AN EXCLUSIVE NETWORKING EVENT BY IN PARTNERSHIP WITH

Finance Excellence in a VUCA WorldExecutive Summary

INTRODUCTIONIn a world that is increasingly being described as ‘VUCA’ in nature (a world that is more Volatile, Uncertain, Complex and Ambiguous), the support CFOs need to provide the business is more critical than ever. Some might say that in a VUCA world finance excellence needs to be the rule rather than the exception, and so to help executives ensure this is the case, CorporateLeaders in partnership with Tata Consultancy Services brought together experts and CFOs at a CFO Roundtable Meeting in Brussels to discuss exactly what this means.

The meeting was keynoted by Bruno Colmant, Head of Macro Research and Executive Board Member at Bank Degroof Petercam, and Frederic Salmon, Chief Financial Officer at BICS, who was joined by VK Raman, Global Head ValueBPSTM at Tata Consultancy Services. During the roundtable discussion, Jesper Lillelund, Partner & Co-Founder of CorporateLeaders, acted as moderator and Jipson Mathew, Country Head at TATA Consultancy Services Belgium was the host of the event.

Top Macro Economic ChallengesFacing CFOs

In his insightful Good, Bad and the Ugly presentation, Bruno Colmant, Head of Macro Research and Executive Board Member at Bank Degroof Petercam, concisely summed up the challenges CFOs now face: that in as little as the last five years, everything they thought couldn’t happen has happened – everything from negative interest rates in some areas; persistently low interest rates elsewhere; long term (and also unexplained) productivity declines, and the rise of ineffectiveness of government monetary policy. All these elements create significant problems – including the impossibility of knowing what a good amount of money is (and at what price).

But VUCA is also on the rise because of other factors too – what he called the ‘Black Swans’ on the next five-year horizon rather than the more positive, ‘white’ ones. The black swans, he said, include slow economic growth (paradoxically, even though more people will live longer, an aging population consumes less); as well as digitilisation and a serious factor that simply can’t be ignored: the erosion of the middle classes, and the rise of the 20-25% of the population that simply do not create any wealth. “It’s an act of faith on the public and the political stability of our economies that we are making,” he said.

Against this backdrop, Colmant argued the potential future outlooks CFOs need to get their heads around have elements of either the ‘good, the ‘bad’ and the ‘ugly’. The ‘good’, he said, is the 5% chance that a small rise in inflation moves the economy away from crisis, with rising employment that will see public debt become more stable. The much more likely (75% chance he said), is that CFOs will face the ‘bad’ scenario. This is the one we see happening now –characterised by almost no inflation, slow growth, and a painful social climate. The only remaining scenario, he argued, was the ‘ugly’ – the 20% chance that there will be persistent deflation, currency wars, debt rescheduling, even asset confiscation. “Things like that could happen,” he warned, “just to stabilise the system and make sure the money is well channelled by the institutions to finance public authorities.”

Whichever of these scenarios play out, Colmant argued the future will almost certainly be one that is still characterised by low inflation, meaning money debasements that will impact commercial debt. He claims banks – because they are still so heavily controlled – are de-facto national banks, meaning doing business has “been decreased significantly.”

“In as little as the last five years, everything CFOs thought couldn’t happen has happened.”

Bruno ColmantHead of Macro Research and Executive Board Member, Bank Degroof Petercam

Practical Issues for Organisations

If Colmant’s talk was about change theory – and what he thinks the main macro-economic trends are, Frederic Salmon, Chief Financial Officer at leading International Telecom Company BICS, described the practical steps he believes CFOs needs to start taking now to transform their operations, using his own experience.

BICS – which is mainly B2B and manages the international transportation of voice and data for fixed and mobile telecom operators or new digital players such as Skype or Facebook – has around 500 staff, with revenues of €1.6 billion. According to Salmon, his organisation is more protected than most from specific events, because telephony still needs to happen regardless of the specifics of the world economy. But, he acknowledged foreign exchange exposures still impacts the business (only around 40% of its revenue is dollar-based), and he also argued the biggest risk currently is disintermediation, where new players are able to come on board.

