest corporations in a global virtual conference conducted simultaneously across nine cities and three continents. Many of the companies at the conference such as SAP, Kingfisher (UK), Du Pont, and Tata Group, explained how reducing their carbon footprints had actually led to significant reductions in costs over a period of two to three years, increased efficiency, heightened productivity and had ultimately, led to a big jump in the profit margins. There is no better way to argue in favour of a green strategy than by showcasing some great success stories. So we thought it ideal to highlight the best practices that some of the greenest organisations have undertaken. In each case, their costs have reduced significantly and their profit margins become healthier. The returns on investments have taken less than three years. October 2011
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cover story
CASE STUDY 1
MINDTREE ROSTOW RAVANAN CFO, MINDTREE
he Indian IT sector as a whole has been one of the first movers in terms of tracking their carbon emission levels and taking significant steps to reduce greenhouse gas emissions. MindTree,the Bangalore-based IT firm for instance, has put in place a ‘Mission 2015’ — setting a target of becoming carbon neutral by then. At a personal level, MindTree encourages carpools. To make it work, those who come to work in carpools are allotted parking space within a minute of the office entrance. Others have to walk a long way. The company also got TERI (Tata Energy Research Institute) to do an energy audit of the organisation. “By setting our AC levels just one degree higher (from 23 to 240C), we reduced our power consumption by over 15 per cent,” recalls the company’s CFO, Rostow Ravanan.
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Another way MindTree is fighting the war on carbon: None of their new buildings face east or westward, thereby ensuring the walls are less exposed to heat. As a result, all their offices require less AC. Technology has in fact, helped reduce both carbon footprints and at the same time, cut cost. For instance, when 900 new people joined MindTree in the first half of 2011, each of them were given a laptop instead of a desktop. “Yes they are more expensive, but laptops generate significantly less heat because they don’t have CRP monitors. Also they have powerful batteries that can go without a recharge for at least 2 hours,” says Ravanan. Then, in 2010, when MindTree completed 10 years (incidentally they also touched the 10,000 employee milestone the same year), the company bought a 40 acre plot outside the city limits and transformed it into a forest. How? “Every single MindTree employee planted a tree in this plot on the day we completed 10 years,” says Ravanan. Perhaps the most commercially sensible step though has been to implement a centralised print management centre. MindTree employees now can order a printout in Bangalore and a colleague in Chennai can pick up the page from the printer in the Chennai office. The catch: every employee has to walk up to a printer each time he wants to order a printout, key in his name and password and then proceed
to order prints. “Print orders reduced by 25 per cent in a few months time,” smiles Ravanan. Have they had to compromise on their profit margins due to these green initiatives? “Not even once,” says Ravanan. “We never had a trade-off. In fact, all our initiatives, from giving laptops to employees, using carpools and video conferences have resulted in lower overhead costs and higher profits over a two-year period.
WHAT THE GOVERNMENT CAN DO Relook at how we manage traffic
• Align road tax to carbon emission levels or fuel-efficiency of the car (similar to policy followed in UK and the USA) • Synchronise traffic signals for smoother traffic flow. Stopping at every signal leads to huge amount of carbon emission • Tax water by installing water metres at homes of all tax payers and offices • Ensure punitive action against corporations not aligning with Bureau of Energy Efficiency Guidelines by 2015
cover story
h e Ta t a Gr o u p h a s always been one to buck the trend or be trendsetters. It has been no different when it came to the group’s initiatives in becoming a carbon-neutral organisation, at a time when most others thought green was a commercially untouchable word. The Tata Quality Management Services was set up 15 years ago by Ratan Tata when he foresaw the increased global competition across sectors and wanted TQMS to put quality control benchmarks in place and monitor quality across all Tata Group companies. In 2008, when the group decided to track and systemically reduce carbon footprints at an organisational level, the Climate Change Centre of Excellence was set up under TQMS, to come up with a blueprint. “Since then we have taken several steps to reduce our greenhouse gas emissions. And while some are necessarily negative levers, in most cases we have benefitted commercially from these green initiatives,” says Arunavo Mukerjee, Vice President, TQMS, who is leading the climate change initiative across the group. So what exactly has the group done? One of the first things TQMS did in 2009, was to set out a group-wide climate change policy. “However, our role is not one of an enforcer. Our group’s philosophy has always been to give complete freedom to each group company to formulate policies of their own. We are there to help, to facilitate and to give guidelines. We expect all our companies to be benchmark leaders,” says Mukerjee. To ensure that reduced carbon emissions became a priority in every business unit, ‘foot-printing’ of 50 group companies was done and 250 ‘climate change champions’ trained
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CASE STUDY 2
THE TATA GROUP
“At one of our companies, we use waste heat to generate power and light up a few local villages that did not have access to electricity” arunavo mukherjee VP, TQMS
at TQMS so that they in turn could lead the war against carbon in their respective business units: Some of the other steps initiated by the group include ensuring all new offices and structures are green buildings. “We are also trying to convert Bombay House (Tata Group’s iconic Mumbai headquarters) into a four star building in keeping with the Bureau of Energy Efficiency Guidelines,” says Mukerjee. Individually too, many group companies have taken long- term measures and significantly cut down their footprints. For instance at Tata Steel, liquid fuel is no longer bought. Instead, the company uses waste heat and uses the energy recovered to generate power in other parts of the process (of steel making). “At one of our companies, called Tata Sponge, we use the waste heat generated from iron making to light up a few local villages which did not have access to electricity till recently,” says Mukerjee, adding, “so we are not just cutting costs and improving our profits by reducing carbon emission. We are also helping people who live in and around our factories.” October 2011
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CASE STUDY 3
SUZLON ENERGY
robin Banerjee, CFO, Suzlon Energy
ne cannot think green without thinking of an organisation that because of the very nature of its business, is environment friendly. “We help others reduce their carbon count. And our efforts to reduce global greenhouse gas emissions begin with our office itself. One Earth, our main office in Pune, is a Leeds certified structure and indeed one of the the world’s greenest buildings,” says Robin Banerjee, Group CFO of Suzlon Energy. Indeed, if you step into the compound in Hadapsar (Pune), you realise that all the offices are powered
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by wind and solar energy, rainwater harvesting is the only way of storing water, ambient lighting is there at every building and the only paper used is the recycled variety. “We do not give any garbage to the municipality. Every inch of waste is recycled and reused,” says Banerjee. Refuting the traditional belief that creating a ‘green’ building costs a lot more than ordinary structures, he says, “This is absolutely untrue. In our experience, the cost of construction of a green building is 15 per cent lower than normal.” Suzlon has also set up an online initiative pals.in or the Pure Air Lovers Society, which fights to reduce carbon in the air at every level. “When every individual is concerned about the fact that we are consuming energy from exhaustible sources, only then will we begin to win this war against carbon. We need to look at alternative energy now,” Banerjee says. What Suzlon has done can be replicated at an individual or a group level too. By switching off the car at red signals, segregating wet and dry garbage, using jute bags instead of plastic and reducing paper consumption at every level, one can cut down individual carbon footprints by close to 25 per cent. Banerjee also believes that both at an organisational and individual level if we can improve our poor personal habits such as wasting water, carbon emissions will be reduced significantly.
5
Incentivise employees to conserve water
Use video conferencing instead of taking a flight
4
3
Make all new buildings into green ones, using less power
2
Wherever possible switch to solar power, an inexhaustible source
Use carpool instead of driving alone. Reward employees who use pool
1
6
Use laptops instead of desktops to save power, reduce heat emissions
7
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Harvest water as an organisation, use existing technology to recycle waste
Train selected employees in best practices, use them to enlighten others
Reuse waste heat wherever possible as an alternative source of energy
10
CASE STUDY 4
SAP “
9
Have individual username and passwords on all printers so you can track number of printouts
TEN BEST PRACTICES
All these practices have not only saved costs, but also helped efficiency, operations and led to higher productivity and profits
ustainability is core to our vision of making the world run better. In a better-run world IT helps companies operate more profitably and sustainably. In 2010, SAP reduced greenhouse gas emissions by six per cent, while at the same time experiencing a year of strong revenue growth. This showcases how positive business results and sustainable operations can go handin-hand. Overall, SAP has lowered its greenhouse gas footprint by 25 per cent since 2007,” says Peter Graf, Chief Sustainabilty Officer and EVP at SAP AG. SAP’s fleet of more than 18,000 corporate cars emits roughly 105,000 tons of carbon into the atmosphere every year, about 25 per cent of SAP’s total carbon footprint. Addressing this, SAP is investing in electric cars fuelled by renewable electricity, as one of its key abatement levers. SAP’s India operations have worked wonders too. The Global Facility Management (GFM) team at SAP Labs India, in less than three months, has completed the Organic Waste Management Project. The unit converts approximately 400 kgs of waste generated daily. Approximately 1, 05,600 kgs of organic waste generated yearly is being turned into odour free organic compost. SAPs total energy consumed has also seen a 10 per cent reduction from 2009 to 2010, while renewable energy usage has increased from 16 per cent in 2009 to 48 per cent in 2010. The
S
“SAP’s revenues increased from €8,198 mn in 2009 to €9,794 mn in 2010” PETER GRAF
CSO & EVP, SAP AG
biggest impact though has been in the profit margins. “After going green, SAP’s revenues increased from €8,198 mn in 2009 to €9,794 mn in 2010 while operating margins increased from 27.4 per cent in 2009 to 30.5 per cent in 2010,” says Graf. Equally importantly, customer satisfaction metrics remained stable in this period. October 2011
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CARBON DISCLOSURE REPORT
Eureka
Green is Profitable too
The 2011 Carbon Disclosure Project Global 500 report shows that many organisations have finally realised the value of reducing their carbon footprint. Increasingly, commercial interests are driving the reduction of greenhouse gas emissions at the world’s largest companies. India Inc needs to catch up fast Dhiman Chattopadhyay
CARBON DISCLOSURE REPORT or the first time in the 10 year history of the survey, the 2011 edition of the annual Carbon Disclosure Project (CDP) Global 500 report has found that the majority of the companies surveyed have climate change actions embedded as part of their business strategy. The report, written by global professional services firm, PwC, on behalf of CDP, attributes this to growing board-level awareness of the link between energy efficiency and increased profitability. The report, entitled Accelerating Low Carbon Growth, analysed disclosures from 404 of the world’s largest companies (representing 81 per cent of the Global 500), which revealed 68 per cent have climate change at the heart of business strategies, compared to just 48 per cent in 2010. There was also a marked rise in the number of companies reporting reduced greenhouse gas emissions, as a result of emissions reduction activities (45 per cen, up from 19 per cent in 2010). A correlation was also established between higher stock market performance over time, and representation on CDP’s Carbon Performance Leadership Index (CPLI) and the Carbon Disclosure Leadership Index (CDLI). Companies with a strategic focus on climate change provided investors with approximately double the average total return of the Global 500 from January 2005 to May 2011. Asked what his conclusions were based on in the report, Paul Simpson, CEO of the Carbon Disclosure Project told CFO India, “The improved financial performance of companies with high carbon performance is a clear indicator that it makes good business sense to manage and reduce carbon emissions. This is a win-win situation for business — the short returns on investments (ROIs) many emissions reducing activities have, can help increase profitability. Companies yet to take action on climate change will have to work hard to remain competitive as we
F
Reduce Carbon Make Money Here are a few reasons why more Indian companies should track and disclose their carbon count and make a serious effort to reduce emissions. • Companies in the 2011 CDLI and CPLI provide approximately double the average total return of the Global 500 between January 2005 and May 2011. This suggests a strong correlation between higher financial performance and good climate change disclosure and performance. • 74 per cent (294) of Global 500 respondents disclose absolute or intensity emission reduction targets, an increase from 65 per cent (250) in 2010. This indicates that more and more of the world’s largest companies understand the need to, and benefits of, accelerating actions to reduce emissions. • 68 per cent (269) of companies are integrating climate change initiatives into their overall business strategy, up from 48 per cent (187) in 2010. The majority (93%, 368) of 2011 respondents report board or senior executive oversight for their company’s climate change programme, up from 85 per cent (328) in 2010. This shows a marked rise in companies linking their climate change strategy with their overall business strategy. • 65 per cent (259) of respondents provide monetary incentives to staff for managing climate change issues, versus 49 per cent (188) in 2010. This suggests more active commitment in advancing greater management of carbon. • A total of 1,780 emissions reduction activities are reported by 97 per cent (384) of responding companies in 2011. Energy efficiency (building fabric, building services and processes), low carbon energy installations and behavioural change are the most commonly identified activity types. • 59 per cent of emissions reduction activities reported by Global 500 respondents have a payback period of three years or less and 41 per cent of initiatives have paybacks of over three years. This willingness to invest in activities with a medium to long-term payback is evidence that companies regard energy and emissions reduction as an important strategic priority. • 45 per cent (178) of respondents have made emissions reductions in some or all of their business from specific measures. This compares with 19 per cent (75) of respondents that had reduced emissions in 2010. The leaders are clearly moving ahead in this regard with all of the CPLI and 73 per cent of the CDLI showing emissions reductions. • Companies in Australia, Germany, Italy, Switzerland and UK are demonstrating strong performance leadership. Canada, Japan, China and India lag behind on performance.
