kpmg_cfo guide.pdf

8/14/2019 KPMG_CFO Guide.pdf

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Everything

a CFO needs

to know in the

first 100 days...

but doesnt knowwho to ask

KPMG LLP (UK)

2010 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMGnetwork of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.


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2010 KPMG LLP, a UK limited liabilit y partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG netnetwork of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.i i ili i I i l i , i i . ll i . , li i li ili i , i i i i

Contents CFO Guide 01

1 Kicking things off04 The CFOs expanding role

06 Managing expectations

08 First impressions

10 Managing stakeholders

12 CFO Profile: Jim Buckle

14 Stakeholder checklist

2 Taking control18 Risk managment and compliance

20 External reporting and audit

22 Five reasons why CFOs get fired

24 The risks beyond reporting

26 CFO profile: Ann Firth

28 Risk and compliance checklist

3 Smooth running32 On top of back office operations

34 Ten qualities of an effective CFO

36 Managing the supply chain

38 CFO profile: Alex Woodward

40 IT management

42 Efficient and effective

operations checklist

4 Pitch performance46 Performance management

48 Infamous finance executives

50 Tax planning

52 Strategic planning processes

54 Managing operational

performance checklist

56 Useful organisations and publications

The first 100 days of a CFOs appointment may determine notonly the future of the CFOs position, but also the direction ofthe company. As such, getting the head of finances prioritiesin order plays a large part in setting the foundations for success.Much like a football manager, the CFO is a multi-taskingstrategist supporting the club or company executive, whilestewarding a united team of strong capable professionalstowards profit and growth. This guide offers helpful tips andchecklists to assist finance chiefs and CEOs through thosechallenging early days of this vital appointment.

For non-finance directors, there are also some handy hints to helpyou nurture a smooth relationship with the new head of finance.

CFO

Football manager

CEO

Football club chairman

Company employee

Football team player

The line-up


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Chapter 1Kicking things off

A wise man once said: Rememberat work, the authority of a person isinversely proportional to the numberof pens he or she is carrying.

Kicking things off CFO Guide 03

As you start your new job asthe head of finance, you may

feel the task ahead of youseems a somewhat dauntingprospect. However, withcareful thought and a planof action, you can removea lot of pain from the first100 days in office.

This chapter looks at thechanging function of the

CFO, what is expected ofthe role and how to makethe best of your first fewdays in the office. Chiefamong these is gettingto know who you need tospeak to, how to approachyour boss and your teamand how to assert yourauthority without gettingpeoples backs up.

The first question you mayponder in any new job iswhat to wear on your firstday. While a suit and tie mayappear to be a safe bet for aCFO, dont forget to read theculture of the organisation.Making yourself approachableis key depending on theindustry, more casual attiremay win you more influence.The CEO should helpcommunicate the companyculture to the CFO.


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The term utility man hasbecome something of a dirtyphrase in recent years. But,for the modern CFO, no othermoniker describes the role asaccurately. These days, ratherthan being average across theboard, the CFO needs to excelin a number of positions. Justa cursory look at the CVs ofthe UKs leading blue chipCFOs reveals commercialacumen, regulatory andcommunication excellence,along with corporatefinance expertise.

Ten years ago, the financefunction generally dealt withjust that: finance. The CFOwas seen as a safe pair ofhands that kept the numbersin order and let the teamsstars do the sexy stuff.Now, the corporate CFOis expected to look aftera whole range of differentareas. Strategy and targetinggrowth in new markets is akey component of the role.Given their comfort with thenumbers, CFOs are ideallyplaced to spot trends anddrive the business forward.

Meanwhile, with the increaseddemands from regulators andstakeholders, managing riskhas risen up the CFOsagenda enormously in thelast few years. Compliance,previously consigned to thelower divisions of the CFOsattention, is also right up there.And CFOs of all sectors areaffected. While financialservices may labour under awider range of regulation, thereisnt a CFO in the land who isunaware of the need to meetthe compliance challenge.

Constant multi-taskingThe CFO has shed the dour, number-crunchingstereotype because the role increasingly requires thehead of finance to do and be many things at the sametime. Being CFO is more flash than it was think howthe slick appeal of the modern football manager hasreplaced the crusty image of a sheepskin-coated,pie-eating, Woodbine-smoking guvnor.

The CFOs expanding role CFO Guide 0504 CFO Guide The CFOs expanding role

Shareholder activism and theincreased reach of regulationhave forced the CFOs dooropen to the demands ofthe businesss stakeholders.This can extend from basicinvestor relations to handlingshareholder queries, liaisingwith investors and speakingto the press. The days ofhiding behind the desk areover and the modern CFOneeds to be a consummatepublic performer.

And what of the top table?The CFOs place on the boardis now more important than

ever. Theyll need to hit thenumbers, liaise with the non-execs, provide wise counseland communicate effectivelywith colleagues to ensurethat their voice is heard.

All in a days work? Its agame of two halves at least!


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First of all, a successfulCEO-CFO relationship relieson both parties being realisticabout what they can expectfrom each other.

For the CEO, there arecertain qualities that he willexpect his CFO to display. Animportant one is decisiveness:a lack of clear decision makingcan be critical to a businesssprospects. So, the CEOwill expect the CFO to spotopportunities and risks, andtake the necessary measuresto pursue growth and protectthe business.

No to yes men!At the top level, certainelements are taken forgranted: the CFO will beexpected to get the financefunction into efficient shape,hit the numbers in theforecast and report to theboard and shareholders intimely fashion, alongsidethe core finance aspectsof the role.

But the clever CEO will alsoexpect his CFO to offer aninvaluable service: challengingthe companys strategy. Thedays of the yes man and his

rubber stamp are over.

Todays CFO must be inpossession of the confidenceto ask probing questions of theboard and to offer alternativesolutions. If the CEO doesntexpect, or indeed, demandthis, then chances aresomething might be amiss.

What CEOs expectfrom their new CFOAsk any chief executive what they want from a CFOand youre likely to get a long list: reliability, flexibility,adaptability, commercial acumen, communicationskills and a sense of humour. Not much, then.

Alongside clarity of purpose,full backing from the man incharge is paramount in orderto project an air of authority.If the top man doesnt haveconfidence in the CFO, whyshould anyone else? Giventhe flak that can fly after a fewiffy results, having the bosss

confidence is crucial for theCFO. Knowing that the topman backs your judgementand is fully behind yourdecisions gives the necessaryfreedom and reassurancefor you as CFO to get onwith your job.

The CFO should also expecthis chief exec to take the timeto offer guidance and advice.Without the closenessengendered by regular timespent together, the chancesof a harmonious relationshipblossoming are reduced. Soregular meetings to coordinatestrategy are the minimum theCFO should expect from thechief executive.

Managing expectations CFO Guide 0706 CFO Guide Managing expectations

The new CFO will also needto be aware that the olddivisions between theboardroom and the dressingroom have been eroded. MostCEOs will expect their newCFO to be contributing at thehighest level within weeksof joining the team. The idea

of CFO as functionary drivenby process are long gone.

