the role of the cfo in the customer-activated enterprise
DESCRIPTION
Kieran McGrath, Chief Financial Officer of IBM Software at IBM, discussed how organizations can leverage technology to become more efficient during his presentation at the 2014 Chief Financial Officer Leadership Think Tank in Chicago on June 10. In his presentation, McGrath pointed out CFOs can better serve their organizations if they find ways to incorporate technology into their work. According to McGrath, technology creates new opportunities for CFOs because it allows them to streamline everyday tasks. McGrath noted a CFO should understand how technology works so he or she can incorporate it into an organization’s operations: “I think CFOs by and large would probably look at technology as way to optimize our performance to drive more efficiency and drive top-line growth by leveraging technology. What you find is that the CEOs in the survey are actually concluding that technology is not only a way to improve the performance of their business, but that it can actually become a key part of their business model.” In addition, McGrath said analytics are important for organizations. Data is readily available to CFOs, McGrath said, but these officials need to know where it is located and how to access it. McGrath pointed out technology, however, levels the playing field and gives CFOs the ability to make better business decisions: “Analytics and data [are] a huge opportunity for CFOs in this space … Lead through business modeling, lead through a business model innovation to making strategic business decisions and be in the absolute leadership portion of [the CFO role].” http://www.argylejournal.com/functions/2014-chief-financial-officer-leadership-think-tank-kieran-mcgrath-chief-financial-officer-ibm-software-ibm/TRANSCRIPT
The Role of the CFO in the Customer-Activated
Enterprise
Kieran McGrath, CFO, IBM Software
© 2014 International Business Machines Corporation 2
CxOs vary in their views about which external pressures are
most significant, but unite in ranking market factors and
technology in the top three
External forces impacting the enterprise (3–5 Years)
Technology factors
Market factors
Macro-economic factors
People skills
Regulatory concerns
Socio-economic factors
Globalization
Environmental issues
Geopolitical factors
CEO CFO CHRO CIO CMO CSCO
Source: Question E8–What are the most important external forces that will impact the enterprise over the next 3 to 5 years?; n=4,009
© 2014 International Business Machines Corporation 3
Technology is of ever-increasing importance to CFOs–the
key moving forward is capturing its potential
2010 2013
Macro-economic factors
Market factors
Technology factors
Regulatory concerns
People skills
Geopolitical factors
Socio-economic factors
Environmental issues
Globalization
We need to have the right
information on time and give
it the interpretation value.
There is a need to frame
information in a financial focus
CFO
Industrial Products company, Mexico
”
Source: Question E8--What are the most important external forces that will impact the enterprise over the next 3 to 5 years?
© 2014 International Business Machines Corporation 4
CEOs consider technology the single most important external
force shaping their organization’s future
CEO Studies 2004–2013
2004 2006 2008 2010 2012 2013
Technology factors
Market factors
Macro-economic factors
People skills
Regulatory concerns
Socio-economic factors
Globalization
Environmental issues
Geopolitical factors
Source: Question E8–What are the most important external forces that will impact the enterprise over the next 3 to 5 years?; n=884 [CEO only]
© 2014 International Business Machines Corporation 5
CFOs rank second only to CEOs in collaborative C-suite
influence
C-Suite collaboration partners
Source: Question B6--Which of your C-suite peers do you work most closely with in support of the enterprise?
78%
65%
24%
CEO CFO All others
Source: “CFO insights from the Global C-Suite Study”, IBM Institute for Business Value, 2014
Finance has a role in bringing
balance to the funding of
innovation. We play a role in
challenging ideas and calling
out where they are not working.
Finance applies discipline to the
process
CFO,
Life Sciences, Unites States
”
© 2014 International Business Machines Corporation 6
Almost all aspects of a CFO’s role have increased in
importance
Importance 2010
50% 100%
Areas of importance–historical
Importance 2013
Measure/monitor business performance
Provide inputs into enterprise strategy
Develop talent in the finance organization
Optimize planning, budgeting and forecasting
Drive enterprise cost reduction
Support/manage/mitigate enterprise risk
Drive integration of information across the enterprise
Execute continuous finance process improvements
Strengthen compliance programs/internal controls
Manage investor/stakeholder relations
Process transactions
90% 80% 70% 60%
Source: Question CFO1--How important are each of the following areas of responsibility to your enterprise?
Source: “CFO insights from the Global C-Suite Study”, IBM Institute for Business Value, 2014
© 2014 International Business Machines Corporation 7
Finance organizations rely on spreadsheets and intuition
two-thirds of the time
Intuition Spreadsheet ERP Analytic tool
14% 52% 19% 15%
50%
100%
0%
Capabilities/tools used to support Finance
Source: Question CFO6--What capabilities / tools does your organization use for the following activities?
