Insights for executives5

In a recent Ernst & Young study, 79% of senior business decision makers indicate that Finance is now either much more or somewhat more strategically involved than it was five years ago. And yet when asked, only 47% want Finance to play a bigger role.

Recent change in role of Finance in business strategy

Part of the reason senior business decision makers resist greater involvement from Finance is a disconnect in priorities. In the wake of expanding globalization, advances in technology, increased regulatory scrutiny and changing consumer demands, the business has had to shift its priorities to remain competitive. Within many organizations, however, Finance has not kept pace.

To meet the changing needs of the business, Finance needs to align its priorities with those of the business. Revenue planning, establishing KPIs and risk management are of particular importance to the business — and three areas where Finance can offer significant strategic value.

The new CFO agenda: revenue planning, establishing KPIs, risk management Three important business priorities where Finance can prove its value

The answers in this issue are supplied by:

Thomas G. CucuzzaAmericas Advisory Finance Competency LeaderErnst & Young LLP +1 248 797 5078 thomas.cucuzza@ey.com

Anne C. IlsemannPartner — Americas AdvisoryErnst & Young LLP +1 212 773 7129 anne.ilsemann@ey.com

2 11 33 53

2 2 17 26 53

Finance

SBDM

Don't know

Much less involved

Somewhat less involved No change

Somewhat more involved Much more involved

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What’s the issue?Our study indicates that the evolving strategic role for the Finance organization is multifaceted. As one survey participant notes:

“From a Finance standpoint, benefits include analyzing business unit results, assisting development of models that support pricing decisions, support expansion decisions, and identify efficiencies that can be gained. From an operational standpoint, we also do a lot of support for various lead Six Sigma projects to help identify financial benefits and track those financial benefits and maintain those financial benefits. From an investor relations standpoint, we contribute a lot of analysis to help the company’s executives determine whether or not we’re meeting the message that we’ve sent to the investing community.”

Finance has earned a seat at the table. However, to keep that seat and remain relevant, it has to re-prioritize its focus issues to match the top business concerns.

For example, in our survey we asked respondents to rank several business priorities in order of importance. Both senior business decision makers and Finance executives placed revenue planning at the top of the list: 81% of senior business decision makers considered this their top priority versus 78% of Finance executives.

From there, however, priorities diverged. Where senior business decision makers were concerned about establishing KPIs and resource allocation, Finance executives saw KPIs as a fifth-level priority and ranked resource allocation second-to-last. Finance executives and senior business decision makers agreed that risk management ranked fourth-highest on the list of priorities, but where 72% of senior business decision makers saw it as very important, only 62% of Finance executives felt the same way.

Finance is recognized for offering objectivity, access to information and foresight. By remaining focused on revenue planning, and realigning priorities and resources to focus on KPIs and risk management, Finance has an opportunity to become — and remain — a valued advisor to the business.

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Finance executivesRanked by very important

Senior business decision makers (SBDMs)Ranked by very important

• Finance executives place higher importance on cost reduction and asset management

• Innovation of business models ranks last as a very important business function

• One hundred percent of SBDMs agree that establishing KPIs and risk management are important business functions overall

• Asset management, a higher-ranking business function among finance executives, falls behind innovation among SBDMs

Revenue planning

InnovationResource allocation

Establishing KPIs

Asset managementCost reduction

Risk management

Not important Somewhat important Very important Not important Somewhat important Very important

Revenue planningEstablishing KPIs

Resource allocationRisk management

Cost reductionInnovation

Asset management

4

2

4

2

2

4

4

18

36

33

36

38

38

47

78

62

62

62

60

58

49

81

79

72

72

68

60

55

13

21

21

28

28

32

404

9

4

6

6

2 Why now?Volatile markets, a more competitive landscape and changing consumer behaviors are fundamentally changing how organizations go to market. The business has had to evolve, shifting its priorities to meet an altered market landscape. It expects Finance to do the same. Finance must refocus its efforts to engage where the business needs it most. Otherwise, the business will close the gap on its own, and Finance’s influence within the organization will diminish.

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3 How does it affect you?Finance executives are well-positioned to provide the right strategic guidance around revenue planning, KPIs and risk management.

