The Activist Role of CFOs The need of the day

Raj G ViswanathanFinancial Advisor

Oriental Insurance Company

Background

OIC is a public sector company carrying out general insurance business since the last 3 decades and has been one of the top 3 players in the industry

The annual turnover is around Rs.3100 crore. The company has been generally making profits and has reserves of over Rs.1300 crores and fair value of equity of about another Rs.3500 crores

The company has 900 offices all over the country an has 3 foreign operations. The company has around 16,000 employees

Role of CFO (FA)

The CFO in the past was the head of the accounting and investment functions and had very little role outside this canvas

Considered more of a number cruncher His advise was not acceptable to the

management as it was perceived to be from an ‘accountant’ who didn’t understand business

Then came the competition and the opening up of the market

The number started falling and everyone attributed this all kinds of reasons till the CFO stepped in with a sound financial cum business analysis plan and a roadmap ahead

Why the CFO to handle this Role?

Advantage of having a close watch on numbers

Never a comment made without supporting numbers

Always privy to the larger picture of profitability

Advantage of having a analytical mind Being able to identify the week areas

without much difficulty

New Role of CFO

The new role of the CFO involves Growth of company's sales and

profitability Implementation of best practices and

contribution towards (a) Business Strategy & Transformation(b) Financial Strategy, Controls and Cost Optimization(c) Corporate Governance and Stakeholder Relations and(d) Reporting, general accounting, cost accounting, internal controls, tax, and treasury

New Role of CFO

Aligning Financial management with long term business plans

CFO has to look beyond being an accountant and a number cruncher

………he has to take a more proactive role of being an financial advisor to the CEO.

In a scenario where the CEO is not responsive, he has to tirelessly sell the concept of the active CFO by demonstrating his value time and again.

If there is a clash between the CEO and the CFO, the Audit Committee has always been a good forum to thrash out such differences…. Not always in a confrontationalist manner

Thank You