SKILLS Finance leaders on competitive career advantage - Driving innovation in management accounting | September 2021
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Driving innovation in management accounting | September 2021
SKILLS
Finance
leaders on
competitive
career advantage
Worldwide leaders in public and management accounting
Making it happen,
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0330 123 1740
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CONTENTS
30 FINANCE LEADERS:
8 SKILLS FOR A CAREER
IN THE DIGITAL AGE
Leaders across varied
industries discuss the skills
and foresight needed to
navigate career progression
in finance and accounting.
34 PRIORITISING
REVERSE LOGISTICS
The explosive growth of
reverse logistics presents
risks and opportunities
for finance professionals.
Here are ways to identify
priorities.
38 SUSTAINABILITY
ACCOUNTANTS:
WHAT DO THEY DO?
Companies are grappling
with ESG risks and
opportunities in their
5 THE VIEW FROM THE 12 HIGHLIGHTING strategy and business
PRESIDENT CHART DATA IN EXCEL models. Some hire
CIMA President Paul Ash, Learn how to create sustainability accountants
FCMA, CGMA, says the dynamic highlights for a or create whole departments
Association can draw on chart. to measure and track ESG
AICPA & CIMA’s combined metrics to ensure long-term
TOP: IMAGE BY STUART KINLOUGH/IKON IMAGES; CENTRE: IMAGE BY OTTO STEININGER/IKON IMAGES;
experience to lead through 16 MOTIVATING PEOPLE value creation.
the next five years. IN A FLAT ORGANISATION
Focus on aspects 42 DRIVING DOWN
BOTTOM, FROM LEFT: IMAGE BY PIRANKA/ISTOCK; IMAGE BY NICK LOWNDES/IKON IMAGES
6 FUNDAMENTALS
TO BUILD STRONGER
other than money and
title to keep staff, and 22 CARBON EMISSIONS
WITH INTERNAL
BUSINESS yourself, motivated. PRICING
Data, trust, and stewardship 22 HOW FINANCE In the current rush to
principles can provide 18 FINANCE AT THE CAN SHAPE AFRICA’S decarbonise, Acciona,
a grounding amidst FOREFRONT OF M&A PUSH INTO NEW MUSIC Swiss Re, and Mahindra
rapid change, says Finance’s role in mergers MARKETS & Mahindra have found
Andrew Harding, FCMA, and acquisitions is Management accounting success in implementing
CGMA, chief executive– expanding, thanks to skills can be harnessed to internal carbon prices to
Management Accounting the function’s increased turn creative talent and reduce emissions and fund
at the Association of input into strategy and the ideas into sustainable greener investments.
International Certified rising influence of data business ventures.
Professional Accountants. and analytics.
26 5 KEY STEPS FOR
8 BOOST YOUR DISCOVERING THE
CAREER WITH SKILLS GAPS AT YOUR
INTRAPRENEURSHIP 12 BUSINESS
Looking for creative ways Keeping pace with change
to challenge yourself means that businesses and
within your current job can professionals need to assess
improve your skills, boost and remedy the difference
the business, and grow your
career opportunities.
between the skills they have
and the skills they need.
42
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 3
46 5 WAYS TO UNLOCK 54 A FUN LOOK AT 58 INSTITUTE NEWS 62 TIN MINING AT SEA
THE VALUE OF YOUR TAXATION THROUGH THE Get updates on issues COVID-19-driven demand
BUSINESS DATA AGES affecting the profession and for consumer electronics
Being proactive with Economists reveal success your membership. sent tin prices soaring,
data can magnify the stories and unintended leading miners in the
value-creating aspects of consequences in their book 61 MICROCHIPS AND THE world’s largest tin-exporting
teams and individuals. about the history of taxes GLOBAL SUPPLY CHAIN country to head offshore.
around the world. Take a look at the
62
50 MANAGING COSTS OF microchip shortage and
SUPPLY CHAIN RISKS
BEYOND THE PANDEMIC
54 the disruption it is causing
in manufacturing.
The pandemic disrupted
supply chains and
added logistics costs in
many industries. Here’s
how Welbilt, a global
supplier of restaurant
equipment, responded. Contributing to sustainability
FM is now shipped without plastic wrapping. Paper wrapping used
50
in certain markets is Forest Stewardship Council (FSC)-certified
and is recyclable and biodegradable. The paper used in FM is made
from wood grown in FSC-certified forests, recycled material, or
controlled wood.
FROM LEFT: IMAGE BY URFINGUSS/ISTOCK; IMAGE BY ROY SCOTT/IKON IMAGES; PHOTO BY WILLY KURNIAWAN/REUTERS
CIMA HONORARY OFFICERS United Kingdom
The Helicon, One South Place. London EC2M 2RB
Paul Ash, FCMA, CGMA Melanie Kanaka, FCMA, CGMA
Tel.: +44 (0)20 8849 2251
President, CIMA Deputy President, CIMA
Chair, Association board United States
Sarah Ghosh, FCMA, CGMA 220 Leigh Farm Road, Durham, NC 27707-8110
Nick Jackson, FCMA, CGMA Vice-President, CIMA Tel.: +1 919-402-4500
Immediate Past President, CIMA
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4 I FM MAGAZINE I September 2021
THE VIEW FROM THE PRESIDENT
PAUL ASH, FCMA, CGMA
S
ince AICPA & CIMA came were posted in 2020, despite
together five years ago, I many work opportunities being
have been a strong greatly diminished due to the
supporter and advocate for our crisis.
