2014 Finance Priorities Survey
Negotiating a Challenging Business Landscape
With Slippery Slopes and Uncertain Terrain
Introduction
In many ways, corporate finance functions encounter challenges similar to those that confront
teams of mounta...
Results and Analysis
The five categories in our survey, the results for which are detailed in the following pages, are:
•	...
Process Capabilities – Financial Transactions

Priority Index

Consolidation

5.9

Debt and other investments

5.8

Pricin...
Key Questions to Consider:
•	 What opportunities (e.g., process adjustments, centralization, supporting technology,
etc.) ...
“ “Our business has several legal entities that have to provide results in a timely
manner. As a result, the period-end cl...
Process Capabilities (Financial Analysis)
Key Findings
•	 Finance functions are increasing their involvement in strategic ...
““We have valuable data that we need to leverage better for future financial growth.”

CFO, small consumer services compan...
Key Questions to Consider:
•	 How is our finance function supporting the CEO’s strategic planning activities and how
can t...
“ “Often, even late in the quarter, there can be surprises between what was expected
per forecast and what actual results ...
Emerging Issues
Key Findings
•	 Swirling uncertainty regarding U.S. healthcare reform and its short- and long-term costs
i...
“ “As a global company, our workforce is becoming increasingly spread out, mobile
and remote. This raises many other relat...
“ “Healthcare is a large cost and changes have a significant bearing on our expenses.”

CFO, small mining company

Focus o...
Technical Capabilities
Key Findings
•	 Companies – and by extension, their finance functions – continue to face intense
pr...
Commentary
The unsteady implementation of DFA – three years after the sweeping law was enacted in July
2010, roughly half ...
Technical Capabilities

Overall

CFOs/Finance
Executives

Large Company
Respondents

Sarbanes-Oxley reporting and disclosu...
Organizational Capabilities
Key Findings
•	 Finance executives and professionals continue to focus on strengthening their
...
“ “Leadership at all levels in the company is a priority. Solid leadership with solid
products will improve [our] company....
Focus on CFOs/Finance Executives and Large Companies
Organizational Capabilities – Results for CFOs/Finance Executives and...
Methodology and Demographics
More than 220 respondents, including CFOs, vice presidents and directors of finance, and cont...
Distribution

4%

Energy

4%

Services

4%

Insurance

3%

Real Estate

3%

Consumer Products

2%

Telecommunications

2%
...
About Protiviti
Protiviti (www.protiviti.com) is a global consulting firm that helps companies solve problems in
finance, ...
Protiviti Business Performance Improvement/Financial
Advisory Practices – Contact Information
James Pajakowski
Executive V...
Europe/Middle East/AFRICA

The Americas
United States
Alexandria
Atlanta
Baltimore
Boston
Charlotte
Chicago
Cincinnati
Cle...
Finance Priorities Survey Results for 2014 - A Protiviti Survey of CFOs
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Finance Priorities Survey Results for 2014 - A Protiviti Survey of CFOs

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Results of Protiviti's third annual survey on top finance priorities highlighted by CFOs for 2014. Visit www.protiviti.com/financesurvey for interactive benchmarking tool, podcast, and more

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Finance Priorities Survey Results for 2014 - A Protiviti Survey of CFOs

