The CFO Middle East | Issue 6

UAE AED 15 | Bahrain BHD 1.5 | Qatar QR 15 | Oman OR 1.5 | Saudi Arabia SR 15 | Kuwait KD 1.2

Vol. 1 ISSUE 6

A WINNING ALLIANCE

how to improve the CFO-CMO relationship

REACH THE HIGHEST

PEAK OF YOUR BUSINESS CAREER

CIMA Awarded Accountancy Body of the Year

UPGRADE YOUR TEAM COMPETENCIES TOWARDS BUSINESS AND FINANCE y y y y y

Fast track routes available for BBA, B.Com, MBA, ICWAI, ACCA and CA holders CIMA Professionals speak three languages Business, Finance and Management Direct membership and designations with CPA Australia, CMA Canada & AICPA USA Top up options for masters and bachelor degrees with UK ranked universities Special pricing and exemption fee waivers up 100%

To discuss on talent competency development programme for your team, connect with our CIMA consultant on +971 (0) 52 790 0754

For individual consultation, contact: T: +971 (0)4 368 9432 E: middleeast@cimaglobal.com www.cimaglobal.com

New game, new rules MANAGEMENT Dominic De Sousa Chairman Nadeem Hood Group CEO Rajashree Rammohan Publishing Director

EDITORIAL Group Editor Jeevan Thankappan jeevan.thankappan@cpimediagroup.com +971 4 375 5678 Editorial Assistant Adelle Louise Geronimo adelle.geronimo@cpimediagroup.com +971 4 375 5683 Contributing Editors Annie Bricker annie.bricker@cpimediagroup.com +971 4 375 1643 James Dartnell james.dartnell@cpimediagroup.com +971 4 375 5684

ADVERTISING Commercial Director - Business Division Chris Stevenson chris.stevenson@cpimediagroup.com +971 4 375 5674

DESIGN Head of Design Neha Kalvani

Much has been written about the changing roles of CEOs, CIOs and CMOs but we haven’t given much thought about the evolution of another important C in the C-suite – the CFO. Believe it or not, the CFO role is fairly new. Before 1978, only less than 10 percent of the major companies in the US had CFOs. After 2000, this figure stood at 80 percent or more each year. At the beginning, the CFO job description was pretty simple – reporting business results, interfacing with capital markets and ensuring the integrity of financial information within the enterprise. Over the years, the CFO profile has evolved and expanded beyond just money managers to include new responsibilities.

In today’s business world, the CFO is expected to be a catalyst for change, and play a leadership role rather than a supporting one. The mandate for modern-day CFOs is well defined – help companies focus on the capabilities that drive business value and reduce costs at the same time. They need to adapt to change quickly with speed and flexibility.

To put it mildly, the role of CFO is more complex than ever.

How does a CFO go about this seemingly daunting task? I am inclined to say the answer is technology. Does this mean the CFO has to be a technologist? Maybe not, but they sure need to understand how to harness the power of technology to help do their job better. Some new technologies, especially cloud computing and Big Data analytics, can give CFOs access to key financial information, new insights and deliver business benefits in ways unimaginable before.

In this issue of the magazine, we have a couple of articles on Big Data and what it means for CFOs. In fact, technology pundits predict that data will soon become an asset on the balance sheet that CFOs will have to reckon with. This is probably the number one reason why CFOs need to work more closely with their CIOs and change the dynamics of this relationship, which, at times, have been at odds. As Deloitte says, “CIOs need to make the business aware of the information available and CFOs have to identify the kinds of information needed.”

Keep an eye out for the next issue of CFO magazine, which will bring you an in-depth analysis of this most important relationship in our data-driven age.

Senior Graphic Designer Analou Balbero

Production Manager James Tharian Data Manager Rajeesh Melath

Jeevan Thankappan Group Editor

Printed by Printwell Printing Press

Head Office PO Box 13700, Dubai, UAE Tel: +971 (0) 4 440 9100 Fax: +971 (0) 4 447 2409

TALK TO US: © Copyright 2015 CPI. All rights reserved. While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

E-mail: jeevan.thankappan@cpimediagroup.com Facebook: www.facebook.com/theCFOme

Twitter: @theCFOME LinkedIn group: ae.linkedin.com/in/thecfome

tHE CFO MIDDLE EAST

Advisory Panel The CFO Middle East’s Advisory Panel presents a dynamic group of experts and leaders in various aspects of the world of finance. As industry captains arriving from world-leading organisations and specialising in financial strategies, accounting and management these key personalities will play a vital role in ensuring the delivery of relevant and accurate analyses of the latest trends and issues in the business community.

Ahmad Darwish Ahmad Darwish is a Board Member and Secretary General of the UAE’s Accountants and Auditors Association (AAA), an organisation tasked with the promotion and development of the accounting profession in the country. He is also the Senior Manager for Financial Accounting at DP World UAE and oversees the management accounting, treasury and asset management divisions of the company.

With his extensive financial expertise Darwish is also the first Emirati to chair the UAE Members Advisory Committee of the ACCA.

Hanady Khalife Hanady Khalife is the Director of Operations, Middle East and Africa, of the Institute of Management Accountants (IMA). She is responsible for training providers, business partners, universities, governmental entities, amongst others.

Khalife is also an expert consultant specialising in assisting clients develop and implement strategic business plans and build partnerships with key industry stakeholders.

Michael Armstrong Michael Armstrong, FCA is the Regional Director for the Middle East, Africa

and South Asia (MEASA) of ICAEW. He is responsible for the ICAEW’s work across the MEASA region, collaborating with key stakeholders, engaging with businesses across the region, supporting ICAEW members and working with both public and private sectors on raising awareness of the relevance of chartered accountancy catalysing economic growth. Armstrong has extensive experience advising financial institutions and energy and natural resources companies in addition to having held several leadership and advisory positions in business and government.

David Thomasson David Thomasson is the founder and Managing Director of Phoenix Financial Training. David is a fellow of CIMA and worked in the accountancy industry for many years before moving into training in the 1990s. PHOENIX offers courses leading to Professional Finance Qualifications in ACCA, CIMA and ICAEW in Dubai and India. Offering a range of bespoke financial courses in Financial Awareness Building and Corporate Treasury Phoenix’s student body ranges from independent students to practitioners of private companies and sovereign wealth funds.

Lindsay Degouve de Nuncques Lindsay Degouve de Nuncques is the UAE Head of the Association of Charted Certified Accountants (ACCA).

Her role entails spearheading discussions with regulators, business leaders and important stakeholders to strengthen the ACCA’s network and profile in the region.

Degouve de Nuncques has spent more than eight years with ACCA in various senior roles.

Geetu Ahuja Geetu Ahuja is the Head of GCC for the Chartered Institute of Management Accountants (CIMA).

Responsible for developing the growth of operations and positioning the global brand of CIMA across the GCC region, Ajuha establishes strategic partnerships with global and regional entities. She is also responsible for overseeing the launch of various region specific CIMA nationalisation programmes in the GCC.

Paul Gyles Paul Gyles is the Regional CFO and Board member for all ISG Group companies – an international construction services company delivering fit out, construction, engineering services and a range of specialist solutions.

He is responsible for the finance, HR, IT, admin and legal functions for ISG’s Middle Eastern outfit. A key aspect of the role is project funding and raising external financing by working with both Arab and international banks. Gyles is also the Chairman of the Steering Committee of the MECA CFO Alliance, the largest CFO networking group in the Middle East.

CONTENTS 3

Editor’s note Group Editor Jeevan Thankappan on how CFOs can harness the power of technology.

5

Advisory Panel Leading finance personalities share their world-class expertise to ensure we give you accurate analyses of the latest trends.

10

Improving CFO-CMO relations The importance of finance and marketing collaboration for a smooth sailing business.

22

10

Survival of the fittest IMA Chairman Joe Vincent talks about the importance of ‘Digital Darwinism’.

“Digital Darwinism is a balancing act. If you stay behind, you’ll fall by the wayside, and if you get too far ahead, you open yourself to risk. The CFO job doesn’t get any easier with all this technology.”

14 Strategic assets MENACORP CFO Petr Molik shares the company’s journey to becoming one of the most successful stockbrokerage firms in the UAE.

18 Cost of compliance How effective compliance programmes can deliver tangible benefits and measurable returns.

24 Between the lines Reading and understanding your company’s balance sheet.

28

Infographic The CFO as an architect of business value.

30

Investing in the future of agriculture Alwyn Crasta, CFO, Al Dahra Holding, discusses how money matters affect the food we eat.

COMPLEXITY

© 2015 SAP SE or an SAP affiliate company. All rights reserved.

IS A PROCESS-ORIENTED PROCESS.

SIMPLE

PUTS PEOPLE FIRST.

The larger you grow, the harder it is to take care of the people who brought you there. SAP’s HR solutions are integrated with your business, making it easier for you to hire, engage and empower your people. So you can all succeed together. That’s running simple.

Find out more at sap.com/runsimple

CONTENTS 34

Disruptive intelligence

36

Highlights of the CFO Innovation Summit.

Pick the pulse What do CFOs need to know about the pulse of budgeting, reporting, and financial consolidation success?

40

Managing space profitably Leveraging effective CRE management for business growth.

48

44

Banking on trust Surya Subramanian, Group CFO, Emirates NBD, on IT banking and the impending digital transformation.

50

52

Treasury tech talk

The strategist CFO

Saad Maniar, Managing Partner of Crowe Horwath UAE, explains how modern technology and software can be utilised to maximise finance business performance.

54 Does Big Data affect the CFO? The latest phenomenon the CFO cannot ignore – Big Data

“The broadening of information requirements and initiatives such as integrated reporting will entail the handling of more data sources and even more information.”

Four orientations for engaging in the strategy process.

58 Opinion Geetu Ahuja of CIMA on getting involved in the Big Data buzz.

56 Tech Talk Top mobile apps for chief financial officers on-the-go.

FEATURE

CFO-CMO

10

www.thecfome.com

FEATURE

CFO-CMO

Improving CFO – CMO relations Why conflicting roles need integration.

I

n any given company, the CFO and the CMO are often at loggerheads. When profits roll in, marketers are quick to secure their budgets and march forward.

When profits take a dent, marketing budgets get the first and deepest cuts.

Intrinsically, CFOs often don’t trust marketing ROI. Marketers talk about creating brand impressions, TRPs and websites clicks. CFOs can’t be blamed for failing to decipher these as bottom line figures. To many a CFO’s mind, these metrics have no value.

And this vicious cycle all-too-often continues - businesses make investments, CFOs fail to understand the return, and marketing budgets get chopped. But what the CFO has to realise is, in ever-fleeting competitive markets with myriad brands, to flash your product and jog the customer’s memory, marketing should be effective and consistent.

So maybe it is time for the CFO and CMO to cease fire.

www.thecfome.com

11

feature

CFO-CMO

Qualify content In many ways, the CMO and CFO are diametrically opposed due to their functional responsibilities.

One role requires a large degree of extraversion, where interacting with customers is key. The other requires an astute guardian of the company’s assets, a risk mitigating figure who can steer the ship in the right direction. A degree of compromise should be expected from both sides.

A CFO needs to realise that not all spending can have a quantifiable return, and that brand building is a key mandate. CMOs meanwhile need to ensure responsible control of their spending, selecting initiatives that are likely to have the greatest impact.

Asking the right questions is a key step in ensuring CFO-CMO cooperation. ‘What sales volume will we generate from the new product?’ is

12

“

Another way to foster CFO/CMO relationship is to build mutual respect by identifying metrics that work for both departments. a brainteaser for a CMO, for example.

‘How much would we need to sell to break even at the various investment levels being considered?’ is more specific and a more diplomatic way of approaching the situation.

