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he finance functions in large U.S. and European firms have focused on cost control,
operating budgets, and internal auditing. But as corporations go global, a world of finance
opens up within them, presenting new opportunities and challenges for CFOs. Rather than
simply make aggregate capital-structure and dividend decisions, for example, they also have
to wrestle with the capital structure and profit repatriation policies of their companies
subsidiaries. Capital budgeting decisions and valuation must reflect not only divisional
differences but also the complications introduced by currency, tax, and country risks.
Incentive systems need to measure and reward managers operating in various economic and
financial settings.
financing, risk management, and capital budgeting.
But the global CFO needs to be aware of the downside of getting strategic about financing
in these ways. Saddling the managers of subsidiaries with debt can cloud their profit
performance, affecting how they are perceived within the larger organization and thereby
limiting their professional opportunities. Similar considerations should temper companies
policies about the repatriation of profits. For U.S. companies, tax incentives dictate lumpy
and irregular profit transfers to the parent. But many firms choose to maintain smooth flows
of profits from subsidiaries to the parent because the requirement to disgorge cash makes it
harder for managers to inflate their performance through fancy accounting. Finally, letting
managers rely too much on easy financing from home saps their autonomy and spirit of
enterprise, which is why many firms require subsidiaries to borrow locally, often at
disadvantageous rates.
In addition to exploiting the de facto internal financial market to mediate between their
operations and the external financial markets, CFOs can add a lot of value by getting smarter
about valuing investment opportunities. When energy giant AES began to develop global
operations, in the early 1990s, managers applied the same hurdle rate to dividends from
around the world that they used for domestic power projects, despite the different business
and country risks they faced. That approach made risky international investments look a lot
more attractive than they really were.
The companys subsequent attempts to improve its capital-investment decision process
illustrate the organizational challenges CFOs face as they move from domestic to foreign
markets. In order to improve the quality of valuations, AES required managers to
incorporate sovereign spreads into their discount rates. Sovereign spreads measure the
difference between the rates at which two countries can borrow in the same currency, and
they are widely tacked on to discount rates in order to adjust for country risk. Although this
method created the semblance of tremendous precision, it came with some curious
incentives, particularly for managers charged with securing deals in emerging markets.
Knowing that their projects would face very high discount rates, managers forecasted
inflated cash flows to compensate. For managers keen to complete transactions, as some at
AES were, excessive penalties and precision can result in a less robust process.
In extreme cases, the gaming that takes place in a formalized process can undermine the
companys strategy. Consider Asahi Glass, one of the first Japanese corporations to
rigorously implement Economic Value Added systems worldwide in order to increase capital
efficiency. Asahi set country-specific discount rates based on typical risk measures, including
sovereign spreads. The result, however, was that managers overinvested in Japan (because of
very low discount rates) and underinvested in emerging markets (because of very high ones).
Once again, adopting a narrowly financial approach led to an outcome directly at odds with
the companys strategic objectives. In response, Asahi made a series of adjustments to
reconcile its initial, purely financial approach to discount rates with its broader organizational
goals.
The moral of these stories is that formal methods of valuation and capital budgetingwhich
work quite well in a domestic context, where the variables are well understoodmust be
refined as companies globalize. Firms need to make sure that their finance professionals
actively discuss potential risks with the country managers who best understand them.
centralizing decisions can generate substantial savings, these might need to be sacrificed to
ensure that the finance function reflects the degree of centralization appropriate for the firm
overall. Highly centralized firms can have a large finance function at headquarters that
effectively dictates decision making for all subsidiaries; such an arrangement can capitalize
on many financial arbitrage opportunities without sacrificing organizational goals
substantially. Decentralized organizations, in which country managers are paramount, must
replicate some financial decision making at the country level.
The finance function must locate decision making at a geographic level where other
strategic decisions are made.
Create a professional finance staff that rotates globally.
Leading companies recruit and rotate financial managers in the same way that they do
marketing and operational talent. If companies groom a network of finance professionals
who are comfortable in various environmentsand have rotated through positions at the
country, region, and corporate levelsthe dynamic between the financial headquarters,
where most expertise resides, and the subsidiary can be a powerful resource in difficult times.
Drug giant Novartis is an example. In 2001, the company had to decide whether to continue
financing its Turkish subsidiary, which had repeatedly delayed payment to Novartis during
periods of crisis. On the numbers alone, the decision would have been straightforward:
Force the managers to fund locally or deny shipments of life-saving drugs to the subsidiary.
