Crucial Role of Professional Accountants
in Business in Mid-Sized Enterprises
SAFA IFAC Regional PAIB Forum : Mumbai
23rd April. 2016
A Presentation by
M.R.Vikram
M.Anandam & Co
We Discuss
1.
2.
3.
4.
5.
6.
7.
8.
Control & Trust
Risk & Entrepreneurship
Cash is King
The Internal Regulator function
The People Problem
The Devil is in the Detail
Black Swans
Ethics &Volatility
Control, Trust and the CFO
There are several key aspects of a ‘good clinical practice’. The first is the concept
of being in control … You must have systems in place to detect problems when
they occur. You must have, in other words, the quality systems and standard
operating procedures (SOPs) … [And] if problems are detected, you must take
corrective action to ensure that the problem is abated and that the way you do
business (processes) is modified as is reasonable to avoid the problem in the
future.
Controlled human malaria infection trials: How tandems of trust and control construct scientific knowledge: Else & Wiebe bijker
Control, Trust and the CFO
Often, trust and control are considered in contrasting ways.
Trust tends to involve personal relationships, generally asks for some symmetry, and
is commonly associated with subjectivity.
There is implicit Trust of the Board in the CFO not necessarily arising out of
Data integrity & assurances
In Mid sized companies , is this higher?
Control involves rules and protocols, often is hierarchical, and is associated with
objectivity and standardization.
The exercise of authority over the system to ensure that the behavior is
conformist
The CFO has to work Trust & Control in Tandem: Balance is the key
CFO is the Knowledge Builder and also the builder of Trust .
Risk & Entrepreneurship: The
contradictions of the CFO world
Who takes the risk?
CEO? Board?
Are CFOs Risk estimators or Risk takers?
Whose risks does the CFO take?
Should CFOs be entrepreneurs?
The ability of the CFO is tested when he can maximise risk
taking to himself while conveying the consequences of Risk to
his Board:
Not easy
Cash is King
Probably, the most important function of the CFO
Understanding business practices: Requires knowledge and insight
Understanding Priorities of management
related party transactions
production vs compliance
Balancing with compliance
Short term, yet long term
projects
downturn
marshalling external sources
timing internal sources
List of zero tolerance items: constantly updated
The People Problem
Retaining trained personnel is a huge (biggest?) challenge of the CFO.
Training is required in
Accounting Standards
Tax Laws
International Trade
Banking Norms
Regulation
Compliances
ERP/Accounting packages
Data Security etc,
CFO should be alert to the demanding and diverse professional
inputs needed, daily. Otherwise, quality of output will suffer.
Only people & Processes can drive efficiency
Ethics, Ethics & Volatility
Is the CFO the repository of ethics? Is he the conscience of not just the Board
but the entire organisation?
Who comes first? Shareholder? Board? CEO? Organisation?
CFO must take the code of ethics seriously, continuously and
the code : They are not written in stone.
Ability to distinguish between Ethics & Corrupt practices:
Ethics are much wider
Ethics are tested more often when conditions are volatile
Influence on
stock prices
capital flows
negative externalities
change
CFO: The Internal Regulator
Is compliance to regulation a full time task?
Huge regulatory overload:
The new Companies Act, 2013 raises the demands on
the
CFO (responsibilities and obligations) exponentially
Boards trust the CFO for regulatory compliance
CFO has to monitor compliances and maybe certify
even where he is not in control
High public expectation on compliance
Constant areas of conflict
Survival or compliance is a common question to be
answered by CFO daily in cash deficit companies
Related party transactions
The Devil is in the detail
As accountants, CFOs cannot make compromises on details. Our
training demands it.
In a disclosure driven environment, there would be many “not material”
events which need to be taken care of.
Related Party transactions
Statutory Compliances
Contingent Liabilities
CFO has to stay on course on details, yet deliver results with speed and
accuracy. This is tough. In a world of shortening response times, “trend”
accounting becomes a must.
Is there an overload of Data which affects insight?
Black Swans and CFOs
The crucial role of CFOs is to reduce the vulnerability of the firm to a “black
swan” event
maggi noodles
diesel car ban
Managing Black Swan events is the special talent now demanded of the
CFO. He should expect it and be prepared for it.
But how???
The CFO slots
High
Integrated Finance
Organizations
Efficiency
Low
Low
High
Business Insight
Source: IBM Institute for Business Value, The Global CFO Study 2010
M.Anandam & Co
THANK YOU