IBM Institute for Business Value. Brazil Point of View IBM Corporation

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1 IBM Institute for Business Value Brazil Point of View

2 Introduction The 2010 IBM CFO Study is the fourth edition since 2003 and builds upon our primary research from 2005 and 2008 CFO Studies CFO Study Brazil Point of View

3 Introduction The Global CFO Study 2010 is the largest CFO-level study of its kind with over 1,900 participants, 70 participants in Brazil Asia Pacific, 27% Geography EMEA, 42% Americas, 31% Others, 8% Global CFO Study 2010 Firmographics Title Enterprise Size (US$) >$20B, 14% >$10B to $20B, 7% >$5B to $10B, 11% >$1B to $5B, 28% <=$500MM, 25% $501MM to $1B, 15% Public, 13% Industrial, 25% Scope of Role BU / Program Area, 5% Others, 1% Sector Communications, 13% Financial Services, 20% Distribution, 28% SVP / Controller / Treasurer, 14% CFO / Deputy CFO / Director, 78% N = 1,910 Geography = Country of Company Headquarters 3 CFO Study Brazil Point of View Country, 27% Region, 11% Enterprise / Global, 57%

4 Introduction In Brazil, there is a good balance in terms of enterprise size and sectors, with an impressive participation of CFOs Brazil CFO Study 2010 Firmographics Enterprise Size (US$) Sector >$20B, 23% Less than $1B, 21% Industrial, 24% Public, 4% Communications, 10% >$10B to $20B, 9% >$5B to $10B, 17% Financial Director 9% SVP 7% N = 70 4 CFO Study Brazil Point of View Title Others, 3% >$1B to $5B, 30% CFO 81% Financial Services, 25% Country, 54% Scope of Role BU / Program Area, 3% Distribution, 37% Enterprise / Global, 26% Region, 17%

5 Introduction CFO Study 2010 key messages Leading Finance organizations are evolving to become Value Integrators and thereby more effective executing on their core Finance activities, monitoring business performance, driving the integration of information across the organization and managing enterprise risk. There are two capabilities that Value Integrators have focused on to improve their Finance effectiveness and contribute to enterprise outperformance. Finance execution excellence matters more than ever. CFOs that have more efficient Finance organizations are more successful at driving operational excellence. Finance organizations must also deliver value through analytics and business insight. Those that have strong business insight are helping drive greater value across their enterprises. By doing both well executing core Finance activities efficiently and providing the insight their businesses need Value Integrators are helping their enterprises make smarter decisions. 5 CFO Study Brazil Point of View

6 Introduction Our study was conducted at the height of the economic crises and comes to market as signs of a new economic environment emerge Economic Environment, Recent Past and Looking Forward Global Financial Crises Liquidity driven crises Real estate bubble burst Failure of collateralized debt obligations Drop in global commerce Cost reduction pressures Rising unemployment Drop in commodity values Dramatic drop in consumer demand Increased risk, volatility and uncertainty 3 0 % 2 0 % 1 0 % % % % % Signs of Stability Change in Industrial Production World Emerging Asia Emerging Economies Advanced Economies Oct Consumer Confidence Mfg. Purchasing Manager s Index Emerging Economies World New Economic Environment Subdued growth Continued cost pressures Continued high unemployment Reduced global commerce and demand End-to-end stimulus and government hand in business Sovereign debt concerns Industry restructuring and consolidation Continued uncertainty, elevated volatility and risk Advanced Economies Source: IBM Institute for Business Value; Based on IMF Global Economic Outlook Sep. 2009, CPB Netherlands Bureau for Economic Policy Analysis 24 Dec. 2009, JP Morgan Global Manufacturing PMI (Jul 2006 Dec. 2009) 6 CFO Study Brazil Point of View Nov

