Getting it right

with growth:
How to be a great
CFO in the new
growth economy

As companies focus on
growth, Chief Financial
Officers are now assuming
a more strategic role and
are expected to deliver
real insight to the C-suite.
Reporting and closing
the books are no longer
enough. CFOs must drive
operational gains and
steer their companies’
growth strategies.
 Contents

Features
2014

05
Readying the growth
foundation: CFOs
take the big view

11
Four paths to
growth for CFOs

29
Five actions for the
growth-oriented CFO
CFO insights
and special
considerations

07
ADP: Driving growth
through innovation

14
Tax strategy: Getting it right
during growth

21
ARRIS: Two steps ahead

26
Euro-Pro: A multipronged
approach to growth

30
Minding the details: A CFO’s
reporting and compliance tip
sheet for growth

01
 Executive summary

Traditionally, Chief Financial Officers play a unique and critical role—

(CFOs) have provided control and providing insight, managing risk, and
Times have changed.
compliance oversight. In the last decade ensuring that companies fully realize
The role of CFO has however, the role of CFOs has evolved the potential value of a given strategy.
into that of a strategic partner to the
evolved to that of a However, growth is hard. During organic
broader executive team, providing
strategic partner to real insight to the company’s growth and inorganic growth, real risks and
planning process. “For the past decade, complexities arise. Several megatrends
the broader executive are at play, such as shifts in demographic
companies have had to contend with
team, providing real a series of large-scale macroeconomic and global economic power,
disruptions,: along with pressures on urbanization, climate change, resource
insight to the company’s scarcity, and rapid technological
costs and earnings,” says Bob Bishop,
growth plans. a partner at PwC. “Now, as the global innovation.2 As a result, “getting it right
economy recovers from the recession with growth” is harder, making the
and cost and short-term earnings are CFO’s involvement critical for success.
not the sole focus, companies can turn
their attention to the top line again.” Technology has freed up
CFOs. Now they can offer a
In PwC’s recent CEO survey, some 85 broader vision.
percent of chief executives are either
somewhat confident or very confident CFOs have always taken the lead when
regarding their company’s prospects it comes to traditional functions such
for revenue growth over the coming as reducing costs and overseeing the
12 months.1 They have already taken standard control, compliance, and
advantage of the more obvious cost reporting aspects of the business. In
reductions, and there is little left to cut. the past, CFOs would need to spend a
Many continue to have strong balance significant amount of time on the rote
sheets and growing cash reserves so aspects of the job, such as periodic
they are starting to increasingly focus on reporting and closing the books.
growth to provide shareholder value. But developments in both technology
Whether growing through M&A, and organizational approaches
emerging markets, digital or are making it easier for the CFO to
innovation, the “evolved” CFO can deliver insight regarding not just
the past but the future. Many of

1. 17th Annual Global CEO Survey: Fit for the Future. (2014)
2. Five Global Megatrends. (2014)

02 Getting it right with growth: How to be a great CFO in the new growth economy
the department’s routine control, Big Data and advanced analytics also
compliance, and reporting functions expand the CFO’s vision at a lower cost
are now automated, generating faster than ever before. Using increasingly
and more accurate results, and giving available digital data, he or she can
finance a highly granular, real-time model various scenarios to get a better
view of the organization’s performance. picture of the future. “Finance sits at the
In addition, technology advances such intersection of a tremendous amount
as cloud computing have the potential of data,” says Gary Apanaschik, a
to bring a range of benefits to finance, partner at PwC. “Not only the financial
including significant cost savings, numbers coming in, but also the
operational efficiencies, flexibility in profitability of individual products
integration and deployment, improved and services, and how markets and
access for employees, and more robust competitors are performing. So they
disaster recovery. This has come can use these new technologies to sift
at a good time and organizations through that information and identify
need to prepare for adoption. the most promising path for growth.”

“Instead of finance spending 70 percent

of its time on basic financials and
reporting, and only 30 percent on more
strategic issues, that ratio has flipped,”
says Hal Houser, a partner at PwC.
Increasingly, this technological agility is
a differentiator between top companies Technology advances such as cloud
and underperformers. PwC’s 2013 computing have the potential to
Finance Benchmark study found that
top companies have automated more bring a range of benefits to finance,
than twice the number of key systems including significant cost savings,
compared to the typical organization,
and that the cost of finance at top- operational efficiencies, flexibility
performing firms is nearly 50 percent in integration and deployment,
lower than at typical firms.3
improved access for employees, and
more robust disaster recovery.

3. Unlocking Potential: Finance effectiveness benchmark study 2013.

03
04 Getting it right with growth: How to be a great CFO in the new growth economy
Readying the growth
foundation: CFOs
take the big view
Getting the core capabilities The bottom line is that as the
primed for increased activity organization begins to grow, the
finance function will need to be able
There is a set of baseline capabilities to scale rapidly, without reinventing
that must be well developed before itself or serving as a drag on the
executing a plan for growth. Growth will process. “Whatever finance does
put stress on the model, and this could has to be scalable,” says Apanaschik.
degrade the ability of finance to deliver “As the company’s growing,
on its basic transactional, compliance finance has to be able to absorb
and reporting responsibilities. Just as that quickly and keep executing
importantly, finance needs to provide on its baseline responsibilities.”
services to the business in the areas
of operational excellence (shared Hiring ahead of growth
services), specialty knowledge (i.e.,
corporate accounting, tax, and treasury) A critical aspect of these foundational
and customer intimacy (FP&A and capabilities is talent. The finance
business unit finance). The ability of function needs to be hiring ahead of the
the finance function to provide these company’s growth trajectory. Growth
services is critical to the success of any inevitably requires special projects
growth strategy. The level of maturity and task forces. People get pulled into
needed across these services will vary various commitments and obligations,
by strategy. For instance, the need for putting greater pressure on the core
highly specialized knowledge in tax reporting and control functions. If the
and treasury surrounding transactions finance organization is staffed to meet
in foreign currency is probably more current requirements and no more, it
important for a growth strategy will soon fall behind. Hiring people
focused on emerging markets than for takes time, and CFOs can’t realistically
a strategy focused on innovation. expect to recruit, evaluate, hire, and
train new people at the height of a
growth wave. To support sustainable
growth, finance must hire ahead of the
curve, ensuring that it has the capacity
needed to meet future demands.4

4. People Performance: How CFOs can build the bench strength they need today… and tomorrow.

05
 Minimizing risk to prepare Knowing where to
for new development increase R&D investment
Risk is growing across many fronts— within the company
regulatory, cyber-security, and Virtually all growth strategies involve
operations—and finance’s relationship investment, and the CFO understands
to risk has changed. In the past, areas which components of the company’s
such as compliance and cyber risk offerings could benefit from increased
were handled within the office of investment in R&D, new markets or
the general counsel. In today’s risk M&A. They have the numbers at their
environment, the office of the general fingertips to substantiate or refute a
counsel often doesn’t have sufficient business case for a particular growth
access to operational data and analytical strategy. But most importantly, the
modeling capabilities to understand CFO is uniquely qualified to put the
growth-related business risk. right principles and guidelines around
those investments, and to make
By contrast, as stewards of the sure that the organization is asking
company’s financial performance, the right questions to minimize risk
CFOs are intimately connected with and maximize upside potential.
risk. Since any growth strategy involves
risk, the role of the CFO in assessing
risk, determining acceptable levels, Perfecting company
and providing insight regarding
transparency as a
how it can be mitigated, has become
increasingly important. New foundation for expansion
technology provides sophisticated Transparency (both external and
models. “By leveraging some of the internal) is an overarching imperative
new analytical tools, CFOs can foster for any growth model. All growth
greater insight and transparency strategies are now and will continue
into the organization, including the to be executed against the backdrop
company’s risk profile,” says Houser. of an intensive focus on transparency.
Outside the organization, the company
must be able to give a clear indication
of its current performance, operational
soundness and its future prospects
to stakeholders such as investors and
“By leveraging some of the new regulators, particularly in heavily
analytics tools, CFOs can foster regulated industries such as financial
services and healthcare. And in those
greater insight and transparency industries, transparency needs to
into the organization, including happen in a protean context where
the regulations themselves are often
the company’s risk profile.” being revamped and reinterpreted.

