finance re-imagined
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Analytics Forum DohaTRANSCRIPT
Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th & April 9th 2013Strictly Private
and Confidential
Consulting
1 Introduction 1
2 Challenges faced by today’s CFOs 3
3 What leading companies are doing
5
4 Why Finance Transformation and How to Benchmark
7
5 Q&A 20
PageSection
Agenda
7 April 2013
Introduction
1
Section 1
7 April 20132
Section 1 – Introduction
PwC’s team with you today
Zahid is a Senior Manager in PwC’s Advisory practice, responsible for Finance Effectiveness. Zahid has over 16 years of experience working with Big Four Accounting firms in USA. He is leading the SAP EPM & BI practice in MENA region.
Zahid’s experience includes wide range of Finance projects from strategic initiatives such as Driver-based Performance Management, Balanced Scorecard and Executive Information System across industries and systems.
Zahid is a licensed Certified Public Accountant (CPA) from AICPA licensed in the State of Missouri, USA.
Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
7 April 2013
Challenges faced by today’s CFOs
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Section 2
7 April 2013
Challenges CFOs today are facing
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 2 – Challenges faced by today’s CFOs
Today’s CFOs face a complex and challenging business environment that requires tremendous business savvy. In this environment, innovation is an essential driver of excellence, and the finance department is no exception. We regularly hold CFO forums and some of the top issues faced by senior finance executives are::
Insight
Efficiency
Compliance & Control
How can I manage my responsibilities to focus in on the activities that create real value for the business?
How do I ensure that the data the company relies on provides the most useful information in evaluating projects and investments?
How do I become a more risk-intelligent CFO?
How do I develop standard approach to evaluating finance investment decisions?
In what areas of finance should I be reinvesting to drive innovation and improved performance?
How do I ensure that the financial reporting data the company relies on is accurate?
How do I reduce the burden of maintaining my control environment without compromising its integrity?
The CFOs are juggling to achieve the right balance between three competing agenda; insight, efficiency and compliance & control
7 April 2013
What leading companies are doing
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Section 3
7 April 2013
What leading companies are doing
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 3 – What leading companies are doing
• Standardising data definitions, systems and processes across management units• Updating capabilities, tools and skills within finance on a continuing basis to increase
efficiency• Making some very tough decisions to upgrade talent in key leadership positions• Hiring people based on their potential to achieve results, not just technical skills and previous
experience• Moving their finance people around the business so they can create more value and grow• Designing performance management programs that effectively measure the performance of a
finance employee• Designing an operating model that considers finance’s contribution across each objective
(Insight, Efficiency and Compliance & Control)
Insight
Efficiency
• CFOs are focusing on activities that create value for the business, and leaving the rest to someone else
• Defining information needs based on the decisions that need to be made rather than by the reports that are expected to be delivered
• Giving business leaders a way to evaluate the risks associated with the opportunities they’re facing
• Distinguishing between rewarded risks, like acquisitions or new product development, and unrewarded risks, like regulatory compliance
• Making sure the leadership team understands the organisation’s risk profile• Deconstructing daily operations to show the workforce how decisions and actions affect
shareholder value• Evaluating the project/investment portfolio in terms of value drivers
Compliance & Control
• Partnering with the CIO and taking ownership of the collection and governance of financial data
• Applying a top-down, risk-based approach to develop lean and balanced controls• Rationalizing existing controls and redesigning test plans based on identified financial
reporting risks• Leveraging automated controls and enabling technologies
7 April 2013
Why Finance Transformation and How to Benchmark
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Section 4
7 April 2013
Finance Transformation: Our Perspective
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Strategy - should be aligned to the overall corporate strategy.
Target Operating Model - Mechanism by which all activities relating to the key building blocks of processes, systems, people and organisation are delivered.
Finance Activities - Assessing where you are now and where you want to be for each of the finance activities will help provide a route map to change.
Strategic Vision
Finance Objectives
Corporate Vision
Finance Vision
InsightCompliance & Control
Efficiency
Target Operating Model – Key Activities
Budgeting &
Forecasting
Business Analysis
Management
Reporting
Strategy & Planning
Accounts Receivable
Treasury
Accounts Payable
Tax Manageme
nt
Internal Audit
Controls
Data Manageme
nt
Performance
improvement
People Manageme
nt
Systems Manageme
nt
General Accounting
Corporate Reporting
What?
Why?