head towards an increasingly resourced constrained, low carbon economy.” Agreeing largely with Simpson, Alan McGill, Partner, Sustainability and Climate Change, PwC said, “Historical financial performance is being exposed by climate change as an outdated model
to assess long term business profitability and growth, when you consider the much wider range of financial and nonfinancial risks associated with business today. Today’s investors have different information needs, which are leading to tougher verification regimes, more October 2011
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CARBON DISCLOSURE REPORT emphasis on executive and staffing responsibilities and incentives, and much more unforgiving examinations of the contribution of business to society. We are accelerating towards newer reporting models that better balance financial and non-financial performance.”
RISING AWARENESS Rising oil prices, energy supply risks and growing recognition of the commercial returns on investments in emissions reduction activities contributed to the growth in importance of climate change as a boardroom issue. Over half (59 per cent) of reported emissions reduction activities delivered payback in three years or less, according to company submissions. These include energy efficiency projects (building fabric, building services and processes), low carbon energy installations and staff behavioural change. Employee incentives to reduce emissions are now offered by 65 per cent of companies,
“The improved financial performance of companies with high carbon performance is a clear indicator that it makes good business sense to manage and reduce carbon emissions” —Paul Simpson, CEO, CDP compared with 49 per cent in 2010. The Carbon Performance Leadership Index and Carbon Disclosure Leadership Index are revised annually based on company submissions and present the leaders of the Global 500 in carbon performance and disclosure respectively. There are 14 new entrants to the 2011 Carbon Performance Leadership Index, which counts just 29 companies due to more demanding criteria applied by CDP. These are: Air Products & Chemicals, Lockheed Martin and
KEY FINDINGS OF THE 2011 REPORT POSITIVES • 73 per cent of respondents reported emissions reduction targets (65% in 2010) • The majority of respondents (93 per cent) reported board or senior executive oversight for climate change (up from 85 per cent in 2010) demonstrating the importance of climate change as a management issue • Over 30 new companies targeted by CDP’s Carbon Action request have now set reduction targets, implying growing recognition by companies of the commercial benefits of emissions target setting
NEGATIVES • Telecommunications is the only sector not represented in the CPLI this year; • The energy sector lags other sectors with only 55 per cent of companies setting targets and is underrepresentated in both the CDLI and CPLI • Just 37 per cent respondents verify their emissions to acceptable standards, despite the importance of providing investors with validated climate data
Morgan Stanley from USA; Honda Motor Company and Sony Corporation from Japan; SAP from Germany; AXA Group and Schneider Electric from France; ENEL and FIAT from Italy, British American Tobacco, BG Group and Glaxo SmithKline from UK and Novartis from Switzerland. Speaking at a global video conference held simultaneously across nine cities and three continents, that brought together the CDP leadership, UN officials heading the climate change projects and CXOs from some of the world’s largest corporations, Peter Graf, chief sustainability officer, SAP said, “We are honoured by the inclusion of SAP in both the Carbon Performance Leadership Index and the Carbon Disclosure Leadership Index this year. We have not only helped our customers to reduce their energy use and related carbon emissions through our software, but also used it ourselves to avoid €185 mn in cost as we reduced our footprint by 25 per cent since 2007.”
HOW IT WORKS CDP’s Carbon Action initiative was launched in 2011. A request was sent to the Global 500 on behalf of a vanguard group of 34 investors with US$7.6 tn in assets asking companies to implement greenhouse gas emissions reduction targets and cost-effective reduction activities. CDP asks almost
CARBON DISCLOSURE REPORT
CHART 1-A
BEST IN CLASS
Top Global 500 companies recognised on both the CDLI and the CPLI Company & Carbon Disclosure
Bank of America Weatpac Banking Corporation
99 96 95 97 97 96
Bayer
99
Philips Electronics BMW Consumer Discretionary & Consumer Staples
Honda Motor Tesco
Financials
A
Carbon Performance Band
Sector
Health care Cisco Systems SAP Sony Corporation
Information Technology
98 96 94
THE BOTTOM LINE
CHART 1-B
GOING UNREPORTED
Largest Global 500 non-responding companies in 2011 Reliance Industries India
Amazon.com USA
China Life Insurance China
Rosneft Russia
Bank of China Sberbank China Russia
Berkshire Hathaway USA
America Movil Consumer Discretionary Energy Financials Industrials Information Technology Telecommunication
Mexico
China Mobile China
6,000 of the world’s largest companies to report on their climate strategies, GHG emissions and energy use in the standardised Investor CDP format. A total of 551 financial institutions with assets of US$71 tn were signatories to the CDP 2011 information request. Low carbon growth is now widely accepted as fundamental to generating long-term shareholder value, avoiding dangerous climate change and helping the global economy recover from recent turmoil. It is for these reasons that in 2011, the Carbon Disclosure Project (CDP) sent its annual request to a preselected 500 companies on behalf of 551 investors with US$71 tn of assets, asking them to measure and report what climate change means for their business. This year, 81 per cent (404) of corporations from the Global 500 responded to the CDP questionnaire.
Apple USA
The project seems to have finally gathered steam with several of the world’s largest corporations, even in the emerging markets, now realising that cutting carbon emissions is not just a political statement, but one that has sound financial benefits as well in the medium and long term. As Douglas Flint, Group Chairman of HSBC Holdings plc summed up, “The reporting framework that the CDP has pioneered over the past decade has helped us both as a respondent and a signatory to improve our understanding of the strategic risks and opportunities in this area.” India is still grossly under-represented as far as the practice of carbon disclosure is concerned, with a mere 18 corporations listed in the 2011 CDP report. Some of the largest coprorations in fact are still not reporting their carbon emissions or have a clear strategy to reduce emissions. The challenge before CFOs across India Inc now is to prepare and execute an effective strategy so that they can get on board in the global fight to reduce greenhouse gas emissions and at the same time increase their bottom line — before it gets too late. October 2011
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OPINION
Governments and industries have realised the opportunities in a
low carbon
future
Lynda Gratton Professor of Management Practice, London School of Business spoke to Dhiman Chattopadhyay about how demographic and sociological trends will help companies reduce carbon footprints and those who factor this in when planning ahead will be remembered as visionary CFOs. Excerpts
How is India perceived as a business destination? What are the things India is doing right and what are the challenges ahead? I think India is achieving amazing things. Considering its history, it has managed to establish a firm economic base, and is gradually moving up the value chain. Its demographic forecasts look promising too, with its working population overtaking that of China by 2030. A young population is already helping India push ahead in terms of technology adoption — India’s Generation Y is the most technologically demanding in the world according to a recent Accenture survey. A few tensions, though, will need to be resolved to ensure that rapid growth continues. The first is that the government will no longer be able to manage economic growth as much as it has previously. The focus will have to be on the nation’s infrastructure and on promoting the green economy. The second challenge is closely linked to this issue of infrastructure: Behind the headline news of strong growth rates is a crisis of increasing income disparities. The physical infrastructure of roads is vastly underdeveloped and has left many
OPINION Ms Lynda Gratton
is Professor of Management Practice, London School of Business, and an authoritiy on people in organisations. An author of six books on the subject, her recent research is on The Shift: How The Future of Work Is Here Now.