06 Getting it right with growth: How to be a great CFO in the new growth economy
ADP: Driving growth
through innovation

With over $11 billion in annual “The ability for finance to provide
ADP has more than revenues, ADP is one of the largest internal business partners with solid
providers of global Human Capital analytics that inform decisions allows
600,000 clients in over Management (HCM) solutions, us to balance revenue growth with
100 countries, and has spanning payroll, HR, benefits cash flows for future investment,”
grown as a result of its administration and more. The company says Mike Burns, vice president of
has more than 600,000 clients in corporate finance and head of Financial
strategy to continually over 100 countries, and has grown as Planning and Analysis at ADP.
evolve its solutions a result of its strategy to continually
and service offerings evolve its solutions and service Finance in ADP goes through a highly-
offerings through innovative design detailed annual planning process
through innovative and technological enhancements. that includes information down to an
design and technological ADP’s finance organization, led by individual salesperson’s productivity.
enhancements. CFO Jan Siegmund, former chief This data is then aggregated up to a
strategy officer and head of corporate product-level and then enterprise-
development, is a key partner in wide view of performance across the
executing against this business strategy. company. In addition, finance runs
scenarios for how sales growth might be
“ADP’s finance organization functions impacted by modeling specific factors.
as a business partner and advisor For example, ADP might look at how
with our internal business units a change in tenure in the salesforce
and is involved in every phase of or geographical variations in the
planning, decision making and sales mix would change outcomes.
resource allocation,” says Siegmund.
While the finance insights described
For example, finance relies heavily above are impressive, they don’t
on analytics to evaluate the lifetime completely rely on complex technology.
profitability of ADP solutions and Most operations use a fairly standard
client segments to determine where Hyperion system. Where ADP shows
the company should invest and innovative thinking to provide
allocate sales resources. In addition, enhanced levels of analytical support
as part of ADP’s annual planning is in establishing true finance centers
process, finance reviews and analyzes of excellence and in implementing
contributions from the different sales clear data definitions that enable
channels and products, including their uniform governance across the
respective profit margins. Using this enterprise. An example of this would
information, finance recommends be the creation of data warehouses
how ADP should allocate sales that unify many sources of data to
resources, funding for R&D, and other enable the company to move faster
investments to best influence revenue and provide more accurate analysis.
growth and overall profitability.

07
 “We’re reformulating our finance So we had to find new methods of
organization to give it a much controlling and monitoring R&D
stronger analytical foundation,” investments. Through team-based
says Siegmund. “We are setting decisions, shorter review cycles and a
higher expectations for how quickly willingness from finance to modify our
we can deliver quality service and approach, ADP is able to move faster
support to our management team.” and mimic the compressed innovation
cycles of smaller start-up companies.”
An example of how ADP is increasing
the quality of finance reports, while Another example of positive change
simultaneously compressing the time within ADP’s finance organization
it takes to complete projects, is how is in the amount of time spent on
the U.S. and India teams collaborate. standard FP&A functions. Finance
ADP is able to use differing time zones used to forecast annual revenues
as a strategic advantage, whereby on a monthly basis in very granular
the US finance team is able to work detail. Today, finance has simplified
through an analytical process during the this process and only generates
workday in the US and then hand it off detailed revenue forecasts at the end
to India for virtually around-the-clock of each quarter, when management
attention until a project is completed. really needs this information.

Another benefit ADP has experienced “We basically abolished two months of
from faster analytics is better decision forecasting each quarter so the finance
support for product teams that are organization could free itself to focus
focused on innovation. In late 2013, on more meaningful scenario-based,
ADP announced its intention to open data-driven, and more strategic work,”
the company’s second Innovation says Siegmund. “We’re moving away
Lab, in Manhattan. Both house from purely transactional elements of
engineers, anthropologists and data finance, evolving into a true business
scientists, who look for new ways partner that helps drive ADP’s
to deliver intelligent solutions to strategic and operational results.”
ADP clients through technologies
such as search, mobile and social. Overall, the evolution of the finance
function at ADP has made the company
“The Labs’ pace of innovation—and more nimble, provides deeper
emphasis on getting new technologies financial insight to internal partners
to market quickly—required finance and is supporting a more innovative
to change its style to become more and fast-paced company culture.
entrepreneurial,” says Siegmund.
“Some of the traditional review and
approval processes related to technology
investments were simply too slow.

08 Getting it right with growth: How to be a great CFO in the new growth economy
Internally, the same demand applies. CFOs can create those analytical models
As business gets more complex and and mitigate somewhat the inherent
companies offer a wider array of uncertainty of future performance.
products and services, the goal for
finance should be to synthesize all of Taking the lead on service
that performance information (and definition and delivery to
relevant external data) into a clear provide company perspective
story that other C-suite executives,
the board, and other stakeholders On the organizational side, new
can quickly grasp. The information models that integrate finance with
doesn’t need to be overly simplified, other functional competencies (e.g.,
but it needs to give a clear and marketing and sales, R&D, etc.) are
transparent indication of what’s giving finance greater insight into
really going on inside the company. business operations. More broadly, the
CFO is often closely involved in how
Leadership teams will need more back office functions deliver services on
in-depth, real-time data on the impact a global basis. Finance is taking the lead
of their growth strategy—what’s going in setting the bar for delivery of services
well and what’s not going well—and through shared services, outsourcing
the CFO can create that transparency. and centers of excellence, and these
Similarly, management will need to get models are increasingly being adopted
a good view of the future, extrapolating by IT and HR. The organizational
from current performance indicators impact is the ability to generate
and developing realistic scenarios efficiencies across the enterprise and
across various contingencies. Again, ensure that growth initiatives don’t
get bogged down unnecessarily.

Get in shape to grow

Integrated organizational model

As the organization begins to grow, the finance function
will need to be able to scale up rapidly, without
reinventing itself or serving as a drag on the process.

Staffing
To support sustainable growth, finance must hire ahead of the curve,
ensuring that it has the capacity needed to meet future demands.

Protection against risk

Any growth strategy involves risk. The increasingly important
role of the CFO is assessing risk, determining acceptable
levels, and providing insight on how it can be mitigated.

R&D investment
CFO is uniquely qualified to put the right principles and guidelines
around R&D investments.

Transparency
All growth strategies are now and will continue to be executed
against the backdrop of an intensive focus on transparency.