As a result of the latter, the strategy of the business has been to grow both organically and inorganically (e.g. through M&As), but even this involves dealing with valuation multiples – and these are currently a tough issue because he said he’s seeing them running very high recently – something like 30 x EBITDA. “As a CFO, paying a 30 times EBITDA is really hard and I would like to see the business case,” he told delegates.

A second headache, he argued, was the Belgian (and overall global) tax system – in particular its unpredictability, and whether national governments are truly using corporate tax as a vehicle to promote growth and wages, rather than being too high, and creating disincentives for businesses.

“The worst case scenario planning needs thinking about daily, almost as if it’s routine.”

Bruno ColmantHead of Macro Research and Executive Board Member, Bank Degroof Petercam

Prepare for the Unexpected

His advice about what CFOs could realistically do was sober: “Prepare for the unexpected,” was his ultimate message. Key to this was the need for CFOs to now ‘expect the unexpected’. He argued that because the market economy is challenged, and governments are attempting to take the economic driving seat once more, anything is now possible, especially as events like Brexit remain a huge unknown. His message was clear: Pre-2008 CFOs might only have had to think about the worse-case scenarios occasionally. Today, and in the future, it’s all very different. Now, he said, this ‘worst case scenario’ planning needs thinking about daily, almost as if it’s routine.

Managing Finance Operation in anEver-changing Business Landscape

But while these are industry-specific, a key plank of his talk was also describing how broader challenges would impact him, and other CFOs alike, that everyone can take lessons from. Chief amongst these were issues of skills shortages in finance departments generally – shortages that will hamper firms’ ability to deal with pressures like digital risk, uncertainty, and the two-pronged presence of increased data and stakeholder scrutiny and regulation. “We have excellent people in our teams but when it comes to aspects like analytics, I don’t have all the right profiles.”

Salmon called on CFOs to really define what they do, to strengthen their case for making change. In his own organisation, Salmon noted there were a range of functions (accounting, controlling, billing, credit risk, etc.), comprising around 90 people, and so the first thing he sought to do was define his department’s mission, and what role it should play in supporting the rest of the organisation. Because BICS is driven by cash-flow, he said it made sense that the department contributes to cash-flow generation. By creating this so-called fixed ‘anchor point’, the business is still able to change, but this anchor will still root the finance department to the ground, to define what it does.

It was in this context that Salmon described how he uses teams from Tata Consultancy Services (TCS) – the company’s strategic business process outsourcing provider – which now comprises around 30% of his finance resourcing. Initially TCS started in finance and billing processes, but it’s now handling other areas like customer care. He said the decision to use TCS was so that a reliable service could be created – one which protected the business from mistakes, so that he actually delivers to the business what he has promised. He said: “As a CFO, not just within my own team but within the rest of the organisation, one of my obsessions is to decrease the unit production costs, and to do it without jeopardising the quality of the service that we are giving to our customers.” This, he argued, has been what TCS has provided him. Setting frameworks for service provision with risk assessments help the way businesses can (in Colmant’s words) expect the unexpected. Salmon said: “I want to make sure we predict the unpredictable as much as possible. What we’ve created is a very good framework for this, and we’ve been using it for exactly that purpose.” VUCA might well be the new world order, but these processes, he argued, protects him from some of the worst elements of unpredictability.

Among the broader challenges that impact CFOs are issues of skills shortages in finance departments.

Setting frameworks for service provision with risk assessments help the way businesses can expect the unexpected.

“As a CFO, one of my obsessions is to decrease the unit production costs, and to do it without jeopardising the quality of the service that we are giving to our customers.”

Frederic SalmonChief Financial Officer, BICS

Maintaining transparency while ensuring stakeholders understand the logic behind the figures also posed as a challenge to CFOs. “A lot of time is being spent matching expectations with the reality of the business and not the industry,” a delegate shared.