  1. 1. 2014 Finance Priorities Survey Negotiating a Challenging Business Landscape With Slippery Slopes and Uncertain Terrain
  2. 2. Introduction In many ways, corporate finance functions encounter challenges similar to those that confront teams of mountain climbers as they determine how to best scale snowy peaks. Just as climbers must employ advanced skills and training to negotiate such uncertain terrain, so, too, must CFOs and finance executives and professionals possess the knowledge and skills required to navigate a business landscape that’s becoming increasingly uncertain and potentially hazardous for their organizations. New and changing regulations, evolving international and domestic tax laws, and ongoing demands for finance functions to deliver strategic contributions to their organizations in the form of business intelligence, data analysis and effective forecasting represent just some of the factors (but hardly all of them) pulling CFOs and their teams along many different but critical paths. Not surprisingly, these themes top the list of priorities for today’s finance functions, according to the CFOs and finance executives and professionals we polled. Key findings from the results of our 2014 Finance Priorities Survey include the following: • Managing cash flow and working capital efficiently and effectively is key – Finance functions are combating inefficiency aggressively as they strive to make their financial transaction processes and systems as streamlined as possible. These efforts include a wide range of improvements to cash forecasting, banking relationships and other crucial areas. As many of our respondents commented, “Cash is king.” • There continues to be a strong focus on streamlining the financial close – From improving the period-end close process and account reconciliations to financial consolidation processes, finance functions want to achieve greater efficiency. • Harnessing business intelligence and “big data” is critical for strategic planning, forecasting, budgeting and profitability analysis – Finance functions are intensifying their focus on strategic planning and profitability analysis capabilities through greater use of business intelligence, big data and related analytical tools. There is a major drive within more organizations to understand in minute detail the performance and profitability of product and service lines, customers, customer segments, and sales channels, thus strengthening executive management’s strategic decision-making regarding investments. • Changes to U.S. healthcare regulations are having a major impact – This is no surprise given the many questions that remain open for companies related to the Affordable Care Act, from compliance to short- and long-term costs. Finance functions face a growing need to manage uncertainty and also accurately provide/supply the data and information necessary for compliance on a timely basis. • Major and looming changes to U.S. tax laws and business regulations represent significant concerns – These changes will have significant implications on tax planning and forecasting. This heightened focus on what’s most important to finance functions today is presented in tables throughout our report – including exclusive views from CFOs and finance executives, as well as from respondents with large companies (annual revenues of US$1 billion or greater). Please note that, upon request, we can provide customized reports based on the results of respondents from specific groups – industry, company size, etc. Protiviti October 2013 2014 Finance Priorities Survey 1
  3. 3. Results and Analysis The five categories in our survey, the results for which are detailed in the following pages, are: • Process Capabilities (Financial Transactions) • Process Capabilities (Financial Analysis) • Emerging Issues • Technical Capabilities • Organizational Capabilities For each of these five categories, respondents were asked to rate, on a scale of one to 10, the level of priority for them and their organizations to improve in different issues and capabilities. A “10” rating indicates the issue is a high priority while a “1” indicates the issue is a low priority. We have classified each of these issues with an index of 6.0 or higher as a “significant priority” for finance functions. Those with an index of 4.5 through 5.9 are classified as a “moderate priority” and those with an index of 4.4 or lower are classified as a “low priority.” Process Capabilities (Financial Transactions) Key Findings • Efficiency, efficiency, efficiency: There clearly is a strong desire to perform transactional activities, such as the period-end close (and the account reconciliation and consolidation processes it includes), as efficiently as possible. This work encompasses, wherever possible, ongoing process improvements and the automation of manual processes. • Finance executives and professionals want to continue improving their cash forecasting and working capital management capabilities – this is, in great part, a response to the growing need for organizations to respond to economic volatility with greater precision, speed and flexibility. • Related to more effective cash and capital management, there also is a high priority being placed on improving banking relationships, which facilitates a stronger understanding of the organization’s cash position on a daily basis, as well as needed access to lines of credit. Overall Results, Process Capabilities (Financial Transactions) Process Capabilities – Financial Transactions Priority Index Cash forecasting 6.8 Period-end close 6.7 Account reconciliations 6.4 Working capital management 6.2 Banking relationships 6.0 2014 Finance Priorities Survey 3
