Q: What are the key findings of the WNS Annual CFO Survey Report 2010?
Ans: As you know the last 18 months or so have been amongst the most challenging for most companies and CFOs have been at the forefront in helping their companies navigate through choppy waters. At WNS we conducted a survey with CFOs of Fortune 1000 Companies and some of the findings from those questions were quite revealing. For example one of the things we figured out, which is not surprising, is reducing cost is obviously amongst the most important items on the CFO’s agenda for 2010. Almost 60% of the respondents said cutting cost is going to be their biggest priority for 2010. Almost 50% of the CFOs also responded by saying that enhancing and strengthening the internal control environment is going to be a key priority for their organizations.
Having seen what companies have gone through in the last 18 months or so, one of the things the survey indicated was helping the companies grow their business is also going to be a key priority for the CFO community. When we look at the survey from a different angle, we also analyzed it and figured out that almost 50% of the respondents leverage finance and accounting outsourcing as a vehicle for reducing their cost structure. Almost 75% of the respondents also suggested that they are looking at expanding the scope of their finance and accounting outsourcing programs.
Q: What are the three big items on CFO's agenda for 2010 and how are the CFO's responding to it?
Ans: Based on the findings of the CFO survey, the three big items on the CFO’s agenda for 2010 include improving the controls environment within the organization, enhancing the transformational capabilities within that finance function, and also getting ready for the upturn.
In terms of what CFOs are doing to meet these objectives, based on our discussion with the finance organizations in large multinational corporations, we already see evidence of the CFO’s organization embarking on pretty significant finance transformation and process reengineering exercises. It is very common these days to see CFOs and their direct reports looking at exploring shared services centers be it captives or be it leveraging third-party service providers to deliver value to the finance function.
Q: There is often a perception that finance and accounting outsourcing is only meant for supporting operational activities, has the survey findings suggested anything different?
Ans: Well, if you look at the finance and accounting outsourcing market for the last 5 years, the market has really evolved and the survey findings pretty much substantiate that. More than 51% of the respondents to the survey believed that finance and accounting outsourcing is not just a vehicle for operational activities, but it also is being treated as a strategic initiative to add value to the finance function. It is also very evident from the kind of activities we see being included in a number of new opportunities that we see through in our pipeline. High value added activities like planning, budgeting, forecasting, finance analytics, financial planning and analysis, activities that are not transactional in nature are often included within the scope of what a third-party service provider can do for the CFO’s organization.
So outsourcing has clearly moved beyond the transactional activities, and a lot of it is because of the increased maturity of the provider community, the changes in perception within the buyer community as well as a number of successful outsourcing programs that had been implemented for end-to-end processes within finance and accounting across multiple industries.
Q: What is perceived to be risks or concerns associated with finance and accounting outsourcing?
Ans: The top risk is the perceived loss of control. There are a number of ways in which companies can mitigate that risk or concern. First and foremost, when companies are outsourcing their finance functions to a third party service provider, it is extremely important for both the provider and the client to work together to design a governance framework that is always on a governance framework that goes beyond the scheduled meetings, a governance structure that touches all aspects within the organization; tactical, operational and strategic. The governance structure should be nimble, proactive and very efficient. We believe companies that have done a good job of creating a governance framework have been successful in almost eliminating this concern around the perceived loss of control.
Secondly, when companies are looking at finance and accounting outsourcing, they should also pay careful attention to the future state retained organization; what activities would be retained by the organization, what activities would be outsourced to the third-party service provider, what are some of the handoffs between the company and the provider. Those are things that need to be defined in a lot of detail. We always advice our clients to spend a lot of time and energy to think through that process, and we help our clients design their retained organization. Thirdly, it is also very important for companies to train their retained organization in how best to manage the service provider. Companies should look at managing the service provider based on predefined matrix. You got to be using and leveraging technology in the best possible manner to manage your relationship between you and your third-party service provider. So while this is a perceived risk, we believe there are many ways of mitigating the concerns around the loss of control.
Q: What is the future of finance and accounting outsourcing?
Ans: The future of finance and accounting outsourcing to my mind is very promising. I think what we have seen up until now in the last 4-5 years is just a tip of the iceberg. We have been seeing a lot of companies that have never gotten into finance and accounting outsourcing actively considering an offshore delivery option. I fully expect companies that have already gotten into finance and accounting outsourcing to expand their programs. We are definitely seeing a trend for companies to embrace finance and accounting outsourcing in a big way.