© 2014 International Business Machines Corporation 8
Value Integrators are pushing the boundaries of efficiency and
insight – a subset are emerging as Performance Accelerators
Low
High
High
Low
Value
Integrator
Disciplined
Operator
Scorekeeper
Constrained
Advisor
Fin
an
ce E
ffic
ien
cy
Performance Accelerator • Profitability and economic analysis
• Pricing
• Demand planning and forecasting
• Product and services development
• Mergers and acquisitions
Value Integrator Finance Efficiency
• Enterprise-wide information
standards
• Standard financial chart of accounts
• Common finance data definitions and
data governance
• Standard/common finance processes
Business Insight
• Operational planning and forecasting
capability
• Common planning platform
• Finance talent development
Business Insight Source: IBM Institute for Business Value,
The Global CFO Study 2010, The Global C-suite Study 2013
Performance
Accelerator
7%
30%
Pushing beyond current
boundaries of efficiency
– into the enterprise
Harnessing new
analytical capabilities
unavailable just a few
years ago
© 2014 International Business Machines Corporation 9
Source: Question CFO2--How effective is your organization in the following areas?
0% 20% 100%
Performance Accelerators have mastered core finance and
enterprise duties–outperforming Value Integrators in every
dimension
Manage investor/stakeholder relations
Process transactions
Strengthen compliance programs/internal controls
Execute continuous finance process improvements
Provide inputs into enterprise strategy
Optimize planning, budgeting and forecasting
Drive enterprise cost reduction
Support/manage/mitigate enterprise risk
Measure/monitor business performance
Develop talent in the finance organization
Drive enterprise-wide integration of information
Gap 43% 62% 81%
60% 40% 80%
All other CFOs Remaining Value Integrators Performance Accelerators
Effectiveness across the CFO agenda
9
© 2014 International Business Machines Corporation 10
Performance Accelerators
begin to pull away in terms of
business insight
Value Integrator
Value Integrators and
Performance Accelerators
are neck and neck in
finance efficiency
Performance Accelerators
shine when it comes to
profitable growth and are
truly the engines of change
Performance
Accelerator
Value Integrator Value Integrator
Performance
Accelerator
Performance
Accelerator
Finance efficiency Business insight Profitable growth
Performance Accelerator’s focus areas can be grouped into
efficiency, insight, and growth initiatives–one ability builds on the
previous
© 2014 International Business Machines Corporation 11
Today, three imperatives guide the most effective CFOs
CFOs design integrated operating models and
processes that are the foundation of a
globally integrated enterprise that proactively
adapts and continually positions for the future.
CFOs are guiding the evolution
of the organization’s value creation engine with profit
opportunities to create the future.
New analytics and data sources enable CFOs to
offer predictive and prescriptive insights
and drive a forward-looking culture
that permeates the organization and
better shape the future.
Help the business make better decisions by
anticipating the future
Drive enterprise agility through
enterprise integration
Lead business model innovation through a new discipline of performance
© 2014 International Business Machines Corporation 12
Driving Enterprise Agility Through Enterprise Integration
21st Century
20th Century
Replicate
Multinational Globally
Integrated
Connect
Replicated and inflexible
operations
Decentralized
management
Business process
complexity
Lack of consistent data
world-wide
Common world-wide processes and
applications
Right skills, right place, right cost
Innovate and radically simplify
processes
Enable growth and productivity
© 2014 International Business Machines Corporation 13
Making Better Decisions by Anticipating the Future
Attribution
Exp
ecte
d L
osses
Expected Loss (Pessimistic)
Lik
elih
oo
d
Loss 1Q12 2 Q12
Expected Loss
Expected Loss (Optimistic)
Potential Loss Curve
Industry 1 Industry 2 Industry 3 Industry 4 Industry 5 Industry 6
4Q13 3Q13
• IGF portfolio of ~$30B
• Previously conducted static
analysis summing credit risk
of individual exposures
• Use of the Credit Algorithmics
Tool (CAT) enables
correlation analysis
– Optimize Pricing
– Resource Deployment
© 2014 International Business Machines Corporation 14
Leading Business Model Innovation Through a Discipline of
Performance
• Analytics solution developed
based on IBM’s experience
• Correlates attributes to
performance
© 2014 International Business Machines Corporation 15
CFO Priorities
Drive Enterprise Agility Through Enterprise
Integration
Help the Business Make Better Decisions by
Anticipating the Future
Lead Business Model Innovation Through a New
Discipline of Performance
© 2014 International Business Machines Corporation 16
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