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A TIME OF
OPPORTUNITIES?
CSC
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A TIME OF
OPPORTUNITIES?
CONTENTS
1 2 1 3 1
SUMMARY
PAGE 9
RESULTS
PAGE 15
TESTIMONIALS
26. ALEJANDRO ARANDA. Finance Manager, Spain - Weber Shandwick Spain 28. DANIEL BACquEROET. Assistant General Manager, Finance and Administration - Brink's France. 30. MICHAEL BERAHA. General Manager - BNY Mellon France 32. GIuLIO DELL'AMICO. Partner - McKinsey & Company 34. VINCENzO MARAGLIANO. Chief Financial Officer - Elica 36. JEAN-PIERRE MELLEN. Chief Financial Officer - Recticel 38. TATIANA SIMONELLI. Finance Director - Bristol-Myers Squibb Italy 40. FABIO TOMASSINI. Chief Financial Officer - Nuovo Trasporto Viaggiatori 42. HERV VARILLON. Finance, IT and Organisational Manager - Crdit Agricole Leasing and Factoring
PAGE 25
4 1
ANALYSIS
46. MARC BENSOuSSAN. Chief Operating Officer, South and West Europe - CSC
PAGE 45
THE CFO BAROMETER IS A SURVEY THAT HAS BEEN CARRIED OUT FOR THE 4TH CONSECUTIVE YEAR BY CSC, IN CONJUNCTION WITH TNS SOFRES. IT IS BASED ON A QUANTITATIVE ANALYSIS OF THE TRENDS AND OUTLOOK FOR FINANCE MANAGERS FROM A SAMPLE GROUP OF LARGE EUROPEAN COMPANIES.
CFO BAROMETER
A EUROPEAN STUDY
A TIME OF OPPORTUNITIES?
INTERVIEW METHOD
The survey was carried out by TNS Sofres using the CATI method (Computer Assisted Telephone Interview) between December 2010 and January 2011.
80 managers were questioned (no detailed criteria were applied regarding activity sector or company size). These managers represent the following target positions: Chief financial officer / finance director / finance manager.
The sample was adjusted in order to ensure that it was an accurate representation of European companies from within the target activity sectors with at least 1,000 employees.
A TIME OF
OPPORTUNITIES?
CFO BAROMETER 2011
SUMMARY
Trends
finance departments
FINANCE DEPARTMENTS MUST NOW DEVELOP THEIR VISION FOR THE FUTURE, ACTINg AS A gUIDE FOR gENERAL MANAgEMENT IN MAKINg LONg-TERM STRATEgIC DECISIONS, IN ADDITION TO ENSURINg PROFITABILITY AND ADEQUATE RISK MANAgEMENT. THIS CAN BE SEEN FROM THE LATEST CFO BAROMETER, A SURVEY OF FINANCE MANAgERS FROM 80 LARgE EUROPEAN COMPANIES.
and
Outlook
for
CFO BAROMETER
SUMMARY
2011
LARGE EuROPEAN COMPANIES HAVE RECOVERED BOTH BY CuTTING INVESTMENTS AND BY DRASTICALLY REDuCING THEIR COSTS AND WORKING CAPITAL REquIREMENTS. THIS RECOVERY HAS BROuGHT PROFITS CLOSE TO THEIR HISTORICAL LEVELS AGAIN, AND GENERATED COMFORTABLE CASH RESERVES.
IN CERTAIN SECTORS, ORDER BOOKS ARE ONLY FILLED FOR TWO OR THREE MONTHS COMPARED TO SIX TO TWELVE BEFORE THE CRISIS. CORPORATE CYCLES (R&D, PRODUCTION, SALES, ETC.) HAVE SHORTENED, AND TODAY IT IS THE SHORT TERM THAT DOMINATES THE DECISION MAKINg PROCESS.