  4. 4. Process Capabilities – Financial Transactions Priority Index Consolidation 5.9 Debt and other investments 5.8 Pricing 5.8 Variance analysis 5.7 Accounts receivable 5.6 Financial risk management (hedging, credit risk, FX risk, interest rate risk, etc.) 5.6 Cost allocation 5.5 Invoicing/billing 5.5 Project accounting 5.5 Accounts payable 5.3 Mergers and divestitures 5.3 Standard costing 5.2 Tax processing (sales and use tax, 1099, T&E tax coding, etc.) 5.1 Time capture and reporting 5.1 Fixed asset accounting 5.0 Payroll processing 5.0 Travel and entertainment reimbursement 5.0 Activity-based costing 4.9 Payroll tax processing 4.9 Commentary Among all respondents, cash forecasting and the period-end close stand out as the two top priorities in this category of our study. The financial close has long been viewed as one of the finance function’s most important transactional activities.1 The fact that it currently remains a significant priority indicates that finance functions a) continue to invest in process improvement and automation to achieve efficiency gains, particularly in organizations that still rely on manual processes, spreadsheets, etc., and b) are committed to leveraging these efficiency gains to increase the resources they allocate to more strategic activities, including cash forecasting and working capital management. Given that cash forecasting and working capital management rank as significant priorities, finance functions are signaling that they are keenly aware of some of the lessons inflicted by the global financial crisis – namely, that greater clarity into cash positions, sometimes on a daily basis, as well as greater flexibility (generated by having higher levels of working capital) are critical. The emphasis on strengthening relationships with bankers also relates to the need for greater clarity. By ensuring the number of banking relationships a company maintains (and how it manages those relationships) is optimal, finance functions gain a precise view of their real-time cash positions and enhance their ability to access needed lines of credit. In addition, the potential for changes in accounting rules – in particular, those for revenue recognition and leases – requires vigilance on the part of those charged with financial reporting so that bank covenants, which drive banking relationships between many companies and their lenders, can be established or modified accordingly in the event of significant accounting-based changes. 1 4 For more on the financial close, please see “Why the Financial Close Matters,” Protiviti: www.protiviti.com/ en-US/Documents/Featured-Articles/Why-the-Financial-Close-Matters.pdf. 2014 Finance Priorities Survey
  5. 5. Key Questions to Consider: • What opportunities (e.g., process adjustments, centralization, supporting technology, etc.) exist to improve the efficiency and accuracy of our period-end close and all of the transactional processes that comprise it? • Are there opportunities to leverage a shared-services model to increase the efficiency of our transactional processing activities? • As we make changes that help drive greater efficiency in our transactional processes, are we maintaining the right – and right amount of – financial controls from a risk management perspective? • What is the current level of clarity in our organization’s daily cash position? • How can our finance function gain a more accurate and more real-time snapshot of our company’s cash position? • What is the current state of our finance function’s working capital management capability? How would our current working capital management capability withstand the effects of another financial crisis with similar or greater force (compared to the 2008-2009 recession)? • To what degree do our current banking relationships help or hamper the clarity and flexibility we maintain with regard to our cash position? How can we rethink and/or restructure our banking relationships to equip us with greater clarity and flexibility? Do our banking relationships and related governing agreements contain sufficient flexibility to accommodate any changes in accounting standards? Focus on CFOs/Finance Executives and Large Companies Process Capabilities (Financial Transactions) – Results for CFOs/Finance Executives and Large Company Respondents Process Capabilities – Financial Transactions Overall CFOs/Finance Executives2 Large Company Respondents3 Cash forecasting Period-end close Account reconciliations Working capital management Banking relationships Consolidation Debt and other investments Pricing Variance analysis Accounts receivable 2 3 Includes responses from CFOs and Vice President-level executives. Companies with revenues of US$1 billion or more. 2014 Finance Priorities Survey 5
  6. 6. “ “Our business has several legal entities that have to provide results in a timely manner. As a result, the period-end close and reconciliations are critical parts for each region.” Finance executive, large manufacturing company Process Capabilities – Financial Transactions Overall CFOs/Finance Executives Large Company Respondents Financial risk management (hedging, credit risk, FX risk, interest rate risk, etc.) Cost allocation Invoicing/billing Project accounting Accounts payable Mergers and divestitures Standard costing Tax processing (sales and use tax, 1099, T&E tax coding, etc.) Time capture and reporting Fixed asset accounting Payroll processing Travel and entertainment reimbursement Activity-based costing Payroll tax processing Significant Priority Index of 6.0 or higher Moderate Priority Index of 4.5 to 5.9 Low Priority Index of 4.4 or lower Commentary The top priorities in this category for CFOs and other finance executives are very consistent with those identified by all survey respondents. Compared to the overall findings, there are several notable differences in the responses of large company participants. First, they ranked a greater number of financial transaction areas as significant priorities compared with those identified by all respondents. Second, nearly every area ranked by large company participants has a higher priority index than that of the overall response, some significantly so, including financial risk management, accounts receivable, consolidation and pricing. 6 2014 Finance Priorities Survey
  7. 7. Process Capabilities (Financial Analysis) Key Findings • Finance functions are increasing their involvement in strategic planning – in terms of index scores, this ranks as the highest priority in our survey. • Not surprisingly, periodic forecasting and budgeting also are top priorities as organizations seek greater understanding and clarity related to performance and their cash positions. • Finance functions are responding to increasing demands from their organizations for additional, and more actionable, information regarding the profitability of specific product or service lines, customers, customer segments, and channels. • As part of an ongoing drive to strengthen competitive intelligence capabilities, finance functions continue to leverage business intelligence and other performance management tools and techniques (including big data and related analytics) to deliver strategic insights to executive decision-makers. Overall Results, Process Capabilities (Financial Analysis) Process Capabilities – Financial Analysis Priority Index Strategic planning 7.0 Periodic forecasting 6.9 Budgeting 6.8 Performance management/executive dashboards/balanced scorecards 6.6 Profitability analysis (product, customer, channel, etc.) 6.6 Business intelligence (operations reporting) 6.4 Margin management 6.3 Profitability reporting – product 6.2 Profitability reporting – segment 6.1 Board of directors financial reporting 5.9 Competitive intelligence (competitor, customer, geopolitical, etc.) 5.9 Profitability reporting – customer 5.9 External reporting (10-Q, 10-K, 8-K, Proxy and other shareholder) 5.7 Profitability reporting – channel 5.7 Management reporting – ad hoc or self-reporting 5.4 Nonfinancial reporting – ad hoc reporting 5.4 Project management 5.4 Enterprise risk reporting 5.3 MD&A 5.3 Other statistical reporting 5.0 2014 Finance Priorities Survey 7