Association. From the beginning, AICPA & CIMA’s 200-plus years’
I saw how each founding body combined experience is vital to our
could empower the other and Association as we embark on our
could become greater than the new five-year strategy. We aim to
sum of our parts. We are now grow even more organically to
ready to move forward and build ensure our Association maintains
on what we have achieved. This its ability to influence and remain
year’s Association theme of “Adapt relevant to all it serves. Strategic
+ Thrive” fits perfectly with my initiatives have been updated in
own theme of “Dare Together”.
Following the challenges we Building a response to the changing
environment and provide the
reputation of
have experienced over the past 18 framework to make strategic
months, I am confident that we investments in, for example,
are not being too ambitious. We technology, people, and resources,
‘daring together’
should not be afraid of new and make alliances with partners
challenges. By “daring together”, I who share common interests.
am certain we will be even more Environmental, social, and
successful in the future. Having governance (ESG) measures now
been through an experience such ‘We should not be afraid of require a greater level of public
as a global pandemic, we have
learned the strength of working
new challenges.’ disclosure, based upon the
collection and analysis of data
together. Being able to collaborate and a clear ESG strategy. As
on the new challenges we face will help us succeed. management accountants, we have always looked
AICPA & CIMA came together because we, as beyond the numbers to describe the value chain
individual members of those founding bodies, chose across the business. Using tools such as integrated
to do so through a democratic process. Any doubts thinking and reporting, we should prioritise finding
some may have had as to whether we would be where ESG principles can be applied and
stronger together have been answered in how, as a implemented. If you need support, AICPA & CIMA
joint Association, we have not only endured the recently published guides such as Putting the E in ESG
pandemic but thrived. and a useful overview of the topic, Sustainability
When we began our relationship, there was no Frameworks and Standards (find the reports and others
precedent to work from and no rule book, but our at cgma.org/resources/reports).
joint resources represent powerful assets. They The challenges ahead of us are likely to change, but
PHOTO BY FIONA HANSON/AP IMAGES
enabled us, almost overnight, to pivot to support our be confident that you are ready to face them. Use them
members and students throughout the world. We as opportunities for positive transformation, with the
were able to move our examinations to a remote resources and support of AICPA & CIMA in your
testing platform. That meant students’ learning did toolkit. I want us as finance leaders to build a
not have to stop. The Association redoubled its efforts reputation for daring to be bold on the transition
to keep members in work at a time when job security KEEP IN TOUCH required. We are ready and able to make the next step
was nonexistent. The Association’s Global Career Hub Follow me in reimagining our profession and making our
contains a huge range of roles to help members find on Twitter: Association even more successful than it has been
their next opportunity. More than 1.25 million jobs @CIMA_President over our first five years.
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 5
Fundamentals
to build
stronger
business
By Andrew Harding, FCMA, CGMA
S
ometimes it is a good idea to go You also need to ensure you do not good relationships with the full breadth of
back to the basics, the ABCs of gather data for data’s sake. As the Global a business’s stakeholders.
management accounting Management Accounting Principles The end goal of this is higher
— and I don’t just mean (GMAPs) say, “Management accounting productivity and efficiency, but despite the
activity-based costing. Going makes relevant information available to rise of AI, companies are — by definition
back to first principles is a good way to decision-makers when they need it.” — staffed by people. The human factor
ground yourself when the world seems to Although it is important, data is only needs to be managed intelligently and
be changing 20 times per second. the start of the decision-making process. empathetically.
Ignoring change is not an option, but Insights gleaned from information must It is a truism that change makes people
reimagining the basics can help. be set against externalities such as uncomfortable, but by encouraging staff to
At its most fundamental level, prevailing business conditions, which can cultivate an agile mindset and adopt
management accounting is about be affected by myriad factors and not all of integrated thinking, you can reduce
decision-making. And to make the right which have data immediately available. friction caused by new systems rubbing
decisions we need the right data. This is where management accountants, against old ways of working. Good
As the new CIMA President Paul Ash with their knowledge of operating and stewardship builds trust, that most
said in his speech at CIMA’s Annual business models, can show both their own difficult quality to evaluate.
General Meeting, “No business has ever value and that of the profession. We use A 2017 Harvard Business Review article,
succeeded without good, solid, reliable, “integrated thinking” to join the dots and “The Neuroscience of Trust”, described
PHOTO BY STE V E FORREST/STE V E FORREST PHOTOGR APH Y
and timely data.” For our profession, data tell the story that supports good decision- how compared with people at low-trust
has always been the keystone. Now, making. companies, people at high-trust
everyone has latched on to that secret, and Understanding the stories behind the companies report 74% less stress, 106%
data analysis is often cited as a, if not the, numbers is a particularly useful skill when more energy at work, 50% higher
key future skill. it comes to performance management. productivity, 13% fewer sick days, 76%
The assembly and analysis of relevant The Association is publishing new more engagement, and 40% less burnout.
data is increasingly automated. Data itself is research on performance management Get the foundations right and you can
becoming more sophisticated, and the that reimagines traditional financial build a stronger business.
conversion of the value of important assets considerations.
into meaningful data is a challenge. How do It says that to succeed over the short,
you plan to show your company’s ESG medium, and longer term, businesses are
Andrew Harding, FCMA, CGMA, is chief
impact, for example? (This FM issue focuses adopting new ways of managing
executive–Management Accounting at
on aspects of sustainability: “Sustainability performance that capitalise on the talents
the Association of International
Accountants: What Do They Do?” on page of their people, and leverage their business
Certified Professional Accountants,
38; and “Driving Down Carbon Emissions model, systems, processes, and
representing AICPA & CIMA.
