The New Reality for Corporate TaxThe New Reality for Corporate Tax

What the market is telling us:• The new realities of tax• Why tax needs to change

Introducing the Five Key Challenges:• CFO Research Study• Why they matter• The inevitable outcome

Understanding the issues:• Creating the connected tax department• Finding the cause, not the symptom• Adding certainty to uncertainty• Focusing on the important and not the urgent

The New Reality for Corporate TaxThe New Reality for Corporate Tax

• Globalization and growth through acquisition

• The toughest regulatory landscape in years

• Auditors now expect to find assessments

• Increased accountability and responsibility

• Pressure to deliver more with fewer resources

• Increased accuracy, reduced uncertainty

• Compliance is no longer enough

Today’s tax leaders face a new reality as they guide and manage their tax function:

Research Validates Key ChallengesResearch Validates Key Challenges

In a 2007 CFO Research Services survey commissioned by Ryan, senior corporate finance and tax executives identified five key challenges that were barriers to success:

Alignment – Does tax matter to the organization and its leaders?

Complexity – Greater than ever

Resources – Top talent is tough to attract and hard to retain

Risk management – Ability to focus on the right things

Data integrity – Confidence in tax-related business systems

Key Challenge: Lack of AlignmentKey Challenge: Lack of Alignment

Research indicates there is a lack of alignment between the tax function, tax leaders, and those who define their success:

The C-Suite – Is tax viewed as essential and integral to the strategic direction of the organization?

Finance Leadership – Is tax feeding into the objectives and metrics that measure and track success and performance?

Lack of Alignment with C-Level PrioritiesLack of Alignment with C-Level Priorities

7 of 10tax respondents devote most of their resources to compliance while the finance executive’s top priority is reducing the company’s overall tax liabilities

Lack of Alignment with Finance FunctionLack of Alignment with Finance Function

87%of finance executives believe the tax function should be more tightly integrated with the rest of the finance function

Research indicates that the scope and complexity of the demands on the tax function impact its ability to align and focus on the strategic activities that matter to the C-Suite:

Regulatory compliance – How do you engineer certainty and repeatability into a world as uncertain as the world of tax?

Globalization – There’s no one size fits all in the world of global taxation. Priorities and perspectives vary greatly by country.

Key Challenge: Increasing Demandsand ComplexitiesKey Challenge: Increasing Demandsand Complexities

Increased Regulatory ComplianceIncreased Regulatory Compliance

9 of 10tax executives are faced with challenges in managing increased regulatory compliance activities

Increased Global ActivityIncreased Global Activity

83%of tax executives are faced with increased complexities due to changing overseas business activity

Research shows that tax leaders are feeling pressure to do more with fewer resources and are finding it tough to attract and retain the quality of talent they need to be successful: Talent Management – Will you attract the caliber of talent that can make a difference if you think and act as a compliance-driven tax function?

Investment/Budget – Will you be able to attract the investment you need to develop and grow your tax function if your organization perceives tax to be a non-strategic compliance function?

Key Challenge: Reduced ResourcesKey Challenge: Reduced Resources

Talent Management ConcernsTalent Management Concerns

88%of tax professionals indicate that improving talent management is a priority over the next 2 years

Significant Budget and Resource ConstraintsSignificant Budget and Resource Constraints

8 of 10tax executives face significant constraints in time, budget, and resources, severely restricting their ability to strategically realign their focus

Research confirms that the measurement and mitigation of tax and business risk in the ultra-transparent post Sarbanes-Oxley world is a top priority of the C-Suite:

Mitigating Business Risk – With transaction tax comprising such a significant component of corporate risk and cash flow, it is critical that the tax function actively participate in the risk mitigation initiatives

Avoiding Financial Statement Errors – Striking the right balance between the big picture and the minutiae — strategic thinkers must also focus on detail and accuracy

Key Challenge: Mitigating RiskKey Challenge: Mitigating Risk

Mitigating Business RisksMitigating Business Risks

only 17%of finance executives rate their tax department as excellent in mitigating business risks

Avoiding Financial Statement ErrorsAvoiding Financial Statement Errors

7 of 10finance executives believe the tax function needs to improve their ability to avoid errors in financial statements

Research indicates that decentralized, redundant, and unreliable data is inhibiting the ability of the tax function to operate as efficiently and effectively as the C-Suite demands:

Tax System Limitations – How heavy is your tax department’s reliance on manual processes and data management? Are you trying to use good people to make the most of bad processes?

Financial System Limitations – Do limitations in your current financial systems hinder your performance as a tax function?

Key Challenge: Data IntegrityKey Challenge: Data Integrity

Tax Systems LimitationsTax Systems Limitations

81%of tax professionals indicate a need to drive improvements in their processes and systems for storing, analyzing, and retrieving tax data

Financial Systems LimitationsFinancial Systems Limitations

77%of companies believe limitations in their current financial systems will present and create challenges for the tax department in the near future

High-value activities are giving way to low-value demands, leading to a focus on the urgent rather than the important, and the misalignment of priorities and resources:

Lack of Strategic Alignment – Increased requirements and reduced resources are driving the tax department to focus on urgent rather than strategic activities

Lack of Organizational Credibility – When the focus is on low-value activities how does that impact the corporate perception of the tax department?