  8. 8. ““We have valuable data that we need to leverage better for future financial growth.” CFO, small consumer services company Commentary Given the uneven and highly risky business and economic terrain, all companies need to chart safe paths in their ascent to greater profitability and success. This explains why survey respondents at all levels of the finance function (and across all company sizes) place a high priority on improving their organization’s strategic planning capabilities. Finance functions also are focusing heavily on a wide range of analytical capabilities and processes – including periodic forecasting, budgeting, profitability analysis, performance management, business intelligence and margin management, among other areas – to produce sharper clarity regarding the company’s current and future performance. Such clarity strengthens strategic decision-making (e.g., what product lines should the company invest more resources in due to their direct impact on the bottom line?) and strategic planning (e.g., what geography, customer segment or service line should the company pursue to increase future profitability in the most effective and efficient manner?). Three years ago, MIT Senior Lecturer Jonathan Byrnes wrote a book in which he predicted that CFOs would assume the role of “chief profitability officers” in their companies by managing profitability as “a central part of their existing jobs” while building “grassroots profitability management processes into [their] company’s core management activities.”4 Today, many CFOs and their finance teams would likely confirm the accuracy of Byrnes’ prediction: Our survey results confirm that finance functions are intent on showing the rest of the business a) which product lines, customers, segments and channels are unprofitable so that those investments can be reduced or eliminated, and b) which of those areas are the most profitable, arming management with information needed to decide whether to expand investment and operations in these areas. This approach is helping to burnish the finance function’s credentials as a strategic partner while motivating the function to improve its capabilities in performance management, business intelligence and related analytical proficiencies. This is no small task; while it is a challenge to develop the capabilities necessary to conduct profitability (and related) analyses, it is even more difficult to sustain these abilities because the data that produces these strategic insights changes constantly. If data integrity issues crop up, decision-makers will quickly lose trust in the information. Finally, it should be noted that competitive intelligence – a related analytical capability – narrowly missed ranking (with an average index of 5.9) as a “significant priority” in our survey. Nevertheless, finance functions continue to place a priority on identifying, tracking and synthesizing data from a wide variety of internal and external sources (e.g., customers, competitors, governments and other public sources) to produce insights that fuel strategic decision-making.5 4 5 8 Byrnes, Jonathan L.S., Islands of Profit in a Sea of Red Ink: Why 40 Percent of Your Business Is Unprofitable and How to Fix It, Portfolio Penguin, 2010: http://jlbyrnes.com/. Performance/Risk Integration Management Model - PRIM2, Early Mover Series: Maximizing the Value of Competitive Intelligence, Protiviti: www.protiviti.com/en-US/Documents/PRIM2-Competitive-Intelligence-Protiviti.pdf. 2014 Finance Priorities Survey
  9. 9. Key Questions to Consider: • How is our finance function supporting the CEO’s strategic planning activities and how can that support be enhanced? • How can our finance function increase the accuracy and credibility of periodic forecasting processes? • Is our company’s current budgeting approach truly effective? What behaviors – both positive and negative – does this budgeting approach generate? How can our budget process be improved to reduce and/or eliminate its negative consequences and build upon its benefits? • What types of profitability analyses (product, customer, channel, etc.) provide the greatest value to the business, and what is our finance function’s current ability to produce these analyses? • To what extent do existing performance management and business intelligence capabilities enable the types of analyses our business needs to strengthen its strategic decision-making? And how can these capabilities be improved, if necessary? • What oversight, responsibilities, controls and other steps are in place to ensure that profitability analyses, as well as other data-driven insights that our finance function produces, remain continually free from potential data integrity issues? Focus on CFOs/Finance Executives and Large Companies Process Capabilities (Financial Analysis) – Results for CFOs/Finance Executives and Large Company Respondents Process Capabilities – Financial Analysis Overall CFOs/Finance Executives Large Company Respondents Strategic planning Periodic forecasting Budgeting Performance management/executive dashboards/balanced scorecards Profitability analysis (product, customer, channel, etc.) Business intelligence (operations reporting) Margin management Profitability reporting – product Profitability reporting – segment Board of directors financial reporting Competitive intelligence (competitor, customer, geopolitical, etc.) Profitability reporting – customer External reporting (10-Q, 10-K, 8-K, Proxy and other shareholder) 2014 Finance Priorities Survey 9
