In the past 12 months, CFO Innovation published more than 200 feature articles, 800 news items, 100 white papers and 50 video presentations. The stories that generated the most interest (i.e., that had the most number of unique views) include those about accounting firms, corporate scandals, salaries and professional development.
In other words, same old, same old – the best read stories in past years had also revolved around these same issues.
But in 2016, we also saw heightened interest in articles about what the job of the CFO would look like in the future, as well as in stories around analytics, automation, digital disruption, and financial planning & analysis.
It seems the winds of change are blowing more strongly in the corridors of the finance suite as indeed in the other nooks and crannies of the office. As the year ends, it is not a bad idea to re-read these articles in preparation for the challenges and opportunities of 2017.
So what were the stories that you and your peers were most interested in over the past 12 months? Here they are, in reverse order:
The woman in question is Chor Woon Yu, also known as Carol Yu of Chinese internet company Sohu.com. According to S&P Global Market Intelligence, which compiles the annual league table for CFO Innovation, she was paid the equivalent of US$9.7 million in 2015 – up 84% from the previous year, boosted by stock awards valued at US$6.9 million.
“This is the first time that a woman topped the CFO compensation league table,” we observed. Hon Hing Hui (also known as Susanna Hui), was ranked No. 7 as Group CFO of Hong Kong telco PCCW (US$4.2 million) and also No. 20 as Group CFO of HKT Trust and HKT Limited (US$2.6 million), which is majority owned by PCCW. Put together, her two salaries effectively place her second to Yu in the league table.
Women in finance should not get too excited, though. Asia (and the rest of the world) is still far behind on gender parity. There are only three women in the Top 50 list of Asia’s Millionaire CFOs. But it is fun – and instructive – to read about the finance chiefs who are at the top of the game cash-wise in Asia and in individual countries, and how they did it.
“The green-eyeshaded accountant who painstakingly checks and crossfoots debit and credit entries will likely cease to exist,” predicts author and IT and management professor Tom Davenport, who is an independent senior advisor to Deloitte Analytics.
But “the auditor who understands, monitors, and improves analytical and cognitive systems and processes will only thrive,” he adds. “There are likely to be jobs for human auditors no matter how much automated technology is adopted.”
The key for auditors is to acquire skills in statistics, data management, analytics and the art of communication and persuasion, says Davenport. That applies as well to CFOs and others in the finance function.
Analytics and automation will also change the office of finance, and this interview with Richard McLean, CFO for Asia Pacific and Japan at enterprise software giant SAP, gives an advance look at what the typical finance function could look like in the near future.
“We have redeployed a lot of people and resources to focus purely on financial planning and analysis and on commercial finance activities,” he says. “These roles are positioned much closer to our internal and external customers, delivering actionable insights to ensure business growth is compliant and is profitable and sustainable.”
McLean then describes the technologies that enable this new direction. The first thing they do is capture and store data in-memory. “This significantly reduces and simplifies the size and complexity of our data layer and enables us to manage our ever larger data at much faster speed.”
They also link finance to the connected world, to customers, suppliers, networks and the workforce “in a way that our old systems didn’t do. What that results in is much more streamlined, real-time end-to-end finance processes that are much more automated and have much reduced numbers and duplication.”
It helps a lot when your own company, SAP in this case, develops the digital technologies that enable the office of finance of the future. But there are many other service providers that other CFOs can tap, even homegrown resources, in their own transformation journey.
It’s not uncommon for a financial professional who has been promoted to a senior role after being a subordinate for years to feel a bit unsure about his or her capabilities. Don’t seat it, counsels Christine Wright, Managing Director at global executive recruitment company Hays.
“No one expects perfection right out of the gate, so stop expecting it from yourself,” she writes. “If you’re too frightened to make any decisions in case you get something wrong, you’ll end up making no decisions at all, and that is no way to run a team or anything else.”
Drawing from her own experience and those of her clients, she goes on to give advice on what to do, from taking a voluntary role outside the company to hone your leadership skills to doing your homework in advance to getting to know your team members to finding a mentor.
“No matter what job you’re in, approach it with a positive attitude,” says Wright. “If you understand that you have great skills and experience to offer, but that you should always, always be open minded and ready to learn, then you’ll do just fine.”
The strong interest in this story highlights the new pre-eminence of planning and analysis in the office of finance. It was written by Nilly Essaides, who was director of the FP&A practice at the Association for Financial Professionals when she did this article for CFO Innovation (she is now Senior Research Director at The Hackett Group).