A new world has arisen from the disorder of the present and the past. This global upheaval has not been caused by the crisis, however it served only to reveal and accelerate it. Firstly, we should salute the global economy's tremendous resilience and emerging markets' enormous ability to recover. Having gone up by 4.8% in 2010, the increase in global gDP is expected to reach 4.2% in 2011, even if this growth remains unevenly distributed. The change that we are experiencing is characterised by two main upheavals. The first shock is the upsurge in digital living and life sciences, which changes human behaviour and reveals radical changes to working, manufacturing and trading methods. The second shock is the transfer of global economic growth from the Atlantic area (uS and Europe) towards the Pacific area (China and India) and the emergence of China as a major power. The influence of emerging markets in the global economy has gone from 25% in 2000 to approximately 40% in 2010 and could represent 60% in 2030. Not enough has been done, however, to fundamentally correct the imbalances at the source of the crisis in 2008. Economic revival policies certainly avoided a worst case scenario. Nevertheless, China's recurrent surpluses still create a global oversupply problem. The expansionist monetary policy of the united States continues to support commercial imbalances. And the global monetary base has shot up since 2007. This situation means we are confronted by two main challenges. The first challenge concerns the reduction of public debt in developed countries. The second challenge relates to restoring growth in developed countries. We must devise new sectors of activity, new ranges of goods and services and new areas of technological progress.
BUSINESSES
In almost all sectors of activity, the crisis is being used as a driver for speeding up the necessary transformation, lowering production costs andreviewingolddogmas.In2009,afterthesharpeconomicslowdown, businesses drastically reduced their costs, working capital requirements and investments, with larger companies taking advantage of favourable loan conditions linked to low interest rates. In 2010, the business activity of large European groups has improved overall, with profits coming closer to their historical levels. Cash reserves testify to the speed with which businesses have adapted to a worsened environment. This cash has not yet been reinvested, mainly on account of a lack of visibility as regards the economic upturn. Going forward, companies will have to implement a policy of active investment in order to maintain their position in the new competitive landscape, particularly in emerging countries where there is growth. In the background behind the performance of large businesses, however, many SMEs have not yet rebuilt their profits and are still experiencing difficulties. In France, savingsonlyfinancetwothirdsofcompanyinvestmentsaverylowlevel.
FINANCE DEPARTMENTS
Finance managers were previously responsible for ensuring profitability, managing risk and monitoring the administrative processes of the companies they work in. From now on, finance managers must not only ensure the company's continuity, but they must also guarantee its reputation. They are increasingly involved more in forecasting than in reporting. They project themselves into the future so that they can present a broader vision to general management. Three quarters of finance managers claim to spend half of their time or more on the strategic aspects of their role.
11
CFOs are expected to be able to respond to requests for information in real time. They have to rethink their management and forecasting processes in order to increase their own responsiveness and make up for the lack of visibility.
12
IN ADDITION TO MANAgINg OVER THE SHORT TERM, MANAgEMENT FORECASTINg NEEDS TO ALLOW CFOs TO IDENTIFY NEW OPPORTUNITIES SO THAT THEY ARE ABLE TO SUPPORT THE COMPANY'S STRATEgIC DECISION MAKINg AND NEgOTIATIONS RELATED TO INVESTMENTS, ACQUISITIONS, DIVESTMENTS, ETC., BY BEINg HIgHLY SELECTIVE WHEN CHOOSINg PROJECTS, WHILE STILL ENSURINg THE RETURN ON CAPITAL EMPLOYED.
AND TOMORROW
Actual growth is not achieved by way of excessive public debt but rather through innovation, trade and profit, which remain the only ways of ensuring our development. The global economy has outstanding drivers at its disposal. The entry into the modern world of the middle classes in emerging markets, an increase of almost 3 billion in global population in a few decades, and a wave of exceptional innovation that has only just started to unfurl all mark the beginnings of a cycle of strong growth for a long period. Some observers note that since 2000, the world has been at the centre of a new economic "super cycle". A super cycle is characterised by increased global growth for at least one generation, strong growth in international trade, rapid urbanisation and investments driven by technological innovation. Global GDP has doubled in ten years and could triple by 2030. Large Western companies wish to gain access to the middle class markets in emerging markets, whereas companies in these countries are interested in the mature markets of Europe and America. According to experts, the major corporations of emerging markets should have collective revenues of uSD 8 trillion by 2020 compared to uSD 1.3 trillion in 2009. The battle will be over access to resources: raw materials, energy, capital and technology. The rivalry between Western powers and China will intensify in all these areas.
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14
A TIME OF
OPPORTUNITIES?