  10. 10. “ “Often, even late in the quarter, there can be surprises between what was expected per forecast and what actual results come in. This is a continual area of focus for [us].” Corporate controller, large manufacturing company Process Capabilities – Financial Analysis Overall CFOs/Finance Executives Large Company Respondents Profitability reporting – channel Management reporting – ad hoc or selfreporting Nonfinancial reporting – ad hoc reporting Project management Enterprise risk reporting MD&A Other statistical reporting Significant Priority Index of 6.0 or higher Moderate Priority Index of 4.5 to 5.9 Low Priority Index of 4.4 or lower Commentary The top priorities in this category for CFOs and other finance executives closely match those identified by all survey respondents. The top priorities among respondents from large companies are similar to the priorities identified by other respondents, with a notable exception: Large company respondents ranked two additional priorities, competitive intelligence and external reporting, as significant. Other respondents identified these two areas as moderate priorities. 10 2014 Finance Priorities Survey
  11. 11. Emerging Issues Key Findings • Swirling uncertainty regarding U.S. healthcare reform and its short- and long-term costs is a major concern for finance executives and professionals. • Other emerging issues viewed to be key priorities – sustainability, globalization and workforce mobility – represent forces that promise to influence the finance function’s decisions and activities. Overall Results, Emerging Issues Emerging Issues Priority Index Changes to U.S. healthcare regulations 6.5 Sustainability 5.8 Globalization 5.6 Workforce mobility 5.1 Sequestration (federal government) 4.9 Aging workforce 4.7 Conflict minerals compliance 2.9 Commentary Not surprisingly, separate research we’ve conducted recently indicates that the implementation of healthcare reform is the top concern among executives and board members within the healthcare industry.6 These changes also represent a pressing priority within finance functions across all industries, according to our respondents in this study. Clearly, this regulatory change has the potential to alter organizational cost structures, workforce strategies and compensation approaches significantly, and executive management is looking to the finance function to provide clarity around these costs as quickly as possible. Other emerging issues finance professionals identify as primary concerns also pose new risks, challenges and opportunities for finance functions. The definition of “sustainability” – and how it is managed within companies – continues to evolve in rapid fashion. Rather than treating sustainability as strictly an environmental issue, organizations are embracing a more expansive approach to managing and measuring sustainability, and finance functions figure prominently in these efforts. Unilever CEO Paul Polman reports that his global company is integrating sustainability considerations into research and development programs, planning and other traditional organizational processes. “[W]e easily have saved just last year alone over 200 million [euros] by thinking about the use of our scarce resources differently,” Polman recently noted.7 Organizations and efforts such as the U.K.-based Prince’s Accounting for Sustainability Project are working with businesses, investors, the public sector, accounting bodies and other groups to develop processes for embedding sustainability into decisionmaking and reporting processes. 6 7 Executive Perspectives on Top Risks for 2013, Protiviti and North Carolina State University’s ERM Initiative, www. protiviti.com/toprisks. “Unilever’s CEO on Making Responsible Business Work,” HBR IdeaCast, May 17, 2012, http://blogs.hbr.org/ ideacast/2012/05/unilevers-ceo-on-making-respon.html. 2014 Finance Priorities Survey 11
  12. 12. “ “As a global company, our workforce is becoming increasingly spread out, mobile and remote. This raises many other related issues such as BYOD, protection of company data, and managing employees remotely ... we need to ensure we remain competitive in these areas.” Corporate controller, midsize technology company Two other emerging issues stand out as priorities for finance executives and professionals given the potential implications to finance functions: globalization, which has a significant impact on supply chain management processes and costs, and workforce mobility, which promises numerous business benefits but also gives rise to new IT and data privacy risks. Key Questions to Consider: • To what extent does our organization and our finance function monitor emerging issues such as U.S. healthcare reform, sustainability developments, globalization implications and workforce mobility trends to understand the opportunities, challenges and threats these forces create? • Does our organization have sufficient resources to track U.S. healthcare regulatory changes and their impact throughout our company? • Is our finance function’s involvement in supply chain management activities sufficient so that new opportunities and risks related to globalization and sustainability are identified and addressed proactively? • To what degree is our finance function involved in integrating sustainability efforts throughout our organization so that these efforts are managed, measured and reported in a rigorous manner? • What opportunities, challenges and risks does our workforce’s growing mobility create? How can these opportunities be exploited? How can the challenges be managed – and the threats avoided? 12 2014 Finance Priorities Survey
  13. 13. “ “Healthcare is a large cost and changes have a significant bearing on our expenses.” CFO, small mining company Focus on CFOs/Finance Executives and Large Companies Emerging Issues – Results from CFOs/Finance Executives and Large Company Respondents Emerging Issues Overall CFOs/Finance Executives Large Company Respondents Changes to U.S. healthcare regulations Sustainability Globalization Workforce mobility Sequestration (federal government) Aging workforce Conflict minerals compliance Significant Priority Index of 6.0 or higher Moderate Priority Index of 4.5 to 5.9 Low Priority Index of 4.4 or lower Commentary The top priorities in this category for CFOs and other finance executives are similar to those identified by all survey respondents, though it is interesting to note that sustainability and globalization rank one point or more lower as priorities for this group compared to the overall response. For large company respondents, the data generally mirrors that of the overall response. One noteworthy difference is the ranking of sustainability as the highest priority (slightly above changes to U.S. healthcare regulations). We feel this is likely due to the relative lower impact of changes in healthcare regulations on larger companies versus smaller companies, combined with the geographic diversity of many large businesses that must comply with more complex local sustainability regulations. 2014 Finance Priorities Survey 13
