The CFO s Role in Resource Management

Transcription

1 The CFO s Role in Resource Management FMI PD Week November 25, 2010 Brian Pagan Director General, Resource Management and Deputy Chief Financial Officer, Fisheries and Oceans Canada Brian.Pagan@dfo-mpo.gc.ca Lori Watson Partner, Strategy and Transformation IBM Global Business Services watsonl@ca.ibm.com

2 Presentation Outline IBM 2010 Global CFO Study What leading Finance organizations are doing to improve finance/resource management efficiency and business insight Fisheries and Oceans Canada Case study Experiences challenges and lessons learned in advancing resource Experiences, challenges and lessons learned in advancing resource management

3 IBM Institute for Business Value IBM Global Chief Financial Officer Study Presentation to FMI November 25, IBM Corporation

4 Introduction We interviewed 166 Government CFOs out of a total study sample of over 1,900 CFOs The study represents different-sized government organizations in 27 countries, operating at different jurisdictional levels Industry (1910) Geography (166) Jurisdiction (166) Other (5%) Finance 9% Government Canada 20% 13% Communications 26 Other developing Europe Local / municipal Regional / state National / federal Distribution 28% 25% Industrial AP US We interviewed CFOs personally, in their offices, during May-Oct The aim was to understand how as CFOs they are responding to the new economic environment. We compared their responses with private sector counterparts to highlight the issues that stand out for Government CFOs and compare their progress in developing Finance capabilities. Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

5 Introduction In Ottawa Bank of Canada Canadian Blood Services Canada Post Corporation Canada Revenue Agency Canada School of Public Service Canadian International Development Agency Canadian Nuclear Safety Commission Canadian Security Intelligence Services Canada Border Services Agency Canadian Institutes of Health Research Department of Foreign Affairs Elections Canada Environment Canada Export Development Corporation Fisheries and Oceans Canada House of Commons Indian and Northern Affairs Canada Industry Canada Department of National Defence Public Health Agency of Candaa Transport Canada Office of the Comptroller General Victorian Order of Nurses There was also provincial government representation (Ontario, British Columbia, Alberta) 5 CFO Study Government Point of View 2010 IBM Corporation

6 The Challenges facing Government CFOs Government CFOs are anticipating particularly strong external forces with a combination of budget cuts and demand for increased services Industry / Sector Changes Over the Next Three Years Demand for external transparency 67% 84% Pressure to reduce cost base 79% 78% Government Private Sector Product / service demand growth 59% 73% Need for faster decision making 68% 74% Ability to attract and retain talent 49% 57% 0% 20% 40% 60% 80% 100% Government N = 132 to 165 ; 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 Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

7 The Challenges facing Government CFOs Government CFOs rate themselves as less effective than the private sector, particularly l measuring performance and reducing costs Current Effectiveness of Finance (Enterprise Wide Activities) Providing input to strategy 51% 52% Measuring / monitoring business performance 38% 64% Addressing enterprise risk Integrating information 35% 39% 48% 52% Government Private Sector Driving enterprise cost reduction 42% 60% 0% 10% 20% 30% 40% 50% 60% 70% Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

8 The Challenges facing Government CFOs Core Finance activities remain important, but the biggest effectiveness gaps are in Enterprise focused Finance activities Core Finance CFO Agenda: Importance vs. Effectiveness Government Strengthening compliance programs and internal controls 83% Gap Developing your people in the Finance organization 87% 58% 29% Executing continuous Finance process improvement Driving Finance function cost reduction 45% 55% 58% 64% 84% 19% 29% 13% Enterprise Focused Providing inputs into enterprise strategy (e.g., growth) 2 Supporting / managing / mitigating enterprise risk Driving enterprise cost reduction (e.g., SG&A) 42% 79% 1 Measuring / monitoring business performance 38% 79% 3 Driving integration of information across the enterprise 35% 51% 48% 69% 81% 78% 30% 30% 37% 41% 34% Importance Effectiveness Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

9 What Government CFOs need to do now becoming a Value Integrator Despite progress, Government CFOs continue to struggle with achieving efficiency and delivering business insight Efficiency and Insight Challenges Finance spends 46% of time on transactional activities 40% lack a common reporting platform Over 60% manually produce operational metrics and there is only a 38% confidence in the realibility of operational metrics 59% not satisfied with their operational planning and forecasting analytical capability Over 40% of organizations produce financial metrics manually 26% lack the necessary common data definitions and processes Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

10 What Government CFOs need to do now raise CFO profile Most Government CFOs are taking an active role in advising and decision making across all items on the CFO s agenda Enterprise cost reduction management Selection of key performance indicators Prioritization of resource allocation Business model innovation / reshaping Risk management Strategic revenue planning Capital asset management Information management strategy Elevated Role of Finance Role of Finance in Driving Decisions Across the Enterprise 60% 57% 56% 45% 35% 47% 62% Government 28% 34% 25% 31% 26% 26% 24% 25% 18% 63% 59% 76% 73% 86% 81% 81% 80% 0% 20% 40% 60% 80% 100% Advisor (e.g., analysis and insight) Decision Maker (e.g., create the plan) We need to get the Finance organization to change - to become more persuasive to drive change across the organization US CFO Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