09
10 Getting it right with growth: How to be a great CFO in the new growth economy
Four paths to
growth for CFOs

There are many avenues for growth, associated risks. The traditional
both organic and inorganic. No strategies have been in widespread
single strategy is the right one for all use for many decades while the
companies. It’s a question of fit, and breakthrough strategies (digital and
fit can be a function of a company’s aspects of innovation) are a more recent
appetite for risk, its ability to invest, phenomenon, often arising from the
the speed with which it needs to technological advancements of the past
grow, its access to capital, company few years. These have enabled new
culture, economic factors, etc. The and disruptive ways to interact and
list is almost endless, and many communicate with customers, vendors,
companies will employ a combination and stakeholders in general. They all
of strategies across their business. have something in common, though:
the role of visionary CFOs in enabling
What follows is a discussion of four these strategies. The rest of the paper
common growth strategies (see will discuss PwC’s point of view on
Figure 1) and the role the CFO can how this role varies depending on the
play in supporting them within their selected growth strategy, including
organizations. Each growth strategy opportunities to realign finance,
has its benefits, shortcomings and risks and other considerations.

Figure 1: How we think about growth

Breakthrough

Digital

Innovation
Traditional

Emerging
M&A
markets

Inorganic Organic

11
 1) Growth through mergers The right deal structure? Is the potential
and acquisitions partner aligned with our operations?

Creating and analyzing better Similarly, CFOs are now tasked with
models for mergers modeling various scenarios in order
to help the executive team consider
In mergers & acquisitions, the CFO has
likely outcomes. To a great degree, this
long held a mandate for conducting
can be enabled by advanced analytics.
due diligence on the array of potential
Companies that build out their data and
targets (this typically includes looking at
analytics capabilities are better equipped
operations and finance, as well as IT and
to “see around the corner.” They can
other back-office functions) along with
quantify opportunities more accurately,
vetting individual candidates on the
and develop a more realistic range of
short list, and kicking the tires to make
potential scenarios, giving the executive
sure their financials and operations
team greater confidence in a particular
are sound. As the deal moves through
plan moving forward. The CFO can
subsequent steps, the CFO is directly
oversee this analytics build out, a point
involved to ensure the right alignment.
that will be discussed in more detail
Increasingly however, CFOs are being
in “Growth through digital” below.
called on to deliver insight into other
parts of the deal-making process. Analyzing public data
For example, CFOs are now better
more accurately
equipped to assess the degree of risk in Given that there is now far more
a particular deal. Is this the right target? public data available regarding the
competition, companies that know how
to access that data and make sense of
it will give themselves an edge in the
vetting and due diligence processes

40% (i.e., in determining the brand strength

of an acquisition target, etc.).

Creating in-house forecasts

of potential acquisitions
Finance teams now Sophisticated modeling also becomes
relevant in situations where a target
devote 25% more company’s financial projections may be
of their efforts to overly optimistic. If finance has solid
internal and external data and strong
insight-focused analytical modeling capabilities, the
CFO can independently determine
activities— the most likely future performance
a 40% increase of the target company, and not leave
the acquirer’s business exposed
since 2009. to someone else’s forecasts.

Unlocking Potential: Finance

effectiveness benchmark study 2013.

12 Getting it right with growth: How to be a great CFO in the new growth economy
Forging finance capabilities to the company (i.e., the CFO) tailor the
right message and get it out quickly,
support more frequent M&A
before any misperceptions or confusion
Serial acquirers become highly proficient regarding the deal can set in. “This is
at doing deals and have more advanced more important today than in the past,”
finance capabilities tied to delivering the says Apanaschik. “New technologies and
necessary services both to support M&A operating models have led to a blurring
and to realize the return on acquisitions. of the lines that divide one industry
They analyze and measure all aspects from another, and deals between non-
of the finance function related to M&A traditional partners are becoming more
and are highly focused on excellence common. That puts a greater emphasis
in integration and the corresponding on understanding the financials behind
process improvement. Key to evolving the deal strategy and communicating
this capability is the use of an M&A this effectively to Wall Street.”
playbook to support the implementation
of a disciplined approach through the
deal continuum including strategy
validation, assessment of options,
evaluation of deals, negotiation & close, The CFO’s challenge is to root out individual
integration, and value captured.
biases, look at all the angles, and continually
Communicating with Wall Street
ask whether the deal is in the best interests
For public companies, communicating
the deal’s strategic objectives with
of the company long-term.
outside investors can have a significant
impact on the overall deal outcome
and earnings per share. In some cases,
the simple combination of revenue
may be the sole objective. But in
more complex deals, where there are
substantial synergies to unlock, and
new product offerings may not be
immediately apparent, it’s critical that

13
 Tax strategy: Getting it right
during growth

Deals capital investments as well as tax-

efficient ways to form joint ventures
Each of the four growth When making an acquisition, it’s critical and other similar arrangements.
avenues discussed in to conduct effective tax planning in They may also need to analyze the
order to reduce transaction tax costs, tax impact from process changes
this paper carries a set uncover unforeseen tax risks and to pre-sale customer interactions
of corresponding tax opportunities, and achieve a favorable (e.g., websites and apps), customer
long-term tax rate for the newly purchases and order fulfillment
implications. In many combined entity. Accordingly, CFOs can (e.g., inventory management),
cases, the tax components add value by performing buy-side tax customer receipts and returns (e.g.,
due diligence during the vetting process. returning online purchases), and
can be significant enough When determining how to design the retention programs (e.g., price
to determine whether new organizational structure, they can match offers and discount cards).
quantify tax assets, risks, opportunities
the initiative ultimately and contingencies, and advise on the
succeeds or fails. As best way to protect key attributes (such Emerging markets
as net operating loss carryforwards)
such, they deserve special in various jurisdictions. Perhaps most In an era of globalization, growth
scrutiny at the outset, fundamentally, they can assess how through an expansion into emerging
business changes may improve the new markets is an increasingly popular
and this is where company’s tax and cash flow position option for many companies, yet
the CFO can provide over the short, medium, and long term. it also carries highly complex tax
considerations, including the
critical insights. compliance risk and planning
Digital opportunities available with the
new taxing system in the countries
Growth through digital initiatives often
into which the company expands.
leads to changes that make the company
Such a move could also result in
more responsive to customer demands.
significant operational changes,
For example, many retail companies
including a reconfiguration of the
are transitioning to a multichannel
value chain, a shift in the location of
retailing model, integrating existing
capital, and adjustments to research
brick-and-mortar and online
and development functions—all
channels, or making fundamental
which may have tax implications.
changes to current processes.
These changes must occur while the
Depending on the specific changes, company aligns the tax structure
tax compliance issues and planning for various business units to ensure
opportunities may arise in areas such financial efficiency. At all stages of this
as, but not limited to, transfer pricing, reconfiguration, companies must also
credits/incentives, customs duties, and consider the increasing government
consumption taxes. CFOs may need focus on perceived tax “avoidance”,
to assess the tax impact of making arbitrage, disclosure and compliance.