7 Introduction The recent economic conditions have had minimal impact on Brazil. The new challenges and opportunity environment for CFOs is the same, though Economic Opportunities Brazil Environment Finance s Role for Economic Opportunities Trend of consolidation & globalization Increase of capital availability Foreign capital entrance Credit availability Stable inflation Economic Challenges Market competition for internal and external demand increase Government stimulus & policy impacting economics scenarios Demand for transparency 7 CFO Study Brazil Point of View Achieve value and synergies from mergers Optimization of capital structure Optimize risk and compliance process including reporting Finance s Role for Economic Challenges Manage cost and resource allocation without losing competitiveness Reacting and anticipating with insight Enterprise performance considering corporative governance

8 Introduction This study examines how the CFO can make the enterprise smarter in an local momentum of growth and opportunities, but still with uncertainties CFO Study 2010 Provocative Topics! The impact of the New Economic Environment on the CFO s role? What Finance model achieves the optimal mix of capabilities needed to outperform?? What can CFOs do to enable timely and informed decision-making?? How can the CFO help the enterprise anticipate and shape its environment? 8 CFO Study Brazil Point of View

9 Introduction CFOs believe that industry / sector pressures will increase challenges and opportunities over the next three years Industry / Sector Changes Over the Next Three Years Brazil Global Need for faster decision making 80% Pressure to reduce cost base 78% Product / service demand growth 76% Need for faster decision making 74% Demand for external transparency (e.g., Board, shareholders, taxpayers, regulators) 73% Demand for external transparency (e.g., Board, shareholders, taxpayers, regulators) 69% Pressure to reduce cost base 71% Product / service demand growth 61% Ability to attract and retain talent 64% Ability to attract and retain talent 56% Potential access to short-term liquidity / longterm capital 47% Potential access to short-term liquidity / longterm capital 40% 0% 20% 40% 60% 80% 100% Brazil N = 70; Global N = 1,844 to 1,905 Note: Defined as enterprises selecting [5] Increase considerably and [4] Increase on a 5-point scale where [5] Increase considerably and [1] Decrease considerably 0% 20% 40% 60% 80% 100% Growth perspective for Brazil will intensify market competition, demanding faster decision making, more transparency and higher operational efficiency. 9 CFO Study Brazil Point of View

10 Introduction CFOs are taking a more prominent role in enterprise decision making Elevated Role of Finance Role of Finance in Driving Decisions Across the Enterprise Global Enterprise cost reduction management 45% 44% 89% Selection of key performance indicators 47% 41% 88% Capital asset management 34% 50% 84% Risk management 41% 42% 83% Prioritization of resource allocation 53% 26% 79% Strategic revenue planning 54% 24% 78% Business model innovation / reshaping 59% 19% 78% Information management strategy 39% 33% 72% 0% 20% 40% 60% 80% 100% Advisor (e.g., analysis and insight) Decision Maker (e.g., create the plan) N = 1,881 Note: Respondent choices included No Role, Informer, Advisor and Decision Maker 10 CFO Study Brazil Point of View Over 70% of CFOs believe they have an advisory or decision making role on the enterprise agenda.

11 Introduction In Brazil, more than the global average of CFOs are taking a prominent role in enterprise decision making Elevated Role of Finance Role of Finance in Driving Decisions Across the Enterprise Brazil Capital asset management 21% 74% 95% Prioritization of resource allocation 52% 42% 94% Selection of key performance indicators 41% 52% 93% Risk management 33% 56% 89% Business model innovation / reshaping 64% 24% 88% Information management strategy 33% 54% 87% Enterprise cost reduction management 45% 41% 86% Strategic revenue planning 69% 15% 84% 0% 20% 40% 60% 80% 100% Advisor (e.g., analysis and insight) Decision Maker (e.g., create the plan) Brazil N = 68 to 70 Note: Respondent choices included No Role, Informer, Advisor and Decision Maker 11 CFO Study Brazil Point of View Over 80% of CFOs believe they have an advisory or decision making role on the enterprise agenda.

