role of cfo apoorva misra

+

Modern CFO: Role and ResponsibilityApoorva MisraCFO and Director Sales & Marketing | Fomento Resources Group

13/04/2023Apoorva Misra

2+Agenda

Evolving Business Environment

Multi faceted role of a CFO

Activities Preformed by CFO

Live Example:-

Capital Budgeting;

Treasury Management

13/04/2023 Apoorva Misra 3

+Evolving Business Environment


4+Evolving Business Scenario

Economic challenges across the globe have reshaped the Global business environment, and as a result, the CFO’s role

Uncertainty prevails due to: Lack of political unanimity Technology shift High level of:

• Nationalism • Protectionism• Government regulations


+Multi Faceted Role of A CFO


6+Role of CFO: Score Keeper

CFO has the ultimate responsibility of timely and accurate financial reporting for internal and external users, the best CFO are able to master this role.

Estimates that are constantly changing drive the information used to produce financial statements. These changing conditions mandate that the CFO be an astute evaluator of data.

Apoorva Misra

7+Role of CFO: Accounting Technician

In the current Globalized World the CFO needs to understand the Generally Acceptable Accounting Principles of its host country as well as across the globe.

The harmonization of international accounting standards toward International Accounting Standard is helpful in reducing the variability in the accounting rules around the world

13/04/2023


8+Role of CFO: System Administrator & Technology Innovator

The increased use of automation and ERP systems in the present day environment makes it essential for the CFO’s to understand the system construct.

Technology comes at a high cost but the implication of not having the right technology is dire. CFO’s do need to play a large role in technology selection and innovation.


9+Role of CFO: Tax Planner

Tax planning is viewed as a means to increase shareholders value.

Firms need to consider short term and long term impact of the tax planning activities specially in the light of General Anti Avoidance Rule “GAAR” and Controlled Foreign Corporation “CFC” rules.


10+Role of CFO: Communicator

CFO that succeed are great communicators.

CFO’s needs to be able to interact with external agencies such as tax authorities, other government authorities, shareholders, bankers, lawyers etc. These external agencies have varied outlook and objectives.

CFO’s needs to be able to interact within the organization and should be able to communicate his points clearly and precisely.


11+Role of CFO: Risk Manager

CFO’s are proactive risk managers. Financial management is managing risk. Risk comes from several sources, such as safety, contract provisions, relationships with employees, customers, subcontractors, vendors, bankers.

The first steps in risk management are identifying and analyzing sources of risk so that they are manageable. The various types of risk that a modern day firm faces are Strategic Risk Operational Risk Legal and Compliance Risk Financial Risk Risk of Business as usual


12+Role of CFO: Strategic Risk

CFO has to have a detailed knowledge of the business, equivalent to that of the CEO, to combine the financial and the business aspects and guide the organization.

The Strategy Execution – The CFO can lead It is not sufficient to just flag a problem. It is needed to

influence the change and this would require soft skills as well as hard work

Each element of strategy should have dashboard to monitor Do not ignore the small thing


13+Role of CFO: Operational Risk

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events Do not ignore even the smallest breach of trust; it can take

bigger shape in the future. CFO must have thorough understanding of business and its

drivers CFO has to understand and track internal and external

environment at all times CFO must be a master of details. Both devils and innovation

lie there.


14+Role of CFO: Risk Manager – Legal and Compliance Risk

Zero tolerance in the light of changing nature of regulations like FCPA, anti-bribery, GAAR etc.

Legal risk always comes out in the long term.

There is a prevalent environment of Nationalism and Protectionism. It is characterized by increased level of unemployment in most countries

The CFO needs to develop an awareness and knowledge of the local laws and regulations

Boundaries are shrinking: Global workforce is to be integrated into the organization


15+Role of CFO: Risk Manager – Financial Risk

Risk of Leveraging. Does adding debt actually reduce the Cost of Capital?

Treasury Policy: Objective should align with Business Risk.

Government Policy and Sociopolitical Risk


16+Role of CFO: Risk Manager - Business as usual Risk

The only thing certain in the world of business is uncertainty and change. CFO should focus on Business Continuity Planning.

Business Continuity Planning is all about anticipating, preventing and responding to incidents which could affect critical business functions in planned manner.• How to continue operating if head office is damaged by

disaster?• How to maintain production if one or more plants are out of

operation?• What happens if sales and marketing systems are shut down?• Where to source raw materials if the existing supply is

interrupted?• What is the action plan if senior managers are suddenly unable

to work?


+Activities Performed by CFO


18+Responsibilities of a CFO – Capital Budgeting Capital Budgeting is one of the major responsibility of a

CFO.

CFO’s should understand the underlying business landscape to perform a good capital budgeting exercise.

CFO’s should also have a good grasp on latest trends and changes taking place in the industry. Knowledge of these changes will increase the reliability of the capital budgeting exercise.


19+Responsibilities of a CFO – Regulatory Compliances Requirements for regulator compliances increase with

the complexity of the business as well as with geographical diversification.

CFO’s shall be aware of the requirements and should keep a track of the regulator compliances made by the finance departments as well as other departments.

CFO shall, on a regular basis, get an external agency to audit the regulatory compliances


20+Responsibilities of a CFO – Treasury Management Modern day organizations need a very robust and

dynamic treasury policy.

The primary objective of treasury policy is to reduce the business risk. The treasury investments shall ideally be negatively correlated with the business risk.

Indian firms do carry large cash balances in their balance sheet, making cash management policy very important.

Indian firms also carry high amount of currency, commodity and interest rate risk. Treasury policy shall focus of reducing such risk.


21+Responsibilities of a CFO – Risk Management, non financial risks Set-up an independent internal audit system. The

internal audit system should be directly report to the CEO.

Focus on regulatory and compliance risk and explore ways to mitigate them.

Focus of Socio-political risk and explore ways to mitigate them.


+

Live Examples


23+CASE STUDY: Capital Budgeting Basic Information

We are evaluating an investment into an iron ore exploration company in Brazil.

The Brazilian Company is concessioner of exploration permit and has very basic data on iron ore reserve and the quality of the reserve.

The Indian Company will invest money in exploration of the iron ore deposit.

How do you think one should proceed with the evaluation of the opportunity?


24+CASE STUDY: Cash Management for Private Company Commodity companies globally are in middle of a

commodity super-cycle, wherein the commodity companies are generating large amounts of cash.

What should these commodity companies do with the large amounts of free cash being generated?

What should these companies with large free cash flow do with respect to their M&A activities, Dividend Policy CSR activities etc.?


25+CASE STUDY: Cash Management for Private Company A private limited company has a surplus cash balance

(over and above the cash required for running the business) of USD 300 Million [Rs 10,000 Million]…. Let us discuss cash management policy….

role of cfo apoorva misra

Documents

role of cfo

modern cfo

cfo activities

best cfo

communicator cfo

drivers cfo

legal risk

risk manager business