14 Getting it right with growth: How to be a great CFO in the new growth economy
For the CFO, growth through Lastly, the IRS has recently expanded its Organization for Economic Cooperation
emerging markets requires an information reporting requirements and and Development’s (OECD) base
examination of the multinational increased its collaboration with foreign erosion and profit-sharing (BEPS)
corporation’s tax attributes, the tax authorities to improve voluntary project includes a focus on the global
location of its taxable profits compliance and tax collection. This tax impact of IP and the need for reform
and capital, an analysis of new activity has created new challenges in order to stem declining government
intercompany transactions that result for multinational corporations, tax bases. Moreover, many tax rules
from operational changes, and a many of whom lack an operational are outdated because technology
means to address new customs and structure that provides for the efficient changes quickly, making it difficult to
duty liabilities due to changes in management and implementation apply the rules to new developments.
product flows, among other issues. of new information reporting and
withholding requirements. Companies CFOs at highly innovative companies
For companies that revamp their supply that are not compliant with US and need to execute a robust analysis
chain, CFOs will need to consider the global information reporting and of these issues and document
location of manufacturing and plant withholding rules face a variety of tax the appropriate transfer price for
facilities (e.g., moving them to Africa implications and significant exposure. intercompany transactions involving IP,
or Asia) and whether joint ventures As a result, multinational CFOs must selecting a business model that yields
with local businesses may enable a take a proactive approach that reduces tax savings and operational efficiencies
more efficient supply chain from a cost cost and exposure, and drives additional (such as choosing which legal entity
and resource consumption perspective. value for their organizations. should own the resulting IP). They
Any relocation or restructuring should also track current and future
involving the supply chain triggers a research and investment tax credits and
host of corporate income and indirect Innovation incentives, and analyze how the indirect
tax issues that can occur at each stage taxes apply to licensing transactions,
of implementation. Creating the overall Whenever a company launches a new along with satisfying registration and
plan must take into account taxes product or makes substantial design filing requirements.
incurred during the transition, as well changes that impact the business
as under the revamped supply chain. model or delivery of products/services,
there are tax planning and compliance
Similarly, the shift of economic implications. For example, technological Michael J. Shehab is the US leader
power megatrend will likely cause a breakthroughs will likely cause the of the Tax Reporting & Strategy
heightened competition for talent. creation of intellectual property (IP). practice working with organizations to
Businesses will need to expand The ownership and licensing of such redesign, redefine, and redeploy their
the number of employees crossing IP across borders can have significant tax departments. He is a recognized
borders to get the right talent in the tax consequences, depending upon the industry leader in helping clients
right location, triggering a host of tax rates and rules applicable to the analyze and improve the ways they
corporate and individual-level tax licensor and licensee. Also, investments use their people, processes, data,
issues and planning opportunities. in research and development potentially and technology to make their tax
While global tax compliance may be could qualify for the favorable research operations more effective and efficient.
the focus, global payroll compliance tax credit or similar incentives.
and foreign asset reporting are Office: +1 (313) 394 6183 |
also key considerations when Another issue is the evolving Mobile: +1 (313) 212 2245
talent moves across borders. regulatory landscape. For example, the Email: [email protected]

15
 Smoothing post-merger integration Knowing when to walk away
from a bad deal
Clearly, CFOs are now driving more
aspects of post-merger integration— Finally, the CFO has a critical role to
often across people, process, and play during the deal process in knowing
technology—to ensure that a deal when the deal may no longer make
achieves its target objectives and sense for the company. Deals sometimes
captures all projected synergies. Such take on a momentum of their own,
metrics are often difficult to track, since frequently because there are multiple
they don’t appear anywhere in a general participants with individual agendas and
ledger—either in the form of new biases. For example, other executives
revenue or direct cost savings resulting in the C-suite may want to burnish
from the deal. Quantifying these gains their reputation as a company builder.
entails assembling an off-line model Operational unit heads may want to
that lays out specific cost reduction give themselves greater responsibilities
steps and cost drivers. The task falls to under the new structure. Advisors and
finance to provide oversight and validate investment bankers may have a purely
that the model is as comprehensive financial motive: their commission.
and detailed as possible, to make
sure that the proposed steps actually And the economic principle of sunk
happen, and to hold people accountable costs becomes a factor as well. Once
in situations when they don’t. large amounts of transaction costs are
already spent, some companies may feel
they have no choice but to move ahead.

CFOs must exercise discipline in such

situations. Their challenge is to root
out individual biases, look at all the
angles, and continually ask whether
the deal is in the best interests of
the company long-term. If that is no
longer patently true, even in the final
stages, the CFO needs to be willing
to ask the tough questions and, if
necessary, walk away from the deal.

16 Getting it right with growth: How to be a great CFO in the new growth economy
 If companies are looking at the same familiar
markets as everyone else, they may not be
looking widely enough, leading them to miss
true growth potential.

2) Growth through BRIC countries of Brazil, Russia, India,

emerging markets and China) may no longer reflect the
best opportunities,” says Mike Boyle,
Providing the company with tools to a partner at PwC. “Or they may work
analyze markets for broader reach for some industries and not others. Yet
As with M&A, CFOs have long had an companies may continue to turn to them
established role in growth through due to historical experience among
expansion into emerging markets, the management team or because
primarily by conducting due diligence competitors are still expanding there.”
on target markets to identify potential CFOs can deliver much needed rigor
risks and misalignments, understanding by establishing a diverse set of skills
foreign accounting standards, available and capabilities that allow companies
talent, infrastructure, cultural issues, to analyze market opportunities
currency, social and political stability, more quickly and accurately.
and other factors. However, complex
as these issues are, there are other
Becoming a sophisticated
areas where the CFO is expected
international vetter for
to deliver real value, as well.
joint ventures
In some markets, companies can
First, CFOs need to look at whether grow more rapidly (and with fewer
the current set of potential markets impediments) through joint ventures
is big enough. As the global economy with local companies, which likely
becomes more interconnected and the have better customer insights and
pace of business speeds up, countries firsthand knowledge of how things
are rising and falling more rapidly than really get done in that market. Many
in the past. If companies are looking at markets specifically require foreign
the same familiar markets as everyone companies to enter the market via
else, they may not be looking widely joint ventures by enacting ownership
enough, leading them to miss true limitations and other restrictions.
growth potential (as, for instance, with However these partnerships carry real
“frontier markets”). Similar to other risk in both financial and reputational
growth strategies, bias is a clear factor terms. Accordingly, the due diligence
that needs to be addressed. “Some of requirements are even greater, and
the most common markets (like the CFOs must be able to filter through
the universe of players and make the
right choices. They also must structure
these partnerships so as not to be overly
cumbersome or lock the company into a
single partner should conditions change.

