CFO as Strategic Business Partner

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  1. 1. SC! email: fintan@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult We get it done SomersConsult Fintan'Somers'2015' SomersConsult Structuring and executing transactions Improving Profitability Transforming Finance Functions Trouble- shooting We get it done Presenta)on!to!MECA!CFO!Alliance!Conference! Dubai,!19!August!2015!! The$Strategic$CFO$
  2. 2. SomersConsult SC! email: fintan@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Transforming Finance Functions Fintan'Somers'2015' 2 This'presenta5on'is'a'combined'summary'of'the'text'and' slides'presented'at'the'MECA'CFO'Alliance'Conference,' Dubai,'19th'August'2015.'' ' ' '
  3. 3. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 3 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 2 The CFO as a Strategic Partner Good!morning!everybody.!And! welcome!to!the!session!en)tled!! ! The'CFO'as'Strategic'Partner'' !! ! My!name!is!Fintan$Somers$and!I! specialize!in!suppor)ng!businesses! to!deliver!business!performance! improvement.!
  4. 4. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 4 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 4 The$context$ How'do'we'respond'to'a'slowMburn'loss'of'marketMshare'or'protability?'Or,!! ' Help!'The'business'is'in'crisis*or*underperforming.'What'are'the'prac5cal'op5ons'for' xing'this'or,'at'least,'limi5ng'the'damage?'' Some)mes!the!business!requires!an! answer!to!a!posi)ve$ques)on:!! !! !How'can'we'make'more*money,' sustainably?!or!! ' How'do'we'execute'the'changes' required'to'achieve'the'strategy'or' business'plan'we'have'agreed?'' !! .But,!unfortunately!! ...oOen,!I!have!had!to!deal!with!a! very$nega)ve$set$of$circumstances:! For!example,!!
  5. 5. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 5 The'purpose*of'this'session'is'to'share'with'you'my'experience'of' being'a'Strategic'Partner,'as'CFO,'to'the'businesses'Ive'served' over'the'past'20'years,'providing'solu5ons'in'both'posi5ve'and' nega5ve'circumstances.''
  6. 6. SomersConsult SC! email: fintan@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Transforming Finance Functions Fintan'Somers'2015' 6 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 8 Bad! Business! Bad! Finance! Func,on! Bad! Business! Bad! Finance! Func,on! ! Lets!start!with!a!ques)on:!! ' Does'a'Bad'Business'make'a' Bad*Finance'Func5on'' ' ' 'or'' ' ' does'a'Bad'Finance'Func5on' make'for' ' 'a'Bad*Business?''
  7. 7. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 7 SomersConsult SC! email: fintan@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Transforming Finance Functions 6 Interna'onal*Assignments*completed* I!have!served!in!a!variety!of! interna)onal!CFO!roles!with!! $ Standard$Chartered$Bank$$ Lloyds$Bank$ !and,!most!recently,!! Commercial$Bank$of$Qatar$ !! All!of!my!assignments!have!involved!improving!business!protability$and!many! have!necessitated!transforming!nance!func)ons$into!a!more!eec)ve!support! tool!for!the!business.!!
  8. 8. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 8 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 9 Strategy! Execu-on! Debt!&!Equity! Financing! Acquisi-ons! &!Disposals! Business! Reposi-oning! Finance'Func)on' Transforma)on' I!have!been!very!fortunate!as!CFO! to!have!had!leadership!roles!in! business!projects!involving:! ! Strategy!Execu)on!! Business!Reposi)oning! Debt!and!Equity!Financing,!! Acquisi)ons!and!Disposals! !! and,!of!course,!Finance$Func=on$Transforma=on!has!featured! prominently.!!
  9. 9. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 9 Having! developed! and! executed! several! nance! func)on! transforma)ons! across! a! range! of! businesses!and!interna)onal!loca)ons,!I!have!been!struck!by!the!similarity!of!the!challenges!faced! by!underYperforming!nance!func)ons!and,!for!that!maZer,!underYperforming!businesses.!! I! have! also! found! that! the! opera)ng! model! for! an! eec)ve! nance! func)on! is! pre?y$standard.!I!have!transformed!several!nance!func)ons!using!a!fairly!simple! opera)ng!model.!! Whenever!I!join!the!execu)ve!team!of!a!business!as!CFO,!whether!it!is!a!high!performing! business!or!not,!I!am!very!aware!that!I!have!a!brief!honeymoon!period!during!which!I!need! to!evaluate!where!my!func)on!can!add!most!value!and!develop!a!compelling!program!that! makes!a!posi)ve!dierence!to!the!business.!Then!the!pressure!is!on!to!deliver.!! !! Some)mes!the!agenda!is!thrust!upon!you!Y!for!example,!a! local,!regional!or!global!economic!crisis,!or!stress,!has!put! protability!or!growth!under!pressure!or!crisis.!! Whether!based!in!the!Middle!East,!the!UK,!the!US,!La)n!America!or! Europe,!I!have!found!that!under4performers*share*many*of*the*same* or*similar*characteris7cs.!! !!