CFO BAROMETER 2011
RESULTS
15
33 %
58 % 54 % 51 % 47 % 42 % 36 % 49 % 50 %
Compliance with Making strategic et rglementations stratgiques standards and decisions regulations
Prise de dcisions
16
CFO BAROMETER
33 %%% 33 33
94 %% 94 92 % 85 %% 85 83 % 86 %% 86
93 %% 93 84 %% 84 83 % 88 %% 88 81 %82 81 %% 81 % %81
73 % 74 %
80 %
68 68 %%
Matriser lhorizon et Amliorer lala Gagner en agilit Simplifier les Matriser lhorizon Amliorer Gagner Gagner en Gagner en Qualit Dvelopper des en agilit Simplifier les Mettre en place Refonte de Controldans les Improve thedes Increaserpondre Simplify NA temps dans les temps the pertinenceoutils daide rpondrelorganisation pertinence des pour agility pour mthodes des autonomie mthodes autonomie pertinence des outils de pilotage exercices de exercices de danalyses ouvert Increase financire financire time horizon informations of desefficacement aux methods relevance des toefficacement aux structures respond informations informations la dcision des des danalyses accessible prvision prvision fins danalyse questions etanalysis de pilotage in forecasting information et questions des des et de pilotage lensemble des financial entreptsfins danalyse et effectively todes ofdonnes (budget, BP, PMT) (budget, de donnes de contrle BP, PMT) de contrle dirigeants (rfrentiels) dirigeants collaborateurs activities used for questions from and autonomy des risques des risques
management
supervision
17
CONTROL
59 %
Measure of profitability
Mesure de la rentabilit
54 % Cot du financement
Financing costs
45 %
Time horizon
Horizon de temps
43%
56 % 51 %
55 % 50 % 49 %
37 %
36 %
29 % 27 % 23 %
2010 2011
1-year budget 1 an
Budget
3-yearans 3 plan
Plan
Court terme Cycle conomique Exercice Company's Financial year propre fiscal own lentreprise
economic cycle
18
CFO BAROMETER
GOVERNANCE
SIgNIFICANCE OF RISK
Since the crisis, CFOs have kept their important roles in the areas of governance and risk management. The risks associated with IT security (82%) and with regulations (87%) remain the most significant concerns for CFOs in 2011. The risks that have a tendency to surface during crises, i.e. the risk of customer default and the risk associated with the financial markets, no longer figure among CFOs' major concerns in 2011.
88 %
Risque li la rglementation
93 % 91 % 87 % 88 % 96 % 82 % 82 % 85 % 85 % 82 % 73 % NA
NA 78 % 68 % 47 %
76 % 74 %
19
COMMUNICATION
92 % 89 % 90 % 83 %
91 % 95 %
81 % 65 %
2008
2009
45 % 46 %
2010 2011
20
CFO BAROMETER
94 % 86 % 87 % 83% 79 % 69% 61 % 53 % 56 % 89 % 89 % 80 %
Rduire le temps
in statutory reporting
Reducing dlais de lead times production des comptes for drawing up financial statements
Diminuer les
Mettre en place une Implementing dmarche doptimisation process des processus de type Lean Six Sigma optimisation
2010 2011 Comptabilit Production Production des reporting ofde type rglementaire, regulatory, statutaire et statutory, fiscal Exploitation Comptabilit Comptabilit Comptabilit
General gnrale (production accounting des donnes (production comptables) of accounting data)
Customer Operation Bank Supplier et fournisseur bancaire client and maintenance accounting(rapprochement accounting accounting des SI bancaire) maintenance (bank of IT systems reconciliation)
21
FOCUS ON IT SYSTEMS
PRIORITY OF IT ISSUES
The most significant IT systems issues according to the finance managers questioned are integrity (93%), security (90%) and data accessibility (90%).