And relying on reporting whathas gone before wont beenough: the boss will expecta clear vision for improvingfinancial performance,spotting and promotingtalent in the team, as well ascommunicating this vision toinvestors and shareholders.

What CFOs wantAmid all these expectations,the CFO may have a fewspecific wants and needs.Firstly, understanding whatthe chief executive wants forthe business is important.Chances are that the chiefexec rose to his position byarticulating a vision for the

company, and this needs tocontinue into his dealingswith his finance chief. Oncethe CFO has settled behindhis desk, the first priority isto get a strong idea of whatthe chief executive wantsthe business to achieve. Thiswill be the tactical plan fromwhich the CFO can work.

An importantquality that the CFOshould display isdecisiveness, asa lack of cleardecision makingcan be critical to abusinesss prospects

CEOFor this job, we needsomeone who is responsible.

CFO Im the one you want.In my last job, every timeanything went wrong, theysaid I was responsible.

MrRight?


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In business, reading theculture of a company andresponding to it is crucial you may have good reasonto want to change it, butnot on the first day!

The flawed and famouslyoutspoken Brian Cloughlasted only 44 days asmanager of Leeds Unitedbefore he was sacked by thedirectors for alienating his starplayers and getting on thenerves of the management.

It turned out that Clough wasa talented manager, but thathe just hadnt got on with therest of the club.

Similarly, in business theexpectations of a CFOs bossand the CFOs team will varyfrom business to business.As the new head of finance,you need to understand thatculture quickly and respondto it. One of the first prioritiesfor CFOs is to meet withsenior people such as the CEOand management team andascertain what they want fromthe finance department. But togain a broad-based view of thecompany, its also valuable tobuild relationships with peoplefurther down the corporateranks, whether that besalespeople, the warehousemanager or the secretariesthat keep the directors diaries.

While getting close to yourfinance team is important they could be your greatestallies it may also be prudentto sit near the CEO and otherunit heads where decisionsare made. You dont want tobe thought of as hiding behindthe spreadsheets and it is for

this reason that new CFOs areurged not to bury themselvesin paperwork for the first fewdays when they could bebuilding relationships.

Team spiritWait before making majordecisions, as you will wantto assess the situation firstand discuss it with relevantcolleagues. An ill-considereddecision early on could makeyou look foolish. On the samenote, CFOs are advised not tocriticise prior practices openlyuntil they are fully aware ofthe facts, as your team couldresent the implication thatintelligent life arrived onlyafter you joined!

Once youve gathered your

intelligence and figured outthe lie of the land, then youcan start to set your priorities.

Manage the boss,manage the teamSitting between the finance team and the CEO,the fresh CFO needs to be thoughtful about gaininghis teams confidence, while establishing a closeworking relationship with the boss.

First impressions CFO Guide 0908 CFO Guide First impressions

Its Friday! The end ofthe CFOs first week. Tocelebrate, why not meetwith the financial reportingteam to get to grips with anydisclosure issues and findout what needs to be donebefore the auditors come?Its hardly a job for a Monday!


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Getting to grips withstakeholder management ishigh on the to-do list in theCFOs first 100 days.

A CFO must take the needsand wishes of a wide varietyof stakeholders into accountas an ongoing part of the role.

The starting point is to identifythe stakeholders, assess theirimportance and decide onwhat they will want to hear.Employees, suppliers andother board members willalmost certainly feature asstakeholders but beyond

these three groups, the rangeof stakeholders varies fromcompany to company.

A CFO working for a publiccompany with a stock marketlisting will have shareholders,as will the CFO of a family-owned firm. However, theseshareholders will differ greatlyin number and in the emotionalrelationship they feel towardsthe company. Increasingly,CFOs are finding that investorsare members of a private

equity group seven timesmore of these deals were donein 2007, compared with 1998.

Stakeholder managementand communication mayinvolve coming to terms witha new owner or it could beabout introducing the companyto the public market after aprivate equity shareholderexit. With increasingly strictfinancial regulations, regulatorybodies are also importantstakeholders that a CFOmust keep happy. Managingrisk related to them, as withall stakeholders, is anotherissue that should be high ona CFOs list of concerns.

CFOs must also ensurethat the leadership of theirorganisation agrees withthe message that theyare conveying to everystakeholder, and that theirown team within the FinanceDepartment are followingthe same game plan.

Get stakeholderson side early onInvestors and stakeholders are not that muchdifferent from football fans. Even temporary failureon the pitch can urge the most fanatical supporter toquestion the ability of the management. In business,the difference is that investors are more inclined to

sell their stake and back a more promising side.

Tackling the issueRather than simply reactingto events, good stakeholdermanagement tends to beproactive. Identifyingforthcoming issues for theorganisation and the area inwhich it operates, and decidinghow these might affect each

separate group of stakeholdersis necessary. A new CFO willhave to act quickly, as moststakeholders will be awareof his or her arrival almostimmediately and will wantreassurance of the suitabilityof the new appointment.

Ensuring that communicationis appropriate in terms of themedium, the frequency andwhat messages it contains willrequire close contact with thedirector of communications.This may vary from stakeholdergroup to stakeholder group. Achange in circumstances, suchas a merger or an acquisition,bad annual results, a rightsissue, changes at board levelor even external events such asnew legislation or a campaign

by a pressure group, will allrequire a CFO to think abouthow stakeholders may beaffected and how they needto be communicated withand handled.

Whatever the circumstancesof a communication with astakeholder, careful thoughtis clearly required. But onevery simple trick can help a CFO should put him orherself in the position of thatstakeholder. What interest financial, legal or emotional

do they have in theorganisation? What do theywant to know? What willthey consider good news?What will set alarm bellsringing? What benefitsare they seeking from theorganisation better salaries,top products or great returnson their investment, or goodbehaviour from a regulatorypoint of view?

Dealing with these issueswill make handling thevarious stakeholders easierand show that, when itcomes to keeping themhappy, the CFO is on theball. But, as in football whenthe clubs supporters areunhappy with performance,its not long before they bay

for the managers blood!

10 CFO Guide Managing stakeholders Managing stakeholders CFO Guide 11

In your first few days,start to identify thestakeholders, assesstheir importance anddecide on what theywill want to hear. The

range of stakeholdersvaries from companyto company

A CFO had just read the storyof Cinderella to his four-year-old daughter for the first time.The little girl was fascinatedby the story, especially thepart where the pumpkin turnsinto a golden coach. Suddenlyshe piped up, Daddy, whenthe pumpkin turned into agolden coach, would thatbe classed as income ora long-term capital gain?

Investment?


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12 CFO guide Profile Jim Buckle Jim Buckle Profile CFO Guide 13

The challenge is to really listen there are always people whoknow how things work and youneed to identify them quickly

A degree in English and the editorship ofthe university magazine might not be theobvious background for an accountant,but along with his work in the media, ithas been useful for Jim Buckle, CFO atLovefilm, one of Europes leading homeentertainment businesses.

