ge510-6239-agile-cfo-full.pdf

8/11/2019 ge510-6239-agile-cfo-full.pdf

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IBM Business Consulting Services

Financial

Managemen

IBM Institute for Business Value

The agile CFOActing on business insight


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ibm.com /bcs

The agile CFOActing on business insight


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Table of contents

Preface page 1

Executive summary page 3

Research methodology and demographics page 4

Acknowledgments page 5

The transition to delivering predictive business insight page 7

Enabling insight page 13

Enhancing insight page 21

The roadmap forward page 29

The Global CFO Study 2005 participant responses page 33

IBM contacts page 44

References and notes page 45


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Mark Loughridge, Senior Vice President and Chief Financial Officer, IBM Corporati

Preface

As the demands placed on

Finance continue to expand, CFOs

are challenged with the paradox ofdelivering a stable, highly effective

finance environment while alsoproviding the agility to respond

and react to rapidly changingbusiness climates.

Nearly 900 CFOs and Senior

Finance Executives around the worldwere surveyed, representing every

major industry sector. Of this total,267 of these executives made time

for in-depth, one-on-one conversa-tions conducted by IBM Business

Consulting Services Partners.The IBM 2005 Global CFO Study

highlights how Finance organiza-

tions are challenged to balancecompeting priorities of business

growth, risk management andperformance insight while adding

significant value to the business.

The result is a roadmap that

clearly addresses the need tomitigate structural complexity in

order to efficiently drive information

integration across and throughoutthe business. This integration, in

turn, will help organizations optimizegrowth opportunities and business

performance while improving riskmanagement.

The CFO Study outlines an ambitious

path for Finance organizations the goal of which is attainable

and invaluable. I know this becauseIBM has been traveling this road

for over ten years. IBMs ownFinance transformation journey

began by significantly reducing

structural complexity, and drivingrisk management and performanceinsight to return real business value

to IBM and our clients.

Out in the global market, our

Financial Management Consultingand Finance and Administration

Business Transformation Outsourcingpractices can leverage our internal

experience, as well as our deep

domain expertise to help clientsoptimize their performance. We have

over 10,000 financial managementand accounting specialists who can

help you in your efforts to identify,create and deliver lasting business

value to your organization.

We would like to take this opportunityto thank each of these CFOs for

their time and for the insights thatare stimulating new thinking inside

IBM about how we can better help

our clients innovate and grow. Mycolleagues and I look forward tocontinuing this conversation and

this journey with you.


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The IBM 2005 Global CFO Study surveyed 889 CFOsand senior Finance professionals in 74 countries. Thisstudy, which provides a comprehensive assessmentof the agenda of CFOs today, underscores Financestransition from primarily stewarding information to alsoleveraging that information to deliver predictive businessinsight to decision makers across the enterprise.

In the IBM 2004 Global CEO Study, CEOs told us thatgrowth and responsiveness topped their agendas. Inthe IBM 2005 CFO Study, CFOs indicated that Financestop areas of importance were performance, growthand risk. These responses track with CEOs agendas. Infact, more than half of the participants in the 2005 CFOStudy placed the highest importance on managingenterprise performance, partnering with the enterpriseto support growth strategies, continuously makingprocess/business improvements, strengthening controlsand meeting fiduciary requirements. The delivery ofinsight related to each of the top areas of importanceis critical to enhancing the responsiveness of decisionmakers and, thus, the enterprise.

Yet, with the exception of compliance and fiduciaryrequirements, there are large gaps in most Financeorganizations between the importance placed on deliv-ering insight and their ability to deliver it. These gaps areprimarily driven by a lack of standardization, a lack ofcommon processes, inconsistent tools/applications andfragmented information.

Highly effective Finance organizations 1 in our study haveenabled delivery of insight by addressing its inhibitors:structural complexity and fragmented information. Theseorganizations are:

Mitigating enterprisewide structural complexity bystandardizing, simplifying and optimizing Highly

effective Finance organizations employ common andsimplified processes and data/information standards.They also reduce the number of ERP systems andrationalize finance budgeting/forecasting tools toimprove the integration of information and deliveryof insight. Moreover, organizations with optimizeddelivery models are more likely to have standardpolicies, common/simplified processes, functionalbest practices and rationalized technology.

Enabling fact-based decisions by integrating information enterprisewide Finance organizationsthat drive global process ownership and establishcommon information standards which together helpfacilitate information integration are more effectiveat delivering insights.

Using this foundation, these organizations areenhancing their ability to provide business insights by:

Partnering with the enterprise to enhance growthinsight In keeping with Finances shift from ahistorical to a more predictive focus, highly effectiveFinance organizations place a strong emphasis onpartnering with the CEO and business unit execu-tives to identify and assess business opportunitiesand synergies for growth strategies.

Optimizing decision support to enhance performance insight These organizations integratetransparent, role-based metrics and exceptionreporting while fully cascading these metrics consis-tently throughout the enterprise. In addition, theydefine quantifiable relationships between businessdrivers and scorecard/dashboard metrics to enablepredictive analysis and improve the accuracy ofperformance outcome forecasts.

Driving beyond compliance to enhance risk insight These organizations expand risk management toenterprisewide views of risk and use performancedashboards and analytical tools that are focused onrisk/reward planning for decision making. Enhancingend-users ability to incorporate risk into their decisionmaking helps to create a culture that is in control butnot operating in an overly risk-averse environmentthat inhibits growth.

For Finance to stand still in todays complex world is togo backward. Agile CFOs and Finance organizationsare leveraging delivery models, enterprise processframeworks, technology and the right people to simul-taneously accomplish both the stability and flexibilitynecessary to remain competitive in todays increasinglycomplex world.

Executive summary


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4

Research methodology anddemographicsIBM Business Consulting Services, in cooperation

with the Economist Intelligence Unit, conducted theIBM 2005 Global CFO Study of 889 CFOs and seniorFinance professionals to gain perspective on currenttrends, key challenges and the future direction ofFinance. Our objective was to examine Financespriorities and progress and understand the actionsthat CFOs are taking to address current and futurechallenges. This research is part of a series onexecutive issues, which includes the IBM 2003 GlobalCFO Survey, the IBM 2004 Global CEO Study, and theIBM 2005 Human Capital Management Study. This

report on the IBM 2005 Global CFO Study providesa roadmap for the future state of Finance. Additionaldetailed study results are provided in the section TheGlobal CFO Study 2005 participant responses.

This study engaged CFOs and senior Finance

professionals across the communications, distribution,financial, industrial and public sectors in 74 countries(see Figure 1). Each sector had a similar breakdown interms of company size (based on revenue), participanttitles and participants scope of responsibility. Thestudy included interviews with 267 CFOs based inAsia Pacific, Europe, North America and Latin Americaand an online survey of 622 participants, whichwas conducted in cooperation with the EconomistIntelligence Unit. Organizations in the study ranged insize from less than US$1 billion to over US$10 billion

in annual revenue, and more than half had annualrevenues of US$5 billion or more. Nearly half of theparticipants had enterprisewide or global responsibility,with the balance evenly divided between regional,country and business unit responsibility.

44% Americas23% Asia Pacic33% Europe, Middle

East and Africa

Geography 31% >US$10 billion27% US$5-$10 billion

24% US$1-$5 billion18% < US$1 billion

Revenue Figure 1. Survey distribution.

