How should CFOs transform the finance function to unlock value in volatile times?

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Ahmed Mazhari

Chief Growth Officer

April 26, 2013 - Change is the order of the day, driven by the tremendous upheaval of the economic turmoil of the past several years. When I look at the finance landscape of 2013, I see three issues crop up time and again: the challenges presented by the whirlwind of Big Data; the need to balance short-term efficiency with medium-term performance; and a variety of compliance-related pressures in mature and emerging markets.

For one, finance senior executives are being bombarded by requests for data from key stakeholders. To respond effectively, they must be able to aggregate information from different parts of the organisation and transform it into insights without being overwhelmed by the sheer volume of the data involved. Second, they must plot a careful path between the need to conserve cash and drive austerity in the short term; and invest in critical programs to ensure growth in the medium term. Third, they must meet the compliance demands of regulators, auditors, governments and others.

To tackle these challenges and achieve sustainable growth, farsighted CFOs are taking a long, hard look at their function to determine how to transform it to create greater value. The truth is, finance transformation is no longer a matter of choice. Let's look at the compliance and data issue in emerging markets for example. With international corporations operating across multiple global markets, many of them emerging and fast growing, existing operating models are simply not effective enough. A major obstacle to emerging market expansion is the different risks and compliance processes involved in setting up operations in new markets. Further, speedy and accurate information is an imperative to support solid decision making if companies are to be able to seize opportunities such as the major cross-border M&A deals realised by the beer brewing sector of late: Heineken’s $5.7 billion purchase of Mexico’s FEMSA, and SABMiller’s acquisition trail in Latin America. The bottom line? Finance organizations need to prepare for a fundamental reset in their functioning in line with shifting global realities.

The gradual breakdown in the old model explains the push for centralisation that I'm seeing in finance functions around the globe. CFOs want finance to be more aggregated so the function can get closer to decision makers and deeply understand the business context of the larger enterprise. In addition, centralisation helps finance leaders gain greater control to successfully lead their organisations through the challenges of Big Data, balancing short and medium term goals, and compliance. As CFOs think through the implications of centralisation, they're asking questions about what they should do in house, what operations they should hand over to outside experts, who their partner should be—and what skills their partner should bring to the table.

From my perspective, a finance transformation partner must have the ability to help clients embrace big data and extract the insights from this information, coupled with deep process expertise and extensive exposure to cross-industry best practices. Finance functions and the companies they serve can gain tremendous insight by learning from radically different organisations. Perhaps a pharma CFO can learn how to drive cost efficiencies; and a retail CFO learn about compliance and controls from pharma. At Genpact, we're proud to serve clients from 16 diverse industry groups. One of our key differentiators is the ability to aggregate best practices across industries and synthesize them into pragmatic solutions to help companies and their CFOs achieve mission-critical goals.

In major corporations worldwide, CFOs are awakening to the need for a fundamental transformation of their function to unlock business value and support growth, perhaps with the aid of a trusted partner. The pressures driving this change will not slacken either: Compliance requirements will only get more complex; the data flood will only gain momentum; and the need to balance present-day cost effectiveness with longer-term success will only get more urgent. As a driver of shareholder value, finance’s moment has arrived. CFOs and corporations will either seize the moment and get ahead of the pack, or be left behind by their competitors.