CFO AS ADVISOR JUNE 16, 2014 MACPA. Copyright 2008 RIGHT ADVISORY LLC. All Rights Reserved

Size: px
Start display at page:

Download "CFO AS ADVISOR JUNE 16, 2014 MACPA. Copyright 2008 RIGHT ADVISORY LLC. All Rights Reserved"

Transcription

1 CFO AS ADVISOR JUNE 16, 2014 MACPA Copyright 2008 RIGHT ADVISORY LLC. All Rights Reserved

2 Instructor Background 2 Robert M. Tarola, CPA President Right Advisory LLC th St., NW Suite 500 Washington, DC (T) (W) (E) robert.tarola@rightadvisory.com Director and Audit Committee Member: Legg Mason Mutual Funds (10 years) TeleTech Holdings, Inc. (6 years) CFO Positions: W. R. Grace & Co. (9 years) MedStar Health, Inc. (3 years) Howard University (4 years) - Current Former Audit Partner: Price Waterhouse LLP (12 years) Advisory Boards: PCAOB Temple University University of Denver University of Baltimore Professional Boards/Affiliations: AICPA MACPA Licensed CPA in DC, MD, PA, VA Chartered Global Management Accountant Education BBA Temple University, 1973 International Who s Who of Professionals

3 Introduction 3 This presentation is designed to help CPAs and other finance professionals develop an understanding of the totality of issues facing CFOs and CEOs. With this knowledge, finance professionals, in business and public accounting, can better conduct their activities and advise their colleagues/clients to make more informed business and financial decisions. A Peek Into the C-Suite and Boardroom

4 Presentation Outline 4 What You Need to Know to be a Credible Advisor How Best to Advise Your Board Advising on Value Drivers Advising on Corporate vs Business Unit Issues How to Operate the Finance Function for Advising Advising on Risk Management Advising on Economic Factors Q&A at Any Time

5 Ruminations from the C-Suite What Keeps CEOs and CFOs up at Night? 5 Missing expectations investors, analysts, board, employees Not meeting organization commitments customer satisfaction, sales, profits, cash, product development Not meeting personal commitments people development, cost improvement, stakeholder satisfaction Threats from the outside competitors, litigators, takeover firms, regulators Does Your Work Cure C-Suite Insomnia?

6 The Corporate Reporting Supply Chain 6 Business Operations Internal Financial Reporting External Financial Reporting Investment, Lending, Regulations Economic Policymaking Companies Financial Publishers and Data Aggregators Investors and Creditors Central Banks Trading Partners Management Accountants Auditors Regulators Software Vendors Where Do You Fit-In?

7 What You Need to Know The Big Picture Understand the View from the Outside Investors Who are your top holders? Customers What are their desires and alternative options? Analysts Who covers you? Media Any special media that follow you beyond the traditional press? Regulators Who regulates your industry? Understand Their Agenda 7

8 The Big Picture 8 Understanding View from the Outside - Investors Who owns the enterprise? What is their investment thesis? What is their investment cost-basis? Who or what influences the investors? Are there any activist issues? How is your Investor Relations function perceived? Know Your Investor Base

9 The Big Picture Understanding View from the Outside - Analysts Do you know their financial models? 9 Do they trust you? What drives their advice? What companies are your peers in their minds? Can you (should you) influence their view of the enterprise? Companies Don t Miss Estimates Analysts Miss Actuals

10 The Big Picture Understanding View from the Outside - Regulators 10 How many government or oversight bodies impact your enterprise? you will be surprised! How can they influence your business and industry? Are you connected? Can you influence? Regulatory Surprises Can Impact Careers

11 Who Regulates Your Industry The Big Picture FDA Food & Drug Administration 11 EPA Environmental Protection Agency FTC Federal Trade Commission DOL - Department of Labor SEC Securities and Exchange Commission Stay close to the political factors

12 Helping the Board Management s Role Enlightening the Board about: Value drivers Risks Performance Compliance Perceptions Auditor s Role Informing the Board about: Activities Concerns Confidence Level 12 Should be Protecting the Board