Complicated negotiations ensured that the subsidiary would continue to operate, capitalize
on the weakness of its competitors, and ultimately pay back the parent. A successful
outcome was achieved only because of the trust built up over many years between finance
managers at headquarters and those in Turkey, many of whom had spent time at Novartis
subsidiaries around the world.
Codify priorities and practices that can be adapted to local conditions.
It is tempting to stipulate that cash repatriation policies or investment criteria be applied
universally. Such a requirement, however, can sacrifice opportunities that arise locally.
Similarly, strategic objectives, as in the Asahi example, may demand flexibility in investment
analyses. Smart companies, therefore, formulate policies centrally with an understanding that
local idiosyncrasies and strategic imperatives may require exceptions. Specifying the process
for making exceptions, such as instituting a standing committee of finance professionals to
review possibilities, is critical to ensuring that deviations from the norm are properly
managed.
Forty years ago, most firms didnt have CFOs, and the finance function was usually staffed
by controllers. As external markets have become more demanding in terms of performance
and their requirements for disclosure, the finance function has become more prominent.
Now that multinational companies have their own internal capital markets, the finance
function must graduate to a more strategically engaged level. A globally competent finance
department is one that understands how to reconcile the firms financial, managerial, and
institutional priorities across its business units. Does your
https://www.ieee.org/documents/financial_ops_manual.pdf
fin
A financial plan outlining the revenues and expenses over a period of time.
A financial operating plan (FOP) uses past performances, incomes and
expenses to forecast what to expect in the following years. It then
incorporates past and recent trends into the planning so as to most
accurately forecast what is to come. It will define goals for areas such as
budgeting, sales, payroll, etc, as well as create a cash flow projection.
A good financial operating plan will need to be ammended and updated
due to any extraordinary events relating to finances, as well as to see if it is
still relevant to the current situation. If prepared and ammended
accordingly, an FOP can be a useful tool in creating and managing the
budget, improving control of management operations and ultimately
creating profitability.
The Operations division functionally is split into four main areas: Capital Markets
Operations, Financial Analytics & Reporting, Operations Design, and Data Science &
Engineering.
Capital Market Operations acts as the front-line of the division to enable all of the firms
businesses and supports the life cycle of a trade by partnering with clients and other divisions to
mitigate risk and provide excellent client service
Professionals in Financial Analytics & Reporting create financial models and manage the
divisions metrics to enable informed business decisions and improve the economics of the our
business
Operations Design professionals plan and execute change programs and create new financial
operations capabilities to drive efficiency, improve client service levels, and reduce our
operational risk
Data Science & Engineering professionals develop cutting edge analytical tools and engineer
solutions to address operational challenges
I look at data that we have as a firm. We use math to synthesize the information that
is present in that data to come up with new conclusions about how we should
transact our business, how we can approve our business, or how we can help our
clients in a new way. Right now Im working on a project where we are looking at
funding channels that we are using to service our day-to-day liquidity needs and the
goal of this project is to really understand what the situations are where we resort to
something that is not optimal from a risk point of view or from a cost point of view
and help to eliminate them.
Accounting
Audit
Corporate Development
Corporate Treasury
Estimating
Financial Planning & Analysis
Financial Services
Financial Systems & Applications
Government Finance
Independent Cost Evaluation
Investor Relations
Overhead Planning & Controls
Planning & Scheduling
Program Finance
Property Management
Tax
ole of Finance
Bookkeeping is one of the main roles of a finance department in any organization. Additionally, a finance
department needs to keep track of sales and spending and produce yearly and quarterly statements.
Financial departments need to also regularly update managers of other departments within an organization
about the financial state of the business. Financial reports must remain accurate, verifiable and objective.
Management relies on the income statement, which shows the companys financial results, to calculate
budgets. Moreover, the finance department needs to help the organization secure necessary funding and
distribute profits in the form of dividends.
services to ensure the profitability of the company. The finance manager also reviews the budget and helps
to make decisions about cuts and increases in spending. Further, finance managers prepare and interpret
financial reports and help to forecast the companys financial future.
This Guideline focuses on key techniques that can be used in practice to implement
management accounting practices that facilitate effective supply chain management.
It recognizes that relationships between organizations will differ because of their
different stages of maturity and strategic choices. It addresses risk management
issues and considers the sustainability agenda as a factor gaining importance in the
area of supply chain management. A central feature of the Guideline is a description
of the way that professional accountants can add value to the management of supply
chains.
