Large scale negotiations, administration and a multitude of decisions to be made--these are all part and parcel of an acquisition. The list of tasks to do includes new roles to be performed and budgets to be calculated. How does the chief financial officer (CFO) feature in such a situation?
Last year's acquisition of Pan Pacific Hotels and Resorts by Singapore-listed hotel and property giant UOL Group Limited poses significant managerial challenges to Neo Soon Hup, CFO of Pan Pacific Hotels and Resorts. Neo is a watchful gatekeeper of his organization's financial books, the eagle-eyed treasurer who ensures the company's coffers are in feisty shape to support its business goals. These goals involve delivering value to its stakeholders, which include employees, guests, hotel owners and business partners.
"It's important to ensure that the company's accounting and financial reports are in compliance with approved accounting standards and adhere to the rules and regulations of the Singapore Exchange [SGX], due to our parent company's listing on the SGX," Neo remarks. "With the increasing focus on corporate transparency especially in the financial area, it becomes even more pertinent that my team and I communicate clearly and credibly to our internal and external stakeholders, which include the board of directors, senior management team, shareholders, regulatory bodies and financial institutions."
Neo is also a strong believer of IT's role in helping an organization run efficiently. The revamped Pan Pacific Hotels and Resorts' website (www.panpacific.com) was last year awarded the Hotel and Lodging Standard of Excellence at the 2007 WebAwards, a worldwide internet competition for website development that recognizes the best websites in 96 industries.
"IT provides an effective platform that enables the business to meet regulatory compliance successfully and produce timely and reliable financial reports," Neo asserts. "It would be difficult to envisage an organization being able to prepare accurate and timely financial and management information without a robust IT system."
With hotels located throughout the world, determining the IT budget for each location dictates careful consideration. Pan Pacific Hotels and Resorts regularly reviews its group IT strategy which specifies the IT standards for its hotels, taking into account the latest advancement in technology and development in the industry. Tentative budgets are then submitted to the board of directors for approval.
"Some of the key challenges faced in the hospitality industry are the implementation of the minimum standards in hotels due to the varying degree of IT-readiness in each location. Convincing the hotel owners of the value of IT investment is also no mean feat."
As the hospitality group expands into different countries, there will be an increasing need for the CFO to understand the varied business requirements of each country. Neo states it is critical to have a robust risk management system to support each hotel.
"Different hotels in different locations will have their own set of business, regulatory and accounting requirements," Neo elucidates. "For example, a hotel in the heart of Singapore within the district of a convention center may receive very different categories of travellers from a resort situated in the mountainside of a skiing destination, which translates into entirely different sets of business needs. Operating a hotel in the city of Dhaka, Bangladesh will need to take into consideration currency control regulations as compared to running a hotel in Japan."
Talent Asia's hotel boom, particularly with regard to China, has highlighted the acute shortage of talent in the hospitality industry. The talent shortage could potentially pose restrictions on a hotel group aspiring to expand in the region.
"One of the main challenges is the recruitment and retention of these talents," Neo explains. "To achieve this, we have to be able to offer talents attractive remuneration and exciting career paths complemented with strong development and training programs."
Education There is also the issue of cost efficiency, which Neo states is critical to an organization's survival.
"It is vital to educate the business managers that achieving cost efficiency is not a one-off matter but a continuous process," Neo points out. "To do this, we help them [business managers] understand the economics of the business so that we can work towards enhancing value and profit levels."
Simplification The vast array of figures in financial reports can be mind-boggling to those not in the know. Neo feels it is vital for the company's stakeholders to understand the significance behind the numbers.
"Accounting and finance matters can be complicated to the uninitiated. It's my team's responsibility to make the information easy to understand so that all stakeholders can better appreciate the financial standing of the organization."
According to Neo, the role of the present-day CFO is evolving to include a host of other functions.
"The role of the CFO has been expanding steadily from a compliance function focused on the recording and reporting of transactions to one that includes almost all aspects of corporate activities," Neo says. "Today's CFOs are involved in treasury operations, tax planning, financial controls, regulatory reporting, strategic planning, risk management, information technology, organizational design and corporate communication."
"The role of the CFO has evolved to a strategic role that calls on a wide range of skills and competencies beyond technical competence in financial control and reporting, which includes providing valuable counsel on the operations and the long term business strategies."
Neo foresees the role of the CFO will continue to change over the next few years, and this change will see the CFO involved in more matters pertaining to IT, particularly with regard to financial and business forecasting.
"Corporate executives, business and finance managers now demand extensive information about current business performances, future risks and new business opportunities, which are beyond the traditional income statements and balance sheets," said Neo. "CFOs will increasingly need to provide analytic tools using information technology to assess and provide accurate and timely information on key business drivers and performances." This change in the role of the CFO will also bring about closer cooperation between the CFO and chief information officer (CIO).
"There will be more synergistic work between the CFO and CIO to ensure precise information management and effective inter-department communications so that the organization's operations are enhanced to support business growth," says Neo. "The objectives of financial control and management are so tightly knit with the information systems in organization that it is essential for the CFO and CIO to complement each other's role in order to achieve corporate objectives."
Neo has several bits of advice for his fellow office holders, ranging from work ethics to basic rest and relaxation.
"A CFO is an integral part of the senior management team; while he or she needs to maintain a degree of independence and objectivity on financial matters, there is also the need to establish strong and open communications channels and work closely with the CEO and the other members of the management team to collectively drive the business strategy," Neo says. "It is also important that the CFO maintains the highest level of integrity and professional ethics as he is responsible for all matters pertaining to finance."
Last but not least, the need to recharge from the grinding work routine.
"The daily challenges of being a CFO increases one's stress levels. Therefore, the incumbent needs to take time to re-energize regularly to remain effective," Neo says.
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