93 %
Integrity
Intgrit 4% 1% 1%
49 % 44 %
90 %
Security
Scurit 2% 1% 6%
59 % 31 %
90 %
Data accessibility
Accessibilit aux donnes 0% 1% 9%
45 % 44 %
Top 2 (5+4) Top 2 (5+4) 5- Very important 5- Trs important 4- Important 4- Important
29%
78 % 49%
3- Moyennement important 3- Medium importance 2- Peu important 2- Low importance 1- Notdu tout important 1- Pas at all important
17%
92 % 83 % 80 % 83 % 73 % 82 % 74 %
2010 2011
NA
Qualit et quality and pertinence des relevance of informations des entrepts information de donnes from data
support tools
Overhaul of the lorganisation data structures des structure des donnes organisation (rfrentiels) (databases)
Refonte de
Mettre en place Implementing des outils de pilotage open ouvert accessible lensemble des management collaborateurs tools
warehouses
22
CFO BAROMETER
HR ASPECTS
PROFILES AND SKILLS IN gREATEST DEMAND WITHIN FINANCE DEPARTMENTS
Expert profiles are increasingly in demand within finance departments (according to 45% of CFOs): this is the result of a desire on the part of CFOs to concentrate on high value added roles. Expert profiles that are capable of responding to fast environmental changes contribute the most to value creation and performance improvement. At the same time, the importance of so-called operational roles remains stable.
67 %
54 % 48 %
45 %
21 %
22 % 20 % 11 %
4%
Experts Experts (cash (trsoriers, analystes managers, financial financiers, experts mtiers) analysts, expert roles, etc.)
Productifs Operational staff (analystes quantitatifs, (quantitative analysts, comptables) accountants, etc.)
Chargs de missions Project managers (recruts pour mener (recruited to manage bien des projets et/ou projects and/or fonctions) coordonner des coordinate functions) (quantitative analysts, accountants, etc.)
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A TIME OF
OPPORTUNITIES?
CFO BAROMETER 2011
TESTIMONIALS
25
"OUR CHALLENGES REMAIN THE SAME: GETTING ACCESS TO FINANCING AND MANAGING THE PRESSURE ON LIQUIDITY."
26
TESTIMONIALS
ALEJANDRO ARANDA
FINANCE MANAGER
HOW DO YOU SAFEgUARD THE CONTINUITY OF YOUR ACTIVITIES OVER THE LONg TERM WHILE STILL MANAgINg THE SHORT TERM?
Considering the economic slowdown, which is not conducive to risk taking,Ibelievethatwemustremainattentivetoshort-termopportunities while still drawing lessons from the work carried out during these recent years of the crisis. At Weber Shandwick, we have tried to optimise and maximise available resources so as to guarantee a healthy economic and financial balance. We have also worked on minimising the impact of this unstable economic situation on our business activities and have defined the company strategy for the long term. Today we find ourselves confronted with a double strategic challenge: on the one hand, we have to review our approach to activities by creating new departments and product lines and by involving new professional experts; on the other hand, we need to adapt to new consumption habits, a direct consequence of globalisation and new technologies, so as to meet the new needs of our clients and requisitioners. While we do not intend to abandon our defensive strategies, we still need to recognise that the leaders of tomorrow will be those who have made their balance sheets healthier and have defined coherent growth strategies that allow them to face new market realities more nimbly and flexibly. An ability to adapt to change will thus be a key factor for success in an economic environment marked by strong competition and major instability.
find that they have excessive debt, which forces them to resort to divestment of assets in order to generate liquidity. It seems clear that reform of the Spanish financial system is essential; it is not insignificant that savings banks in this country are restructuring to become private entities, allowing them to remain outside the sphere of influence of the public authorities. We must draw lessons from this turbulent period so that we can know clearly where and how loans are granted.
STAgNATION OF WESTERN MARKETS VERSUS STRONg gROWTH IN EMERgINg MARKETS: HOW SHOULD COMPANIES REACT WHEN FACED WITH THIS NEW ECONOMIC SITUATION?
Over the last few decades, emerging markets have gradually increased their share of the global market to the detriment of developed countries. It is logical that the arrival of new, more competitive economies on the market means that we are confronted with greater sector-based specialisation. Nevertheless, without this representing a threat, the rapid growth of emerging markets creates increased purchasing power there, which improves per capita revenue and will also result in increased internal demand for goods and services. This represents a real opportunity for growth for many companies that wish to adopt a policy of international expansion. Weber Shandwick's presence grows stronger from year to year in these markets, particularly in the Asia-Pacific region and Latin America, and currently represents 10% of the total volume of our global activities.
HOW CAN COMPANIES PROTECT THEMSELVES FROM FUTURE CRISES AND STILL gUARANTEE THEIR FINANCIAL INDEPENDENCE?
