AN INTERNATIONAL survey on the changing role of Finance Directors, which included responses from the Channel Islands, reveals that corporates accept that their finance function will need to improve in the wake of the credit crisis.
The survey, undertaken by CFO Research Services for KPMG International late last year, reported that, even in the early stages of the credit crisis, over 80 percent of the survey’s 516 respondents agreed that their finance functions had to improve their ability to challenge and support the business and to increase their influence over strategic decision-making at Board level.
Better planning, forecasting and budgeting were chosen by 83 percent of respondents as the best way of improving their standing at Board level. With CFOs generally spending more time on investor relations, the survey also reports how finance functions in top performing companies, those with a continuous annual EBITDA growth rate of over 20 percent during the last three years, consider the timely reporting of business results to investors to be more of a priority than the under-performing companies.
‘When KPMG previously undertook this survey three years ago, there was an upsurge of opinion, even then, that finance functions should be more forward-looking, providing the insight and advice that would lead to more informed decision-making at Board level,’ said KPMG executive director Dr Elaine Monkhouse.
‘Looking at these findings, you have to query whether this ever happened. We’re now seeing an even greater conviction that things need to improve. This tells you that plenty more companies have since realised where their shortcomings lie – but also that those who realised this three years ago appear not to have done anything about it. The report gives an extremely interesting insight and we are delighted that the Channel Islands were involved, since the findings are even more relevant.’
The KPMG International survey, entitled “Thriving, not just Surviving”, does provide encouragement for those businesses now prepared to overhaul their finance function. Of those businesses surveyed which had undergone a finance function reorganisation over the past three years, 60 percent claimed that it had resulted in better overall performance of their finance staff and 55 percent felt it had improved the ability of their staff to focus on value-adding business support.
The report also shows that under-performers spend too much time downloading and reworking non-standard data in an attempt to supply meaningful information to business leadership. They also remain mired in the traditional control and compliance role which evolved in response to the accounting scandals of the early 2000s.
However, few modern, top performing organisations are happy with the idea of their CFO simply acting as a score-keeper or tracking the past. Best practice now suggests that the CFO and the finance function should be far better at influencing key business decisions.
The problem for any business looking to reinvent its finance function in this way will be talent; or the lack of it. Difficulty in finding and retaining skilled finance professionals was cited by 55 percent of respondents as the single biggest barrier to change within the function. As a result 90 percent of respondents felt that they could improve finance’s influencing skills by training, not recruitment.
‘All the best intentions for change could flounder if businesses do not have the right people to effect the necessary changes and this is especially difficult in small jurisdictions such as the Channel Islands,’ said Dr Monkhouse.
‘Finance professionals who can assess situations, predict potential outcomes and are able to take responsibility for communicating difficult messages to management have always been in short supply. Right now, they are worth their weight in gold and should be freed from their daily, backward-looking responsibilities to focus on more resourceful support desired by senior management.’
She added, ‘This survey highlights that the need for change is more fundamental than ever before. Despite this, I fear that many organisations may hold back on what remains of the crisis before undertaking any change. While I would not advocate wholesale change at such a delicate time, I think there is still much that can be presently achieved within finance, which can bolster a company’s defences against what is left of the crisis. Today’s finance function should look forward and focus on providing accurate and insightful enterprise-wide information.’
Issued by Katrina Bray at Image PR on 723456 or email firstname.lastname@example.org
Note to Editors
About KPMG Channel Islands
KPMG Channel Islands Limited is the CI member firm of KPMG International. It has offices in Guernsey and Jersey employing more than 240 staff. It is a leading auditor of investment funds in the Channel Islands as detailed in the annual Reuters Fitzrovia survey and has large market shares in the banking and insurance sectors (no independent market share figures available). It also audits many local businesses, including the States owned trading companies.
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 144 countries and have 137,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and separate entity and describes itself as such.