17
 81% of US CEOs say that technological

81% advances will transform their

business over the next five years.
Five Global Megatrends. (2014)

3) Growth through digital Not surprisingly, companies have

difficulty understanding the right
Digital technology is already having
strategy for leveraging digital
a major impact on the way businesses
technology across the business and
operate, influencing, and in some cases
realize that a move in the wrong
determining how clients create and
direction could be a costly waste of
defend competitive advantage, how
capital and resources. Failure to act,
they develop and manage brands and
however, could result in lost opportunity
customer relationships, and how they
cost and competitors quickly gaining
engage with their customers, suppliers,
momentum and market share.
stakeholders and the capital markets. It
is likely that the winners of the future It is this apparent dichotomy that
will be those organizations that are offers CFOs an opportunity to elevate
disruptors in their industry—exploiting their role within the organization—
digital technology to transform both to interpret the disruptive nature of
what they do, and how they do it. These digital, champion growth through
companies will constantly find new digital, understand the associated
ways to engage with their customers, risks and mitigate them.
and keep the products and services
they offer exciting and relevant. Uncharted territory

There are so many opportunities Given a business landscape where

to leverage digital technology for competitive advantage can be transient,
growth—each with its own costs and where companies must reinvent
complications—that it is difficult to themselves, their strategies, and the
cut through the noise and find the value they offer (i.e., experimenting
best way to move forward. 81% of and learning, identifying new
CEOs participating in PwC’s Global opportunities, exploiting them quickly,
CEO Survey believe technological and moving on) the role of the CFO
advancements are the most important becomes increasingly critical, in terms
trend to transform their business of objectively assessing the potential
in the next five years.5 But most impact, benefits and risk associated
are unprepared to capitalize on the with new business models arising from
opportunity—just 20% of companies say a digital growth strategy. The challenge
they have strong Digital IQ, meaning the for the CFO is to help the business
ability to understand, value and weave navigate this uncharted territory.
technology throughout the enterprise.6

5. 17th Annual Global CEO Survey: Fit for the Future.(2014)

6. PwC’s 6th Annual Digital IQ Survey.

18 Getting it right with growth: How to be a great CFO in the new growth economy
CFOs need to add insight, objectivity
and business judgment to help their
companies enable and execute a digital
growth strategy. Specifically, CFOs
are in a unique position to provide the
following value to their organizations:

• Set a Strategy—Champion the

development of a cross-functional
business strategy for the digital
age which fits the context of their
business and propels it forward by
creating more value and reaching
more customers more effectively.

• Assess Readiness—Assess the

digital readiness and maturity of
each function within Finance as
well as the broader organization’s
infrastructure (including analytics)
needed to enable a digital operating
strategy and build the cross-functional
capabilities necessary to succeed.
organizations have successfully applied
• Progressively Optimize—Optimize digital technology to streamline their
the back office function to embed internal functions and processes, leading
agility and better support the to accelerated financial reporting
adoption of new business models processes, significant savings in the cost
arising from a digital strategy. of finance, and enhanced quality and
reliability of the financial information
• Empower Digital Adoption—Create produced for internal and external
an empowered, data-driven culture, purposes. Increasingly, however, the
that fosters confidence among discussion focuses on the role of the
employees, excellence in execution CFO in driving top-line growth through
and maximum value for customers new digital products, services, and
by leveraging Big Data and advanced initiatives that improve the way the
analytics to gain insights and better company connects with its customers.
support the decision making process That isn’t a standard part of the mandate
regarding customer needs, business
models, and investments in R&D,
marketing, human resources,
operations, supply chain, back
office and risk management.
Most companies recognize the growth
• Expand the Digital Skillset—Help opportunity surrounding digital (as
the business achieve a high level of
trust and engagement with their well as the threat from digitally enabled
brand among employees, customers competitors), yet deciding how best to
and partners (i.e., supply chain and
channel) to drive innovation, market move forward requires a careful analysis.
diversification and revenue growth.

CFOs have often been among the

first executives to embrace the digital
revolution. Over the past decade, finance

19
 for many finance organizations, but as from digitally enabled competitors),
with deals, innovation, and emerging yet deciding how best to move forward
markets, CFOs can and should be requires a careful analysis. Digital
directly involved in digital initiatives. evolves faster than other disruptive
shifts, requiring that companies
Deciding if the company has determine the “right” level of digital—
invested enough in digital the optimal allocation of R&D and IT
At a strategic level, CFOs need to help investments, management attention,
determine whether the company is process re-engineering and capital to
leveraging digital technology and ensure that the company is pursuing
business models to a sufficient degree. new opportunities prudently without
While the impact will vary among overcommitting. As in other areas,
organizations and industries, such this involves an analysis of risk. Can
technologies can have a transformative the organization afford to pursue a
effect on customer intimacy and specific technology? Or more to the
business models. Most companies point, can it afford not to? Clinging
recognize the growth opportunity to the status quo often introduces
surrounding digital (as well as the threat real financial risks. These are thorny
challenges, and the CFO is the executive
best positioned to address them.

Ensuring the
company’s cybersecurity
Any digital initiative has the potential
to introduce new vulnerabilities to
the organization. Working with the
Chief Information Officer and Chief
Sales Officer, the CFO needs to help
determine the right cybersecurity
posture to ensure that the company is
reaching for new opportunities without
leaving itself exposed to unnecessary
risk. This is a delicate balance—it’s
easy to say no to all digital growth
In typical firms, nearly twice as efforts in the name of cybersecurity,
yet this isn’t a realistic position for
much time is spent on data gathering, most organizations. In fact, this is often
trading cybersecurity risk for a larger
compared to the time spent on analysis.

Unlocking Potential: Finance

effectiveness benchmark study 2013.

20 Getting it right with growth: How to be a great CFO in the new growth economy
ARRIS: Two steps ahead

ARRIS makes the infrastructure at Nortel, where he did several deals

“To me, CFOs are that powers the digital era. Based that were critical to the then-new
in Suwanee, Georgia, the company technology of delivering telephony via
successful when they’re manufactures telecommunications cable lines. Those experiences made
viewed by the leadership equipment for consumers—like set- him a leading candidate to head finance
as a valued partner, not top boxes and cable modems—and for at ARRIS during its current expansion,
large cable, telephone, and satellite which has been based primarily
just providing back-office providers. (For most people reading on innovation and acquisitions.
support. CFOs need to this article electronically, ARRIS
be formulating strategy, technology was likely on one end Regarding innovation, ARRIS is among
of the transmission, if not both.) the largest investors in the world in
thinking through the R&D, spending roughly 11.8 percent
bigger decisions, and For the past decade, the company has of revenue on R&D in 2013, according
then going off and been growing rapidly—both organically to SEC filings. That’s necessary in a
and inorganically—in a trajectory that field like digital media, where the
getting those decisions mirrors the boom in technology and technology cycles are accelerating,
implemented.” reach of the digital media industry and where new innovations can
—David Potts, CFO, ARRIS overall. Much of that growth has become obsolete in 18 months or less.
been facilitated by CFO David Potts, The company’s cable and telephony
a 20-year telecom veteran who had customers constantly demand newer
worked at Nortel and other companies and better equipment that can deliver
before joining ARRIS in 2001. digital media at higher bandwidth.
This is a challenge given that the
In many ways, Potts was a pioneer improvements are largely transparent
among CFOs, in that he was actively to end users. “As a consumer, you’re not
involved in strategic considerations at spending incremental dollars for new
Nortel dating back to the 1990s, when equipment,” Potts says. “So we have to
many other CFOs were still focused on be able to develop that next-generation
more basic functions like compliance box that gives better speed and
and reporting. For a time, Potts served bandwidth on a per-subscriber basis.
as CFO of Bell Northern Research It requires tremendous innovation.”
(the research arm of Nortel) where he
learned to apply financial discipline That said, Potts notes that R&D is
and oversight to the R&D process. He actually a fairly linear way to grow,
also served as vice president of M&A in that most new ideas in the digital