With Internal Pricing” on page 42.) procedures. It also notes the advantage of
6 I FM MAGAZINE I September 2021
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Boost your
career with
intrapreneurship
Looking for creative ways to challenge yourself within your
current job can improve your skills, boost the business,
and grow your career opportunities.
By Anastasia Uglova
S
pend a few years working for services, and systems for the benefit of becoming the next Blockbuster.
the same employer and even their employer. So how do you ditch your career rut
the most exciting job can You may have heard of while convincing your boss to let you be a
eventually feel limiting and intrapreneurship by other names: workplace hero?
monotonous. As the allure of hackathons, skunkworks, sandbox funds,
new challenges wears off, you find innovation hubs, incubation labs. While Start with a why
yourself daydreaming about quitting if these may sound like trendy new concepts Begin, as all good ideas do, with why. There
only to keep your skills fresh in a rapidly that would never fly at a conservative are several very good reasons to innovate
changing job market. workplace, intrapreneurship is actually a from within.
But forgoing job security is far from the time-tested tactic that finds itself in very
only way to jump-start a sluggish career. To good company: 3M’s Post-it Notes, Staying sharp through upskilling and
try your hand at something new while Facebook’s Like button, and Lockheed knowledge transfer
keeping your gainful employment, Martin’s F-22 Raptor and SR-71 Blackbird Some job skills have a sell-by date. By
consider intrapreneurship. aircraft are all examples of internal working on new projects outside your
Like entrepreneurship, innovation incubated outside of normal usual functional area, you gain exposure
intrapreneurship is the practice of rapidly work process. and an introduction to new and valuable
spinning up novel solutions to complex Perhaps the best-known example of skillsets, opinion leaders, and technology
problems. But while entrepreneurs launch corporate intrapreneurship is Google’s platforms.
IMAGE BY STUART KINLOUGH/IKON IMAGES
new ventures to solve external problems in 20% Project, intended to encourage At the same time, your colleagues in
society and the business world at large, the employees to spend 20% of their time other business units benefit by sharing
focus of the intrapreneur is internal, working on personal and creative information and cross-pollinating the
exploring opportunities to improve things endeavours to boost innovation and different tactics internal teams use to
inside the organisation they work for. employee retention. It is no surprise that analyse problems and design solutions.
These employees prepare compelling the home of the 20% Project is also the
business cases and sometimes assemble birthplace of Gmail, the most widely used Increasing engagement and motivation
strike teams to experiment with new product in the history of email. If you are feeling bored at work, focusing
approaches to “business as usual”. They are Not every skunkworks scheme will on innovation can reignite a sense of
given the resources and autonomy to build become the next Gmail, but any excitement and new possibilities by
and test these processes, products, company that does not innovate risks helping you see old problems with fresh
8 I FM MAGAZINE I September 2021
eyes. Additionally, the attention and because they get caught up in doing what yourself indispensable. New initiatives
recognition that comes with “unorthodox” they have always done, the way they have often put the people behind them on the
projects translates to renewed inspiration always done it. radar of executives. After all, these
and engagement, especially as your ideas This is called organisational inertia, executives have dedicated valuable
gain traction and your work is recognised but intrapreneurship breaks that cycle by company resources, time, and money to
for its positive contribution to the spinning up new ideas, products, and support your efforts.
company’s future. services to stay agile and competitive in Now you have their attention, too, and
the marketplace. they are going to want to hear how that
Contributing to innovation and market new project is going. This chance to
leadership Earning respect and relevance impress your peers and superiors can
No company wants to be last in line when through self-promotion become the career opportunity of a
the market shifts. Business leaders know Speaking of leadership, intrapreneurship lifetime, because how your colleagues
that stagnation means death, but large provides a visible platform to perceive you is one of the most significant
companies struggle with innovation communicate your value and make factors in your success — even more so
Focusing on innovation can recruit top talent to remain competitive.
A skunkworks initiative that pairs
reignite a sense of excitement and hiring managers with junior-level
employees directly addresses pain points
new possibilities by helping you in talent acquisition and succession
planning, helps the company stay relevant,
see old problems with fresh eyes.
keeps leadership in touch with today’s
business trends, and gives less
experienced colleagues a chance to emerge
as leaders.
than skills and experience, as documented help your company get ahead of the curve Plan the how
by workplace researcher and speaker Dan by proposing to try out a new tool to solve A fruitful conversation about taking on a
Schawbel in his bestselling book, Promote an unmet business need. new assignment — especially one that is
Yourself: The New Rules for Career Success. outside your company’s usual way of
Change management doing business — takes serious
Move to a what With so much change coming to finance, preparation. While it may be tempting to
A good way to come up with ideas for how can you help your company and complain that you are bored and
internal skunkworks is to list what you colleagues adapt smoothly and uninspired, you should keep this crucial
already dislike or find inefficient about productively? Your executives are likely conversation focused on solutions and
your company. Even better is involving asking themselves the same question. possibilities: solutions for business
others in your brainstorming by asking Help them answer it by offering to explore problems and possibilities for your career.
your colleagues what they wish they could current and future changes that are likely An ideal container for this type of
change. For example, are you annoyed by to cause friction, along with novel conversation is a goal-setting meeting
your company’s outdated human methods and techniques to mitigate their with your boss.
