The role of the CFO in strategy formulationThe role of the CFO in strategy formulation

CFO SHOW 2012

The role of the CFO in strategy formulationThe role of the CFO in strategy formulation

CFO SHOW 2012

Nigel Mangwiro

Key questions ?Who can be a CFO?

Changes in the role's focus?

Scorekeeper to strategic partner.Scorekeeper to strategic partner.

Their contribution to strategy

formulation? Which aspects of strategy

formulation?

Best practices elsewhere?

What core competences are required

for a CFO?

Areas of application in our context

Descriptives of the CFO's

Conscience of the C suite

Co-pilot

Strategic partner to the C suite

Architect of the Corporation's future

Bean Counter??

Scorekeeper??

Ultimate reinsurer of the C suite

Clear shift from pure scorekeeper to strategic Clear shift from pure scorekeeper to strategic

Not all are accountants

Who can be a CFO?

Most popular route highlighted in yellow

40% have a non finance background

Most have an MBA

Broaden your knowledge base to stay on top of the game.

Most have an MBA only, indicating broad skills the role must have

Does this mean the Broaden your knowledge base to stay on top of the game.

35% play a leading role in strategy formulation

EY CFO program -2010 Survey

35% play a leading role in strategy complex shareholder

universe to be the

greatest challenge

65% - cost

management is no 1

priority compared to 3

years ago

2/3 agree CFO has to

increasingly act as the increasingly act as the

face of the company

performance

2010 Survey

crisis, cost

management now no.

1 priority

finance still core!Clear shift in the focus of the role from scorekeeper to

strategic partner

Focus varies depending on economic stability, growth phase Focus varies depending on economic stability, growth phase

of organisation

While CFOs have to expand their roles to strategy and

operations, fundamental role of finance remains core

Continued focus on fundamentals , whilst enabling corporate

strategy

The recent financial crisis has reinforced need to pay close

attention to cash, cost management ,risk and working capital

Clear shift in the focus of the role from scorekeeper to

Focus varies depending on economic stability, growth phase Focus varies depending on economic stability, growth phase

While CFOs have to expand their roles to strategy and

operations, fundamental role of finance remains core

Continued focus on fundamentals , whilst enabling corporate

The recent financial crisis has reinforced need to pay close

attention to cash, cost management ,risk and working capital

Application points for the CFOApplication points for the CFO

finance value lines

Design and align finance function along the finance value line to achieve balance between the gatekeeper and strategist roles.

•Align key

result areas to

the finance

value lines

•CFO focus

areas are in

strategic strategic

management.

•Balance with

Operational

Mgt Design and align finance function along the finance value line to achieve balance between the gatekeeper and strategist roles.

Integrate Scenario thinking into

your strategic conversations

Plan with a cone of possibilities given the uncertainties and rules of the game

Understand the pivot flags that will change the game

Identify markets and segments that will weather the storm in spite of how scenarios will play outout

Identify the core capabilities that must be developed

Generate innovation

ONE WORLD

Hard Times40%

5%

US 10 year bond rate increases above 5%

U(2017)

DIVIDED WORLD

Forked Lightning20%

ONE WORLD

New Balls Please 10%

8-10%

Drop in US unemployment

Drop in national debt to GDP ratio

V(2012/2013)

DIVIDED WORLD

Ultraviolet UV 30%

7 0007 000

20 00020 000

30 00030 000

40 00040 000

ChileChile

New ZealandNew Zealand

ItalyItaly

JapanJapan

AustraliaAustralia

USAUSAPositionsPositions

3 0003 000

4 0004 000

5 0005 000

6 0006 000

7 0007 000

NamibiaNamibia

BrazilBrazil

ArgentinaArgentina

VenezuelaVenezuela

RussiaRussiaSOUTH AFRICASOUTH AFRICA

ChileChile

Prosperity Prosperity -- GDP GDP per capita in $USper capita in $US

GROUNDEDGROUNDED

1 0001 000

2 0002 000

SomaliaSomaliaIndiaIndia

UgandaUganda MalawiMalawi MozambiqueMozambique

ZambiaZambia

BoloviaBolovia

ColombiaColombia

PeruPeru

South KoreaSouth Korea

New ZealandNew Zealand

GermanyGermany

CanadaCanada

Singapore 26/182%Singapore 26/182%Hong Kong 25/161%Hong Kong 25/161%

NamibiaNamibia

VenezuelaVenezuela

RussiaRussia

BotswanaBotswana MalaysiaMalaysia

TAKETAKE--OFFOFF

MozambiqueMozambiqueZim ‘05Zim ‘05

Zim ‘95Zim ‘95NigeriaNigeria

ChinaChina

AngolaAngola

Use Frameworks assess performance and healthUse Frameworks assess performance and health

Put your strategy to the test! CFO lead that process!