Severalarticlessupportthetheorythatthemainreasonsfortheeconomic recession were a financial sector that has run out of steam plus a lack of responsiveness on the part of the financial regulators in taking appropriate corrective measures. At present, our challenges remain the same: getting access to financing and managing the pressure on liquidity. Financial conditions continue to be restrictive and companies
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28
TESTIMONIALS
DANIEL BACQUEROET
BRINK'S FRANCE
MANAGEMENT CONTROL (DFCG)
29
30
TESTIMONIALS
MICHAEL BERAHA
GENERAL MANAGER
HOW ARE COMPANIES REACTINg TO THE STAgNATION OF WESTERN ECONOMIES AND STRONg EMERgINg MARKET gROWTH?
For us, Europe is a growth region: it is a market that remains highly fragmented, but is flourishing thanks to structural and regulatory changes. We want to continue setting up activities there, knowing that I already have roughly 10,000 colleagues in Europe, and that together we have managed European customers for over a century! Asia interests us in the longer term: it's a gamble, whilst Europe is a strategy which is at the centre of our hopes and desires, and is where we see new opportunities in the short term.
WHAT ARE THE PRIORITIES FOR FINANCE DEPARTMENTS IN THIS UNUSUAL PERIOD?
It's all about showing that there will be a return on investment, and ensuring that financing secured will be used wisely. An important indicator is positive operating leverage: revenue growth must be higher than any growth in costs, even though our operations require much investment; each year a large part of our revenues are spent on IT investment. In addition, the rising cost of capital is something we monitor very closely.
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"NOWADAYS, THE CFO MUST PLAY THE ROLE OF A PEER IN MAKING STRATEGIC DECISIONS, WITH AN ABILITY NOT ONLY TO INTERPRET THE WEAK SIGNALS COMING FROM THE MARKET BUT ALSO TO REACT PROMPTLY TO EXTERNAL AND INTERNAL FACTORS."
32
TESTIMONIALS
GIULIO DELL'AMICO
PARTNER McKINSEY
& COMPANY
THE ROLE OF THE CFO IS UNDERGOING RADICAL CHANGE TO BECOME A FIGURE THAT CAN COMBINE PLANNING AND ANALYSIS, BUT ALSO ONE THAT IS INCREASINGLY INVOLVED IN STRATEGIC DECISIONS AND ABLE TO CONTRIBUTE DECISIVELY TO THE VALUE CREATION PROCESS OF THE COMPANY.
WHAT CAN THE CFO DO NOWADAYS TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH? WHAT MEASURES HAVE BEEN TAKEN BY YOUR COMPANY TO gET THROUgH THIS DIFFICULT PERIOD?
What is fundamental is the progressive evolution of the role of the CFO. From being a process manager who carefully controls the business, he is turning into a business partner who focuses on planning and analysis, is deeply involved in business decision making and who takes a forward-looking approach in order to become a value partner who brings distinctive competencies to company. Nowadays, the CFO must play the role of a peer in making strategic decisions, with an ability to interpret the weak signals coming from the market and to react promptly to external and internal factors. In addition to the normal functions of the CFO, he/she plays a key role as a value partner regarding: Active management of the company's asset portfolio: decisions related to the managing the companys presence, in terms of geographic location, product range and distribution channels - the determining factors for growing the business. In the last 10 years, the expansion of market presence together with M&A activity represented 95% of the growth generated by a sample of 720 large companies; Investor relations and communication, which requires a good understanding of the nature of the company's investors and the management of adequate communication with them; Measurement and performance management at a high level of granularity (every single element of performance), which links the metrics of the profit and loss account and cash flow to the allocation of capital employed and thus the creation of value.
WHAT CAN THE CFO DO TO PROTECT THE BUSINESS FROM POSSIBLE FUTURE CRISES AND, AT THE SAME TIME, ENSURE THE COMPANYS FINANCIAL INDEPENDENCE?
Inadditiontotheactionsalreadymentioned,nowadaysitisfundamentalto haveaproactiveapproachtoriskmanagement,throughtheidentification and the prioritisation of key business risks, the measurement thereof, and the adoption of appropriate measures for mitigating or covering criticalevents.Onemustnotneglecttheimportanceofstrategicplanning that takes into account alternative scenarios derived from the trends associated with various macroeconomic variables that are relevant for the business, and identifying for each scenario the various actions to take. Last but not least, it is important to think of and implement stress tests that take into account not only possible changes in the key drivers of the business, but also the occurrence of critical events.