resources software? Does a business impact. Talking about job aspirations and career
process add too much unnecessary time In the process, you will collaborate and planning is an essential conversation that
and not enough value? problem-solve with many different teams, too few employees have with their
Talk to others, determine if the educate yourself on some of today’s most managers — but the ones who do have that
sentiment is shared, explore alternate pressing workplace issues, and gain conversation end up seeing their
ideas from adjacent teams, and propose essential change management skills in an professional prospects skyrocket. When is
solutions by testing innovations to era of rapid innovation. the last time you sat down with your
research and implement, such as: manager to talk about where you want
Reverse mentoring your career to go and what work
Automation The practice of pairing executives with experiences would best position you to
Instead of feeling anxious and paralysed junior staff to facilitate the exchange of reach those goals? If the answer is never, it
by the prospect of artificial intelligence ideas and expertise is a tactic pioneered by is past time to book that meeting.
making human jobs obsolete, take charge General Electric in the 1990s. Legendary At the meeting, start with the “why”
of the inevitable disruption by helping Chairman and CEO Jack Welch sought to from this article to help your boss
lead the change. This way, you emerge as teach his company leadership about the understand the business case behind your
an indispensable subject-matter expert technological advances reshaping his idea. Next, research the “what” as it relates
while facilitating a crucial transformation industry. Chief among these was the to your company — or come up with your
for your employer. internet, a revolution that GE’s senior own project ideas.
Explore what automation projects are executives struggled to grasp, and which A great way to generate problems worth
already in the works and see if you can get its junior employees were exceptionally solving is to talk to colleagues. Propose a
involved. If there is nothing underway, well equipped to explain. plan that details not just the problems, but
Today, reverse mentoring can be used the solutions you envision. Your proposal
by companies to teach essential digital may not be what you ultimately end up
Resources skills such as social media and artificial incubating, but the first step is simply to
intelligence. kick off the conversation. ■
Articles
“Top Finance Skills”, a series of Succession planning
Q&As with finance and business Reverse mentoring can even help
Anastasia Uglova is a communications
leaders, FM magazine, companies tap into new ways to attract
and personal branding consultant
tinyurl.com/ye6qgqaq new talent. Data from postsecondary and
based in the US. To comment on this
MBA programmes shows that Millennials
Career help article or to suggest an idea for
and Generation Z are increasingly less
another article, contact Drew Adamek,
Global Career Hub, interested in pursuing careers in financial
an FM magazine senior editor, at
mycareer.aicpa-cima.com services, which poses an existential threat
Andrew.Adamek@aicpa-cima.com.
to finance departments struggling to
10 I FM MAGAZINE I September 2021Islamic Finance:
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© 2020 Association of International Certified Professional Accountants. All rights reserved. CGMA and Chartered Global Management Accountant are trademarks of the
Association of International Certified Professional Accountants and are registered in the United States and other countries. The Globe Design is a trademark owned by the
Association of International Certified Professional Accountants. 2001-23377
2001-23377_1911-86011 CGMAStore Islamic Fin FM ad.indd 1 2/5/20 3:51 PMIMAGE BY PIRANKA/ISTOCK
Highlighting
chart data
in Excel
A series approach can produce conditional
formatting that changes dynamically.
By Liam Bastick, FCMA, CGMA
W
hen creating financial models, charts are often an
effective way to present data. Sometimes, you
might wish to highlight specific datapoints to
emphasise them.Example 1 data
Consider the following example, shown in the
screenshot “Example 1 Data”, which shows the historical
Example 1 chart data for income for a company, summarised quarterly.
From the provided data, I plot a line chart such as the
one in “Example 1 Chart”, which has a clear minimum and
maximum.
If I wish to highlight these points on the graph, it would
be easy enough simply to highlight them and change
the format of the points, as shown in the screenshot
“Example 1 Chart With Highlights”.
But what if the data changes? I would have to go
back and edit the chart points each time there is a new
maximum and minimum point. This is not the way to do it!
In this situation, let’s create dynamic highlights for the
chart. To do that, I am going to use two “helper” data series:
one series is to calculate the maximum and the other, the
minimum (surprise, surprise), as shown in the screenshot
“Helper Series Data”.
The Total Income series represents the original series
data that I used to construct the chart. Formulas are used
to construct the Max and Min series; the Max series is
calculated with the following formula:
=IF(G$15=MAX($G$15:$T$15),G$15,NA())
Example 1 chart with highlights
The Min series is calculated with this formula:
=IF(G$15=MIN($G$15:$T$15),G$15,NA())
This results in the series displaying only the
maximum and minimum value in the original chart data,
and #N/A for everything else. Using formulas allows
these two series to be dynamic, so when there is new
data, the Max and Min series will update accordingly. The
#N/A error is deliberate, as it prevents data being plotted
as zero, depending upon the type of chart being selected
(I have deliberately used a line chart here to demonstrate
this point).
Now that I have the data series, I can include them in the
chart. When I click on the original chart, Excel highlights
the relevant data series, as shown in the screenshot “Chart
Data Highlighted”.
I can then drag the values down or I can right-click on
the original chart and select the Select Data option, which
will cause the Select Data Source dialog box to appear.
Helper series data
14 I FM MAGAZINE I September 2021Chart data highlighted
Add new series Chart with conditional formatting
Add Max and Min
I can then add new series by clicking on the Add button on
the left side of the dialog box, as shown in the screenshot
“Add New Series”.
