Chief Financial Officer – What Constitutes Competency? ( IV )

He must be able to articulate, communicate and execute major initiatives required to implement strategies which shall include developing value creating optimal capital structure and dividend policy, managing relationship with investors and all the financial community, negotiating and executing all major financial transactions including borrowings, shares issuances and repurchases, coordinating preparations of short-term operating budgets, developing key performance measures for each business unit, ensuring that business units have adequate management controls in place, assessing business unit performance in conjunction with senior management.
There is also the typical financial function he must assume. For instance: ensuring that all external reporting and compliance obligations are fulfilled, establishing controls to safeguards assets, ensuring the integrity and efficiency of working capital management, filing and paying all tax obligations, pursing opportunities to reduce tax burden, maintaining close relationships with banks, and managing risk management programs.

The CFO must possess the relevant knowledge and skills and these will include seasoned business judgment and superior analytical capabilities particularly in strategic business and financial analysis, ability to form an indepdendent view and challenge the ideas of the CEO and operating managers while maintaining their respect and confidence, has the presence to deal with the financial community, taking the initiatives to lead negotiations in major transactions, and strong administrative and people management skills.

If this sound daunting, have no fear. We understand the intricacies of value drivers and possess know-hows and tools to fine-tune them to achieve compelling value propositions. Let our team of experts lead you through the Value Based Management process.

Are you ready to be an ACE CFO? Where you can articulate, communicate and execute the corporate strategy..

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Chief Financial Officer – What Constitutes Competency? ( III )

His job scope would include something along the following lines:

He must be fearless in challenging the norms, championing the rationale for changes in performance, defining financial benchmark and implementing systems to track performance against goals, supporting the development of corporate expansion strategies, mapping perspectives on market opportunities, evaluating skills and assets in place for pursuing opportunities and recommending programs to enhance skills to fill gaps, performing business and financial evaluation of specific proposals.

Using the Capital Asset Pricing Model ( CAPM ) , he should be able to identify the appilcable hurdle rate ( which is defined as the Weighted Average Cost of Capital or WACC ). Return on Equity ( ke ) is defined as the sum of the Risk-Free Rate and the Product of its Beta and Market Premium ie. ke = rf + b*(rm - rf) ).

In order to create value, he needs to assess whether the business model is capable of maintaining and or sustaining a competitive advantage period ( CAP ) during which the business model is able to generate superior Return on Invested Capital ( ROIC ) in Excess of its Cost of Capital or Return in Excess of Cost of Capital (RECC) .

Financial indicators should include Operating Margin ( i.e. Earning Before Interest and Tax ( EBIT ) over Sales ) and Asset Turnover Ratio( Sales over Invested Capital ). Enterprise Value ( EV) is the consequence of the value based management process that involves thinking strategically that will lead to the underpinning TODAY of the future cashflow that shall arise from the successful business execution of the said strategy. For a steady-state type of model, EV is equalled to EBIT(1-tax rate) over Hurdle Rate. With growth, EV can improve to EBIT(1-tax rate) over Hurdle Rate less Growth Rate. ( When growth rate exceeds the hurdle rate, this formulation has to be modified).

Next: He must also plan and execute majors initiatives required to implement strategies which shall include developing value creating optimal capital structure and dividend policy, designing and managing strategy for communicating the key elements of plans and performance to investors and all the financial community...

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Chief Financial Officer – What Constitutes Competency? ( II )

Senior executives with similar mindsets will compete along predictable lines, and the results would be more features added to the product offerings to the extent that the average consumers are overwhelmed by them and honestly speaking have no need for most of the esoteric features.

So on one hand, executives must develop a proposition that balances value and innovation. On the other, it must gain traction, and generates sufficient revenue to underpin superior economic profit. Hence the link between business corporate and financial strategies is getting more critical and it requires substantial effort and resources to manage value. So, is managing value mission-critical? The alternative to that: can we afford to ignore value-based management?

Increasingly, companies must reinvent in order to come up with the next generation of products to seek out uncontested market space and underpin revenue growth. As such, the task of communicating to investors, also known as investor relationship cannot be over-emphasised and is another responsibility of the CFO.