As with any good partnership, communication is the key. Open dialogue is important in any successful relationship, and this is especially

apt at C-level. Direct contact, clear planning, and no nasty surprises all make for a smoother relationship.

Stray from these basic principles, and needless problems ensue.

Finance chiefs want to know about revenue and revenue growth, profit and profit growth, and cash flow. As money minders, they take calculated decisions on where, when and how a business is

www.thecfome.com

FEATURE

CFO-CMO

likely to turn a profit. As far as they’re concerned, the CMO is responsible for returning the cash invested in the marketing budget over time. For the CMO on the other hand, it is better to use the same healthy metrics as the CEO reports during the quarterly business review. Convey marketing results at an enterprise level; don’t start off with campaign outcomes. The CFO ultimately wants to know if the business is making progress or not. Address this first, then follow with inquests to explain how and why things have happened.

On their part, CFOs shouldn’t hesitate to ask questions of CMOs to make sure the department is not straying from its budget, and can remain transparent to the results of its campaigns. CFOs need to understand sales forecasts to help the management team project cash flow and income and then adjust their core strategies. When it comes to

www.thecfome.com

dealing with non-finance people, the CFO needs to manage the situation patiently.

Marketing staff are often not focused on total net income. Helping them understand the important balance of revenue generation and spending is key.

Another way to foster the relationship is to identify metrics that translate across departments. They need to surpass simple marketing budgets and projected returns, and involve more dynamic uses of customer and prospect data. Most CMOs have a wealth of customer data, but would benefit from the use of the finance department’s experience in drawing relevant conclusions from it.

It’s absolutely essential for marketing leaders to understand the value in getting the most out of their relationship with the CFO. While it’s wise for conversations to centre on financial data, some non-

financial marketing metrics could prove a lure for the CFO. Such examples are customer acquisition and retention rates, up sell yield, Net Promoter Score (NPS) and market share. The path of purchase data may also help the CFO with capital investment decisions.

Grey areas between numbers could cause confusion for some CFOs, and CMOs need to use this opportunity to clarify these results. For example, if consumers are not buying one of the company’s most popular products – which will prompt demands of an explanation from the CFO – the CMO, as the voice of the consumer, should aim to provide context within the buyer’s realm.

An approach that could benefit both parties is if the CFO can adopt the mentality of an investor, while the CMO gains a better understanding of capital, liquidity and balance sheets.

This could make it easier to grasp what it takes to meet growth return goals.

If the CMO can see a greater portion of the profit and loss, and have access to transactional data, they can gain a stronger understanding of how capital works and how decisions are made based on its use. It’s likely that with this approach, CMOs will gain an insight into the pressures on other members of the executive leadership to meet certain growth targets. In line with this, the CMO needs to learn how to drop marketing strategies that will not profit the company.

The skills of both executive parties are essential in delivering robust business strategies. Collaboration of the two departments has the potential to create innovative growth metrics for the future.

Before this collaborative vision can become reality, the CMO-CFO relationship must grow beyond budget meetings. CMOs and CFOs share the responsibility for marketing performance. Once both the chieftains realise this, the integration of marketing and profits should be smooth sailing.

13

Interview

Petr Molik

Strategic assets MENACORP is among the most successful stockbrokerage firms in the United Arab Emirates. Company CFO Petr Molik sits down with CFO Assistant Editor Adelle Geronimo to discuss the journey that has brought them through the destructive storm of the 2008 economic collapse to the sanctuary of Dubai’s recuperating shores.

14

www.thecfome.com

Interview

Petr Molik

T

he financial crisis of 2008 caused a lot of disruption in a number of industries in the UAE. The country’s economic growth was stunted as sectors including real estate, retail and telco experienced chronic uncertainties.

A number of companies reduced their operations, while some stopped trading altogether when forced to lay off a massive chunk of their workforce.

However, one company decided to take a different approach, and instead continued to invest in a strategy that became the foundation of its success.

MENACORP became fully operational in 2006. Licensed and regulated by the Securities and Commodities Authority of the UAE, and the Dubai Financial Services Authority, the company is fullyowned by one of the most prominent conglomerates in the UAE – the Bin Hamoodah Group, which is controlled by the Bin Hamoodah family. Formally known as Wafa Financial Services, the road to success hasn’t been easy for MENACORP. “Like a lot of brokerages at the time, we weren’t as profitable as we could have been back then, because there were more brokerage firms than listed companies,” Molik says.

“

When the crisis hit, like most companies in the UAE, Wafa had an even tougher time. However, Bin Hamoodah Group decided to recruit two people who they thought would help the company bounce back from the crisis, two experienced investment bankers who were working in Tunisia.

Fathi Ben Grira was enlisted as CEO, while Molik was appointed CFO. “We came to the UAE in August 2010 and saw opportunities,” Molik recalls. “Although it was a work in progress, the environment was encouraging and gave us the confidence to continue.”

By then, the financial crisis was already in full swing, with the real estate and stock markets in a dire state.

“Market volumes were at less than 10 percent from the peak in 2008, so basically the market lost 90 percent, it crumbled completely,” Molik says.

“Even today’s big players like Emaar, du and Etisalat lost a significant amount of their shares during those times. When we joined, Fathi had the idea of changing the name of the company to MENACORP, however, the shareholding structure and the ownership remained the same,” he adds.

In early 2011, with a fresh start for the business as their objective, they

In 2012, we started recruiting the most talented finance professionals we could find. With that we were able to create our core team. I think that has been the key to our success.”

www.thecfome.com

officially renamed the company. Wafa was fully rebranded, a move that they believed would pave the way for more effective transactions.

“When we came to the country the market was really at its lowest,” says Molik. “However - credit to Fathi - we were able to come up with a strategy that convinced our shareholders to continue with the business and revive whatever was left. So for the next two years we followed that strategy.”

Molik says that they also wanted to have a different strategy for developing the business, and that shareholder backing would be important in this implementation.

“The strategy was to invest not in fixed assets but in people,” he says. “In 2012, we started recruiting the most talented finance professionals we could find. With that we were able to create our core team. I think that has been the key to our success, because when the market started rebounding we were already equipped with the team that helped us rise from the market.”

Discussing his role as CFO, Molik explains that while he works closely with Ben Grira in formulating the best game plan for MENACORP, he is more focused on the risk management aspect.

“Fathi and I were friends even before joining the company so we know each other very well,” he says.

“We discuss strategies together. We trust each other implicitly, we know each other’s strengths and weaknesses professionally. We have a certain synergy that makes us a good team.”

Having significantly increased its market share, MENACORP has already positioned itself as a market leader both in Abu Dhabi and Dubai.

Now, it has more than 80 employees

15

Interview

Petr Molik

comprised of 17 nationalities and has garnered a vast client base including government bodies, insurance companies, corporations, private offices and distinguished high net worth individuals.

“Through the diversity in our workforce, we have built a strong work culture within the firm,” Molik says.

“We don’t see people as costs, but as assets. In fact 80 percent of our cost base is for payroll and bonuses for our employees, I think we are the only financial company in the GCC area that does that. Our people continue to contribute significantly to the company and we want more people like that to be part of our team.”

In 2013, MENACORP set up an office in Dubai, to further strengthen its presence in the Emirate. The company leased a 700 square metre office at Dubai’s Boulevard Tower Plaza, known as the “Aston Martin building”, steps away from Burj Khalifa and The Dubai Mall.

“We still have our office in Abu Dhabi, and also have our offices in DFM and ADX,” Molik says. “We thought about moving the main operation to Dubai because we saw a lot of growth potential in the financial market here. It is also because we found that a lot of great talent here is in Dubai, and we felt that it would not be ideal to recruit people from here and ask them to travel to Abu Dhabi.

“

Kuwait, Qatar and Subsequently, our office in Oman. Beyond the Gulf, Abu Dhabi remains and our they can also trade in a employees in that area will range of other markets continue there. It was not a MENACORP including the New York matter of ‘either-or’; these set up an Stock Exchange and are both great markets and we wish to build up the office in Dubai, NASDAQ in the US, the London Stock Exchange, business in both Emirates.” to further and stock markets in When asked about strengthen its Palestine, Lebanon, how he sees the finance presence in the Jordan, Egypt, Morocco, industry progressing, Tunisia and Libya.

Molik explains that in Emirate.

Earlier this year, the brokerage business MENACORP was where the stocks prices ranked the top brokerage firm in trade are driven by the quarterly figures value and market shares by the DFM. of the companies, nothing is really The prominent recognition further set in stone. gave the firm’s brand more visibility, “However, as an investment banker confirming their prominence in the and a CFO, I always look at the finance industry and proving how much long-term situation of things, and I the strategy to invest in people became can say that the market can really be the driving force to their success. unpredictable especially in this region.

Molik says the company has a clear Say a crisis in Yemen or Iran comes vision of how it will move forward, up, it can really change everything.

“The pillars on which we built In medium-term, as far as I can tell, MENACORP are very strong. We will the industry in doing really well and continue to hire the best talent in the it will continue to do so. I believe that market. Secondly, we aim to carry on the economy is moving in a positive having the best standards and practices direction. There is a growing demand in risk management and business for financial services, and companies development. We want to put more like us are well in place to answer to focus on the high-net worth and ultrathat demand,” he adds. high net worth segment of the market.

MENACORP currently offers its “The management and the clients the opportunity to trade, by shareholders are completely aligned means of a single consolidated account, with the direction of where the in a range of GCC equity markets company is going, and that pushes – including those in Saudi Arabia, us to strengthen our position in both Emirates – DFM and ADX. Third, we of course want to ensure that our brand is well-recognised and known as one of the top brokerage companies in the region because that provides us possibilities to go further, especially in terms of expanding our presence in other trade markets. Finally, we want to develop other segments such as financial advisory, asset management and investment banking.”

2013

However, as an investment banker and a CFO, I always look at the long-term situation of things, and I can say that the market can really be unpredictable, especially in this region.”

16

feature

Compliance

f o t $ Co ance i l p m o c D oes t

W

hen addressing issues of compliance, CFOs often balk at upfront investments, which can remove valuable resources from revenue-generating activity. While it is true that, in some cases, significant costs may be incurred to meet new or changing regulations, it is imperative that long-term considerations are the driving force in determining the positive value of and investment in compliance.

18

line co h e b o t to m

mply?

Recent studies have revealed that senior executives in both finance and human resources now believe that effective compliance programmes deliver tangible benefits and measurable returns, contributing to the bottom line.

Management teams are beginning to vouch for the fact that compliance activities have had a positive impact on several aspects of business performance, including employee productivity, profitability and operational efficiency.

www.thecfome.com

www.thecfome.com

19

feature

Compliance

Erratic compliance management Companies that update their compliance function erratically find themselves scrambling to keep up with the neverending stream of new rules and regulations. Instead of taking a shortterm view of the situation, finance chiefs ought to see compliance as a continuous process and a growth opportunity that can help boost business performance.

Efficient and effective compliance protocols ensure that the process receives appropriate focus and attention.

The beneficial indices Senior finance and HR executives have identified tangible benefits from good management of employmentrelated tax and payment compliance, in areas such as wage payments processing, employment verification and employment tax processing. The positive impact of well-managed compliance affects intangible performance measures, including employee satisfaction, employee engagement and corporate brand and reputation.

Compliance issues need to be addressed with consistency. By involving all parties in compliance issues, managers can create a more integrated, transparent and open working environment. This transformation can only begin by setting a strong, stringent message, right from top to the bottom of the company. Compliance should not be a linear task, but a ripple effect. Those who are waiting for a compliance crisis to push such an initiative to the top of their to-do lists are likely to end up with a compliance function that is inefficient and expensive to maintain.

