Get to know your CFO

Get to know your CFO

Chief financial officers have transformed from being financial gatekeepers to strategic partners and advisors. They wear multiple hats.

The role of the chief financial officer (CFO) in the current challenging global economic conditions is ‘certainly not for the faint-hearted’. This was how Dr Ernest Kan Yaw Kiong, president of the Institute of Certified Public Accountants of Singapore (ICPAS), described it at a recent joint ICPAS-Microsoft CFO forum on ‘Business Intelligence for Challenging Times’ in the Lion City in June.

Dr Kan said the finance function has undergone a role transformation from predominantly being transaction processing focused, to now being decision support focused, with CFOs providing both qualitative and quantitative business insights.

The evolving CFO focus was on creating business value rather than just crunching numbers.

Top speed

“To say that the modern-day CFO is now operating at top speed, multi-tasking, with varying roles and wearing many hats is not exaggerating,” Dr Kan said. “He or she is responsible for the complex issues pertaining to financial instruments, fair value, payment, et cetera.

“They also have to deal with complexity in information technology, mergers and acquisitions transactions and corporate governance, which has very much been in the limelight recently. They have issues on financing, compliance with laws and regulations, human resources, investor relations—the list goes on.”

Dr Kan told the forum delegates that the complexities of business models and globalised operations add to the pressure facing CFOs today.

“Coping with voluminous amounts of data to justify decision-making is where the CFO constantly has to work with the CEO,” he said. “Undertaking strategic and tactical exercises to transform businesses, creating shareholder value is also a very important element. With greater transparency, these are just some of the important tasks that CFOs have to grapple with today.”

Velocity of business

Dr Kan quoted Bill Gates, from the Microsoft founder’s 1999 book ‘Business at the Speed of Thought’.

Gates said the 1980s were about quality, the 1990s were about re-engineering and the 21st century would be about ‘velocity’. When the increase in velocity of business is great enough, the very nature of business changes.

Dr Kan quoted Gates as saying that “management that lives without information at their fingertips, doesn’t realise what they are missing. Some may not understand what is possible and might not be seeing the potential of using technology to move the right information, quickly, to everyone in the company”.

In his book, Gates said the businesses that will be successful in coming decades would be the ones using digital tools to re-invent the way they work. The ‘digital nervous system will let you do business at the speed of thought’ which will be the key to success in the 21st century. “We have seen so many successes today that prove how true have been the statements that Bill Gates made,” Dr Kan said.

“The CFOs of today require the most efficient and best business support tools to make their work more productive and impactful. They play a pivotal role in the survival and continual success of modern-day business. Accounting is the language of business which requires professionals to sift through the mountains of operational and financial data to arrive at the truly critical information for optimal decision-making.”

And, the pressures that CFOs now face, seem to be having a distinct impact on their job satisfaction, at least according to a recent survey by BNP Paribas, one of Europe’s biggest banking and financial services groups, with a presence in more than 85 countries, including 9,400 employees in Asia.

BNP Paribas tracked resignations tendered by CFOs, heads of finance, financial controllers, finance directors and finance managers in Singapore, from 27 September 2007 to 31 January 2009.

A research team, headed by Wee Siang Ng, head of Singapore research, BNP Paribas, combed through Singapore Exchange filings and found that during this period, there were 176 resignations, or 2.5 resignations every week.

Short terms

They found that more than a third (34.1 per cent) of CFOs resigned, or were sacked, within their first year of tenure. Some 17 per cent resigned after at least four years of appointment and resignations were more common among smaller enterprises with market capitalisation of less than US$100 million.

Microsoft Singapore’s managing director, Jessica Tan Soo Neo, told the forum that the economic downturn has increased the competitive landscape, driven by globalisation and technology opportunities.

“We all now have opportunities as well as a lot of competitive pressures,” Tan said.

“Because of new players, new markets, we are also seeing business models changing. Society’s cultural environment is changing because of the profile, needs and habits of our users; how they communicate and how they interact is changing the way our businesses need to respond.”

Tan said the compliance and governance responsibilities of CFOs were especially important in the current global economy, as was cost management.

She said business leaders were now also looking at CFOs to help in a range of other issues, including gaining new customers, and delivering customer value. “We, at Microsoft, partner very closely with our finance team, to ensure we have the right business information in real-time, proactively, about how we are performing in relation to the marketplace. We rely on our finance people to know about trends relating to our existing customers so they can provide insights to us on that.”

Tan said the finance team plays a very big role in Microsoft in business planning, the major part of which is half-yearly.

“Finance plays a very big role in providing us with the right information to make the decisions; information on market trends, market data and market movement. It’s not just something they collect at planning times, it’s got to be something that we use continuously, daily and that we monitor, using business intelligence tools.”

Chow Kam Wing, executive director and chief financial officer, Micro-Mechanics (Holdings), said that the CFO’s role has changed from transactional to strategic.

Micro-Mechanics is a Singapore Exchange main-board listed company that designs and manufactures consumable tools and precision parts for the global semiconductor industry.

Corporate scandals

“Since 1990, the revolution of technology, Internet and computers has sped everything up and the development of globalisation has made business models more complicated than ever before,” he said. “Because of this, there have been lots of corporate scandals. We’ve heard about Enron and the dot-com crash and recently Lehman Brothers, which is six times bigger than Enron and the banking industry nearly collapsed.

“Boards of directors are now very much concerned about investments, so they come to who, the CFO, because we know the figures.

“We have to protect the company assets, the investors, through internal control and with management. We set the targets for growing the business and for shareholder reward and shareholder value, and we have to hit the targets.

“With the financial downturn, the titles ‘strategist’ and ‘catalyst’ are more appropriate for CFOs, not because they are high profile and high class, but because we need decision-making, we need action because we are talking about the life or death of the company.” CIO Asia

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