HOW ARE YOU REACTINg TO THE NEW ECONOMIC SITUATION, CHARACTERISED BY THE STAgNATION OF WESTERN MARKETS AND STRONg EMERgINg MARKET gROWTH?
It is important to seek and to achieve growth by leveraging ones own distinct competences and identifying at a granular level (in terms of geography, product or channel) the opportunities for growth that exist in Western markets. It is also necessary to invest in those high growth markets that prove to be more compatible with the presence and the characteristics of the company, and into which it can more easily export its own distinct competences.
33
"THE CFO PLAYS A KEY ROLE IN SPREADING A MINDSET OF PERFORMANCE MEASUREMENT, WHILE AT THE SAME TIME MAINTAINING RIGOROUS COST CONTROL THROUGHOUT THE BUSINESS."
34
TESTIMONIALS
VINCENZO MARAGLIANO
ELICA
IN ORDER TO CONTINUE TO GROW IN A MATURE MARKET, ELICA LEVERAGES ITS CAPABILITIES IN PRODUCT AND PROCESS INNOVATION TO SUPPORT A STRATEGY OF INTERNATIONAL EXPANSION AND HIGHLY SELECTIVE M&A, FURTHER REINFORCING ITS TOP OF THE RANGE POSITIONING.
HOW ARE YOU REACTINg TO THE NEW ECONOMIC SITUATION, CHARACTERISED BY THE STAgNATION OF WESTERN MARKETS AND STRONg EMERgINg MARKET gROWTH?
Since 2006, Elica has pursued a path of internationalisation by opening a business unit in Mexico, aimed at serving American markets (both North and South) and by opening a factory in Poland near the production plants of our main OEM clients and Eastern European markets. This trend accelerated over the last two years, during which Elica completed an acquisition in the very high-end segment of kitchen hoods in Germany in 2008, and one in China in September 2010. In May 2010, Elica also signed a joint venture agreement in India. In Germany, the acquisition had as primary goal the development of the sales of Elica brands in the German-speaking markets. The operations carried out in Asia will promote our expansion in markets with the fastest growth rates in the world.
WHAT CAN THE CFO DO TO PROTECT HIS BUSINESS FROM POSSIBLE FUTURE CRISES?
In a mature sector like ours, either the business has the strength and capabilities necessary to grow in a sustainable manner, or it is inexorably destined to fold.
35
36
TESTIMONIALS
JEAN-PIERRE MELLEN
CHIEF FINANCIAL OFFICER
RECTICEL
IN RECENT YEARS RECTICEL, WHICH MANUFACTURES VARIOUS POLYURETHANE BASED PRODUCTS, HAS FOCUSED PRIMARILY ON THE AUTOMOTIVE SECTOR. IN THE WAKE OF THE ECONOMIC CRISIS AND LOWER MARGINS IN THE SECTOR, THE COMPANY IS NOW CHANGING COURSE. AS OF NOW THE EMPHASIS WILL BE ON NON-CYCLICAL SECTORS WITH STRUCTURAL GROWTH TRENDS, AND NEW NICHE PRODUCTS TAILORED TO CUSTOMER REqUIREMENTS. THE TASK OF CFO JEAN-PIERRE MELLEN IS TO ENSURE THAT THE CAPITAL STRUCTURE AND INTERNAL ALLOCATION OF FINANCIAL RESOURCES SUPPORTS THIS NEW STRATEGY. CASH FLOW OPTIMISATION AND SYNERGIES WILL PLAY A KEY ROLE IN THIS.
WHAT ARE THE MAIN CHALLENgES FOR RECTICEL IN THE NEARBY FUTURE?
First of all, to cope with continuously increasing raw materials prices, among others by way of synergies, so that we can make the most of economies of scale. In addition, we need to roll out our projects in the area of product development as quickly as possible. The water absorbent foam is a nice example of this. In future we intend to offer even more tailored niche solutions to our industrial customers, but that will only be feasible if we can generate enough volume in the more traditional sectors.
AND MORE SPECIFICALLY, IN FINANCIAL TERMS? WHAT ROLE DOES THE CFO PLAY IN THESE PLANS?