“Growing volatility in the business environment (risk, competition, variability of outcomes), cost pressures and a new focus on enterprise performance is sparking a renewed interest in how to best organize the financial planning and analysis (FP&A) function,” she observes.
“So does the increased realization among companies that FP&A can add substantial value by supporting management decision-making and acting as a business adviser to the operations.”
Essaides then discusses the three structures that CFOs can utilize for FP&A: decentralized, centralized and hybrid. Most companies opt for the hybrid approach, she notes, but many factors should be considered in making the decision, including market characteristics and level of technology.
They can, says Adrian Johnston, Vice President of Applications at Oracle Asia Pacific, who was interviewed for this article. The thesis is that digital disruptors like Uber, Airbnb and Amazon have shown that they can put brick-and-mortar companies out of business.
To survive, enterprises must anticipate what disruption is coming. “As CFO, I must know who my customers are and how their needs are changing and keep track of what my competitors are doing,” says Johnston. “Having an integrated system equipped with the right software and applications in the firm can give the CFO all the information he needs to make these decisions much faster than before.”
One approach is to replace the on-premise legacy systems with cloud solutions. This means that the CFO and the CIO must work more closely than ever before.
“The CIO must make sure the technologies and analytics applications in the cloud are current and relevant to the firm so that it will enable the CFO to make fast and profitable decisions,” says Johnston. “To fend off competition from the likes of Uber and Airbnb, speedy response is key, and a successful CIO-CFO partnership is the enabler of that.”
This is yet another story around financial planning & analysis that generated strong interest. We asked: Why can’t finance folks persuade others in the team and the rest of the organization, and also outside stakeholders, to implement (or even just comprehend) a recommended course of action?
The answer: The FP&A team and others in the finance department are generally competent in technical skills, but they need to much more to effectively articulate their thoughts and findings, and then persuade business units to implement the recommended courses of action.
This means mastering the art of story-telling. The rest of the article discusses practical ways for finance professionals to accomplish this, as well as how to avoid typical pitfalls such as information overload.
Based on his experience and perspective as CFO of Unit4 Asia Pacific, a provider of enterprise applications designed to empower people in service organizations, Eric Cheung identifies 15 trends that he believes will change the office of the CFO and the job of the holder of the office.
The “structural shifts” include constant transition from job to job, the CFO’s involvement in risk assessment, the need to incorporate ‘soft power into ROI perspectives, and the rise of the product-as-a-service model.
Whether you personally agree or not, this is a thought-provoking treatise that could help illuminate the way forward for finance.
Corporate scandals. We like reading about them, so long as they are not about us or our company. It’s not really schadenfreude, the pleasure someone derives from someone else’s misfortune. It’s more: What can we learn from this so we can avoid getting mired in one?
The fraud at LG Chem, South Korea’s largest petrochemical company, highlights the unpleasant truth that even huge enterprises can be victimized by apparent fraudsters.
According to LG, it received an email from a long-standing supplier, Saudi Aramco Products Trading, a unit of the Saudi national oil company, informing it of a bank account change. The email contained the correct particulars around a shipment of naptha in the second half of March, including the amount due (24 billion won or US$21 million).
It is unclear whether the change in the bank account after so many years raised a red flag with LG Chem finance staff or if they bothered to confirm the veracity of the email with people in Saudi Aramco before wiring the payment. What is known is that the payment was made to the new account, which was later discovered to be not owned by Saudi Aramco.
A basic, but expensive mistake, and a cautionary tale that CFOs should circulate to everyone in finance, especially the AP team.
No surprise here. Our report and analysis of the financial results of the Big Four firms is always the best read in the past years. The top story of 2016 racked up more than 38,000 unique page views, 80% more than the our report on the same topic last year.
“For fiscal year 2015, the bragging rights as the biggest of the Big Four accounting firms go to . . . PwC, which reported revenues of US$35.4 billion to Deloitte’s US$35.2 billion,” we wrote. Deloitte was No. 1 for fiscal year 2014.
Three of the Big Four enjoyed a record year. PwC’s revenue rose 4.3% from fiscal 2014, while Deloitte’s was up 2.9%. EY, consistently the No. 3 firm, had a great year too – revenues hit an all-time high of US$28.7 billion, up 4.7% from the previous year.
But things did not turn out as well at KPMG, whose US$24.4 billion in revenues were 1.6% lower than in 2014.
A Record Year for Three of the Big Four
Fiscal year to 31 May 2015 for Deloitte, 30 June 2015 for PwC and E&Y, 30 September 2015 for KPMG. Sources: Deloitte, EY, KPMG and PwC