Jim trained at KPMG and then, after stintsat the BBC and Dell Computers, his careertook an unexpected turn with a couple ofdotcom start-ups. One resulted in the alltoo common closure, but the other with asuccessful sale when News Internationalbought Propertyf inder.com. Arrivingat Lovefilm in April 2006, this variedexperience proved invaluable to him.

This really pulls together the threadsof what Ive done previously, he says.On the one hand were an online mediabusiness, which is where my experienceat Propertyfinder is useful. On the other,were very metrics focused, concernedabout how many discs we get out in a day,which is the kind of thing that I workedon at Dell.

Jim arrived at Venture Capital-backedLovefilm just as it was merging withanother company called Video Island thatoffered the same service. Every member ofthe new management team had to producetheir first 30-, 60- and 90-day plan.

We had a whole integration process togo through. We needed to decide whichwarehouse to close, which softwareplatform to use and which staff to lose,says Jim. Although he was hitting theground running, he was determined to f indout as much as possible about the businessbefore he started making changes.

The challenge is to really listen you needto know the strategy and the key metrics,as well as what people in the organisationwant to do and where the finance functionfits into that, he explains. There arealways some people who really know howthings work and so you need to identifythem quickly they might be quite junior.

Lovefilm is now profitable but atPropertyf inder, which never made money,Jim had to manage cashflow very tightly,only paying suppliers if there was at least200,000 in the bank. Profitable or not,as a CFO or CEO youre always wearingtwo hats. With investors or the media,you need to be positive, but when yourethinking about cash flow you shouldconsider the possible negatives.

So, does Jim, who is 41 and married withtwins, love film himself? Hes certainlynot a film buff but, as he points out, itsimportant to relate to what you do withoutgetting so fanatical that you cant see thewood for the trees. Running is how herelaxes, he reveals, adding: Thatswhen I get some of my best ideas.


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ChecklistStakeholder management

14 CFO Guide Stakeholder checklist

One new message for directors

First day of the new CFOSo theres somebody new holding the purse strings. As a non-financedirector, avoid the temptation to batter a pathway to the CFOs doorto demand a bigger budget.

The CFO will soon make your acquaintance but not to discussincreased spending. Start off your relationship by making it veryclear what your department does and how it adds value to thebottom line. If you can demonstrate this quickly and conciselyyou will have the CFOs full attention!

Detailed objectives/suggested tasks Timing

Identification of key stakeholdersObtain a complete inventory of key Identify key stakeholders both external and internal 30 daysstakeholders that a CFO needs to Map stakeholders on CFO Agenda framework or

interact with: similar relationship map

Stakeholders agenda

Gain an understanding of current For key stakeholders, determine their views and

views of key stakeholders, potential issues through initial research and

including any issues discussions with peers and current finance team

Prioritise stakeholders based upon potential issuesand importance to achieving goals from CFO agenda

Conduct meetings with C level peers, Audit Committee

Chairperson, Board of Directors and Finance Leaders

Develop and execute meeting schedule: 60 days Key analysts; significant stockholders; debt holders

Key customers; suppliers

Stakeholder management

Proactively manage stakeholders Develop stakeholder management strategy

to address any issues and to help (e.g. stakeholder map) with associated action plan

ensure achievement of CFO Execute action plan

agenda goals

Leadership and direction

Provide clarity over future direction Develop finance vision and strategy

and priorities. Align with corporate strategy

Inputs from leading practices and current

state of finance

Gain an understanding of the relative Carry out an evaluation of finance resources

strengths and weaknesses of current Leadership team

CFO organisations resources Other finance resources (quality and members)

Ensure CFO organisation fully Develop communication strategy 90 daysunderstands vision and strategy Websites; email; town hall meetings; conference

through calls; cascade management; blogs

Monitoring and feedback mechanisms

Ensure alignment of leadership team Set personal goals and objectives

Align compensation and incentives

Monitoring and feedback mechanisms

Notes for non-finance directors CFO Guide 15


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Risk and compliance can be seen asa necessary evil and a drain on theCFOs time. But the clever incumbentwill note that in difficult times acompanys corporate governancecredentials are good for the brand.

Benjamin Franklin once said:Necessity wont make a

good bargain. This may ormay not be true, but if youignore your duties in modernbusiness the consequencescan be catastrophic.

When a new CFO is chompingat the bit to make a differenceto the bottom line, he or shecould be forgiven for thinkingthat risk management onlyaverts disaster rather thanadding value.

In the first 100 days, its crucialthat the CFO gets to grips

with compliance processes,reporting standards and newregulation not to mentionother business risks.

If a CFO can display to theoutside world that effectivecontrols are in place, he or shecan make a virtue of the factwhen trust is in short supply.

Taking control CFO Guide 17

In spite of what the CFO orCEO may have heard, theauditors are there to help thebusiness. So, make contactwith them early on by askingthem to prepare a briefingpack of upcoming changesin regulatory reportingrequirements.

Chapter 2Taking control


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Its fair to say that theresponsibility for riskmanagement across a wholerange of issues lies firmlywith the CFO. This personis the safe pair of handsmarshalling the companysdefences against variouscorporate threats. And itsnot just financial issues.

Consider what one FTSE100CFO has to say on thesubject: People need torealise that all these long-term risks can affect thebusiness. Naturally, its hardto get off the moving train

when its going well, butthere are some long-termconsequences and risks thatyou have to mitigate. Andthat might mean taking ashort-term hit on profits inorder to look long term andachieve proper results. Thatshows the true characterof the company and howit conducts itself.

Risky businessAll CFOs experienced enough to remember thepre-Enron days would agree that the rules aboutdue diligence have changed and that risk andcompliance increasingly demands their time.

Referee!The clever CFO will beaware that the issue of riskmanagement is already builtinto the job. While the currenttrend might be for a separaterisk management function,which might appease thosewishing to see corporations

hog-tied by watertight rules,the finance function is stillthe keeper of the risk registerfor most blue-chips. Andthis should mean that riskmanagement is an integralpart of business operations,not a box-ticking function ina separate office.

Ask most investors and theywill tell you that they dontneed to know about everypossible risk facing thecompany, from falling salesto product recalls, executivedepartures to hurricanes.They simply want to knowthat the CFO is flagging upto the board the real risks thebusiness is currently running,with adequate controls inplace to mitigate against them.

Of course, every game needsa referee and your averageCFO these days is serving anumber of arbitrators. There isnow an unprecedented rangeof regulators in the corporateworld imposing their will oncompanies. There are nowrulebooks covering corporate

governance, pension liabilities,share schemes, audit andfinancial reporting, to namea few. So while the CFO maynot know every last sub-clausein the laws of the game, it ishis responsibility to ensure thatsomeone on the team does.

Knowing the drillBut does this rules-drivenapproach benefit thecompanies labouring underthe regulations? Most CFOswould say no. To manyfinance chiefs, the issue ofcompliance has become thebiggest single headache theyface. And that emphasisesthe need for two things: awell-drilled in-house financeteam with the necessarytechnical expertise to

cover the main risks; and aproperly informed roster ofprofessional advisors at theCFOs disposal, ready totackle any compliance issuethat may arise.