11 The Value Integrator Finance must have key competencies in order to deliver efficiency and insight Addressing the Broader Enterprise Focused Role of Finance Demands on Finance Provide performance insight Help drive enterprise cost reduction Provide transparency and accountability Support risk management Integrate information Partner in strategy and value creation Finance Capabilities Needed Finance Efficiency Business Insight Competencies Corporate philosophy on information standards Common Finance data definitions and data governance Standard Financial chart of accounts Standard / common Finance processes Analytical capability (operational planning and forecasting) People / talent (effectiveness of developing people in Finance) Technology (deployment of a common planning platform) 11 CFO Study Government Point of View 2010 IBM Corporation

12 The Value Integrator Four Finance profiles become apparent when participants are segmented by efficiency and business insight Finance Profiles High Finance Efficiency Low Low Business Insight High Source: IBM Institute for Business Value, The Global CFO Study CFO Study Government Point of View 2010 IBM Corporation

13 The Value Integrator Government CFOs feel that they are more efficient in core Finance efficiency a good platform on which to build, but more progress on all fronts is needed Government CFOs rate themselves more efficient in core Finance High Disciplined Operator Value Integrator Global Govt: 39% Global Govt: 22% Private Sector: 34% Private sector: 23% Core Finance Efficiency Scorekeeper Constrained Advisor but less well equipped to better inform enterprise decisions Global Govt: 31% Global Govt: 8% Private Sector: 33% Private Sector: 10% Low Low Source: IBM Institute for Business Value, The Global CFO Study 2010 Business Insight High 13 CFO Study Government Point of View 2010 IBM Corporation

14 The Value Integrator Value Integrators drive broader and continuous improvements in all the areas where Finance operates What Do Value Integrators Do Differently? Drive data integrity and integration Use decision support analytics to drive continuous improvement Reflect business risks in performance reporting Streamline information delivery People Data & Analytics Have clear accountability re: managing and improving performance, managing risk Attract and develop talented staff, with advanced analytical skills Seek and apply more efficient and effective delivery models, i.e. Centers of Excellence Maintain standardized Finance processes Extend planning and decision support processes beyond the Finance function Focus on continuous process improvements through benchmarking and process owners Operating Model Process Technology Rationalize and standardize planning, forecasting, reporting and analytical applications Are early adopters of sophisticated planning and analytical functionality 14 CFO Study Government Point of View 2010 IBM Corporation

15 The Value Integrator Global study data indicates that those that excel in both efficiency and business insight are more effective Effectiveness Across the Full CFO Agenda Scorekeepers (Baseline) 0% Disciplined Operators 19% Better 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 ing Finance function cost reduction Driving enterprise cost reduction Strengthening compliance programs and internal controls 0% 20% 40% 60% 80% 100% 120% Percent more effective than baseline 140% Source: IBM Institute for Business Value, The Global CFO Study 2008, CFO Study Government Point of View 2010 IBM Corporation

16 What Government CFOs need to do now tackle their unique challenges CFOs should look at ways of making the organization smarter to deliver more with less, rather than just downsize Other Govt. entities Explore operating models Reallocate resources based on service value Reduce fraud and abuse Explore new channels for service delivery (e.g., online) Identify revenue opportunities (e.g., value based pricing on services) Private companies (e.g. by partnering with public or private sector parties) Integrate back office processes Shared service centers Improve procurement Government Services Di Drive better asset utilization Rationalize infrastructure (IT virtualization, cloud computing) The major challenge will not be to reduce expenses, it will be to spend smarter Mexican CFO 16 CFO Study Government Point of View 2010 IBM Corporation

17 Conclusions Conclusions To tackle the immediate challenges facing CFOs, as well as to build the capabilities needed for the long term, Government CFOs need to: Identify the critical gaps in the capability of their Finance function, ensuring there is a foundation of sound data on which business insight can be built Build capabilities in the areas of greatest importance to the challenges ahead organization wide performance management and cost reduction Learn from both public and private sectors to set out an action plan to tackle the greatest gaps Build the authority of the CFO to contribute to strategic initiatives and to act as provider of insight and a decision maker, rather than scorekeeper and informer Work with senior executive colleagues to deliver innovative solutions across the organization; including new business models and operating models. It is a really exciting time to be a CFO. New Zealand CFO New Zealand CFO 17 CFO Study Government Point of View 2010 IBM Corporation

18 Implementing the CFO Model at tfisheries i and doceans Pi Priorities iti for Sound Financial Management November 25, 2010 P. 18