21
 media space are extensions of existing However, the company’s not done yet. A
technology. In growth through deals, by critical factor was ensuring that the deal
contrast, the goal is to leapfrog forward didn’t overload ARRIS, and thus prevent
in either technology, geographic reach, it from seeking new deals in the future.
or both. For example, after a series of “Once you’ve absorbed the deal, you
modest deals dating back to 2007, ARRIS want the capital structure to evolve so
announced a major acquisition in 2012 that you’re still in a place where you can
to buy Motorola Home, a maker of set- continue to execute on M&A—and other
top boxes that Motorola had actually things as well,” Potts says. In meeting
sold to Google. It was a transformative with analysts and investors lately, he
deal. At the time, ARRIS had about hears a common refrain: What’s next?
$1.5 billion in revenue, and Motorola
Home was about three times that Regardless of how ARRIS continues its
size. “We went from 1,500 employees growth trajectory, Potts will be at the
to 6,500 employees,” Potts says. table during strategic deliberations. “To
me, CFOs are successful when they’re
ARRIS financed the deal through debt— viewed by the leadership as a valued
thanks to favorable interest rates—but partner, not just providing back-office
there were some wrinkles to sort through. support. CFOs need to be formulating
Google wanted to retain a slice of equity strategy, thinking through the bigger
in the new venture, and one of ARRIS’s decisions, and then going off and
customers did as well, requiring that getting those decisions implemented.”
Potts sort through all the ramifications
of those terms. Integrating the two
businesses—one essentially a carve-out
from Google—was a major challenge
as well, particularly with respect to
financial processes, which needed to
be compliant with filing requirements
within 12 months of the close. Since
the deal was announced in December
2012, ARRIS’s stock price has roughly
doubled, from $15 to $30 as of Q3 2014.

22 Getting it right with growth: How to be a great CFO in the new growth economy
financial risk—the lost opportunity always sound? Is this attitude based on
cost associated with clinging to older, bias or objective information? The CFO
non-competitive products and services needs to be able to spot and eliminate
in an increasingly digital world. biases by asking the right questions
and determining the relative risks
It’s also easy to go to the other and benefits among potential digital
extreme and spend unnecessary partners. Companies need to apply the
amounts of capital trying to fortify concept of diversity—in geography,
the organization’s cyber defenses and in talent, and in mindset—to avoid
prevent all breaches. The right posture is letting outdated traditions, protocols,
somewhere in the middle, and the CFO or attitudes leave them blind to a new
is the executive tasked with determining development. This applies to all areas of
the right balance of risk and return using the business and to all growth agendas.
objective data and analytical models.
Bottom line for CFOs
Keeping an open mind
and eliminating bias Net, net—every industry must now
think more like a technology company,
Technology evolves quickly, and the constantly figuring out how to stay
universe of outside vendors and partners ahead of existing competitors or
changes constantly. For example, a tiny new entrants against a backdrop of
cybersecurity startup with little brand constant change and disruption. This
cachet or track record could have the means not only providing the digital
best technology to address a particular channels and services customers have
problem, yet many organizations may come to expect, but also improving
be hesitant to give it a look. Instead, those services, lowering their price and
they may want a familiar, “known” bringing them to market in innovative
brand—not realizing that its solution ways that leverage the transformative
is growing obsolete. Is this approach capabilities of digital technology.

Top companies have

automated more than 25%
twice the number
of key systems vs.
typical companies.
11%
Unlocking Potential: Finance
effectiveness benchmark study 2013.

23
 4) Growth through Once a company selects innovation
innovation as a growth strategy, the CFO should
assess opportunities for innovation
Being the CFO who asks, what through a strictly financial lens, to
is the cost of doing nothing? identify the revenue stream and the
Most companies understand that potential business opportunity. This
innovation is an imperative. But what is critical, given that many other
does that mean, exactly? Without participants in the innovation process—
the proper guidelines and analysis, particularly engineering and product
companies can end up chasing development teams—often focus
innovation for its own sake, or because more on functionality and design
they see competitors doing it. A better rather than the rubber-meets-the-road
approach is for the CFO to ask some issues of distribution, sales, and cash
insightful questions regarding the flow. The answers to these questions
organization and the competitive could mean the difference between a
landscape. Specifically, what is the cost profitable venture and a money-loser.
of doing nothing? How quickly would
the company’s market share drop and
Implementing financial
what would the competitive situation
discipline around investments
look like in 12 months if it didn’t By definition, digital and innovation
innovate? Companies—and specifically as growth strategies often involve trial
CFOs—should be asking this question and error, and they can frequently be
all the time because the answer gives an expensive. New projects invariably
indication of how much the company fail—often multiple times—before
should be focusing on innovation. they succeed. From a cost perspective,
this can seem like wasted capital, and
many organizations seek to cut costs
by scaling back on R&D or process
improvement or taking an overly
simplistic view of the relationship
between investment and results. In
other cases, organizations try to “throw
money at the problem,” believing that
the next product or initiative will be
the home run that recoups all prior
costs. Neither extreme is right.

Instead, organizations need to establish

the right level of oversight—akin to
financial guardrails—giving R&D
and process improvement initiatives
wide latitude to work within those
constraints. Because this process is

24 Getting it right with growth: How to be a great CFO in the new growth economy
 Organizations that plan to grow through innovation
should have a strong financial model in place for
how they will fund and govern the R&D or process
innovation process.

similar to considerations that finance Accordingly, companies need to build

makes regarding investments in other a more innovative culture that can
parts of the organization, the CFO accelerate the process. This means
is ideally suited to provide guidance building capabilities that can quickly
for this kind of financial discipline. solicit and synthesize customer feedback
along with relevant product information
Organizations that plan to grow and market intelligence, all of which are
through innovation should have a more perishable today than in the past.
strong financial model in place for
how they will fund and govern R&D Creating flexible modifications
or process innovation. They need as innovation progresses
to source engineering and product
Innovation also requires some clear
development talent, and they need
milestones along the way, and the
clear insights on consumer behavior
discipline to objectively assess results
and preferences. The CFO can
and decide whether an initiative is still
oversee the gathering of this data.
on track. This need not be a simple “kill-
Creating more immediate or-continue” decision. There are often
assessments of the impact other options available, such as scaling
of innovation back the company’s ambitions from a
full-fledged launch to a smaller pilot. In
A key component of growth through other cases, an acquisition of competing
innovation is speed. In the past, technology might make more sense or
companies could often afford to spend a partnership with someone else in the
months building a business case ecosystem such as a provider (or even
for a new innovation opportunity. a competitor) that has already made
Today, given the pace of technological greater progress on a similar initiative.
change, that approach is no longer Yet in some cases, when the desired
valid. “Companies often don’t have the results aren’t likely to be forthcoming,
luxury of time required to conduct a the organization may have no choice
detailed analysis, and in many cases, but to cut its losses and reallocate funds
the old financial and ROI models no to something more promising. The
longer apply, particularly with regard to CFO often needs to be the executive
disruptive new technologies,” says Boyle. willing to make such hard decisions.
The need for speed introduces new
complexity into the innovation process.