From the beginning, as CFO I was deeply involved in the development of thisstrategy.Itssuccessdependsonrigorousperformancemanagement. The strong emphasis on cash performance was a necessary evolution for Recticel, given our traditionally high debt ratio in the past. Today we examine every investment to determine if it fits with the strategy and offers sufficient financial return. Risk management is also essential. Recticel is driven by a very strong entrepreneurial culture, but the urge to take on new challenges should be accompanied by a thorough understanding and management of risk. As CFO I rely on a well developed internal control system to manage these things. My most important objective is the further optimisation of our capital structure, partially thanks to a less volatile and stronger cash flow. Recticels new strategy is focused on growth. Now that we have clearly defined our areas of activity, we need to have the necessary financial room to manoeuvre so we can seize growth opportunities!
37
"A CFO CAN AND MUST BE THE CEO'S BUSINESS PARTNER, HELPING HIM IN THE DEVELOPMENT OF STRATEGIES."
38
TESTIMONIALS
TATIANA SIMONELLI
FINANCE DIRECTOR
WHAT CAN THE CFO DO NOWADAYS TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH? WHAT MEASURES HAVE BEEN TAKEN BY YOUR COMPANY TO gET THROUgH THIS DIFFICULT PERIOD?
In my opinion, business continuity and growth are not in conflict with each other, but rather must be part of a single holistic strategy. Analysis of the pharmaceutical sector, and specifically the Italian one, shows that it is currently characterised by a fall in growth rates and lower margins,forreasonsthatarenotentirelyattributabletotheglobalcrisis.In order to meet external market requirements and create a foundation for future success, at the end of 2007, Bristol Myers Squibb (BMS) decided to transform itself into a biopharmaceutical company, by combining the best of the traditional pharma model (strong competence in clinical trials and the approval process, financial solidity, geographic scope and penetration) with the best of the biotech model (innovative research, agile and entrepreneurial culture). Since then, BMS has always operated in a coherent manner, focusing on prescription drugs (leaving aside all the other secondary businesses that it was previously engaged in) and concentrating on the development of innovative molecules for curing serious diseases with a strong social impact. The pipeline has continued to evolve and, as financial analysts have confirmed, it has become one of the most promising in the sector, in the five therapeutic areas in which it competes. In addition, we have pursued a very innovative approach by integrating internal research with a selective acquisition strategy called String of Pearls, which has led to ten important acquisitions in less than three years. In addition, the decision to enter into partnerships has allowed the company to reduce the risk of clinical trials and, at the same time, to share the cost of development and marketing, leveraging the competencies acquired from each partner. In short, its a win-win approach that optimises return for partners by avoiding extraordinary financialoperations(mergersand/oracquisitions),whichdonotgenerate immediate value for shareholders, as has been widely demonstrated in various cross-sector analyses. BMS has also reported excellent financial results thanks to the implementation of initiatives aimed at increasing productivity, by rationalising the production network, focusing on core competences and outsourcing those activities which specialised players can do better than in-house organisations.
WHAT CAN CFOS DO TO PROTECT THEIR BUSINESSES FROM POSSIBLE FUTURE CRISES AND, AT THE SAME TIME, SAFEgUARD THE COMPANY'S FINANCIAL INDEPENDENCE?
There is no panacea, but one can, and indeed must, prepare for the future in the best possible way, making the most of not only products and services, but also of the business and management models.The analysis of success stories illustrates the importance of thinking and acting on a medium-term basis, striking a balance between immediate and future investments, forecasting developments in reference markets. Of course, we dont have a crystal ball, but there are various types of what-if analyses that can be used to identify possible future scenarios. Occasionally some outcomes may seem absurd and disastrous, but it is necessary to make an effort to understand the underlying rationale. Of course, failure is possible; for this reason, it is fundamental to measure and monitor risk, to have alternative plans, and to have the courage to stop new projects whenever they prove to be inadequate.Through long-term financial forecasts, risk adjusted models, choice management and the development of alternative plans, the CFO can and must be the CEO's business partner, helping him in developing strategies. Added valueiscreatedbyathoroughknowledgeofthebusiness,thecompany's operational business context and its business partners. Regarding financial independence, there is definitely no guarantee of avoiding possible acquisition by another company. It is also true that companies that are capable of planning their own future and of fully exploiting their potential enjoy good ratings not only from financial analysts, but also from investors. ultimately, I dont think one should be scared of acquisitions, as they are often nothing more than the recognition of the companys value, and invariably whoever is buying will integrate the best parts of the acquired company: products, business models, and staff. Excellence is a winning card even in this case!