There are many detailedaspects to most regulations,and for the CFO tounderstand them intimatelysimply isnt feasible. So theCFO needs to ensure that hisadvisors are fully aware of theissues the business faces inorder to provide timely and

accurate solutions to technicalproblems. With a strongdefence behind him, theCFO can focus on leadingthe attack on the competition.

So, todays CFO needs tosquare the circle of instillingadequate controls and riskmanagement measures,with allowing operationalmanagers to spot andpursue opportunities.

No CFO today can affordto ignore the letter of thelaw and the expectations ofshareholders, analysts andinvestors on this issue.

Risk management and compliance CFO Guide 1918 CFO Guide Risk management and compliance

No CFO today canafford to ignore theletter of the law andthe expectations ofshareholders, analystsand investors onthis issue

Grappling with tax issuescan make a significantdifference to the bottom line.Around Day 60, ensure thatthe appropriate tax planning isin place and start to considerfuture tax planning strategies.The CEO will want to knowwhat approach the businesswill take on tax matters and itmay be worth communicatingthese issues to the board.


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The CFO isnt expected toknow every single element

required of the companysreporting performance. Forthat, he will need to look tohis auditors for impartialguidance. The City willexpect nothing less.

For example, consider thedemands of the Sarbanes-Oxley Act: introduced afterEnron, it now governs thecorporate behaviour of anycompany with a US listing.Section 404 in particularrequires CFOs to liaisecarefully with their auditorsto make sure they haveadequate controls in placeto satisfy the regulators.So, CFOs will need to ensurethat both their auditors andinternal audit teams are fullyau fait with the demands of

the Act. As any referee willtell you, ignorance of thelaw is no excuse.

Alongside this, the CFOshould be making full useof the expertise offered bytheir auditors. Regulationshave a nasty habit ofchanging with little fanfare,and its crucial the businessisnt caught out. While it isthe primary responsibility ofthe finance team to monitor

these changes, a new CFOshould be open with the

company auditors aboutany concerns regardingimminent rule changes.

What this illustrates is theneed for the CFO to engagewith auditors right from dayone. Professional advisors auditors in particular areonly as good as the directionthey get from their clients,so a hugely important factorin tackling the issue offinancial and risk reportingis to set aside enough timeto adequately brief auditorson the key risks the businessis running.

And while the relationshipwith auditors is crucial,CFOs need to askthemselves whether they

have the right firm for thejob. Modern regulationmakes the proactive auditorworth their weight in gold,so the CFO should be askingwhether their auditors arefully focused on spottingpotential bumps in the roadand working with the CFOto eliminate risk.

Fit for purpose?All managers have to be careful with the companysfinances and keep track of expenditure or risk publicdisgrace. The new CFO would do well to make fulluse of the auditors to make sure the business getsa clean bill of health.

20 CFO Guide External reporting and audit External reporting and audit CFO Guide 21

Modern regulationmakes the proactiveauditor worth theirweight in gold.New CFOs shouldask themselves

whether theirauditors are fullyfocused on spottingpotential bumps inthe road


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Getting the bootCFOs, like football managers, can be proneto shameful dismissal. Indeed, the turnoverof new CFOs is consistently high. Here arefive good reasons why CFOs get sacked:

1. Failure to warn the boardwhen problems ariseCFOs are expected to keepa constant eye on how thenumbers are faring toforecast and anticipate wherethe figures are headed andsound the horn at the firstsign of difficulty. Be direct,

dont sugar-coat the badnews and always rememberto give colleagues a rangeof possible outcomes sono one is kept in the dark.

2. Estimations wideof the markRequired to be a professionalforecasterof figures, if aCFO provides wildly inexactand inaccurate numbers itseriously undermines thecredibility of the role. Avoidlosing the confidence of thebig cheese by keeping areliable financial reportingsystem, monitor it continuallyand notify management ifall is not as expected.

3. Company culture ofscape goating the CFOTaking undeserved flak canbe beyond your control soresponding to it correctly iscrucial. Take responsibilityfor your teams shortcomingsbut be demonstrative whenblame lies elsewhere.

Make sure unit heads areaccountable for their budgetsand staff and that youhave communicated theirresponsibilities. For example,if the commercial team losesa valuable client, you need tobe sure that support for thatteam was not found wanting.

4. Personal failuresVice has been the ruinof many a footballer andmanager, and CFOs, beinghuman, are not immune tosimilar temptation. However,the CFO should represent allthat is ethical and responsible.The CFO is the final authorityon financial statements,so inappropriate, illegalor irresponsible behaviourequals an immediate red card.

5. Professional conflictsof interestAlways remember to stickto the companys stringentconflict of interest disclosurepolicy and ensure yourpersonal expense reports andtransactions are above boardto avoid even a hint of conflict.

22 CFO Guide Five reasons why CFOs get fired Five reasons why CFOs get fired CFO Guide 23


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Belt and bracesCFOs learn early on in the job that every businessactivity comes with its own hazard. They must besure that the individual in charge of that activity isaware of their responsibilities.

As we have seen in the post-Enron environment, when itcomes to reporting, risk andcompliance have emerged askey considerations for CFOs.In this area there are reportingand auditing processes inplace (see page 18). But thecompliance risks do not endbeyond the filing of results.

Today, compliance pervadesalmost every aspect of thebusiness world from taxfilings and financial covenantsto data protection laws andhealth and safety measures.And its the role of the

CFO to have an awarenessof everything.

Take tax, for example. CFOsneed to ensure tax filingsare being completed on timeand that appropriate detailsare being provided. Theyalso need to have a thoroughawareness of any relevantexemptions. Tax breaks areavailable to businessescomplying with certainstrictures relating to thingssuch as IT investment andenergy usage. But to qualify

for these exemptions, youhave to comply with therules (see page 50 formore details about tax).

Key questionsIssues of compliance andrisk will surround most ofthe financial arrangements acompany has in place. Thereare several questions a CFOmust answer in the first30 days. What debts do youhave? How are repaymentsorganised? What happensif you fail to meet yourobligations? Have anycovenants been agreed with

lenders? Borrow from a bankand youll almost certainlyhave covenants imposed uponyour business. These mightrequire you to maintain aparticular degree of profitabilityor revenue generation, and youbreach these agreements atyour peril. Make an error withregard to covenant complianceand the lender will be able tore-dictate payment terms.

Enterprise Risk Management(ERM) provides a frameworkfor businesses to measureand assess risk and reward.It is a powerful tool for CFOs.Successful ERM enablesbusinesses to differentiatebetween acceptable risksand those that are simply

too much of a gamble.Through ERM, a CFO candevelop processes andstructures that will helpmitigate some of the potentialdangers ahead.

Its similar to making a playerundertake a medical beforesigning him. Unearth aserious injury and you can callthe deal off. But if the playerhas a less serious problem,there may an opportunity torestructure things.

Getting supportThe list of things a CFO hasto consider goes on and on.There are matters concerningdata protection, equalopportunities and even thedisposal of certain assetsthat are likely to have anenvironmental impact.

