Designing a finance function to meet tomorrow’s … · Page 4 Designing a finance function to...

Designing a finance function tomeet tomorrow’s challengesApril campaign

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Finance function challenges and way forward

Achieving finance excellence

EY approach and value

FAAS contacts

Finance functionChallenges and way forward

Page 4 Designing a finance function to meet tomorrow’s challenges

Finance functions across the globe areaiming to add value

In delivering an effective support function to the organization, finance must balance its three key priorities: costreduction, compliance requirements and efficient operations.Be effective in driving forward the business► Deliver an effective finance support service to business units► Provide timely and accurate reporting and business information► Strengthen business decision making throughout the organization► Provide challenge to the business► Be seen as a valued partner to the business

Promote strong governance and control in the organization► Design an appropriate financial control framework► Facilitate improvements in control in the business► Promote management of financial risk to the organization► Meet increasingly onerous statutory and regulatory requirements

Be efficient in the operation of the finance function► Reduce the costs of the finance function► Realize benefits of investments in finance► Integrate finance teams of acquired businesses► Streamline commodity processes including reporting

Back-office focus

Effectiveness

Potential balance

EfficiencyControl

Striking a balance for the organization

The key challenge for finance is to improve in all three dimensions while retaining the appropriate balance for the organization.


Finance function key challenges in achievingits objectives

Responsivenessto business needs

► Limited time to focus on higher value-added activities (e.g., strategic planning and decision supportsystem)

► Inadequate focus on complex business performance management► Need for a closer integration between finance and other areas such as risk and technology► Silo approach leading to business inefficiencies

Technology

► Lack of preparedness and foresight to adapt to increasing and more complex reporting and businessneeds

► Inefficiencies in reporting − balance between speed, cost and output► Greater need for a single source of truth for financial information► Focus on data analytics, technology controls, cyber security and business continuity

Governance, riskand compliance

► Greater accountability on CFO and senior executives► Need to document and prove financial controls in an ever-changing business and regulatory environment► Need to balance cost and control, and embed control in business processes► Increasing regulatory, legislative, supervisory and contractual compliance pressures

Efficiency andcost pressures

► Rise of outsource usage and increase of finance activities available for outsourcing► Inadequate focus on leveraging low-cost geographies for finance and shared service centers (SSCs)► Need to leverage investments in technology to reduce cost► Need for standardization and simplification of finance processes

Business issues Finance function challenges


The way forwardFinance function: current focus and future considerations

► With the enhanced scale of operations, increasing complexities andconcentration of all critical and non-critical finance activities, there is animmediate need to have clear role definition for finance,segregation of duties between corporate finance and BU financeand a robust organization structure will assist the right peoplefocusing on the right business issues.

► Future considerations include robust planning, budgeting andforecasting, finance function improvement initiatives at a macrolevel and process level, with a solid governance and controlframework embedded.


The way forward

Technologyand data

People and organization

Future phasesCurrent scope

►Define role of finance,scope of activities,optimal organizationmodel and governancestructure

►Consistency of keyaccountingpolicies

►Further standardizationand streamlining of coretransaction processes (e.g.,within shared servicesenvironment)

►Governance frameworkand changemanagement

►Standardization of managementreporting and financial budgeting;global processes

►Assess ERP system;alignment of code blockbased on moreconsistent managementmodels

►Deploy single globalplatform for reporting

►Centers of excellence forspecialist functions

► Integrate solutions withenterprise data warehouse

►Deploy single global platformfor financial planning

►Expand planning processtransformation: strategic plan;operational planning processes6

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Processand policy

►Transition to local GAAP►Fast close of books

►Establish commoncore structures forfinance operations

►Talent and performancemanagement processesfor finance

►Alignment offinancestrategyto overallbusinessobjectives

►SSC strategy and managedservices operating model

►Target operating model –design and delivery

►Processtransformation andreducing cost offinance

Strategic direction and decision support

Achieving finance excellence


Achieving the right balance

Strategic directionand decision support

People and organization Process and policy Technology and data

► Sharper cost focus► Elimination of operating silos► Continuous improvement of

support services► Appropriate operating model

► Appropriate or leanorganization structure, rolesand responsibilities

► Training, development andupskilling

► Defined career path

► Process simplification andstandardization

► Leverage technology andachieve automation

► Robust controls to mitigaterisks

► Harmonize accounting policiesand reduce GAAP differences

► IT strategy aligned with broaderbusiness objectives

► Act as a business supporter► Automation and integration

resulting in increased efficiencyand effectiveness

► Alignment of finance strategy tooverall business objectives

► SSC strategy and vision► Target operating model –

design and delivery (outsource,offshore, BOT, captive, etc.)