12% Public14% Communications23% Distribution25% Industrial26% Financial services

Sector

15% Business unit/program area47% Enterprise/global20% Country17% Region

Scope of responsibility

4% Treasurer/Audit/Senior Business/Other6% Finance Manager8% General Manager18% Controller/Assistant Controller40% CFO/Deputy CFO/CRO/SVP23% Finance Director/VP

Title

Source: IBM Business Consulting Services, The 2005 Global CFO Study.


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Acknowledgments

The CFOs and senior Finance professionals acrossall sectors and geographies who contributed theirtime and valuable insights

IBM Business Consulting Services Partners andIBM client account teams who conducted theinterviews

The IBM Financial Management practiceand leaders who managed the effort in eachgeographical region or country

The Economist Intelligence Unit for valuablemethodological guidance, contribution to thedesign of the survey questions, and collecting 662survey responses

IBM Business Consulting Services GeneralManagement and Marketing leadership

The IBM global benchmarking organization forassistance during the data collection and analysis

The IBM Institute for Business Value formethodological guidance, subject matter expertiseand commitment to success.

The IBM 2005 Global CFO Study is the result of several months of collaborative effort. IBM Business

Consulting Services would like to thank all those who contributed:


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The transition to deliveringpredictive business insightIn the last few years, corporate governance-relatedheadlines and high-prole corporate bankruptcieshave placed an increased emphasis on nancialintegrity and business control. While this emphasis hashad Finance circling back to the basics, effective CFOscontinue to aspire to a more proactive role than simplyassuring the accuracy and transparency of nancialstatements. After all, keeping score is just the price ofadmission, not a competitive advantage.

In the IBM 2004 Global CEO Study, CEOs indicatedthat growth and responsiveness topped their

agendas. In the current CFO study, Finance leadersplace high importance on managing enterpriseperformance, partnering with the enterprise tosupport growth strategies, continuously makingprocesses / business improvements, strengtheningcontrols and meeting duciary requirements. Thus,CFOs share CEOs clear business imperatives ofprotable growth and responsiveness.

Finances move toward enhancing exibility andresponsiveness is a progressive one. The IBM 2005Global CFO Study shows that Finance organizationsthat are highly effective can attribute their achieve-

We must install good controlpractices while keepingoperational flexibility.

Director Finance and Administration,Global Automobile Manufacturer

ments to moving from a role of static reporting anddata stewardship to a more predictive role of providingdynamic business insight to decision makers.Moreover, CFOs aspire to deliver insight simultane-ously across the three top areas of importance for anenterprise performance, growth and risk.

In the past, practical limitations forced Finance organi-zations to focus primarily on only one of these focusareas (e.g., performance, growth or risk), but processand technology improvements make it possible todo more. Indeed, by applying nancial management

discipline to the enterprisewide delivery of predictivebusiness insight, CFOs seek to strengthen theirroles as trusted advisers and become true businesspartners with their CEOs and business unit leaders.

Additionally, our analysis of publicly available nancialdata from the June 2003 to June 2005 quarterlyreports of nearly 300 of the study participantssuggests a nancial benet may be linked to theeffectiveness of delivering insight. Participants withhighly effective delivery of performance insight, growthinsight and risk insight have higher revenue growthand are driving more value creation than their industrypeers with less effective insight delivery. 2


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Gaps between areas of importance andeffectivenessDespite the aspirations of most Finance organiza-tions, there are large gaps between the importanceof insight related to performance, growth and risk andFinances perceived effectiveness in delivering it (see

Figure 2).While performance management topped CFOsagendas in 2003, 3 progress on the effectiveness indelivering it appears elusive. Nearly 60 percent of2005 participants indicated that they are less than

highly effective in managing performance, whichimpacts the ability of Finance to plan and forecastfuture results. Additionally, while CFOs endorse theirCEOs growth agendas, the gaps imply that nearly 70percent of participants do not perceive themselvesas highly effective in providing support for growth.Results also indicate that nearly 60 percent ofFinance organizations do not have robust processesin place to support growth. Participants also placea high importance on continuous improvement (61percent) to drive protable growth but, again, a majorgap exists.

Links between insight and business resultsFor our analysis, revenue growth was defined as revenue growth over a two-year period (June 2003 June 2005), and value creationwas defined as shareholder return performance over the same two-year period. As part of our analysis of the quarterly reports of 289

public companies in our sample, we ran regression models to investigate the drivers of revenue growth and value creation. Based on

this analysis, we identified that growth insight (in particular, planning growth strategy, continuous process / business improvementand sound costing and profitability methods) and information integration are drivers of value creation. We also identified that

performance insight (more specifically, rolling forecasts based on business events and proactive business portfolio management),growth insight (including business opportunity identification/assessment and idea collaboration) and risk insight (in particular, risk

identification and risk management strategies) are correlated with revenue growth.

Riskinsight

Measuring / monitoring business performance

Partnering with your organization to identify and executegrowth strategies

Continuous process improvement / business improvement

Leading nance-related compliance programs andstrengthening the internal control environment

Meeting duciary and statutory requirements

Percent of responses

Figure 2. Finances top areas of importance and gaps in effectiveness.

Responses = 870 Source: IBM Business Consulting Services, The 2005 Global CFO Study.

0 10 20 30 40 50 60 70 80 90 100

Performanceinsight

Growthinsight

69

61

61

59

57

42

31

28

50

66

Highly important

Highly effective


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It takes an agile CFO and Finance organization todeliver insight for the three top areas of importancesimultaneously. Our analysis shows that only a handful(3 percent) of CFOs believe they are highly effectiveat delivering performance, growth and risk insightssimultaneously. Furthermore, only 10 percent indicatedthey are highly effective in two out of three areas, while35 percent say they are highly effective in only onearea. These ndings suggest that over half of the 889study participants feel they are not highly effective atdelivering insight for any of these three areas.

Structural complexitya key issueThe low enterprisewide adoption of standard andconsistent processes and technology contributesto structural complexity and, in turn, worsens theeffectiveness gaps (see Figure 3). Over 60 percent

of participants indicated they have yet to implemententerprisewide standard policies and rules or extendcommon processes across the entire enterprise.Additionally, more than 80 percent have not pursuedenterprisewide process simplication or expanded useof functional best practices across the whole enterprise.

On the whole, technology and platform improvementsremain fragmented much like the nance processesthey attempt to transform. Over 70 percent of par tici-pants have not yet reduced the number of commonplatforms, rationalized budgeting/forecasting tools orreduced the number of enterprise resource planning(ERP) systems enterprisewide. Naturally, this fragmen-tation and lack of standardization results in variousversions of the truth, manual data reconciliationsand ineffective use of technology, inhibiting Financesability to inuence decisions and deliver insight.

Implemented a standard chart of accounts

Implemented standard policies and business rules

Increased extent of common processes

Pursued process simplication

Expanded use of functional best practices

Reduced the number of nance common platforms

Rationalized nance budgeting / forecasting tools

Reduced the number of ERP instances

Rationalized the number of data warehouses

Percent fully adopted enterprisewide

Figure 3. Low enterprisewide adoption of process and technology improvements.


0 10 20 30 40 50 60 70 80 90 100

Process

Technology

12

27

27

24

17

56

38

35

14

We have fragmentedsystems and inconsistent

processes, which impact theintegrity of information.

CFO, Large Asia Pacific Food Producer


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Indeed, analysis of the ndings indicates that less than2 percent of participating organizations have adoptedeach of the suggested process and technologyimprovements across the entire enterprise. Slightlymore organizations have adopted all of the technology improvements enterprisewide (6 percent), while 4percent have adopted the process improvementsenterprisewide. These ndings suggest that organiza-tions often turn rst to technology before xing brokenprocesses, which in the long run may suboptimize theultimate benet of technology investments.