There is little doubt that ithas become the role of thefinance team, and the CFOin particular, to take overallresponsibility for risk andcompliance. But that doesntmean that one individual hasto be aware of every last detailrelating to every single issue.Instead, the successful CFOneeds to ensure that his or herteam has the necessary skills,experience and resourcesto cope with its obligations.

A football manager wouldnttry to conduct a playersmedical himself. But hewould guarantee thatsomeone at the club wassuitably qualified to performthis task. The life of a CFO

really isnt all that different.

24 CFO Guide The risks beyond reporting The risks beyond reporting CFO Guide 25

There are severalquestions a CFOmust answer in thefirst 30 days. Whatdebts do you have?How are repaymentsorganised? Haveany covenantsbeen agreed withthe lenders?

The risks dont end withreporting figures correctly.CFOs and CEOs areincreasingly expected toensure that privacy, equalopportunities and health andsafety policies are in place.The CFO should meet withthe head of counsel toconfirm that the businessis adhering to these policiesand to get the status ofvital regulatory filings.


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28 CFO Guide Risk and compliance checklist Notes for non-finance directors CFO Guide 29


Spend some meaningful time with the CFOMost directors expect CFOs to assume a stronger role, overseeingcorporate governance. While improving the quality of the boardsinformation depends on the CFO, directors need to be aware oftheir duties and be proactive in fulfilling them.

Close contact with the CFO will enhance governance and improvedirectors grasp of the company finances. Do not be unduly passivenor overly aggressive, a balance needs to be struck. Trust the CFObut always seek verification.

ChecklistRisk and compliance


External financial reportingEnsure external financial reporting Meet with financial reporting team to understand 30 daysobligations are met and on a current state of reporting, potential issues and level

timely basis of effort required

Meet with external auditors to get their views on

reporting process, potential issues and areas of risk

Understand current state of Review past regulatory filings and integral

internal financial controls management reports

Discuss regulatory compliance with finance teams and external auditors

Gain an understanding of upcoming Ask external auditors to prepare a briefing

changes in external financial pack of upcoming changes in regulatory

reporting requirements (e.g. GAAP reporting requirements

IFRS, SEC pronouncements)

Tax filings

Obtain an understanding of tax filing Meet with head of tax to understand status of 60 daysstatus and any associated issues tax filings (VAT, local international jurisdictions)

and potential issues

Regulatory compliance

Gain an overview of various Meet with legal counsel or head of regulatory filings

regulatory requirements and filings, to understand key regulatory requirements (e.g. Data

and status thereof Privacy/ Safe Harbour, Equal Opportunity, FCC) and

status of required regulatory filings, including

potential issues

Organisation and resources

Evaluate whether there are Meet with department heads to discuss resources

sufficient and approriately skilled and potential gaps

resources to manage risks and

comply with reporting requirements

Funding

Understand funding Meet with Treasurer to be briefed on debt covenants

arrangements and ability to

meet debt/equity obligations

and expectations

Enterprise Risk Management (ERM)

Ensure organisation has appropriate Ascertain responsibility for ERM and consider 90 daysERM practices in place, including whether this is appropriate

Standard & Poors requirements Organise a briefing on ERM practices, gain an

understanding of key risks and mitigating controls


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2010 KPMG LLP, a UK limited liability partnership, is a subsidiar y of KPMG Europe LLP and a member firm of the KPMG net i i ili i I i l i , i i . ll i . , l i i l i i l i i , i i i i work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Chapter 3Smooth running

The trouble with senior managementto an outsider is that there are toomany one-ulcer men holding downtwo-ulcer mens jobs.HRH the Duke of Edinburgh

Ensuring efficiency andeffective operations will be

a priority for a new CFO fromthe get-go. But often moreurgent matters can push thislower down on the CFOs100-day agenda.

This chapter looks at how toensure smooth running of theback office operations, suchas transaction processingand the IT function.

Remember, though, itsyour job to improve efficiency

where possible; its notyour job to micro-manageevery little process thatis the job of your team.

Part of your assessment ofback office operations willbe to check that your staffhave the right support andthe right ability.

Smooth running CFO Guide 31

The major difference betweena thing that might go wrongand a thing that cannot possiblygo wrong is that when a thingthat cannot possibly go wronggoes wrong, it usually turnsout to be impossible to get ator repair. Douglas Adams

Dontpanic!!


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As we have discussed, CFOsand their teams have comeunder growing pressure tocontribute more value to thebusiness at a more strategiclevel. But while this may bethe case, a CFO neglects theless glamorous back officeoperations at their peril.The new CFO will look atoperations and see whatefficiencies can be made butlimit the amount of personaltime he or she needs to give tothis task without compromisingthe quality of that operation.

There are two ways a CFO can

attempt to free up the timethey need for more strategicactivities. They can eitherinvest more money internallyto improve and streamline theiroperations or they can bring inan outside company to run theday-to-day, non-strategic partof their department. By your90th day, you will want tomake a clear assessmenton the level of resources athand to handle back officeoperations so that you canmake a decision on whatlevels of investment to make.

Transaction processingThe finance teams traditionalrole of transaction processingis one case in point. The firstport of call for the CFO is tomake sure the appropriatepolicies and procedures arein place, find out if there areany ongoing issues involvingthe payment of suppliers orgetting paid by customers.

Further on in the first 100days, the CFO will wantto meet with the head ofaccounting and establishwhat resources and level ofskills are employed to meet

this function. In addition, theCFO might compare againstother industry benchmarksand leading practices. Witha stronger grasp on how thebusiness is faring and whatlies in store for it in thefuture, the CFO will at thispoint also assess the extentto which the current systemof transaction processing willmeet the businesss needsin coming years.

Delegate the detailsCFOs are not required to examine the details ofindividual back office operations on a day-to-daybasis, but they must make sure that someone does.Similarly, a football manager would not think to checkthat each player gets an appropriate-sized slice oforange at half time, but he would make sure thatsomeone was responsible for refreshments.

32 CFO Guide On top of back office operations On top of back office operations CFO Guide 33


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How to be the special oneAs you sashay through the office among your colleagues,push your shoulders back and move with your head heldhigh. These people admire you, hold you in reverence andvalue you as a football team would their club manager.If you are the special one, you can take your team to thetop of the league. But the role of the CFO is by no meanseasy, possessing the following 10 qualities should win you

the respect of the finance team, the board and your CEO.

1. Uncompromising integrityand ethical standardsIt may be obvious, but asCFO you are the custodianof everyones money andneed to maintain that trustand keep allegiances. Beprepared to report bad newsto the board immediately,

despite the fact you allowedthe marketing departmentto go ahead with fruitlessexpenditure that wastedthe companys cash.

2. Financial accounting, cashmanagement and corporatefinance competenceKeep yourself abreast ofup-to-date accountingknowledge. Cashmanagement skills are alsoa core asset, as well asthe ability to disseminatethis to managers, creditors,shareholders and others.