Being the finance top-dog , the CFO is expected to take the lead in drawing up a strategy roadmap. Success is measurable in terms of how well the company has made the transition into value creation. The CFO plays a vital role in partnering with the CEO by acting as his confidant on major strategic and operational issues, as well as the no less important tasks of overseeing the financial and planning functions i.e. budgeting, internal control and financial management. He must be visionary in creating value, and this includes implementing a framework for evaluating plans with value creation potential.

Next: His job scope would include something along the following lines:He must be fearless in challenging the norms......

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Chief Financial Officer – What Constitutes Competency? ( I )

We read in the newspaper with interest on whether a person at a young age of 26 is capable of discharging the duties and responsibilities expected of a Chief Financial Officer ( CFO ).

The question is essentially what makes for a competent CFO? At the higher order, question can be phrased as whether he is trustworthy – i.e. a person who has integrity and the competency to fulfill the task entrusted on him. Taking an extreme example, a person can be a genius but hasn’t an iota of honesty in him. From the recent global fallouts, local shakeouts, if our memories do not fail us, there is no lack of examples of such traits. Would you have such personalities? On the other hand, an honest man who is clueless as to what he is doing is unlikely to do his job properly. Would you have him too?

Efficiency is regarded as a key measure of corporate governance, and breakdowns in governance could significantly erode business efficiency. Well-functioning markets require accurate information to allocate resources, and market participants must have confidence that our predominately voluntary system of exchange is transparent and fair. Unless the laws governing how markets and corporations function are perceived as fair, economic system cannot achieve its full potential. With globalization, corporates are finding the going tough, as traditional barriers are no longer capable of adequately protecting their turfs. With increasing choices, stakeholders are taking centre stage. Shareholders will vote with their feet if they do not get a decent return on their investment, consumers will gladly part their monies to your competitors if your product is not up to speed, and employees are likely to move when their efforts are taken for granted.

Corporates have no choice but to adopt an outside-inside approach. They must be customer-centric. This means that they have to be serious in wanting to understand the ever evolving needs of the customers. The only constant is change – so the saying goes.

Next: Senior executives with similar mindsets will compete along predictable lines, and the end result would be more features added to the product offerings to the extent that the average consumers are overwhelmed by them and honestly speaking have no need for most of the esoteric features.....

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Customer Centric Wealth Management Competency

This week I caught up with some old friends for lunch and we had some interesting discussions.

One of them mentioned that he has been approached by financial service providers offering wealth management products and services. After having gone through their proposals, he remained yet to be convinced of the value proposition of these service providers i.e. financial planners and or private bankers.

His view was that he could obtain a risk-free return of say 3-4%per annum in a fixed-income product, and the best these service providers could do is to offer a return of non-guaranteed return of 8% per annum. He felt that the services offered were of limited value, and this essentially would be in the form of providing a listing of funds with details on their respective performances. He felt that he would be better off constructing his own portfolio.

Without dwelling into the details, here are my observations.

First, we have a valuable insight from a prospective consumer and he felt that the choices available were not up to his expectations. Second, the service providers appear unable to articulate and communicate their execution capabilities to convince my friend of the whys and hows of wealth management. Obviously, wealth management is an art as well as science, and for the uninitiated, the literature can be and is overwhelming. However, one should not underestimate the intelligence and instinct of the consumers.

The present state of offering these services certainly can be improved through education and or competency-based learning.

Competing on the same paradigm, and with supply outstripping demand, growth for the wealth management industry is likely to be curbed unless service providers can provide value innovation in their services. The underlying discomfort is about fees levied by the service providers for services that are perceived to be of limited value.

The challenge is for the wealth management industry to come up with a set of competency -based learning program that is customer-centric in orientation. The likely winning proposition could be one where the service providers and or the industry can offer tools that empower the individuals to measure and manage their wealth. It is hope that uncontested space can be created and rendering the competition irrelevant. After all we are talking about world class talent and the world is our stage. So would be our competition.

Well the opportunities are.......mavens ( typically consumers ) , training providers, value based management, human resource , learning development consultants as well as service proivders can come together to draw up a strategy roadmap to make Singapore the wealth management mecca.

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