rural areas excluded from the exciting economic activity of the urban centres. Why are demographics and the environment so important today? Why would organisations need to factor in these issues when budgeting for or planning a new project? By 2025, we can expect that people will be more individualistic and increasingly prepared to forge lifestyles based on their own needs and to reduce their carbon footprints. I predict that, in 2025, many people will live their lives alone or in small family groups and some of these relationships will become more virtual. It will increasingly be the norm to work much of the time from home or in small community hubs to avoid the carbon costs. Younger men will have decided to spend more time at home and to take a more active part in caring for their children. More people will work as freelancers and ‘neo-nomads’, expecting increasing autonomy and freedom. As families become smaller and more dislocated, friends (and what I have termed the ‘regenerative community’) will play an increasing role in individual happiness. This is something HR and indeed, the CFO and his finance team, will have to start working on when planning for the future. You spoke about reducing carbon costs. Where does India stand in the war against carbon emission? What are some of the best practices and how how can organisations stand to gain by reducing their carbon emissions? India, along with China, is treating the issue of climate change with a level of sincerity not yet seen in some West-
“It will increasingly be the norm to work much of the time from home.” ern nations. Government and industry have not only acknowledged the challenges ahead, but have started to realise the opportunities of a low carbon future. Investment in advanced low carbon technologies are being made all throughout India. The emphasis on frugal innovation — creating robust products at low cost — has its roots in India, and is inherently efficient. Even large companies such as TCS are embedding the notion of sustainability into their development strategies: look at Yantra Park, the TCS green campus near Mumbai, that places a premium on reducing the
carbon footprint. These developments are just part of a gradual shift towards a sustainable world. Though low carbon issues have traditionally been seen as challenges to be addressed, companies and their CFOs are now seeing them as opportunities to be embraced. Think of the new green economy — investors and governments will put in billions of dollars into sectors and organisations that use alternative sources of energy and are carbon neutral. The organisations and indeed the nations that join the war against carbon the fastest, will benefit from being an integral part of this future. October 2011
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cfo
Profile RAJESH GHONASGI CFO, Persistent Systems
Pursuit of
In
In his over-two-decade long career, 10 of them as CFO, Rajesh Ghonasgi has seen both success and challenges. But the last three years as CFO of Persistent Systems have been the most exciting. Here, he talks about his journey, and his vision for Persistent Systems DHIMAN CHATTOPADHYAY
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Growing up in Mumbai’s busiest suburb of Andheri (that houses more people than many of India’s Tier-II cities) Rajesh Ghonasgi would swing to the rhythm of ‘Beatlemania’ and swear by those now iconic dialogues uttered by an angry young man called Amitabh Bachchan. Brought up in an academic atmosphere (his father taught at the city’s wellknown Sydenham College and at the University of Mumbai) he had the usual dreams that most people growing up in the early 1970s would harbour: become an engineer, fly a plane or perhaps don the robes of an academic. Things changed however, after he did well enough in school to get into Sydenham for his BCom and came in closer contact with successful finance professionals, bankers and entrepreneurs who would visit his father. “As I watched those smartly dressed and successful people talk to my father, I realised I wanted to be like them. You do get impressed by such things as a teenager,” he smiles. The CA, therefore, was a foregone conclusion (he also did his ACS, Corporate Law later, from
Yusuf Khan
Excellence
Milestones First Job SB Billimoria & Co A HA! MOMENT When I graduated from an accountant to a manager in the early 1990s TOUGHEST CHALLENGE Formulating the right business strategy during the economic crisis of 2008-09 LESSER-KNOWN FACT Wherever I am, I have to hit the gym once a day Dream To make Persistent a $500 mn company by 2015 in terms of revenues
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cfo Profile the Institute of Company Secretaries of India). In 1986 he joined SB Billimoria & Co for a year where he cut his teeth in finance and auditing, before sharpening his skills at Wipro for the next 11 years, an organisation that he says, helped him mature. He is the first to admit that he considers himself extremely lucky to have found a mentor in the iconic Wipro CFO Suresh Senapaty, a humble and vastly knowledgeable man who acted as his coach and guide. In 2000 after more than a decade with the IT major, he briefly moved to Deutsche Software as its head of finance and then at ICICI Ventures as CFO, before joining another IT biggie Hexaware Technologies as its global CFO in 2002. The six years he spent at Hexaware were eventful ones with the company going through some challenging times between 2003 and 2006 before coming out with all guns blazing acquiring targets and expanding its footprints into North America and Europe in 2006. Ghonasgi led many of these M&A deals. In 2008, he joined his current assignment, as CFO of a then mid-sized IT firm called Persistent Systems. It is here, under the Chairmanship of entrepreneur Dr Anand Deshpande (who Ghonasgi refers to as a ‘ mentor, a visionary and an inspiration’) that he made his mark, leading Persistent to an IPO in record time, creating a global brand with offices across three continents and ensuring that the company grew at a rapid pace while continuing to build equity. Ghonasgi smiles as I touch upon some of the milestones. “They weren’t as simple as they sound; nor were they easy,” he says. “The high point really was the IPO. We decided to go for the IPO only in December 2009, and by April 2010, we were listed on the National Stock exchange (NSE) and the Bombay Stock Exchange (BSE). It was a very satisfying moment for us. All our hard work, those long weekends had paid off,” he recalls. The challenge, post the IPO, was different. “Being a listed company meant shareholders had a right to know what you were doing with their money. You had to be more transparent, more answerable to the world. As CFO it was my job to ensure all my colleagues knew how to address market reactions. So we put systems in place and picked up tricks of the trade which would help us anticipate market reactions before they occurred,” he says. The key 26
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Favourite
Picks NEWSPAPER
ET MAGAZINE
National Geographic FILM
Star Wars series MUSIC
Beatles; recently Ajay & Atul
with ghonasgi as cfo, persistent has seen steady growth and both the firm and its leadership have been recognised for great work
DESTINATION GOA ROLE MODELS Anand Deshpande, Suresh Senapaty
lesson he passed on was to communicate good news to stakeholders as soon as possible and to communicate the not-so-good news even faster. “This is essential to build trust with all stakeholders,” he says. The proof of the pudding is in the eating, and Persistent did prove its point when it clocked revenues of $170 mn in 2010-11, a growth of 34 per cent over the previous year. His first year at Persistent however, was far from smooth. Less than six months after he joined, the world as we knew it came apart at the seams with the global financial crisis. “My first reaction was to control costs and shed some of our over 6000-strong
cfo Profile
“Being a listed company meant shareholders had a right to know what you were doing with their money. You had to be more transparent, more answerable to the world”
workforce. Again, my CEO’s (Dr Deshpande) foresight helped. We decided to keep our talent bank intact and instead prepared to be first off the block when the mood improved and the economy bounced back. Because we did that, we had a brilliant year,” recalls Ghonasgi. So where does he see Persistent he a d e d i n t h e n e x t f e w y e a r s ? Ghonasgi is confident that the Pune headquartered company (now ranked among the leaders in the OPD space) will continue to scale up and be recognised as a leader in the software
product development segment. He is also hopeful of scaling up to $500 mn by 2015. “Organic growth is what we are looking at,” he explains. It is apparent as we chat, that his stint here has been eventful and exciting. Few CFOs have been through the experience of an IPO, an economic crisis, large M&A deals and rapid growth — all in a span of three-and-a-half year s. Ghonasgi says each of these experiences has taught him important lessons. “One of the most valuable mantras I picked up is that a CFO needs to articulate his point in simple language and keep it short. He must also
be able to clearly establish the difference between his organisation and competition, to convince a banker to lend or a client to do business,” he says. The other lesson he wants to pass on in the light of his IPO and post-IPO experience is simple: “Be transparent and honest at all times. It may cost you a few rupees in the short run but will ultimately earn you the respect of all and get you new business.” Words of wisdom indeed as India battles to establish its reputation as not just a good place to invest in but also a country where honesty and integrity in business are paramount. October 2011
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in practice
Green business
Why business needs to care Assimilating two often-incompatible objectives — lowering carbon emissions and reducing waste, while at the same time raising productivity and revenue — continue to dominate discussions even at global climate summits Steve Starbuck
U
nited Nations delegates from 191 countries met in Cancun, Mexico in December 2010, with an aim of working towards a global agreement to mitigate climate change. The United Nations Climate Change Conference, known as the Conference of Parties (COP), has taken place each year since 1995. The primary focus of recent conferences has been on negotiating a new, comprehensive agreement that would include commitments from all major economies, including the United States and China. Achieving such a comprehensive agreement among the parties has proven difficult. No new agreement was created during the summit in Cancun. As a result, there is a growing sense of urgency to create a new accord as the commitments from the last global climate change agreement, the Kyoto Protocol, are set to expire by 2012 end. The next COP is scheduled for Durban, South Africa in December 2011. 28
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While the UN negotiators struggled to reach a consensus in the halls of the Cancun convention centre, leaders from businesses all around the world met in different forums outside the convention centre to observe the proceedings and assess their own evolving roles on climate change. One of the largest side events was the World Climate Summit, a business conference that took place in between the two weeks of UN negotiations. During this event, executives candidly discussed how the business community can realise the ultimate ‘win-win’ — to improve financial performance while reducing carbon emissions and waste. Despite the lack of progress on a global climate change agreement and the related regulatory uncertainty, corporate executives in Cancun expressed a commitment to investing proactively in environmentally sustainable business practices that simultaneously meet
the bottom-line growth expectations of their stakeholders.
Driving Business Benefits Momentum for corporate action to combat climate change is increasing, in part because businesses recognise they can no longer afford to wait for guidance from the public sector. Jose Maria Figueres, the former president of Costa Rica and leader of the UN Information and Communication Technologies task force, summed up the matter at a speech during COP 16: “The war on climate change is too big to be left in the hands of government.” The role of business in relation to climate change was expanded upon during a keynote speech by Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change that opened the World Climate Summit.
Photos.com
in practice
Figueres demonstrated an understanding of the pressure on the corporate community to balance being responsible environmental citizens and achieving strong financial performance, as she urged businesses to intensify efforts to counteract climate change by taking concrete steps in three targeted areas that can generate significant financial returns. In the workshops that followed, attendees discussed the role of business
in the battle against climate change, noting that the actions they take will need to make good business sense that result in revenue generation, cost reduction or risk mitigation in addition to the environmental benefits.
IMPLEMENTING NONREGRETTABLE INITIATIVES Figueres identified environmen-
tally friendly initiatives that are inherently beneficial to the bottom line as ‘non-regrettable’ measures, including energy-efficiency technologies, as one way the climate change agenda can easily become part of cost-savings strategies, particularly in terms of infrastructure costs. To lower their carbon footprints and reduce costs, leading companies are implementing energy-efficiency measures, such as investment in new lighting technologies, data centre October 2011
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in practice
While government support is necessary to address the challenges posed by climate change, there is no reason for businesses to wait for a global accord to implement strategies that have mutual economic and environmental benefits improvements and other green building mechanisms. Executives at the World Climate Summit from a variety of industries highlighted the significant savings that energy-efficiency investments have yielded over short and long periods of time. As exemplified by many companies, investments that meet acceptable return on investment hurdle rates can and should be made without regret. To do this effectively, financial executives should make sure that all internal stakeholders are at the table in the ROI discussions, including facility managers, purchasing professionals and an integral functional group, the tax department. Return on investment modelling should include the various relevant incentives, such as local utility company programmes, as well as federal, state and local tax incentives.