3. Basic business knowledgeand strong understanding ofcompany operationsFor a successful turnaround,stay on top of business

fundamentals and yourorganisations business model.

4. Strategic visionand leadership skillsDont shun or hide away fromyour colleagues. Youre notjust the numbers person.Apply your strategic mindto formulating and executingbusiness plans, as well asdemonstrating your leadership

skills across the financial andmanagement team as a whole.

5. Problem-solving abilitiesDont just settle for a gooddeal the best CFOs createa win-win plan to securethe companys future.

6. Communication skillsDont live up to theexpectation that accountantscant communicate. Listen anddeliver your message withoutthe technical jargon. Maketime to improve these skillsif you suspect a deficiency.

7. Strong work ethicExpect to work long hours,especially in a turnaround,while processing largeamounts of informationwith a very fine toothcomb.

8. Self-confidence andwillingness to take a standSelf-confidence is a must.How can you deny the directorwho uses any swaying tacticpossible to secure that boostto their budget, without havingreams of confidence? A beliefin, and affirmation of, your

decisions and views is crucial.9. Results-oriented mindsetResults must come first, notprocesses, particularly when itmay be company procedureswhich resulted in a blunder.

10. ReliabilityThis may sound obvious,but keeping to a stricttimescale, while producingaccurate information anddemonstrating a willingnessto undertake any task forresults, will keep you awayfrom the firing line. Recentresearch from softwareconsultancy BizNet foundthat most CEOs of large firmswanted their CFOs to be atrusted advisor and truepartner hallmarks of a

reliable business person.

34 CFO Guide Ten qualities of an effective CFO Ten qualities of an effective CFO CFO Guide 35


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Supply chain oversightFor managers of small companies, there is alwaysa temptation to take on too much responsibility.Bigger businesses appoint trusted lieutenants in thefinance team to ensure that the companys partnersand suppliers keep the exchange of goods andservices in motion.

Its essential to ensure thatyour business is receiving thehighest quality products andservices at the best possibleprice. But its just asimportant not to get boggeddown in the details.

When it comes to managingthe supply chain, it pays tohave a strong team in place.

The successful managementof supply chains has neverbeen more critical toorganisational performancethan it is today and thatreflects a number of recenttrends. First and foremost,businesses are becomingincreasingly global. Evenmodest-sized firms can nowboast a worldwide rosterof suppliers, partners andcustomers. But dealing inoverseas markets will alwayspresent unique challenges.Each country will, for example,have its own nuances with

regard to the legal and financialregulations youre obliged toabide by and these may bevery different to the practicesyouve grown used to in theUK. A major responsibilityof the CFO is to ensure thathis or her team is fully awareof, and prepared for, anydifferences that may emerge.

Whats clear is that supplychains are becoming everlarger, more complex andinternational. Its the roleof the CFO to ensure thateverything is managedappropriately. If not, costsmay rise and service levelsmay fall. Most worrisome of

all, should a partner suddenlyencounter unexpecteddifficulties, a company mayfind itself desperately short ofan essential asset and blindlyscrambling around trying tofind an alternative supplier.

The secret to managing asupply chain effectively isto ensure that appropriateprocesses and proceduresare in place. A strong CFOmust ensure his teamunderstands that choosingsuppliers isnt just aboutcost. Product quality andservice levels are just asimportant. Moreover, signingup a supplier isnt the end ofthe process. A successfulprocurement team willcontinue to monitor the

performance of its suppliers and of potential alternatives to ensure that it continuesto receive the best deal.

Keeping tabs on the playersAt the end of the day,first-rate supply chainmanagement is all aboutrelationships. Forging stronglinks with existing suppliersmight enable you to securediscounts or garner morefavourable payment terms.

Building relationships withalternative suppliers,meanwhile, could result inan altogether better dealfor your business or a ready-made contingency plan incase you experience a breakin the chain. If you just tellyour team what you expectfrom them, you may besurprised at what they deliver.

OutsourcingGlobalisation aside, therehave been other fundamentalchanges to what we perceivesupply chains to be. Questionmost CFOs on this topicas recently as 10 years agoand, chances are, they wouldsimply have recounted a listof organisations providingbasic goods and utilities.As the naughties haveadvanced, times havechanged. Outsourcing hasrisen exponentially. Today,supply chains are as muchabout services as they are

about goods. In fact, itsnot unusual for companiesto completely hand overresponsibility for a particularbusiness function such asHR, IT or even marketing to a third party.

36 CFO Guide Managing the supply chain Managing the supply chain CFO Guide 37

When it comes to efficiency,by Day 90 the CFO and CEOshould start looking at otherbusinesses and compare theirbenchmarks and practiceswith their own business.Are yours the best ones forthe company right now?

The successfulmanagementof supply chainhas never beenmore critical to

organisationalperformance thanit is today and thatreflects a numberof recent trends


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As soon as he had completed his trainingat KPMG London Alex Woodward left Britainfor Spain and the firms Valencia office. Ispent three years of my childhood on theisland of Cyprus so I felt a strong attractionto the Mediterranean environment inValencia the minute I walked off the plane,he recalls.

Alex, 44, now lives in Barcelona with hisSpanish wife and their four children. AsGroup Administration & Finance Directorfor Spanish group Abertis Airports, whichruns Luton, Belfast and Cardiff airports inthe UK. He works between Barcelona andLuton. Alexs Anglo-Spanish lifestyle isideally suited to the challenges he has

faced in his professional life since hearrived in February 2008 as Abertis hadbought Cardiff-based airports groupTBI plc less than four years previously.

Theres still a lot of integration work to bedone as the head office has been movedfrom Cardiff to Luton and now most of thesenior positions are going to Barcelonawhere corporate Aber tis is based, explainsAlex. Its about getting to grips with t wodifferent approaches. The Spanish style isvery direct English people might evenmistakenly think it rude whereas in the UKpeople tend to be less naturally assertive.I was recruited because, having lived inSpain for 17 years, I can wear both hats.

The British approach to problem solvingis more structured, Alex finds: ManySpanish tend to jump straight into thedetail, so Ive frequently found myselfsaying: Stop and explain this to mefrom the beginning. I want the teamto see the wood for the trees.

As UK companies face an increasingnumber of acquisitions by foreign groups,he advises anyone in this situation to tryto identify the management styles oftheir new teams or bosses and to beready to work with them.

Its not typical with Spanish companies tohave an induction course, for ins tance, he

says. You have to ask the right questions.Theres often no one to give you the globalpicture so you have to pick it out it fromwhat youve learnt from different people.

Currently Alex spends four days in Lutonand the rest of the week in Barcelona.I made a positive decision when I firstarrived to immerse myself in Spanishculture. I speak Spanish to my wife andfriends, and only speak English to mychildren. This makes it possible to be ableto change between Spanish and Englishmode at work whenever necessary.

You have to ask the right questions.

Theres often no one to give youthe global picture so you have topick it out from what youve learntfrom different people

38 CFO guide Profile Alex Woodward Alex Woodward Profile CFO Guide 39


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Systems savvyWhile the CFO is not required to go at the businesssIT equipment with a screwdriver and a pair of tweezers,ensuring that the companys systems are managedeffectively has fallen under the CFOs responsibility.

