Finance Re-imagined

Finance Transformation - Challenges & Opportunities for today's CFOs

10:30am – 11:00amApril 8th & April 9th 2013Strictly Private

and Confidential

Consulting

1 Introduction 1

2 Challenges faced by today’s CFOs 3

3 What leading companies are doing

5

4 Why Finance Transformation and How to Benchmark

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5 Q&A 20

PageSection

Agenda

7 April 2013

Introduction

1

Section 1

7 April 20132

Section 1 – Introduction

PwC’s team with you today

Zahid is a Senior Manager in PwC’s Advisory practice, responsible for Finance Effectiveness. Zahid has over 16 years of experience working with Big Four Accounting firms in USA. He is leading the SAP EPM & BI practice in MENA region.

Zahid’s experience includes wide range of Finance projects from strategic initiatives such as Driver-based Performance Management, Balanced Scorecard and Executive Information System across industries and systems.

Zahid is a licensed Certified Public Accountant (CPA) from AICPA licensed in the State of Missouri, USA.


10:30am – 11:00amApril 8th 2013 •

7 April 2013

Challenges faced by today’s CFOs

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Section 2

7 April 2013

Challenges CFOs today are facing

4


10:30am – 11:00amApril 8th 2013 •

Section 2 – Challenges faced by today’s CFOs

Today’s CFOs face a complex and challenging business environment that requires tremendous business savvy. In this environment, innovation is an essential driver of excellence, and the finance department is no exception. We regularly hold CFO forums and some of the top issues faced by senior finance executives are::

Insight

Efficiency

Compliance & Control

How can I manage my responsibilities to focus in on the activities that create real value for the business?

How do I ensure that the data the company relies on provides the most useful information in evaluating projects and investments?

How do I become a more risk-intelligent CFO?

How do I develop standard approach to evaluating finance investment decisions?

In what areas of finance should I be reinvesting to drive innovation and improved performance?

How do I ensure that the financial reporting data the company relies on is accurate?

How do I reduce the burden of maintaining my control environment without compromising its integrity?

The CFOs are juggling to achieve the right balance between three competing agenda; insight, efficiency and compliance & control

7 April 2013

What leading companies are doing

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Section 3

7 April 2013

What leading companies are doing

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10:30am – 11:00amApril 8th 2013 •

Section 3 – What leading companies are doing

• Standardising data definitions, systems and processes across management units• Updating capabilities, tools and skills within finance on a continuing basis to increase

efficiency• Making some very tough decisions to upgrade talent in key leadership positions• Hiring people based on their potential to achieve results, not just technical skills and previous

experience• Moving their finance people around the business so they can create more value and grow• Designing performance management programs that effectively measure the performance of a

finance employee• Designing an operating model that considers finance’s contribution across each objective

(Insight, Efficiency and Compliance & Control)

Insight

Efficiency

• CFOs are focusing on activities that create value for the business, and leaving the rest to someone else

• Defining information needs based on the decisions that need to be made rather than by the reports that are expected to be delivered

• Giving business leaders a way to evaluate the risks associated with the opportunities they’re facing

• Distinguishing between rewarded risks, like acquisitions or new product development, and unrewarded risks, like regulatory compliance

• Making sure the leadership team understands the organisation’s risk profile• Deconstructing daily operations to show the workforce how decisions and actions affect

shareholder value• Evaluating the project/investment portfolio in terms of value drivers

Compliance & Control

• Partnering with the CIO and taking ownership of the collection and governance of financial data

• Applying a top-down, risk-based approach to develop lean and balanced controls• Rationalizing existing controls and redesigning test plans based on identified financial

reporting risks• Leveraging automated controls and enabling technologies

7 April 2013

Why Finance Transformation and How to Benchmark

7

Section 4

7 April 2013

Finance Transformation: Our Perspective

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10:30am – 11:00amApril 8th 2013 •

Section 4 – Why Finance Transformation and How to Benchmark

Strategy - should be aligned to the overall corporate strategy.

Target Operating Model - Mechanism by which all activities relating to the key building blocks of processes, systems, people and organisation are delivered.

Finance Activities - Assessing where you are now and where you want to be for each of the finance activities will help provide a route map to change.

Strategic Vision

Finance Objectives

Corporate Vision

Finance Vision

InsightCompliance & Control

Efficiency

Target Operating Model – Key Activities

Budgeting &

Forecasting

Business Analysis

Management

Reporting

Strategy & Planning

Accounts Receivable

Treasury

Accounts Payable

Tax Manageme

nt

Internal Audit

Controls

Data Manageme

nt

Performance

improvement

People Manageme

nt

Systems Manageme

nt

General Accounting

Corporate Reporting

What?

