EI Finance 4 Growth Workshop 15 th February 2011

Transcription

1 EI Finance 4 Growth Workshop 15 th February 2011

2 EI Finance 4 Growth Workshop Series 15 th February, 2011 THE STRATEGIC ROLE OF THE CHIEF FINANCIAL OFFICER Ilya Strebulaev Stanford Graduate School of Business

3 Ideal CFO: What Do Board Members Think? The following personal qualities are the most important in a CFO:* 1. Personal integrity 2. Independence (willingness to challenge the CEO or other managers) 3. Communication skills 4. Leadership ability 5. Team player (willingness to compromise) *Source: Survey of 434 corporate directors; CFO Magazine, 2005, January, p. 42 3

4 Ideal CFO: What Do Board Members Think? The following professional qualities are the most important in a CFO: 1. Strategic sense 2. Accounting expertise 3. Budgeting and planning ability 4. Management skill 5. Capital-markets knowledge Source: Survey of 434 corporate directors; CFO Magazine, 2005, January, p. 42 4

5 Changing Role of CFOs The world the CFO now lives in is different technical accounting skills are not as important. Finance must get closer to the business and partner with them to achieve objectives. Finance must also be confident enough to challenge the decision-making process. Paul Whelan, CFO, Telefonica O2 Ireland The recession has really highlighted the need for Finance to have a broader business understanding Finance is most successful when it understands what is really going on in the organization, is able to communicate these insights effectively, and is in a position to exert influence where needed 5

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7 Ideal CFO Assessment: Major Risks

8 Ideal CFO Assessment: Major Risks Average Median 4 or 5 Public U.S. Ideal CFO Assessment: Major Risks Cyclicality/GDP % 44% Commodity prices/fx Unexpected inflation % 30-45% % 35% Interest rates % 45% Distress % 18% Size % 29% Regulation % Competition % Obsoletion %

9 CFO Assessment from L4G Programme: Goals 1. I want Board of Directors to see me as the strategic financial leader 2. Open my mind to new techniques and methodologies 3. Improve negotiation and conflict management skills 4. Potentially become CEO in a future business 5. Improve ability to deal with internal management issues 6. Become a strategic contributor and thinker 7. Enhance hard and soft skills 8. Reduce micromanagement and improve efficient delegation 9. Develop long-term vision skills 10.Improve leadership skills 11.Improve my financial knowledge 12.Improve communication with senior management 13.I want to develop a bigger picture 14.Be able to lead and take responsibility as opposed supportive position currently in place 9

10 CFO Assessment from L4G Programme : Big Strategic Decisions IPO/trade sale Completing significant acquisitions Opening foreign sub Branching into related product lines Increasing direct sales force Entering new geographic market Exit for shareholders in 3-5 years Searching for strategic alliances Possible change of ownership Establish based operations in the UK in the next 12 months Making and acquisition abroad Identify new markets and new acquisitions Potential spin-off of one or possible more of the core businesses Whether to look for or accept a trade sale Participation in larger government programs Concluding Vision 2015 plan

11 CFO Assessment from L4G Programme: Challenges Managing and financing growth Transition from small to medium Make sure that business decisions are grounded in sound financial criteria Limited horizon of products Managing multi-site, multi-culture organization New competition M&A by competitors make them stronger Competition against global giants Retaining highly skilled staff Delivering solutions in various countries Sourcing new funding Scalability of the current model Fund raising to secure debt finance for M&A Valuation of potential targets Integration of acquired companies Lack of capital is a major issues Aligning interests of VC investors and other stakeholders

12 MAJOR STRATEGIC CHALLENGES Agility and flexibility to adapt to unexpected market shocks What is your visibility if major source of funding is disrupted? Scenario analysis External vs internal financing Non-financial role of VC/PE: most important overlooked point about financing by small growth companies Vision and long-term planning Does your firm have a clear and well-defined vision? Do you have a transparent long-term plan? Goals? 12