SEIZING OPPORTUNITIES ALONG THE ENTIRE VALUE CHAIN Figueres pointed to the entire value chain as a second area to identify cost savings through the environmental lens. In many industry sectors, the 30
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biggest factors in a company’s environmental footprint fall outside of its direct control. The bulk of a company’s emissions often result from processing, packaging, transportation or other activities undertaken by its suppliers. Ad d i t i o n a l l y, i n m a n y c a s e s , the carbon footprint created by the use and disposal of a company’s product is bigger than the footprint created when the product was manufactured. Consequently, businesses are looking at the value chain in its entirety, analysing the impact of their products and services at every stage of production, from sourcing of raw materials to end-of-life product disposal. Figueres urged companies to ‘look upstream’, searching for opportunities to work with suppliers to reduce greenhouse gases and implement sustainability strategies. A global survey of 300 corporate executives, conducted in 2010 by Ernst & Young, found that two-thirds of companies are already discussing climate change programmes with their suppliers. More than one-third (36%) are working directly with suppliers to wring carbon emissions from their value chains.
Executive focus on greening the value chain can result in cutting costs out of the supply chain and increasing revenue by meeting the preferences of more environmentally conscious consumers. Financial executives can play an invaluable role in this effort by helping to measure the economic impacts of the potential ways to cut carbon emissions and waste from a value chain. The opportunities exist, for instance, to cut carbon and waste through various activities, such as purchasing, storage handling and asset recovery.
INVESTING IN PIONEERING TECHNOLOGIES In the words of Lord Nicholas Stern, a British economist attending the Cancun summit, “The new industrial revolution has begun, and the business world is leading this challenge.” Financial risks and opportunities will need to be evaluated as companies debate the options for investment in new technologies. The evaluation of new risks and opportunities can be done through innovations that transform a company and, ultimately, an entire industry. This
in practice was the third area that Figueres raised as the most ripe for corporations, as it can benefit both the environment and company financials. She challenged attendees at the World Climate Summit to work within their industries to drive sector-wide transformation through environmental innovation. Implementing the non-regrettables and greening the value chain will have measurable impacts on the environment. Business leaders can have an even greater influence, she noted, by investing in green research and development. R&D through an environmental lens can enable a company to bring about new consumer product segments, new strategies for cost-effective energy management and new operational efficiencies. At a company level, this process effectively begins when environmental sustainability risks and opportunities are considered as part of the corporate and financial strategies. Opportunities to implement company-wide transformation could take place throughout an organisation from its supply chain to
infrastructure management to energy usage, among other areas. Industry-wide transformations have and are currently taking place. However, there is a tremendous amount of additional opportunity. Notable transformations have taken place in the footwear and, food and beverage industries. More recently, the transportation industry is assuming entirely new product segments based on clean technologies, such as electric vehicles and biofuels. Transformation comes about in many ways — in some cases, it occurred when an individual company shared a best practice. In the case of the automotive industry, rapid competition for the most economic and efficient vehicle is accelerating eco-friendly industry change. Additionally, industry-wide transitions to more environmentally sound standards can take place through collations and partnerships.
Why Not Now? Though leaders across all sectors recognise the critical need for a global
Opportunities to implement companywide transformation could take place throughout an organisation — from its supply chain to infrastructure management to energy usage, among other areas
agreement among the world’s major economies to reduce carbon emissions, there was consensus in Cancun that the business community should act on its own and not wait for others or governments. Numerous business drivers — including internal and external stakeholder demands — are currently creating pressure to propel the US and global business response to climate change. Increasingly, corporate stakeholders (investors, customers and employees) expect a focus on environmental sustainability, as well as transparent and readily available in information about companies’ progress. And while government support is necessary to address the challenges posed by climate change, there is no reason for businesses to wait for a global climate change accord to implement strategies that have mutual economic and environmental benefits. They can take steps now in the areas of implementing energy-efficiency measures, seizing opportunities to lower carbon emissions along the entire value chain and investing in pioneering technologies to generate industry-wide transformations.With a focus on lowering their carbon emissions and reducing waste in the three areas, companies tap new potential to make money, save money and manage risk. Bottom line, it’s about finding balance between environmental and economic benefits. S T E V E S TA R B U C K , the A meri cas Leader of Climate Change and S ustainability S er vices at E rnst & Y oun g L L P , attended the U nited N ations C limate C han g e Conference as an observer and facilitated an executive discussion at the World Climate Summit, the largest gathering of business executives during COP 16. ©2011 Financial E x ecutives I nternational | www.financialexecutives.org October 2011
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in practice
opinion
ARE YOU READY TO FACE A CUSTOMS AUDIT? CFOs must take proactive steps to ensure their accounts teams are geared up for a customs audit. Here’s why Subhasis Banerjee
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istorically, company purchase or logistics departments have dealt with the customs authority at its cargo’s port of clearance. These departments normally use a customs clearing agent, popularly known as a CHA, to clear their shipments. CHAs are used to file Bills of Entry for assessment through electronic data interchange (EDI). This form of lodgement, commonly known as system-based assessment, was introduced by the customs authority in 2005. Customs authorities selectively pick up consignments for examination and assess them on the basis of certain risk parameters. A post-clearance audit is required to be performed only at the premises of the customs department. In other words, the customs authority never visits an importer’s premises to conduct the audit as the service tax/excise/VAT authority does. Once goods are cleared from the port, they are not usually subject to any fur32
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ther investigation (other than the selective post-clearance audit) unless there is a suppression of facts at the port level. Moreover, the customs authority examines all the details (during the postclearance audit) at the port level itself. Hence, the probability of missing any important facts is remote.
Self assessment There is no concept of self-assessment u n d e r c u s t o m s l a w. T h e o t h e r tax authorities are accustomed to assessments being performed on a self-assessment basis. In other words, other tax authorities allow assessors to compute their own tax liability and accept this without any verification. But, at the same time, authorities keep an eye on taxpayers and review t h e fi n a n c i a l r e c o r d s o f s e l e c t organisations, popularly known as a service tax/excise audit or a business audit by the VAT authorities. In the current budget, the central g o v e r n m e n t i n t r o d u c e d a s e l fassessment scheme for customs law as well. The importer/exporter is now required to undertake self-assessment
of duty and needs to ensure that the classification, applicable rate of duty, value and benefit of exemption claimed, if any, are correctly declared in the Bill of Entry or Shipping Bill. The purpose of introducing such a scheme is to bring the customs assessment in line with other tax assessments as well as to expedite the port clearance process. There will be no verification at the port level. But the customs authority has the right to visit the importer’s premises to audit their account books in order to assess the accuracy of the declaration made by the importer at the port.
Impact of self assessment in customs It is a settled position in tax law that the assessing authority cannot go beyond a year from the date of receipt of the tax return to ascertain the veracity of the information supplied, if all information is duly reported in the return. In the event that assessors inadvertently omit any facts and this is detected during an audit, the tax authority can examine longer periods and reopen previous years’ transactions as well.
in practice This change will not only invite one more visitor to your organisation who will make your already-overloaded employees busier, it will also add one more responsibility to your CFO to make sure that the accounts department is not working in isolation, but has access to all the necessary information to protect the company from surprises.
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Way forward
Customs authorities used to verify the documents at the port level, so in the past, there was a smaller chance of omitting any information at the time of clearance. But now nothing will be verified at the port level. The customs authority will accept documents/information as submitted by the purchase/ logistics department at face value, at the time goods are cleared.
Lack of coordination It is an accepted fact that very few organisations have purchase/logistics departments and finance/account departments that communicate with each other frequently. As a result, in most cases the CFO has only a macro level sense of what information has been reported to the customs authority at the time of clearance of goods. Sometime in the future, the customs auditor will knock at the door of the accounts department to perform an analysis of the available information and reconcile
this with the information reported by the logistics/purchase department at the time the cargo was cleared at port. Verification of financial data to ascer tain the value of the imported cargo and examine the conditions attached to the duty exemption notification is a happy hunting ground for customs auditors. Thus any disconnect between the purchase and the finance department will result in fertile ground for litigation.
Challenges before the CFO The new challenge before the CFO is to coordinate the function of their department with the purchase/logistics department. Any information or documents submitted by the clearing agents need to be reviewed by the finance department. In order to prevent any surprises in future, the responsibility matrix in an organisation needs to be revisited to ensure that the purchase/logistics and accounting/ finance functions work hand in hand.
For the CFO, the way to manage the new legislation is to: 1. Create awareness amongst staff members in both departments about the changes by conducting an in-house workshop, forming a joint team, etc. If required, the organsational matrix can be revisited to ensure harmony in the flow of information. 2. Revisit the internal control system to ensure adequate checks and balances. This will take care of the synergy of flow of information and documents within the organisation. In other words, there should not be any missing links in the information submitted at the time of cargo clearance and the data captured in the account books. 3. Set up an internal review system within the organisation (the internal audit division can take this responsibility) to closely monitor the efficacy of the system and ring the bell for the CFO on time. 4. The global supply chain management (GSCM) team has an important role to ensure that there is no hidden risk in the transactions entered into by their Indian counterparts. So it is important for the Indian CFO to rope GSCM team in this crucial initiative.
Subhasis Banerjee, FCA, is Director-Indirect Tax, KPMG. The views expressed here are personal October 2011
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technology
Can Cloud Replace Outsourcing? Given the current momentum behind the cloud, its impact on offshore outsourcing is unavoidable Pam Baker
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adagopan Singam, VP of Cloud Computing at HCL Technologies, a leading offshore IT and software development company said, “In the ‘cloud era’, division between service lines will collapse, building a new outsourcing model, which is anything but conventional.” He said, “Cloud computing will help shift the focus to delivery of business services rather than delivery of IT solutions. In the process, this will enable new service definitions, service lines and business models, for both the customer and service provider.”
Just hype? shigil n
Despite all the hype, the cloud era is not yet here. Indeed, there is some concern that some things carrying a cloud label are not cloud at all. October 2011
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in practice Skills There’s a dearth of skills needed to fully execute cloud services, as well. The KPMG survey found that on a scale of one to five with five being ‘very skilled’, advisors gave only a score of 2.39 to endusers for understanding how the cloud works. Providers gave the end-users only a slightly higher score of 2.73. And those
Despite all the hype, the cloud era is not yet here. Indeed, there is some concern that some things carrying a cloud label are not cloud at all
were the highest scores cloud end-users received. At the very bottom of the rankings, according to both the advisors and the providers polled, were end-users’ skills relating to both sourcing and managing cloud computing initiatives. That’s not to say that traditional offshore outsourcing is a sure win in the contest. “Not only is the cloud more labour efficient than traditional IT delivery, the technology makes more efficient use of non-labour IT resources, as well, and allows for delivery and management of applications in new ways,” said Mike Eaton, CEO and Founder of Los Angeles-based Cloudworks. “So when customers consider some of the risks and difficulties of offshoring, such as process realignment and, in some cases, quality, cloud computing may very well be an appealing alternative.” Offshore outsourcers are fully aware of the difficulties CIOs cite with the traditional outsourcing model. They
PHOTOS.COM
In a recent survey by audit and tax advisory giant KPMG, both sourcing advisors and third-party service providers were polled on the maturity of cloud offerings in the market today. The “advisors were of the opinion that what is being taken to market under the cloud marketing banner is for the most part repackaged legacy offerings.” Those same third party providers, however, ranked their own infrastructure as a service (IaaS) and software as a service (SaaS) offerings, as high in both quality and quantity. Further, advisors in the survey voiced concern over the total cost of ownership (TCO) of cloud resources. “There is little reliable data on the total cost of ownership of cloud resources,” said one advisor quoted in the survey results. “Yes, the initial capital expense is lower, but are access fees and other installs going to be higher or lower than conventional licences? I don’t think we are far enough into the cycle to have good, verifiable data on TCO.”