19 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Financial Management Framework Parliame ent Financial Legislation Departmental Enabling Appropriation Legislation / FAA / FedAA Legislation Fiscal Framework ARLU / Estimates / RPP / Supps / DPR / Public Accounts Expenditure Management System (EMS) Tr reasury Bo oard Financial Management Governance MRRS Policy / PAA / Management Accountability Framework (MAF) TB Policies, i Standards, d Directives and Guidance TB Financial Management Policy Framework (FMPF) Internal Control Financial Resource Management Financial Information & Reporting Financial Management Systems Transfer Payments (Gs&Cs) Investment Planning CFO Model P. 19

20 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Departmental FMF (Conceptual) es Policy Disciplin Go overnance S tructures Proces sses and Ena ablers Financial Management Governance TB Financial Management Policy Framework (FMPF) Internal Control Financial Resource Management Financial Information & Reporting Financial Management Systems Transfer Payments (Gs&Cs) Investment Planning DM as Accounting Officer and Governance Committees - Governance / Accountability Departmental Audit Committee and CAE - Independent Monitoring and Oversight Values and Principles Authorities and Frameworks * Controls and Systems Sign-Offs and Reporting Monitoring and Oversight Financial Stewardship Result ts Sound P. 20

21 Financial Management Governance Proposed Key DFO Frameworks * Authorities and Frameworks TB Financial Management Policy Framework (FMPF) Internal Control Financial Resource Management Financial Information & Reporting Financial Management Systems Transfer Payments (Gs&Cs) Investment Planning Dept l Fra mework Gu idance Responsibili ties Financial Management Framework Dept l Audit Committee Charter Performance Management Agreements Risk Management Framework Internal Control Framework (COSO) Statement on Internal Control Integrated Planning Framework Budget & Resource Management CFO Attestation Guidelines Integrated Financial Information & Performance Reporting Strategy Management Reporting Standards Audited Financial Statements TB Financial System Standards Data Interoperability Standards Common Data and Bus. Processes Transfer Payments Framework Program Design Guidance Procurement Review Committee Departmental Investment Planning Real Property Management Framework Measurement of Invest Performance P. 21

22 Expected Tangible Outcomes Monitoring and a strong challenge function to support the DMs, CFO and ADMs in meeting their FMF expectations suitable consequences are in place to address non-compliance and effective training / guidance is available to support stakeholders FMF is embedded in financial management governance of dept. FMF supported by a series of important enablers to guide managers e.g. Integrated Planning and Reporting Framework Budget and Resource Management Framework (BRMF) CFO Attestation Guidelines - MC and TB Submissions Processes Internal Control Framework (ICF) Forecasting Action Plan Chief Audit Executive (CAE) adopts FMF as a standard to assess department and performance P. 22

23 Integrated Planning One-Pass Planning process Sectors and Agency, in collaboration with Regions, develop national plans at the Program level CFO will develop the RPP and the Corporate Business Plan using information from the Business Plans CFO will provide guidelines for Operational / Work Plans to ensure consistency between regions and programs RPP Corporate Business Plan Budget Allocations HR Strategies & Internal Services Requirement Risk Management Performance Management Agreements Service Level Agreements Mid Year Review Performance Data P. 23

24 One-Pass Planning for Results August September October November December January February March CRP Priority Setting Mid Year Review E-Scan DMC DMC DMC Budget Allocation SLAs Program Plans Phase I Phase II Program Plans PMAs Operational Plans Work Plans Programs Sectors CCG Regions Corporate Business Plan DMC Approval DMC Approval Concise RPP Electronic RPP TPPP Corporate Business Plan Corporate Planning & Reporting P. 24

25 Integrated Budget Framework Key Components Purpose Context Values and Principles Governance Roles and Responsibilities Policies and Processes Legislation and Authorities The main elements of the proposed framework have been sourced from examples in other departments The proposed policies and process are the main areas, but directives and guidelines are also recommended to further training objectives The governance must be aligned with DMC, Finance Committee CFO Vision, Mission, Mandate to support decision making and oversight Capital and Investment Planning Strengthening Forecasting and Internal Reporting Funding Pressures Reallocations o Budget Transfers Budget Allocation Framework Salary Management Financial Coding Costing Partnering and Collaboration Arrangements Allotment Control and Treasury Reporting Revenue and External Charging Framework Treasury Board Submissions P. 25

26 The Forecasting Action Plan Identification of target carry-forward Final Adjustments for Supps C and internal pressures Approval of Business Plan and Department Report on Plans and Priorities Supply Periods Assessment of Actual Against P7 Montly Financial Reports P7 Position Simplified Budget Transfer Rules Adjustments for Supps B and internal re-allocations Launch of Business Planning Budget Allocations Completion of National Transfers PMA Commitments Adjustments for Supps (A) P. 26

27 Lessons Learned Understand culture and change management - Align organizational structure Trust and confidence is earned over time - Facilitated by being at the table Communicate and share information - Vertically / horizontally P. 27

28 Thank You!?? Questions?? Brian Pagan Director General, Resource Management and Deputy Chief Financial Officer, Fisheries and Oceans Canada Lori Watson Partner, Strategy and Transformation IBM Global Business Services