Bottom line of compliance Managing compliance properly comes with its own price tag. Organisations need to invest in the latest technology solutions to maintain employment compliance policies. After the initial investment in the appropriate management tools, companies need

20

to funnel resources into finding, hiring and training employees who specialise in compliance operations management. These employees will play a major role in the elevation of compliance protocols locally and throughout the organisation.

Employees who are well-trained and knowledgeable in industry compliance protocols and procedures should be spread throughout an enterprise.

While there are undoubtedly necessary investments into compliance, placing compliance as a priority will ultimately support the bottom line by improving employee engagement, mitigating risk and meeting regulatory protocols.

Compliance costs include those of labour, opportunity cost, as well as the regulator infrastructure. To manage this high cost, every company must have an understanding of the dynamics between total cost of ownership and compliance costs.

Companies that select individual solutions for each regulatory challenge will spend much more on the IT portion of compliance projects than those who take a proactive and more integrated approach.

The best way is to combine compliance requirements and build synergistic solutions. The effort saves time and money as well as establishing a framework for responding to future requirements.

Compliance in the GCC Compliance regulations in the region

are largely focused on government policies. Businesses in the GCC are often branches of larger, multinational organisations that are beholden to foreign laws. Maintaining compliance within such a complex system may seem daunting, but will, in the longterm, prevent regulatory action against the organisation and, additionally, will provide a competitive edge within the market. Energy, infrastructure and construction industries in particular need to remain diligent in their

“

An efficient and effective compliance function is making sure that the function receives appropriate focus and attention.� www.thecfome.com

FEATURE

Compliance

application of compliance protocols for factors such as environment, risk and safety.

In addition to labour and immigration laws, commercial law and the Telecommunications Regulatory Authority in the UAE, companies may be obligated to comply with regulations from the UN, the US, and the EU. This may seem daunting for businesses, and keeping updated on new and adapting laws from each originator may seem like an enormous task. In spite of the cumbersome nature of the brief, it is essential that organisations maintain compliance to protect the integrity of their finances and the business as a whole.

Improving compliance Companies should monitor the total cost of compliance relative to its effectiveness. Higher spending will not necessarily mean a higher level of compliance or reduction of

www.thecfome.com

risk. The risks of non-compliance must be communicated clearly to the entire C-level suite and a risk profile should be agreed upon.

Compliance should be managed as a programme rather than a project, as regulatory compliance must be a continuous process spread across all departments at all levels. Effective compliance requires organisational support, process control methodology and content control. To control compliance costs, commonality in compliance requirements should be highlighted, using an investment approach for budgeting, and taking complexity out of the system whenever possible.

Privacy and data protection laws, as well as policies that protect confidential information should be top-of-theline concerns for all organisations.

Compliance requires organisations to adopt and implement a variety of costly activities related to process, people and

technologies. These activities include ensuring that there are trained staff dedicated to compliance as well as enabling technologies to curtail risk.

In today’s corporate environment, where budget costs and personnel can be limiting factors, communication with the trade compliance department is imperative. This is not only to ensure that the company is protected from instances of regulatory noncompliance, but also to identify business opportunities and bottomline impacts. Suggestions such as where to manufacture based on the company’s global footprint allow CFOs to leverage the multitude of global free and regional trade agreements, thereby lowering total landed costs on raw materials and finished goods, while providing the company and its customers the competitive advantage of qualifying goods.

Additionally, procurement, purchasing and import planners can benefit from the trade compliance team’s services in determining the appropriate harmonised tariff classification and country of origin for marking products, again demonstrating that the trade compliance department is not a business hindrance, but rather a business accelerator.

Regulatory demands have undoubtedly increased over the years, and as factors such as data and identification become more complex, so too will regulatory protocols. It is imperative for organisations to refocus on regulatory and compliance management now, so that new laws and regulations can be addressed more smoothly in the future. An investment that brings software and human capital in areas such as settlement, credit risk management and IT now may seem like a heavy spend, however, putting regulatory compliance as a priority in the short-term, is sure to have positive long-term results.

21

Interview

Joe Vincent

Survival of the fittest

With a membership of 80,000 accounting and finance professionals, the Institute of Management Accountants is a cornerstone in career development and industry networking. IMA Chairman Joe Vincent was recently in Dubai to discuss the importance of ‘Digital Darwinism’ – the process of natural selection through technological evolution – and took time out to speak with CFO’s James Dartnell.

T

ell me about your thoughts on Digital Darwinism and its implications for the finance industry.

It’s all about the evolution of technology and finance’s ability to keep up with it. It’s influencing a lot of areas. The ACCA (Association of Chartered Certified Accountants) and the IMA did a study about a year or two ago which listed 10 main aspects of technology that would be important in this respect. The main ones are mobile, social, Big Data and Artificial Intelligence. Accountants are the most likely figures who can help organisations influence this change & help them keep up; they’re the closest ones to IT. If you don’t make this jump then you’re going to be out of business at the end of the day. One example is Kodak, who thought they could run a film business forever, which didn’t happen. The important thing is that management accountants stay on top of these issues and lead their companies into this unknown future

22

and do everything they can to keep up.

I’ve been in accounting for 40 years and we started out with transistors and four and eight column pads.

That change is nothing compared to what will happen in the next 10 or 20 years. The Wall Street Journal recently wrote a piece discussing how if we ever get into quantum, speeds will be tens of thousands times faster, which will make a PC look like an abacus. Everything today is binary, but with quantum we could be dealing with atoms instead of silicon and electronics.

Finance has to be a leader in this process. I think the main issue is Big Data. There’s so much being generated on a daily basis, it’s important that it can be put into manageable buckets.

with the pace of it. The last 8-10 years has made Digital Darwinism more important. Finance needs to work with IT to refine the process, and look at how to manipulate the data.

With that in mind, given that 90 percent of data created in history has been produced since 2012, is ‘Digital Darwinism’ a relatively new concept?

No. We won’t be able to resist, if you do you’ll be left on the side. Financial roles are a judiciary in that they maintain and ensure we have a well thought out plan.

Without finance and the support of upper management, you’ll be left by the wayside and somebody will pass you.

It’s been around for a long time.

Companies haven’t really kept up

You said that accountants are positioned closest to IT departments. Why do you think this is?

The two have been melded for years.

Finance has to help IT to understand what the business’ needs are, and IT can make things happen by manipulating the data but finance must feed them by saying what they want. It’s an iterative, indefinite process.

Is resistance to Digital Darwinism an option?

www.thecfome.com

Interview

Joe Vincent

Is the Middle East’s status as an emerging market with a large amount of greenfield IT projects an advantage or disadvantage in this culling process?

It’s absolutely advantageous. A lot of older firms have history that’s harder to get rid of. Change comes different to everyone and can be hard. Having legacy systems that need updating is a disadvantage. Generating data in different ways and putting it into buckets that don’t exist on old systems is an absolute advantage for the Middle East.

What can CFOs do to stay on top of Digital Darwinism? What strategies and processes should they implement?

There’s no black and white answer to that. It pertains to each business and its needs. Social, mobility, cloud and BYOD will affect everyone in one way or another.

What’s the importance of the way that customers interact with devices and their experience in terms of the technology used?

I don’t think there’s any limit to that.

Now you can book airline tickets and check house prices and details on your smartphone. The opportunities are endless. The CFO needs to work

“

with operating people to identify which initiatives will provide value for the business. Along with their team, they need to understand changes in technology, and come up with ideas in utilising it.

Companies need to make sure they adapt to help their customers. For example, Google recently altered its algorithms to give preference to mobile sites, which has been a huge upheaval for those who aren’t mobilefriendly, which has caused a scramble.

If we’re not on top of those changes, there will be a huge impact for the finance part of an organisation. We as finance professionals need to make sure we’re adaptive and responsive to changes and that we manage risk – cybersecurity falls on the CFO too.

door wide open. People can hack into systems easily. It falls on the CFO as our teams are the keepers of the data.

IT may generate it but finance are typically the guardians of it.

What role will the Internet of Things play in this transition?

It’s a balancing act. If you stay behind, you’ll fall behind, and if you get too far ahead, you open yourself to risk.

The biggest part is awareness of new technologies and how they will affect business. The CFO job doesn’t get any easier with all this technology.

From a reporting point of view technology makes the CFO job easier to punch out numbers much quicker.

We have a responsibility to provide timely and accurate information. That frees up time to create value for the business. A lot of that is about keeping aware of what’s going on.

It continues to grow, and certainly can transform businesses. For example, your fridge could be saying that you need to buy more milk, and the next step is that it goes ahead and does that without you asking. It’s a fascinating thing to take advantage of. At the same time it’s important to say that you can easily waste money trying to chase certain tech that may not catch on.

Cyber-risk multiplies with this, from a risk point of view it leaves the

“Digital Darwinism is a balancing act. If you stay behind, you’ll fall behind, and if you get too far ahead, you open yourself to risk.

The CFO job doesn’t get any easier with all this technology.”

www.thecfome.com

Is there one particular technology that will play the biggest role in Digital Darwinism or is it a question of finding the right blend at the right time?

We don’t always pick these things correctly. Market forces often decide something and the consumer takes over, then the business has to fall back and catch up to utilise these things.

Do you have any advice for CFOs who are skeptical of staying ahead of the curve and taking certain risks?

How can CIOs and CFOs do that given that technology budgets are largely spent on ‘keeping the lights on?’

It needs to come from business development money. A business case needs to be built to make these things happen. It’s not a CFO decision; the CFO’s role is to bring people together to make sure the business understands.

23

feature

Balance Sheet

Between the lines How to read the most of your balance sheet.

24

www.thecfome.com

FEATURE

Balance Sheet

T

he balance sheet has been the go-to tool for financiers since money began changing hands.

However, this complex document is more than it seems. The balance sheet must not be read as a series of individual statements but as a sum of its parts. For instance, an income statement may report a large sale to a new customer, while the balance sheet shows the sale as an accounts receivable. Reading an ageing receivables report may reveal that the account has been unpaid for quite some time. Reading all of a company’s statements and reports deepens the understanding of this financial story. The balance sheet gives a clear picture as to whether the company has achieved its ultimate goal - profitability.

To use this tool effectively and improve financial performance, the major balance sheet components need to be evaluated - assets, liabilities, and equity. Assets, such as cash, equipment, and property, are owned by the company for one reason - to increase the business’s profitability and future wealth. One way to look at the effectiveness of assets is to evaluate how well they are generating profits by focusing on the return on assets (ROA). Periodic review of business ROA trends enables comparison with industry averages.

Balance sheet benchmarks Most financial ratios are derived from two financial statements, the balance sheet and the income statement.

When analysing the balance sheet it is important to understand that one measure doesn’t tell the entire story. The best approach involves calculating several ratios and looking for trends in the data. When calculating financial ratios, the evaluation is usually benchmarked

www.thecfome.com

against other companies. The best comparisons include: • Market averages: these are marketwide averages or financial ratio ‘rules of thumb’ that apply to ‘generic’ companies.

• Industry averages: a better comparison than market averages, here the benchmark is against companies in the same or similar industries.

• Same company: ratio analysis can be done using historical, current, as well as forecasts or projections for the same company.

The following financial ratios are the key metrics that can be calculated using only the balance sheet.

Current Ratio The ‘current’ or ‘liquidity’ ratio is a measure of the solvency of the business. For a potential investor, this ratio highlights the company’s ability to cover current liabilities with available resources. A high current ratio indicates that the company would be prepared to cover its short-term liabilities using available, or liquid, cash. A low score - below 1.0 - can be used as a benchmark, indicates that the business may not be able to meet its short term obligations.