The next step is to fill out the Edit Series dialog box
accordingly for Max and Min series, as shown in the
screenshot “Add Max and Min”.
The two additional series are now added and shown in
the Legend Entries (Series) box within the Select Data
Source dialog box, as shown in the screenshot “Adding
Series”.
Do remember to reference the Horizontal (Category)
Axis Labels if the dates are replaced with sequential
integers, as illustrated in the “Adding Series” screenshot;
otherwise, this may cause charts to display incorrectly in
alternative scenarios.
The chart now appears as shown in the screenshot
“Chart With Conditional Formatting”. Max and Min are now
Adding series chart series and will be changed dynamically depending on
the data.
In essence, this is “conditional formatting” for a chart. ■
Liam Bastick, FCMA, CGMA, FCA, is director of
SumProduct, a global consultancy specialising in Excel
training. He is also an Excel MVP (as appointed by
Microsoft) and author of Introduction to Financial
Modelling. Send ideas for future Excel-related articles
to him at liam.bastick@sumproduct.com. To comment
on this article or to suggest an idea for another article,
contact Jeff Drew, an FM magazine senior editor, at
Jeff.Drew@aicpa-cima.com.
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 15Motivating
people in a flat
organisation
O
ne of the greatest assets an particularly with longer serving staff, Give people a sense of purpose
organisation can have is a because some people are better at A feeling of belonging and the idea that
motivated staff. Motivated negotiating than others. There often is an there is a greater goal also helps to keep staff
employees are more engaged, element of gender or other biases, engaged. People should feel that they are
more productive, and more including unconscious ones, too. So you contributing to something bigger than just
likely to stay in their jobs longer. But how need to ensure that people who work at the their immediate role. A famous illustration
do you motivate people — especially in same level get the same pay — and this of this is the (probably apocryphal) story of
today’s nonhierarchical companies where needs to be done in a holistic and US President John F. Kennedy asking a
real promotions are few and far between? structured way. One of the best ways of janitor at NASA what he did. The janitor
doing this is having transparency around replied, “I’m helping put a man on the
What role does money play? pay and pay bands. Bonuses are generally moon.” Interestingly, this is something the
Money is what is known as a “hygiene not a good way to motivate people. They public sector and not-for-profit
factor”, a basic requirement. If you don’t produce short-term upticks in satisfaction organisations often do much better than
pay people enough, it can be a significant but do little in the long term and can be the private sector.
demotivator. But once you pay them divisive.
enough, paying them any extra has little Be an attractive organisation
effect. It’s a good idea to pay people slightly Be fair with appraisals People want to work for a business they
above the market rate — this tells your staff Fairness is not just about pay. Both can be proud of. Some might seek to work
you value them enough to pay more than managers and organisations should for a widely admired household name, like
your competitors do and will help make ensure that staff appraisals are conducted Google or Nike. But people increasingly
you an employer of choice. in a way that is both fair and seen as fair. choose employers based on criteria such
PHOTO BY STREETFLASH/ISTOCK
Employees should feel that a balanced as environmental responsibility, diversity
But it’s not that simple view has been taken of their performance and gender balance, corporate social
Pay is not just benchmarked externally. and that everyone is held to the same responsibility, and so on. This is
People compare themselves to their standards. They should be asked to particularly true of younger employees
colleagues. Having unfair salary disparities contribute and should agree with the and graduates. Attractiveness is closely
internally can be hugely demotivational conclusions of the appraisal. If there are related to purpose — people want to work
— and can lead to charges of problems, a way forward that both parties for a business that reflects their own
discrimination. This often happens, buy into should be found. values and that they can feel good about.
16 I FM MAGAZINE I September 2021In a structure that includes few real promotion
opportunities, focus on other factors to keep staff
engaged.
By Rhymer Rigby
Career development is the new career Be a good boss much of this advice works for individuals.
progression It’s not just a saying that people join You can ask for training and to be moved
In old-fashioned, hierarchical companies but leave managers. In survey around the organisation if you feel you are
organisations, people got a promotion after survey, a dislike of a boss is cited as becoming stale and stuck in a rut. You can
every few years, which gave them a feeling the number one reason for leaving. So, be a take the initiative and make suggestions to
that they were moving forward. In flat good boss. Take an interest in your staff your boss. You can ask for feedback and
organisations, this is much tougher. But it and their careers. Be available to talk — or flexible working. You can join company-
is not impossible. You can still offer people take them out for coffee when it makes wide groups that concern themselves with
career development. This might involve sense to do so. Give them feedback social responsibility or charitable work. All
moving them sideways to gain experience, regularly. Bosses tend to assume that if of these will give you new experience and
temporarily assigning them to other things are going OK, they don’t need to say bring you into contact with new people.
business units or special projects, or giving anything. This is not the case. Tell staff You can, to a very large extent, empower
them training. You still provide the sense they’re doing a good job. Or pick up the yourself and take charge of your career and
of building careers and skillsets, just in a phone and thank them. Better still, motivation.
different way. acknowledge them publicly.