Without enterprisewide adoption of commonprocesses and standards, many Finance organiza-tions nd themselves managing by intuition insteadof fact. Without common processes and standards,organizations rely on the manual effort of smart

people to maintain the accuracy and integrity ofnancial information. This reliance embeds uniqueknowledge in individuals versus institutionalizing itinto repeatable, controlled processes and technologythat can be shared more widely. As a result, datagathering is difcult and fact-based insight hard tocome by. This relegates decision makers to intuition-based management, which works ne in an upwardlytrending market. But when the markets and resultsbecome more volatile, intuition may fail since thetrue drivers of the business are not clearly understoodand linked to the key strategic objectives. Conned tothis manual environment, Finance struggles to providedecision makers with the information needed to driveprotable growth or offset emerging risks.

Fragmented information When we conducted the IBM 2005 Finance SharedServices and Outsourcing Survey of Finance execu-tives, we found that only 9 percent of participants ratedthemselves as excellent at gathering, interpretingand conveying information in a way that drives prots.Contributing to this problem, 50 percent indicatedthat, while information was plentiful, it was not focused,relevant or suitable for driving action. 4 These ndings

highlight the need for Finance organizations to activelyintegrate information at the source, which lessens theneed to continuously verify the datas relevance beforeusing the data to make business decisions.

Slowdown in the transformational journey todecision support A comparison of survey ndings from our 1999, 2003and 2005 Global CFO studies indicates that Finance

organizations are shifting steadily from focusing ontransactions to decision support activities (see Figure4). Automation in reporting and transaction processingmay explain the progress made from 1999 to 2003.However, this shift appears to have slowed in the lasttwo years.

One primary reason for this slowdown is thesignicant focus on processes and technology tomanage increased compliance requirements andrisk programs. Additionally, as highlighted previously,Finance organizations are still struggling to standardize

and improve processes and data structures andto implement supporting technology for enhanceddecision support.

Lots of data. Not a lot ofinformation.

CFO, North American Software Firm

A high level ofresources is consumed by

compliance programs. CFO, Large Asia Pacific Bank


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Transactional activities

Control activities

Decision support / performancemanagement activities

0 10 20 30 40 50 60 70 80 90 100

Figure 4. Shift from a transaction focus to decision support activities.

Responses = 248 (based on face-to-face interviews).Source: IBM Business Consulting Services, The 2005 Global CFO Study.


19992003

Today

In 3 years

6550

4734

2026

2627

1524

2640

Another factor that contributes to the slowed progressis the difculty Finance has nding the right peoplewith the right skills. Nearly two-thirds of the studyparticipants indicated that nding and developingpeople with the appropriate nance and businessskills is a challenge. Moreover, it is a consistentchallenge globally as executives in virtually everygeographic region in the study stress the need toretain the best people and develop new skills within

their organizations.

Drivers of business insightFinance organizations face many challenges whenit comes to delivering insight effectively. However,our ndings indicate that strategies are emerging to

enable and enhance business insight (see Figure 5).Highly effective Finance organizations set the stageby rst addressing inhibitors: structural complexity andpoor information integration. They also partner withtheir enterprises to enhance protable growth, optimizedecision support to improve performance, and movebeyond compliance to predictively assess risks and

their impacts.

Figure 5. Steps to enabling and enhancing insight.

Mitigate enterprisewidestructural complexity bysimplifying, standardizingand optimizing

Enable fact-based decisionsby integrating informationenterprisewide

Partner with the enterpriseto enhance growth insight

Optimize decision supportto enhance performanceinsight

Drive beyond complianceto enhance risk insight

Enabling insight Enhancing insight

Source: IBM Business Consulting Services.A top challenge is hiringand retaining enough

good people. Regional CFO, Global Automobile

Manufacturer


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Finance organizations that want to deliver insighteffectively begin by building a foundation to enable it.Highly effective organizations have taken the following

steps to enable insight: Mitigate structural complexity by standardizing,

simplifying and optimizing.

Integrate information enterprisewide to enable fact-based decisions.

Mitigate structural complexity by standardizingand simplifying processes and technologiesand optimizing delivery modelsFinances gaps in delivering insights are aggravated

by the drivers of structural complexity inherent withinmost organizations. As mentioned previously, theimplementation of process and technology improve-ments has been fragmented. Given the low adoptionrate of enterprisewide improvements, many Financeorganizations are managing multiple processes andsystems. As enterprises grow organically or throughacquisition and move into new markets, geographiesand customer segments, they typically build or inheritadditional processes and systems. Therefore, the issueof complexity is ongoing.

Without a strategy to mitigate structural complexityand a strictly enforced adherence policy, Financewill struggle constantly to provide insights, primarilyrelying on time-consuming manual consolidation ofstatic spreadsheets. A common result is time wasteddiscussing the veracity of the data instead of focusingon the information provided and analyzing it to providepredictive insights.

Enabling insight

Standardize and simplify processes and rationalizetechnology enterprisewide Our study ndings show that highly effective Financeorganizations implement standard policies, commonprocesses, process simplication and functional bestpractices enterprisewide at a higher rate than organi-zations that are less effective at driving insights acrossthe enterprise. The adoption rate of process simpli-cation among highly effective Finance organizations istwice as high (22 percent), and their adoption rate forfunctional best practices (21 percent) is almost threetimes as high as that for less effective organizations(11 percent and 8 percent, respectively).

We need to ensure

data integrity betweendifferent systems. CFO, North American Retailer

We would be able to benefit

right now from a technologyplatform that would allowcommonality between

units, improved quality ofmanagement and businessinformation, and give usbetter ability to manage

performance and forecastfuture results.

CFO, Large North American Bank


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Increasing the use of common processes andpursuing simplication has a positive effect oncompliance programs, the support of enterpriserisk management, performance management andcontinuous process improvement (see Figure 6).

Not surprisingly, process simplication also helps driveintegration. With less to consolidate and informationcaptured at the source, it becomes easier to integratethe information and processes to provide key insights.

Highly effective Finance organizations take a similarenterprisewide approach to rationalizing technology.Notably, our study shows that highly effective Financeorganizations are nearly twice as likely to havereduced their instances of ERP systems (37 percent)and to have rationalized their data warehouses (27percent) as less effective organizations (19 percentand 14 percent, respectively).

Taking steps to reduce the number of ERP systemsand rationalize nancial budgeting and forecastingtools benets virtually all areas of insight and theintegration of information. Not surprisingly, this leads toa single version of the truth as it reduces the numberof reconciliations needed and the time spent gatheringdata and information. As a result, Finance can spendmore time doing the actual analysis of data andinformation to provide predictive insights and drivedecisions.

Optimize the delivery model In general, optimized delivery models help Financeorganizations rationalize and simplify their processes,which, in turn, enables and enhances insight. Thedenition of optimal varies from enterprise to enter-prise. Finance organizations may optimize theirdelivery model through the use of local/regionalshared services, global shared services, outsourcingor internally decentralized activities. In addition,

Reduced the number of ERPinstances

Rationalized nancebudgeting / forecasting tools

Pursued processsimplication

Increased extent of commonprocesses

Figure 6. Benets of simplifying and standardizing processes and rationalizing technology enterprisewide.