12 Introduction However, Finance needs to improve its effectiveness in order to deliver on the enterprise agenda Core Finance CFO Agenda: Importance vs. Effectiveness Global Developing your people in the Finance organization Executing continuous Finance process improvement Strengthening compliance programs and internal controls Driving Finance function cost reduction 49% 55% 59% 61% 52% 75% 84% 83% Measuring / monitoring business performance 62% 85% Enterprise Focused Providing inputs into enterprise strategy (e.g., growth) Driving enterprise cost reduction (e.g., SG&A) 52% 59% 80% 80% Supporting / managing / mitigating enterprise risk 51% 77% Driving integration of information across the enterprise 39% 73% Importance Effectiveness Finance effectiveness continues to lag. Global N = 1,834 Note: Importance defined as enterprises selecting [5] Critical and [4] on a 5-point scale where [5] Critical and [1] Unimportant. Effectiveness defined as enterprises selecting [5] Very Effective and [4] on a 5-point scale where [5] Very Effective and [1] Ineffective 12 CFO Study Brazil Point of View

13 Introduction Finance effectiveness lags as well in Brazil, aligned to the global average, although the gap to deliver on the enterprise agenda is greater CFO Agenda: Importance vs. Effectiveness Brazil Developing your people in the Finance organization 47% 86% Core Finance Executing Continuous Finance Process Improvement Strengthening compliance programs and internal controls 49% 59% 80% 79% Driving Finance function cost reduction 61% 51% Providing inputs into enterprise strategy (e.g., growth) 54% 91% Enterprise Focused Measuring / monitoring business performance Supporting / managing / mitigating enterprise risk Driving integration of information across the enterprise 33% 47% 66% 89% 87% 81% Driving enterprise cost reduction (e.g., SG&A) 53% 74% Brazil N = 69 to 70 Note: Importance defined as enterprises selecting [5] Critical and [4] on a 5-point scale where [5] Critical and [1] Unimportant. Effectiveness defined as enterprises selecting [5] Very Effective and [4] on a 5-point scale where [5] Very Effective and [1] Ineffective 13 CFO Study Brazil Point of View Importance Effectiveness For enterprise focused activities, Brazil lacks slightly more effectiveness: 34% gap average against 26% at global.

14 Introduction A broader enterprise focused role requires core Finance efficiency be in place to reliably support business insight and decision making Addressing the Broader Enterprise Focused Role of Finance Demands on Finance Help drive enterprise cost reduction Improve access to and reduce cost of capital Finance Capabilities Needed Finance Efficiency Support risk management Provide performance insight and anticipate Partner in strategy and value creation Business Insight 14 CFO Study Brazil Point of View

15 Introduction Analysis of CFO responses and objective enterprise financial measures identified enablers to deliver efficiency and insight Finance Efficiency Finance Efficiency and Business Insight Enablers Enabler Corporate philosophy on information standards Common Finance data definitions and data governance Standard Financial chart of accounts Standard / common Finance processes Low Do not see any value in enterprise-wide standards High Enterprise-wide standards mandated for all business units and enforced Not adopted Enterprise-wide > 75% Not adopted Enterprise-wide > 75% Not adopted Enterprise-wide > 75% Business Insight Analytical capability (operational planning and forecasting) 1 People / talent (effectiveness of developing people in Finance) Technology (deployment of a common planning platform) Not deployed Ineffective Not deployed Satisfactory analytical capability Effective people / talent Deployed to a large extent 1 Also analyzed Scenario Planning, Predictive Analytics 15 CFO Study Brazil Point of View

16 Introduction Four Finance profiles become apparent when participants are segmented by efficiency and business insight Finance Profiles High Finance Efficiency Low Low Business Insight High 16 CFO Study Brazil Point of View

17 Themes Three key themes emerged from examining the four profiles Delivering efficiency through standards matters more than ever Providing business insight drives performance improvement beyond Finance The greatest rewards come from doing both well Today the activities are manual because of the existence of many systems. CFO, Brazilian Automotive Industry We have designed good processes and now we face the challenge to make people abandon old habits and use new processes. How to shape people and process? This is the key challenge. CFO, Brazilian Retail Industry 17 CFO Study Brazil Point of View