How?
7 April 2013
Finance Function Measurement framework
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Insight: Relevant, accurate and timely KPIs to support business managers in decision making
Efficiency: Elimination, standardisation and automation to free up resources for value added activities
Compliance and Control: Sustainable, flexible embedded controls to meet current and future regulatory demands
• As Finance functions serve the ever-increasing demands placed on their resources, an appropriate balance of Insight, Control and Efficiency is required.
• Whilst specific to individual businesses, we have often found significant time and resources dedicated to driving greater compliance, at the cost of providing real insight or efficiency.
• High performing functions must continually look to refine this balance, either through targeted change or a more holistic review of the functional Operating Model.
Above median
Below median
Top quartile performance
Current stateAspiration
Transactional efficiency Accounts payable Accounts receivable General accounting &
financial reporting Financial reporting
Strategy & planning Budgeting &
forecasting Business analysis Perf. Impr. projects Management
reporting Business partnership
Business insight
Compliance & control Treasury Internal audit Process controls &
compliance Tax accounting &
compliance
Finance functions must continually re-assess and refine their role within the organisation:
7 April 2013
Our view of typical finance processes
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Analysis Areas Analysis CategoriesBusiness Insight•Strategy & planning•Budgeting & forecasting•Business Analysis•Performance improvements projects
Transactional Efficiency•Accounts payable (P2P) •Order to Cash (O2C)• Billing, Credit and collections •General accounting•Record to Reporting (R2R) - Financial / external reporting
Control•Revenue assurance, risk and fraud management•Treasury and cash management • Internal audit E
ffic
ien
cy
an
d E
ffecti
ven
ess
Poli
cie
s an
d P
rocess
es
Sys
tem
s A
rch
itectu
re
Con
trol
Fra
mew
ork
& S
eg
reg
ati
on
of
Du
ties
Data
7 April 2013
Our gap report includes KPI benchmarking, improvement opportunities identification and sets out the framework for improvement roadmap
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
TransactionalEfficiency
Business Insight
Compliance& Control
Lower quartile
Median Top quartile
Transactional efficiency
1 Days to period end close 5
2 Days to publish financial results
4
3 Single data repository for reporting
Yes
4 Complexity of key financial systems
Standard / integrated
5 Efficiency FTEs per €bn revenue
55.8
FTEs normalised to XYZ Ltd revenue1 Accounts payable 162 T&E accounting 13 Accounts receivable 134 General accounting and
financial reporting 20
5 Total FTEs – Trans. efficiency 53 Process cost as a % of revenue
1 Accounts payable 0.05%2 T&E Accounting 0.003%3 Accounts receivable 0.06%4 General accounting and
financial reporting 0.12%
5 Total costs – Trans. efficiency 0.22%
7
5
No
255.3
72
61
0.37%0.01%
Highly complex
123
241
0.12%
1
0.80%
0.31%
Positive initiatives Findings / opportunities
• 1 Chart of accounts on single GL for group reporting
• Time to close accounts is in top quartile (5 days)
• Use of reporting Cube as a primary data repository
• SSC Project Sun project aimed to increase process quality at SSC (AR/Database) sharing best practices
• Travel & Expenses processing costs less than peer median
• Appointment of an Operations Controller to look at implementing process best practices
• Process: After close, it takes 7 days to report where team are at full capacity and have no bandwidth for projects and business partnering
• AR: PwC acknowledge the complexity of AR process, however 123 FTEs is high compared to median
• AP: No coordinated purchasing policy or vendor management or discount / supplier terms management for Opex
• Organisation: An opt-in approach to using the SSC has led to an in-country focus on improvements rather than adopting learnings from other countries.