Quick Ratio An alternative calculation of liquidity, known as the quick ratio, measures the company’s ability to cover short term obligations as well. The difference in this particular measurement is the removal of some of the less liquid assets from the equation. This is a more aggressive test of financial strength. As with the current ratio, a high score reflects financial strength.

Leverage Ratio Another indication of the financial strength of a company is the leverage ratio. Also known as the debt-to-equity or debt-to-worth ratio, this calculation

25

feature

Balance Sheet

gives a potential investor an idea of whether or not the company is healthy enough to pay creditors and obtain sustainable and long-term funding. It should be noted that this indicator can vary by industry. However, throughout industries, a general benchmark is that the ratio should not exceed 2:1, liability to shareholder equity.

Activity Ratio These calculations provide a measure of how healthy a company’s assets are – in short, how likely it is that the company can convert its assets into cash or sales. Activity financial ratios such as these can demonstrate to shareholders and investors how financially fit a business is.

Measuring personnel Financial metrics aren’t just for the company, but also measure the people behind the business and how well they are doing their job. A few key indicators are: • Days Sales Outstanding (DSO) DSO calculates receivables over revenue per day. A high DSO score indicates that the business collects its accounts receivables in a timely manner, whereas a high DSO number shows that the company allows its product to be sold on credit, and therefore takes longer to collect on its accounts.

• Days Inventory Outstanding (DIO) This financial ratio is used to measure the average number of days a company holds inventory before selling it. This ratio is industry specific and should be used to compare competitors.

• Days Payable Outstanding (DPO) The Days Payable Outstanding equation reveals the number of days that a business has to meet its credit obligation. This calculation also reveals how long the cash will be available to the company before it needs to pay back its creditors.

The cash conversion cycle can be

26

calculated with the below equation: Cash Conversion Cycle = DIO + DSO – DPO

This conversion cycle gives a holistic overview of company effectiveness and is a clear indicator of where a company stands in the market.

The receivables turnover ratio is categorised as an activity ratio because it measures the company’s effectiveness in collecting its credit sales. Inventory turnover is important for companies with physical products and is best used to compare against peers.

An inventory to sales ratio is an excellent tool when tracking budgets on a yearly or quarterly basis.

Its aim is to shed light on the manner in which inventory is being managed.

Another useful ratio in determining the quality of the potential product is intangibles to book value. With the exception of organisations that retain a great deal of intellectual property or widely known brands, intangible assets should be kept to a minimum.

An inventory to sales ratio is an excellent tool when tracking budgets on a yearly or quarterly basis. Its aim

is to shed light on the manner in which inventory is being managed. This ratio is intended to reveal issues with cash flow in trends in inventory flow.

Debt to equity ratios is evaluated to understand whether the company is in a difficult situation or not. A company that is working with a high level of leverage, as well as a high debt ratio may seem like an issue. However, the actual cause for concern is when an organisation has a low debt ratio and that debt ratio changes suddenly.

Comparative balance sheets A comparative balance sheet presents simultaneous information about an entity’s assets, liabilities, and shareholders’ equity as of multiple points in time. It could be in long range - three years - or short - three months.

The aim is to highlight the company’s financial health over time, by developing a trend line analysis through individual snapshots of the financial history. One can use vertical analysis - a linear look at the actual figures or horizontal analysis, which means analysing trends and fluctuations, along with comparative balance sheets to get a complete picture.

Between the lines Understanding the different types of financial documents and the information each contains helps you analyse your financial position and make more informed decisions about your practice. Balance sheet ratios are an excellent tool in the determination of key financial factors including the ability to meet financial obligations and effective credit usage.

The ratios determined by the balance sheet allow for a comparative view of reporting periods. One should pay attention to changes in assets, debts and investments. Using the ratios, CFOs can determine the overall past, present and future health of the business.

www.thecfome.com

Fully serviced offices for rent

16 locations across the UAE With no set-up costs or long term contracts, Regus offices offer you total flexibility.

• Fully equipped - just plug & play

• Terms to suit any size of business • World class IT and telecoms

• Dedicated support team

• New office locations opening soon

Call now and book a FREE tour

800 73487 regus.ae

Infographic

THE CFO AS AN ARCHITECT OF BUSINESS VALUE Accenture’s 2014 High Performance Finance Study finds that CFOs are now using enterprise transformation to create value for the company – but leading change remains a challenge to overcome.

THE STRATEGIC INFLUENCE AND ROLE OF THE CFO CONTINUES TO GROW

73% are challenging and supporting strategic decision-making

61% are partnering effectively with other enterprise functions

60% are providing insightful analytics to the company

COST CONTROL IS NO LONGER THE PRIMARY EMPHASIS IN MOST ORGANISATIONS

Focus primarily on cost control Focus primarily on investment in growthoriented activities Evenly split between cost control and growth

2011

2014

2016 - Projected

Source: Accenture

28

www.thecfome.com

Infographic

A CHANGING FOCUS MEANS THAT ENTERPRISE TRANSFORMATION REMAINS HIGH ON THE AGENDA Percentage of respondents that have initiated or completed these activities in the past two years.

66%

75%

Operating model rationalisation

43%

53%

Functional cost reduction

New market entry

Business portfolio rationalisation

CFOs HAVE AN OPPORTUNITY TO DRIVE THE BROADER TRANSFORMATIONAL AGENDA And CFOs are less likely to partner with other executives:

81%

of CFOs partner with the CEO to drive transformational change

Managing change remains two of CFOs top three challenges

56%

CFO PARTNERSHIPS

measuring the benefits of transformation

But only

5% of companies claim the CFO drives a broad enterprise transformation agenda focused on profit and cost optimisation

53% COO 46%

CSO 39%

CIO 25%

CPO 24%

CHRO 20%

managing the change process

CFOs are balancing their focus on cost optimisation with profitability to better transform the enterprise for growth and deliver business value.

www.thecfome.com

29

Interview

Alwyn Crasta

Investing in the future of agriculture His career spanning 20 years is driven by the belief that ‘Ideas Create and Values Protect’.

Alwyn Crasta is the Group CFO of Al Dahra Holding - a leading company specialising in agriculture and animal feed production; with global operations, farms and production facilities in the Americas, Europe, Asia and Africa. Crasta is also Second Runner up at the MENA CFO OF THE YEAR Award, 2013.

W

hat is needed to be a top CFO? A good CFO must be honest, ethical and able to develop and maintain the trust and confidence of all constituents. It is important that they always deliver the true message. Most of the time they may highlight bad news in order to take corrective action. Such highlights benefit all stakeholders as this creates confidence and better results It is extremely important for the CFO to understand operations and business facts. We can’t just be the ‘Numbers Guy’; we have to integrate with operations and other departments. This helps to understand key cost divers, control matrix and the pain points of each business.

It is important to keep the company strong and emphasis on quality should not be compromised. In order to keep cost as low as reasonably possible,

30

there should be constant review on the way we do the business. This includes bringing continuous efficiency, finding best alternatives with lower cost, cutting down on non-products costs like travel. Keeping general and admin cost low, centralising functions, automations and avoiding duplications are also important.

What are the main cost factors in your particular industry. How do you identify and exercise control over them?

Cost control is a continuous process that begins with the proposed annual budget. The budget helps to identify the key costs of each department of the business, and to plan and control identified cost. The planning process provides two types of control mechanism – feedforward, which provides a basis for control at the decision point, and feedback, which provides a basis for measuring

the effectiveness of control after implementation.

We have a monthly reporting process, which highlights cost variances against budget and managers can focus and keep control over cost.

In such a volatile and competitive market, how does finance provide the cutting-edge in costs without compromising on quality?

One of biggest challenges in this real world is that nothing is certain.

Operating efficiency involves reducing cost in all areas of the business.

• Some of the key areas where Al Dahra has been able to minimise costs are: • Volume Management and better price negations • Diversified sourcing • Long-term hedging of product prices • Forex hedging and logistics cost control through vertical integrations

www.thecfome.com

Interview

Alwyn Crasta

“

One of biggest challenges in this real world is that nothing is certain. Operating efficiency involves reducing cost in all areas of the business.�

www.thecfome.com

31

Interview

Alwyn Crasta

What is your greatest area of spend where there is a lot of uncertainty on return?

As we are in the agriculture business and farming, big spending is needed to create proper structure.

Uncertainty and risk go hand in hand with farming, agricultural production is directly dependent on nature with all its uncertainties, like climatic change, droughts, floods, frosts, storms, cyclones and disease.

All these effects from nature impinge on yields through their effect on market supply, hence return on such spending is uncertain.

I always endeavour to use innovative financial planning ideas to transform long gestation agriculture projects into high-return self sustaining projects with the highest standards of corporate governance; thus doing my bit in bringing quality food at reasonable prices to the people around me.

What could disrupt your company and what can finance do to mitigate that risk?

Some of the issues we encounter are natural disasters or fire on stock, which might disrupt the business or the Group may be adversely affected by uncertainties such as change in policies, taxation and other developments in laws and regulations in other countries.

The Group sources almost all of its produce from foreign markets for which payments are made in foreign currencies. Depreciation of the value of the AED vis-Ă -vis other currencies, would increase the costs incurred by the Group in procuring forage and other agricultural products and would have an adverse impact on the financial position of the Group.

Some preventative measures for business continuity include setting aside financial reserves to ease cash flow problems if they arise and choosing the right insurance to protect against losses.

32

How has winning the CFO MENA runner up award helped you in business?

Receiving an award certainly makes you feel great. I got this esteemed recognition at Naseba 7th Annual CFO Strategies Forum. I consider it an acknowledgment for all the hard work and success demonstrated by Al Dahra in the last few years.

In this part of the world, where the climate is harsh, what is it like being in the agriculture sector?

Modern agriculture has vastly increased the amount of food that farms are capable of producing.

But this can have a major negative impact on the environment. Al Dahra has partnered with experts all around the world to provide a consolidated management, logistics and funding platform that applies their in-depth expertise and knowledge in this field. The beneficiaries of the cultivated goods and produce are predominantly UAE and the host countries.

Our country faces two sets of challenges - internal challenges due to the geography and environmental conditions of the Emirate and external challenges due to global trade trends and changing market dynamics. Limited arable land, severe water shortages, rapidly growing population and increased domestic consumption are a few examples of internal challenges faced. On the other hand, soaring international food prices, export ban risks, decrease in global food stock levels, climate change, extreme nature conditions, supply shortages and pests, diseases and infections pose major external challenges.

The agriculture sector is a doubleedged sword. It is the engine and the main vehicle to produce various food items but it also is undoubtedly the highest water consuming industry.

The biggest concerns we face are in water and food security.

What are your biggest career accomplishments?

Cash flow and banking relationship; we have continually managed to arrange funds for operations as well as acquisitions and projects. The finance team has been able to effectively present and convince bankers to fund our transaction through innovative structures, resulting in significant reduction in leverage on Al Dahra’s books and cost of borrowing.

I have also assisted my organisation in many acquisitions and expansion projects to implement the strategic vision to create food security and emerge as a global player in agriculture. Another achievement has been reporting and standardisation. I have worked extensively to implement best financial control practices and standardised reporting mechanisms on all our subsidiaries worldwide.

Currently, ERP roll out across all subsidiaries and standardised business models are in progress.

Since you work with associates in different parts of the world, how do you collate and manage different financial transactions?

We always have to face various challenges to manage business and financial transactions when we spread across all over the world with various different business models. Today we have offices and operations in four continents. Some of the initiatives we have done to better manage financial transactions include standardisation of accounting classifications and reporting. I am working in the direction of implementing standardised planning mechanisms through a five-year business plan which will play a critical role in future resource planning and performance evaluation.

www.thecfome.com

1994 - 2014

We have moved to our new Middle East Head Quarters in Business Bay. To facilitate and support our expansion drive for the coming years and to serve our esteemed clients better we have moved to a fully-owned state-of-the-art office facility.