An Inevitable Outcome: The Low-Value LoopAn Inevitable Outcome: The Low-Value Loop

Low-Value Loop: Lack of Strategic InvolvementLow-Value Loop: Lack of Strategic Involvement

9 of 10finance executives indicate the need for increased tax involvement in planning and policy matters

of tax respondents believe they have the requisite organizational credibilityto be effective

50%Lessthan

Low-Value Loop: Lack of Organizational CredibilityLow-Value Loop: Lack of Organizational Credibility

Tax leaders that fail to see the value they create, fail to think big, and fail to think differently are more likely to:

• Fail to align with the things that truly matter

• Fail to understand the criteria for success

• Have a limited internal voice

• Limit their ability to increase resources

• Have a limited impact and visibility in the

organization

• Have low perceived value and productivity

The Bottom LineThe Bottom Line

Leveraging experience and best practices to transform the tax department into the Tax Competency Center:

• Understanding where you are and where you need to be

• Creating the framework and roadmap for tax success

• Creating a culture dedicated to continuous improvement

• Making tax truly matter to your organization

A Better Approach: Tax Competency CenterA Better Approach: Tax Competency Center

Tax leaders who pursue a best practices approach:

• Benchmark and build a case for transformational change

• Understand and align with the success measures of key stakeholders

• Shift the focus to high-value activities and outsource or automate low-value activities

• Develop a strong communication plan for exchanging information and celebrating success

• Hire and retain talent who share the proper mindset

Driving Better Performance ThroughBest PracticesDriving Better Performance ThroughBest Practices

Transformation starts with benchmarking and the identification of best practices:

• Benchmark your current performance

• Identify best practices in relation to peer and historical performance

• Measure the delta between your reality and your potential

• Justify financial and human resource investment through the development of an ROI-based business case

• Develop a culture of performance measurement

Driving Better Performance ThroughBest PracticesDriving Better Performance ThroughBest Practices

Prioritize and implement change efforts in alignment with key stakeholder objectives:

• Develop evaluation criteria for the prioritization of improvement opportunities such as:

– Stakeholder objectives

– Current corporate initiatives

– Impact potential

• Implement change initiatives with reasonable expectations

• Implement change initiatives at a reasonable pace

Driving Better Performance ThroughBest PracticesDriving Better Performance ThroughBest Practices

Focus on high-value activities and outsource or automate low-value activities:

• Benefits of focusing on high-value activities:

– Maximize corporate value

– Apply knowledge of business intricacies

– Promote talent retention and development

• Benefits of outsourcing or automating low-value activities:

– Creates availability of departmental resources for higher-value activities

– Improves the efficiency of your work effort

– Embeds expert functional knowledge in repetitive activities

Driving Better Performance ThroughBest PracticesDriving Better Performance ThroughBest Practices

Implement a successful communication plan:• Highlights of plan components:

– Solicit regular feedback from stakeholders for perceptions and measurement of tax department performance

– Invest in understanding the changing needs and objectives of stakeholders

– Communicate departmental goals and prioritize transformation initiatives

– Publish progress of transformation efforts

• Benefits of effective communication:

– Broader ownership of tax department efforts

– Improved overall approach through increased participation in plan

– Greater appreciation for the tax department’s contribution

Driving Better Performance ThroughBest PracticesDriving Better Performance ThroughBest Practices

Hire and retain top talent by offering existing staff and future candidates a more desirable career path and experience:

• A best practice focused function improves departmental culture

• A focus on higher-value activities improves the ability to offer current and potential employees a more desirable career path and experience

• A more strategic department offers broader exposure to the overall business operations

• A tax department recognized for delivering greater organizational value is involved at a higher level in the decision-making and planning process

Driving Better Performance ThroughBest PracticesDriving Better Performance ThroughBest Practices

How Many of the Five Challenges Apply to You?How Many of the Five Challenges Apply to You?

1. How confident are you in the quality of the policies, practices, systems, and processes in place at your organization?

2. Do you have confidence in your organization’s ability to focus on the areas that you know need improvement?

3. Are you confident that your department is working in alignment with its internal partners and has a greater voice and influence as a consequence?

4. Do you have confidence in your ability to not only add real business value, but do it in a way which is highly visible within the organization?

5. Are you confident that your company knows about the tax department’s true performance and values the contributions made?

Today’s tax leaders face two choices:• Do nothing: Do you create or perpetuate

the low-value loop?• Do something: Can the right

reaction lead to the right outcome?

You can make the choice that makes the difference

You can transform your role and empower your team

You can be able to make sure you and your team matter

Some of the world’s most successful companies are starting to see and believe that they can!

Moving Beyond the Status QuoMoving Beyond the Status Quo

Please Call With Comments or QuestionsPlease Call With Comments or Questions

G. Brint RyanManaging Principal

RyanThree Galleria Tower13155 Noel RoadSuite 100Dallas, Texas972 934 0022

brint.ryan@ryanco.com