18 Efficiency through standards Finance continues to struggle with structural complexity due to issues related to automation and standards Over 50% of Enterprises produce financial metrics manually Nearly 10% have no information standards Efficiency Challenges 50% lack a common reporting platform Finance spends 55% of time on transactional activities Over 20% lack the necessary common data definitions and processes 18 CFO Study Brazil Point of View

19 Efficiency through standards Brazil goes beyond global respondents in standards and lags in automation and common reporting platform implementation Efficiency Challenges Financial metrics produced manually 39% 51% Percent of time spent on transactional activities 48% 55% Lack of information standards 9% 15% Lack of common data definitions and processes 21% 26% Lack of a common reporting platform 36% 50% Brazil Global Brazil N=70; N=65; N=70; N=70; N=70; Global N=1,895; N=1,478; N=1,867; N=1,892; N=1, CFO Study Brazil Point of View

20 The challenge in Brazil is greater than at the global level: larger transactional level today to evolve towards a same workload profile as the global, in three years 100% Efficiency through standards Global Finance Workload Distribution 100% Brazil 80% 49% 33% 80% 55% 33% 60% 60% 40% 26% 39% 40% 23% 39% 20% 0% 25% 28% Today 3 years 20% 0% 22% Today 28% 3 years Transactional Activities Decision support Control (and risk) activities Brazil N = 65; Global N = 1,478 Although the workload distribution is very similar, Brazilian enterperises have 6 points more transactional workload today than global ones. 20 CFO Study Brazil Point of View

21 Efficiency through standards Enterprises with high Finance efficiency are rewarded financially Finance Efficiency Contributes to Financial Outperformance Revenue Growth 5 Year CAGR ( ) Global EBITDA 5 Year CAGR ( ) Return on Invested Capital 5 Year Average ( ) 11.4% 10.3% 11.3% 9.3% 7.7% -1.2% Enterprises with high Finance efficiency All other enterprises Revenue Growth: N = 745; EBITDA: N = 698; ROIC: N = CFO Study Brazil Point of View

22 Efficiency through standards Enterprises with high Finance efficiency are also rewarded financially in Brazil Finance Efficiency Contributes to Financial Outperformance Revenue Growth 5 Year CAGR ( ) Brazil EBITDA 5 Year CAGR ( ) Return on Invested Capital 5 Year Average ( ) 17.4% 13.9% 16.0% 15.7% 11.3% -13.9% Enterprises with high Finance efficiency All other enterprises Revenue Growth: N = 34; EBITDA: N = 32; ROIC: N = CFO Study Brazil Point of View

23 Efficiency through standards Enterprises that have increased Finance efficiency are more capable to promptly react to external factor. In Brazil, they exceed the global average, with a higher gap to other enterprises Effectiveness Benefits of Finance Efficiency Finance Efficiency Helps the Enterprise React to External Forces Brazil Global Enterprises with Finance efficiency All other enterprises 70% 88% 26% better Enterprises with Finance efficiency All other enterprises 62% 74% 19% better Brazil N=70 Note: Defined as those enterprises selecting [5] Very Well or [4] on a 5-point scale where [5] Very Well and [1] Very Poorly Global N = 1, CFO Study Brazil Point of View

24 Efficiency through standards Enterprises that establish process ownership are far more likely to achieve the standards that enable Finance efficiency. In Brazil, standards adoption is higher in both cases Accelerator #1: Process Ownership Adoption of Process Ownership Brazil Global Enterprises with Finance efficiency All other enterprises 48% 88% 83% more Enterprises with Finance efficiency All other enterprises 33% 81% 145% more Brazil N = 70 Note: Defined as those enterprises selecting >51% adoption rate Global N = 1, CFO Study Brazil Point of View

