balancing risk and performance with an integrated finance organization · balancing risk and...

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Balancing Risk and Performance with an Integrated Finance Organization

Cormac PetitGlobal Banking Leader

IBM Institute for Business Value

IBM Global Business Services

© Copyright IBM Corporation 2007The Global CFO Study 20082

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IBM has been conducting CFO studies for the past 5 years

CFO Studies



The Global CFO Study 2008 is the largest CFO-level study of

its kind with 1,230 participants

Geography SectorRevenue

Title Scope

Source: IBM Global Business Services, The Global CFO Study 2008

CFO Study 2008 firmographics

Asia Pacific,

25%

EMEA,

32%

Americas,

43%

Public, 15%

Communications,

12%

Industrial,

26%

Distribution,

25%

Financial Services, 23%

BU / Program

Area, 13%

Country,

16%

Region,

12%

Enterprise /

Global, 59%

Board /

President, 1%CRO /

Risk, 8%

SVP /

Controller /

Treasurer,

25% CFO / Deputy

CFO / Director,

66%

<$500M,

10%

$501M to

$1B, 17%

>$1B to

$5B, 32%

>$5B to

$10B, 11%

>$20B,

20%

>$10B to

$20B, 9%



Two-thirds of CEOs believe they need to make bone-jarring

changes in response to changes in the global marketplace

Global is not optionalNeed the willingness,

and the wherewithal to

manage risk

Strategic imperatives



How do Finance organizations approach globalization’s

opportunities and challenges?

What financial management models have the flexibility

to not only accommodate but also enable strategic and

operational transformation?

What is the CFO’s role with respect to risk management?

…so we set out to answer some stimulating questions

?

?

?

Stimulating questions




Three key themes emerge


Integration brings effectiveness and rewards

Outperforming is about getting to the truth

Risk management is a team sport



So, what are the drivers of effective information integration?

Financial

outperformance

Increased effectiveness in

driving integration of

information enterprisewide

Globally

mandated

standards

Standard chart

of accounts

enterprisewide

Common data

definitions

enterprisewide

Standard common

processes

enterprisewide

Components of an Integrated Finance Organization

These are the components of good

governance and what we are calling the

Integrated Finance Organization (IFO).Source: IBM Global Business Services, The Global CFO Study 2008



What’s Important to the CFO? Everything.


Measuring / Monitoring Business Performance

Continuous Process Improvement / Business Improvement

Meeting Fiduciary and Statutory Requirements

Driving Integration of Information Across the Enterprise

Developing People

Aligning Finance with the Business

Driving Cost Reduction

Leading Finance-Related Compliance Programs and

Strengthening Internal Controls

Inputs into Identifying and Executing Growth Strategies

Supporting / Managing / Mitigating Enterprise Risk

The two agenda items ranking lowest

in importance are key differentiators of

financially successful companies.

CFO agenda

40%

65%

51%

55%

37%

42%

80%

60%

71%

72%

73%

75%

75%

74%

76%

84%

30%

45%62%

66%

Importance

Effectiveness



Delivery Models

Technology

6%

10%

21%

18%

16%

25%

20%

33%

52%

48%

50%

65%

Enterprise standards lead to simplified technology and

delivery models help maintain standards


IFOs

Non-IFOs

Enterprisewide technology and delivery model improvementsPercent fully adopted enterprisewide

Reduce the number of enterprise

resource planning (ERP) instances

Rationalize the number of data warehouses

Use outsourcing

Reduce the number of Finance applications

Use shared services for transactional

activities

Use centers of excellence for decision

support and analytical services



As companies increase in size, exposure increases

0%

20%

40%

60%

80%

Under $1B $1B-$5B $5B-$20B Over $20B

Major risk event in past 3 years

Prepared or Very prepared

Risks and preparedness

45% 46%

60%65%

34%38%

31% 35%



CFOs are uniquely positioned to determine and guide the

overall enterprise risk profile

Source: IBM Institute for Business Value

Low tolerance

for risk

High appetite

for risk

Internal

Auditor

Controller

Line

Executive

StrategistCEO

Risk

Manager

Tactical Strategic

SalesMarketing

COO

CIO

ILLUSTRATIVE

Risk

profile

Organizational

mindset

CFO

Adventuresome

visionaries

Operational leadersDaily operators

Image makers

CRO

Perception of the enterprise risk profile by role



To establish global standards and become an Integrated Finance

Organization, Finance should take ownership of their processes

worldwide, simplify their technology and delivery models, and provide a

single version of the truth to their enterprises. They should formally

define their risk programs and take an active role in risk management

Conclusion





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