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Corporate Finance, DeFi, Blockchain News

Masters of finance

By Paul A. Boulanger, Christian Campagna, James M. Ellis and Chuck Wise

Most CFOs are trying to drive value in today’s turbulent markets, but only a few are succeeding. Here are five advanced capabilities that sustain their achievement.

Stop worrying so much about cost control within the finance function and start focusing on growth instead.

Before you say, “Financial heresy!” consider this: When Accenture recently surveyed more than 500 senior finance executives across 14 industries and more than 20 countries to discover how well they are coping with virtually continuous market volatility, we found that organizations with the leanest financial functions are also performance laggards.

Indeed, our research indicates that in their zeal to downsize as demand for their companies’ products or services declined, some finance organizations may have reduced costs too much—underinvesting in their function to the point where its ability to create value for the larger enterprise is being seriously compromised.

Half the finance executives we surveyed told us that they remain focused on reining in costs. But our research also revealed a significant shift in thinking as companies grapple with the complexities of today’s global marketplace. Some 38 percent of chief financial officers and 46 percent of the broader C-suite they serve now believe that the finance function should start relaxing its obsession with cost control and concentrate more on collaborating closely with fellow executives to find profitable growth opportunities for the enterprise as a whole.

Finance, in fact, is well positioned to act in a more central and strategic manner within the company by assuming three key roles: provide critical guidance on how and where to allocate resources and invest to drive growth; identify and minimize risk; and help shape a strategic response to market volatility.

Of course, excelling at such financial basics as core accounting is critical to delivering such value. And our research confirms that finance organizations generally have improved core capabilities substantially over the past three years—so much so that nearly three-quarters of the finance function’s C-suite “customers” say they are satisfied with its contribution to the broader strategic goals of the enterprise.

Still, since 53 percent of our survey respondents say that regulatory change has a very high impact on the function, accounting and compliance capabilities will continue to face ongoing pressure to adapt. And neither finance executives nor the broader C-suite are satisfied with the finance organization’s performance in the areas they say matter most—its effectiveness for the business, the quality of its workforce and its management of risk.

Our research revealed, however, that few finance organizations—less than 15 percent of responding companies—are delivering higher value to the enterprise; we have designated them “masters” of finance. We identified them by analyzing performance metrics provided by participants across three key areas—core accounting, cost of finance and delivering value—to see which organizations were outperforming the overall group.

Focus of finance: Different perspectives

At many companies, there is a clear difference of opinion within the C-suite about what role the finance function should play. For example, whereas only a little more than a third of CFOs believe the finance function should focus primarily on growth-oriented activities, nearly half of other C-level executives think growth is where the focus should be.

Masters of finance

And when we investigated further we found that the winners are not only well integrated with the enterprise as a whole, they are also masters of five specific, advanced financial capabilities.

1. Finance function strategy and governance

Having an ongoing finance function strategy is considered a core capability for high-performance finance organizations. And while all the organizations we surveyed have improved in this area, finance masters take a significantly more sophisticated approach to the overall management of their function.

Winning finance organizations focus on the continual development and enhancement of their capabilities—and enterprise growth is high on their strategic agenda. For example, only 12 percent of finance masters told us that they would still be focused primarily on cost control a year from now, while more than half said that at that time, growth would be of culture by instituting the change management processes needed to help embed a value creation mindset across the company. As a result, the Stockholm-based company has enhanced its growth execution capabilities.

Leading finance organizations also have an exceptionally clear governance structure, organized to maximize competencies in support of their strategic agenda. For example, finance masters make a clear distinction between financial planning and analysis on the one hand and accounting operations on the other, and they organize accordingly. Moreover, each individual part of the finance function clearly understands its role—not only internally but also in relation to the enterprise as a whole.

Most critically, the finance organization as an integrated entity holds a key position at the heart of the larger enterprise, and thus is able to contribute directly to the strategic priorities of the company.

Consider, for example, the case of a leading global steel group, which transformed its previously decentralized finance function into a single, global entity as the first step in a process designed to enforce groupwide responsibilities. The transformation, which resulted in a new operating model and strategic vision for finance within the enterprise, also created new reporting capabilities and capital expenditure—and helped drive a significant improvement in return on invested capital.

2. A value-centered culture

Finance masters understand that the creation of shareholder value is the goal of all enterprise activities. What’s more, they play a central role in driving that value.

Indeed, thanks to their role in planning and analyzing business performance, finance masters influence the broader culture of the enterprise. And by proactively embedding finance in the larger enterprise, ensuring that financial thinking, metrics and analytics are pervasive, they participate directly in high-level decision making—enhancing their ability to respond to constantly changing markets, which 46 percent of our survey respondents cited as one of their most significant challenges.

At the smoke-free-products maker Swedish Match, for example, the finance function played a key role in developing such a value-centered culture by instituting the change management processes needed to help embed a value creation mindset across the company. As a result, the Stockholm-based company has enhanced its growth execution capabilities.

3. Strategic planning and target setting

Finance masters are intimately involved in the ongoing process of identifying an appropriate business strategy and translating that strategy into specific objectives, value drivers and key performance indicators—as well as in creating the strategic planning documents and strategy maps that drive the business forward.

They participate directly in target setting, driving value by translating vision and strategy into rigorous operational and financial targets. Finance masters help analyze both the portfolio of businesses that make up the enterprise and their expected contributions, and they collaboratively set top-down performance targets for each segment of the business.