HOW IS YOUR COMPANY REACTINg TO THE NEW ECONOMIC SITUATION, CHARACTERISED BY THE STAgNATION OF WESTERN MARKETS AND STRONg EMERgINg MARKET gROWTH?
Innovation and excellence are always rewarded. One should not give up when confronted by an unfavourable macroeconomic context. At a global level, even BMS is looking carefully at markets with high growth rates (we operate in China, India and Brazil), developing strategies and deploying adequate resources. In addition, I must insist on the fact that notwithstanding the stagnation of our domestic market, Italy still offers many opportunities!
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"CFOs HAVE A LARGE RANGE OF PRIORITIES. CERTAINLY, THEY MUST BE ABLE TO MAINTAIN A CONSTANT FOCUS ON THE GROWTH DRIVERS OF THE BUSINESS."
40
TESTIMONIALS
FABIO TOMASSINI
CHIEF FINANCIAL OFFICER
WHAT CAN THE CFO DO NOWADAYS TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH?
A great deal of uncertainty surrounds the traditional markets, which are characterised by increased competition and the evolution of major macroeconomic factors, in turn increasingly influenced by new international political balances and the steady rise of emerging markets. In this context, CFOs have to juggle numerous priorities. Certainly, they must be able to maintain a constant focus on the growth drivers that enablethebusinesstogenerateprofitandthusensureitsexistence inthe marketplace. At the same time, the CFO must participate in formulating corporate strategy, by helping identify business opportunities. Lastly, the CFO must safeguard the long-term continuity of the business by monitoring the conditions in which it operates, and making sure neither internal nor external factors change those conditions in a manner that threatens the companys existence. The current crisis has had a significant impact on the number of players in the market, and has rewarded the leading companies able to ensure their continuity. These businesses have also been able to capitalise on the opportunities for growth linked to market consolidation. Another significant effect of the crisis was to heighten awareness of the need to closely monitor the evolution of risk factors. This implies being able to develop alternative scenarios that enable the rapid implementation of measures required to safeguard the companys resources.
WHAT CAN THE CFO DO TO PROTECT HIS BUSINESS FROM POSSIBLE FUTURE CRISES?
Financial resources are increasingly considered to be a real production factor and the corresponding suppliers demand in addition to an adequate compensation for the risk associated with the project or company a certain stability and continuity of the business. To ensure business continuity and proper remuneration for risk, it is crucial for the company to focus on pursuing long-term objectives while maintaining sufficient flexibility to enable it to seize opportunities for growth and to withstand volatility and turbulence in the short to medium term. The CFO can help top management define a method to measure value creation in order to reconcile two requirements: firstly, to guarantee the implementation of the right strategic plan in order to achieve long-term goals; and secondly, to be able to react to unexpected events.
HOW ARE YOU REACTINg TO THE NEW ECONOMIC SITUATION, CHARACTERISED BY THE STAgNATION OF WESTERN MARKETS AND STRONg EMERgINg MARKET gROWTH?
NTV is currently operating in a national market and, given the specific nature of its business, its supply markets are not located in the emerging markets such as those collectively called the BRIC countries. I believe that the stagnation of European markets can only be overcome through structural measures at the Eu level.
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HERV VARILLON
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CFO BAROMETER 2011
ANALYSIS
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ANALYSIS
MARC BENSOUSSAN
CSC
The new world that we see unfolding each day was not caused by the crisis. The crisis only served to reveal and accelerate it. Businesses are in the vanguard of the changes which characterise this new world. The first shock sustained concerns the emergence of digital technologies and life sciences, which herald profound disruptions in our ways of working, producing and interacting. The second shock is related to the shift of the engine for global growth from the Atlantic area towards the Pacific and the emergence of China as an economic superpower. In almost all business sectors, the crisis has been used by businesses in a very relevant manner to accelerate transformations, lower production costs and to re-examine a certain number of old dogmas from every angle.
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CSC
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