25
 Euro-Pro: A multipronged
approach to growth
When CFO Brian Lagarto joined Euro- Euro-Pro has also relied in part on an
Pro Operating LLC, the creator of the international expansion: it now does
Just five years later,
Shark® and Ninja® brands, in February business in more than 30 countries,
Euro-Pro is on track 2009, the company was on the verge growing that component of its
of a major growth spurt. At that time, business from $14 million in sales to
to post more than
Euro-Pro, a private company based in approximately $100 million. Euro-Pro
$1.5 billion in annual Newton, Massachusetts, had about $350 has also built out its digital distribution
million in annual revenue, and a single channel. While the company still has
revenue, with a diverse
product—the original steam mop—that a strong foundation of sales through
lineup of products. made up the bulk of its sales and profits. big-box retailers and direct sales
However, the executive team (including through infomercials, Euro-Pro recently
Notably, that growth
CEO Mark Rosenzweig, President increased its focus on e-commerce.
has all come through Mark Barrocas and Lagarto) knew that
they could not rely on just their steam That kind of speed could only come
organic measures—not through established innovation
category to drive significant growth.
acquisitions—and At some point in the future, the steam expertise. In the past, Euro-Pro relied
category would mature and they needed on external partners, which were
finance has been a critical coordinated through a few internal
to invest in other categories to achieve
partner throughout. the growth targets that were planned. product development staff. Starting
in 2011, Euro-Pro slowly built up its
Just five years later, Euro-Pro is on internal R&D department, which
track to post more than $1.5 billion in today comprises 20 people. That
annual revenue, with a diverse lineup initiative was funded with capital
of products. Notably, that growth has from the steam mop—a deliberate
all come through organic measures— decision by the executive team.
not acquisitions—and finance has Maintaining an internal R&D group
been a critical partner throughout. costs far less than working with third-
party product development firms, and
Most of the company’s growth has allows for much greater coordination
come through product innovation and (particularly with a CEO who is laser-
high quality product. The leadership focused and involved in the product
team and particularly the CEO have innovation process). R&D is charged
a strong focus on developing new not only with developing new products
products (Rosenzweig actually and features, but also, critically, with
hosts all of Euro-Pro’s infomercials). innovating for efficiency and cost.
Initially, the company focused on
vacuums—a natural extension from
its successful steam mop—through the
Shark® brand. At the same time, the
company also created a new kitchen
brand, Ninja®, from scratch, shipping
its first Ninja® product less than nine
months after launching its growth
strategy. The Ninja® brand currently
operates in the small motorized
appliances category within kitchen.

26 Getting it right with growth: How to be a great CFO in the new growth economy
Growth through innovation also requires Shark® vacuums have grown from one
strong oversight from finance. Early on percent of the market to more than
in Lagarto’s tenure, the executive team 30 percent. The Ninja® line of kitchen
made the deliberate decision to reinvest products is on track to hit over $400
income from the steam mop to build million in sales for 2014. Further, Euro-
an innovation capability. Today, the Pro has been named Vendor of the
company uses product roadmaps that Year for several of the top retailers
project forward 18 to 24 months, and it in the U.S. over the last few years.
puts rigorous models into place to make
sure that new products in the pipeline In all three aspects of the company’s
hit their ROI targets. “We work with the growth strategy— product innovation,
R&D team on a week-to-week basis,” product quality and driving consumer
says Lagarto. “Based on the numbers, demand—Lagarto is a strategic partner
we’ll sit down with our CEO and with the CEO and president. That is
president and decide whether to move possible in large part because he has a
forward or to put a particular project on strong controllership team to handle
hold to focus on other opportunities.” closing the books each month. (Lagarto
reviews the results with them and is
This vetting process, he adds, has been responsible for reporting, but he is no
a learning curve for the company. “It’s longer directly involved in the process.)
basic to R&D, but it’s something we This year, his team drove a major
didn’t start thinking about until we project whereby they realigned their
brought innovation in-house. We bring process and controls. The result is a
a lot of projects to the table, but that month-end close that is now six days
means there are a lot of projects where versus 14 days just nine months ago.
we decide not to move forward. We
have to encourage the researchers and “That’s a tremendous change for
innovators, and say, ‘I know you worked this business, but it’s necessary
hard to make this project happen, but because we’re so much bigger now,
if the financial component isn’t there, and because we’re moving so much
we can’t move forward.’” It has required faster,” he says. Because the closes are
some education and communication to more accurate and take less time, he
make sure everyone knows that these is freed up to generate insights that
experiences are not failures—they are an can drive the business forward. “I’m
inevitable part of the innovation process. not the guy just keeping score and
reporting out to other executives,”
Lagarto says. “That’s not the kind of
role that I would ever be happy in.”

27
28 Getting it right with growth: How to be a great CFO in the new growth economy
5 actions for the
growth-oriented CFO

1. Make sure the developing flexible financial systems

foundation is in place that include individual, non-customized
best-of-breed modules to account
Often, the selection of a growth strategy for different parts of the business.
is a matter of fit, and fit is usually a Similarly cloud-based solutions allow
function of organizational and process CFOs to add to or reconfigure finance
maturity as well as core capabilities and infrastructure, adding newly developed
capacity. This is particularly true for (or acquired) business models more
the finance function. Before a company quickly and easily. In either case,
undertakes any growth strategy, it’s speed and agility are critical.
important that the finance function
be in order, including the tightening 3. Build systems and processes
of core capabilities. Make sure you that can easily scale or absorb
are staffed for the future. Start hiring
multiple paths of growth
ahead of the growth strategy since
finding good people takes time. While the entire C-Suite is invested in
growth, it is the finance function and
2. Build agility into your the CFO in particular that provide the
finance infrastructure, institutional baseline understanding of
with a defined finance financial capacity and infrastructure that
information model and enables the selection of the right strategy
as well as its successful execution. Any
flexible financial systems
growth agenda, like the four discussed
The CFO of a company in growth mode in this paper, will likely become a
has to assume that it will be acquiring company’s preferred avenue for growth
or building completely new business and be repeated over time. A source of
models. Hardwiring too much into competitive advantage then becomes
current systems could lead to trouble the ability to fully operationalize and
on either a cost or complexity basis (or refine the execution of a particular
both). A single, integrated Enterprise strategy on an ongoing basis. For any
Resource Planning (ERP) tool that growth initiative, the CFO should
handled everything from purchase-to- understand which capabilities will
pay, order-to-cash, contracts, and project be required, assess the organization’s
costing for an entire organization may current strengths and weaknesses, and
have worked in the past with businesses work with the rest of the executive
that weren’t likely to change much. But team to address critical gaps.
today, many nimble organizations are