25 Efficiency through standards Brazil s Finance efficient enterprises are aligned to the global respondents in the adoption of a common technology platform, which drives a greater adoption of standards Accelerator #2: Common Ledger and Accounting Transaction Applications Implementation of a Common Ledger and Accounting Transaction Applications Brazil Global Enterprises with Finance efficiency All other enterprises 78% 93% 19% more Enterprises with Finance efficiency All other enterprises 62% 91% 47% more Brazil N = 70 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all Global N = 1, CFO Study Brazil Point of View

26 Efficiency through standards Brazil is ahead of global respondents in the adoption of alternative delivery models although there is an opportunity for improvement Accelerator #3: Alternative Delivery Models for Transactional Activities Enterprise-wide Shared Services / Centers of Excellence or Outsourcing Adoption Brazil Global Enterprises with Finance efficiency All other enterprises 30% 53% 77% more Enterprises with Finance efficiency All other enterprises 29% 49% 69% more Brazil N = 70 Note: Defined as those enterprises selecting enterprise-wide where choices included enterprise-wide, Line of business consolidation, Country / regional-based, Not adopted Global N = 1, CFO Study Brazil Point of View

27 Efficiency through standards For decision making processes, the need for automation is more severe Process Improvements Undertaken for Decision Making Employed functional best practices Brazil 48% 67% Benchmarked process to external sources 56% 65% Common planning platform 33% 56% Automated financial workflow Common reporting platform 44% 48% 53% 53% Measure/monitor cross-functional processes 33% 44% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Enterprises with finance efficiency All other Enterprises The need for automation is real, even for the Finance efficient organizations: a little more than a half have common planning / reporting platforms or use automated workflows Brazil N = 70 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all 27 CFO Study Brazil Point of View

28 Themes Three key themes emerged from examining the four profiles Delivering efficiency through standards matters more than ever Providing business insight drives performance improvement beyond Finance The greatest rewards come from doing both well Employees need to have a comprehensive vision of the company s business processes. CFO, Brazilian Transportation and Logistics Industry Allocation of investment business by brand or specific activity is still based on questionable criteria. CFO, Brazilian Food, Beverages and Tobacco Industry 28 CFO Study Brazil Point of View

29 Business insight The majority of enterprises are not able to effectively deliver business insights Over 50% lack a common planning platform Business Insight Challenges Over 50% not satisfied with their operational planning and forecasting analytical capability Nearly 60% manually producing operational metrics Nearly 40% are poor to average at anticipating external forces 29 CFO Study Brazil Point of View

30 Business insight The following are examples of business insight from rear view to forward-looking view Business Insight Key Business Questions What happened? How many, how often? Where exactly is the problem? Why is this happening? What actions are needed? What will happen next? What if these trends continue? What are the risks or opportunities? Rear View Current View Forward-Looking View Examples of Business Insight 30 CFO Study Brazil Point of View Balance sheet, profit and loss, and cash flow statements Revenue and cost variance analysis Customer, product and market profitability Spend optimization Working capital analysis Market, customer and channel pricing Sales and supply chain effectiveness Cash forecasting Scenario-based planning and forecasting Strategic investment decision support Volatility and risk-based predictive and behavioral modeling

31 Business insight The majority of enterprises are not able to effectively deliver business insights. In Brazil, this challenge is larger for deployment of a common planning platform and automation of operational metrics Business Insight Challenges Lack of a common planning platform 49% 53% Not statisfied with operational planning and forecasting analytical capability 51% 55% Operational metrics produced manually 53% 59% Poor to average at anticipating external forces 39% 44% Brazil Global Brazil N=70; N=65; N=69; N=70; Global N=1,889; N=1,466; N=1,864; N=1, CFO Study Brazil Point of View