*Based on statistical signicance testing of organizations that have fully adopted the process and technology improvement enterprisewide against all other orgSource: IBM Business Consulting Services, The 2005 Global CFO Study.

Fully adoptedenterprisewide processand technology

improvement

Performanceinsight

Growth insight

Impact of improvement on Finances effectiveness

Positive impact*

Meetingduciary and

statutoryrequirements

Leadingnance-related

complianceprograms

Supporting /managing

enterpriserisk

Measuring /monitoring

businessperformance

Continuousprocess

improvement

Partnering toidentify and

execute growthstrategies

Drivingintegration of

information

Risk insight Informationintegration


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Implement a standardchart of accounts

Implemented standardpolicies and business rules

Increased extent ofcommon processes

Expanded use of functionalbest practices

Pursued processsimplication

0 20 40 60 80

Figure 7. Optimized delivery models help organizations simplify and rationalize.

*Statistical condence of at least 85 percent; all others are above 95 percent.Source: IBM Business Consulting Services, The 2005 Global CFO Study.

Percent of responces

High satisfaction - Internal shared servicesHigh satisfaction - External outsourcersAll responces

2828

3028

5543*

5658

7167*

Process improvements Technology improvements

Rationalized nancebudgeting / forecasting tools

Reduced the number ofnance common platforms

Reduced the number ofERP instances

Rationalized the number ofdata warehouses

Percent of responces

3835

33*27

27

43

4637*

0 20 40 60 80

14

12

35

38

56

2927

21

17

these vehicles can work in combination such as anoutsourced shared services model that is either globalor regional.

However, the benets of optimizing the sharedservices delivery model (either internal or external) are

clear (see Figure 7). Organizations in our study thatindicated high satisfaction with their internal sharedservices or their external outsourcers are more likelyto have standard policies and common/simplied

processes and adopt functional best practices. Theyalso rationalize tools, common nance platforms, ERPinstances and data warehouses at a higher rate thanorganizations that indicate lower satisfaction levels.What is less clear is the sequence of events. Didthese the organizations standardize and rationalizebefore moving to an optimized delivery model or didthe optimized model bring about standardization andrationalization? While this has been a long standingdebate within Finance, it is clear that effective optimi-zation yields benets.

When mitigating structural complexity, CFOs should ask these questions: What impact has structural complexity had on your enterprise?

Are your Finance organizations common processes more local or global?

Have you set enterprisewide standards for data strategy, chart of accounts, process design, etc.?

Does your organization have the resources internally to drive the transformation needed to improve your ability to produce

greater business insight?

Does the inherent structural complexity of finance processes and technology consume significant resources and inhibit theshift to decision support activities?


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Risk

insight




Leading nance-related compliance programs andstrengthening the internal control environment


Supporting / managing enterprise risk


Figure 8. Integrating information helps to close the gaps between areas of importance and effectiveness.


0 10 20 30 40 50 60 70 80 90 100

Performanceinsight

Growthinsight

69

61

61

59

5766

Areas of high importance

Average level of highlyeffective Financeorganizations

Effectiveness oforganizations that werehighly effective at integratinginformation enterprisewide

71

50

47

4025

62

37

42

31

28

50

Integrate information enterprisewide to enablefact-based decisionsThe IBM 2005 Global CFO Study ndings indicate thateffective information integration across the enterprisehelps close the gaps signicantly between areas

of importance and perceived effectiveness (seeFigure 8). Organizations that were highly effective atintegrating information enterprisewide were foundto be consistently more effective than average inaddressing each of the top areas of importance.

The integration of information reaches far beyondtechnology to include the approach to data gover-nance, ownership of processes, management ofinformation and sharing of insights.

Consistency of data betweenFinance and business is a

top priority. CFO, Large Asia Pacific Bank

Our number one challengeis to improve the integration

and sharing of criticalbusiness information between

businesses, operations andtechnical divisions.

Finance Operations Executive, Large North American Bank

64


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Our study shows that Finance organizations haveestablished the basics required to integrate infor-mation and deliver business insights (see Figure9). Most Finance organizations have coordinatedplanning activities and consolidated actuals, budgetsand forecasts. However, data and information oftenremain in silos within business units and/or geogra-

phies, contributing to the sense that information, whileplentiful, is often not focused, relevant or suitable fordriving action. Without data standards in place, aggre-gation of data across business units is challengingand time consuming.

We need to break downbarriers to sharing key data

across and between the other

major departments. CFO, Large North AmericanGovernmental Agency

10

26

41

21

3

14

8

33

Consolidating and integrating actuals, budgets and forecasts

Coordinating planning activities

Drive ownership and mapping of processes

Creating a governance structure to ensure commoninformation standards

Conducting relationship management for sources / suppliersof external data

Designing and maintaining collaborative Web-basedinformation portal

Creating and populating a knowledge managementrepository


Figure 9. Steps taken by Finance to integrate information and deliver insight.


0 10 20 30 40 50 60 70 80 90 100

Today Planned in three years time

32 42

26 33

87

43 36

44 42

79 13

Integrationofinformation

Deliveryof insight

23 44

No plans to adopt


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As enterprises become more global and complex,many in Finance are recognizing the importance ofestablishing a governance structure to help ensurecommon information standards. To drive commonstandards and simplify processes, our study showsthat Finance organizations plan to redouble effortsinvolving process ownership and mapping ofprocesses. This emphasis on process ownershipreects a shift from viewing virtually all data and infor-mation as the property and responsibility of individualbusiness units to viewing them as corporate assetsthat can be leveraged throughout the enterprise.While responsibility for accuracy of the data remainsat the source, accountability for overall integrateddata integrity shifts to Finance. Once data accuracy isproven, study participants indicated that they plan toimprove the relevance of and access to the information

by creating collaborative tools such as Web-basedinformation por tals and knowledge managementrepositories.

The CFO is now the trusteeof information and assets of

the corporation.

COO, North American Bank

Drive ownership and mapping of processes

Create governance structure to ensurecommon information standards

Manage external data sources / suppliers

Consolidate and integrate actuals, budgetsand forecasts

Figure 10. Enterprisewide integrated information enables fact-based decisions.

*Based on logistic regression analysis of Driving Integration of Information Across the Enterprise. **Based on statistical signicance testing of information integration driver and impact on each insight area.Source: IBM Business Consulting Services, The 2005 Global CFO Study.

Risk insight Performance insight Growth insight

Recommended actions to driveinformation integration*

Positive impact**

Impact of improvement integration drivers on insight areas

To increase the predictability of information in the nextthree years, study participants indicate that Financeorganizations plan to more than double the use of fullyintegrated systems for budgeting, planning, reportingand general ledger (from 42 percent to 90 percent).In addition, a planned increase in utilizing rollingforecasts (from 57 percent today to 88 percent in threeyears) is supported by the use of integrated short-term and long-term forecasts. This trend in increaseduse of rolling forecasts will also be supported bythe predicted doubling of planning processesembedded in everyday operations and the continuedcompression of cycle times.

Not surprisingly, process ownership and common infor-mation standards have a positive enabling effect onthe delivery of risk, performance and growth insights

(see Figure 10). Additionally, combining internal infor-mation with robust data from external sources enablesbetter insights into risk and growth. Collectively, theseactions help close the gaps between Finances aspira-tions and the overall delivery of insight.


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When integrating information, CFOs should ask these questions:

Is there enterprisewide process ownership?

Are common information standards in place? Is data treated as an enterprisewide asset?

Is information shared throughout your Finance organization? Throughout the enterprise?

