CFO AS ADVISOR

JUNE 16, 2014

MACPA

Copyright© 2008 RIGHT ADVISORY LLC. All Rights Reserved

Instructor Background

Robert M. Tarola, CPAPresidentRight Advisory LLC

1101 30th St., NWSuite 500 Washington, DC 20007(T) 202.625.8356(W) www.rightadvisory.com(E) robert.tarola@rightadvisory.com

Director and Audit Committee Member: Legg Mason Mutual Funds (10 years) TeleTech Holdings, Inc. (6 years)

CFO Positions: W. R. Grace & Co. (9 years) MedStar Health, Inc. (3 years) Howard University (4 years) - Current

Former Audit Partner: Price Waterhouse LLP (12 years)

Advisory Boards: PCAOB Temple University University of Denver University of Baltimore

Professional Boards/Affiliations: AICPA MACPA Licensed CPA in DC, MD, PA, VA Chartered Global Management Accountant

Education BBA Temple University , 1973 International Who’s Who of Professionals

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Introduction

This presentation is designed to help CPAs and other finance professionals develop an understanding of the

totality of issues facing CFOs and CEOs. With this knowledge, finance professionals, in business and

public accounting, can better conduct their activities and advise their colleagues/clients to make more

informed business and financial decisions.

A Peek Into the C-Suite and Boardroom

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Presentation Outline

What You Need to Know to be a Credible Advisor How Best to Advise Your Board Advising on Value Drivers Advising on Corporate vs Business Unit Issues How to Operate the Finance Function for Advising Advising on Risk Management Advising on Economic Factors

Q&A at Any Time

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Ruminations from the C-Suite

What Keeps CEOs and CFOs up at Night? Missing expectations – investors, analysts, board,

employees Not meeting organization commitments – customer

satisfaction, sales, profits, cash, product development Not meeting personal commitments – people

development, cost improvement, stakeholder satisfaction Threats from the outside – competitors, litigators, take-

over firms, regulators

Does Your Work Cure C-Suite Insomnia?

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The Corporate Reporting Supply Chain

Where Do You Fit-In?

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Business Operations

Internal Financial Reporting

External Financial Reporting

Investment,Lending,

Regulations

Economic Policymaking

CompaniesFinancial

Publishers and Data

Aggregators

Investorsand

Creditors

CentralBanks

TradingPartners

Management Accountants

Auditors Regulators

Software Vendors

What You Need to Know – The Big Picture

Understand the View from the Outside Investors – Who are your top holders?

Customers – What are their desires and alternative options?

Analysts – Who covers you?

Media – Any special media that follow you beyond the traditional press?

Regulators – Who regulates your industry?

Understand Their “Agenda”

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The Big Picture

Understanding View from the Outside - Investors Who owns the enterprise? What is their investment thesis? What is their investment cost-basis? Who or what influences the investors? Are there any activist issues? How is your Investor Relations function perceived?

Know Your Investor Base

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The Big Picture

Understanding View from the Outside - Analysts Do you know their financial models?

Do they trust you?

What drives their advice?

What companies are your peers – in their minds?

Can you (should you) influence their view of the enterprise?

Companies Don’t Miss “Estimates” – Analysts Miss “Actuals”

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The Big Picture

Understanding View from the Outside - Regulators How many government or oversight bodies impact your

enterprise ? – you will be surprised!

How can they influence your business and industry?

Are you connected?

Can you influence?

Regulatory Surprises Can Impact Careers

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The Big Picture

Who Regulates Your Industry FDA – Food & Drug Administration

EPA – Environmental Protection Agency

FTC – Federal Trade Commission

DOL - Department of Labor

SEC – Securities and Exchange Commission

Stay close to the political factors

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Helping the Board

Management’s Role – Enlightening the Board about: Value drivers Risks Performance Compliance Perceptions

Auditor’s Role – Informing the Board about: Activities Concerns Confidence Level

Should be Protecting the Board

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Helping the Board

National Association of Corporate Directors:

Wants Boards to embrace the following principles:Sensible Executive CompensationEffective Risk OversightDemonstrated Corporate ResponsibilityOpen Transparency

Need to be Part of the Solution

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Helping the Board

Current Board Room Hot Topics:

Cybersecurity Enterprise Risk Management Regulatory Compliance Executive Compensation Succession Planning

CFO Often Needs to Lead the Discussion

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Helping the Board

Era of High Public Scrutiny and Frivolous Litigation Understand your financial and enterprise risks!