  14. 14. Technical Capabilities Key Findings • Companies – and by extension, their finance functions – continue to face intense pressure to address and comply with evolving business tax policies, business regulations and accounting standards, particularly given the magnitude and pace of changes in them. • A potential overhaul of U.S. tax laws, changes to state or jurisdiction taxes, and U.S. business regulatory changes, including the ongoing implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), rank among the top priority areas for finance functions.8 Overall Results, Technical Capabilities Technical Capabilities Priority Index U.S. tax laws 6.1 Domestic regulations (tax) 6.0 Tax planning/forecasting 5.8 State or jurisdiction taxes 5.7 Revenue accounting – general: revenue recognition – multiple element deliverables 5.6 Sarbanes-Oxley reporting and disclosures 5.5 In-country taxes 5.4 Readiness for adopting new and impending accounting pronouncements 5.4 International/transfer pricing regulations 5.3 International cash/earnings repatriation – compliance and accounting implications 5.2 Fair value accounting (ASC 825 – formerly FAS 159, Fair Value Option for Financial Assets and Liabilities) 5.1 International Financial Reporting Standards/GAAP convergence projects 5.1 Reporting uncertainties – external reporting 5.0 Segment reporting 5.0 FASB Exposure Draft – Revenue from Contracts with Customers 4.9 Foreign taxes 4.9 Reporting uncertainties to the IRS (new regulations) 4.9 Business combinations 4.8 FASB Accounting Standards Codification – impact on both research capabilities and disclosures 4.8 Proxy rules, including risk and compensation disclosures 4.8 Extensible Business Reporting Language (XBRL) 14 4.8 Stock-based compensation (ASC 718 or ASC 505-50 – FAS 123R Share-Based Payments) 8 4.8 Regulation S-K and S-X requirements 4.5 “Dodd-Frank at 3: Accepting Uncertainty,” FS Insights, Special Edition: Volume 4, Issue 4, Protiviti: www. protiviti.com/en-US/Documents/Newsletters/FS-Insights/FS-Insights-V4-I4-Dodd-Frank-at-3-Protiviti.pdf. 2014 Finance Priorities Survey
  15. 15. Commentary The unsteady implementation of DFA – three years after the sweeping law was enacted in July 2010, roughly half of the new regulation’s rules had yet to be finalized – crystallizes the regulatory uncertainty bearing down on finance functions and also helps explain the desire CFOs and their staffs express to maintain a state of vigilant readiness. The possibility of a substantial overhaul of the U.S. income tax code – a move that enjoys broad support even if it is not currently atop the federal legislative priority list – further underscores the magnitude of change finance functions need to be prepared to address. Achieving this state of readiness requires finance functions to possess the expertise necessary to: • Monitor and understand pending accounting, tax and other regulatory pronouncements. • Create new (and/or revamp existing) policies and processes concerning relevant regulatory and accounting rules changes. • Ensure that these new policies are transformed into procedures that the rest of the enterprise understands and follows. Accessing and deploying this expertise can be a challenge for companies of all sizes. Smaller organizations may have difficulty justifying the expense of keeping that expertise on staff, while larger companies must strike the right balance between devoting too many full-time resources to this type of readiness and remaining prepared to respond with sufficient expertise when the level of new accounting pronouncements and related regulatory changes increases. Regardless of company size, our survey results show that readiness – to potential tax, regulatory and accounting rules and policy changes – represents a crucial requirement. Key Questions to Consider: • What is the overall state of our finance function’s readiness to respond (with internal policy and procedure guidance) to new accounting pronouncements as well as to tax and regulatory changes that affect accounting and financial reporting processes? • Does our finance function possess the expertise to address international/transfer pricing regulations as well as other new business regulations and tax rules (both foreign and domestic)? • Are our revenue-accounting policies, processes and controls monitored in a sufficiently rigorous manner? Focus on CFOs/Finance Executives and Large Companies Technical Capabilities – Results for CFOs/Finance Executives and Large Company Respondents Technical Capabilities Overall CFOs/Finance Executives Large Company Respondents U.S. tax laws Domestic regulations (tax) Tax planning/forecasting State or jurisdiction taxes Revenue accounting – general: revenue recognition – multiple element deliverables 2014 Finance Priorities Survey 15
  16. 16. Technical Capabilities Overall CFOs/Finance Executives Large Company Respondents Sarbanes-Oxley reporting and disclosures In-country taxes Readiness for adopting new and impending accounting pronouncements International/transfer pricing regulations International cash/earnings repatriation – compliance and accounting implications Fair value accounting (ASC 825 – formerly FAS 159, Fair Value Option for Financial Assets and Liabilities) International Financial Reporting Standards/ GAAP convergence projects Reporting uncertainties – external reporting Segment reporting Foreign taxes FASB Exposure Draft – Revenue from Contracts with Customers Reporting uncertainties to the IRS (new regulations) Business combinations FASB Accounting Standards Codification – impact on both research capabilities and disclosures Proxy rules, including risk and compensation disclosures Regulation S-K and S-X requirements Stock-based compensation (ASC 718 or ASC 505-50 – FAS 123R Share-Based Payments) Extensible Business Reporting Language (XBRL) Significant Priority Index of 6.0 or higher Moderate Priority Index of 4.5 to 5.9 Low Priority Index of 4.4 or lower Commentary There are a few differences worth noting here – specifically, CFOs appear to consider a number of areas to be lower priorities compared with the overall response. These areas include, but are not limited to, SOX reporting and disclosures, international/transfer pricing regulations, international cash/earnings repatriation, IFRS/GAAP convergence, fair value accounting, segment reporting, and proxy rules. The priorities cited by respondents from larger companies are similar to the overall results, with a couple of exceptions: Large company respondents identified SOX reporting and disclosure requirements as a more significant priority, and view Regulation S-K and S-X requirements to be a lower priority. 16 2014 Finance Priorities Survey
