Delivering Value in a Complex World

7/30/2019 Delivering Value in a Complex World

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Delivering Value in a Complex WorldThe Next Opportunities for the Australian Finance Organisation


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The concept of high-performancefinance has been subject to Accenturesin-depth research for almost a decade.The High Performance Finance Researchin all its permutations has always started

with the simple question: Does financereally matter to an enterprises overallgrowth, competitiveness and ability to bea high performance business? Over theyears, this research has clearly indicatedthat finance does matter. In fact, itmatters a great deal.

Accentures most recent High PerformanceFinance Research in Australia has beenconducted against the backdrop of theEuropean debt crisis, high exchangerate volatility, ongoing questions ofthe sustainability of the China boom,instability in the Government and thelocal recessionary fears, particularly inthe non-mining sector of the Australianeconomy. As part of this survey, we havetried to find out what is top of mind forAustralian Chief Financial Officers (CFOs),to better understand the issues they arefacing and the plans they have for thefuture.

Most Australian businesses are currentlydealing with tough trading andincreasingly complex market conditions,placing great strain and expectationson CFOs and their teams to proactivelymanage cashflow, conserve capital andprovide key inputs in business decisionmaking. Our ongoing research into HighPerformance, combined with our clientexperiences and local market knowledge,has led us to identify six key businessissues facing most Australian businessesand government agencies that should betop of mind for Australian CFOs:

Improving productivity and efficiency,

to counter rising input costs and lackof pricing power;

Managing for a structural shortage ofskilled talent;

Delivering on capital projectsmaximising the efficient use ofavailable capital;

Overcoming the growth plateau inconsumer demand;

Dealing with new risks in economicvolatility;

Handling imminent government reformand fundamental policy and regulatorychanges.

So how are Australian CFOs approachingthese challenges? To find out, Accenturerecently surveyed Australian financeleaders, as part of our ongoing researchinto High Performance Finance. Wesurveyed and interviewed 30 AustralianCFOs and senior finance professionals inlate 2011 / early 2012 as an extensionof our global High Performance Financestudy, which surveyed more than 530finance executives and approximately300 C-level executives (CXOs includingCEO, COO, CIO and CMO) at large, globalorganisations, and included in-depthinterviews with finance executives atleading companies around the world.The demographic of the Australianrespondents included 90% from theprivate sector (spread evenly acrossindustry sectors) and the remaining fromgovernment organisations.

The findings from our Australian researchclearly show that Australian CFOs aregrappling with similar issues to thoseof their overseas counterparts, but aredirecting more investment towardssimplifying their finance operating model,

addressing Australian legislation andreforms and implementing cost efficiencyinitiatives. Locally, more than 65% ofFinance executives are satisfied with theongoing performance and improvementof Finance (a 5% uplift from our previousAustralian survey in 2008) as shown infigure 1, recognising the ongoing rise ofFinances importance and influence at thec-level.

Our research identified 5 key themesthat ought to be top of mind for every

Australian CFO:

Finding 1

Streamline Finance OperationsIn such a volatile market, with manyupcoming regulatory changes, theFinance function is becoming increasinglycomplex. Investment is needed to furthersimplify the operations, address regulatorygaps and improve the integration of risk,finance and treasury.

Finding 2Continue to improve financematurity and process excellence

Australian Finance functions have madeimprovements over the past three years,particularly in improving basic financeskills (such as purchase to pay, record toreport and order to cash processes). Butno longer is basic capability sufficientin the light of significant opportunitiesto further lift the overall maturity of theFinance function, such as:

Basic Capabilities

End-to-end process excellence (global

process ownership); Fast close;

Global ERP/platform integration;

Working capital improvements; and

Cost and profitability management;

Advanced Capabilities

Post Merger Integration;

Capital planning and management;

budgeting and Forecasting;

value centred culture; and

Tax and treasury optimisation

Executive Summary

Finance Function Management

Finance & Accounting Operations

Corporate Finance

Enterprise Performance Management

Risk Management

65%

66%

69%69%

68%69%

77%83%

60%70%

Global Australia

Figure 1: % of Finance executives that are Very Satisfied/Satisfied


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Finding 1: Streamline Finance Operations

We live in a world of constant economicturmoil. Globally, enterprises facedifferent challenges and as a result theytake up different initiatives to deal withthe environmental changes. The impact of

these environmental changes on talent,regulation, volatility and data explosionare making the Finance function inAustralia more complex.

