“We’re at an important inflection point in the U.S. and global economies, as we move from crisis mode to a more stable environment where we can focus on strengthening our organizations and delivering on our key objectives”, noted Oracle’s Epstein. “This year’s CFO Summit gave us the opportunity to look back at the financial crisis of 2008, to better understand what triggered the meltdown on Wall Street and how we avoid similar scenarios in the future.  We also looked at the lessons learned from previous recessions on IT cost-cutting and why this recession – and our approach to IT investments – must be different to succeed in the New Economy.”

Attendees received an inside view into the global financial crisis from Dan Simkowitz, managing director and chairman of global capital markets at Morgan Stanley Smith Barney. Simkowitz was one of several Morgan Stanley advisors to the U.S. Treasury following the meltdown on Wall Street in September 2008, and played a key role in helping former U.S. Treasury Secretary Hank Paulson and his team shore up the U.S. economy post crisis.

Another perspective on the financial crisis‘ impact on the U.S. and global economies was given by renowned economist Martin Baily, a senior fellow at the Brookings Institution and former chairman of the Council of Economic Advisers during the Clinton administration.  Baily provided CFOs in attendance with a progress report on the first year of the Obama administration, and also discussed the impact of deleveraging, re-regulation, and globalization on the U.S. economic recovery. 

“A recession is in essence a market-cleansing mechanism that can accelerate competitive trends and force companies to make hard decisions”, noted Symantec Executive Vice President and CFO James Beer.  Beer, who keynoted at the event, drew upon his extensive experience as CFO at Symantec and former CFO of American Airlines to put together a list of four key strategies CFOs can adopt immediately to gain an edge over the competition when better times return.

“First, stay close to your customers”, Beer advised.  “In uncertain times, customers need our help, so invest in creative ways to address their changing needs.  Second, focus on sustainable, long-term cost reduction.  Third, redistribute spending by re-assessing your product and market portfolio and aligning your investments with the opportunities of the future.  And fourth, stay focused on developing your best talent by keeping the lines of communication open, rotating top performers into new roles, and continuously recruiting the best and the brightest from graduate schools and universities.”

Beer also participated on a panel on mergers and acquisitions (M&A) best practices, along with Morgan Stanley’s Dan Simkowitz and Oracle Senior Vice President Doug Kehring.  The panel, moderated by Hugo Sarrazin, director of McKinsey’s Business Technology Group, focused on defining the best practices CFOs can adopt today to take advantage of the revival in M&A activity and the market’s willingness to reward well-executed deals.  “Having a successful track record in executing M&A deals, and providing the market with as much transparency as possible are really important right now”, Simkowitz told the audience.   “Whether it's synergies in an M&A deal or growth in your business, once you achieve credibility, the market's willing to pay multiples for it.”

In addition to point moderating the M&A panel, McKinsey’s Sarrazin also shared new proprietary McKinsey research on why IT cost-cutting is different this recession, and why CFO must approach their IT investment strategies differently as well.   “This recession, companies are approaching IT cost-cutting very differently than in the pas,”, Sarrazin explained.  “They are aggressively reducing costs in what McKinsey terms ‘factory IT’ – which is the core IT machine – while trying to preserve more of the project-based initiatives that are enabling the business and building capability to compete in the future.” 

Sarrazin described how these moves represent a fundamental rebasing of IT, from companies consolidating their infrastructures and rationalizing IT services, to changing the way they do application development and management.  He encouraged CFOs to play a more active role in this rebasing process by helping their organizations optimize their portfolio of IT investments for maximum return, and taking the lead on creating a stronger partnership between the IT organization and the business units.

View keynote presentations and video highlights from Oracle CFO Summit.

Today’s uncertain economic environment, and an increasing number of incidences of poor financial management of companies across the world, has compelled organizations to focus on how to better manage their financials and business performance. Regulatory compliance, governance and risk management are popular by-words among the regulators and the CFOs of large corporate houses.

Simultaneously, the onus on finance as the owner of financial transactional data and management and financial and regulatory reporting has increased too. Against this background CEOs and CFOs are often asking the question, “What should the right operating model for finance be?” To what extent should finance limit itself to financial transactions, regulatory reporting and compliance? To what extent should it try to work as a true business partner and provide rest of the business with valuable analysis and insights into current performance and future opportunities? Should finance drive enterprise level controls and performance management? Should the CFO also be the CPO (Chief Performance Officer)?

