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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?
4
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