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The real paradigm shift is in IaaS, which is shifting a company’s systems, storage, and databases to the cloud are also highly sensitive to the changes brewing in the cloud and are seeking ways to make their operations weather resistant. In essence, most are looking to build new cloud-centric outsourcing models using a blended model. Whether or not any given enterprise decides to go with the cloud, offshore outsourcing or some blend of the two depends entirely on the enterprise’s specific needs and the tasks at hand. “The impact of the cloud on the outsourcing industry depends on the definition of outsourcing,” explained Paul Liu, CIO at the global IT services provider Freeborders. “If outsourcing is defined as resources doing application development and maintenance, then cloud computing is not really a game changer. The real paradigm shift is in infrastructure as a service, which is shifting a company’s systems, storage, and databases to the cloud. But new architectures will need to be created that take into account the challenges of security, compliance, and accessibility requirements.” In the end, said Liu, “we will see a continuous movement of services to the cloud as traditional IT environments come to the end of their lifecycle.” both articles have been reprinted with permission from cio update. http://www.cioupdate.com. earlier published in ctoforum, a 9.9 media publication
Security and the Cloud At the end of Charles Dickens’ tale of post-revolutionary France, Sydney Carton sacrifices himself in order to preserve the life of a man he considers more worthy. It’s a noble act, immortalised by his final words: “It is a far, far better thing that I do now, than I have ever done.” Of course, he has the advantage of being able to foresee the future benefits of his sacrifice. He is impelled, in fact, by the certainty that his short-term suffering will be repaid many times over in the next life, and indeed this one. Sadly, the rest of us don’t have that option. In a recent Vanity Fair article on the nature of advanced persistent threats, (APT), Michael Joseph Gross recounts a discussion between an embattled CIO and his CFO discussing their vulnerability to attack: “What’s the worst that can happen if we don’t fix any of these?” the CFO asked. “We have large exposure,” answered the CIO. “We could potentially be attacked... ” “No, no, no. What is the financial impact if we don’t do any of these?” asked the CFO. “We’re not regulated or audited, so there won’t be any fines,” said the CIO. The CFO answered: “You get no budget,” and the topic was closed. Now you could certainly argue the fault here lay with the CIO for not adequately presenting the long-term risk to the company of a serious breach. Or, that the CFO should be more aware of the fact that corporate responsibility should extend beyond just short-term regulatory costs. But, finger pointing aside, this does present an illuminating insight into the way that businesses of all kinds look at the costs, and benefits, of security. After all, security processes are always a trade-off, and security spend is, and should be, based on solid cost-benefit analysis. What concerns me, though, are the implications this has for cloud security. As the pressure to realise the cost-savings from cloud services ratchets up (and it surely will continue to do so for some time) then the importance of ensuring the security of cloud services will diminish, lost in the cloud feeding frenzy. Yet, the move to cloud represents an opportunity to rethink security for information and services. But, to get it right requires time and planning and breathing room for the security folks. And this is running out. Sooner or later, that almost primal urge of the corporate organism to maximise profit and avoid immediate pain will overcome caution and the wholesale adoption of cloud computing will happen. Perhaps it already is. One thing is certain though: it will happen whether the security industry is ready or not. There is an important lesson that we should not forget about revolutions: they are often bloody affairs, and rarely enjoyed by those that must live through them. This revolution may be much the same. If the short term pain of regulatory compliance and the cost of handling breaches begin to take a bite out of the much-vaunted cloud cost savings, then security practitioners will once again be asked to paper over the cracks and make the best of the poor planning and hasty decisions that have already become de-facto standards. And so, as Dickens wrote at opening of that very same novel: “It was the best of times; it was the worst of times.”
October 2011
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Event
CFO LEADERSHIP CONCLAVE 2011
Striving ahead in an uncertain world The Second Annual CFO Leadership Conclave organised by 9.9 Media, saw 50 of India’s leading CFOs and senior finance executives engaged in discussions on the overall theme: “When nothing is sure, everything is possible” CFO India bureau
E
ngrossing discussions, lively Q&A sessions, and engaging debates over lunch and dinner on topics that varied from means to detect corporate fraud and the challenge of IFRS to preparing for future financial shocks and even the role of mythology in finance: the Second Annual CFO Leadership Conclave organised by 9.9 Media at the Westin Sohna Spa & Resort on September 25-26, 2011, was a resounding success. The over-50 delegates, who attended the two-day conference, enjoyed the sessions thoroughly and then let their hair down for an equally exciting cricket match where many of the CFOs showed off both their physical fitness and sporting skills. The theme of the conference was “When nothing is sure, everything is possible,” in view of the recent and ongoing volatility in global markets and the fact that despite such gloom, there is no dearth of hope and optimism, especially in India.
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DAY 1: DETECTING FRAUD, FINANCIAL R EPORTING AND CRICKET In his Keynote address that set the tone for the conference on September 25, Dr Suman Bery, Member, Economic Advisory Council to the PM and former director general of NCAER mentioned that no government could function effectively unless it also understood and received regular feedback from various
communities. He urged the attending CFOs to not just ask him questions but also answer some of the questions he would be posing before the audience, since, he felt, that was the best way to understand what the country’s finance community felt towards the path of economic growth that the government had taken. Earlier, in her welcome address, Ms Anuradha Das Mathur, Co-Founder and Director, 9.9 Media
CFO LEADERSHIP CONCLAVE 2011 Clockwise from left: dr suman bery (l), member, economic advisory council to the pm delivers his address; mr sandeep baldava, partner, e&y discusses the effects of corporate fraud, as ms anuradha das mathur, editor cfo india, looks on; mr anup vikal, cfo interglobe enterprises discusses challenges for future cfos; mr ym deosthalee, md & chairman of l&t holdings addresses the gathering
The ability to innovate constantly would be the CFOs biggest challenge in future, felt Mr YM Deosthalee, Chairman and Managing Director of L&T Holdings and Editor of CFO India, argued that in an era when few people seemed certain as to how global markets would behave or economies would shape up, it was best to search for opportunities that lay hidden in the challenges, instead of looking at the glass as half empty. After a quick tea-break, proceedings kickstarted with a talk by Mr S Durgashankar, EVP M&A, Mahindra & Mahindra and former CFO of Mahindra-
Satyam. Speaking in front of a packed audience on ‘Nothing is Impossible’, he justified his position by taking delegates through his own experience at Mahindra-Satyam, where he and his team not only spent 18 months getting accounts back in order and up-to-date, they also drew up a blueprint to prevent similar misconducts in future. He then raised the question whether there could be a common roadmap to fraud prevention.
Equally engaging was the speech on ‘Fraud Prevention & Detection: Emerging Trends’ by Mr Sandeep Baldava, Partner and Leader, Fraud Investigation & Dispute Services, Ernst and Young. He said as frauds continued to rise and further erode shrinking corporate bottom lines, organisations should adopt a more structured approach towards fraud prevention and detection. Questions for both the October 2011
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CFO LEADERSHIP CONCLAVE 2011 speakers were so many that it spilled well into the lunch break. Post-lunch, in the session ‘Decoding IFRS’, Mr Sunil Sayal, Vice President, Finance & Company Controller, Ericsson India said despite the hurdles and the mess that things seem to be in now, IFRS needs to be looked upon as a friend. He opined, CFOs could use IFRS to greatly enhance their finance reporting standards and help their organisations grow. Mr Charanjit Attra, Chief Financial Officer ICICI Securities, shared notifications by ICAI and MCA on convergence with IFRS and the proposed roadmap. In the next half an hour, Mr Milan Rao, CEO of Airtel’s Business Enterprise Division, spoke about how telecommunication technology had impacted the finance fraternity and gave them a vision of the exciting future that lay ahead for this sector. In the next session, Mr Anup Vikal, Group CFO, Head of Strategy and IT for InterGlobe Enterprises Ltd, was inspiring as he spoke about the challenges and opportunities for the next generation of CFOs. He discussed the increasingly demanding role that the CFO would have to play and its implications on the CFO’s role, stressing in particular the varied expectations from different stakeholders and the skill sets required for success. As the sun set, delegates took one of the waiting golf carts to their rooms or villas. While some of them chose to relax and try out the spa, many others walked across to the floodlit field for an exciting cricket match. After a day of engaging discussions on corporate fraud and IFRS, business jargon gave way to cover drives and sneaky singles while CFOs donned the whites for a game of cricket. The evening ended over cocktails and a scrumptious dinner as light music played in the background. The sponsors of the cricket match, Ace Data Services, gave away glittering trophies to the winners. 40
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After a day of engaging discussions on corporate fraud and IFRS, business jargon gave way to cover drives as CFOs donned whites and played cricket
CFO LEADERSHIP CONCLAVE 2011
clockwise from top: cfos pose after the cricket match; Mr sunil alimchandani of network18 explains a point to mr vinod agarwal of guthy renker; mr hiranya ashar of rolta india(r) catches up with mr sarabhjit kochhar of panalpina(r) and mr deepak garg of the cfo insititute; mr devdutt pattanaik enthralls the audience; mr s durgashankar of M&m makes a point
DAY 2: MYTHoLOGY, CLOUD, COLLABOR ATION & the FUTURE Day 2 started early with lavish breakfast before delegates were enthralled by Mr Devdutt Pattanaik, Chief Belief Officer at Future Group who spoke on “Why we work”. He spoke about a ‘3Bs Model’, establishing a relationship between belief (input), behaviour (pro-
cess) and business (output). “What is not the truth to me is a myth. So is my truth the only truth?” he asked. Through a gripping visual of a cheetah chasing a deer, he explained why every individual who works for a living feels he or she is a victim and the other is a villain. The next session on ‘Cloud is where the future lies’, saw Mr Samiron Goshal, Partner, E&Y and Mr Vijay Sethi, CIO &
VP-IS, Hero MotoCorp, agreeing that on a smarter planet, nearly everything computes: home appliances, cars, roads, clothes, even cornfields now have built-in intelligence. In the following session Mr Jaimin Bhatt, Chief Financial Officer, Kotak Mahindra Bank and Ms Preet Dhupar, Director, Finance & Operations, BBC World India, discussed various ways through which CFOs need to collaborate with other C-Suit colleagues to make operations smoother. The concluding session of the conclave was addressed by Mr YM Deosthalee, the iconic Chairman & MD, L&T Finance Holdings. Discussing how finance should prepare for the next economic and social upheavals, Mr Deosthalee spoke about the need for innovative approaches as we move out of the economic recession and towards a growth-oriented era. The ability to innovate constantly, he felt, would be the CFOs most critical challenge in future. The event ended on a positive note with the delegates looking forward to returning to the 2012 edition next year. The key sponsors of the 2011 Conclave were, Airtel and Microsoft (Gold Sponsors), Ernst and Young (Knowledge Partner), and Associate Sponsors SBI Capital, Sri City and Ace Data. October 2011
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Case
Study
The Commodity
Exchange Challenge
Taking over and converting a regional commodity exchange into a national multi-commodity online exchange and getting diverse stakeholders to agree on key issues is a huge challenge, as Kotak Mahindra’s CFO, Jaimin Bhatt and Head, Group Strategy, TV Raghunath found out
W
hen Kotak Mahindra Bank decided to step into the financial infrastructure space in 2008-09, they in on the commodity exchange space, but it had ot be a national player. They felt the best way would be to take over a regional plater such as the Ahmedabad Commodity Exchange (ACE), upgrade it and expand its product portfolio. They knew it would mean facing a complex series of regulatory and legal knots they would have to untangle over the next 12 months, apart from launching the
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online exchange itself. It would also involve raising funds from investors and dealing with 200 existing trading members of the old exchange. It was a challenge that required the group’s CFO Jaimin Bhatt and his colleague, Head of Strategy TV Raghunath, to fire on all cylinders and effectively collaborate with the compliance, IT, marketing, business and legal teams at every step.
