The Growing Role of Financial Leaders - LEAPROS · Siemens AG Key figures, FY 2013 ... Changing Role of Financial Leaders Key Member of ... • Influential Communicator and Negotiator

© Siemens AG September 2014 All rights reserved.

The Growing Role of Financial Leaders Kairav Modi Siemens AG

September 2014

September 2014 Page 2 Kairav Modi – Industry RP

© Siemens AG 2014. All rights reserved.

Siemens AG Key figures, FY 2013

As reported in annual reports

In millions of € FY 2012 FY 2013 New orders 75,939 82,351

Revenue 77,395 75,882

Income 4,642 4,212

Free cash flow 4,727 5,257

Employees 366,000 362,000

Revenue by Sector Revenue by Region

Based on customer location

Continuing operations – comparison with previous year

Revenue and employees

Healthcare

18%

Energy

35% Industry

24%

Infrastructure and Cities

23% 20%

Americas 28% 38%

Germany

14%

Asia, Australia

Employees in thousands

FY

100,000

80,000

60,000

40,000

20,000

2000 1986 1990 1995 0

Revenue in millions of €

2005 2013

500

400

300

200

100

Europe, CIS, Africa, Middle East (excl. Germany)



Power Generation Services

Siemens Worldwide – 1.10.2014 Flat and market driven organization along the value chain will capture growth opportunities

Divi

sion

s (G

loba

l P&

L)

1) Commonwealth of Independent States

Managing Board

Market Americas Global

Healthcare Middle

East, CIS1) Asia,

Australia Europe, Africa

Financial Services

Power and Gas

Wind Power and

Renewables

Mobility

Energy Manage-

ment

Building Techno-logies

Digital Factory

Process Industries and Drives

Healthcare

Separately managed

Corporate Core Corporate Services

PG

MO PS

WP

EM BT DF PD HC SFS

Go-

to-m

arke

t



How our world is changing Globalization

Port of Jebel Ali, United Arab Emirates

Global trade Between 2000 and 2012 the

total volume of global trade tripled

Multinational companies The supply chains of global

companies account for about 80% of global trade

Growth of emerging markets By 2030, China will have

overtaken the US as the world’s largest economy, and Brazil will overtake Japan



How our world is changing Urbanization

Commuters in Jakarta

Growth of cities 2009:

For the first time in history, more than 50% of the world’s population lived in cities

2050: 70% of the world’s population will live in cities

Megacities worldwide 1970:

2 megacities with more than 10 million inhabitants

2025: 37 megacities; more than 13% of the world's population will live in a megacity



How our world is changing Digital transformation

Networked world of complex and heterogeneous systems

Automation factory in Amberg, Germany

Digitalization Worldwide data volume

doubles every two years. By 2020, it will have grown to 40 zettabytes – a 50-fold increase within 10 years

Worldwide revenue of the IT and communications industries reached a record €2.84 trillion in 2013

Revenue from apps alone amounted to $72 billion in 2013 and will more than double by 2017

Digitalization boosts GDP – a 10% increase in the digitalization level of a country leads to 0.75% rise in per capita GDP



How our world is changing Demographic change

Morning gymnastics in Shanghai

World population 2012: 7.1 billion people 2050: 9.6 billion people

Worldwide life expectancy 2012: 70 years 2050: 76 years By 2050, the share of the

population aged 60 or over will, for the first time, equal the share of the population younger than 15



How our world is changing Climate change

2013: Highest CO2 concentration in the atmosphere in 800,000 years

2001 to 2010: Warmest decade on record

Ice sheets off the Icelandic coast



Common Myths identified with the Role of a CFO…

DEMONS WHO WILL REDUCE COST

ACCOUNTING AND FINANCE GEEKS (Bean Counters)

NOT A TEAM PLAYER!

BUSINESS CASE FOR EVERYTHING!



Situation Room

Global Organisations /Eco System

Fast Changing Business, Social

and Economic Environment

CFOs – Myths? What is the DNA

of a CFO?



DNA of a CFO Changing Role of Financial Leaders

Key Member of the Top

Management

Conformance, Stewardship

and Performance

Excellent Business Acumen

Industry Knowledge and

Adaptability

Respected Finance

Professional & Team Player



1. Key Member of the Top Management Team

• Shared leadership along with the CEO

• Elbow to the CEO

• Support and challenge the CEO in running the business

• In most organisations, CFOs are seen holding Board positions

• Common to see the CFO and CEO present the Financial and Business results to the external investor community

• Providing accountability and transparency along with leadership

• Develop effective partnerships with other Board Members and Leadership Team

• Sounding Board for the other members of the management team

• Influential Communicator and Negotiator

4 EYE PRINCIPLE



2. Conformance, Stewardship and Performance

• Must appreciate the dual aspects of Conformance and Performance

• Conformance requires the CFO :

• Stewardship of organizational assets keeping accounting, tax, regulatory and legal aspects at the forefront

• While driving conformance, the CFOs are expected to significantly contribute towards the Performance of the organisation – increase productivity, set business objectives, drive business results, deliver business insights and trends, etc

• Sustainability (Environment, People and Business) – Dow Jones Sustainability Index rated Siemens as the No 1 company amongst the Industrials group in 2014 – Finance Organisation is a key part of the Siemens Sustainability Board



Siemens Sustainability Portfolio

Source : Siemens Internet – Sustainability Report (Summary)



3. Business Acumen

• Ever changing Business Environment

• Business Environment is ever changing leading to a changes in customer demands, processes, etc

• CFO would have to be quick to understand the needs of the Customer and its impact on the Business

• Analyse the Impact from a Financial and Business Plan perspective

• Able to present a common and unifying perspective on the strategic objectives, business models, opportunities and threats, key success factors

• How would processes change based on customer needs?

