The changing role of the financial controller - EY

1 financial controller network The changing role of the financial controller Research report Table of contents Welcome and overview 1 The FC journey: where from and where next? 2 The challenges seen The challenges ahead Finance function priorities and best practice 4 Four priorities for FCs The wider landscape 7 Investment and business environment roles in the finance function The changing role of the CFO financial controller 's personal development 10 CFO, divisional FD or FC? Recommendations for FCs This report considers the changes in the role of the FC over the last five years; it offers feedback, assessment Welcome and insight into the day-to-day role of the finance function. and overview Our commitment The continually increasing global reach and complexity of business means more exposure for FCs. to the FC. Finance is becoming a business partner at the heart of community the organisation.

2 As part of our continuing commitment to provide There is greater pressure to deliver higher quality financial controllers (FCs) management information. with the most up-to-date Pressure to improve and move from efficiency towards and relevant content, Ernst effectiveness is mounting, including the use of shared services, Jon Stanton, Partner & Young has commissioned outsourcing and dealing with the maturity of technical systems. this research. In the coming months we will be holding a number of associated events that will The chief finance officer (CFO), whose own role is evolving, cover a variety of directly and indirectly related topics and provide particularly towards investor relations, is passing more high level excellent networking opportunities. These are listed at the back of work to the FC. this report. Thus, the FC with ambition is being presented with more opportunities This report considers the changes in the role of the FC over the than ever before.

3 In particular: last five years; it offers feedback, assessment and insight into the The day-to-day work is increasingly stimulating and varied. day-to-day role of the finance function; and it offers suggestions for managing the individual's career. Remuneration and incentive packages are very attractive. The FC role provides an excellent springboard to becoming Key messages the CFO. According to our research, 82% of FCs believe that their job has become more challenging over the last three years. The research An already intricate and complex corporate finance function is This report focuses on the findings of Ernst & Young's research, fuelled by a changing regulatory environment, budget and resource conducted by Lighthouse, with FCs in late 2007. It also draws on constraints and plans for corporate expansion. There is an ever global Ernst & Young research carried out with CFOs available in full increasing need to gain both a technical and strategic edge.

4 On request at The FC research is based on 44. Management and investors have a seemingly insatiable appetite for interviews carried out in September, October and November 2007. information, which must always be delivered faster and in ever clearer Sixteen of these were conducted as in-depth qualitative interviews. formats. This requires not just accounting, tabulation and reporting of A further 27 interviews were conducted on-line. The interviewees data but attention to analysis, communication and presentation too. were selected from a spectrum of roles including: While there is no question that Sarbanes-Oxley and IFRS have tested 38 financial controllers the resources of both individuals and organisations, the challenges 1 Finance director and opportunities for the FC are increasing: 1 Executive search consultant Sarbanes-Oxley and IFRS are now embedded and there are few major regulatory changes in the pipeline (at least for the 4 Partners from Ernst & Young time being).

5 All 38 FCs who contributed to this study were from Britain 's most influential and successful companies. 60% of respondents work for companies with a turnover of 1bn+. The changing role of the financial controller 1. The FC journey: where from and where next? Understanding the journey that FCs and the finance function have been on over the last five years helps us to understand the current state and therefore how to assess and execute against future priorities. Respondents ranked the importance of challenges in the last five years and in the next. Eight out of ten FCs say their job has become more challenging in the last five years, while only 5% consider it to have become less challenging.. The challenges seen . Recruiting skilled finance people has . been clearly voted top for the last five . years. Close behind has been keeping up 3 BOLJOH.

6 To date with the legislative changes and regulatory changes demanded by Sarbanes- Oxley and IFRS.. Implementing regulatory changes has required an immense amount of manpower.. Moreover, there is also no margin for error: there has been significantly increased TJO F . QF r . IB UI . MEF Z . T. E. U. HZ. MT. FM. FO. TF. T. FE. FT. ST. MPB. CV OD. U. USP. JUZ BUJPO. FT. LF QBS. M D XJ. OO. regulatory scrutiny and yet the reporting PMP. FT. FN. OH. IF JOB. PSL. PO. STP. JDB UF. IO. SPD. TUB E . T. IP. BH. O U F G. NQ OGPSN. deadlines have not been relaxed! H D. IO EB. S. E X. QF. FD. H Q. BO. UIJ UI. TJO. SPN. G U. UP. MFY. TF. JBM. L N. WJO. PG. F P. J. SFB. Q. SFB. OD. S . Z G. V. PO GJMF. QSP. 3JT. P. 6T. BO H . JOB. The challenges ahead D. G. *OD. *OD. UJO. DP. MVN E . UF. WF QJO. DUJ QSP. *N. J. E G. WP NBO. X. F . DSV. E. BUJ ,FF. GVO IF.

7 JMMF. E T. F. Looking forward and given the current H U. E E. TL. TF. WJO. JOH. TF. SFB. climate it is not surprising to see that JTM. SFB. QSP. U. SVJ. *OD. MFH. recruiting talented people remains the *OD. *N. D. 3F. number one challenge. This was mentioned by almost all of our survey respondents. 3 BOLJOH r OFYU ZFBST The major shift however appears to be the 3 BOLJOH r MBTU ZFBST. expectation that keeping up-to-date with new regulations will decline in importance over the next five years, dropping from second to sixth place. Many of the requirements of Sarbanes-Oxley and IFRS now embedded. However, although the worst is over, it may be only a matter of time before new regulations emerge. 2 The changing role of the financial controller Although maintaining compliance will still require energy and As a partner at executive search company Odgers Ray & Berndtson, oversight, normal service is being restored.

8 Paul Blackburn, the FC Mark Freebairn has a unique overview of the changing dynamics in the at GSK, is representative when he observes, finance function. We spent a great deal of time on governance over the last five Five years ago, he says, Finance directors were spending one years. But in 2006 and 2007 we have seen a return to normal day per week on investor relations, one day per week on corporate operations and business as usual. governance, and three days per week trying to help run the business. Now finance directors are spending two days per week Much of the last five years has been focused on dealing with on investor relations, two days per week on corporate governance, regulation but in an economically benign environment. Now that the and you are still expected to spend three days per week on trying to outlook is uncertain, the finance function is likely to have a role right help the business.

9 So finance directors are pushing more on to FCs.. at the commercial heart of the business as the challenges of dealing with a downturn move to the fore. This is most apparent in the FTSE Paul Blackburn, FC at GSK, agrees, 100 and private equity portfolio companies. The difference between the CFO and the FC is that the controller is Therefore, new challenges are materialising. Improving the profile more like the financial operating officer. They make sure everything of the finance function within the business has emerged as a new is running well, there are no surprises and the audits are good. The priority, moving up from being perceived as only the sixth most CFO keeps on top of the numbers, but he has a big external focus in important challenge over the last five years to second in importance positioning the company with our investors.. for the next five years.

10 It is clear that new opportunities and challenges are opening up for FCs. The next three sections analyse how FCs can capitalise on those financial controller or financial operating officer? opportunities. First we consider the key priorities for the FC and the The importance of corporate governance and investor relations is finance function. Then we look at the role of finance, and finally offer growing and the focus of the CFO's job has shifted. In particular, some thoughts for the FC's own career development. the CFO is spending an ever increasing amount of personal time on investor and other external relations. This may mean that they delegate more difficult but stimulating work to the FC, who often to all intents and purposes has become a financial operating officer. Often this role encapsulates the day to day management of the global finance function, financial planning and analysis (strategy), treasury and tax, and project work related to acquisitions, disposals and the broader business development agenda.