► Governance framework andchange management

► Analytics, reporting and insights

► Organization design► Improvement in structure, roles

and identification ofresponsibilities

► Training and knowledgetransfer

► Process reviews,documentation andstandardization

► Policies and procedures► Process risk and controls► Improvement in statutory

reporting► Legal entity rationalization► Local compliance and reporting

requirements► Internal and external reporting

► Review of IT strategy and itsimpact on finance organizationand SSC strategy

► Review of IT operations as acritical supporter to the financefunction

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Integrated by:► Robust project and change

management

► Business case development► Benefits realization► Migration strategy

► Readiness assessment► Acceptance criteria► Sign-off and approval

► Project planning► Transition planning


Strategic direction – overview and focus

Focus and rationaleThe strategic direction for shared or managed services is shaped and influenced by a number of change drivers:► Sharper cost focus: Many finance leaders are driving strategic change and cost management in the finance

function due to cost pressures and the overall need to align finance strategy to business objectives.► Elimination of operating silos: Some organizations sustained regional and functional silos during the past decade

of mergers, allowing systems and processes to proliferate. An SSC or managed service environment focusesattention on standards and end to end process excellence, eliminating silos and reducing costs.

► Continuous improvement of support services: Finance, IT, HR and other support services are under pressure tomake tangible contributions to earnings.

Work stream scope Points to consider Key supporters and options

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► Business and financestrategy

► SSC strategy and vision► SSC governance► Voice of the customer► Service management

framework► Service level agreements► Charging strategy► Business continuity

► How many SSCs should there be?► What is the underlying SSC strategy (back office transaction

processing, Centers of Excellence, hybrid)?► What does the business want to achieve through shared services?► How does the SSC align with the business strategy and

objectives?► What do the customers and stakeholders need?► How should the SSC be funded?► How should the SSC be governed?► How do we build in future scalability?► Who will the SSC report to?► Will the SSC be a cost or profit center?

► Global SSC operating models► Emerging hybrid models► Three-tiered operating model► Expert centers► Centers of Excellence► Finance maturity profiles► Captive managed services


People and organizational change – overviewand focus

Focus and rationale► Focus on recruiting and training staff with the appropriate processing skills, finance knowledge and language

capability► Reward and recognition frameworks that incentivize high performance and continuous improvement► To facilitate migration up the shared service value chain, there is a need for greater levels of skills in:

► Business understanding – understanding the context, complexity, dynamics, key issues and drivers of their customer’s business► Business analytics – the ability to analyze and interpret financial and non-financial data to provide insight► Business decision-making and problem answering – understanding how information impacts the business and to use this understanding

to advise decision makers

Work stream scope Points to consider Key supporters and options

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► Organization design andsizing

► Organization readiness

► Staff management

► HR transition

► Knowledge transfer

► Competency framework

► Job profile and descriptions

► Talent management

► Cultural blueprint design

► Recruitment strategy

► How should the shared services operation be organized (process,customer, etc.)?

► What are the key roles?

► What does the shared service culture need to be?

► How will we train staff?

► Is the business and organization ready, are the roles andresponsibilities clear?

► How will we incentivize people?

► What will the requirement be for language skills?

► Competency frameworks forfinance

► Opportunities to improveorganization and governancestructures

► Talent management strategies

► Finance academy


Process – overview and focus

Focus and rationale► When designing the SSC there is a need to review current leading practices in process design to determine how

these link to the challenges that the business is facing.► Process design should leverage integrated business applications, automation and workflow while reducing the

manual intervention.► Process, policy and data structures need to be standardized.