One of the most significantareas of an organisationthat CFOs are now findingthemselves responsiblefor is IT, as CIOs and ITDirectors increasingly beginto report directly the CFO.

The data that thesedepartments produceconcerning sales, costs,margins and staff productivityare essential for financialmanagement. Just as afootball manager gets moreobservations about theteams performance andadvice on improving it than

he can necessarily handle for a CFO too muchuncoordinated data canalso be counterproductive.

In order to manage andinterpret this data and ensurethat IT systems are workingwith optimal efficiency, CFOsoften assume a CIO role andget involved in the operationsof the IT department as itrelates not only to Financebut to every other aspectof the organisation.

Constructing the game planIt is necessary for the CFO tomeet with the IT departmentand establish what level ofhis input is required andassess whether adequateresources for themanagement of that teamare in place. Furthermore, itis essential not to lose sightof the wood for the trees.

In other words, the CFO mustunderstand each function ofthe IT operation, while bearingin mind the overall pictureand its contribution to theorganisation. The architecture

is every bit as important asthe individual applications.

This means that the breadand butter core transactionprocessing needs to worksmoothly, of course, butthe CFO needs to keepan eye to the future.

At a conference held by ITresearch specialists Gartner,40 percent of attendeessaid that most traditional ITorganisations will be closeddown by 2012, as eachdepartment becomes an ITspecialist in its own right.

While changes in technologytake place and IT functionsmigrate into individualdepartments, the CFO mustadapt to meet the needsand working practices oftheir new environments.As the person with overallresponsibility for this, theymust be ahead of the game.

40 CFO Guide IT management IT management CFO Guide 41


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42 CFO Guide Efficient and effective operations checklist Notes for non-finance directors CFO Guide 43


Win the CFOs confidenceCFOs would not tolerate a member of their team botching figuresor failing to pay attention to the details and the finance chief wouldhave good reason not to stand for failures in the boardroom either.

A director who shows that he or she has a proper grasp of theirdepartment and can supply the finance team with accurate andtimely information is more likely to win the CFOs confidenceand gain greater support from Finance.

ChecklistEfficient andeffective operations


Transaction processing

Ensure there are appropriate Confirm that there are policies and procedures 60 dayspolicies and procedures in place and that they are appropriate

Evaluate current levels of Discuss with the head of accounting: 90 daysefficiency and effectiveness Current resource levels and skill mix

of transaction processing Transaction processing costs

Gain an understanding of effectiveness

of transaction processing

Financial controls Compare against benchmarks and leading practices

Are current processes repeatable and sustainable?

Are there monitoring mechanisms in place?

Will these meet future business needs?

Information technology

Gain an understanding of Meet with CIO or head of finance systems to

information technology used for gain an overview of technology architecture

core transaction processing and applications

Determine if there are any issues or significant

improvement opportunities


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Setting the goalpostsand keeping scoreNothing says performance like a ball in the back of thenet, but in business the goals are harder to define. CFOsneed to set out these key performance indicators earlyon in their tenure and then keep score.

Assessing the performanceof key players is as importantfor CFOs as it is for a footballmanager. So, the CFO needsto assume a major role inhelping to drive operationalperformance.

Meeting unit heads withinthe organisation in order toget their feedback on thequality of support that theyare receiving from theFinance Department shouldbe high on the list of prioritiesfor any incoming CFO. Heor she will need to assesswhether key performanceindicators (KPIs) and othermanagement informationare appropriate and timely.Establishing whether thequality of decision supportprovided and the level ofinvolvement is adequate isanother important task.

External benchmarking is auseful tool you may want toidentify what other companiesof a similar size and sector areusing. Determining this willenable a CFO to see whatpractical measures arerelevant. These methodsmight include activity-basedmanagement, value-basedmanagement which areaimed at growing the value ofthe organisation and its assets and balanced scorecards.These measure whether thevarious operational activitiesof the organisation are aligned

with its overall objectives,vision and strategy.

Top tacticsIt may well be the case that allthree of these methods, plusothers, could be useful to theorganisation. But identifyingbest practice here and thendeciding what can be usedwithin the CFOs ownorganisation is only half thestory adapting thesemethods to that organisationsown needs and then gainingbuy-in from the staff that willimplement them is also vital.

Reviewing the basic structureof the organisation to ensurethat it has the right decision

support both in terms ofreporting lines and properlytrained specialist departmentsis also important. The CFOwill need to consider whetherFinance has the right skill setsand experience appropriateto senior decision supportroles. Developing trainingprogrammes and encouragingstaff to think beyond theirtraditional, purely financial roles,to focus on broader indicatorsand goals might also be partof the CFOs winning strategy.

46 CFO Guide Performance management Performance management CFO Guide 47


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27/31

2010 KPMG LLP, a UK limited liability partnership, is a subsidiar y of KPMG Europe LLP and a member firm of the KPMG net i i ili i I i l i , i i . ll i . , l i i l i i l i i , i i i i work of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

Paying your duesGiving proper responsibility to someone witha detailed understanding of the companys taxsituation in the first 60 days could save yourcompany money and even its reputation.

When it comes to tax, anincoming CFOs chief prioritywill be to meet with the headof Tax and make sure thatpayment deadlines are metand that compliance is beingsuitably adhered to. It willalso pay to check that thehead of Tax is up to date ontax regulations and has anyforthcoming changes to thelaw firmly on the radar.

With Her Majestys Revenue& Customs (HMRC) involvedin numerous test case battleswith the European Court ofJustice, there is a degree offlux and uncertainty in theUKs tax system, which couldpotentially cost UK businesses.

Other demands on the CFOstime may preclude him fromthinking too much about taxplanning until later in the first100 days. But effective taxplanning can save a companysignificant amounts of moneyby mitigating its tax liabilities.

To this end, you may wish toraise tax as an issue on theboardroom agenda, as CFOsare increasingly being calledupon to communicate taxstrategy to fellow boardmembers and make surethey are aware of risks.Its also important that no

one conducts tax planningwithout the knowledge ofthe head of Tax. It is theCFOs duty to make surethese controls are in place.

Tax risksA CFO will need to considerwhat the companys attitudeis to tax risk and look at howtax liabilities have beenhandled previously, as well ashow the business fares in theeyes of HMRC. An aggressiveattitude to tax planning canreduce costs, but trustedlow risk firms who haveadequately communicatedtheir compliance are likelyto be subject to enquiriesby the authorities just onceevery three or four years less than organisations with

a more adventurous take ontax planning.

But tax policy can also haveimplications beyond thebalance sheet. It affects theway shareholders and otheraudiences view the company.For instance, a company thatvalues its Corporate SocialResponsibility credentialsor has major contracts with

government bodies willwant to make clear that taxcompliance is a priority andthat being trusted and payingits liabilities is a core valueof the companys brand.