Visit the Global Career Hub from AICPA &
Make their lives easier Empower people CIMA for help with finding a job or
This is closely related to being an attractive As a boss, you should give staff the tools recruiting. Visit mycareer.aicpa-cima.com. ■
organisation. Be thoughtful and show your they need to do their jobs and then let
employees you care. Perhaps the most them get on with it. Be there if they need
obvious example of this is that parents of you, but give them space to work, and Rhymer Rigby is an FM magazine
young children are likely to find working resist the urge to ask for constant updates contributor and author of The
for an employer that tries to be flexible or constantly look over their shoulders. Do Careerist: Over 100 Ways to Get
much easier. As we return to offices after not do their jobs for them or tell them how Ahead at Work. To comment on this
COVID-19, there is going to be a great deal you would do things better. Be a manager, article or to suggest an idea for
of flux and change in this area. It is an not a micromanager. another article, contact Neil Amato,
opportunity for companies to rethink how an FM magazine senior editor, at
people work — and help their staff better Motivate yourself Neil.Amato@aicpa-cima.com.
manage work/life balance. If you are working in a flat organisation,
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 17Finance at the forefront of M&A While many business activities were halted by the pandemic, mergers were not. Here are the factors driving finance’s expanded M&A role. By David A. J. Axson
D
espite the impact of the global
pandemic, there has been no
IMAGE BY ROY SCOTT/IKON IMAGES
shortage of merger and
acquisition (M&A) and
divestiture activity. More than
28,000 transactions were completed
globally in 2020. We have seen a number
of sizable deals, including Morgan
Stanley/E-Trade, LVMH/Tiffany,
Salesforce/Slack, Intuit/Credit Karma,
Grubhub/Just Eat Takeaway, andFinance is instrumental not just in measuring portfolio value and isolating
opportunities to realise value through
making sure the numbers add up asset divestment. They can also expedite
the process by identifying potential
but also in ensuring M&A buyers, easing the due diligence process,
and preparing assets for a seamless
transactions deliver lasting value.
decoupling.
Deal structuring
Due diligence has long been
foundational to structuring M&A
transactions. Historically, this was
Liberty Global/Telefonica. Respondents stages of the M&A process, from largely confined to financial data;
in a global survey by Bain & Company identification of potential acquisition however, in recent years the scope has
expected M&A to contribute to 45% of targets to long-term strategic value expanded significantly. Due diligence
their growth in the future compared creation. now analyses data on a broad range of
with about 30% over the past three Looking at the five main stages in the topics, including potential litigation
years. M&A process (see the diagram, “M&A’s 5 risks; employee demographics including
Finance has always been an integral Stages”), we can identify the critical diversity; sustainability strategies;
part of the M&A process. However, until roles that finance increasingly plays enterprise data quality; system
relatively recently, that role has been throughout. complexity; and the relative strength of
mostly focused on performing financial customer, supplier, regulator, and
due diligence, integrating financial Target identification investor relationships. Ultimately, all of
systems, and tracking synergy savings The rapid expansion in publicly these datapoints feed into a financial
realisation. In the current environment, available data has allowed investors and model that develops valuations,
we are seeing the role of finance expand acquirers to garner significant establishes potential acquisition prices,
from purely an accounting lens to a intelligence about acquisition targets. At and forecasts future financial returns.
more strategic role in M&A. one large US financial institution, the Finance owns these processes and is
finance team has been maintaining being asked to expand capabilities to
Expanded role target company data books that have handle not only financial data but also
Two factors are driving an expanded role been updated every quarter for more operational and market data, structured
for the CFO and finance in M&A activity. than 20 years. The data books track the and unstructured.
First is the more strategic role CFOs play financial performance and gather
in the enterprise as a whole. In recent market intelligence of potential Day one operation
years, CFOs have become much more acquisition targets for each of the Planning for a successful start following
forward-looking and growth-oriented. institution’s major divisions. In recent the completion of an M&A transaction is
Evaluating portfolio value and studying years, manual data collection processes crucial for deal success and sets the
acquisition and divestiture have been replaced by artificial foundation for both near-term synergy
opportunities are at the heart of the intelligence and data-mining tools that realisation and strategic value creation.
CFO’s role in supporting an enterprise’s feed advanced analytic models to update The key parts of this planning include
growth strategy, of which M&A is an valuations and possible bid scenarios. ensuring that the essential data required
integral part. After the fiduciary role, Equally important, but often to run the combined business is
this is finance’s most important job. neglected, is that divesting assets can be available, accurate, and harmonised, and
The second driving force is the as strategically important as acquiring that the systems are capable of
proliferation of data and analytics across new ones. In fact, 78% of companies effectively operating and accounting for
the enterprise, which has created new surveyed by EY in 2020 expected to the merged or divested entities.
opportunities to take a fact-based, initiate divestment activity in the next Companies with well-defined M&A
data-driven, and analytic approach to all two years. CFOs have a key role to play in playbooks can mobilise
M&A’s 5 stages
Target identification Deal structuring Day one operation Synergy realisation Value creation
20 I FM MAGAZINE I September 2021multidisciplinary teams with embedded
finance skills around key data and CFOs have a key role to play in
system elements that combine business,
functional, and technical expertise. measuring portfolio value and
Today, these teams are using
sophisticated data sourcing, cleansing, isolating opportunities to realise
value through asset divestment.