  10. 10. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 10 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 10 A!good!example!of!this!was!when,!as!CFO,!I! supported!Lloyds$Bank!in!limi=ng!the!impact! of!the!Argen)na!debt!crisis!! Financial!markets!forced!an!80%! devalua)on!of!Argen)nas!1!to!1!exchange! rate!with!the!USD! ! ! Argen)na!defaulted!on!its!foreign!USDY denominated!debt.! SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 9 80%$devalua+on$of$Peso$
  11. 11. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 11 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 12 40%!loss!of!Peso!deposits!from!Banking!system!before!withdrawal! restric;ons!imposed!! Argen)nas!dualYcurrency!banking! system!went!into!meltYdown!! ! Lloyds!Banking!Group!had!a!fullYservice!retail! and!commercial!bank!in!the!country.!
  12. 12. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 12 It!is!a!good!example!of!what! might!have!been!in!store!for! Greece!had!it!exited!the!Euro!!
  13. 13. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 13 bank!runs! civil!unrest! $ extreme!nancial!vola)lity!!
  14. 14. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 14 appalling!nancial!losses!for! savers,!investors!and!businesses! and!a!very$large!propor)on!of!the! popula)on!reduced!to!poverty.!!! ! Nearly!15!years!aOer!the!event!Argen)na! is!s)ll!pre?yAwell$excluded!from! borrowing!interna)onally.!! SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 15 50%$increase$in$$
  15. 15. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 15 Developing!strategic!op)ons!in!the!midst!of!this!carnage!was!dicult.! But!having!stabilised$the!business,!in!this!case,!the!strategic!op)ons!we! developed!were:!Invest,!Close!or!Sell.!! But!we!managed!to!execute!a!sale!and!transfer!to! a!local!bank!cleanly!and!successfully.!! Gebng!buyYin!to!execu)ng!the!Sell$op=on!was!not!an!easy!task:! the!situa)on!was,!understandably,!extremely$emo=ve,!and!many!of! the!sta!faced!bleak!futures,!in!an!economy!that!was!likely!to!be! extremely!compromised.!! ! The!challenge!as!CFO!was!to!develop!the!nancials!around!the!three! scenarios,!get!the!local$management$team!and!the!Group!acquainted! with!the!cost/benet!associated!with!the!various!op)ons!! so!they!could!understand$and$support!the!best!op)on!for!the!Group!!!! which!was!to!Sell!(something!that!would!have!been! dicult!to!do!without!the!support$of!the!local!management! team!and!sta).!!
  16. 16. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 16 Another!couple!of!examples!are!the!work!I!performed!as!CFO!in!suppor)ng!the!resolu)on!of!Standard! Chartereds!problems!with!a!UK!recession!(the!business!was!running!losses!of!over!100!million!while!I! was!CFO)! and!in!containing!the!impact!of!the!Asian! economic!crisis!on!its!business!in!La)n!America.!! I!guess!one!lesson!I!have!learned!is!that!the! dynamics!of!the!external!environment!need!to! be!a!big!focus!for!the!CFO!and!Im!not!talking! about!the!immediate!market:!! the'World'is'now'very'interconnected.!
  17. 17. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 17 Whatever!the!business!or!environment!you!are!dealing! with,!it!is!the!responsibility!of!the!CFO!to!shine!a!light! on!and!put!measurement!around!the!material! opportuni)es,!risks,!weaknesses!or!strengths!that!the! management!team!should!be!focused!on! So,$Crisis!Management!is!one$circumstance!that!the!Strategic!CFO!has! to!deal!with.$$$ No!business!is!ever!just!ne!and!this!is! proved!when!you!look!at!the!lack!of! robustness!of!some!businesses!that!look! great!in!the!good!)mes,!but!struggle!in!bad! )mes.!!! But!some)mes!the!agenda!for!the!CFO!is!less$obvious,!for!example,!when!the! business!appears!to!be!doing!well!but!it!is!losing!rela)ve!protability,!posi)on! or!compe))veness.!OOen!this!situa)on!coincides!with!many!on!the! management!team!thinking!that!things!are!just!ne.!! !!