In light of the increasing complexity of thefinance operations, CFOs are looking tosimplify their businesses by driving globalprocess ownership and standardisation.They are looking to invest in programmesthat simplify their operating models andoperations, address regulatory gaps,improve the integration of risk, financeand treasury and further leverage theirinvestments in ERP implementations.

Our Australian research has found thatsourcing, attracting and retaining financetalent (30%) is the single highest factorimpacting the Finance function (seefigure 2). This is no surprise, where locallyfinance professionals demand relativelyhigh wage premiums and there is scarcityof the deep finance specialisation requiredto support the increasing complexity.As a result, many are looking to simplifytheir operating model and also leverageoffshore workforces to execute day-to-day finance processing.

The next highest impacting area isregulatory change (23%), which isincreasing the cost of doing business inAustralia. Some of the key legislationchanges impacting Finance in Australiaare: the Mining and Resources RentTax (MRRT), the clean energy bill (alsoknown as Carbon tax), increased bankingregulation such as the upcoming ForeignAccount Tax Compliance Act (FATCA) and

Basel III, and ongoing Finance AccountingStandards Board (FASB) changes,such as the requirement to include allleases on the balance sheet. The otherenvironmental factors impacting theFinance function are data (13%) andvolatility (10%).

Figure 2: Impact of environmental factors on the finance organisation

No Impact or Low Impact

Regulation

Data

Permanent Volatility

Talent

Australia

Moderate ImpactHigh Impact

27%

27%50%23%

27%13%

60%

50%

10% 40%

30% 43%

38%37%

37%37%

33%

33%

38%33%

39%30%

39%

30%

23%23%

Global Australia

Complex legacy systems and environment

Finding and retaining a skilled finance workforce

Lack of integration between enterprise strategy,

operating plans and performance management

Not enough time to focus on value-oriented finance

capabilities

Managing new and complex financial, business and

operational risks

Managing the complex needs of all stakeholders

Complex outsourcing and shared servicesarrangements

Figure 3: Greatest challenges as a senior finance executive

Australian CFOs highlighted in our survey(figure 3) that the 4 greatest challengesto their Finance function achievingoperational excellence are:

1. Overcoming complex legacysystems and environments:

Large ERP investments often regularlyneed to be upgraded/changed

Too many systems & tools, that aretypically supplemented by spreadsheets

Process automation is costly

2. Finding and retaining a skilledworkforce:

Retaining talent is difficult in a full-employment market

Existing talent needs to be augmentedto support value-add and increasedspecialisation

Leveraging of different sourcingstrategies

3. Lack of integration betweenStrategy, Operating plans andPerformance Management:

Lack of end-to-end process excellence

Cottage industries performing bottom-up planning that often does not alignwith the top-down strategic planningtargets

Limited alignment of organisational keyperformance indicators (KPIs) & targetsetting to individual performance

4. Not enough time to focus onvalue-add activities:

Too much time spent on month-endand operational activities

Focus on efficiency and getting thebase capabilities right

Value-add activities are not alwaysseen as a fundamental finance service


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Figure 4: Which of the following practices do you employ for effective finance workforce management?

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FEATURE: FOCUS ON FINANCE TALENTMANAGEMENTA crucial element for continuing to improve Finance maturity and processexcellence is in realising the full potential and retention of finance talent.Roughly one third of all respondents indicate that they intend to implementnew workforce programmes in the next two years, with the top 5 workforce

management programmes being:

Competitive salary and benefits;

Innovation & idea generation programmes;

Celebrating performance rewards;

Training for finance specialisation and skill uplift; and

Re-training staff to focus on value-add and analytics.

Competitive salaries and benefits are offered

Finance leadership encourages innovation and provides employees with opportunities to share ideas

Performance rewards tie to both individual success and enterprise profitability

Individuals are encouraged to proactively seek training on new topics and technologies

Training is used to keep the finance workforce current and re-training is used rather than hiring/firing

Employee satisfaction surveys are conducted regularly and results are shared

Full participation in coaching and mentoring activities

Formal finance competency model is in place defining required skills, career levels and appropriatecurriculum

Real time critical feedback is provided and is an embedded part of the Finance function culture

Well-defined talent sourcing and selection strategy is in place

Global and local communities of practices, effective at sharing knowledge

Career advancement includes rotations through various roles within Finance

60%

50%

50%

50%

47%

47%

57%

40%

40%

37%

37%

37%

Figure 4: Practices employed for effective workforce management in Australia


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Finding 2: Continue to improve finance maturityand process excellence

Back in 2008, Australian CFOs recognisedthe need to close the gap between currentfinance capabilities and the requirementsof their organisations. Our recent researchhas found that since then significantimprovements have been made in thematurity of Finance functions acrossAustralia, with 83% of Australian CFOssatisfied or very satisfied with theirbasic finance and accounting operations,compared to 77% globally.