We stay committed to our vision to provide the best and most professional Accounting, Audit, Business & Management Consulting services to all our valued clients.

OUR NEW ADDRESS: Level 15, Lake Central - At The Bay, Business Bay, Al Abraj Street, P.O. Box: 55535, Dubai, UAE

Tel: +971 4 276 2233, Fax: +971 4 422 1680, dubai@morisonmenon.com

Offices in UAE (Dubai, DAFZ, Abu Dhabi, JAFZ, RAK FZ, RAKIA, Sharjah), Oman, Qatar, India www.morisonmenon.com - www.consultuae.com

BUILDING BE T TER BUSINESSES - GLOBALLY

event

CFO Innovation Summit

Disruptive intelligence The MECA CFO Alliance recently hosted a CFO Innovation Summit under the theme “Future of Business Intelligence,” which was held at the Ritz Carlton Hotel in Dubai. We bring you the highlights of the event.

34

T

urning the spotlight on the best practices that can transform the finance functions to meet the business challenges of 21st century, the event was supported by SAP, Thomson Reuters and Grant Thornton as strategic partners, and gathered CFOs, senior finance leaders, industry experts and key decision-makers across various industry segments in the region.

The event was kicked off by MECA Founder Saleem Sufi and the Steering Committee Chairman Paul Gyles.

It was followed by a keynote presentation delivered by Waldemar Adams, Head of Business Analytics, SAP EMEA, on the “Future of Business Intelligence.”

During Adams’s presentation, he underlined the growing pressures in

www.thecfome.com

event

CFO Innovation Summit

“

Leading change with a new vision, strategy and culture is a serious but necessary ingredient for success in this world of change.”

business. “Factors such as volatility in markets, commodity prices and stocks, pressure on margins, disparities in regulations, and disruptive technologies are here to stay which indicates that much is expected from the finance functions our organisations,” he said.

According to him, having a proper understanding of the data gathered through optimising analytics presents immense potential for business development. He gave the audience an overview on how CFOs and other finance decision-makers can leverage SAP’s Business Intelligence solution to cope with how these factors are reshaping businesses.

“Only 10 percent of businesses use analytics today, and we see that reaching up to 75 per cent in the next

www.thecfome.com

five years, and only SAP offers an integrated (end-to-end) information exploitation solution that can assist organisations in dealing with this inevitable growth,” he added.

Adams’ presentation was followed by an interactive session led by Cisco’s Den Sullivan, Head of Architecture, Cisco Systems and Guy Smith, Head of Cisco Capital Finance, on “How to Build Future Business Intelligence System on a Strong Foundation.”

Khurram Bhatti, Partner, Grant Thornton, shared key insights into “Changing infrastructure and times: the impact of business intelligence”, through which he highlighted the elements that CFOs need to consider when it comes to innovation within their organisations.

“By having effective and efficient business intelligence, organisations can improve efficiency in business, increase their productivity and lower risks. It will also allow you to learn your brand’s strengths and weaknesses and increase your profit,” said Bhatti.

Other speakers included motivational speaker and trainer Colin Abercrombie, who discussed “What Business Intelligence Really Means to Your Employees and How to Motivate and Collaborate”; and international speaker Alan O’Neill who presented a topic called “Consultant Customer Service, Culture and Delivering Excellent Performance through Business Intelligence.”

During his presentation, O’Neill said, “The world is changing at a rapid rate and within that, so too is the role of the CFO. No longer the classic ‘bean-counter’ the CFO of the future will be a mature leader, adding real value with great business insights and objectivity. With all of this BI comes a level of responsibility to work collaboratively with all functions and lead change with a level of empathy that is appropriate to the needs of the organisation. This requires a better understanding of the whole organisation ‘system’, including knowing more about HR, marketing, operations and so on. Leading change with a new vision, strategy and culture is a serious but necessary ingredient for success in this world of change.”

The information-rich conference also included a case study presentation on business intelligence, which was delivered by Richard Saville - Director of Sales, Excel4Apps. It also featured panel discussions and a twohour session of the CFO Strategy Club where senior CFOs and experts shared their insight on how finance can get involved in strategy management in order to maximise value creation for their businesses.

The conference proved to be an excellent learning platform for CFOs and other senior finance leaders to get a tight grasp of the far-reaching opportunities that business intelligence can bring to any organisation.

35

feature

Budget Reporting

Pick

the pulse What CFOs need to know about the pulse of budgeting, reporting, and financial consolidation success?

O

rganisations that strive to stay fiscally flexible have historically responded better to changing market dynamics. These companies tend to complete more of their strategic initiatives successfully than their slower, less agile counterparts.

However, these agile organisations are increasingly rare.

36

With organisations often reporting that many projects are not aligned to strategy, this may be a result of a lack of involvement

by C-suite executives in the planning and execution processes.

Rather than micromanaging, or alternatively, going missing, executives should identify and focus on the key initiatives and

www.thecfome.com

FEATURE

Budget Reporting

“

In a research conducted by the Project Management Institute, highperforming organisations successfully completed 89 percent of their projects, while low performers completed only 36 percent successfully.

projects that are strategically relevant to their vertical. A number of companies either lack the skills or fail to deploy the personnel needed for strategy implementation.

The void caused by lack of agility and strategic alignment leaves organisations unable to take advantage of expected economic growth, to react to strategic shifts in customer expectations and demands, and to mitigate project dollars lost.

In a research conducted by the Project Management Institute, high-performing organisations successfully completed 89 percent of their projects, while low performers completed only 36 percent successfully. This difference in success results in high-performing organisations wasting nearly 12 times less than low performers.

The CFO-CIO integration CFOs have traditionally dedicated the majority of their time to complex financial systems, processing transactions and budgets. This has left CFOs essentially ‘keeping the lights on’ with little time to invest in value-added activities. Conversely, CIOs are consistently evaluated on IT project management skills

www.thecfome.com

or the monetary results of their implementations. These days, C-level IT staff are moving from the IT department and into the boardroom to lead enterprise-wide projects.

The inevitable march from the shelter of the department out into the boardroom may seem intimidating for the CFO or CIO. However, success can be found in collaborative efforts between these two roles. The CFO and CIO are best suited to tackle corporate performance improvement and performance management projects and implementations as a duo. A finance background paired with tech-savvy know-how will lead the next generation of corporations.

Both roles will thrive from such collaborative efforts and will turn their functions from simply reactive to strategic and forward thinking.

Budgeting, reporting and consolidation Muhammad Salahuddin, Chief Financial Officer, Giga Communications, presents a candid overview of the main aspects used to determine finance performance.

“During the budgeting process CFOs must be effective communicators,”

37

feature

Budget Reporting

Muhammad Salahuddin, Chief Financial Officer, Giga Communications

“

Reporting is a critical part of any business and this data needs to be accurate and timely in order to understand their company’s financial performance.”

38

he says. “If employees are still thinking of the CFO as a bean counter, they are doing something fundamentally wrong in the performance of their duties. With the help of ERPs or good budgeting and planning software, the figure work of budgeting exercise is taken care of, however, the ability to see the unseen and a good skill to collate and present the data are not there.

“Reporting is a critical part of any business and this data needs to be accurate and timely in order to understand their company’s financial performance. In some businesses, the CFO may be responsible for compiling these statements,” Salahuddin continues.

“In other companies, they oversee accounting personnel to insure timely and accurate monthly financial statements. But the CFO is not simply responsible for handing

www.thecfome.com

FEATURE

Budget Reporting

over spreadsheets. The data should include metrics like variance against budget, percentage and dollar changes against historical averages, changes against prior period numbers, and so on. Aside from monthly reporting, they should be responsible for implementing and updating dashboards to monitor key performance indicators or metrics.

They should conduct monthly review meetings with business owners, CEOs and managers which include a review of the financials to identify trends and discuss areas for improvement.”

Salahuddin goes on to highlight the importance of the impact that these shifts have on a company’s internal processes. “Research shows that the consolidation and close process is still time consuming and error-prone, with many companies taking 11 to 20 days to close the books each month. This is a huge time drain, especially on finance and accounting departments with limited budgets. The manual gathering and validation of spreadsheets leads to quality issues and late submissions.”

In most cases, a company perceives a process as a recursive ‘series of actions’ or tasks executed in a closed loop fashion - as opposed to a linear process which is a ‘one shot deal’. The cycle time of a recursive process may vary greatly depending on the application. In terms of financial and economic application, process management is long and taxing.

The performance of industrial control loops directly affects company profitability and operability in several ways including stability, robustness and safety as well as cost, efficiency and the maximum rate of production.

Optimising the performance of regulatory controls requires

www.thecfome.com

“

It is important, particularly in the finance industry, that the metrics upon which process health is judged are chosen with consideration, based on the product, consumers and geographic location of the business.

knowledge of the process and control systems, the right tools for the job, and most importantly, a systematic approach to follow.

Regular investigation into processes and performance status should be done to determine if improvement is needed. Resulting metrics should be compared to past investigations to see if improvement projects are warranted.

It is important, particularly in the finance industry, that the metrics upon which process health is judged are chosen with consideration, based on the product, consumers and geographic location of the business. Metrics used can include quality, error count, time, cost and revenue, but should be limited due to task crossover between metrics.

Areas of improvement Automating processes helps to minimise potential errors and the amount of manual work. Companies should administer a better backup process and get built-in security features, which is a huge turnaround from spreadsheets. Automation in areas such as allocation, intercompany eliminations, data import and reclassifications can save time, and ultimately, money.

Automated performance tracking in particular is key. Automating these processes can give real-time information and reporting, rather than waiting to ‘massage’ the information out of a traditional spreadsheet.

Data visualisation generates relevant information. When data is put into an easily consumable format, trends that may not be obvious when viewing a spreadsheet become apparent. Generally, managers are more likely to provide information needed to impact critical decisions when visual analytic tools are provided.

Ultimately, this adds strategic value to the organisation.

The only way to run a business is by donning an optimistic economic outlook. But the shifts in customer landscape and the global market environment remain complex.

As a result, organisations must consider a multitude of factors to stay competitive and improve their bottom line. Focusing on the successful execution of strategic initiatives via projects and programmes mitigates lost profit and allows for effective responses to the forecasted shifts in today’s tricky environment.

39

feature

CRE

Managing space profitably A

lthough it remains an important part of a corporate balance sheet, corporate real estate (CRE) often receives little attention from the CFO. Typically managed by a company’s various operating units or a separate real estate function, its impact on a company’s strategic goals

40

is not always apparent. The commercial maintenance and asset viability of CRE are under fresh scrutiny from CFOs – who are under pressure to improve financial performance – many of whom have concluded that it warrants personal attention.

Real estate does not just represent the physical space where work is

www.thecfome.com

feature

CRE

www.thecfome.com

41

feature

CRE

Global CRE transaction volume

Americas include USA, Canada, and Latin America; EMEA includes UK, Western Europe, Eastern Europe, Middle East and Africa; Asia-Pacific includes China, Japan, Autralia, New Zealand, India, Hong Kong, Singapore, Malaysia, South Korea, Taiwan, and others Source: RCA, August 2014, Deloitte

produced. It is the home ground of interaction where customers communicate firsthand with the brand.

It is where commitments are made.

Consequently, the standard of CRE affects productivity, brand perception and staff morale. Most organisations are hamstrung with too much real estate, which is often not of the requisite quality to support modern work styles and brand perception. Businesses on average have 30 to 50 percent more real estate than they need, and this excess stunts financial performance.