How well does your enterprise integrate external data into financial and nonfinancial analyses?

Is your enterprise heavily reliant on consolidating spreadsheets?


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With a foundation set by mitigating structuralcomplexity and integrating information, highly effectiveorganizations have focused on enhancing business

insight by taking the following actions:

Partner with the enterprise to enhance growth insight.

Optimize decision support to enhance performanceinsight.

Drive beyond compliance to enhance risk insight.

Partner with the enterprise to enhancegrowth insightIn the IBM 2004 Global CEO Study, four out of veCEOs identied revenue growth as the key focus areafor strengthening nancial performance over the nextthree years. 5 The CFOs and Finance professionals wesurveyed in 2005 afrmed their support for the focuson growth.

It is interesting to note, though, that less than 50percent of the CFOs and Finance professionals viewedtheir growth activities as strengths, and over half ofthe participants indicated that they struggle to deliveranalytics to plan, forecast and measure businessopportunities. Only 42 percent indicated that providing

information to identify areas for protable revenuegrowth and cost containment is important, and only40 percent saw planning growth strategy as a strength.

Additionally, only one-third deemed identifying andassessing business opportunities and synergies to bea strength.

However, participants indicate that they will beincreasing their capabilities in supporting growth byfrequently updating costing and protability methodsand providing insight related to such factors ascustomers and products (see Figure 11). Regardingthe latter, participants plan to provide support stafng

and create centers of excellence for governing andanalyzing this information.

Providing support stafng for users needing nancial andnon-nancial (e.g., customer, product) information

Implementing sound costing and protability methods thatare frequently updated

Creating centers of excellence around customers, products,

contracts, etc.


Figure 11. Finances plans to support growth.


0 10 20 30 40 50 60 70 80 90 100


53

55

22 38

25

33

No plans to adopt

40

20

14

Becoming aware of someof the opportunities in otherparts of the organization ina timely manner in order to

assist or partner with them isa challenge.

VP Accounting, Worldwide Oil Explorationand Production

Enhancing insight


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22

In addition to the most common activities plannedto support growth, highly effective Finance organiza-tions also place a strong emphasis on identifying andassessing business opportunities and synergies whilesupporting the planning of growth strategies (see Figure12). This highlights a shift from focusing on reportinghistorical nancials to providing predictive insight.

When driving growth insight, CFOs should ask these questions: How does your Finance organization align its strategy to the overall enterprise strategy?

How does Finance help to document, test, communicate and refine assumptions on which growth strategies are made?

How often does your Finance organization update its strategy to reflect changes in business goals? What triggers these updates?

How does Finance maintain a sound understanding of cost and profitability by customer, by product, by channel, by contract?

How often are costing and profitability methods updated to reflect changes in business goals (e.g., new channels, new products/

services, etc.) and external events (e.g., commodity hedging, new competitors, etc.)?

Support planning of growth strategies

Implement sound costing and protability methods that arefrequently updated

Constantly update nance strategy to reect changes inbusiness goals

Identify and assess business opportunities and synergies

Create centers of excellence around customers, products,contacts, etc.

0 10 20 30 40 50 60 70 80 90 100

Figure 12. Partnering for growth.

Note: This gure includes only those actions where the difference between highly effective and less effective organizations is statistically signicant.



Organizations with higheffectiveness

Organizations with medium orlow effectiveness

2919

5826

6037

6149

6828

Recommended actions Current adoption rate / strength in partnering for growth

As highly effective Finance organizations partner inthe future of the enterprise, it is important that theycontinually update their Finance strategies to reectchanges in business goals. Without business under-standing and acumen, Finance professionals not onlyrisk being disconnected from other executives, theyalso, more importantly, may encourage decisions thatare not aligned with the enterprises strategic goals,which can potentially erode enterprise value.


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Optimize decision support to enhanceperformance insightFor the past several years, Finance has been incor-porating business performance management (BPM)into its everyday work. Foundational investments have

resulted in an increase in the amount of realtime,non nancial data that is now being managed byFinance and provided to business users. At the sametime, the use of externally supplied data relating to

Enterprisewide BPM reporting / access, customized byorganizational role

Enterprisewide Web-based reporting and/or portals

Enterprisewide BPM reporting / access, linked to externalpartners (e.g., suppliers, customers, etc.)

Analytical tools for investigative and ad-hoc analytics(e.g., hypothesis testing)

Data mining tools for predictive modeling

Enterprise resource planning (ERP) functionality for BPM


Figure 13. Adoption of business performance management tools.


0 10 20 30 40 50 60 70 80 90 100


22 48

25 47

35

27 47

15 40

29 47

Enterpriseaccess tomeasurement

reporting

Analyticaltools to helpreact toinformation

45

30

28

26

45

24

20

No plans to adopt

We would like fully digitizedperformance reporting on thedesktop, in realtime, for every

executive and manager. CFO, Large Asia Pacific Bank

the business environment also has increased. Thesedevelopments mean that Finance can more readilydeliver useful nonnancial information and insight todecision makers to enable them to make adjustmentsto their operations and plans.

More than half of the Finance organizations in ourstudy have already adopted standard planning,budgeting and forecasting processes, and 73 percentof organizations are integrating actuals, forecasts,budgets and variance reporting. Study participantspredict that this will increase to 96 percent in justthree years. Adoption of processes for operationalmonitoring such as exceptions-based reportingand analytics is less prevalent at 38 percent but isexpected to more than double to 82 percent withinthree years.

Meanwhile, the adoption of business performancemanagement tools (see Figure 13) signicantly lagsprocess adoption. However, Finance organizations


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24

recognize a signicant opportunity to adopt thesetools to drive greater value from current processes.Participants expect dramatic increases in their use ofERP functionality and analytical tools for investigativeanalysis, ad-hoc analysis and predictive modeling.They are also planning to improve enterprisewideaccess to reporting information to create greatercollaboration within the enterprise as well as with theirvalue network (e.g., suppliers, customers, etc.). Impor-tantly, this access will be customized to organizationalroles to increase relevance to the end user.

When driving performance insight, CFOs should ask these questions: How integrated and streamlined are the planning, budgeting, forecasting and decision-making processes?

How extensively is external data used in forecasting/reporting processes?

How do you ascertain that performance management metrics are fully cascaded throughout the business? Are metrics role-specific

Are they aligned to business strategy and key business drivers?

To what degree does your organization utilize exception-based reporting and analytics?

Does your organization have an effective understanding of the quantifiable relationships between business drivers and performancoutcomes? Can it predict the impact changes in these drivers will have on performance outcomes? Is there a process for testing,

refining and communicating this understanding?

Utilize collaborative planning, reporting and decision-making process

Employ rolling forecasts, based on relevant business events

Use a streamlined, integrated budgeting process

Use linked and aligned scorecard metrics cascaded down to eachfunction and business unit

Focus on exception-based reporting analytics

Create enterprisewide business performance management reporting /access, customized to organizational role

0 10 20 30 40 50 60 70 80 90 100

Figure 14. Optimizing decision support.

Note: This gure includes only those actions where the difference between highly effective and less effective organizations is statistically signicant.Source: IBM Business Consulting Services, The 2005 Global CFO Study.


Organizations withhigh effectiveness

Organizations with mediumor low effectiveness

4328

4631

5035

6548

6850

7155

Recommended actions Current adoption rate in managing performance

While Finance is aggressively pursuing performancemanagement frameworks, the cascading of metricsdown to functions and business units appears tolag executive level scorecards. To be truly effective,these efforts need to be linked and aligned. Moreover,metrics appear to be better aligned to groups andteams than to strategy and roles. Highly effectiveFinance organizations seek to integrate transparentrole-based metrics and exception reporting and fullycascade the metrics consistently throughout the enter-prise (see Figure 14).