Another big challenge was the ability to attract the skillsets and profiles needed in finance departments. Some delegates were hiring engineers and managers to fill certain analytical and business partnering gaps. According to Amit Kapur, Director & Head Benelux at Tata Consultancy Services, companies need to re-imagine and redefine the way they position functions within finance in order to attract the desired skills such as data scientists.

When it came to discussing what Salmon said, it was interesting that the main line of questioning was on the future role of the CFO and making the finance department more agile. To one question Salmon argued the CFO should only be dealing with pure finance for just 20% of his/her time, and that achieving business partnership (being a true partner to the business), is more important than ever. One called it ‘policymaking as opposed to procedure’; another described it as knowing the subtleties between business drivers and revenue drivers, and ‘taking more of a helicopter view of the organisation’. According to VK Raman, Global Head ValueBPSTM at Tata Consultancy Services, he sees significant shifts in the expectations from the finance function. “You cannot become a business partner unless and until you understand the business, where the money is made, what are the pricing powers of your products, what are the margins potential, and what are the opportunities to price higher or extract more value. So on the point about finding out what one should do and what one should not do - value your time like it is gold.”

“You cannot become a business partner unless and until you understand the business.”

VK RamanGlobal Head ValueBPSTM,Tata Consultancy Services

Corporate Challenges

Unsurprisingly, both presentations generated lots of discussion. Many delegates saw parallels between the low inflation rates seen today, and what happened in Japan in the 1990s. While Colmant argued the similarities were not quite exact (Japan’s issues were exacerbated by having an aging population), he agreed the government had to change its monetary policy eventually – on this occasion targeting low interest rates. Other delegates were interested in the power of ‘events’ to change policies – everything from terrorism to regulation and even migration. Although these were all conceded as things that could have an impact, Colmant argued the one constant is that the main changes CFOs have to deal with will be those that come from governments rather than the market economy. “The private economy is shrinking compared to the importance of government in the economy,” he said.

During the roundtable discussions, delegates also shared their main challenges in managing or transforming finance to provide better value to their organisations. Common challenges included having the ability to anticipate future events, risk assessment and creating agile finance operations in this VUCA world we work in. When it came to the challenges of operational efficiencies, many agreed that to overcome them, a CFO must be able to identify what he/she should do and not do - to be able to balance activities towards operational accounting and the strategic aspects of the business.

The technology behind Artificial Intelligence, getting data and using it effectively, also came up as a challenge for some delegates. One delegate shared that his organisation had been engaging with a handful of clients on how information could be used to run operational efficiency. “What we are finding is that almost 90 per cent of the findings will be known to you. But there is that 10 per cent that you don’t know that gives you the additional kick in terms of being able to push the envelope in getting more effectiveness, better outcomes.”

Speakers

Bruno Colmant

Head of Macro Research, Bank Degroof Petercam

Bruno Colmant is Head of Macro Research and Executive Board Member at Bank

Degroof Petercam. He holds a Ph.D. and a Master Degree in Applied Economics from the Solvay Business School Economics & Management (ULB). He also holds a Master of Sciences in Business Administration from Purdue University (USA) and a Master in Fiscal Sciences (ICHEC-ESSF). He is a member of the Belgian Royal Academy.

Bruno Colmant began his career at Arthur Andersen, Dewaay and Sofina. He was Managing Director at ING (1996-2006), Cabinet Head of the Belgian Finance Ministry (2006-2007), CEO of the Brussels Stock Exchange, Member of the Management Committee of NYSE Euronext and Chairman and CEO of Euronext Brussels (2007- 2009) and Deputy CEO at AGEAS (2009-2011). Since 2011, he is Academic Advisor AGEAS and Partner of the consulting firm Roland Berger.

He is a member of the Central Council for the Economy and lecturer in finance at the Vlerick Management School, UCL and at the Solvay Business School Economics & Management (ULB). He has authored more than 60 books.