• Technology: IT systems (e.g.15 ERPs across Group – one of which is CODA) are not fully integrated, resulting in a complex, fragmented data architecture
Key Recommendations
• Organisation Blueprints from the Project Sun project now need to be implemented, with best practice initiatives centrally coordinated under the Group FC and the Head of SSC and driven by the SSC
• Establish pan-European Executive committee to include members of the Board to oversee Group-wide process improvements and standardisation
• Continue to share and apply best practice from across the organisation: E.g. invoice raising under single process ownership supported by a 3rd party provider; enforcing a standard billing policy across Group to reduce the drivers of back-office A/R activity
• For future Finance strategy to be leveraged effectively, process standardisation under single pan-European ownership and consistent system tools will need to take effect to allow Bolivia, Argentina and New Zealand to make better use of the SSC
10 10
10
XYZ Ltd
Top Quartile Performance
Peer Group Above Median
Peer Group Below Median
ILLUSTRATIVE SAMPLE
Finance Gaps and N-tile Assessment Key Recommendations
7 April 2013
Roadmap sets out the priorities and timeline to implement the changes
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Systems:
1. Full utilisation of sub-ledger functionality2. Automated code combination validation process3. Investigate Salesforce.com capabilities for rolling it out for all leasing /
sales transactions 4. Implement Consolidation functionality5. Implement Planning Budgeting capability6. Implement Reporting / BI solution by replacing current Discoverer
environment 7. Maintain Financial Statement Generator reports8. Use of Revenue recognition functionality in AR sub ledger9. Share drive access to be extended to allow for ‘pulling’ of data and
reporting schedules10. Automate HR liabilities accruals and other allocations using Mass
Allocations
Process / Policies 11. Revenue recognition process need to integrate with % completion of work
Key Priorities
New
En
viro
nm
en
t
Medium
2
13
4
5
6
7
Exi
stin
g E
nvi
ron
men
t
Criticality
Low High
8
9
Imp
lem
en
tati
on
*
10
Generate Consolidated
Financial Reporting per
IFRS and Parent Company Reporting
3 Use Trial Balance to extract data for Financial reporting (manual FSG mapping)
4. Make off-line adjustments (outside GL) to Financial Reports to reflect IFRS compliance
5. Coordinate with HR to source Disclosure Reporting(e.g. End of Service , Senior staff remuneration)
8. Manually consolidate results and eliminate intercompany accounts
1. Receive valuation and impairment testing results from I&A rework to provide format for GL team
6. Work with C&L team on IFRS related disclosures (segment reporting, current / non current liab. etc
10. Produce Standalone financial Statements (outside uae co) and relevant notes to accounts. Monthly IFRS Income Statement 6 monthly full IFRS reporting
11. Produce Consolidated financial Statements
12. Support Internal & External Auditors ,coordinating with finance and other functions
13. Produce Statutory audited IFRS statements
7 Produce books from multiple sources including standalone results for non UAE entities
9. Manually update income, valuation and impairments w.r.t. JVs and Associates
Improvement Opportunities and Roadmap Activity Dictionary
ILLUSTRATIVE SAMPLE
7 April 2013
Rate your subsidiary in terms of the following
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
High Performing Low performing Key Desired state – 12 mnths
Desired state – 2/4 yrs
As is assessment
Controls and ProcessesFinancial reporting processes
MI & Analysis
Planning
Expenses
Business partnering
Organisation and Scope of Finance
People
Systems and Data
ILLUSTRATIVE SAMPLE
7 April 2013
Our approach towards benchmarking
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Develop SCAN report
Process Diagnostics and Benchmark Integration
Compare data with industry / cross-industry peers (Internationally based on available database /
research)
Obtain and analyse historical performance data
Set out the benchmarking KPIs
Identify business activity of head office functions
Voice of Internal Customer ‘how head office supports Business Domains and key challenges’
Finance
Legal
Human Resources
Operations
Marketing
Risk
Areas of focus
• Global best practices-PwC benchmarking Database
• Saratoga
• SCORE database
7 April 2013
Global best practices database
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Benchmarking and Process Appraisal ToolsFact-based consulting (Qualitative and Quantitative).
Best PracticesOffers our point of view on the optimal way to perform a given business process based on the PwC experience and in-depth market research of over 2000 assignments from different organisations.
• Steps leading organisations take to achieve peak performance.
• Improvement opportunities, corrective measures and related recommendations
• Objective, evidence-driven baseline of current performance in terms of efficiency and impact, compliance, control and business insight; and
• Identification of opportunity savings, potential for service improvement and any areas for feasible change and action.
Risk & ControlsOffers PwC point of view on the optimal controls and checks needed at the process level to mitigate key risks
7 April 2013
We leverage our benchmarking and analytics service – PwC Saratoga
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Saratoga holds one of the world’s largest and most robust database of people and functional performance metrics, with benchmark information from over 2,400 international organisations.