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Drive beyond compliance to enhancerisk insightToday, Finance is fairly effective in control andcompliance areas. While reporting processes,documentation of accounting policies and controlsover the close process have been (and continue to be)areas of focus, study participants indicated they areexpanding their concentration to include enterprisewidecontrols and providing controls over IT and infrastructure(see Figure 15). Finance also recognizes the need forexecutive sponsorship of control programs and Boardunderstanding of the controls framework.

Documentation of accounting policies

Controls over the close process

Financial reporting processes

Controls for recording nonroutine and complex transactions

Board and audit committee understanding of controls framework

Controls over IT and infrastructure

Executive sponsorship of controls program

Enterprisewide controls program

Ability to evaluate and test controls over outsourced processes

Controls over M&A


Figure 15. Plans for internal control areas.


0 10 20 30 40 50 60 70 80 90 100

Previous focus Current focus

38 53 18

44 42 11 3

40 43 10 7

23 55 9 13

16 59 18 7

21 53 18 8

29 42 18 11

20 50 16 14

13 25 3329

13 17 4426

Previous focus in the future Not applicable

Meanwhile, study results show that Finance appearsto be further along with automating controls than withsupporting the realtime actions that might producegreater insight (see Figure 16). The regulatoryenvironment has driven this difference. However,Finance indicates a future focus on embeddingautomated alerts and analytical tools in dashboardsand work ow monitoring and management tools,underscoring the recognition that risk insight must bebroadened and incorporated into the everyday routineof running the business.


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26

Additionally, Finance has begun to leverage future-oriented risk management activities to provide insightinto emerging opportunities. Eighty percent or more ofthose surveyed indicate that they are actively partici-pating in the identication, analysis and assessment ofrisks associated with opportunities.

One-third of highly effective Finance organizations aredriving beyond compliance by taking a broader viewof their roles in enterprise risk management. Whilemanaging the traditional areas of risk (e.g., compliance,liquidity and credit) as others do, these organizationsare twice as likely to address nontraditional areas suchas operational, market, strategic and/or event risk.

These organizations employ performance dashboards

and analytical tools focused on risk/reward planningand decisions (see Figure 17). Because a major failurecan spell disaster for the entire enterprise, highlyeffective organizations are proactively developing riskmanagement strategies for potential opportunitiesand missteps (e.g., exit strategies, etc.). They articulateproactive risk guidelines for new opportunities, therebyincreasing full awareness of both downside andupside risk. Dashboards and analytical tools furtherenhance the ability of end users to incorporate risk intotheir decision making and help create a culture thatis in control but not operating in an overly risk-averseenvironment.

Automate business processes to improve effectiveness androbustness of internal controls

Automate business processes and controls documentation

Drive understanding of control points

Use realtime compliance reporting / status dashboards

Use analytical tools that are embedded in the actual workow (e.g., automated realtime alerts)

Adopt business activity monitoring with automated alertsembedded in operational dashboards

Percent of adoption

Figure 16. Automated processes and tools enable risk insight.

Internal Control Actions (Responses = 619); BPM Tools (Responses = 859) Source: IBM Business Consulting Services, The 2005 Global CFO Study.

0 10 20 30 40 50 60 70 80 90 100

Previous and current focus Plan to focus on in the future

47 42

45

44

29 43

42

43

Automatingcontrols

Supportingrealtimeinsight andaction

No plans to adopt

11

20 47 33

19 50 31

28

14

12

We would like to spend lessenergy in data collection andreporting, more in planning

and control. Finance Director, Leading European

Provider of Custom Third-PartyWarehouse Logistics

With margins shrinking,we are looking to move

culture from risk-averse torisk-managed.

CFO, Large Asia Pacific Bank


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When driving risk insight, CFOs should ask these questions:

How often is your Finance organization providing the appropriate risk mitigation strategies? Is your organization formally supportingthe development of these strategies or reacting to events as they occur?

How does your Finance organization currently incorporate risk consideration and guidelines when analyzing potential opportunities

and failures?

Within your organization, how prevalent are risk-based metrics and dashboards with embedded automated alerts and analytical/

modeling tools?

To what extent has your organization automated processes and control points?

Automate process to improve robustness of controls


Develop risk management strategies for potential opportunities and failures

Articulate risk guidelines for opportunities

Adopt business activity monitoring with automated alerts embedded inoperational dashboards

Use analytical tools that are embedded in the actual work ow

0 10 20 30 40 50 60 70 80 90 100

Figure 17. Driving beyond compliance.

Note: This gure includes only those actions where the difference between highly effective and less effective organizations is statistically signicant.Source: IBM Business Consulting Services, The 2005 Global CFO Study.


Organizations with higheffectiveness

Organizations with medium orlow effectiveness28

17

2817

4520

5216

5441

5744

Recommended actions Current adoption rate / strength in supporting andmanaging enterprise risk


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Todays highly effective CFOs are focused on buildinginsight capabilities across their organizations to givetheir enterprises the exibility necessary to rapidly

respond to changing business conditions. Establishingan agile Finance organization that simultaneouslydelivers business insight related to growth, perfor-mance and risk helps create more value for the enter-prise and is an emerging priority for study participants.

This more ambitious role for Finance requires a newmodel (see Figure 18).

Based on responses of highly effective Financeorganizations, we have identied several key attributesCFOs will want to consider when planning the designof future nancial processes, organization models,technologies and skill mixes (see Figure 19).

Risk insight

Figure 18. A model for the agile Finance organization.

Source: IBM Business Consulting Services.

Performance insight Growth insightOptimizing

upsideopportunities

Mitigatingdownside

hazards

Stability

Agility

Mitigate structural complexity by simplifying, standardizing and optimizing

Enable fact-based decisions by integrating information

Drive beyond compliance toenhance risk insight

Optimize decision supportto enhance performance

insight

Partner with the enterpriseto enhance growth insight

Enablers

Enhancements

The roadmap forward

Business model and overall strategy are aligned Business acumen within Finance Continually targeting / rening data, report and insight requirements Data requirements mapped to business and strategy Delivery of role-specic insight based on requirements Best-in-class external information (e.g., from suppliers, customers, etc.) leveraged

Cross-functional / cross-silo frameworks Cause-and-effect relationships across business dened Business drivers widely understood Accurate data

Skills to enhance business partnering Controls reect business drivers Embedded investigative analytics to detect risk Role-specic risk automatically agged Use of enterprise risk management tools (e.g., risk assessment, risk tolerance/what ifs)

Growth insight

Performance insight

Risk insight

Figure 19. Key attributes of an agile Finance organization.



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30

Finance organizations appear to be taking a two-step approach to developing an agile organization,as depicted in Figure 20. While Finance organizationscan pursue the steps in parallel, organizations that rstbuild a streamlined foundation position themselvesto deliver nancial and operational information withgreater speed and integrity. They can then focus onenhancing existing strategies and initiatives related toperformance management and risk to deliver businessinsight to support growth.

The foundational enablers of this approach includeincreased commonality and standardization ofprocesses and data structures. This streamliningfacilitates more efcient integration of information and

technology and helps reduce structural complexityacross the organization.