  17. 17. Organizational Capabilities Key Findings • Finance executives and professionals continue to focus on strengthening their leadership and change management skills – areas that help them address many of their core finance priorities, such as strategic planning, forecasting, budgeting and the period-end close. • Coaching/mentoring, personnel performance evaluation and developing rapport with business unit executives also are key priorities. Overall Results, Organizational Capabilities Organizational Capabilities Priority Index Leadership (within your organization) 6.0 Change management 5.9 Coaching/mentoring 5.7 Personnel performance evaluation 5.5 Developing rapport with business unit executives 5.3 Developing rapport with senior executives 5.3 Leveraging outside expertise 5.2 Developing outside contacts/networking 5.1 Negotiation 5.1 Working effectively with regulators 5.1 Written communication 5.1 Leadership (in outside organizations, groups, etc.) 5.0 Management of shared services 5.0 Time management 4.9 Working effectively with external auditors 4.9 Working effectively with outside parties 4.9 Dealing with confrontation 4.8 Management of outsourcing arrangements 4.8 Networking with peers 4.8 High-pressure meetings 4.6 Presenting (large groups) 4.5 Presenting (small groups) 4.5 Six Sigma/continuous improvement 4.4 2014 Finance Priorities Survey 17
  18. 18. “ “Leadership at all levels in the company is a priority. Solid leadership with solid products will improve [our] company. Leadership also includes hiring the right people to lead and also those willing to be led.” CFO, midsize telecommunications company Commentary The personal skills priorities survey respondents ranked highest in this category reflect most, if not all, of the other priorities detailed earlier in our report. Additionally, these priorities point to the finance function’s rising strategic importance. It is noteworthy that all survey respondents – regardless of their position or company size – identified the same top-two priorities regarding their personal skills: leadership within the organization and change management. If CFOs are going to make good on their objective to strengthen their strategic planning contributions, it makes sense that they also intend to invest time and energy in strengthening their leadership capabilities. And if finance professionals are to improve their function’s profitability analysis capabilities, it makes sense that they are also focused on improving their ability to affect and manage change. To illustrate, the analytical insights finance presents to the organization are designed to bring about positive changes (e.g., regarding how much the company invests, or does not invest, in various product lines, service lines, customer segments or sales channels). Key Questions to Consider: • What formal and informal opportunities (leadership development programs, stretch projects, rotational assignments, mentoring, etc.) exist to help all finance professionals improve their leadership and change management skills? • Are there new ways finance professionals can “get out of the finance function” to work closely with business and executive colleagues to develop a stronger rapport while building greater trust and credibility? • Are our finance executives providing rising finance professionals with opportunities to present to, and interact with, our senior business executives? 18 2014 Finance Priorities Survey
  19. 19. Focus on CFOs/Finance Executives and Large Companies Organizational Capabilities – Results for CFOs/Finance Executives and Large Company Respondents Organizational Capabilities Overall CFOs/Finance Executives Large Company Respondents Leadership (within your organization) Change management Coaching/mentoring Personnel performance evaluation Developing rapport with business unit executives Developing rapport with senior executives Leveraging outside expertise Developing outside contacts/networking Negotiation Working effectively with regulators Written communication Leadership (in outside organizations, groups, etc.) Management of shared services Time management Working effectively with external auditors Working effectively with outside parties Dealing with confrontation Management of outsourcing arrangements Networking with peers High-pressure meetings Presenting (large groups) Presenting (small groups) Six Sigma/continuous improvement Significant Priority Index of 6.0 or higher Moderate Priority Index of 4.5 to 5.9 Low Priority Index of 4.4 or lower Commentary The priorities concerning Organizational Capabilities identified by finance executives track closely to the priorities identified by all respondents. The priorities cited by respondents from larger companies are similar to the overall results. 2014 Finance Priorities Survey 19
  20. 20. Methodology and Demographics More than 220 respondents, including CFOs, vice presidents and directors of finance, and controllers, participated in our study, which was conducted in the second and third quarters of 2013. Respondents answered more than 100 questions in five categories: Process Capabilities – Financial Transactions; Process Capabilities – Financial Analysis; Emerging Issues; Technical Capabilities; and Organizational Capabilities. We are very appreciative and grateful for the time invested in our study by these individuals. All demographic information was provided voluntarily and not all participants provided data for every demographic question. Position Chief Financial Officer 22% Manager 14% Corporate Controller 11% Financial Reporting Director/Manager 10% Vice President, Finance 9% Controller 6% Finance Staff 5% Internal Audit 4% Budgeting/Planning Director/Manager 3% Management Consultant 3% Other C-level executive 4% Other 9% Industry Financial Services Manufacturing 11% Government/Education/Not-for-Profit 7% Professional Services 7% Technology 6% Healthcare 5% Hospitality 5% Life Sciences/Biotechnology 5% Retail 5% Utilities 20 20% 5% 2014 Finance Priorities Survey