Why?

How?

7 April 2013

Finance Function Measurement framework

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10:30am – 11:00amApril 8th 2013 •


Insight: Relevant, accurate and timely KPIs to support business managers in decision making

Efficiency: Elimination, standardisation and automation to free up resources for value added activities

Compliance and Control: Sustainable, flexible embedded controls to meet current and future regulatory demands

• As Finance functions serve the ever-increasing demands placed on their resources, an appropriate balance of Insight, Control and Efficiency is required.

• Whilst specific to individual businesses, we have often found significant time and resources dedicated to driving greater compliance, at the cost of providing real insight or efficiency.

• High performing functions must continually look to refine this balance, either through targeted change or a more holistic review of the functional Operating Model.

Above median

Below median

Top quartile performance

Current stateAspiration

Transactional efficiency Accounts payable Accounts receivable General accounting &

financial reporting Financial reporting

Strategy & planning Budgeting &

forecasting Business analysis Perf. Impr. projects Management

reporting Business partnership

Business insight

Compliance & control Treasury Internal audit Process controls &

compliance Tax accounting &

compliance

Finance functions must continually re-assess and refine their role within the organisation:

7 April 2013

Our view of typical finance processes

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10:30am – 11:00amApril 8th 2013 •


Analysis Areas Analysis CategoriesBusiness Insight•Strategy & planning•Budgeting & forecasting•Business Analysis•Performance improvements projects

Transactional Efficiency•Accounts payable (P2P) •Order to Cash (O2C)• Billing, Credit and collections •General accounting•Record to Reporting (R2R) - Financial / external reporting

Control•Revenue assurance, risk and fraud management•Treasury and cash management • Internal audit E

ffic

ien

cy

an

d E

ffecti

ven

ess

Poli

cie

s an

d P

rocess

es

Sys

tem

s A

rch

itectu

re

Con

trol

Fra

mew

ork

& S

eg

reg

ati

on

of

Du

ties

Data

7 April 2013

Our gap report includes KPI benchmarking, improvement opportunities identification and sets out the framework for improvement roadmap

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10:30am – 11:00amApril 8th 2013 •


TransactionalEfficiency

Business Insight

Compliance& Control

Lower quartile

Median Top quartile

Transactional efficiency

1 Days to period end close 5

2 Days to publish financial results

4

3 Single data repository for reporting

Yes

4 Complexity of key financial systems

Standard / integrated

5 Efficiency FTEs per €bn revenue

55.8

FTEs normalised to XYZ Ltd revenue1 Accounts payable 162 T&E accounting 13 Accounts receivable 134 General accounting and

financial reporting 20

5 Total FTEs – Trans. efficiency 53 Process cost as a % of revenue

1 Accounts payable 0.05%2 T&E Accounting 0.003%3 Accounts receivable 0.06%4 General accounting and

financial reporting 0.12%

5 Total costs – Trans. efficiency 0.22%

7

5

No

255.3

72

61

0.37%0.01%

Highly complex

123

241

0.12%

1

0.80%

0.31%

Positive initiatives Findings / opportunities

• 1 Chart of accounts on single GL for group reporting

• Time to close accounts is in top quartile (5 days)

• Use of reporting Cube as a primary data repository

• SSC Project Sun project aimed to increase process quality at SSC (AR/Database) sharing best practices

• Travel & Expenses processing costs less than peer median

• Appointment of an Operations Controller to look at implementing process best practices

• Process: After close, it takes 7 days to report where team are at full capacity and have no bandwidth for projects and business partnering

• AR: PwC acknowledge the complexity of AR process, however 123 FTEs is high compared to median

• AP: No coordinated purchasing policy or vendor management or discount / supplier terms management for Opex

• Organisation: An opt-in approach to using the SSC has led to an in-country focus on improvements rather than adopting learnings from other countries.