Work stream scope Points to consider Key supporters andoptions

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► Process transformation► Controls framework► Tax models► User Acceptance Testing (UAT)► KPIs and performance metrics► Document management► Data cleanse► Legal and statutory assessment► Operational review and status► Leading practices► Policies and procedures► Business calendar► Help desk

► What processes and activities should be included in the SSC andwhat is the criteria for inclusion?

► How do we make the transaction processing more streamlined?► How do we make management information more accurate and

usable?► When do I reengineer business processes?► What level of efficiency is expected from the SSC?► How do we meet the legal and statutory requirements of each

country in scope?► What tax efficient models could we adopt?► What standards do we need to adopt?► How is non compliance addressed?► Is risk management and control an integrated part of business

activity?

► Leading practices► Industry comparisons► Process diagnostic


Technology – overview and focus

Focus and rationale► Advances in web-based technologies and workflow-supporting technologies have been fundamental building blocks

for SSC implementations.► Web-based interaction with third parties enables efficiency savings through both greater automation and self-service.► Data and data management tools are increasingly important – particularly as organizations seek to improve returns

on their investments.► Smarter application of technological knowledge revolutionize working practices which can be achieved through

intelligent analysis of to-be stage and generating efficiency savings through the automation of current processes.

Work stream scope Points to consider Key supporters andoptions

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► Vendor management► Applications► System integration► Information management► Technical Infrastructure

► What technology do I need?► How can I leverage the existing IT infrastructure?► How do we link shared services to our IT strategy?► Will a vanilla software configuration be mandated?► Will we have a single instance, single configuration, common data

structures?► Should we adopt process improvement tools to be used to

automate routine transactions?► What does technology make possible?► What functionality can really transform the way we work?

► ERP (localized)► Imaging and document

archiving and retrievaltechnology

► Electronic data interface► Electronic funds transfer► Middleware► Employee self service► Data warehouse► Modelling tools► Spread sheets and end

user tools


Shared services or managed services?Operating model considerations

Decision criteria► Service can be shared► High degree of automation► Process can be web

enabled► Customers have access to

tools► Customer are able to make

cultural shift in serviceprovision

► High degree of expertise► Service required frequently► Proximity to customers and

decision makers essential► People providing service

are an integral part of themanagement of theenterprise

► Service can be shared► Process and systems

commonality► Critical mass exists to

enable economies of scale► Manually intensive work► Service can be remote from

customer

► Service can be shared► Process only used

periodically or occasionally► High levels of expertise

required► No critical mass of staff► Knowledge can be easily

transferred

► Service cannot be shared► Service required regularly► Local knowledge required► Systems and processes

unique to location► Not economic to

consolidate to SSC

Support function activities are allocated to different service delivery models with the aim of improving cost efficiency andraising quality or service levels.

Local and HQservice provision

Businesspartnering

Centers orCommunities of

Excellence

Self-service orvirtual shared

services

Physical sharedservices

Benefits► Very low cost► Flexible and scalable► Customers control service

levels

► Highly responsive► Focused on value creation► Experts used as experts not

administrators

► Low cost► Flexible and scalable► Accountable► Service levels and quality

can be controlled► Allow consistency of

service► Continuous improvement

► Pools scarce expertise► Improves cost efficiency► Service available to all

regardless of size► Environment designed to

create and shareknowledge

► Experts used as experts notadministrators

► Service level controlleddirectly by customer

► Highly responsive

EY approach and value


EY finance excellence methodology

Validate requirementsand performengagement specificplanning

► Understand thecurrent state

► Evaluate the currentstate

► Generate andprioritizerecommendationsand next steps

► Agree approach andrefine requirements

► Develop detaileddesign

► Finalize design andgain approval

► Developimplementation anddeployment plans

► Build and validateimprovements

► Execute deploymentplan

► Confirm operationaleffectiveness

► Support continuousimprovement

► Expand benefitsacross the extendedenterprise

► Define scope andopportunity

► Collect data

► Define vision andstrategy

► Analyze and developoptions

► Develop businesscase

► Developspecifications

► Develop detaileddesign

► Confirm approachand benefits

► Build

► Validateimplementation

► Implementation

► Stabilize

► Operate

► Improve

► Extend

1–2 weeks 7–8 weeks 16–20 weeks 12+ months 4 weeks – 6+months

* The above approach reflects very indicative timings. Actual timings could be different and would depend upon client context, project scope , complexity etc.