Regardless of the sequence of actions taken, Financeorganizations should establish executive accountabilityand ownership of enterprisewide data and processes

as well as alignment with business goals.

To facilitate this transformation, CFOs should designan enterprisewide process framework as a prereq-uisite to controlled, structured process changeand the denition of associated costs. To facilitateprocess optimization, CFOs should dene thedrivers of enterprisewide processes, determine howto achieve world-class performance standards forend-to-end processes, utilize process best practices

Figure 20. Roadmap of recommended actions by enabler/enhancement.


Simplify,standardizeand optimize

Constantlyupdatenancestrategyto reect

changes tobusiness

goals

Integrateinformation

Drivebeyondcompliance

Optimizedecisionsupport

Partner forgrowth

Establishexecutiveownershipof data andprocesses

Simplify and standardize processes Standard policies

and business rules Enterprise process

framework Common processes

Processsimplication

Use of functionalbest practices

Optimize delivery models

Create a governance structure to ensurecommon information standards

Drive ownership and mappingof processes


Manage external datasources / suppliers

Consolidate and integrate actuals,budgets and forecasts

Articulate opportunityrisk guidelines

Develop risk managementstrategies

Automate processes toimprove controls

Use streamlined, integratedbudgeting process

Utilize collaborative planningand decision-making process

Employ rolling forecasts, basedon relevant business events

Identify and assess businessopportunities and synergies

Implement sound costing andprotability methods

Provide business activitymonitoring with automated

alerts embedded in operationaldashboards

Use analytical tools that areembedded in the actual work ow

Focus on exception-basedreporting and analytics

Create enterprisewide BPMreporting/access

Use linked and aligned scorecardmetrics cascaded down

Create centers of excellencearound customers, etc.

Support planning of growthstrategies

Rationalize technology ERP instances Finance budgeting tools Finance common platforms Data warehouses


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and implement technology enablers. By identifyingthe distinct components of their organization andexamining whether each is core to the business and asource of differentiation, CFOs can begin to segregatewhich processes and activities can best benet fromshared services or outsourcing.

When taking an enterprisewide approach to processmanagement, organizational and service deliverymodels for Finance need to be evaluated and poten-tially modied. A single model, whether centralized ordecentralized, will most likely be insufcient, as organi-zations will be required to leverage centers of excel-lence, optimize limited skills, rationalize redundanciesand align with overall process redesign. Our studyndings suggest that shared services and outsourcingmodels will become more common as Finance organi-

zations realign their operating models.Finally, the technology environment will need to bemore exible and responsive to the rapid need forbusiness insight. Process-based and service-orientedtechnology models are emerging as companiesintegrate and exploit their ERP platforms and businessintelligence applications to enhance exibility.

ConclusionThe demands placed on Finance organizationscontinue to evolve as they transition from reportinghistorical nancials and assuring compliance toproviding predictive insights and actively par tnering

with the business in decision making. Highly effectiveFinance organizations mitigate risk and help ensurestability of the business while, at the same time,remaining agile enough to provide insights acrossthe top three importance areas of risk, growth andperformance.

The rst steps to enabling insights are mitigatingstructural complexity and integrating informationacross the enterprise. Once the stage is set, Financeorganizations then can simultaneously drive beyondcompliance activities to enhance risk insight, optimize

decision support to enhance performance insight andpartner with the enterprise to enhance growth insight.By refocusing their efforts and aligning their strategywith that of the business, Finance organizations will beable to emerge as a strategic business partner andhelp create value across the enterprise.


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32


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This section contains more detailed response data from the IBM 2005 Global CFO Study.

The Global CFO Study 2005participant responses

Measuring / monitoring business performancePartnering with your organization to identify and execute

growth strategiesContinuous process improvement / business improvement

Leading nance-related compliance programs and strengtheningthe internal control environment


Developing your people

Aligning nance with the businessDriving cost reduction

Supporting enterprise transformation activities


Driving integration of information across the enterprise

0 10 20 30 40 50 60 70 80

Percent of high responses

Which of the following are the most important areas of focus in your role as a Finance professional?


0 10 20 30 40 50 60 70 80


Percent of high responses

How would you rate the effectiveness of your Finance organization in each of the following areas?

Measuring / monitoring business performancePartnering with your organization to identify and execute

growth strategiesContinuous process improvement / business improvement




Aligning nance with the business

Driving cost reduction





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0 10 20 30 40 50 60 70 80 90 100

Fully adopted enterprisewide Partially adopted Started to adopt No plans to adopt

How far along is your Finance organization in implementing the following process and technology improvements to

address structural complexity?



Implemented a standard chart of accounts

Implemented standard policies and business rules

Increased extent of common processes

Pursued process simplication

Expanded use of functional best practices

Reduced the number of nance common platforms

Rationalized nance budgeting / forecasting tools

Reduced the number of ERP instancesRationalized the number of data warehouses

Process

Technology







Aligning Finance with the business

Driving cost reduction




0 10 20 30 40 50 60 70 80Percent of responses

Which of the following are the most important areas of focus in your role as a Finance professional? (Responses by geography).

Americas

Europe, Middle East and Africa

Asia Pacic



41/52

Non-nance processes

Treasury

Travel and expenses

Tax transactionsTax management

Strategic planning

Risk management

Project and cost accounting

New business analysis

Management reporting

Order to cash

General accounting

Finance applications management

Financial and performance analysis and reporting

External reporting

Capital planning

Budgeting and forecasting

Analytics

Accounts payable

0 10 20 30 40 50 60 70 80 90 100

Which of the following service delivery models does your enterprise currently employ for each of the following processes?

Responses = 219 (based on face-to-face interviews) Source: IBM Business Consulting Services, The 2005 Global CFO Study.


Regional / local internal shared servicesGlobal internal shared servicesOutsourced to regional / local provider

Mostly decentralizedOutsourced to global provider


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36

Non-nance processes

Treasury

Travel and expenses

Tax transactionsTax management

Strategic planning

Risk management

Project and cost accounting

New business analysis

Management reporting

Order to cash

General accounting

Finance applications management

Financial and performance analysis and reporting

External reportingCapital planning

Budgeting and forecasting

Analytics

Accounts payable

0 10 20 30 40 50 60 70 80 90 100

Which of the following service delivery models will your enterprise employ within three years for each of the following processes?

Responses = 190 (based on face-to-face interviews) Source: IBM Business Consulting Services, The 2005 Global CFO Study.


Regional / local internal shared servicesGlobal internal shared servicesOutsourced to regional / local provider

Mostly decentralized

Outsourced to global provider

Consolidating and integrating actuals, budgets and forecasts

Coordinating planning activities

Providing support stafng for users needing nancial and non-nancial (e.g., customer, product) information

Implementing sound costing and protability methods that arefrequently updated

Creating a governance structure to help ensure commoninformation standards

Designing and maintaining collaborative Web-basedinformation portal

Conducting relationship management for sources / suppliers ofexternal data

Creating and populating a knowledge management repository

Creating centers of excellence around customers,products, contracts, etc.


Does your Finance organization currently undertake these activities to integrate information and delivery insight, or does itplan to do so?


0 10 20 30 40 50 60 70 80 90 100

Today Planned in three years time No plans to adopt


43/52

Use rolling budgets and forecasts

Use expert knowledge in the organization

Compress cycle time

Integrate short- and long-term forecasts

Increase planning frequency

Drive ownership and mapping of processes and understanding ofcontrol points

Use fully integrated systems for budgeting, planning, reporting andgeneral ledger

Embed planning process in everyday operation


Which of the following processes does your Finance organization inuence to increase the predictability of information?