Faced with intense global competition in a rapidly changing marketplace, companies today need
continuous improvement of product and process and effective management of a diverse
workforce in order to create value and competitive advantage. One innovative management
approach gaining widespread acceptance is the use of self-directed work teams (SDWT's),
capable of evolving and adapting to changing circumstances. By involving employees in problemsolving and in managing their own work, SDWT's can increase motivation and productivity as well
as the quality of products and services.
This guideline describes the role of HR, and discusses general concepts and specific techniques
for measuring the performance of the HR function. Concrete examples of different types of
analysis and a case study are also provided. In organizations without an HR function, the
approaches and material presented can be of assistance in personnel administration.
Strategic Partnering
In order to improve their chances of survival in the marketplace, companies are turning with increasing
frequency to strategic alliances with their suppliers, customers and competitors. This innovative approach
allows organizations to share skills and resources, develop new products and technologies and gain access
to new markets.
Companies recognize that though "exceeding customer expectations" is a worthy goal, exceeding those
expectations profitably is necessary for long-term corporate viability. Thus, an understanding of corporate
profitability necessarily relies on an understanding of what drives shareholder value in organizations
Distribution Channels Management Accountability
Today, distribution channels are still looked upon as a major source of potential cost reduction. However, as
organizations are realizing that their ability to compete is highly dependent upon providing quality customer
service, distribution channels have reached a new level of significance.
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Information Technology
Increase your knowledge of strategic and operational management of computer hardware and software
products, as well as their applications and how they affect your organization. Understand the business
benefits of IT, and how to successfully manage it.
Final Rules on Identity Theft Red Flags and Notices of Address Discrepancy
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Strategic Partnering
apid change. In order to improve their chances of survival in the marketplace, companies are turning with
increasing frequency to strategic alliances with their suppliers, customers and competitors. This innovative
approach allows organizations to share skills and resources, develop new products and technologies and
gain access to new markets. When there is a good strategic and operational fit between partners, these
cooperative relationships can produce mutual competitive advantage.
In providing an overview of the emerging concept of strategic partnering, this publication discusses the
potential benefits and associated risks, the importance of careful partner selection, the use of control
mechanisms and the measurement of performance.
Management Control
Learn how the broad area of control is implemented by your board of directors, management, and other
personnel to provide reasonable assurances of effective and efficient operations, internal financial control,
and compliance with laws and r
Implementing Benchmarking
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Strategic Partnering
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Strategy maps provide a way for organizations to describe andcommunicate their strategies. Evolving as a
breakthrough in second-generation balanced scorecards, the underlying concept of strategy maps is based
on a well-known premise a picture is worth a thousand words. Strategy maps provide a way for companies
to tell the story of their strategy in a way that reduces the noise level in the message. The visual nature of
the strategy map enables individual employees and other stakeholders to locate themselves in the bigger
picture and take up their role in the ongoing story of the organization.
Strategy maps describe how organizations create value by building on strategic themes such as growth or
productivity. These themes determine what specific strategies organizations will adopt at their customer,
process, and learning and growth levels. Well constructed maps describe how the organization plans to
meet its specific customer promises through a combination of employee, technology and business
processes that satisfy customer expectations and meet shareholder demands. In short, they provide the
conceptual framework that organization leaders and their followers can use to better understand and
execute strategy. In so doing they reduce the impediments to successful strategy implementation.
Planning the Trip
A systematic approach is key to realizing the benefits of strategy mapping. The following six steps have
proven very useful and. can be used by managers to effectively create and implement strategy mapping
initiatives in their own organization:
1. Determine the overriding objective While customer satisfaction and quality are worthwhile pursuits,
the overriding objective(s) for profit-making enterprises must be economic. These financial targets should be
a SMART goals specific, measurable, attainable, realistic and have a time parameter. For example,
increase component sales by 20% within the next two years.
2. Determine the dominant value proposition No organization can be all things to all people. The key
here is to select one dominant value proposition and provide breakthrough customer value in that
proposition. Operational excellence, product leadership and customer intimacy are all worthy value
propositions, pick one to excel at.
3. Choose the key financial strategies Deciding on your dominant value proposition will guide your
selection of financial strategies. Focusing on your dominant value proposition will bring clarity to asset
utilization decisions, productivity pursuits, and the cost and revenue balancing act.