SustainIdentify Diagnose Design Deliver

Diagnosing the current state Designing and implementing the transformation Initiatives

EY can provide support as the company fulfills the following steps:


EY value

► Our depth of global experience, including extensiveresearch and analysis, provides strong subject matterresources and insights to our clients.

► Our team integrates advisory capabilities across ourmultidisciplinary service lines to deliver the full range ofrecommendations to address your needs.

Industry andsubject matterknowledge andteam

► We harness leading edge project management techniquesand tracked benefits delivery, supported by a clear changemanagement principles.

► Our integrated service delivery approach includes benefitsmanagement starting with an individual project and endingwith financial statement impact.

Methodicalexecution anddelivery

► We are able to help identify and deploy rapid savingsinitiatives that may fund the assessment, rationalization,review and realization phases of the improvement program.

► We work closely with client leadership to agree on acommon vision of success and shape a program that iscommercially compelling and realizable.

Rapid andefficientapproach

► We understand the psychology of cost – sustainability is thekey focus from the outset, considering cost effectiveness inrecommendations.

► We frame cost improvement opportunities in terms of adesirable end-state encouraging clear motivation to “takethe pain of change” out of the process.

Drivesustainability

► Clear action plan► Measurable benefits► Fast and efficient delivery► Proven approach► Industry knowledge► Leading practices► Risk management► Sustainable execution

Delivering results withindependence andobjectivity


* The above approach reflects very indicative timings. Actual timings could be different and would depend upon client context, project scope, complexity etc.

Service: Finance excellenceIndustry: Diversified industrial products

Case studyFinance excellence

Business drivers► Standardize and streamline the client’s finance

processes across various regions► Strong emphasis on reducing the overall costs and

reshaping the finance function► Improving finance operations to meet company’s overall

plan and business strategy► Strong focus on streamlining and simplifying finance

function to reduce manual intervention► Leveraging technology to reduce manual intervention

and to enhance control over the processes.

► Assisted in the development of a transformation road map► Provided project management, change management and process improvement services► Developed a customized tool – Financial Statement Automation Tool (FSAT), to assist in the

production of statutory financial statements in accordance with local GAAP► Centralized the project by developing a multifunctional platform – ePlaybook, a live version

of the EY step plan, with access to the client and its auditors► Established teams across various regions to leverage the localized GAAP knowledge for

preparation of the statutory reports► Helped enable a round the clock work culture, thereby reduced the turnaround time by

having a global footprint of the team► Supported corporate secretarial services – assisting in timely preparation and submission of

regulatory filings

Value delivered to client► Helped in making the finance process cost efficient through increased automation► Helped streamline controls by leveraging technology and reducing manual intervention► Helped change finance focus from back-office “bookkeeper” to “trusted business advisor” to the business► Helped to develop the approach, architecture, roadmap and business case to support the transformation► Brought leading practices and lessons learned to help this client quickly and efficiently meet their objectives

Certain of our services for an audit client and its affiliates may be more limited in order to comply with applicable independence standards. Please reach out toyour EY contact for further information.

FAAS contacts


Financial Accounting Advisory ServicesContacts

Pankaj ChadhaFinance excellence

[email protected]+91 124 671 4150

Myles CorsonFinance excellence


Vish DhingraFinance excellence


Ken AkaishiJapan FAAS


EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services wedeliver help build trust and confidence in the capital marketsand in economies the world over. We develop outstandingleaders who team to deliver on our promises to all of ourstakeholders. In so doing, we play a critical role in buildinga better working world for our people, for our clients and forour communities.

EY refers to the global organization, and may refer to one ormore, of the member firms of Ernst & Young Global Limited,each of which is a separate legal entity. Ernst & YoungGlobal Limited, a UK company limited by guarantee, doesnot provide services to clients. For more information aboutour organization, please visit ey.com.

© 2016 EYGM Limited.All Rights Reserved.

EYG no. 00502-163GBL

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ED NoneIn line with EY’s commitment to minimize its impact on theenvironment, this document has been printed on paper witha high recycled content.

This material has been prepared for general informational purposes onlyand is not intended to be relied upon as accounting, tax, or other professionaladvice. Please refer to your advisors for specific advice.

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