32 Business insight Objective financial data validates that decision making supported by business insight contributes to enterprise outperformance Business Insight Contributes to Financial Outperformance Revenue Growth 5 Year CAGR ( ) Global EBITDA 5 Year CAGR ( ) Return on Invested Capital 5 Year Average ( ) 12.5% 11.9% 9.4% 9.0% 7.3% 0.6% Finance organizations with strong business insight All other enterprises Revenue Growth: N = 580; EBITDA: N = 435; ROIC: N = CFO Study Brazil Point of View

33 Business insight Objective financial data validates that decision making supported by business insight contributes to enterprise outperformance as well in Brazil Business Insight Contributes to Financial Outperformance Revenue Growth 5 Year CAGR ( ) Brazil EBITDA 5 Year CAGR ( ) Return on Invested Capital 5 Year Average ( ) 17.5% 13.8% 9.4% 16.3% 12.9% -2.7% Finance organizations with strong business insight All other enterprises Revenue Growth: N = 33; EBITDA: N = 31; ROIC: N = CFO Study Brazil Point of View

34 Business insight Finance organizations in Brazil with strong business insight are performing slightly better than the global average Effectiveness Benefits of Business Insight Business Insight Helps the Enterprise Anticipate External Forces Brazil Global Finance organizations with strong business insight All other enterprises 51% 81% 59% better Finance organizations with strong business insight All other enterprises 51% 71% 39% better Brazil N = 65 Note: Defined as those enterprises selecting [5] Very Well or [4] on a 5-point scale where [5] Very Well and [1] Very Poorly Global N = 1, CFO Study Brazil Point of View

35 Business insight Finance organizations with business insight establish operational data standards, providing insight based on a common truth. Brazil exceeds the global average Accelerator: Establishment of Non-Financial Data Standards High Adoption of Non-Financial Data Standards Brazil Global Finance organizations with strong business insight 65% 81% more Finance organizations with strong business insight 53% 51% more All other enterprises 36% All other enterprises 35% Brazil N = 65 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all Global N = 1, CFO Study Brazil Point of View

36 Business insight Although almost 80% of the CFOs are concerned about decision making or demand growth, less than 60% are satisfied with current financial or operational analytics Analytical Satisfaction Brazil 58% Financial analytics 77% 46% Operational planning/forecasting 15% 49% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Brazil N = 65 Total Finance organizations with stong business insight All other Enterprises 36 CFO Study Brazil Point of View

37 Themes Three key themes emerged from examining the four profiles Delivering efficiency through standards matters more than ever Providing business insight drives performance improvement beyond Finance The greatest rewards come from doing both well Bringing an innovative (provocative) approach is important. CFO, Brazilian Insurance Industry The Finance organization will need to be more proactive in anticipating events and understanding data and transforming this into information that will allow the organization to make more informed decisions and less educated guesses. CFO, Brazilian Retail Industry 37 CFO Study Brazil Point of View

38 Efficiency + Business insight Value Integrators excel in both efficiency and business insight, contributing to financial outperformance Efficiency + Business Insight Contributes to Outperformance Revenue Growth 5-year CAGR, % Global EBITDA 5-year CAGR, % Return on Invested Capital 5-year average, % Finance Efficiency 9.8% 9.0% 9.3% 3.9% -2.1% -0.1% 10.2% 7.8% 11.6% Revenue Growth: N = 580; EBITDA: N = 531; ROIC: N = CFO Study Brazil Point of View Business Insight Business Insight Value Integrators also have an almost 20% better operating efficiency ratio than all other companies examined.

39 Efficiency + Business insight Value Integrators in Brazil, a growth market, experienced larger revenue and EBITDA growth and higher average ROIC than the global population s Value Integrators Efficiency + Business Insight Contributes to Outperformance Revenue Growth 5-year CAGR, % Brazil EBITDA 5-year CAGR, % Return on Invested Capital 5-year average, % Finance Efficiency 13.8% 13.7% 15.6% 9.0% -26.0% 8.0% 18.0% 1.0% 14.0% Revenue Growth: N = 33; EBITDA: N = 31; ROIC: N = CFO Study Brazil Point of View Business Insight Business Insight Value Integrators also have a 15% better operating efficiency ratio than all other companies examined.