Figure 5 shows that when compared totheir global counterparts, Australian CFOsmore readily identify opportunities to

improve and deliver advanced capabilitiesin:

Investor relations

Strategic planning

Capital planning

Finance strategy

Figure 5: Finance executives reporting highly advanced finance capabilities (on a scale of 5)

Investor Relations

KeyOpportunityAreas

60%

54%

54%

49%

60%

50%

55%

56%

62%

49%

57%43%

53%50%

56%50%

49%63%

51%73%

47%

47%

40%

37%

33%

43%

23%

27%

30%

30%

Strategic planning

Capital Planning & Management

Finance function strategy and structure

Internal controls

Transaction processing

Treasury

Value-centered culture

Target setting

Workforce management

Tax

Performance reporting & analytics

Budgeting and forecasting

Financial risk (market & credit) management

Business risk and operational risk

Global Australia


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In addition to these areas, there areemerging areas of focus that can drivesignificant value and improved businessalignment, such as: liquidity management,transfer pricing, sustainabilityperformance management, real estate/asset optimisation, scenario modelling/data mining and merger & acquisitionintegration. While many of these areas arenot new, they are capability areas that areincreasingly getting focus at the C-level.

It is encouraging to see that in anincreasingly volatile business environment,both the global and Australian CFOsare reporting highly advanced financecapabilities in:

Managing Business, Operational &Financial Risks

Performance Reporting and Analytics

Budgeting and Forecasting

Without these capabilities, many mightstruggle to respond with speed andagility to the many environmental factorsimpacting the Australian economy.

Figure 6 shows that when compared totheir Australian counterparts, Global CFOsare planning more initiatives over the next2 years in the following areas:

Driving standardisation for operationaland process excellence (focusing onimproving service levels, high quality/zero defects, delivering at speed andlowest cost);

Implementing or expanding ERPsystems (focus on improvingtransaction processing and overallsimplification; and

Improving advanced performancemanagement capabilities

Figure 6: Global vs Australian CFOs - Initiatives planned over the next 2 years

Complete standardization to ensure

consistency across the enterprise

Implement or expand ERP systems

21%

20%

9%

6%

6%

5%

4%

Implement advanced enterprise

performance management capabilities

Implement new workforce programs

Conduct finance benchmarking

study to assess quality & efficiency

Implement or expand finance

shared services environment

Develop and implement Finance

function strategy

Delta Global to Australian survey results


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Finding 3: Transform Finance as part of IntegratedBusiness Services

There is an increasing trend toconsider the transformation of theFinance function as part of a broaderintegrated and global business servicestransformation. This trend has been ledglobally by a number of leading foodmanufacturers and consumer goods andenergy companies and is now providinga new platform for end to end servicedelivery, where Finance is only one ofthe service delivery capabilities provided.From our research over 60% of AustralianCFOs indicated that they are looking toextract more value from their sharedservices and operational centres andexpect to drive further changes to theiroperating model to support businessexecution in the next 2 years.

While these types of transformationsare largely a cost optimisation play, byextending service delivery globally, acrossthe traditional shared services operations(such as: finance and accounting, humanresources, master data management,procurement), there are also significantbenefits in uplifting capability to include:research, analytics (customer, channel,distribution, manufacturing), customer

order management, product innovation,business process management. Thesechanges are reflective of the increasedreputation of existing shared servicesand suggest that there are real demandsto change operating models to enhanceservice delivery, at scale and at reducedcost.

So what is Integrated BusinessServices (IBS)?

IBS effectively involves elevating all of thenon-customer facing services into a singlesupport business, where the operatingmodel leverages economies of scale andskill (by being both global and local), whilestill reducing cost to serve IBS providesglobally, a wide range of fully integratedvalue add services or products that is nolonger organised by functions. Typically,the scope of processes is extended into

new services, such as, research andplanning, analytics, order managementand logistics management. This providesa better platform for end to end servicedelivery across the enterprise, wheretypically there is a global transactionhub, in a low cost location, supported byregional support centres and in-countrylocal and market support that are alignedclose to the business.