The challenge Two large national commodity exchanges already existed, namely MCX and NCDEX. There were numerous
regional players as well, operating in local markets and dealing primarily in one or two commodities. Kotak’s vision was to be another national player. The board’s orders to Bhatt and his team were clear: convert ACE into a national exchange and expand the portfolio beyond the sole item it was dealing with at the time — castor. The other big challenge was the structure of the exchange itself. To convert a company limited by guarantee into a corporate entity capable of holding its own would be no easy task. “Once we plunged into the challenge, we also realised the third crucial hurdle
Jiten Gandhi
Dhiman Chattopadhyay
Case Study
Project Map The challenge: To convert a regional commodity exchange into a national player
JAIMIN BHATT, CFO
TIMELINE: May 2009 to June 2010
team: Finance along with Business, IT, Compliance, Marketing & Legal teams LESSONS: Predict the future and keep plan B ready. Be credible and have a sound business plan October 2011
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case study
T.V. RAGHUNATH GROUP HEAD, STRATEGY
Raghunath and Bhatt admit that the challenge couldn’t have been tackled alone by the finance team. It was a collaborative effort that involved colleagues in business, marketing, IT and legal 44
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for us: there were multiple regulatory authorities we would have to work with but in the end the Forwards Marketing Commission (FMC) would give us a mere 12 months to launch the national multi-commodity online exchange. If we failed, our in-principle licence would not be finalised,” says Raghunath. Matters were not made easier by the fact that this was the first time Kotak was entering the financial infrastructure space for the first time.
How it was tackled Rao and Bhatt admit that this challenge could not have been tackled alone by the finance team. It was a collaborative effort that involved colleagues in the business, marketing, compliance, IT and legal teams as well. Raghunath says once the decision to step into the financial infrastructure space was taken, the first step was to decide what route to take and then seek approval from the regulatory authorities to proceed further. “Frankly we could either go for a
Greenfield licence or try and launch a new national exchange like MCX. In the end, we realised our best bet was to take one of the 20-odd existing regional commodity exchanges and convert it into a national exchange. This is where we found a perfect match in ACE. Most of the 200-odd members at ACE aspired to do business on a much larger stage. But they needed financial and managerial skills to achieve this. We had the financial strength and the skills to get them there. What we needed was a vehicle or platform to launch ourselves from. ACE provided just that,” recall Raghunath and Bhatt. To set the ball rolling, the finance team helped prepare an actionable business plan in collaboration with the business team. This was first placed before the board and then before the regulators. After this through a complex regulatory process, the old exchange was legally converted into a multi-commodity national exchange. “Our compliance and secretarial teams along with exter-
Case Study
“If you have a clean reputation and come up with a sincere, sound business plan then regulators and clients will happily keep the faith and do business with you, even if you are a first-timer” Jaimin Bhatt, Cfo, Kotak Mahindra Bank nal legal advisors spent days with us to sort this out,” explains Raghunath. Finally on May 14, 2009, the FMC granted them the in-principle goahead to form a national commodity exchange called ACE Derivatives. The race against time had begun! Bhatt explains that the execution challenge was three-fold: corporate and legal issues had to be handled; the company had to raise funds from both the old trading members of ACE as well as from the new shareholders within the restrictions specified by FMC (mainly PSUs); and finally, key people had to be hired to launch the project — all by May 2010. According to the guidelines FMC stated that the existing 200 traders at ACE could hold a maximum of 23 per cent share in the newly formed entity. This along with KM’s 51 per cent ceiling, meant a minimum of 26 per cent of the initial 100 crore (this figure too was fixed by FMC as a condition to allow the bank to launch the exchange) needed to get the exchange up and running, would have to come from unknown shareholders. New investors had to be found fast. As a first step, all the 200 existing members were given time till January 2010, to become shareholders by paying a stipulated amount. This wasn’t easy since members came from diverse economic backgrounds. “Given the
economic conditions of the previous 12 months, we weren’t even sure if many of them would be able to come on board,” recalls Bhatt. With just six months to go, the core team stepped on the gas and investment distribution colleagues were roped in. Their network with the Public Sector Undertakings were utilised to get a few PSUs and cooperatives to invest in ACE. “It was almost like an IPO at one stage. We were meeting potential investors, convincing them about the exchange, bringing many of them to our office to show them how work was
KEY MOMENTS • F irst
up the finance team, along with the business team prepared an actionable business plan to convince the regulators that they could convert ACE into a national exchange • When it came to convincing PSUs to become investors, Bhatt and Raghunath roped in investment colleagues and used their network to reach out to PSUs • Collaboration was the basis of their success at every step. So when there was a problem regarding a technical matter with MCA, the bank’s IT team stepped in to solve it
progressing and even organising a mini roadshow,” reveals Raghunath. At every stage, adds Bhatt, teamwork saved the day for them. For instance, when feedback from the sales team suggested that many PSUs would back out if the price per share was kept at an optically high premium, the finance team decided to go through serial bonus issues in order to bring down the per share price. “Basically we were raising X amount and then paying out a bonus and then repeating the process. Finally we got the price down to 11 per share, something that was acceptable to most PSU investors,” says Bhatt. With days to go for the July 2010 deadline, the required 100 crore were mobilised in the specific pattern that FMC had directed. Finally, in October, after all regulatory checks had been completed, ACE debuted in the market. Today almost a year later, ACE deals in seven products and is growing at a steady clip — enough to please both the Kotak board and the investors. The bank is now in the final stages of diluting its stake to 40 per cent as mandated by FMC.
LESSONS Bhatt and Raghunath laugh when I ask about lessons picked up on the way. “There were so many that one could write a book,” they say. Raghunath believes his key learning was “the importance of scenario planning can never be underestimated. Look into the crystal ball and foresee what might happen, what could go wrong and have a plan B for all of these risks,” he advises. Bhatt has a more philosophical lesson to share when he says, “if you have a clean reputation and come up with a sincere, sound business plan then regulators and clients will happily keep the faith and do business with you, even if you are a first-timer. Never compromise on credibility.” Lessons and qualities that obviously stood Kotak Mahindra in good stead when they took over and converted ACE from a local to national player.” October 2011
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insight
STRATEGY
Governance since the economic crisis Corporate directors must strengthen their capabilities and spend more time on board work, concludes a McKinsey Global Survey
C
orporate boards are under pressure to take more responsibility for developing strategy and overseeing business risk after the financial crisis exposed many cases of inadequate governance. Yet, according to the latest McKinsey Quarterly survey on governance, directors report that their boards have not increased the time spent on company strategy since our previous survey, conducted in February 2008 —seven months before the collapse of Lehman Brothers. Moreover, 44 per cent of respondents say their boards simply review and approve management’s proposed strategies. Just one-quarter characterise their boards’ overall performance as excellent or very good; even so, the share of boards that formally evaluate their directors has dropped over the past three years. In this survey, we asked directors how much time their boards spend on different activities, how well they understand the issues their companies face, and what factors they think would be
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most effective in improving board performance. The picture that emerges is that boards have taken to heart the new and higher demands placed on them. But some directors say they feel ill-equipped to live up to these expectations because of inadequate expertise about the business and the lack of time they can commit to their board duties, which they say is less than ideal for them to cover all board-related topics in proper depth. The most effective remedies, respondents say, would be to spend more time overall on board work, improve the mix
of skills or backgrounds on the board, and have tougher and more constructive boardroom discussions.
Developing strategy In our 2008 survey, more respondents wanted to increase the amount of time their boards spent on strategy development and talent management than on core governance and compliance, execution, or performance management. Interestingly, in this year’s survey, directors say their boards are now spending roughly the same amount of
Only 21 per cent of directors surveyed claim a complete understanding of their companies’ current strategy
insight time on strategy (23% of board time, versus 24% in 2008) and talent (10%, versus 11%) that they were three years ago. With the lack of progress, it’s not surprising that two out of every three directors still say they want to focus more on these two areas, with a slightly lower share saying they would like to spend more time on business risk management (Exhibit 1) The amount of time spent on these areas differs by overall board performance, and directors at underperforming boards see a greater need than others to do better: 78 per cent of them want to spend more time on strategy, compared with 65 per cent of directors who view their boards’ performance as excellent or very good and say the same. Inadequate time spent on strategy is likely one reason many respondents say their boards play a passive role in developing strategy (Exhibit 2).