A CFO can do much tohandle tax policy but thegood news about tax and there is such a thing,believe it or not is thatcomprehensive, up-to-dateadvice is always availablefrom a professional advisor.

For more information abouttax you can order KPMGsEverything you ever wantedto know about tax withoutgetting lost [email protected]

Strategic thinkingAs strategic planning comesto the foreground of the CFOsagenda, any new developmentin the business, such as adivestment of assets, staffincentive schemes or settingup an office overseas, may wellcome with an unexpected taxbill attached. This could affectcash flow and undermine theCFOs reputation for smoothfinancial management.

Business processesthroughout the companyhave implications for tax,ranging from purchasing to

staff remuneration, so itsessential that the CFO isaware of the policy andpractice in all these differentareas. Changes in theseprocesses as well as acompanys performanceor structure may alterthe tax liability. Therefore,anticipating and managingsuch changes is importantto the financial performanceof the company.

Tax planning CFO Guide 5150 CFO Guide Tax planning

Later on in yourfirst 100 days youmay wish to raisetax as an issueon the boardroomagenda, as CFOsare increasinglycalled upon tocommunicatetax to fellowboard members

Before you complete yourfirst 100 days, make sureyour team leaders are onboard with your strategy.Establish personal goalsand objectives and alignthese with compensationand incentives.


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Time to think aboutthe futureAs the your first 100 days progress, you willincreasingly be called upon to fulfil your strategicrole in the business. You will want to make sureyou have met your other priorities so that you cangive adequate time to this important function.

Indeed, you overlook strategicplanning at your peril. Attemptto achieve too much toosoon and the results canbe near catastrophic.

Within most organisations,the entire executive teamhas some responsibility forstrategic planning. But, moreoften than not, its the CFOthat has to fulfil the mostdifficult role. He or she hasto strike a balance. On theone hand, the CFO has to dealwith the businesss divisionalheads, who will want to spendbig to achieve optimumsuccess as quickly as possible.

On the other, theres theCEO and non-executiveteam who will demand tosee tangible results for everypenny invested. Reconcilingthese expectations is thereal challenge.

executive directors. Thiswill provide a wealth ofinformation relating to currentpractices and will also offerinsights into the financeteams historic involvementin strategic matters.

Asking questions of yourpeers will be helpful. Itsimportant to establish howthe finance team is perceivedwithin the business. Doesit already add value? If not,what can be done to delivermore? Its just as importantto discover how the roleof CFO is viewed by therest of the executive team.Do people think yourethere to run a watchful eyeover things and provideessential insights? Or dothey assume youre justthere to cut the cheques?

By conducting this researchthoroughly from the outset, itbecomes possible to evaluatecurrent strategic planningpractices effectively. You canassess how current projectsare progressing and decidewhether or not existing fundingstructures are appropriate.

The art of saying noNever lose sight of the factthat its the CFOs job to sayno. Within every business,someone has to step back,weigh up the risks andensure that money isnt beingsquandered in pursuit of pipedreams. Instead, projectshave to be carefully plannedand constantly monitored.Most importantly of all, theyhave to be in keeping withthe overall strategic visionof the business. Theres nopoint, for instance, throwingcash at a new product ifyou have absolutely no ideahow to take it to market.

During the CFOs first 100days progress in strategicplanning will becomeincreasingly important.For many CEOs, a strategicbusiness partnership withtheir CFO is what they wantmost from the relationship.

However, when it comesto strategic planning, theearly days are particularlyvital in developing a completepicture of the processes andstructures already in placeand getting you to that stagewhere you are able to providefull strategic support to theexecutive team.

As we have seen, the beststarting point is to schedulein meetings with fellow

Strategic planning processes CFO Guide 5352 CFO Guide Strategic planning processes

All the while, the organisationoverall financial positionshould be closely monitored.Remember, the whole pointof strategic planning is to useyour resources as effectivelyas possible. Keep an eyeon your debt and equitylevels and dont let the ratio

between these two metricsexceed a level with whichyoure comfortable. Its easyto over-commit financially,but far harder to turn thingsaround once youve over-stepped your means. Justthink of all those footballclubs desperate to returnto their past glories.

Q:How do you createa small business?

A:Manage a big onevery badly.

The whole pointof strategicplanning is to useyour resourcesas effectively aspossible. Keep aneye on your debtand equity levelsand dont let theratio between thesetwo metrics exceed

a level with whichyoure comfortable


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54 CFO Guide Managing operational performance checklist

ChecklistManagingoperational performance


Business performance management

Ensure Finance is playing Meet with business stakeholders to get feedback 30 daysan appropriate role in helping of quality of finance support received vs expectations

to drive operational Meet with financial heads supporting business

business performance operation to:

Assess whether KPIs and other management

information are appropriate and timely

Consider whether the quality of decision support

provided and level of involvement is adequate

Performance Measures

Determine whether Finance is Evaluate performance measurement practices 60 daysmaking use of leading practice in place vs leading practices (e.g. Activity- Based

measures and approaches Management; Balanced Scorecards)

Tax Planning

Ensure that appropriate tax Discuss effective tax rate and tax planning with

planning is carried out to manage head of Tax

the effective tax rate Consider opportunities for future tax

planning strategies

Organisation Structure and Human Resources

Consider whether resources Evaluate organisation structure for decision support

and organisation structure in both in terms of reporting lines and specialist

place are appropriate to provide departments (e.g. dedicated Project Management

decision support capability; dedicated decision suppport group)

Consider whether finance has the right skill sets

and training for senior decision support roles

Operational Planning and Forecasting

Ensure operational planning and Review operational planning and forecasting process 90 daysforecasting is effective and helps to determine if it is effective (e.g. timely; appropriate;

drive business performance carried out at the right level of detail)

Notes for non-finance directors CFO Guide 55


Some top tips1. Finance directors should know a lot about risk, so when seekingCFO backing on a project, provide some risk analysis to showwhat happens when things dont go to plan.

2. CFOs like predictability. Whether you are pushing a marketingcampaign or a training programme for employees, give the head offinance some measure of what you expect your project to achieve.

3. Past performance is a crucial guide to finance controllers. If youcan show CFOs historical data, they will be grateful for your efforts.


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31/31

2009 KPMG LLP, a UK limited

liability partnership, is a subsidiary of

KPMG Europe LLP and a member firm

of the KPMG network of independent

member firms affiliated with KPMG

International, a Swiss cooperative.

All rights reserved. Printed in the

United Kingdom.

KPMG and the KPMG logo are

registered trademarks of KPMG

International, a Swiss cooperative.

Designed and produced by Wardour

Publication number: 309-772

Publication date: April 2009

The information contained herein is of a general nature and is not intended to address

the circumstances of any particular individual or entity. Although we endeavour to provide

accurate and timely information, there can be no guarantee that such information is

accurate as of the date it is received or that it will continue to be accurate in the future.

No one should act upon such information without appropriate professional advice after

a thorough examination of the particular situation.

DisclaimerAll figures were correct at the time when the publication went to print.

Credits

Main photography by Drew Gardner; profiles photography by Johanna Ward.

kpmg.co.uk

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