  21. 21. Distribution 4% Energy 4% Services 4% Insurance 3% Real Estate 3% Consumer Products 2% Telecommunications 2% Communications 1% Media 1% Certification Certified Public Accountant (CPA)/Chartered Accountant (CA) 75% Certified Internal Auditor (CIA) 7% Certified Management Accountant (CMA) 6% Chartered Financial Analyst (CFA) 4% Certified Information Systems Auditor (CISA) 2% Other (Chartered Global Management Accountant, Certified Treasury Professional, etc.) 27% Size of Organization (by Gross Annual Revenue) $20 billion or greater 6% $10 billion - $19.99 billion 9% $5 billion - $9.99 billion 4% $1 billion - $4.99 billion 21% $500 million - $999.99 million 15% $100 million - $499.99 million 20% Less than $100 million 25% Organization Headquarters North America 94% Europe 3% Asia-Pacific 2% Other 1% 2014 Finance Priorities Survey 21
  22. 22. About Protiviti Protiviti (www.protiviti.com) is a global consulting firm that helps companies solve problems in finance, technology, operations, governance, risk and internal audit. Through our network of more than 70 offices in over 20 countries, we have served more than 35 percent of FORTUNE 1000® and FORTUNE Global 500® companies. We also work with smaller, growing companies, including those looking to go public, as well as with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI). Founded in 1948, Robert Half is a member of the S&P 500 index. About Our Business Performance Improvement Services Our Business Performance Improvement experts help CFOs and other executives improve their business operations. This includes process improvements for financial and reporting processes and integrating risk considerations into their performance management activities, as well as assistance in reductions of working capital and improvements to cash flow, control and optimization of costs, and management of risk in their operations. We help drive performance of the supply chain through operations process improvements, strategic sourcing strategies, inventory management, contract management and enhancements to working capital. We assist client executives in improving their control over major capital and construction projects, creating more reliable project timelines and reducing exposure to cost overruns. We also support investment and divestiture transactions, including execution of financial and operational mergers and acquisitions (M&A) due diligence, and we assist in the selection and implementation of enterprise performance management software applications. About Our Financial Advisory Services Our Financial Advisory consultants help companies reduce their risk of non-compliance, while limiting exposure to financial restatements and other costly non-routine situations. The conditions in today’s global business market – including rapidly changing regulations; increased scrutiny of company financials; complex, nonrecurring business transactions; and a shortage of experienced finance and accounting professionals – strain the capabilities of many finance organizations. This increases an organization’s exposure to mistakes, lost synergies and the inability to maintain baselevel financial processes, and has led to more than 5,200 financial restatements in the United States since 2004. The risk of these errors is typically higher during the adoption of new accounting standards; significant business transactions; implementation of new IT/ERP systems; restructurings, acquisitions and divestitures; and expansion into new markets or businesses. Our Financial Advisory professionals provide the critical functional and project management expertise necessary to prepare for and manage non-routine situations cost-effectively, such as restatements, mergers and IPOs. We proactively monitor new accounting rules and offer our clients assistance with addressing complex accounting or reporting challenges. 22 2014 Finance Priorities Survey
  23. 23. Protiviti Business Performance Improvement/Financial Advisory Practices – Contact Information James Pajakowski Executive Vice President – Global Services +1.312.476.6378 james.pajakowski@protiviti.com CHICAGO NEW YORK James Pajakowski +1.312.476.6378 james.pajakowski@protiviti.com Charles Soranno +1.732.326.4518 charles.soranno@protiviti.com DALLAS Ryan Senter +1.469.374.2425 ryan.senter@protiviti.com HOUSTON Marcus Delouche +1.713.314.4982 marcus.delouche@protiviti.com Christopher Wright +1.212.603.5434 christopher.wright@protiviti.com SAN FRANCISCO Gordon Tucker +1.415.402.3670 gordon.tucker@protiviti.com SANTA CLARA Jay Thompson +1.713.314.4923 jay.thompson@protiviti.com Steve Hobbs +1.415.402.6913 steve.hobbs@protiviti.com MIAMI WASHINGTON, D.C. Byron Traynor +1.786.264.7166 byron.traynor@protiviti.com Gary Callaghan +1.571.382.7228 gary.callaghan@protiviti.com 2014 Finance Priorities Survey 23
  24. 24. Europe/Middle East/AFRICA The Americas United States Alexandria Atlanta Baltimore Boston Charlotte Chicago Cincinnati Cleveland Dallas Denver Fort Lauderdale Houston Kansas City Los Angeles Milwaukee Minneapolis New York Orlando Philadelphia Phoenix Pittsburgh Portland Richmond Sacramento Salt Lake City San Francisco San Jose Seattle Stamford St. Louis Tampa Washington, D.C. Winchester Woodbridge Argentina* Buenos Aires Chile* Santiago Peru* Lima Brazil* Rio de Janeiro São Paulo Mexico* Mexico City Monterrey Venezuela* Caracas India Bangalore Mumbai New Delhi France Paris Italy Milan Rome Turin THE NETHERLANDS Amsterdam Singapore Singapore Germany Frankfurt Munich UNITED KINGDOM London Bahrain* Manama Qatar* Doha Kuwait* Kuwait City United Arab Emirates* Abu Dhabi Dubai OMAN* Muscat South Africa* Johannesburg Canada Kitchener-Waterloo Toronto Asia-Pacific Australia Brisbane Canberra Melbourne Perth Sydney China Beijing Hong Kong Shanghai Shenzhen Indonesia** Jakarta South Korea Seoul Japan Osaka Tokyo * Protiviti Member Firm ** Protiviti Alliance Member © 2013 Protiviti Inc. An Equal Opportunity Employer. PRO-1013-101052 Protiviti is not licensed or registered as a public accounting firm and does not issue opinions on financial statements or offer attestation services.

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