Understanding the company It stands to reason that corporate directors need to know their companies and their industries very well if they are to challenge management on strategic issues, yet that knowledge is often lacking. The results indicate a need to better educate boards on industry dynamics and how their companies create value, among other core issues where respondents say their boards’ knowledge is incomplete (Exhibit 3). Only 21 per cent of directors surveyed claim a complete understanding of their companies’ current strategy. Respondents on boards in the financial sector, where many boards failed to prevent management forays into risk-laden subprime mortgages before the 2008 crisis, indicate that directors’ knowledge is below average on indutry dynamics (Just 6% claim to have complete understanding) but slightly above average on company risk (17%). Half of all directors say the information they get is too short-term. These October 2011
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insight responses resonate with calls from governance oversight bodies for boards to take a greater role in developing longterm strategy. Directors who describe their boards’ overall performance as excellent or very good are happier about the time frame of the information they receive — though a third of those respondents still say it is too short-term.
Improving board performance Insufficient time spent on key issues (strategy, risk, and talent) and inadequate knowledge (about their companies and industries) are probably two important reasons why just 26 per cent of respondents characterise their boards’ overall performance as excellent or very good (Exhibit 4). Directors at publicly owned companies — the category that has been the most frequent target of criticism and regulated governance reforms — are more positive about their boards’ performance than their peers at private equity firms and family-owned businesses. This is notable, since companies in the latter two categories have been widely perceived to enjoy superior governance due to stronger owners and more active boards. How can boards of all categories raise their game? Among the survey’s options for improving performance, the one selected by the most respondents was to spend more time on company matters both at formal meetings and through informal contacts (Exhibit 5). Directors say that on the whole, they’re putting in 28 days’ worth of work and should ideally spend 38 days to discharge their responsibilities effectively; chairs put in 36 days and should ideally spend 47 days (Exhibit 6). More time overall would presumably help directors cope with core governance and compliance duties and still be able to deal with strategy, risk, and talent issues more thoroughly than before. It’s also a logical expectation on 48
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insight honest look at how their boards are performing and what they need in order to perform at a much higher level.
Looking ahead
One-third of boards never evaluate individual directors, for example, and among those that do, 42 per cent of board members view those evaluations as ineffective the part of directors that if they spend more time on company issues, they will receive more compensation in return: respondents report that they are being compensated for roughly 25 days of work per year, or 11 per cent less time than they’re actually spending. Many directors also call for better people dynamics that enable tough and constructive boardroom discussions. This factor is the one where there’s the biggest difference between boards that respondents say need to improve or improve significantly (44% prioritise it) and boards rated by their directors as excellent or very good (26% highlight this need). More effective director training was cited about half as frequently by respondents as a factor that could improve performance, but training and director assessments are key parts of new codes designed to professionalise boards,
such as the UK Corporate Governance Code. Indeed, other results indicate considerable room for improvement at most companies. One-third of boards never evaluate individual directors, for example, and among those that do, 42 per cent of board members view those evaluations as ineffective (Exhibit 7). Similarly, more than half of respondents report a need for improvement in the training of new members on their boards. On the whole, board chairs report a slightly rosier view. They tend to be more positive than non-chairs on the effectiveness of training programmes, the frequency of director evaluations, the effectiveness of information provided to their boards, the extent of their boards’ role in developing strategy, and overall performance. Given the differences, these results emphasise that many chairs may need to take a more
Most boards say they want to spend more time on strategy development, risk, and talent management, which may require meeting more days per year and companies compensating directors for their extra time spent. Boards could also shift time in each category toward high-impact areas — in strategy, for example, towards longterm trends that could disrupt the current business model. At many boards, there is plenty of room to improve understanding of industry dynamics, risk, and value creation. Enhanced training of new directors and better information is one way forward, but boards may also need to shake up their composition by increasing the number with a background in the company’s industry, where board knowledge seems particularly lacking. Many directors are calling for more constructive board discussions. Highquality debates can be fostered by methods such as challenging the key assumptions behind management’s proposals, exploring various biases that board members bring to the table, and conducting annual evaluations of individual directors to assess the degree to which they contribute. The contributors to the development and analysis of this survey include Chinta Bhagat, a principal in McKinsey’s Singapore office; Martin Hirt, a director in the Greater China office; and Conor Kehoe, a director in the London office. This article was originally published in September 2011 on The McKinsey Quarterly, www.mckinseyquarterly.com. Copyright (c) 2011 McKinsey & Company. All rights reserved. Reprinted by permission. October 2011
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leader’s
world
Nice is
Overrated Sure leaders who understand their people and listen to grievances are great leaders. But being the ‘nice guy’ isn’t always a great reputation for a leader to have David Lim
ABOUT THE AUTHOR David Lim, Founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be reached at his blog http:// theasiannegotiator. wordpress.com, or david@everestmotivation.com
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One of the most impactful news stories recently was the death of Apple co-founder Steve Jobs. As a personal fan of the Macintosh, and all its variants of the desktop computer, I credit him (and his teams) for shaping how we actually live and work. The next time you drag a file into the trash bin on your desktop — well, that was Apple’s creation, the famed GUI — graphic user interface. For me, my experiences with their products extend to having used them on two Mount Everest expeditions, and another 8000m peak expedition. When other Windows laptops belonging to others were seizing up in the cold and high altitude, our Macs soldiered on. Early critics laughed at Apple. In 1984, the tech reviewer of the San Francisco Chronicle wrote: “The new Apple Macintosh comes with an unusual pointing device called a ‘mouse’. We don’t think this will last very long.” This, in part explains the worldwide tributes to the 56-year old, who died of pancreatic cancer. With a sharp business acumen, Jobs was a CEO who thought like a CFO (with all due respect to Peter Oppenheimer, Apple’s CFO), a showman, a tech visionary and a ruthless business developer. I want to talk about the lessons we can learn from the flipside of Steve Jobs, or what I call the Dark Side.
Recently, articles from the Huffington Post have painted a contrarian view of the man. In my humble opinion, we all have a Dark Side. Our success in life depends on how we manage it. Jobs himself was described by many former employees and associates as ruthless, rude, hostile, spiteful. Fortune quotes a story where he gave a half-hour dressing down of his staff. Jobs berated them: “Can anyone tell me what MobileMe is supposed to do?” He got an acceptable answer, and then continued, “So why the f**k doesn’t it do that? You’ve tarnished Apple’s reputation,” he told them. “You should hate each other for having let each other down.” He then fired the group leader on the spot. So here’s my take on managing this:
Focus on outcomes and be harsh on behaviours that don’t support this
“You can choose to be ‘nice’ and hope for a good outcome, or you can push them hard when the situation demands”
After all, people are in a business to achieve specific goals, and by keeping criticism focussed on outcomes and behaviours, you avoid upsetting people by keeping the criticism away from their personalities or personal values.
Understand that greatness and excellence was never derived from a softly-softly approach Jobs knew, this, as well. You need to take a robust approach, and have great laser-like clarity in your dealings and behaviours. Sometimes, this will put off people who are less committed and less hard-working. Being uncompromising also means you are willing to affect the quality of certain relationship to achieve your vision. But the clearer they are, and the more you articulate this to your people, they and you will be better off. Are some tennis champions ‘bad boys’ for swearing and cursing? You bet. But does this detract from their excellence and achievements? No way.
Be ruthless on outcomes, as well as acknowledging failure Remember the failed Apple product, the Newton? Hailed as a step forward, the tablet that came out in 1983, was a market failure. Jobs took the blame and moved on. Mukul Deva, a friend of mine, is a techno-thriller author in India. He says that once a book is written and sent off to the publishers, he moves on. He doesn’t waste too much time basking in success or wallowing in failure. When we are ruthless for outcomes, we push our people — not that we want to break them, but so that we can help 52
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them find what they are capable of. Not everyone you deal with is as committed as you are. You can choose to be ‘nice’ or you can push them hard when the situation demands. You may be surprised at the outcome.
Being a CXO isn’t about popularity I’m sure many of you reading this may have fired staff in the past. It’s never an easy task, but made easier if you consider this guideline: If all the coaching and training doesn’t produce the outcomes you want with respect to a staff member, only three things can happen to resolve the impasse: a) you leave, b) they leave, c) you fire them. Many CXOs could be much more effective if they were brave enough to have clarity about this and fired more toxic workers. Many years ago, I used to be given a dressing down in college by my English professor who hated the word ‘nice’ when I used it in literature. To her, nice was the vaguest of descriptions of just about anything. When I die, I’d like to be described in a variety of ways: driven, motivated, decisive, but never ‘nice’. So, get in touch with your Dark Side. Nice is overrated. David Lim is a leadership and negotiation coach, best-selling author, and two-time Mt Everest expedition leader. Check out a free e-book segment of his latest book How Leaders Lead at http://www.howleaderslead.com Contact: david@everestmotivation.com.
photos.com
leader’s world
Lounge
10.11
CFO
There is a new big cat on the prowl. Check out the Mahindra XUV500 this month in Lounge. Buying a Blu-ray player? Read about the Sony BDP S380. And for travel buffs we go right across to the French Pyrenees this time for a romantic holiday. Enjoy the feast and have a great Diwali.
mahindra XUV500
The new Big Cat is here
DID YOU
Amit Chhangani
M&M introduced utility vehicles in India in 1947 and now operates across four continents. M&M has also produced several cars like Bolero, Scorpio, Verito Xylo and the XUV500.
KNOW?
The Mahindra XUV500 offers technology, performance and features at an incredible price, says The automobiles team at Mahindra & Mahindra has been working very hard at their latest baby, the World SUV, Codename W201, or the XUV500 (pronounced as five doubleoh). The company wanted to deliver cutting edge tech, modern features, a powerful engine and a modern design at an unbeatable price. Millions of kilometres of testing later, they have come out with the final product, and boy, does it impress!
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Design Design-wise, the XUV500 looks athletic and sharp. M&M insists that the new SUV’s design is inspired by the Cheetah, the fastest animal on land. The jaw-like front grille, the pawstyled handles and the pouncing cheetah body line are some of the most prominent cues taken from the magnificent beast. The XUV500’s
cfo lOunge
on Wheels SLEEK INTERIORS, CHEETAH-LIKE LOOKS AND SOME GREAT SAFETY FEATURES MAKE THE XUV500 A GOOD BUY, especially given its price point
taut, angular lines, small overhangs, a swooping roofline and flared wheel arches make it an interesting work in automotive design. Still, to a trained eye, some design elements on the XUV500 are juvenile. Mahindra could have done with some restraint while designing the XUV500’s exterior.
Interiors The first thing you notice about the XUV500 is its very plush, two tone interiors. The seats have generous bolstering, they are shaped well and materials such as leather, chrome and faux wood, associated with premium cars abound within the cabin. The driver side seat is 8-way adjustable, including height, and also features lumbar support. The attention to detail and the finesse may not be comparable with the best in the business, but the first sight does give a positive impression. While we discuss all this, you also have to remember the fact that the XUV500 carries a sticker price almost half that of other SUVs.
