Challenges and opportunities for the CFO

1. Challenges and opportunities for the CFO R.Kannan Hinduja Group 5th November 2015 Copenhagen Compliance

2. Trends and Challenges • Synchronised slow down in the Economic growth of developed countries. • Pressure on corporates to improve the performance. • Increased regulation on governance requirements of corporates and banks and increased cost on compliance. • Tax planning as a strategy is becoming ineffective. • New decision rules adopted by authorities are introducing uncertainty . • Tax arbitrage available to make a business more competitive is diminishing. • compliance requirements are becoming very stringent and the knowledge about the new developments in regulatory aspects have to be updated on a continuous basis. • New developments including emergence of digital technologies are challenging the robustness of present business models • A performance of a corporate today is more influenced by developments in the environment

3. Strategic Pillars of an organisation • New Investments – In the fast growing and synergetic businesses to sustain momentum • Stream line, restructure the existing investments to ensure financial stability • Increase share holder value / Enterprise value to raise more cost effective resources. • Human Capital Management to achieve .very high employee productivity. • Role of CFO in managing all the above is crucial for survival of the enterprise.

4. Employee Management • Has to ensure the right people are in place in the Finance function. • Help align the HR strategy in line with Corporate strategy by evolving a suitable compensation strategy in line with the Industry standards. • Apart from focusing on management of portfolio of Businesses and resources, help the CEO to focus on Portfolio of Human resources. • Support the initiatives with a good training budget for existing employees. • Analyse the Human resources portfolio in terms of High cost – Low productivity, Medium cost – Medium productivity , Low cost – High productivity in a 3* 3 matrix and align the human resources in terms of the appropriate position. • Ensure High cost goes with high productivity, medium cost with medium productivity and low cost with low productivity. Help CEO to achieve the balance through a detailed analytics.

5. Share holder Management • Assess the expectations of share holders in terms of expected dividend policy, bonus issues and consistent and above industry performance. • Bring transparency in communication with the Share holders and seek their support for higher growth . • Constant communication with the shareholder’s to ensure that the company become’s a share holder brand.

6. Regulators • Keep updated on a continuous basis the regulatory developments. • Put in place a mechanism to adopt the new regulatory requirements without any delay. • Incorporate the requirements into the reporting / IT systems. • Always to stick to the regulatory aspects , without fail and give lot of importance to compliance. • Give a separate focus on compliance on priority.

7. Customers • Many industries have become hyper competitive today. • Customer acquisition cost is much higher than the customer retention cost. • Help Marketing understand the profitability of customer segments and customers through analytics based on the numbers available. • Focus on profitable customers. • Do away with customers who are not profitable. • Allocate budgets for new product development/ innovation. • Allocate budgets for R&D • Allocate budgets for Customer Analytics.

8. Organisation change • Today many companies in the world require change in business model and restructuring. • This involves organisation change. • Which is a tedious and long term process. • The drive for change has to come from Finance function through the analytics. • Growth is not only about acquisitions but also about exiting from businesses which are no more attractive. • The change process involves in Change in Strategy, Structure of the organisation and Systems and processes.

9. Processes • Digital technologies are enabling total visibility into enterprise and consumer data. • Digital technology will become the backbone of the organisation. • The role of ERP will change and cloud based platforms will become the main technology for reporting , planning , forecasting and analytics. • There will be less need to spend precious time on creating spread sheet models. • The availability of online data on real time will drive the decision making process. • This will result in reduced complexity, increased productivity and significant cost savings.

10. Finance Organisation • By 2020, cross functional , integrated teams will deliver 80% of traditional financial services. • Finance staff productivity will increase by two to three times. • Finance organisation costs will reduce by 40%. • Finance will transform from traditional accounting function to predictive analytics function which creates lot of value for an enterprise. • Cross functional , integrated business service model will emerge. • The focus on strategic management will increase. • Three main competencies in finance will be Analytics, Integrated business services , Communication and Control .

11. Vendor / Dealer Management • Vendors have to be seen as an extended enterprise. • What is happening to vendors and their business models will be significant. • Need to develop a strong relationship with vendors and make them part of the total value chain of an enterprise. • The relationship with IT vendors to be reviewed at regular intervals. • Distribution reach provides a competitive advantage for an enterprise. • Dealers have to be seen as an extended form of enterprise and all the best practices of the enterprises have to be adopted at Dealer level. • Apart from Risk assessment of the enterprise, the risks faced by Vendors as well as Dealers to be reviewed at regular intervals.

12. Policies • Finance has a overview of all the functions . • Finance understands the impact of decisions implemented in various functions. • Finance in an advantageous position in developing growth oriented policies and need to participate in development of policies in all the functional areas. • The cost benefit of policies have to be thoroughly analysed by Finance and help in decision making of the CEO.

13. Way forward • The new developments force corproates to review their present business models and transform to sustainable , new , innovative business models. Finance has to play a major role in evolving a sustainable , suitable business model • Finance has to play major role in introducing best Corporate governance practices which leads to a professional management of an enterprise and ultimately results in creation of good value. • Focus on Compliance aspects and develop robust systems and procedures for management of the enterprise which reduces the risk of an enterprise. • Measure and Monitor performance , once in a month. • Increase the engagement in Strategy making. Provide inputs into enterprise strategy. • Adopt the digital management Strategy • Develop the right talent in the finance organisation.

14. Thank You