Strategic planning of CRE While the CFO’s role has changed from being the gamekeeper of financial results to one that has greater involvement in strategic planning, many finance chiefs are learning that a weak CRE strategy can hinder growth plans.

The CFO also faces the hurdle of having a lack of consolidated information about company real estate holdings, while there are conflicts between the CRE strategies of business ensue. All in all, poorly

Most organisations are hamstrung with too much real estate, which is often not of the requisite quality to support modern work styles and brand perception.

42

managed CRE becomes a business risk. If facilities are acquired and operated by branch or field-level staff, companies often fail to conduct a rigorous assessment of potential legal liabilities or property-related hazards. Worse still, they may even fail to develop contingencies, exposing themselves to risks such as disruption of operations, employee health and safety, and IT system vulnerability.

The CRE function, therefore, should not only be technically competent but also needs to take the initiative when it comes to finding new opportunities for cost savings.

Areas of savings can include the bulk purchasing of furniture and equipment, identifying leases that are due to expire and renegotiating them, looking for opportunities to consolidate holdings across the portfolio, and the disposal of excess real estate.

www.thecfome.com

feature

CRE

Integrated approach Regaining control of CRE is no easy task, but the financial benefits – as well as the positive impact on employee productivity, morale and brand perception – can be significant.

A major concern for the CFO is that CRE planning is seldom well integrated with corporate strategic plans. Integration is not equally important to all companies, of course.

For a distributor, CRE may be a relatively straightforward matter of securing inexpensive warehouses.

However, for other companies including companies with a strategy that calls for expansion or cost cutting - real estate is a more complex and important consideration. Outsourcing extra CRE resources must also be considered as a means of generating income.

Centralised CRE can provide the CFO with the real estate data necessary for managing corporate financial property. To do this in the most efficient, value-added way, meetings should be held bimonthly and include senior members of the business unit, the CRE and the CFO. A few strategic changes can make CRE effective. Organisations need to confront important questions about workplace and facilities strategy which should be set off by a comprehensive review of the demand for space.

Along with defining or refining the corporate stance on work style, the role of mobility, and workplace density, it can achieve a huge reduction from typical space footprints. Organisations need to build a central database that captures all leases and facility services contracts in order to bring real estate-related spending within the scope of professional management.

This facilitates central visibility of the portfolio, in line with the business demand for space use.

www.thecfome.com

All in all, to get the most out of CRE, CFOs need to guide their companies over a range of hurdles including fragmented management structures and a lack of accurate, consolidated real estate portfolio information.

Once this demand has been clearly defined, it is important to brief and incentivise CRE teams to work closely with procurement and operations. Procurement teams are in a position to create stronger policies and strategic plans to support the sourcing of property service and management supply chains to utilise economies of scale between CRE teams and suppliers.

Although field services contracts can make savings, the biggest gains can be made by reducing the total footprint and eliminating recurring cost streams. Net upfront cash is boosted by disposing of assets, and also eliminates recurring cost streams.

Consolidating multiple locations in one city or region, or deploying flexible working policies reduces square footage and can also resulting in workforce benefits like increased morale, enhanced collaboration, better work-life balance and improved productivity.

Part of the reason that organisations overpay for facilities services is that the management of services contracts is frequently left to local office managers or even administrative staff. This includes everything from janitorial services to security and even lease management. As these contracts are often handled in local departments, there is a lack of global

visibility to services contracts, and often no visibility to important items like leases and their terms.

Common mistakes that result from this approach include one-off deals and leases that do not support future corporate changes or activities.

When it comes to improving facilities management, the first step is to start with service specification. This means looking at outcome-based metrics rather than determining exactly how a service should be performed.

Concentrating on outcomes can open the doors to more supplier innovation and best practices, as opposed to them inefficiently fulfilling service requirements.

All in all, to get the most out of CRE, CFOs need to guide their companies over a range of hurdles including fragmented management structures and a lack of accurate, consolidated real estate portfolio information.

Depending on the company, this may call for a centralised structure, the use of technology and outsourcing, and a concerted effort to bring real estate issues to the company’s strategic planners. Ultimately, the main benefit of effective CRE management is to free resources that are tied up in real estate and allow the CFO to reallocate them to revenue-generating areas of the business such as employees, sales and marketing, or manufacturing.

43

FEATURE

Trends

Trendy Alignment Global trends catch on quickly in the UAE. How do marketing teams keep up?

44

www.thecfome.com

FEATURE

Trends

T

he basics of marketing are perennially one and the same; to reach out to your customer. But with technology changing at the speed of lightning, what matters most is how you effectively activate the basics by deploying smart technology.

Alignment across departments and processes equates to agility.

Knowledge sharing facilitates collaboration between IT and business executives, making it easier for firms to detect change before deciding a joint course of action for how best to respond. The resulting alignment between IT and business strategy can enable agility through effective communication.

“Marketers are coming under the scanner, challenged by changing

www.thecfome.com

business demands and consumer expectation to bring in innovative communication channels,” says Mani Nair, Marketing Head, Eurostar Group. “Gone are the days of storytelling and brand building.

Things now revolve around smart marketing mechanics deployed by a brand and the reaction by the consumers. The concept of measurement has become very open. Brands which are behind fictional theories might lose out to brands that can connect with consumers. At Eurostar we have realised the importance of alignment to smart marketing techniques and have deployed many digital initiatives directly and through the retail channels, which ensures sell in and sellout.”

UAE sets a trend in being tech savvy Trends catch on pretty quickly in the UAE; smart mobile technology has taken the lead with the highest percentage of mobile phone penetration in the world at 73 per cent. Other industries which are burgeoning in the country include retail, hospitality, real estate and, recently, medical tourism.

Consumers in the country are demanding. Effective marketing alignment for such diverse fields to such a discerning multicultural clientele is a challenge.

“UAE-based marketers are exposed to over 2000 consumer origins,” Nair says. “The country also has a very high penetration of smart devices which allows them to explore all

45

FEATURE

Trends

methods of deploying the marketing strategies and campaigns for their brands. The global phenomena of adapting digital technologies are now being reinvented by UAE-based marketers to suit this audience.

Mobile apps have had and continue to have a huge effect; with every marketer trying to grab a share of the pie by engaging consumers with their apps across multiple platforms.

Online and e-commerce platforms are becoming more and more aggressive and this paves ways to maximise the brand reach to global consumers, with the smart gadgets and connected devices available across all demographics.”

Effective marketing tips to adapt and align • Transparency is the most important tool of marketing Consumers are going to continue to exert power and influence. At any given time, companies resist the idea of radical transparency and are bearing the brunt for it. Being the best in the business is so fleeting that by the next season you can be forgotten. The best marketing approach is to give the customer a real and accurate picture of what you are doing for their special interest.

• Keep things simple Companies may be serving the most complex market ever, but they don’t need to create more complexity.

In order to get the most out their

“

interactions with customers, CMOs must employ a holistic strategy when it comes to their company’s all-round value proposition. This entails integrating insights across geographies, business departments and functional groups.

• Technology is the vantage point Rather than thinking in terms of digital marketing, companies should be thinking in terms of marketing in a digital world. Having a solid marketing team with heavy digital DNA and technology acumen is hugely advantageous. Internal communications need to be viewed as a marketing asset. They can be used to create brand ambassadors by monitoring which employees understand the core values of the brand as well as the company strategy.

• Agility marketing The advent and mass proliferation of social media has managed to create elusive consumers with short-term thinking. It’s easy to get bogged down in likes, shares, tweets and click-through rate stats from a range of social platforms. The trick is, though, to have more consumer data, with shorter leads and alwayson, real-time marketing. The need for quarterly or monthly data is often redundant, with information needed on the hour or by the minute. “Social media plays a crucial role in today’s consumer minds; multilevel marketing today is done by the consumers itself,” Nair says.

The global phenomena of adapting digital technologies are now being reinvented by UAE-based marketers to suit this audience.

46

“Once they feel their comments or feedback are reviewed and shared by others, the heroic effect begins and overnight bloggers are born.”

• Creativity sells Be different, original and true to your core values in your marketing strategy. Unfortunately, media agencies give strictly narrow recommendations. They should only be the ones facing the consumer while the company steers the sole marketing campaign. The focus should be on personalisation over globalisation. Technology has brought the world closer together, but marketing still remains a facet that is specific to regions. Businesses should bare this in mind; don’t leave marketing to a centralised agency that may not appreciate the nuances of regional markets.

Balancing the alignment Companies should adapt powerful procurement strategies to maintain a cautious financial stand.

Greater accountability and transparency will result from marketing procurement’s continued influence. Procurement teams need to operate closely with the CMO, CIO, CTO and CFO to remove internal stalemate and focus more on increasing operational efficiency, not solely on cost negotiations.

The potential for IT-led capabilities to redirect business strategy can be shared with business executives. This reduces the path dependencies and routines, thereby enabling better alignment and increased adaptability and innovation. The quality of competitive intelligence that can be sourced can be the difference between achieving company ambitions and total failure. All sources must be tapped when it comes to competitor information. Sales forces, outside consultants, market surveys, and trade associations all need to be explored

FEATURE

Trends

“

Mani Nair, Marketing Head, Eurostar Group

One way to look at marketing is to never let any communication go unattended, because it reflects through the way the topic is handled by the brand.

for a variety of data, including pricing, promotions and sales results among others. Competitive activity in the marketplace needs to be monitored.

Understanding each competitor’s behaviour in a short and long term context is key. A virtuous cycle of IT and business opportunities creates new knowledge that can be shared with suppliers, customers, and key business partners - relationships that are often a necessary part of how firms react to change. All too often, businesses focus too much on their past rather than their future

www.thecfome.com

– what they have done rather than what they will do. Instead of looking back on results, those efforts can be redirected into hypothesising future market scenarios and anticipating potential shifts. This can be used to usurp competitors.

“One way to look at marketing is to never let any communication go unattended, because it reflects through the way the topic is handled by the brand. Consumers do voice their positive and negative feedback,” Nair says. “It is the brand which has to handle situations.”

47

interview

Surya Subramanian

Banking on trust

Surya Subramanian isn’t a man who can afford to get his sums wrong.

Emirates NBD’s Group Chief Financial Officer talks to CFO ME about his relationship with technology, IT banking threats and the company’s CIO, and how his customers are benefitting from the digital transformation.

48

www.thecfome.com

FEATURE

Surya Subramanian

S

urya Subramanian never lets technology connections impair his plans. “Speaking with my CFO hat on, I can never purchase tech for the sake of tech,” he says. “Return on investment has to be there, but this can come in a number of forms: improved customer experience, market leadership, renewing enhancements or risk mitigation. A project has to tick one or more boxes, and the more it ticks, the faster it will go ahead.”

Four years into the job – and into his stint in Dubai – Subramanian’s role is heavily intertwined with IT. “Broadly speaking, my job is split into two roles,” Subramanian says. “One is in finance, and the other in bank management, which encompasses technology cost and benefits, as well as strategy. Thankfully it’s not a Jekyll and Hyde balancing act.” He also says he is “joined at the hip” with company Chief Information Officer Ali Sajwani. “Ali works within the COO’s enterprise, and is in charge of the IT board,” he says. “He’s in charge of the steering committee process, which considers all projects and change requests, and involves most senior C-suite executives of the organisation. That’s the main forum for presenting technology details and implications. He has a small finance team that reports to me, but we work very closely together.”

This close bond has had a marked impact on the way Subramanian values technology, and a number of cutting edge initiatives that he has overseen have now come to fruition.