40 Efficiency + Business insight The majority of enterprises are not able to effectively deliver business insights, in spite of being Financially efficient For a scorekeeper, whatever the chosen path forward Disciplined Operator or Constrained Advisor the financial outperformance produced as Value Integrator is generous Brazil 40% 35% 30% 25% 20% 15% 10% 5% 0% 19 Value Integrator Profile percentages (N count show in bars) 7 Constrained Advisor 24 Disciplined Operator 15 Scorekeeper However, in Brazil, it is more usual to have Finance organizations that excel in Finance efficiency than in analytical support. Brazil N = CFO Study Brazil Point of View

41 Efficiency + Business insight Value Integrators are more effective than those who excel in only one dimension of efficiency or business insight Effectiveness Across the Full CFO Agenda Scorekeepers (Baseline) 0% Disciplined Operators 19% Better Global Constrained Advisors 33% Better Value Integrators 59% Better Value Integrators Constrained Advisors Disciplined Operators Scorekeepers Driving integration of information across the enterprise Measuring / monitoring business performance Developing your people in the Finance organization Providing inputs into enterprise strategy Executing continuous Finance process improvements Supporting / managing / mitigating enterprise risk Driving Finance function cost reduction Driving enterprise cost reduction Strengthening compliance programs and internal controls 0% 20% 40% N = 1,454 to 1,469 Source: IBM Institute for Business Value, The Global CFO Study 2008, % 80% 100% Percent more effective than baseline 120% 140% 41 CFO Study Brazil Point of View

42 Efficiency + Business insight Value Integrators drive broader improvements in data and analytics, process, technology and people What do Value Integrators do differently? Streamlined information delivery Electronic data capture at the source Systematic data cleansing and auditing Business risks in performance reporting Employed functional best practices Utilized automated workflow tools Measurement & monitoring of processes Common reporting platform Common planning platform Global % More 32% 35% 31% 22% 31% 25% 41% 31% 22% 0% 20% 40% 60% Percent adopted 80% 100% Disciplined Operators Constrained Advisors N = 1,454 to 1,469 Note: Defined as those enterprises selecting [5] To a very large extent or [4] on a 5-point scale where [5] To a very large extent and [1] Not at all Source: IBM Institute for Business Value, The Global CFO Study 2008, CFO Study Brazil Point of View Value Integrators

43 The Path Forward The Path Forward 43 CFO Study Brazil Point of View

44 The Path Forward CFOs aspiring to evolve their Finance Model to higher capability should address performance gaps with specific action plans Paths to Higher Value High efficiency enabled by process and Finance data standards suggests Disciplined Operators focus on maturing business insight and partnering capabilities High Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value Finance Efficiency Scorekeepers can attempt a direct path to become Value Integrators. This will involve establishing Finance efficiency while simultaneously building business insight capabilities. Alternatively, a staged approach can also be done Low Low Business Insight High Constrained Advisors have good business insight, constrained by structural complexity, therefore address process and data standards to improve efficiency, accuracy and speed 44 CFO Study Brazil Point of View

45 The Path Forward The Scorekeeper is characterized by low efficiency and business insight capabilities, suggesting three possible paths With the proper mandate, sufficient resources and executive support, Scorekeepers should consider simultaneously addressing efficiency and business insight capabilities. Alternatively, a staged approach would suggest 1) addressing a Process and Data Standards foundation (efficiency first), then leveraging that to deploy improved business insight capabilities next or 2) addressing business insight capabilities first and then follow with standards Suggested Focus Areas Findings: Scorekeepers lack the standards that are foundational and essential to excel in either Core Finance or Enterprise-Focused activities Establish process owners and drive to process commonality Benchmark processes to identify underperforming areas and redesign Establish and enforce Finance data standards, as broadly as possible Rationalize and deploy a common Finance technology platform Increase automation of data acquisition and integration Drive error processing and reconciliation functions close to the source Consider accelerating the journey with less risk and cost by migrating to an established and proven platform Build upon improved Core Finance infrastructure to deploy leading analytical capabilities 45 CFO Study Brazil Point of View