• Technology: IT systems (e.g.15 ERPs across Group – one of which is CODA) are not fully integrated, resulting in a complex, fragmented data architecture

Key Recommendations

• Organisation Blueprints from the Project Sun project now need to be implemented, with best practice initiatives centrally coordinated under the Group FC and the Head of SSC and driven by the SSC

• Establish pan-European Executive committee to include members of the Board to oversee Group-wide process improvements and standardisation

• Continue to share and apply best practice from across the organisation: E.g. invoice raising under single process ownership supported by a 3rd party provider; enforcing a standard billing policy across Group to reduce the drivers of back-office A/R activity

• For future Finance strategy to be leveraged effectively, process standardisation under single pan-European ownership and consistent system tools will need to take effect to allow Bolivia, Argentina and New Zealand to make better use of the SSC

10 10

10

XYZ Ltd

Top Quartile Performance

Peer Group Above Median

Peer Group Below Median

ILLUSTRATIVE SAMPLE

Finance Gaps and N-tile Assessment Key Recommendations

7 April 2013

Roadmap sets out the priorities and timeline to implement the changes

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10:30am – 11:00amApril 8th 2013 •


Systems:

1. Full utilisation of sub-ledger functionality2. Automated code combination validation process3. Investigate Salesforce.com capabilities for rolling it out for all leasing /

sales transactions 4. Implement Consolidation functionality5. Implement Planning Budgeting capability6. Implement Reporting / BI solution by replacing current Discoverer

environment 7. Maintain Financial Statement Generator reports8. Use of Revenue recognition functionality in AR sub ledger9. Share drive access to be extended to allow for ‘pulling’ of data and

reporting schedules10. Automate HR liabilities accruals and other allocations using Mass

Allocations

Process / Policies 11. Revenue recognition process need to integrate with % completion of work

Key Priorities

New

En

viro

nm

en

t

Medium

2

13

4

5

6

7

Exi

stin

g E

nvi

ron

men

t

Criticality

Low High

8

9

Imp

lem

en

tati

on

*

10

Generate Consolidated

Financial Reporting per

IFRS and Parent Company Reporting

3 Use Trial Balance to extract data for Financial reporting (manual FSG mapping)

4. Make off-line adjustments (outside GL) to Financial Reports to reflect IFRS compliance

5. Coordinate with HR to source Disclosure Reporting(e.g. End of Service , Senior staff remuneration)

8. Manually consolidate results and eliminate intercompany accounts

1. Receive valuation and impairment testing results from I&A rework to provide format for GL team

6. Work with C&L team on IFRS related disclosures (segment reporting, current / non current liab. etc

10. Produce Standalone financial Statements (outside uae co) and relevant notes to accounts. Monthly IFRS Income Statement 6 monthly full IFRS reporting

11. Produce Consolidated financial Statements

12. Support Internal & External Auditors ,coordinating with finance and other functions

13. Produce Statutory audited IFRS statements

7 Produce books from multiple sources including standalone results for non UAE entities

9. Manually update income, valuation and impairments w.r.t. JVs and Associates

Improvement Opportunities and Roadmap Activity Dictionary

ILLUSTRATIVE SAMPLE

7 April 2013

Rate your subsidiary in terms of the following

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10:30am – 11:00amApril 8th 2013 •


High Performing Low performing Key Desired state – 12 mnths

Desired state – 2/4 yrs

As is assessment

Controls and ProcessesFinancial reporting processes

MI & Analysis

Planning

Expenses

Business partnering

Organisation and Scope of Finance

People

Systems and Data

ILLUSTRATIVE SAMPLE

7 April 2013

Our approach towards benchmarking

14


10:30am – 11:00amApril 8th 2013 •


Develop SCAN report

Process Diagnostics and Benchmark Integration

Compare data with industry / cross-industry peers (Internationally based on available database /

research)

Obtain and analyse historical performance data

Set out the benchmarking KPIs

Identify business activity of head office functions

Voice of Internal Customer ‘how head office supports Business Domains and key challenges’

Finance

Legal

Human Resources

Operations

Marketing

Risk

Areas of focus

• Global best practices-PwC benchmarking Database

• Saratoga

• SCORE database

7 April 2013

Global best practices database

15


10:30am – 11:00amApril 8th 2013 •


Benchmarking and Process Appraisal ToolsFact-based consulting (Qualitative and Quantitative).

Best PracticesOffers our point of view on the optimal way to perform a given business process based on the PwC experience and in-depth market research of over 2000 assignments from different organisations.

• Steps leading organisations take to achieve peak performance.

• Improvement opportunities, corrective measures and related recommendations

• Objective, evidence-driven baseline of current performance in terms of efficiency and impact, compliance, control and business insight; and

• Identification of opportunity savings, potential for service improvement and any areas for feasible change and action.

Risk & ControlsOffers PwC point of view on the optimal controls and checks needed at the process level to mitigate key risks

7 April 2013

We leverage our benchmarking and analytics service – PwC Saratoga

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10:30am – 11:00amApril 8th 2013 •


Saratoga holds one of the world’s largest and most robust database of people and functional performance metrics, with benchmark information from over 2,400 international organisations.