0 10 20 30 40 50 60 70 80 90 100


Delivering business analytics to plan, forecast and measurebusiness opportunities

Making capital investment decisionsProviding information to identity areas for protable revenue

growth and for further cost containment

Planning growth strategy

Developing business cases

Contracting and negotiating with third parties

Identifying and assessing business opportunities and synergies

Managing integration / divestiture programsDeveloping risk management strategies for emerging

opportunities or potential failures

0 10 20 30 40 50 60 70 80 90 100

Strength Neutral Weakness Not applicable

How would you rate your Finance organizations performance level in executing growth activities?

Responses = 862




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38

Participates in formal working teams

Proactively manages the business portfolio

Articulates risk guidelines for opportunities

Understands customer / end-user needsCollaborates across network / extended enterprise for the generation of new ideas

Captures and cultivates new ideas

Identies processes to enable innovation to incubate and evolve new ideas

Generates business intelligence on market dynamics

Tracks and measures innovation success rate

Frees up venture capital to achieve innovation

0 10 20 30 40 50 60 70 80 90 100

High Medium Low

How would you rate your Finance organizations level of support for innovation?



Integration of actuals, forecasts, budgets, variance reporting

Collaborative planning, reporting and decision-making process

Focus of forecast on steps to close gap to plan

Rolling forecast, based on relevant business events

Metrics, incentives and accountability attached to groups and teams

Streamlined, integrated budgeting process

Linked and aligned scorecard metrics cascaded down to eachfunction and business unit

Measures that are transparent, timely, online, role specic and linkedto strategy

Focus on exception-based reporting and analytics


Does your enterprise plan to adopt these processes for creating an integrated and continuous informationmanagement environment?

Responses = 811Source: IBM Business Consulting Services, The 2005 Global CFO Study.

0 10 20 30 40 50 60 70 80 90 100



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Executive-level scorecard of key indicators and results

Enterprisewide BPM reporting / access, customized by organizational role

Enterprise Web-based reporting and/or portals

Analytical tools for investigative and ad-hoc analytics (e.g., hypothesis testing)

Data mining tools for predictive modeling

Enterprise resource planning functionality for BPM

Analytical tools that are embedded in the actual work ow (e.g., automatedrealtime alerts)

Business activity monitoring with automated alerts embedded inoperational dashboards

Enterprisewide BPM reporting / access, linked to external partners (e.g.,suppliers, customers, etc.)


Does your enterprise plan to adopt these business performance management tools?


0 10 20 30 40 50 60 70 80 90 100


Documentation of accounting policies

Controls over the close process

Financial reporting processes

Controls for recording nonroutine and complex transactions

Board and audit committee understanding of controls framework

Controls over IT and infrastructure

Executive sponsorship of controls programs

Enterprisewide controls program

Ability to evaluate and test controls over outsourced processes

Controls over M&A

0 10 20 30 40 50 60 70 80 90 100

Previous focus Current focus Plan to focus on in next 12 months Not applicable

Does your Finance organization focus on or plan to focus on the following internal control areas?




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40

Create a code of conduct for all staff

Create a code of conduct for executives / ofcers

Use explicit afrmation of behavioral standards with visible actionagainst violations of ethical standards

Cascade accountability for controls and nancial reportingAutomate business processes to improve effectiveness and

robustness of internal controls

Automate business processes and controls documentation

Increase stafng levels in accounting / nance / internal control

Develop Finance staff via training in risk management

Use realtime compliance reporting / status dashboards

0 10 20 30 40 50 60 70 80 90 100

In the past 12 months Plan to initiate in the next 12 months Not applicable

Has your Finance organization implemented and mandated the following internal control actions?



Comply with regulations

Identify potential risks

Report risk data

Analyze impact of new risks

Monitor risk levels

Supply risk data to other parts of the organization

Assure risk data quality

Advise on risk mitigation strategies

Execute risk management strategies

Design enterprise risk management framework

Develop enterprise risk management culture

0 10 20 30 40 50 60 70 80 90 100

How often does your Finance organization support the following enterprisewide risk management activities?



Frequently Sometimes Never


47/52


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42

Decision support nance activities located within the business

Centralized decision support nance activities

Shared services dedicated to F&A transaction processing

F&A as a part of a multifunctional shared services center

Centers of excellence

Shared services dedicated to analytics

Small corporate center


Which of the following structures does your Finance organization employ?


0 10 20 30 40 50 60 70 80 90 100

Chief Compliance Ofcer

Chief Risk Ofcer

VP of Knowledge Management / Data Management

VP of Standardization and Simplication

Chief Transaction Processing Ofcer

Chief Growth Ofcer


Which of the following roles does your Finance organization employ?


0 10 20 30 40 50 60 70 80 90 100




49/52

Accounting

Business / nancial analysis

Treasury

TaxControls

Business support / performance management

Risk management

Compliance

Shared services (Finance and accounting only)

Internal audit

Strategic planning / business development

Shareholder relations

Outsourcing (Finance and accounting only)

IT

Procurement

Human resources / administration

Alliance management

Other

Which of the following functions reports into the CFO of your organization?


Percent of responses0 10 20 30 40 50 60 70 80 90 100


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44

IBM Contacts

Morris Treadway is a Partner with IBM Business Consulting Services and leads the Asia Pacic Financial

Management practice. He is based in Shanghai, China and can be reached at [email protected] .

Stephen Rogers is the Global Financial Management Lead for the IBM Institute for Business Value. He isbased in New York, NY and can be reached at [email protected] .

Spencer Lin is a Managing Consultant with IBM Business Consulting Services, Financial ManagementPractice. He is based in Chicago, IL and can be reached at [email protected] .

Susan Stewart is an Associate Partner with IBM Business Consulting Services. Financial ManagementPractice. She is based in Cincinnati, OH and can be reached at [email protected] .


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References and notes

1 Organizations are classified as highly effective based on the par ticipants rating of the following question, Howwould you rate the effectiveness of your organization in each of the following areas?

2 IBM Business Consulting Services analysis of the quarterly reports of 289 public companies in oursurvey sample.

3 Bramante, Jim. CFO survey: Current state and future direction. IBM Business Consulting Services.November 2003.

4 Rogers, Steve and Susan D. Stewart. Finance Shared Services and Outsourcing: Magical, Mythical orMundane. IBM Business Consulting Services. May 2005. http://www-1.ibm.com/services/us/index.wss/ ibvstudy/imc/a1011250?cntxt=a1000074. This paper was based on the IBM 2005 Finance Shared Services andOutsourcing Survey, a global study of 210 CFOs in 45 countries that was conducted to assess progress made inthe effective and efficient use of delivery models.

5 Your Turn: The Global CEO Study 2004, IBM Business Consulting Services. 2004. http://www-1.ibm.com/ services/us/index.wss/ibvstudy/bcs/a1001708?cntxt=a1000074. This global survey of more than 450 CEOs wasconducted to understand their planning agendas for the next two to three years.


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Copyright IBM Corporation 2005

IBM Global ServicesRoute 100Somers, NY 10589U.S.A.

Produced in the United States of America12-05All Rights Reserved

IBM and the IBM logo are trademarks orregistered trademarks of International BusinessMachines Corporation in the United States, othercountries, or both.

Other company, product and service namesmay be trademarks or service marks of others.

References in this publication to IBM productsand services do not imply that IBM intends tomake them available in all countries in whichIBM operates.

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