Case in point: Lantmännen Energi, a division of Lantmännen, a $5 billion Swedish farming cooperative that operates in 18 countries. The company has four business units that commercialize environmentally friendly gasoline, biofuel, grainbased ethanol and wheat products for the food industry.

The company wanted not only to establish a clearer link between its long-term strategy and day-to-day operations but also to be able to assess client and product profitability within each business unit in order to optimize its portfolios. By working with finance to identify key performance indicators for each unit, Lantmännen Energi was able to set individual targets that collectively contributed to stretch goals for the company as a whole.

4. Forecasting, reporting and analytics

Forecasting is the ongoing process of making projections of futureperiod business performance, usually on a monthly basis, while reporting and analytics looks at what actually happened, why it happened and what to do about it. Many finance organizations, accustomed to tackling both tasks in a more predictable environment, are struggling to do so in the new era of permanent volatility—especially if they are insufficiently integrated with the larger enterprise. Our experience suggests that the degree of integration tends to have a direct impact on the quality of insight into the reporting and analytics critical to line management. And finance masters have taken significant steps to integrate their function.

At one Southern Europe-based global retail bank, for instance, the CFO gained greater control over forecasting and analytics— and enhanced his organization’s role in driving value for the enterprise— after the company aligned its forecasting and reporting to focus on the achievement of the overall group strategy. The bank’s new, group-wide processes are not only faster and more efficient, they also allow all business units to see exactly where they are against their specific objectives within the overall group strategy—a much more thorough perspective than traditional accounting and budgetary views.

Accenture, similarly, leverages its own financial and operational data and enterprise resource planning platform technologies to drive an integrated forecasting capability that its various operations lean on heavily for day-to-day business decision making.

Meanwhile, the finance function at one European food company has dramatically improved its reporting and analytics capabilities. The company’s effort, which involved eliminating duplicate reporting and establishing structures to improve the quality and usefulness of information, has given the company both greater transparency into financial data and better datacapture capabilities—in short, more consistent reporting, better decision making and, thus, results.

Masters of finance

5. Financial risk management

Specific financial risks have traditionally been addressed within specific areas of the finance function— foreign exchange risk within treasury and cash management, for instance. But in today’s wildly unpredictable business environment, the management of risk must change accordingly.

Finance masters recognize that they must manage risk both more proactively and more holistically, building strategic, enterprisewide capabilities that focus on preemption and help identify how to derive business benefits from risky situations. As a result, they are involved in the identification, assessment, measurement, management and mitigation of financial risks right across the enterprise.

For financial services companies directly hit by the credit crisis of 2008 and its aftermath of capital and liquidity constraints, such an enterprisewide approach to risk management has clear benefits. Indeed, consolidated risk management can benefit most organizations. One diversified metals and mining company, for example, has minimized its market risk and improved credit and operational risk management by consolidating its processes and aligning its business strategy with operations.

As a result, the company’s finance organization is better able to manage volatile cash f lows and currency f luctuations—and the enterprise as a whole is better able to monitor the risk exposures that might translate into financial operational losses.

Nothing is certain in today’s turbulent markets. But by embedding their function at the heart of the enterprise, ensuring that financial rigor pervades decision making, and developing advanced planning, forecasting, reporting and risk management capabilities, some CFOs are showing that mastery of finance is not only achievable, but also a key value driver for the business as a whole.

About the authors
- Paul A. Boulanger is the managing director of the Accenture Finance & Enterprise Performance group. He has more than 20 years of management consulting experience working with clients worldwide across many industries, helping them develop finance function strategy and plan and implement large-scale finance transformation and change programs. Mr. Boulanger is based in Atlanta.
- Christian Campagna is the Frankfurtbased managing director of the Accenture Finance & Enterprise Performance group in Europe, Africa and Latin America. Dr. Campagna, who has more than 20 years of cross-industry management consulting experience worldwide, focuses on finance function strategy, integration and transformation programs, and the design and reengineering of finance and other general and administrative functions and processes.
- James M. Ellis is the managing director of finance operations in the Accenture Finance & Enterprise Performance group. With 25 years of management consulting experience across several industries, Mr. Ellis works with multinationals in strategy and organization design, M&A and post-merger integration, shared services, process reengineering and business process outsourcing. He is based in Atlanta.
- Chuck Wise is an Atlanta-based senior principal in the Accenture Finance & Enterprise Performance group, leading Accenture Benchmarking Solutions. For nearly 20 years, Mr. Wise has worked with clients across many industries on cost and performance benchmarking, finance functional strategy, finance organization design, enterprise performance management, post-merger integration, shareholder value analysis and strategic cost reduction programs.
- Les S. Stone is a New York-based senior director in the Accenture Finance & Enterprise Performance group. He has more than 35 years of finance experience, including holding senior finance roles in a Fortune 150 firm.
- Atlanta-based Doug Derrick, who leads Accenture’s North American Management Consulting in automotive, industrial equipment, infrastructure and transportation services, works with clients in strategy, logistics, operations and dealer development.
- George Marcotte leads Accenture’s Enterprise Performance Management Strategy group globally as well as the company’s Enterprise Analytics group in Europe, Africa and Latin America. He is based in London.

The authors would like to thank Robert Bergström, a Singapore-based executive principal in the Accenture Finance & Enterprise Performance group, for his contributions to this article.

For further reading “Accenture 2011 High Performance Finance Study: Delivering Value in a Complex World”:

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Lundi 2 Avril 2012