Taking Ownership

The term CPO was coined by Tony Politano in his book, Chief Performance Officer, in 2003. The CPO is the business executive who helps the CEO run the business on course. As Politano puts it, “the CPO acts as the heads-up display for the CEO.” CPOs facilitate the process of integrating key information and insights from within the business, scanning the external environment and providing all the required analysis necessary to make good decisions. The CPO helps in:

• Collecting key performance measures from various parts of the business.
• Consolidating the disjointed performance data into a single enterprise-wide performance framework.
• Condensing the performance data to the right level of detail for senior management, and
• Communicating the business implications of the information for the management to take corrective actions.

So, who in the organization qualifies most to be the CPO? In all likelihood it is the CFO. Here are the reasons why.

Firstly, the CFO is the business owner for the most important asset in the business - capital. He or she is responsible for ensuring the best use of it, for maximum returns and hence maximum performance. ROCE (Return on Capital Employed) is probably the most important measure that determines CFO and CEO performance today. Secondly, the CFO owns the process that plans for the deployment of capital across different areas of the business, in the long, medium and short run—namely, strategic planning, annual budgeting and quarterly forecasting. Thirdly, the CFO also owns the control functions that ensure the rest of the business is using the capital efficiently, and running as planned. In today’s environment this control function has the additional dimensions of regulatory compliance and risk management. In addition to internal audits and controls, CFOs have to ensure that the financial books are in compliance with the corporate regulatory frameworks laid out by the regulators, such as the SEC (Securities and Exchange Commission) and IFRS (International Financial Reporting Standards) guidelines. CFOs also need to have a realistic assessment of the risk of doing business, including credit, market and operational risks, and create capital buffers to protect the business adequately. Risk Adjusted Return on Capital (RAROC) is a popular measure of business performance today.

If CFOs are to be effective CPOs, they need insights into how the company is performing, so that they can flag early warnings for management to take corrective action. Given the complexity of today’s businesses, this is no small task. CFOs needs strong support from the rest of the organization, a shared vision and commitment from peers at the C-level, and most importantly their peers' acceptance of their role as CPO.

Building An IT Toolkit

From a process perspective, management needs to institute an integrated planning, execution and performance management framework that links together all elements of an organization’s value chain. A balanced score card approach that ties the strategic goals of capital deployment to operational level KPIs (Key Performance Indicators) across the different business functions is needed, so that the different parts of the business are working towards one common goal. From a pure information management perspective, the CFO/CPO needs to have to capability to harness the volumes of data from all the activities performed in the value chain. For most companies, this data exists in diverse technology platforms, across multiple geographies and in raw form. To find the proverbial needle in the haystack in the face of such complexity requires strong technology capabilities around transactional and master data accuracy, in-time data availability, and analytical capabilities that transform raw data into insightful information.

The good news is that from a technology perspective, tools are available today that can address each and every aspect of the challenges described above. Financial planning tools allow scenario modeling and sensitivity analysis to support long-range capital deployment decisions. Budgeting and forecasting tools take the long-range plans as inputs and develop capital and operating budgets for each part of the business. Sales and operations planning tools translate the financial numbers into operational targets for sales, logistics, manufacturing/service fulfillment and procurement. Execution tools support business execution and enable efficient operations and tools for recording the financial transactions and enabling financial reporting. Tools are also available to complete the feedback loop for monitoring performance and to signal the need for corrective actions. These are the operational analytics tools that report on KPIs set across the different business functions and tie back to the balance scorecard.

So what stops the CFO from being the CPO today? The real challenge is not the capability or the availability of technology tools, but the vision of the senior management team in instituting a clear performance management framework across the enterprise, and empowering the CFO to be the owner of the entire performance monitoring process.

For More Information

The New CPO

According to CFO Magazine, more than 85% of finance executives responding to a new CFO magazine survey say they don't expect their companies to return to business as usual after the economy recovers. (Sept 2009, “Hard Lessons)

In this tough and uncertain economic climate, containing costs while insuring flexibility to address changing conditions, including ramping up for the recovery, has never been more important. Organizations are focusing scarce resources on essential business functions and they are challenging IT to provide improved service levels. Companies are demanding greater responsiveness to business priorities while reducing IT costs at the same time. This “mission impossible” is causing IT organizations to look at transformational solutions that can help achieve top levels of IT performance, now!

With this online self assessment CFOs can identify opportunities to improve IT performance, and to provide some guidance on the potential benefits that could be realized by achieving a significant improvement in performance levels. IT labor (including outsourced labor) continues to be the largest cost component in any IT budget and application management and associated tasks for existing systems dominate IT labor costs. The focus of this online self assessment, and in our belief, any transformational IT activity, needs to begin with application management.

This assessment will provide you with benchmark report of your own applications management performance compared to the industry average and top performers, as well as:

• A comparison of your IT spending levels, process maturity and best practices in IT value delivery to those of your peers and top performers
• Benchmarks of your capacity for innovation and flexibility
• An estimate of potential benefits that you could achieve by transforming application management

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