“As an organisation, we like to see our customers benefit from the digital transformation,” he says. The bank has installed a video teller system in Dubai Mall, and two of Emirates NBD’s other important initiatives were launched in late 2014. Its Direct Remit service allows money to be transferred to certain banks

www.thecfome.com

in India and the Philippines in just 60 seconds at no charge, while eIPO allows companies to turn themselves public via an ATM or through online channels. eIPO has been used in “four major” Q4 IPOs, including Emaar Malls’ decision to go public in September last year.

“As the market moves, we always need to bolt on enhancements to our core banking services,” Subramanian says. “As technology evolves, we need a certain common platform to run applications. We believe in technology benefitting our customers.” The company has also “sliced and diced” its IT chain by using disclosure management software to now publish Q4 results by 18th January, when they were previously released around 13th February.

Subramanian names the company’s most used technologies as its corporate board application, email, messaging software, and telecom applications. He says a balance must also be struck between what can be outsourced and what should be built internally. “We take care of elements that give us a competitive edge,” he says. “Things like mobile banking we do ourselves, whereas it doesn’t make financial sense to build an inhouse application for core banking.

Although our IT architecture is complex, it is no different from a standard bank, but everything does have to be constantly refreshed, replaced and redesigned as we are one of the largest banks in the Middle East.”

The 2007 merger of Emirates Bank International and National Bank of Dubai into Emirates NBD continues to have an impact on the company’s IT. “The history of the merger has meant we are still aligning banking systems,” Subramanian says. “That is just one aspect in which we are engaged in continuous enhancement.”

Perhaps at the top of the list for any modern banking IT arm is the issue of security. Get it wrong, and vast sums of cash, as well as the organisation’s invaluable reputation will be in jeopardy. “We are in a business of trust, and we cannot afford to lose that,” Subramanian says. The IT and finance teams work in tandem to ensure things don’t go awry. “A dedicated team decides the budget for security. We do vast amounts of internal and external penetration testing, and have a multi-layered security apparatus, including self-imposed security.

In-house leaks can be dangerous, but we also use other agencies that work with us for external perimeter checks.” Subramanian is bullish about the bank’s IT security as a whole. “The reality is that we haven’t been hit so far – but you can never be sure; you can’t know what you don’t know,” he says.

Subramanian is far from flattered by impostors who involve him in remittance scams. “At the moment there are around half a dozen people impersonating me on LinkedIn,” he says. Such profiles are used to ask relatives of the bank’s customers to deposit cash in exchange for the assets of their ‘deceased’ loved ones.

“Our Head of HR has the most fake profiles of anybody I’ve ever met. The people behind these accounts are often sloppy with their imitations, but you’d be surprised how many people fall for their scams.”

Although the future of technology in banking is cloaked in mystery, Subramanian is certain of one thing, “As our volumes increase, so does the demand for more advanced technology,” he says.

“Technology is not just about fancy things; the engine room of the organisation. It’s also about improving the smaller everyday processes that benefit our staff.”

49

opinion

Treasury

Treasury tech talk Saad Maniar, Managing Partner of Crowe Horwath UAE, explains how modern technology and software can be utilised to maximise finance business performance.

R

ecently, I was invited to join a high profile round table event organised by this magazine where the key discussion points included a review of systems that provide full transparency and real time transactional frameworks for treasury functions, the strategic and logistical advantages that the new technology brings for areas such as predictive accounting, cash flow management and financial exchange governance and the evolving role of treasury management and how the new technology capabilities enhance the raft of banking relationships.

So, from Wall Street to back street, what’s driving this treasury technological transformation?

Here’s a simple answer. Before the financial crisis, many treasurers lacked real time visibility over their cash and risk positions and were using the traditional approach to finance reporting. However, since 2008-2010 credit risk and liquidity management have been at the forefront of corporate overhaul strategy, leading to a transformation in both the profile of treasury and the role it fulfills, and in the technology that facilitate visibility and control over cash and risk.

Needless to say that despite the dynamic changes in financial technology, the treasury function stubbornly continues to use some archaic systems and in some cases, paper-based solutions in the way they prepare their financial statements and reports and this continues to pose great challenge.

50

Granted, treasury has remained traditional for good reasons as well. It doesn’t want to join the bandwagon of disruptive technologies. Look at how technology like smartphones, mobile wallets, voice print, cloud computing and the like… are changing every single day with more functionalities.

Treasury may look archaic, but remaining traditional has its positive side, as it guarantees security of data and minimizes chances of errors.

Implementing a secure treasury solution does not have to be as fast as these disruptive technologies.

It should take an incremental and layered approach.

While modern technology and software makes treasury function easier in the area of preparation of financial statements, it also comes in handy when dealing with fraud.

As you are aware, cash and liquidity are the key treasury operations that include global cash management, forecasting, payment controls, bank relationship management and the funding structure of the business. Risk management is a core treasury activity to manage financial risks such as foreign exchange, interest rate, commodity prices and counterparty risk.

So, has this automation transformation addressed the needs of accountants and treasurers?

Partly. There’s no doubt technology has improved the way accounting and treasury functions, however it has not cured all ills.

The world is increasingly global in the level of connectivity and

every day the pace of information moves faster than the one before.

Organizations operate on a progressively global basis. As a result it becomes increasingly challenging to manage a central view of all financial arrangements.

As finance professionals, we are constantly bombarded with new tech compliance procedures.

However, even with the increased investment in treasury technology to comply with the procedures, the primary challenges facing treasury still exist. These include inadequate systems, financial exchange management, and visibility to global operations continue to be difficult.

Other challenges include a lack of clear understanding in terms of new compliance standards, lack of comprehensive controls across the organisation and the general compliance fatigue. Some organisations resort to outsourcing of some of the processes, which often leads to third parties having access to data they shouldn’t have access to.

As finance professionals, measuring and monitoring treasury security must be an ongoing process. It is a dynamic security policy because the threat landscape changes every day. As effective as we are, criminals are equally savvy. It has to be dynamic.

Keeping up with modern technology will definitely help the treasury professionals perform their job more securely, efficiently, more cost effectively and in a timely manner.

www.thecfome.com

Investment partnerships for long-term shareholder value creation

Outsourced Accounting Why Should We Outsource Our Accounting?

The Benefits of Outsourced Accounting

Cost effective

Reduction in employer payroll taxes

Expertise

No workers’ compensation insurance

Accuracy

No medical insurance or other benefits to pay

Consistent reconciliation

No retirement plans

Backup

No vacation or sick days to consider

Allows you to focus on core business

No placing classified ads

Fraud prevention

No screening interviews

Confidentiality

No HR issues

Accounting Services Financial reporting (Internal & External) General ledger accounting Auditing (Internal, External, & Statutory) Design and implementation of corporate accounting platforms Accounting software package implementation

Corporate Finance Advisory Corporate acquisitions & divestitures Mergers & acquisitions Management & leveraged buyouts Capital raising (debt & equity) General corporate finance advisory and planning

Grosvenor Business Tower, Office 1911, PO Box 502831 Tecom – New Media City, Dubai, United Arab Emirates Phone:+971 4 456 3401, Fax:+971 4 456 3468 Mob: +971 50 342 1613, E-mail: info@nm-invest.com manager@nm-invest.com, Website: www.nm-invest.com

insight

Deloitte

O F C ist g te a r The st Four orientations for en

C

gaging in the strategy pro

EOs and boards increasingly want CFOs to not only deliver a finance organisation that gets the numbers right, but also partner with them in shaping the company’s strategy. But when asked what they want from a strategic CFO, their answers vary.

For example, CEOs typically want their CFOs to look around corners for new opportunities and potential black swans as well as help transform the company’s products and markets, capitalise and plan for future growth, create and effectively communicate the corporate growth story, and improve decision making around key investments. At the same time, boards have their own expectations concerning risk management, protecting the company’s reputation, and compliance and regulatory matters, among others.

Given this varied mix of responses, where should CFOs focus, and how should they orient themselves to supporting strategy?

Based on practice observations, discussions with numerous CFOs, and knowledge gained from more

52

cess

than 500 Deloitte CFO Transition Lab sessions, we have framed the four orientations of a strategist CFO model to help guide better alignment between CFOs’ actions and CEO and board expectations. Beyond the well-established four faces of the CFO as operator, steward, catalyst, and strategist, the orientations bring greater clarity to the strategist role and the capacity of an organisation to reorient and execute a new strategy.

We’ll outline the orientations and examine how each is a choice regarding the scope of a CFO’s role and means of involvement in the strategy process.

The strategy process: core questions Making the necessary choice starts with a version of the cascade of strategic choices first laid out by A.J. Lafley and Richard Martin in their book Playing to Win: How Strategy Really Works. Key corporate strategy questions include: 1. What are the aspirations and goals of the company?

2. Where will you play? (What products and/or services will your company

choose to offer, and in what markets will you offer these products and services?)

3. How will you play to win? (How will your company differentiate itself to gain advantage over competitors?)

4. What distinctive capabilities are required to sustain competitive advantage?

5. What management systems and processes are required to succeed?

CFOs can then bring a financial discipline to support and extend the above strategy process by addressing questions such as: 1. Are the financial goals of the company viable?

2. What products and markets deliver the greatest promise for revenue or margin growth?

Four orientations There are four distinct ways CFOs can orient themselves— responder, challenger, architect, or transformer: Responder. As a responder, the CFO and the finance organisation support the company’s strategy development

www.thecfome.com

Insight

Deloitte by helping key business leaders quantitatively analyse the financial implications of different strategy choices. This type of CFO orientation is especially evident in highly decentralised businesses where the CEO chooses to drive accountability for strategy and performance to business-unit leaders. Occasionally, this orientation is also prevalent when the CEO chooses to limit the role of the CFO or finance in the strategy process to quantitative and analytic support. To be an effective responder, the CFO and finance organisation should consider having a central financial planning and analysis (FP&A) capability that delivers the relevant analyses and data to the businesses, whose leaders have primary responsibility for generating strategy alternatives.

Challenger. As a challenger, the CFO and finance organisation act as stewards of future value in the strategy process by critically examining the risks to, and expected returns on, different strategy alternatives. Being a challenger is sometimes equated with being a “Dr. No,” as the CFO and finance organisation seek to minimise risk or ensure adequate returns to future capital allocations and investments - see Lessons from the Lab: It Takes More than “Dr. No” to Create Value. Being an effective challenger may require the CFO and finance organisation to have FP&A capabilities similar to those required of a responder, as well as access to requisite information from the business units on key strategy assumptions and models.

Importantly, the CFO requires the permission of the CEO to challenge business-unit leaders and their strategies. When given that permission, the CFO as challenger is especially critical to the review of major strategy investment decisions.

Architect. In the architect orientation, the CFO, finance department, and business leaders jointly work through

www.thecfome.com

shaping strategy choices and apply finance strategies to complement and maximise the value of particular strategies. Architects go beyond the challenger orientation to enable the financing of innovative initiatives through varied finance strategies and finance arrangements with suppliers, customers, or delivery channels. Architects thus work to find “a path to yes” on key business investments. To effectively deliver the architect orientation, the CFO, finance organisation, and businesses might need to establish mutual trust and work together at the outset of setting the strategy. In addition, the CFO often needs a strong finance team inside the businesses to proactively partner with business leaders throughout the strategy process.

Transformer. As a transformer, the CFO becomes a lead partner to the CEO in shaping and executing future strategy. The CFO is key to execution of “real operational and financial options” for shifting the product market mix, delivering value, and creating distinctive capabilities. For example, consider a multidivision company with common accounting and financial systems where the original synergies driving the existing product market mix no longer exist.

By upgrading the systems, but doing so in a way that allows the efficient spinout of a division in the future, the CFO operationally creates the capacity for shifting a core strategy choice - the product market mix.