• What impact would these have on the financials of the organisation?

• How would the charging / revenue models change?

• Impact on the regulatory environment, external and internal stakeholders, etc



Siemens Plant Data Services Technological backbone for intelligent data analysis and analytics

Siemens Plant Security Services

Siemens Plant Data Services

Siemens Plant Analytics Services

• Asset Analytics • Plant Analytics • Energy Analytics • Energy Demand

Management

Siemens Plant Cloud Services

• Open industrial cloud platform including standardized device connectivity

• Ecosystem for customers and analytics Partners

• Siemens as a data custodian

• Plant Protection against cyber attacks

• Enabler for Plant Analytics and Plant Cloud Services

• IP protection of production data



Changing Customer Expectations lead to change in Revenue and Service Models

Power by Hour Robot > Automobiles Industry



4. Industry Knowledge and Adaptability Key Member of the Top

Management

Independence, Stewardship and

Responsibility

Business Acumen Industry Knowledge and Adaptability

Excellent Finance Professional & Team

Player

• Must be quick to understand changes in Industry Dynamics and plan to adapt the same to the Business

• In the Industry of the future, the product will become an information carrier and steer its own way through the production process

• Witnessing the dissolution of the classical production hierarchy, with a shift away from centralized control toward decentralized self-organization.”

• Integration within the Organisation

• System Thinking Approach

• Holistic Approach

• Optimized Resource utilization

• Good Governance and Compliance

• Corporate Responsibility and Transparency to all Stakeholders



Increase efficiency 1 Shorten time-to-market 2 Enhance flexibility 3

• Shorter innovation cycles • More complex products • Larger data volumes

• Individualized mass production

• Volatile markets • High productivity

• Energy and resource efficiency are decisive competitive factors

Increasing competitiveness

How does a CFO adapt to the ever changing ‘Smart Manufacturing Environment’ – Industrie 4.0

Industrie 4.0 should help to solve manufacturing challenges



Cyber-physical systems have all the information as a digital model

Service Production execution

Production planning

Product design

Production engineering

The digital model is always up-to-date and is extended over the entire lifecycle

• Software/Informatics • Mechanics (CAD) • Electrics (CAE) • Automation, HMI • Safety, security • Maintenance

Cyber-physical system (CPS)

Physical production facility Digital model

• Location, identity…

• Status • SW version • Interfaces • …

Contains all the information on …

+



Future: Industrie 4.0

Dynamic network of local controls

Extended complex communication

Digital models of the overall process and participants

Process optimization in dynamic networks

Self-configuring security concepts also for temporary requirements

Humans to define rules and frameworks for decision making

Today

Local controls

Realtime communication

Digital "copies" of products and production

Manufacturing Execution Systems

Industrial security concepts

Execution and decision making mainly by humans

What does this mean to us as Finance Professionals?

What is the Capital Cost and the RoI / Payback (Timeline)?

Value Chain Impact (suppliers,OEM, etc)

Tax, Legal and Regulatory Topics

Future Business Collaboration Models

Profitability Analysis and Business Plan



5. Respected Finance Professional and Team Player

• Be the Change you want to see – Mahatma Gandhi

• Provide Leadership on the structure of the Finance and Accounting function keeping the ever evolving and changing business environment in focus

• Shared Services approach

• Productivity Improvement

• Competency based team structures

• Ethical approach

• Financial Innovator (example Innovative Finance schemes to improve WC)

• Ensure transparency and accuracy of information and records within the GLOBAL organisation

• Implementation of the appropriate Performance Measurement Tools across countries leading to a One System for All environment

• Sensitive to culture and people aspects in an international environment

• Respect for the Individual



SMART Reporting Tool : Web based tool implemented to conduct Global Management Reviews

BA AM DAsh

MIS

Consolidation System

Financial Warehouse

SMART

Reporting

Local SAP System

Project Monitoring & Controlling Tool

(PMCT)

Transaction Tool

Reporting & Auditing

Controlling & Analyzing

Managing



Benefits Achieved

One Common language between HQ and Regions

Flexible and Easy structure

Simplified Presentation of Financial Data

Consistent performance through a common reporting system – No chance for

incorrect data analysis

Top Down view with a potential to do a “deep dive” if necessary using local systems through strict access rights

Significant Time and Effort saved in preparing monthly Management Reports



In Summary Success Mantra for a CFO

Key Member of the Top

Management

Conformance, Stewardship

and Performance

Excellent Business Acumen

Industry Knowledge and

Adaptability

Respected Finance

Professional & Team Player



THANK YOU

Documents

The Growing Role of Financial Leaders - LEAPROS · Siemens AG Key figures, FY 2013 ... Changing Role of Financial Leaders Key Member of ... • Influential Communicator and Negotiator