Benefits

• A strategic benchmark with practicality and alignment to the organisation strategy

• Large available data breadth providing reliability and objectivity

• Process provides a measurement framework to be used going forward in the business

• Benchmark captures quantitative measures and a qualitative view of business practices

• Opportunity to investigate and raise areas of concerns which are highlighted by the analysis and data

• Saratoga functional effectiveness allows the organisation to understand areas that may require their review and improvement.

What is Saratoga?

• Saratoga is PwC’s measurement and benchmarking service which was developed 25 years ago.

• Saratoga comprises performance data from over 2,400 companies globally across a variety of industries. Saratoga holds one of the world’s largest, most robust databases of people related performance metrics.

• Saratoga analyses an organisation’s data and their key metrics which show the strengths and limitations of the organisation’s human capital and financial resources. It focuses on issues that can have an impact on improving performance and increasing competitive advantage.

PwC Saratoga can assist your organisation to:• Build a clear analytical understanding of existing human capital profiles;

• Highlight potential cost savings, efficiency gains, service improvements and effective support function delivery opportunities;

• Select suitable organisations against which to benchmark key performance indicators and best practice; and

• Plan, implement and drive the actions necessary to realise value added objectives.

7 April 2013

Plan to complete SCAN phase in six-weeks leveraging our Methodology and benchmarking toolkits

17


10:30am – 11:00amApril 8th 2013 •


Maturity Mapping and Roadmap

Project Management

Develop project plan and Project

Kick - off

Project initiation

Assess (Scan – Maturity assessment & benchmark performance)

Final Functional Workshops – Functional maturity models and benchmarks / trend relevance

Review existing policies & processes

CXO level discussions

Voice of Internal Customer

Initial Functional workshops – Leading practices & KPIs to be collected

Cross functional workshops and roadmap

Functional maturity

assessments vis-a-vis performance

benchmarks

Functional roadmap - functional integration

touch points

Stage 1 Scan Stage 2 Scan Stage 3 - Maturity Mapping and RoadmapPlanning

7 April 2013

We have over 30 years of presence in the Middle East with a dedicated team of Finance Consulting practitioners

18


10:30am – 11:00amApril 8th 2013 •


EgyptCairo

JordanAmman

Saudi ArabiaRiyadh

Al KhobarDhahranJeddah

BahrainManama

QatarDoha

OmanMuscat

YemenSanaa

LebanonBeirut

West Bank and

GazaJerusalemBethlehe

mGaza

LibyaTripoli

KuwaitKuwait

City

IraqBaghdad

SyriaDamascus

IranTehran

UAEAbu Dhabi

Dubai Emaar Sq.

DIFCSharjah

Our Finance Consulting expertise includes :● Finance transformation and

fast close design● Operational finance● Enterprise resource planning

& performance management ● Treasury management● Business operating model● Project and program

management● Process design / best practices● System design, build and

testing● Training and roll-out● Data reconciliation● SEC, GAAP, Tax and SOX

controls

PwC at a glance:

● $31.5 billion revenue for FY2012

● 180,000 people● 776 offices● 158 countries

People by region:

● 40% Europe● 23% North America● 24% Asia Pacific● 7% MENA● 6% South and Central

America

Areas of service include:

● Performance improvement● Transactions ● Global tax structuring● Global tax compliance ● Crisis management● Assurance● Human resource services

A strong regional firm…

● Unified regional practice with presence in 15 countries● Diverse pool of over 2,700 professional across the region● Largest pool of resident Advisory staff fully connected to the global

network● The Middle East region is fully integrated with in the global PwC

network

7 April 2013

Middle East Finance Consulting Leadership Team

19


10:30am – 11:00amApril 8th 2013 •


T: +971 4 3043300 (ext. 3362)M: +971 56 [email protected]

Sharat SethPartner


Manoj ShahPartner

Rob HucknallPartner


7 April 2013

Q&A

20

Section 5

pwc.com/middle-east

PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information.

“PwC” is the brand under which member firms of PwC PricewaterhouseCoopers International Limited (PwCIL) operate and provide services. Together, these firms form the PwC network. Each firm in the network is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way.

PwC in the Middle East

Established in the region for over 40 years, PricewaterhouseCoopers Middle East has offices in 12 countries: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Palestine, Qatar, Saudi Arabia and the United Arab Emirates, with around 2,700 people.

Complementing our depth of industry expertise and breadth of skills is our sound knowledge of local business environments across the Middle East.

www.pwc.com/middle-east

© 2012 PricewaterhouseCoopers. All rights reserved.

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