South Africa

Details

  • Service: Advisory, Performance & Technology
  • Type: Press release, Survey report
  • Date: 2011/06/10

CFOs face multiple challenges building ‘visionary’ finance functions 

A new study from KPMG International and CFO Research Services found that demands of modern globalised business are forcing finance professionals to transform themselves from efficient managers of transactions into ‘business visionaries’, providing boards with insight into true performance measures and guiding corporate investments and cost control decisions.

But, problems with inflexible systems and tools, difficult internal collaboration structures and lack of appropriate skills, combined with the sheer complexity of modern organisations, are preventing good progress for many finance functions.

 

These insights come from A New Role for New Times, a survey of nearly 450 senior finance professionals in large companies throughout the world, carried out by CFO Research Services in collaboration with KPMG’s global Financial Management practice.

 

Nearly half of the respondents reported that their departments were playing a greater role in strategic decision-making now than five years ago, and 62% said they expected this role to increase still further towards 2015.

 

Much of this change in role is being driven by the widespread consequences of the merger and acquisition boom of the years leading up to 2008, and the financial meltdown that followed.

 

“Many respondents surveyed said that they were dealing with much more complex organisations than in the past, and that an important part of their work now involves helping senior colleagues to understand the implications of this new complexity for the profitability of the company,” said Therese Cilliers, Director for Finance Transformation at KPMG in South Africa.

 

“But the role now goes beyond just explaining financial performance. One Chief Financial Officer (CFO) in the US said that a key function of the CFO today is the anticipation of critical financial factors that will keep a business moving along in a sustainable manner. He added that the finance officer has to be ‘a visionary of the business, not just a storyteller’,” said Cilliers.

 

Developing the ability to provide this insight is not proving to be a straightforward task, the survey found.

 

Executives give themselves high marks when it comes to processes that are internal to finance, including treasury activity, general accounting and financial reporting, and risk management activities. They are less confident with planning, budgeting and forecasting, where nearly a quarter regarded these as weaknesses.

 

While survey respondents say they will seek to improve their capabilities for planning, budgeting, and forecasting, they also acknowledge that these processes are often the most difficult to transform.

 

“A common problem,” said Cilliers, “is that planning and budgeting involve the entire organisation, but finance is not always seen as the leader of this process. Finance professionals may be acting as coordinators, but they often have difficulty bringing people together to change what are often highly political processes.”

 

Improving these systems is made difficult by perceived problems in working with other departments. Only 43% of respondents thought that their own department’s ability to support major business decisions such as mergers and acquisitions was a strength, while approximately 40% cited as a strength the quality of their work with other administrative departments or the IT function.

 

Difficulties with the IT function are a particular concern, since this seems to be the area which requires most work. Many respondents were concerned that their financial systems are not evolving fast enough to meet the changing needs of the company, describing their current systems as ‘antiquated’.

 

“A key aim for many finance departments is to link strategic planning and rolling forecasting to improve investment decisions and cost control,” said Cilliers.

 

“But where the financial system infrastructure does not provide accurate, up-to-date and consistent information on all parts of the business, this is very difficult to do. A great deal of the work we see today in finance departments is directed at putting financial reporting onto a single, up-to-date platform across all parts of the business, particularly after a merger. Stories of major difficulties in this process are common,” she added.

 

CFOs also reported problems with finding the right people to staff their departments. One South African consumer goods company CFO said, “the people we hire are excellent management accountants, strong in governance. But they can be hopeless at conceptual/analytical matters and business decision support services.”

 

To assist local companies with the new complexities confronting CFOs, KPMG in South Africa recently acquired business intelligence solutions company FIOS. “This acquisition has created a win-win-win situation,” says Tony Vicente, Managing Director of KPMG's Performance and Technology business unit. “Not only does KPMG benefit from the expertise of market leaders in business intelligence (BI) systems and methodologies, but FIOS can leverage off our large client base. The ultimate winners, of course, are our clients who benefit from more sophisticated IT and BI solutions to the challenges they face without outsourcing to a number of different suppliers.”

 

Some companies have chosen to split the business support role out of the accounting department and run it as a separate part of the finance function. But, others have found that this can lead to “silo thinking” and a sense of isolation between the accounting team and the business advisers.

 

“We are finding that traditional skills are failing to match the requirements of a transformed finance function,” said Vicente. “There are many opportunities open for people able to match accounting skills with insight and good communications, but they are hard to find.”

 

“The core message coming out of this research and KPMG’s work with clients is that finance functions need to embrace a change of culture if they are to meet the demands placed upon them,” said Cilliers. “Changing economic conditions are continually expanding the information and analysis that top management requires from finance, and the strategic tasks that flow from them.”

 

“To meet these needs, CFOs are working to make their functions more agile and better-aligned with their company’s growth strategy. This is not a process that can be completed overnight. With the right tools and the relevant expertise at their disposal, CFOs should meet the emerging demands placed on them revealed by our survey,” Vicente concluded.

 

Notes

 

A New Role for New Times is published by CFO Research Services and reports the results of just under 450 online responses from companies in South Africa, North America and Europe, collated and analysed by CFO Research Services, working in collaboration with KPMG’s global Financial Management practice. The report examines respondents’ views on the role of their corporate finance function today and their aspirations for the future in meeting evolving requirements. Respondents included senior finance executives working for companies in a wide range of industries, with the manufacturing, financial services, chemicals, energy, utilities and consumer goods industries particularly well represented.

 

The survey results are being released with KPMG’s Transforming Finance – Challenges and breakthrough solutions for CFOs, which is a response to the issues raised in A New Role for New Times from KPMG professionals around the world. It draws on their experience and on a number of case studies to present ideas for practical solutions to the challenges of addressing rapidly-changing global financial transformation.

 

About CFO Research Services


CFO Research Services is the sponsored research group within CFO Publishing LLC, which also includes CFO magazine (www.cfomagazine.com), CFO Conferences (www.cfo.com/conferences), and www.cfo.com.

 

Contact

Contact

Therese Cilliers
Director
Finance Transformation
Tel: +27 (0)11 647 6749
therese.cilliers@kpmg.co.za

 

 

Tony Vicente
Head of Performance and Technology
Tel: +27 (0)11 647 8294
tony.vicente@kpmg.co.za

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