  18. 18. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 18 For!example,!when!I!supported!the!reposi)oning!of!an! Interna)onal!Private!Banking!business! To!be!fair,!this!was!true!for!much!of!the!industry.!! If'a'business'is'weak'in'the'good'5mes,'it'makes'surviving' the'bad'5mes'very'problema5c.!In!this!instance,!business! volumes!contracted!substan)ally!globally,!as!did!margins,! and!in!a!subYscale!business!with!a!high!xed!cost!base!this! was!a!lethal!combina)on.!! The!number!of!foreignYowned!banks!in!Switzerland! peaked!at!169!in!2009,!but!had!fallen!to!122!by!2015! ! it!was!very!apparent!that!the!nega)ve!impact! on!the!business!of!the!2008!Global!Economic! crisis!was!considerably!amplied!by!the!fact!that! the!business!had!had!indierent!performance!in! the!good!)mes.!!
  19. 19. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 19 Businesses!need!to!an)cipate!and!have!the!exibility!to!react!to!suddenYshock! or!slowYburn!changes:!the!businesses!that!lose$out!are!oOen!the!ones!that! cant$or$wont!develop!an!opera=ng$model!that!supports!this!goal.!! !! Of!course,!on!a!more!posi=ve!note,!some)mes!the!CFOs!challenge!may!be! suppor)ng!a!business!with!a!material!investYtoYgrow!program.!In!some!respects!this! can!be!more!challenging!than!a!businessYasYusual!business.!The!CFO!needs!to!be! everAvigilant!in!avoiding!GroupAThink,!maintaining!a!construc)ve!challenge!on!the! assump)ons!and!opera)ng!models!suppor)ng!the!investment!cases!and!developing! MI!to!assure!that!plans!are!tracking!to!the!investment!case,!the!nancing!plan!and! the!strategy.!! !!! And!of!course,!if!the!external!World!changes,!then! it!can!be!challenging!to!get!the!team!to!pull!back!on! an!investment!program.!In!addi)on!to!dealing!with! a!management!team!that!is!very$emo=onally$ engaged!in!comple)ng!what!they!started,!you!also! have!to!deal!with!the!possibility!of!accoun=ng$or$ actual$losses!if!you!cancel!or!cut!back.!! Even!if!the!Present!Values!work! the!accoun)ng!losses!s)ll!s)ng! and!can!be!dicult!to! communicate.!This!can! par)cularly!be!the!case!when! nego)a)ng!an!acquisi)on:!it!can! very$hard!to!walk!away!!!
  20. 20. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 20 SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult 20 The need for an effective Enterprise Financial Management Culture So!what!has!my!experience!taught! me?!!What!goes!wrong?!!What!do! we!need!to!do!to!get!it!right?!! !! The!crea=on$of!an!Enterprise!Financial!Management!Culture!needs!business! ownership!and!leadership.!Of!course!the!CFO!can!facilitate!and!support!its! development.!!! In!my!experience,!poorly$ performing$businesses$and$ management$teams$do$not$ support!and!are$not$supported! by!an!eec)ve!Enterprise! Financial!Management!Culture.!! !! But!unless!the!leaders!in!the!business!really$get$behind$it! and!push$for$it$to$happen,!it!wont!happen.!!
  21. 21. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 21 SomersConsult SC! email: fintan@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Transforming Finance Functions 21 Owns! Executes! An-cipates! Manages! Inuences! Performs! Eec-ve!nancial!management!culture! You!can!recognise!an!eec)ve!Enterprise! Financial!Management!Culture!when! everybody!from!topYtoYboZom!of!the! organisa)on:! !! is!focused!on$inuencing$and!communica)ng$key$ performance$indicators$that!demonstrate!trac)on!on!the! things!that!maZer! understands!the!linkage$between!nancial!performance$ and$pay$(and!this!linkage!must!be!eec=ve)! !! understands$and$owns$the!overall! nancial!targets!and!their!role!in!reaching! those!targets! ! understands$and$executes$the!things!that! need!to!happen!to!reach!the!targets! ! is$looking$forward,!an)cipa)ng$problems! and!opportuni)es!that!might!aect! nancial!performance,!taking$ac=on!to!x! or!mi)gate!problems!and!exploit! opportuni)es! !! communicates$and$manages$problems! and!issues!before!they!hit!the!reported! results!and!opportuni)es!before!they!are! missed! !
  22. 22. SomersConsult SC! email.: fintan.somers@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Fintan'Somers'2015' 22 SomersConsult SC! email: fintan@somersconsult.com Dubai: +971 50 331 4583 Skype: SomersConsult Transforming Finance Functions 21 Owns! Executes! An-cipates! Manages! Inuences! Performs! Eec-ve!nancial!management!culture! I!can!preZy!well!guarantee!that! if!you!see!a!poorly!performing! business,!one!or!more!of!these! factors!needs!improvement.!! ! If!they!fail$on,!or!deAemphasise,!one!or!more!of!these!factors!then! it!is!likely!that!this!fail!or!deYemphasis!replicates!all!the!way!down! the!organisa)on.!! And,!of!course,!it!starts$with! the!leadership!team.!!
  23. 23. SomersConsult SC! email.: fi...

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