Look “beyond the balance sheet”

Comfort level of controls – assess, evaluate, conclude, communicate

Surprise quotient?

Don’t Know What You Don’t Know

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The Value Drivers

Key Value Factors Management credibility Competitive position Ability to innovate Capital structure Talent management Industry dynamics Risk profile Market perceptions

C-Suite Focus on Value Creation

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The Value Drivers

Understand How Your Business is ValuedCustomer viewEquity analyst viewDebt analyst viewRating agency viewRegulator view Investor relations view

Do You Know What They Think?

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The Value Drivers

Focus on Value Creation

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World-Class Financial Processes

Financial PlanningLong-term Mid-term

Short-term

Business vs. Corporate

C-Suite Has to Balance Often Competing Interests Compliance vs. risk taking

“Unfair?” reward systems

Should know vs. need-to-know

Business value vs. corporate value

Understand This Dynamic – Be Seen as the “Honest Broker”

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Business vs. Corporate

How to Drive Business Performance while Satisfying Corporate Governance Requirements Develop value-driven business plans

Incorporate IR and Treasury

Incorporate internal audit and risk management

Plan with analyst story in mind

Develop a Complementary Accounting Environment

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The Finance Function

How to Deliver Sophisticated Financial ServicesFinancial planning and analysisAccounting and reporting Investor relations and communicationsTreasury and taxationTransaction processing and controls Internal audit and risk management

C-Suite and Board Count on You!

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Financial Services

How to Develop a Partnering Mind-Set Focus on value drivers Be service oriented Be a team player

Why is it Important? Builds trust Enhances credibility Avoids finger pointing

Create a Value-Added Organization

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Financial Services

No-Surprises How to achieve? Why necessary? Who should be involved? How to set accountabilities?

No Missed Deadlines Part of the service culture Customers rely on commitments Help establish credibility

C-Suite Bottom Line

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Risk Management

Enterprise RiskNot just financial Look beyond the balance sheet Includes operational, reputation, legal compliance and

regulatory risks Incorporate in all plans and decisionsAssess against “Key Value Drivers”Guidelines – COSO and COBIT Frameworks

C-Suite and Board’s Primary Responsibility

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Risk Management

Questions to Ask: What Might Go Wrong? (and Why?) What Must Go Right? (and Why?)

Design Metrics to Address Both Questions Fiduciary and compliance Strategic and competitive

Develop “Metrics That Matter” to Monitor Risk

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Economic Analysis

Apply Macro- and Micro-Economic Theory and Analysis: To address the impact on investment and operating

decisions To determine proper accounting treatment for an event

or transaction To assess risk related to business cycles and value inputs To create the “story” for investors and analysts

Economics Drive - Decisions, Accounting, Disclosure

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Economic Analysis

What you Need to Know in Order to Measure and Account for the Economic Effects of Transactions: Business purpose? Desired outcome? Financial resources at risk? Who serves to gain? Who bears risk of loss? What are expected returns? Are accountabilities clear?

An Impartial Assessment is Critical to C-Suite

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Summary

Focus on Information Needs of Outsiders – Board, Investors, Analysts, Customers

Understand the Value Drivers of the Enterprise Coordinate the Interests of Corporate and Business

Objectives Create a Value-Added, Credible Financial Services Function Evaluate Risk in the Broadest, Most Complete Way Become the Owner of Impartial Economic Analysis

Credibility = Sound, Impartial Advice from Finance Professionals

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