13 Helping the Board 13 National Association of Corporate Directors: Wants Boards to embrace the following principles: Sensible Executive Compensation Effective Risk Oversight Demonstrated Corporate Responsibility Open Transparency Need to be Part of the Solution

14 Helping the Board 14 Current Board Room Hot Topics: Cybersecurity Enterprise Risk Management Regulatory Compliance Executive Compensation Succession Planning CFO Often Needs to Lead the Discussion

15 Helping the Board 15 Era of High Public Scrutiny and Frivolous Litigation Understand your financial and enterprise risks! Look beyond the balance sheet Comfort level of controls assess, evaluate, conclude, communicate Surprise quotient? Don t Know What You Don t Know

16 Key Value Factors Management credibility Competitive position Ability to innovate Capital structure Talent management Industry dynamics Risk profile Market perceptions The Value Drivers 16 C-Suite Focus on Value Creation

17 The Value Drivers Understand How Your Business is Valued Customer view Equity analyst view Debt analyst view Rating agency view Regulator view Investor relations view 17 Do You Know What They Think?

18 The Value Drivers 18 Financial Planning Long-term Mid-term Short-term World-Class Financial Processes Focus on Value Creation

19 Business vs. Corporate 19 C-Suite Has to Balance Often Competing Interests Compliance vs. risk taking Unfair? reward systems Should know vs. need-to-know Business value vs. corporate value Understand This Dynamic Be Seen as the Honest Broker

20 Business vs. Corporate 20 How to Drive Business Performance while Satisfying Corporate Governance Requirements Develop value-driven business plans Incorporate IR and Treasury Incorporate internal audit and risk management Plan with analyst story in mind Develop a Complementary Accounting Environment

21 The Finance Function How to Deliver Sophisticated Financial Services Financial planning and analysis Accounting and reporting Investor relations and communications Treasury and taxation Transaction processing and controls Internal audit and risk management 21 C-Suite and Board Count on You!

22 Financial Services How to Develop a Partnering Mind-Set Focus on value drivers Be service oriented Be a team player Why is it Important? Builds trust Enhances credibility Avoids finger pointing 22 Create a Value-Added Organization

23 No-Surprises Financial Services How to achieve? Why necessary? Who should be involved? How to set accountabilities? No Missed Deadlines 23 Part of the service culture Customers rely on commitments Help establish credibility C-Suite Bottom Line

24 Enterprise Risk Not just financial Risk Management Look beyond the balance sheet Includes operational, reputation, legal compliance and regulatory risks Incorporate in all plans and decisions Assess against Key Value Drivers Guidelines COSO and COBIT Frameworks 24 C-Suite and Board s Primary Responsibility

25 Questions to Ask: Risk Management 25 What Might Go Wrong? (and Why?) What Must Go Right? (and Why?) Design Metrics to Address Both Questions Fiduciary and compliance Strategic and competitive Develop Metrics That Matter to Monitor Risk

26 Economic Analysis 26 Apply Macro- and Micro-Economic Theory and Analysis: To address the impact on investment and operating decisions To determine proper accounting treatment for an event or transaction To assess risk related to business cycles and value inputs To create the story for investors and analysts Economics Drive - Decisions, Accounting, Disclosure

27 Economic Analysis What you Need to Know in Order to Measure and Account for the Economic Effects of Transactions: Business purpose? Desired outcome? Financial resources at risk? Who serves to gain? Who bears risk of loss? What are expected returns? Are accountabilities clear? 27 An Impartial Assessment is Critical to C-Suite

28 Summary 28 Focus on Information Needs of Outsiders Board, Investors, Analysts, Customers Understand the Value Drivers of the Enterprise Coordinate the Interests of Corporate and Business Objectives Create a Value-Added, Credible Financial Services Function Evaluate Risk in the Broadest, Most Complete Way Become the Owner of Impartial Economic Analysis Credibility = Sound, Impartial Advice from Finance Professionals