Or, by changing the mix of debt to equity, the CFO may free up cash to invest in future growth, creating financial options for the future.

Through carefully structured financing and lease models, the company could change how customers are able to buy or use its products, thus shifting the business model to moreprofitable formats. In short, CFOs as transformers proactively engage in addressing the core questions in a

strategy process, and they develop and execute options through finance in a way that allows the company to shift its strategy effectively.

Choosing to be an effective strategist For CFOs, choosing to be an effective strategist demands earning a seat at the strategy table, having an effective finance team, and selecting the strategy orientation that is appropriate to the context of the company and level of permission granted by the CEO. This is obviously not simple, and effective CFO strategists continually need to reorient themselves to changing organisation situations and contexts.

While increasingly recruited to be strategy partners to their CEOs, many CFOs in our CFO Transition Lab sessions note they have to earn a seat at the strategy table especially those internally promoted from controller, accounting, and finance-operations roles. Initially, this generally requires three things: knowing the businesses, generating valuable strategy ideas and opportunities, and having a finance organisation that delivers the basic finance and accounting processes consistently without errors.

One way to generate valuable strategy opportunities is to ask critical questions about the dominant growth constraints, uncertainties, and risks, and scale assumptions confronting the company. A strong finance team is also key to earning a seat at the table, for three reasons.

Firstly, by getting the basics right, the team presents the finance organisation as credible. Second, a strong finance team frees up the CFO to attend to strategic matters.

Lastly, it can provide the quantitative analysis and support capabilities vital to shaping strategy.

(This article was sourced from Deloitte CFO Insights)

53

Blog

Oracle

Does Big Data affect the CFO?

By Karen dela Torre, Vice President, Oracle

B

ig Data is the latest buzz phrase in business but what does it mean and why is an appreciation of Big Data so important for the office of the CFO and senior management decision-making? The notion of Big Data is not entirely new.

After all, CFOs are accustomed to dealing with mounting volumes of information. But when does a lot of information become Big Data? For the most part, the finance function has not had to deal with the issues of Big Data - the volumes in most core financial applications are large but certainly not in the realms

“

of terabytes, petabytes, or even greater. Big Data takes “large” to an entirely new level.

The statistics bandied around

by Big Data cognoscenti are truly breathtaking. According to Gartner, the volume of worldwide information is growing annually at a minimum rate of 59 percent annually - or to put it another way, all of the world’s data in existence today will have doubled in less than two years. But Big Data is characterised by much more than just volume. The so-called three “Vs” of Big Data neatly sum up its characteristics: volume, velocity, and variety.

But Big Data is characterised by much more than just volume. The so-called three “Vs” of Big Data neatly sum up its characteristics: volume, velocity, and variety.

54

Variety is causing the growth in data volume Nevertheless, volume is important.

So what is driving the explosive growth in volume, especially when the world’s economy is hardly growing? The explanation lies not in an increase in transaction volumes but in a broadening of data sets - collecting more analysis about current data - plus the collection of entirely novel types of data.

For example, in the accounting arena Solvency II requires insurers to hold information about counterparties and IFRS demands more-segmental analysis.

Furthermore, environmental and sustainability reporting has forced some organisations to collect entirely new information, such as electricity meter readings and CO2 emissions.

Hence, organisations are grappling with variety as well as volume.

Added to the mix is the rampant growth of unstructured data such as commentary and other text-based information in social media, blogs,

www.thecfome.com

Blog

Oracle

“

The broadening of information requirements and initiatives such as integrated reporting will entail the handling of more data sources and even more information.

and Websites. The proliferation of mobile devices has added a new dimension, exacerbating the growth of Big Data as organisations and individuals find themselves able to interact with each other as well as corporate systems anytime and anywhere.

But what of velocity? Uncertain times create an insatiable appetite for information. Nervous regulators want to see information more frequently and management teams want to reforecast more often. So the speed with which information is demanded, delivered, and consumed is accelerating. But how do organisations rise above the challenge of Big Data?

Where Is the value in Big Data?

Perhaps it is time for businesses to consider a fourth “V” - the “value” of information since it is the value of the information that should drive the investment in Big Data rather than the collection of it, for its own sake. In fact, market commentators caution that the unfettered pursuit of Big Data will lead to difficulties in data collection, data transformation, data storage, and data analysis, potentially undermining established processes such as performance management that may not be able to cope with the manipulation of such large and unwieldy volumes.

Yet there is value in Big Data provided you know where to look

www.thecfome.com

and have deep enough pockets A shortage of analytical skills to fund the investment. Amazon There are also concerns about the and eBay probably know more availability of skills to manage, about their customers than almost analyse, and interpret Big Data. any other retailer by virtue of the For example, the McKinsey Global masses of data they Institute suggests that collect and analyse. Even the United States alone in the office of the CFO faces a shortage of there are signs that Big 140,000 to 190,000 Data could turn into big people with deep insights. For example, analytical skills as well annual the combination of as 1.5 million managers unstructured social and analysts to analyse growth in analytics and financial Big Data and make information forecasting could lead decisions based on their volume to a new generation of findings. Added to which forecasting techniques the Corporate Executive in which forecasts are Board says that even as informed by customer companies invest eightsentiment about products, and nine-figure sums to derive customers, and campaigns. insight from information streaming Where Big Data straddles in from suppliers and customers, multiple data sources can lead less than 40 percent of employees to enhanced competitiveness. have sufficiently mature processes The pharmaceutical, financial and skills to do so. services, retail, and agricultural Big Data is a phenomenon that the industries are already learning to CFO cannot ignore. The broadening master the implications of Big Data. of information requirements and But marshalling and tuning data initiatives such as integrated on this scale requires specialised reporting will entail the handling information discovery tools that of more data sources and even can build effective database more information. Big Data might structures yet shield end users from not have arrived in the finance complexity. The key to big advances function just yet, but the writing is from Big Data will be the ability to on the wall. This is a good time for meld the ease of use of traditional CFOs to huddle with their CIOs to business intelligence with the new discuss and develop a strategy for technologies necessary to manage managing and leveraging Big Data such large volumes. for competitive advantage.

59%

55

TECH TALK

APPS

Apps for CFOs on-the-go A round up of some of the best mobile apps for chief financial officers

Flipboard Have your favourite news article or magazine clipping at your desk or in your pocket, ready to be opened and read. This app is your personal magazine – you can view stories, photos and videos while on the move. Pick a few topics and tap any of the tiles to begin flipping through your personal magazine.

Through the app you can follow a few topics and save them on the app. You can always add more as you find new topics, magazines or interesting people to follow.

Read world class publications like The Financial Times, The Guardian, New York Times and the likes on Flipboard – find any source with the search bar. Save stories you enjoy and connect them to your Facebook, Twitter and LinkedIn accounts and easily share your posts with friends.

56

AVAILABLE ON

Android and Windows COST

Free

www.thecfome.com

TECH TALK

APPS

Roambi Analytics This fantastic app allows you to turn raw business data into interactive graphics designed for mobile devices. You can easily transform data from CSV, CRM, databases and the like into interactive charts, dashboards and visual images. It contains 10 pre-designed dynamic visualisations that you can choose from to make the presentation of your data more visually appealing and engaging. Roambi helps provide on-the-go professionals with the data they need in a format they can understand - anytime, anywhere.

AVAILABLE ON

iOS, Android and Windows COST

Free

Meeting Mapper This app is fantastic for documenting meetings for CFOs who are always on-the-go. Through Meeting Mapper you can track who was present at a particular attended the meeting, their stance, role and level of participation.

You can also add new contacts to your contact database during a meeting. Take detailed notes (both public and private) which you share with the other participants of the meeting. Gather rich information and data in the meeting to easily create action items or next steps and automatically schedule the actions for follow up.

The app is fully integrated with Evernote, Box, Dropbox, Salesforce and Oracle Sales Cloud.

AVAILABLE ON

iOS (compatible with iPad) COST

Free

www.thecfome.com

57

cOLUMN

Geetu Ahuja

Big Data – Are management accountants ready to harness the buzz?

By Geetu Ahuja, Head of GCC, CIMA

T

oday we consume and utilise data more than ever before. About 20 years ago, our average daily intake of technology was around 6 hours, mostly in the form of TV, radio and computer usage. In 2015, it won’t be far-fetched to assume that almost 95 percent of our waking hours is spent connected to technology. Trillions of tweets, blogs, Facebook, LinkedIn, Instagram posts are created by the hour and this number is only expected to rise further.

Apart from social media, which only forms a miniscule part of this data, retail transactions, medical records, travel records, commuter movements, educational records, and even security surveillance data are captured on a daily basis. Our consumption of these massive amounts of data and information has today given birth to the Big Data buzz and as data gets generated at the speed of thought, we simply cannot discount or ignore it.

So, what is Big Data and what does it have to do with management accountants in the Middle East?

Interestingly, Big Data has been ranked as one of the ten most influential technology trends that will have the potential to significantly reshape the business and accountancy landscape.

In the region, it is slowly gaining momentum among the accounting fraternity, however, its influence is yet to be fully realised.

The challenge for organisations and business managers in this exciting new space is to first recognise the

58

potential of Big Data. They then need to develop strategies for capturing and managing data, followed by developing and encouraging talent within their organisations to exploit the benefits of Big Data. It is in this last step that management accountants have a significant role to play given their training, skills, competencies and mindset.

As a business organisation, what really matters is the value Big Data brings to the table rather than just looking at it as a technology hype that needs to be adopted and this is where the management accountant’s role begins.

Management accountants standout from their typical counterpart, the financial accountants. In that respect, they are not limited to internal financial data and performance analysis but are involved in the overall performance of an organisation from financial, productivity, efficiency and effectiveness measures. In the era of Big Data, management accountants need to redefine many traditional boundaries and definitions and acquire new skills. Their role demands the same output at a higher rate of adoption and they need to be agile, learn new skills, and probably challenge some fundamentals too.

As decision makers in their organisation imagine the opportunities they can have with the insights of the online searches filtered for their customers. If they work for a bank and if they know that their customer

is, at a particular moment, browsing on websites for vehicles to buy or houses to rent, knowing the customer’s financial position through the accounts they maintain, the bank might be able to offer car or housing loans before the customer goes to another financial services company. The possibilities are endless and it is the identification of what is valuable real time or near real time information to their organisation that is the real game-changer.

I think management accountants are poised to be tomorrow’s data scientist if they acquire the required skills such as advanced algorithms, use of new technical tools, data handling and mining and so on.

Organisations today expect their management team to provide predictive insights that will enable decision makers to develop strategy and deliver strategic outcomes. Getting to grips with Big Data and business analytics will provide them the ideal platform to achieve the recognition as truly value adding business partners.

What they should recognise is that they must be open to the idea of transforming themselves by looking and thinking outside the box. Big Data and business analytics is an opportunity that should not be missed.

Management accountants must recognise that they have a very powerful toolkit that can complement their current roles and responsibilities in their organisation and now is the time to get involved in the Big Data buzz before it is too late.

www.thecfome.com

Feeling the Pressure of Inefficient Reporting?

We Have Your Solution Relieve your stress by integrating Excel directly with your SAP or Oracle E-Business Suite environment.

Reduce your risk of reporting error with a direct, real-time link to your ERP data.

Empower your users to quickly and easily create and run visually rich, intelligent reports and dashboards.

Award-Winning Software Excel4apps solutions have cured the reporting pain of over 20,000 Oracle & SAP users in 62 countries.

Escape the constraints of time-consuming traditional ERP reporting tools with our fast, accurate and flexible reporting solutions.

Visit us at go.excel4apps.com/relief to learn more and enter the draw for an iPad Mini.

go.excel4apps.com/relief