migration, and harmonisation tools to
rapidly assimilate and merge data across
all parties to a transaction. As
companies increasingly digitise core
operating processes and migrate
systems and data to the cloud, many
historic integration challenges of harmonise data, the longer synergy underpins strategic and operational
incompatible systems and poorly savings take to be realised and the success. Investors, regulators, and board
governed data are becoming less greater the risk of a deal’s economics not members are becoming increasingly
common. This accelerates integration meeting expectations. A 2018 McKinsey conscious of the value (and risks)
and reduces the risks of data- and study reported that synergy savings associated with M&A. Emerging
system-driven integration challenges. targets were almost twice as likely to be technologies are shortening cycle times,
However, CFOs need to ensure that the met or exceeded when CFOs played an reducing risk, and delivering more
underlying data and system integral part in the synergy management predictable outcomes; however,
architectures can rapidly handle process. management needs to commit to
integration and divestiture challenges. managing M&A with the same care and
All too often, selling entities remain Value creation (and risk discipline that it commits to other
saddled with long-term support mitigation) elements of the enterprise. One final
agreements for businesses they no Today, more and more M&A deals are note of caution, however. Recent
longer own, which can reduce the predicated on strategic logic that is research has identified that one of the
strategic value of acquisitions and underpinned by the value of combining biggest reasons for a failed M&A is not
divestitures. data, products, relationships, and/or directly financial or operational in
markets to create value. Combining nature. Strategic logic and a compelling
Synergy realisation product sets, customer bases, market business case are all for nought if
Almost all M&A deals are founded upon access, sourcing, administration, and organisational and cultural alignment
some strategic logic for combining two innovation all require a robust, scalable, and integration are not successful.
or more entities. However, that is rarely and adaptive financial planning and Finance has a role to play here as well.
enough to convince investors and management architecture. All too often The metrics that are used to measure
lenders to back a deal. They are not organisations lose focus on the strategic performance, aligning financial policies
prepared to wait for the benefits to rationale for a deal after the high hurdles and controls, merging organisations and
accrue; they want a payback in the short of deal closure and synergy realisation job descriptions, and creating a unified
term through the realisation of synergy have been cleared. financial calendar, can all have an
savings. Again, finance is central to the The deals that pay off handsomely are impact on culture. Being sensitive to the
value proposition. Estimating savings those where finance keeps the harmonisation of policies and practices,
from organisational streamlining, leadership team honest and tied to the such as travel and entertainment,
contract renegotiation, overhead cost strategic rationale of the deal. In the spending approval levels, and, in today’s
reduction, elimination of duplicate worst case, that may mean that finance post-pandemic world, remote working
activities, and scale economies is has to confront and communicate the practices, can smooth the integration
founded upon the quality of the data uncomfortable reality that a deal has process. Finance is instrumental not just
used to make estimates and, more failed and that it is better to cut losses in making sure the numbers add up but
importantly, tracking and reporting and move on. Discipline and focus while also in ensuring M&A transactions
savings as they are realised. The longer it avoiding emotional bias are central to deliver lasting value. ■
takes a merged organisation to truly enabling the realisation of the original
value proposition and uncovering new
sources of value over time.
David A. J. Axson is a consultant and
author and a retired partner from
The payoff
Accenture, a co-founder of The Hackett
The CFO and finance team are not just
Group, and former head of corporate
partners to the C-suite, but also leaders
planning at Bank of America. To
in ensuring discipline, focus, and
comment on this article or to suggest
analytical rigour in M&A. The ability to
an idea for another article, contact Neil
manage M&A sustainably across an
Amato, an FM magazine senior editor,
enterprise as the business portfolio
at Neil.Amato@aicpa-cima.com.
changes is a core competency that
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 21IMAGE BY OTTO STEININGER/IKON IMAGES 22 I FM MAGAZINE I September 2021
How finance can
shape Africa’s push
into new music
markets
Digital music platforms demand finance skills, new
business models, and creative thinking.
By Jessica Hubbard
A
frican music is having a markets, Mavin Records can benefit from a experience,” said Amal Ratnayake, FCMA,
golden moment. In March, higher average revenue per user (ARPU), CGMA, a former CIMA president who is the
Nigerian Afrobeats star Burna which denotes the value of a user’s stream CFO at officialCOMMUNITY, an online
Boy (whose real name is in a particular region. global brand management and
Damini Ogulu) won Best Sean Watson, managing director, Sony e-commerce agency for the music industry
Global Music Album at the 63rd Grammy Music Entertainment Africa, which houses that represents recording artists including
Awards, while his compatriot Wizkid won stars including Wizkid, Gyakie, and rapper James Taylor, Mark Knopfler, Bonnie Raitt,
Best Music Video for his Brown Skin Girl AKA, said that artists are now “plugged and Santana.
collaboration with Beyoncé. The into the global game” because of the access Yet while streaming live concerts is a
popularity of these artists and Afropop provided via global DSPs. concept still in its infancy, Ratnayake said
more broadly reflects a growing appetite “We’re tapping into new audiences in that the explosion of digital music
for African music and culture — which is markets previously disconnected from platforms is prompting a massive overhaul
being propelled by social media, online African music, and we’re able to reach the of existing business models within the
concerts, and the proliferation of digital large African diaspora around the world industry.
service providers (DSPs) such as Apple more than ever … bringing huge “The way in which music is consumed
Music, Boomplay, and Spotify. opportunities for our artists,” Watson has changed dramatically, and no one
“Social media has expedited the creative explained. really considers buying music anymore,”
and cultural exchange between regions, Additionally, in the absence of live he said. “While this has been great from
whereby a song can travel to places an artist concerts due to social-distancing the consumer’s perspective, there are
cannot even imagine,” said Ifeoma restrictions over the past year, many artists going to have to be changes in revenue
Okonkwo, ACMA, CGMA, director of finance have participated in virtual events models and in determining what goes to
at MG Entertainment Nigeria Ltd. (better streamed live to paying audiences and rights holders and what goes to the artists
known as Mavin Records), which represents thus gained further exposure to lucrative … so we can expect new innovations and
major African artists including foreign markets. structures to emerge.”