Benefits
• A strategic benchmark with practicality and alignment to the organisation strategy
• Large available data breadth providing reliability and objectivity
• Process provides a measurement framework to be used going forward in the business
• Benchmark captures quantitative measures and a qualitative view of business practices
• Opportunity to investigate and raise areas of concerns which are highlighted by the analysis and data
• Saratoga functional effectiveness allows the organisation to understand areas that may require their review and improvement.
What is Saratoga?
• Saratoga is PwC’s measurement and benchmarking service which was developed 25 years ago.
• Saratoga comprises performance data from over 2,400 companies globally across a variety of industries. Saratoga holds one of the world’s largest, most robust databases of people related performance metrics.
• Saratoga analyses an organisation’s data and their key metrics which show the strengths and limitations of the organisation’s human capital and financial resources. It focuses on issues that can have an impact on improving performance and increasing competitive advantage.
PwC Saratoga can assist your organisation to:• Build a clear analytical understanding of existing human capital profiles;
• Highlight potential cost savings, efficiency gains, service improvements and effective support function delivery opportunities;
• Select suitable organisations against which to benchmark key performance indicators and best practice; and
• Plan, implement and drive the actions necessary to realise value added objectives.
7 April 2013
Plan to complete SCAN phase in six-weeks leveraging our Methodology and benchmarking toolkits
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
Maturity Mapping and Roadmap
Project Management
Develop project plan and Project
Kick - off
Project initiation
Assess (Scan – Maturity assessment & benchmark performance)
Final Functional Workshops – Functional maturity models and benchmarks / trend relevance
Review existing policies & processes
CXO level discussions
Voice of Internal Customer
Initial Functional workshops – Leading practices & KPIs to be collected
Cross functional workshops and roadmap
Functional maturity
assessments vis-a-vis performance
benchmarks
Functional roadmap - functional integration
touch points
Stage 1 Scan Stage 2 Scan Stage 3 - Maturity Mapping and RoadmapPlanning
7 April 2013
We have over 30 years of presence in the Middle East with a dedicated team of Finance Consulting practitioners
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Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
EgyptCairo
JordanAmman
Saudi ArabiaRiyadh
Al KhobarDhahranJeddah
BahrainManama
QatarDoha
OmanMuscat
YemenSanaa
LebanonBeirut
West Bank and
GazaJerusalemBethlehe
mGaza
LibyaTripoli
KuwaitKuwait
City
IraqBaghdad
SyriaDamascus
IranTehran
UAEAbu Dhabi
Dubai Emaar Sq.
DIFCSharjah
Our Finance Consulting expertise includes :● Finance transformation and
fast close design● Operational finance● Enterprise resource planning
& performance management ● Treasury management● Business operating model● Project and program
management● Process design / best practices● System design, build and
testing● Training and roll-out● Data reconciliation● SEC, GAAP, Tax and SOX
controls
PwC at a glance:
● $31.5 billion revenue for FY2012
● 180,000 people● 776 offices● 158 countries
People by region:
● 40% Europe● 23% North America● 24% Asia Pacific● 7% MENA● 6% South and Central
America
Areas of service include:
● Performance improvement● Transactions ● Global tax structuring● Global tax compliance ● Crisis management● Assurance● Human resource services
A strong regional firm…
● Unified regional practice with presence in 15 countries● Diverse pool of over 2,700 professional across the region● Largest pool of resident Advisory staff fully connected to the global
network● The Middle East region is fully integrated with in the global PwC
network
7 April 2013
Middle East Finance Consulting Leadership Team
19
Finance Transformation - Challenges & Opportunities for today's CFOs
10:30am – 11:00amApril 8th 2013 •
Section 4 – Why Finance Transformation and How to Benchmark
T: +971 4 3043300 (ext. 3362)M: +971 56 [email protected]
Sharat SethPartner
T: +971 4 3043300 (ext. 3303)M: +971 50 [email protected]
Manoj ShahPartner
Rob HucknallPartner
T: +971 4 3043300 (ext. 3266)M: +971 56 [email protected]
7 April 2013
Q&A
20
Section 5
pwc.com/middle-east
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information.
“PwC” is the brand under which member firms of PwC PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.
PwC in the Middle East
Established in the region for over 40 years, PricewaterhouseCoopers Middle East has offices in 12 countries: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Palestine, Qatar, Saudi Arabia and the United Arab Emirates, with around 2,700 people.
Complementing our depth of industry expertise and breadth of skills is our sound knowledge of local business environments across the Middle East.
www.pwc.com/middle-east
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