29
 Mind the details: A CFO ’s reporting
and compliance tip sheet for growth

Deals registration statements among

From an accounting other potential consequences.
When a company is growing by
perspective, each of the acquiring other businesses, one In addition to the 8-K deadlines,
four growth avenues consideration is whether the acquisition buyers may have additional reporting
highlighted in this paper creates any financial reporting requirements in connection with
requirements. These requirements a registration statement. These
have corresponding vary depending on the size of the requirements may accelerate the
implications. They don’t deal, but in general, deals that are reporting timeframe and in some
necessarily change the determined significant give the public instances may require financial
buyer approximately 75 days after statements for certain probable
calculus that favors one the close of the deal to file a Form 8-K acquisitions. Given the complexity
option over another, but with the SEC that includes historical in this area, companies will often
they raise issues that are financial statements and pro forma work with outside advisors,
financial information reflecting the including securities counsel.
important for CFOs to transaction. In some cases, this can
fully understand. be difficult. For example, when the
target is a small, private company, it Digital
may not have financial statements, One key consideration for digital growth
the financial statements may not be in initiatives is the disclosure of potential
accordance with SEC GAAP, or they risk, primarily due to cyber-security
may not go back far enough (up to threats. Most digital initiatives entail
three years). Similarly, buying a single interacting with the customer online
product, service, or division of a larger (increasingly on mobile platforms) and
entity requires carving out the financial capturing personal data, often including
statements for the business that is being credit card information. That introduces
acquired. “CFOs doing a deal should a potential for security breaches, the
understand which financial statements risk of which should be considered
they’ll need, and for how many years,” for disclosure in a company’s periodic
says Beth Paul, a partner at PwC. “And filings (e.g., 10-Q and 10-K filings).
during negotiations, the CFO should The risk has multiple dimensions,
ensure they will be able to get the including operational (an impaired
financial statement in the form they ability to do business), financial (the
need to meet any filing requirements.” remediation costs to address a breach,
such as credit monitoring for impacted
If the buyer misses their Form 8-K
customers and price incentives to
deadline, the ramifications can be
minimize attrition), and reputational
serious, since the company is no
(the potential loss of future revenue).
longer a “timely” filer in the eyes
of the SEC, meaning it is no longer
eligible to quickly access the public
capital markets through short-form

30 Getting it right with growth: How to be a great CFO in the new growth economy
 Emerging markets Once the company invests in a new
system to enable process innovation and
Growth by expansion into emerging capitalizes that cost, there’s always the
markets raises considerations as well, chance that the system doesn’t deliver
primarily in the treatment of taxes and the desired improvements. Similarly, a
in the way such expansion introduces new software product that costs millions
new risks. “The rapid growth in some in R&D investment could turn out to be
emerging markets is what attracts a flop. In each instance, the company
companies,” says Paul. “Companies would need to assess the fixed asset or
need to be careful to ensure their inventory on its books for impairment.
growth doesn’t get ahead of their In the unfortunate situation when things
local controls and infrastructure.” don’t go as planned, CFOs need to be
That introduces an aspect of risk that aware of the accounting ramifications
must be assessed and disclosed. and plan for communications with
stakeholders.

Innovation
As technology evolves, innovation can
Beth Paul is the Strategic Thought Leader
change the nature of the company’s
in the National Professional Services
offering which can impact revenue
Group of PricewaterhouseCoopers LLP.
recognition and cost capitalization.
In this role, she works closely with the
This is particularly relevant given that
firm’s leadership to determine PwC’s
many businesses are seeking to sell
position on emerging trends in auditing,
add-on services for their products,
accounting and financial reporting matters.
and those services are often delivered
via digital channels over time. In
other cases, “traditional” products
themselves are transitioning to a
service or subscription model. Such
situations may change the way that
the company recognizes revenue and
capitalizes costs, and this can impact a
company’s key financial performance
measures. As a result, the CFO has to
be in the loop during discussions of
the initiative, in order to understand
any potential changes in the income
stream to be able to communicate
effectively to the investor community.

31
 Figure 2: Critical Requirements for Finance to Support Growth
Emerging
Innovation Deals Digital
markets

Transaction processing (back-office excellence)

First class consolidation tool with multi-currency capabilities to accelerate the

reporting process • •
Lean process improvement team to achieve back office standardization in
support of growth • • • •
Drive technology advancements to eliminate non-value added activities •
Consolidation and centralization of back office functional activities •
Regional hub network to consolidate back office support •
Team and systems to adjust and adopt to new and changing business models • • • •
Specialty knowledge within the Finance team

Strong technical accounting team with centralized leader in Corporate • •

Strong Finance, M&A and Tax working model • •
Robust M&A playbook to facilitate and streamline pre- and post-deal activities •
Compliance and control capabilities focused on new and emerging markets to
address foreign regulatory, compliance and treasury requirements • •
Finance and Treasury working model to facilitate increased real-time
transactions through digital initiatives •
Risk monitoring, cybersecurity, data protection and compliance for digitally
enabled processes and new business models • •
Decision support and analysis

Team capability to support robust data analytics • • • •

Analytical tools with modelling and data visualization capabilities • • • •
Dedicated analytic resources to support the various operations and
development teams • • •
Capital investment processes to expeditiously make funding decisions and
monitor return on investment • • • •
Clear processes and governance for R&D investment, tracking and return
on investment • •

32 Getting it right with growth: How to be a great CFO in the new growth economy
4. Spot and eliminate biases 5. Invest in analytics
A critical and growing responsibility and modeling
among finance organizations is the Just as transparency is needed to give
ability to identify bias in decision- organizations a clearer sense of what’s
making. As executive teams evaluate happening in the organization at a point
a specific market, product, or strategy, in time, analytics and modeling are
they sometimes operate with blinders needed to give organizations a more
on, unintentionally eliminating options accurate understanding of what’s likely
that could represent a better solution to happen in the future. (See Figure 2.)
to the company’s needs. Avoiding these
biases usually requires organizational Analytics and modeling software is
—maturity—companies need to be increasingly available, costs less, and
able to evaluate themselves and their requires less computational power than
competitive environment objectively. even just a few years ago. And just as
As a result, it’s often a bigger challenge importantly, the underlying algorithms
in young and fast-growing companies are becoming more accurate in being
(and those seeking to expand to able to model various scenarios.
emerging markets) which simply may For example, a company looking
not have all the information required to enter a new market can consider
to make the best decision. In all cases, what might happen if that country’s
the CFO can broaden the potential interest rate were to rise 1 percent,
universe of options by seeking to or if unemployment were to fall, or
identify and root out bias, making if certain demographic shifts were to
sure the executive team is asking accelerate or slow down. The result is a
the right questions and applying the greater ability to identify the universe
correct filter to their decisions. of potential outcomes and prepare for
both upside opportunities and downside
risks. This function is becoming so
critical that some organizations now
have a central analytics function that
can work across all business units.
This is becoming a core capability,
particularly in consumer-oriented
organizations. The CFO can oversee this.

Avoiding biases usually

requires organizational
maturity.
Companies need to be able to evaluate
themselves and their competitive
environment objectively.

33
To have a deeper conversation
about this subject, please contact:

Gary Apanaschik Christ H. Economos

Finance Performance Management US Deputy Tax Leader, Sectors
Leader & Health Industries Advisory and Services
Finance Leader +1 (646) 471 0612
+1 (860) 241 7210 [email protected]
[email protected]
G. Scott Hale
Bob Bishop Public Sector Practice Finance Leader
Consumer and Industrial Products & +1 (703) 918 3682
Services Finance Leader [email protected]
+1 (312) 298 2037
[email protected] Hal Houser
Financial Services Finance Leader
Mike Boyle +1 (646) 471 4134
Technology Information Communication [email protected]
& Entertainment Finance Leader
+1 (617) 530 5933 Beth Paul
[email protected] National Thought Leader, Strategic
Professional Services Group
Martyn Curragh +1 (973) 236 7270
US Deals Leader [email protected]
+1 (646) 471 2622
[email protected]

PwC (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and
enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our
network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers
to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal
entity. Please see www.pwc.com/structure for further details. This content is for general information purposes
only, and should not be used as a substitute for consultation with professional advisors. MW-15-0073