Key attributes and characteristics of anIntegrated Business Service are:

Category IBS Characteristic

Business Processes Global end to end processes

Clear global process ownership

Business Process Management capability in place

Systems and Data Common systems and standardised ERP

Global data management

Use of leading practice technology enablers

Corporate Structure Run as independent entity, reporting to senior C-Level

Independent P&L

Global governance structure

Role and Mandate Strategic business partner

Retains strategic ownership and management

Multi-function scope

Delivery Model Hub and spoke delivery model

Leverages low cost locations

Captive and outsourced combination

Makes use of Centres of Excellence

Service Management Full chargeback based on service provided

Single face for all customers

Consistent service management across functions and serviceproviders

Optimised service and operating level agreements

People & Culture Service-oriented culture

Clear career paths and succession planning


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Finding 4: Use Analytics & PerformanceManagement as a competitive advantage

Many CFOs are looking to enhancetheir analytics capabilities to embed aspart of the performance managementprocesses and optimise decision processeswithin their organisation. Sophisticatedanalytics is a game changer capabilitythat can help companies to outperformtheir competitors, by expanding insightfrom a past and present oriented view,to one that is more future oriented andpredictive. Developing an analytics culturethat looks for competitive advantageinvolves 4 key steps:

1. Strategy and Insight Generation to understand and focus on the

key questions to manage businessperformance

2. Insight Validation - Embed analyticalprocesses to generate hypothesis andvalidate key insights

3. Analytics Execution - Determineinterventions to execute and resourcesto allocate

4. Value Realisation - Measures thequality of the decision and the rootcause of a course correction

Most Australian companies have soliddescriptive analytical capabilities, suchas alerts, query/drill down, standard andad hoc reporting, but the opportunitywith the explosion of data is to leveragethis for increased predictive analytics.Predictive analytics includes higher ordercapabilities, such as statistical analysis,forecasting/extrapolation, predictivemodelling and scenario optimisation.An increased and enhanced predictiveanalytics capability is the game changerwhere leaders are starting to differentiatethemselves from the rest. Figure 7 outlinesthe steps involved to use analytics as acompetitive advantage.

Analytics-Enabled Decision MakingDecision Process Optimization

Improve the speed and quality of decision making to confirm

that analytic-enabled insights are turned into both actions and

measureable outcomes that drive higher performance

Insight GenerationPredictive Analytics

Apply logic, business rules, algorithms, statistical models and

analysis combined with industry-focused managementconsulting methods to develop insights

Business IntelligenceImprove business performance with appropriate, action able and

timely data and information

Managing InformationImprove business process and insights with information strategy,

architecture and governance to achieve a single source of the

truth for all information

Analytical Competitive Strategy

Competitive Advantage

BusinessAgility

Figure 7: Analytics as a Competitive Advantage


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Figure 8 highlights the CFO satisfaction

with the current performancemanagement capability. Finance plays apivotal role in performance managementas it is a critical capability for the creationand monitoring of shareholder value. Byembedding performance management inthe larger enterprise and making sure thatfinancial thinking, metrics and analyticspervade the organisation, CFOs canparticipate directly in high-level decisionmaking. With robust enterprise-wideperformance management, Finance canhelp organisations make better, timelier

decisions and guide improved resourceallocation on a consistent basis toenhance sustainable shareholder value.

Leaders are building out their analytics

capability to support enterprise-wide,leveraging best of breed technologies anda mix of onshore and offshore analyticscapabilities. While some are building outtheir analytics service offering at scale,some Australian companies are choosingto selectively invest in specific analyticse.g. cross-sell, customer profitability,social media, fraud, etc. These smallerinitiatives typically have a payback periodof 1 year and can provide a platformfor further enhancements in analyticscapability.

Speed and accuracy of the monthly financial

reporting

Speed and accuracy of the forecasting

Reporting of non-financial measures

Integrated technology systems to support

collection and reporting of information

Ability to produce business models and test impact

of proposed changes

Ability of business users to view and analyze

performance reports at will

Below Average About Average Above Average Top of the Peer Group Dont Know

Global Australia

4% 1%

1%

10%

9%

1%

1%

4%

4%

32% 39% 19%

21%38%27% 13% 37% 7%43%

7% 31% 19%42% 7% 20%43%30%

28% 41% 26% 56% 17%27%

17% 30% 43% 7%

3%

5%

31% 41% 22%

3%

27% 57% 10%

3%

12% 31% 35% 18% 20% 20% 46% 7%7%

Figure 8: CFO Satisfaction with Performance Management Capability


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Finding 5: Finance as a Strategic Business Partner