As Finance’s No. 1 priority, revenue planning is already aligned to the business and is the easiest focus area to demonstrate immediate value. It is a core competency for Finance and a key driver for strategic involvement. Finance has the institutional knowledge, access to historical information and objectivity to deliver experienced advice in this area.

In terms of establishing KPIs, Finance plays a key role in centralizing reporting and benchmarking proper target measures. It has an opportunity to leverage its institutional memory and long-term foresight to deliver value in defining the metrics to help drive the business forward rather than simply tracking the progress of business.

“Finance provides the data tracking, the data analysis, and then a view forward.”

COO, Real Estate

Risk management is an area that Finance deems important — but the business sees as more important. In our survey, senior business decision makers indicate that Finance’s involvement in risk management resides at the executive level. This presents a significant opportunity to provide an elevated — and welcome — level of support in other areas of the business.

To meet the new priorities of the business and earn its respect, Finance will need to act quickly to assess available skills, identify the gaps and mobilize resources. Otherwise, the business will find a team of its own that will.

“Finance needs to understand the business and what it takes to grow the business. So I think the individual, whatever level they may be from the Finance side, needs to understand not only the corporate umbrella strategy, but also each business unit strategy to ensure that they have the right input when they do come to the table.”

SBDM, VP Marketing

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4 What’s the fix?To provide the support the business seeks and remain relevant as a strategic advisor within the organization, Finance needs to move quickly, taking action in the following areas:

“The benefit to Finance’s involvement is that Finance brings a unique perspective on risk and is able to quantify the risk exposure the company faces.”

Finance Executive, Director of Financial Planning

Know the priorities. To truly support the

business, Finance needs to know what the priorities are

and where it can most effectively support those business priorities.

Assess existing skills. Once the priorities are understood, Finance needs

to have the right capabilities. The organization needs to objectively assess the skills it has and the

skills it needs to focus on new priorities.

Realign skills and processes to meet business needs. In some instances, Finance will need to provide additional training for its staff so that it is able to appropriately support new business

requirements. In other instances, the organization may have to acquire additional resources who have the proper skills. Not everyone will be suitable for providing elevated and more strategic levels of support to the business.

Business

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What’s the bottom line?Finance has worked hard to play a more prominent role within the organization. It has navigated ever-increasing regulatory requirements, economic volatility, eroding margins and rapid advances in technology — all of which have fundamentally changed how organizations operate. It has earned its seat at the boardroom table. But to remain relevant, Finance needs to realign its priorities to match those of the business.

Revenue planning, establishing KPIs and risk management are three areas where Finance is well-positioned to add value to the business. But to prove that value, the Finance organization will have to move quickly to understand the business needs, identify the skill gaps, and align resources to meet changing business priorities. Any delay on Finance’s part and it risks being left behind.

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For related thought leadership

visit ey.com/5For related thought leadership

Breaking the glass ceilingNew ways Finance can leverage core strengths and add strategic value

Globalization, advances in technology, and increased regulatory reporting have placed immense pressure on the business. Finance needs to quickly close the gap in terms of knowing what the business priorities are. If Finance fails to catch up or keep up, it will not only be limited in the strategic value it can deliver, but also may actually see its level of influence diminish.

Finance executives: can you keep pace with changing priorities? Misalignment can reduce an organization’s cost-competitive profile

The roles of the CFO, Finance executives and the Finance organization as a whole have changed significantly in the last five years, and the CFO has finally earned a seat at the decision-making table. To maintain this seat, Finance needs to grow ahead of its roots and keep pace with rapidly changing business priorities.

Ernst & Young

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Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

About Ernst & Young’s Advisory ServicesThe relationship between risk and performance improvement is an increasingly complex and central business challenge, with business performance directly connected to the recognition and effective management of risk. Whether your focus is on business transformation or sustaining achievement, having the right advisors on your side can make all the difference. Our 23,000 advisory professionals form one of the broadest global advisory networks of any professional organization, delivering seasoned multidisciplinary teams that work with our clients to deliver a powerful and superior client experience. We use proven, integrated methodologies to help you achieve your strategic priorities and make improvements that are sustainable for the longer term. We understand that to achieve your potential as an organization you require services that respond to your specific issues, so we bring our broad sector experience and deep subject matter knowledge to bear in a proactive and objective way. Above all, we are committed to measuring the gains and identifying where the strategy is delivering the value your business needs. It’s how Ernst & Young makes a difference.

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