Engine & Transmission The XUV500 is powered by a 2.2 litre engine christened the mHawk 140. It isn’t just a retuned version of the 2.2 litre mill that does duty on Scorpio. It’s a significant upgrade and technically a much superior unit. The new powertrain boasts of inclusions such as a variable geometry turbo to eliminate turbo lag and a dual mass flywheel for smoother operation. The engine is mated with an all new, next generation 6-speed manual transmission which is better than the transmissions seen on Scorpio and Xylo. There isn’t any irritating rubberiness to it and shifts slot into the gates in a reasonably fluid manner.
Ride and Handling The XUV500 surprises with its composure. Mahindra have tested
Mahindra XUV500 Price: XUV500 W8
11.95 lakh
XUV500 W6
0.8 lakh
(Both ex-Delhi) Engine: mHawk140, Direct injection diesel engine Cubic Capacity 2179 cc Max Power 140 Bhp
@ 3750 rpm
Max Torque
Gear Box
330 Nm
@1600-2800 rpm 6 speed
synchromesh manual
Positives Everything about its engine, technology, features, equipment and price is a big plus. Negatives Brakes could do with more feel and bite. No space for luggage with seven aboard. VERDICT Well engineered & loaded to the brim. At 10 lakhs, an absolute steal!
it for more than one and a half years to hone its body behaviour to a very high level, and it shows. We must, however mention here that the brake pedal lacks the feel and bite for the first few centimetres of decompression. There is a loose, soft and soggy feel to it which doesn’t inspire confidence, although it works quite fine in the end.
Features and Equipment The XUV500 is loaded to the gills with technology. It includes projector headlamps, a 6-inch colour touchscreen infotainment display, intellipark park assist system, rain sensing wipers and dual front airbags. The top-end W-8 model also boasts of additional features such as side and curtain airbags, an Electronic Stability Programme and smart technology like Hill Hold, Hill descent control and telescopically adjustable steering. If you are looking at a car in the 10 lakh range, this could actually be a great buy. October 2011
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cfo lounge
Gizmos new launches
Nikon V1 Hot Spot
Sony BDP S380 A feature-rich, entry-level Blu-ray player Nimish Sawant The Sony BDP S380 is a sleek Blu-ray player with a minimalistic design. The glossy black front fascia has a slight protrusion in the front and houses the disc tray, a USB port on the right-hand edge and play/stop/pause buttons with a light blue glow around the centre. On the rear, there’s an HDMI port, a USB port, component, composite and LAN ports. The user interface of the BDP S380 is very similar to its previous generation cousins. There’s a ribbon interface with the main options such as Setup, Photo, Music, Video and Network. The BRAVIA internet video supports as many as 15 video feeds including Wired, YouTube and others, which is great for online video junkies. There isn’t much in terms of wallpaper design; you have a glowing blue light which mimics that of the player’s front panel. Switching menus is quite slow, but we liked the Resume Play option. Quality-wise, we’re not complaining. The colours in our test movie — Avatar — were quite vivid. There was no banding or noise in solid scenes. Text
rendering was smooth and we didn’t notice any jaggies. Navigating through content on a USB drive is a bit annoying though, as there’s no segregation of media type. The Setup menu is quite exhaustive, offering you tweaking options for audio settings, Blu-ray settings and network settings among other things. You can set the HDMI output resolutions from 480i to 1080p based on your TV set. At 8,990, the Sony BDP S380 is a great deal if you’re not looking at 3D Blu-ray playback. The internet video streams is a great feature to have. The only drawback of the BDP S380 is its lack of DivX support. Specifications: PVideo format sup-
port: MPG, MPEG, M2TS, MKV, MP4, M4V, AVCHD, AVI; Video feeds: Yes (15 feeds) Ports: 2x USB, 1xHDMI, 1xComponent, 1xComposite, 1xLAN; Drive type: Tray loading. Contact: Sony India Phone: 1800-103 7799 Email: sonyindia.care@ap.sony.com Price: `8,990
Nikon has entered the mirrorless compact camera market with V1. The sensor on this camera is really small when compared to other mirrorless compacts, but it boasts of a 10 frames per second burst mode and there is a feature called Motion Snapshot.
BlackBerry Torch 9860 BlackBerry Torch 9860 is a 3.7-inch touchscreen phone with an 800x480 pixel resolution and housing the BlackBerry 7 OS. It runs on a 1.2 GHz Qualcomm processor and has 768 MB of RAM. It is priced at `28,490.
Lenovo B320 with Onekey Lenovo has an updated variant of the B320 all-inone. It has a unique addition in the form of a single press key which switches the AIO from the computer to an HDTV mode without having to turn on the PC. powered by
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ad Re Y st OG Mo L E ’s NO ZIN dia CH GA In TE MA
cfo lounge
travel
french pyrenees
ROMANCE IN THE PYRENEES A holiday visiting the French Pyrenees is one you wouldn’t forget in a hurry Anil Mulchandani The French Pyrenees is one of the most beautiful parts of France, rich in history and natural beauty. We had heard about the impressive landscapes of deep canyons, magnificent amphitheatre-shaped valley walls called cirques, spectacular limestone caves, meadows, forests, rivers, waterfalls and the kind of pastoral scenes that are rare in contemporary Europe. Flying from Paris to the Pau-Pyrenees Airport I was reminded of Alphonse de Lamartine who once said: “Pau has the world’s most beautiful view of the earth just as Naples has the most beautiful view of the sea.” En route to our hotel, our hosts showed us corporate offices of many leading companies. The area has always been rich in minerals. It is also a university town because of which you will see a large number of students here, including some from India. Another mainstay is tourism. The British discovered Pau and left their imprint — there is an 18-hole golf course, a foxhunting club, Irish pubs, and old tennis courts. Soon, as if on cue, we arrived at Parc Beaumont a former British estate and checked-in at the Hotel Parc Beaumont. After lunch, we set out for the famous Boulevard des Pyrenees and walked along the elevated promenade, which offered a superb view of the snow-covered peaks of the Pyrenees, Gave de Pau River and the neatly laid-out Pau cityscape. One of Pau’s prime draws, this promenade 58
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has many teahouses (called salon de in French), bars and cafes. At the end of the walk, we came to the Chateau de Pau to see the fabulous collection of rich tapestries and fine porcelain, oak furniture and the turtle shell cradle of King Henry IV. The guide proudly told us that King Henry IV was born in Pau in the 16th century when his mother,
cfo lounge
travel
Below: the romantic interiors of the chateau at pau lit up with beautiful chandeliers
Above: The famous chateau at pau; Below left: The pau arnos circuit is a state-of-the-art race track. The picturesque pathway leading to the girque de gavarnia
Jeanne d’Albret moved to this city. “The lips of the new born Henry were moistened with the Jurançon wine, a sweet wine that grows around Pau,” he explained. From the chateau, as we walked back to the hotel, we met a jockey who invited us to the foxhunting club. He explained that he was a rider and not a hunter, and did not pursue the blood sport. At the clubhouse, we saw the pack of foxhounds and a number of horses. Next morning we set out for the Cirque de Troumouse,
a semicircle of precipitous cliffs with high snow-covered peaks rising up behind them. From here, we continued to the Cirque de Gavarnie. This is a breathtakingly beautiful valley 800m deep and 3000m wide. We walked along the five-km path, which is the best way to enjoy the cliffs, waterfalls, snow covered jagged peaks, lush greenery, wild flowers, butterflies and birdlife. The highlight is the multitiered waterfall called Grande Cascade de Gavarnie, the tallest waterfall in France stretching about 1500 ft in all. We were told that these hills are home to European brown bears, marmots and foxes, but while we did not see them I did spot an eagle and colourful hill birds during the walk, and a vulture on the drive up. Hungry after the walk, we tucked in lunch at an inn with a view of the snowcovered peaks. GETTING THERE: Fly Air France to Paris where you change for Pau Pyrenees Airport (www.pau.aeroport.fr). PLACES TO STAY: Hotel Parc Beaumont (http://www. hotel-parc-beaumont.com/) is one of the best and most attractive places to stay in Pau. Heritage buffs should stay at La Villa Navarre, which is an original 19th century mansion with antiques. October 2011
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not just
the last word
Despite greater controls, instances of corporate fraud may go up before they come down…
C
FO India’s recently concluded Leadership Conclave saw unprecedented interest in a session on corporate frauds – detection and prevention, alike. A large part of the attraction was the stellar presenters – S Durgashankar who was privy to, and responsible for, revamping finance and accounts at Satyam and Sandeep Baldava, Partner for Fraud Investigation and Dispute Services at Ernst & Young whose professional experiences make for a racy thriller; but the topic itself is new and ‘under-studied’ and therefore the intrigue. The level and intensity of frauds have increased over the last 3 decades. Data reveals that the 1980s saw 5 major frauds, the 1990s witnessed 11 and the 2000s reported over 35. There are no marks for guessing what this decade will throw up! Moreover, it is a wellestablished fact that fraud thrives in times of economic uncertainty. CFOs, willy-nilly, are believed to be at the centre of all financial matters and are coming up for increased scrutiny from regulators and other stakeholders. Given all of this, there is an obvious need to buckle up and prepare for what seems to lie in store. The E&Y Global fraud survey estimates that a typical organisation loses 5% of its annual revenue to fraud 60
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leading to a global fraud loss of over USD 2.9 trillion. Frauds last a median of 18 months before getting detected and, interestingly, more than 85% of fraudsters were previously charged or convicted for a fraud-related offence. What’s true for India? There is a worrisome acceptance that some level of fraud is a cost of doing business. There is an absence of policies and procedures or an absence of communicating them to employees and vendors. Misuse of trust and authority coupled with a lack of loyalty in the face of multiple employment opportunities adds to the problem. Finally, high growth coupled with high attrition is a lethal combination for the ‘fraud opportunity set’. In some ways, it all adds up to the ultimate ‘perfect storm’. Can we then prevent fraud and help this imminent situation? While
there are multiple suggestions and the focus on strong internal controls and internal audit is universal – what seems to be a common underlying theme to all the various schools of thought are the following: • a paradigm shift from ‘transaction tracking’ to ‘real-life behaviour tracking’ • the key lies in compliance and enforcement • you cannot delegate and forget – the devil will continue to lie in the detail • ask a lot of questions of your key people • you cannot ignore the link between a disintegrating social and ethical fabric and corporate governance Mr Durgashankar summed it up rather well at the end asking of the audience ‘what would you choose – good people but defective/inadequate controls or bad people with good/superior controls?’ The obvious answer would be good people and good controls – but in a less than perfect world that may not be possible. Will it get a little worse before it gets better? As always, what do you think? Write in and help us get closer to the answer. Happy Diwali! Anuradha Das Mathur, Publisher CFO India
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