Good strategyGood strategy Hallmarks of bad Hallmarks of bad

strategystrategy

Ultimately good Ultimately good

strategy is a way of strategy is a way of

thinking , not a thinking , not a

procedural exerciseprocedural exercise

Good strategy must Good strategy must

always have a always have a

diagnosis, guiding diagnosis, guiding

strategystrategy

••Failure to face the Failure to face the

problemproblem

••Mistaking goals for Mistaking goals for

strategystrategy

diagnosis, guiding diagnosis, guiding

philosophy and philosophy and

coherent actions.coherent actions.

••Bad strategic Bad strategic

objectivesobjectives

Put your strategy to the test! CFO lead that process!

Tests of good strategy

•Will your strategy beat competition?

Tests of good strategy

•Will your strategy beat competition?

Hallmarks of bad Hallmarks of bad

•Will your strategy beat competition?

•Does it tap a true source of advantage?

•Does it put you ahead of trends?

•Does it embrace uncertainty.

•Will your strategy beat competition?

•Does it tap a true source of advantage?

•Does it put you ahead of trends?

•Does it embrace uncertainty.

Failure to face the Failure to face the

Mistaking goals for Mistaking goals for

•Does it embrace uncertainty.

•Does it balance commitment and

flexibility

•Has it been translated into an action plan?

•Does it embrace uncertainty.

•Does it balance commitment and

flexibility

•Has it been translated into an action plan?

Application points summary

Design and Align key result areas to the finance value lines to achieve balanceDesign and Align key result areas to the finance value lines to achieve balanceDesign and Align key result areas to the finance value lines to achieve balanceDesign and Align key result areas to the finance value lines to achieve balance

Reshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long run

Reviewing organizational structure to improve cost position and operating leverageReviewing organizational structure to improve cost position and operating leverageReviewing organizational structure to improve cost position and operating leverageReviewing organizational structure to improve cost position and operating leverage

Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.

Champion testing of the corporate strategy ! Few questions that you can ask?Champion testing of the corporate strategy ! Few questions that you can ask?Champion testing of the corporate strategy ! Few questions that you can ask?Champion testing of the corporate strategy ! Few questions that you can ask?

Linking marketing spend to financial metrics to extract shareholder valueLinking marketing spend to financial metrics to extract shareholder valueLinking marketing spend to financial metrics to extract shareholder valueLinking marketing spend to financial metrics to extract shareholder value

Broaden your knowledge baseBroaden your knowledge baseBroaden your knowledge baseBroaden your knowledge base

Design and Align key result areas to the finance value lines to achieve balanceDesign and Align key result areas to the finance value lines to achieve balanceDesign and Align key result areas to the finance value lines to achieve balanceDesign and Align key result areas to the finance value lines to achieve balance

Reshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long runReshape our business models to make them sustainable in the long run

Reviewing organizational structure to improve cost position and operating leverageReviewing organizational structure to improve cost position and operating leverageReviewing organizational structure to improve cost position and operating leverageReviewing organizational structure to improve cost position and operating leverage

Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.Incorporate scenario thinking in your strategic conversations a team. CFO, take the lead role.

Champion testing of the corporate strategy ! Few questions that you can ask?Champion testing of the corporate strategy ! Few questions that you can ask?Champion testing of the corporate strategy ! Few questions that you can ask?Champion testing of the corporate strategy ! Few questions that you can ask?

Linking marketing spend to financial metrics to extract shareholder valueLinking marketing spend to financial metrics to extract shareholder valueLinking marketing spend to financial metrics to extract shareholder valueLinking marketing spend to financial metrics to extract shareholder value

Questions and answers Questions and answers Questions and answers Questions and answers