VK Raman

Global Head ValueBPSTM, Tata Consultancy Services

VK Raman heads ValueBPSTM, a strategic unit within TCS BPS, which works with large

customers to transform their Finance and Shared Services operations. In his role, he continues to focus on building the TCS BPS Capability and Offerings maturity, driving key customer interactions and architecting innovative, transformational solutions.

In his previous role, VK was responsible for TCS’ business processing services both in core domain operations as well as in finance and accounting, HRO and Supply Chain Management areas. He has been instrumental in managing and growing TCS BPO into an industry leading position.

VK has over 30 years of experience holding leadership positions in organizations such as GE Capital Services, Citibank, Tata Motors and Digital Equipment. Before joining Tata Consultancy Services, he was the CEO of Global Realty Outsourcing, India operations. VK received his Bachelors of Commerce degree from Madras University. He is a Chartered Accountant and has been a member of the Institute of Chartered Accountants of India. VK has expertise in the areas of finance, process design and management, risk management and Six Sigma deployment.

Jesper Lillelund

Partner & Co-Founder, CorporateLeaders

Jesper Lillelund has been engaged in building valuable business networks on the international scene for over 20 years. Jesper

combines his in-depth industry knowledge, access to a wide network of business leaders, and market development skills focusing on making business transformation and corporate excellence part of the business agenda.

Prior to co-founding CorporateLeaders, Jesper was instrumental in building a leading independent business transformation association from an informal business community to a global player. He also served as the Marketing Director at The Wall Street Journal Europe where he was responsible for managing brand, direct and on-line marketing. In his career at the Journal Europe, Jesper was also responsible for developing new revenue generating businesses. This included launching The Wall Street Journal Europe’s conference operations starting with the highly sought after European CEO Summits to the regional Central European Economic Review conferences. Prior to the Journal Europe, Jesper held market analyst roles at MAN B&W Diesel and Danisco in Denmark.

Jesper holds an MBA in International Management from the University of Dallas and a BBA in Management and International Business from Baylor University in Texas.

Frederic Salmon

Chief Financial Officer, BICS

Frederic joined the international team of Belgacom (now Proximus) in 2000 after some years in external and internal audit

functions, and later on, with the Executive Office attached to the CEO of the Belgacom Group. For more than 4 years in the strategy department, Frederic actively supported the various strategic growth initiatives of BICS.

In 2005, Frederic joined the commercial team and was quickly promoted in 2007 as Regional Vice President for Africa. Under his leadership, BICS became a significant player in providing international services to telecom operators in Africa, while welcoming MTN as BICS shareholder.

Prior to his current function as CFO, Frederic also headed the Mobile Financial Services activities of BICS until its spin-off and the creation of a joint venture with MasterCard and eServGlobal, where he still serves on the Board today.

Frederic has a Master degree in Business & Engineering, is a Certified European Financial Analyst and also followed post-graduate finance trainings with INSEAD in Fontainebleau and IMD in Lausanne.

CorporateLeaders

info@corporate-leaders.com • +32 472 434 731

www.corporate-leaders.com

Partner

Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT, BPS, infrastructure, engineering and assurance services. This is delivered through its unique Global Network Delivery Model™, recognized as the benchmark of excellence in software development. A part of the Tata group, India’s largest industrial conglomerate, TCS has over 353,000 of the world’s best-trained consultants in 45 countries. The company generated consolidated revenues of US $16.5 billion for year ended March 31, 2016 and is listed on the National Stock Exchange and Bombay Stock Exchange in India.

For more information, visit: www.tcs.com

CorporateLeaders is an exclusive independent network that inspires business and leadership by providing a trusted forum for executives to network, exchange ideas, share lessons learned and drive business forward in an ever changing environment.

We focus on providing exclusive member and partner services, intimate and content rich networking events, research, thought leadership, content marketing, and advice on leadership development with the executive needs and experiences at its core.

For more information, visit: www.corporate-leaders.com

Organiser