4. Choose the key customer related strategies Similarly, your dominant value proposition will determine
how much emphasis you place on adding and retaining customers, increasing revenues per customer, or
reducing costs per customer.
5. Choose the key internal business process strategies Once the appropriate financial and customer
strategies are identified, the what we want to accomplish becomes the how. Identifying appropriate
metrics serves to provide focus and prioritize the effort expended on critical internal operations, innovation,
or customer management processes.
6. Choose the key learning and growth strategies - Finally, the inevitable gaps in knowledge skills and
abilities necessary for effective execution are addressed with learning and growth strategies in three key
areas: human capital, information capital and organization capital.
This six-step process will produce an effective strategy map, a reliable navigation tool that your entire
organization can use to maintain focus on the ultimate destination of success.
Embarking on the Journey
Once a corporate level map is developed, it can be used to communicate the path of the journey you are
embarking on together in a way that will draw others into their own planning for how they can contribute to
the successful achievement of the organizations objectives, ensuring that everyone is on the same bus.
While some organizations will be well served by one corporate-level strategy map, others may find the need
to cascade the process further down into their organization and develop more detailed maps for different
terrains, based on geographical, product, service or group distinctions. Additional perspective can also be
developed by drilling deeper into specific strategies within the corporate level map.
While some have the perception that strategy mapping is a good tool for the corporate behemoths of the
world, large companies do not have a corner on the market when it comes to poor strategy execution. Nor
do they have a corner on the market when it comes to the benefits of strategy mapping.
ATS, Automated Tooling Systems, Inc. a Toronto Stock Exchange company is an excellent case in point. A
leading designer and producer of automated manufacturing and test systems, ATS used strategy mapping
to overcome several significant impediments to growth that were rooted in the entrepreneurial culture that
had contributed to their success.
Following the death of their founder Klaus Woerner in 2004, Ron Jutras, the former CFO took over as CEO
and made strategic planning and execution a priority for ATS, implementing a strategy mapping initiative.
After first selecting a customer intimacy value proposition revolving around the objective of becoming a total
solutions provider, ATS developed drill-down strategy maps for their three main business groups.
According to Jutras, taking a more disciplined and structured approach to running the business has brought
our organization together more globallyThe strategy map has played a significant role in helping us
understand communicate and execute our strategy. We are committed to it.
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Treasury Management
Learn about the concepts and techniques related to the strategic management of financial capital. Discover
how to manage the investment of funds and plan and execute programs to satisfy capital needs in
accordance with your organization's strategic plan.
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Strategic Partnering
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Content Overview
Redesigning the Finance Function
The finance function is central to the successful operation of any organization. The finance professional, by
working with the rest of the management team to ensure that resources are efficiently and effectively
acquired, maintained, and deployed in the best interests of all of the organization's stakeholders, sustains
the finance function's essential role in the business equation.
Post Appraisal of Capital Expenditure
Capital budgeting is a vital part of planning, but must be based on uncertain predictions. Modern companies
recognize that monitoring the outcome of past budgeting decisions can improve future decision making. This
guideline details the Post Appraisal process in comparing, when sufficient evidence becomes available, the
actual quantitative results with the estimates made at the time of budgeting.
Corporate Governance: The Role of Internal Control
Recent extensive study of internal control in business has led to the development of a definition capturing
both positive and negative aspects of the issue. While the structure of modern organizations often
undermines this control, it has become recognized as an essential component of successful enterprise.
Organizational Restructuring
Restructuring continues to be a hot topic for organizations involved in mergers and acquisitions, downsizing,
cost reduction programs, shared services, and more. This guideline discusses the objectives for
restructuring, roles and responsibilities, structural options, and implementation issues.
Organizations must understand when, why and how customers react to products, services and price
changes, and use that information to better manage their customers through value managing internal
functions and processes. Unfortunately, many organizations' information systems have historically
emphasized internal financial results.
Implementing Benchmarking
The long-term viability of an organizationwhether in a competitive or not-for-profit sectordepends largely
upon how well it understands and meets its customer requirements on a daily basis. These requirements
and the ways to achieve them are constantly changing, thereby creating opportunities and challenges. By
studying and emulating world-class performance in meeting these challenges, an organization can improve
its odds of survival.
Stakeholder Reporting
Gain insight into preparing financial and non-financial information to meet public policy and regulatory
requirements, as well as governance relationships.