Based on our client experience, Financehas played three core roles: protector& custodian (of assets and regulatorycompliance); controller & commentator(of business and financial performance);

and advisor & consultant (for businessstrategy and the operating model). Theseroles have not and will not change, buttheir requirements and what defines andcontributes to success have undergonefundamental changeswith an everincreasing expectation for Finance topartner, engage and consult with otherparts of the organisation on their mostpressing issues. Nearly three quarters ofCxOs (ie. customers of Finance) said theywere satisfied or very satisfied that theirfinance organisation provides timely,

responsive and accurate services andAustralian CFOs recognise that they playa key role in supporting the business. Ourresearch (figure 9) has found that theAustralian CFOs are doing less than theiroverseas counterparts when it comes topartnering with the business, with furtherroom for improvement by :

Partnering with other corporatefunctions (delta global to Australia is15%)

Providing analytics to the company

(delta global to Australia is 13%)

Proactively responding to regulatorychanges (delta global to Australia is13%)

Identifying growth opportunities (deltaglobal to Australia is 9%)

While CFOs have made great progresstowards creating a business partnercapability, they need to continue to buildadvanced capabilities, notably in theareas where the other internal business

functions can be better supported andvalue for the organisation as a wholecan be created pro-actively. Many willcontinue to focus on initiatives thatcan help Finance become a true andindispensable business partner, in areassuch as strategic planning, analytics, valuedriver analysis and scenario modelling.Those CFOs that have the appropriatecapabilities in place to support thecorporate growth agenda while keepingan eye on costsare better positioned tocontribute the most to their company's

future performance.

17%

The Finance function is partnering with othercorporate functions

15%

13%

13%

9%

9%

8%

6%

The Finance function is proactively responding toregulatory changes

The Finance function is providing analytics to thecompany/organization

The Finance function is expanding its input intostrategy and high-level decision making

The Finance function is driving into the greatercompany/organization to deliver value

The Finance function is identifying growthopportunities

The Finance function is improving its capabilities

Delta Global to Australian survey results

Figure 9: Global vs Australian CFOs - Focus on partnering with the Business


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Conclusion

Since the global 2011 High PerformanceFinance Study was published, the worldhas continued to experience increasedvolatility and uncertainty, particularlydriven by the events in Europe. Despite

Australia having higher projected growththan most developed countries, we havea dual-paced economy with differentgrowth between mining and non-miningsectorsmaking it hard for Australianorganisations and businesses to executetheir business strategies and prioritiseinvestment plans to position for theeventual upturn.

So what are Australian CFOs doing totransform Finance and support thebusiness? The CFOs we surveyed intendto do it by focusing on streamlining theirfinance operations, while addressing

regulatory changes and reducing costs;building out their analytics capability asa competitive advantage; and improvingbusiness partnership and consulting withthe business.

All of these actions require leadershipand a willingness to drive and managechange. The lessons derived from the pastfew years, supported by our research arevery clear. A high-performance Finance

function is an essential ingredient in anorganisation becoming a high performernow and in the future.


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About AccentureManagement Consulting,Finance and EnterprisePerformance

Accenture is a leading provider ofmanagement consulting services worldwide.Drawing on the extensive experience of its16,000 management consultants globally,Accenture Management Consulting workswith companies and governments toachieve high performance by combiningbroad and deep industry knowledgewith functional capabilities to provideservices in Strategy, Analytics, CustomerRelationship Management, Finance andEnterprise Performance, Operations, RiskManagement, Sustainability, and Talentand Organisation. Accenture Finance andEnterprise Performance consulting serviceshelp finance organisations maximise thevalue they create for their enterprises.

About Accenture

Accenture is a global managementconsulting, technology services andoutsourcing company, with more than249,000 people serving clients in morethan 120 countries. Combining unparalleledexperience, comprehensive capabilitiesacross all industries and business functions,

and extensive research on the worldsmost successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses andgovernments. The company generated netrevenues of US$25.5 billion for the fiscalyear ended Aug. 31, 2011. Its home page iswww.accenture.com.

Contact Information:

Cara MortonSenior ExecutiveFinance & Enterprise PerformanceAsia-Pacific+61 2 9005 5639

Jordan Griffiths

Senior ExecutiveFinance & Enterprise PerformanceAustralia+ 61 3 9838 7530

Contributors:

Sander VlasveldKarthik Karunanithi

Disclaimer

This report has been prepared by and is

distributed by Accenture. This documentis for information purposes. No part ofthis document may be reproduced in anymanner without the written permission ofAccenture. While we take precautions toensure that the source and the informationwe base our judgments on is reliable, wedo not represent that this information isaccurate or complete and it should not berelied upon as such. It is provided with theunderstanding that Accenture is not actingin a fiduciary capacity. Opinions expressedherein are subject to change without notice.

Copyright 2012 AccentureAll rights reserved.

Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture

Delivering Value in a Complex World

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