46 The Path Forward The Constrained Advisor has low efficiency and high business insight, so the focus should be on standards and efficiency Current inefficiency may be making analytic support difficult & complex for Constrained Advisors. Addressing structural complexity inherent in Finance can help improve efficiency, timeliness and integrity of analysis. Suggested Focus Areas Findings: Constrained Advisors have advanced their analytical capabilities without addressing standards that improve speed, efficiency and reliability Establish process owners for core Finance and decision support processes Target core Finance processes to improve efficiency and speed Drive data standards for financial and operational metrics and analysis models Leverage commonality to automate more with technology 46 CFO Study Brazil Point of View

47 The Path Forward The Disciplined Operator is characterized by high efficiency but low business insight, so the focus should be on business insight Building upon a solid foundation of Finance efficiency, Disciplined Operators can concentrate on developing the high-value skills and tools required to provide forward-looking analytical support to the business. With their fiduciary and reporting responsibilities demanding less executive attention, they can invest more effort in becoming Value Integrators. Suggested Focus Areas Findings: Disciplined Operators have more advanced Core Finance capabilities and are positioned to leverage a foundation of standards to deploy analytics Apply process ownership and standards to decision support processes Apply data ownership and standards to analytical data and operational metrics Attract and retain higher order talent and deploy decision support COEs Drive commonality into the decision support technology platform Deploy advanced analytical models such as predictive modeling as deeply into operational systems as feasible 47 CFO Study Brazil Point of View

48 The Path Forward The Value Integrator is characterized by both high efficiency and business insight capabilities, so the focus should be on sustaining Value Integrators have achieved the requisite balance of efficiency and business insight to effectively partner on Enterprise-Focused activities. Suggested Focus Areas Findings: Value Integrators can maintain their advantage through a program of continuous improvement to sustain capabilities and value Adopt a continuous improvement program to sustain and expand current capabilities Deploy a robust governance and succession program for process and data management Increase focus on attracting and retaining talent Expand focus on value creation analysis to drive further performance improvements Protect from downside performance by embedding risk into performance analytics Embed risk measures and predictive analytics into operational systems and processes 48 CFO Study Brazil Point of View

49 Conclusions The CFO Study reveals that Value Integrators provide strong data points for our hypothesis They have implemented common process and data standards across their organizations to increase speed and curtail reconciliation and duplication. With reliable, integrated information as their springboard, they have also developed the talent, technology and analytical capabilities to proactively uncover and communicate business insight. By executing their core financial activities efficiently and providing the insight their businesses so desperately need, Value Integrators are helping their enterprises make smarter decisions. What Finance model achieves the optimal mix of capabilities needed to outperform? Finance Efficiency How can you increase the effectiveness of Finance to satisfy rising expectations? How do you drive the integration of information across the enterprise? How do you control costs and improve productivity? Value Integrators How can the CFO help the enterprise anticipate and shape its environment? What can CFOs do to enable timely and informed decision-making? Business Insight How do you ensure data integrity to produce valid insights? Do you have the business insight to drive performance improvement beyond Finance? Does your Finance organization have the talent to provide forward-looking insight? 49 CFO Study Brazil Point of View

50 Conclusions What will Brazilian CFOs implement in the next three years? Process simplification and information enablement are among the most important initiatives of the future CFO agenda Important Initiatives to Implement in the Next Three Years Enable process simplification Employ a decision support system Implement common reporting/planning platform Implement/rationalize application portfolio Move to Finance shared services Drive Finance data standards Outsource transactional processes Leverage labor arbitrage 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent selected Brazil N = CFO Study Brazil Point of View

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