Rema, Johnny Drille, and Ayra Starr. “There is incredible potential to At Mavin Records, for example, the
According to Okonkwo, these artists are replicate the concert experience online label is expanding through formal
being “heavily discovered and consumed” using technology such as augmented partnerships with the likes of YouTube,
on YouTube in particular, which is creating reality, although it is still very early days and by producing original content, such as
new revenue opportunities in markets and, at this point, fans don’t really get the “Comments With Ayra Starr” and “Johnny’s
such as the US, UK, and France. In these feeling of being a part of the live Music Mondays”, that goes beyond typical
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 23into place, that enhance transparency,
accuracy, and accountability,” Okonkwo
added. “I have learned to employ a lot of
financial modelling, scenario-based
analysis, simulation, and sensitivity
Amal Ratnayake, FCMA, analysis to ascertain the real value of
CGMA, the CFO of a commercial opportunities and to advise
company that represents on potential deals.”
musicians, says music
consumption changes will Streaming: The growth engine
mean changes to revenue Although the diversification of content
models. production to areas such as brand
activation and influencer marketing is
profitable, Mavin Records, like many other
labels, is ultimately focused on the
fast-growing appetite for streaming music.
“Our overall strategy across all
endeavours is being repurposed to either
subtly or outrightly trigger streaming from
music videos. In this way, the organisation world, piggybacking on music as our fans and customers,” Okonkwo said.
is transitioning from a traditional music foremost and primary asset,” Okonkwo “Streaming has also helped in mitigating
record label to a multifaceted explained. Yet capitalising on these global costs with regards to physical production
entertainment company — offering opportunities requires the organisation to and inventory management.”
services such as content production, brand leverage financial and accounting According to PwC’s Global
activation that generates awareness, expertise, and particularly the niche area Entertainment & Media Outlook 2020–
influencer marketing, merchandising, and of royalty accounting (see the sidebar, 2024, streaming revenues in Africa’s three
music licensing and publishing. “Turning Creative Flair Into Business biggest markets — South Africa, Nigeria,
“The expansion in services is a general Success”). and Kenya — will see average
strategy that we are employing to connect “We have had to put world-class annual growth in revenue of 25%, 34%,
African entertainment and culture to the structures — financial and otherwise — and 27%, respectively, in the five years to
Turning creative flair into business success
The music industry provides a strong Financial advisory abroad, the proposition could look
example of how management Where there are indications that an good qualitatively but would
accounting skills can be harnessed to artist’s financial judgement and ultimately see Mavin Records
turn creative talent and ideas into decision-making is becoming clouded achieving less profit as a result of
profitable — and sustainable — by stardom, financial advisory can be all the associated fees. A simulation
business ventures. Ifeoma Okonkwo, provided to bring a more grounded analysis can show the numbers and
ACMA, CGMA, finance director at Mavin approach to creative projects. demonstrate that the business
Records, highlighted four areas in would achieve more profit if the
which she brings structure and Simulation analysis same service were to be handled
business savvy to creative ventures. When assessing whether creative locally.
ideas or new commercial
Budgeting partnerships are viable, mini case Royalty accounting
Okonkwo builds budgets in partnership studies can be developed for each Learning about royalty accounting,
with the artists and key stakeholders project to simulate projections for which is often a very small and
PHOTO BY FIONA HANSON/AP IMAGES
from across departments such as “do or do not” decision-making. overlooked part of professional
artists and repertoire (A&R), These case studies include all accounting courses, is important
commercial, and marketing. the details of recoupment, as well for management accountants
Budgets are key to keeping artists’ as any advances and loans to working in creative industries.
expenses in check and are used to make sure that there is full Creating and sharing quarterly
monitor variances from actuals so that transparency from the outset. earnings reports with artists allows
expenses do not stifle an artist who is For example, Okonkwo said that royalty earnings and distribution to
still under recoupment (recovery of an when assessing a potential contract be tracked.
advance paid to them). with a DSP (digital service provider)
24 I FM MAGAZINE I September 20212024. These growth rates are forecast to to end, and that’s the tough part,”
result in consumer streaming revenue Ratnayake said. “One needs to gain a
gains of $69 million in South Africa, $105 detailed understanding of the value and
million in Nigeria, and $22 million in cost drivers of each venture in order to
Kenya over the same period. develop sustainable revenue-sharing
“While physical recorded music has agreements between all parties … and this
been on a dramatic decline over the past is where a skilled finance professional can
ten years, we are now also seeing digital make an immediate and important
downloads going into their own decline,” impact.”
said Charles Stuart, director, technology, At Mavin Records, this is precisely how
media, and telecommunications at PwC Okonkwo and her finance team are
South Africa. “With streaming, there is bringing a formal structure to the “varying
now a far better option for consumers on value of streams across platforms”, which
the table, with access to millions of tracks is highly dependent on multiple factors
at a fraction of the cost of downloads. This including subscription tier and territory.
is the new growth engine for the music “Cost/benefit analysis is always
industry.” employed in deciding for or against
Watson echoed this sentiment and said ventures,” she said. “Whilst some of these
that streaming is now “at an all-time high ideas may look good qualitatively, they
in terms of appetite and business”, with may be a misalignment of our goals at the
Apple’s and Spotify’s recent expansions time, as some of these activities require
across Africa serving as “testimony to the considerable time and resources to scale
value that is being built”. from infancy.”
“Furthermore, entrepreneurs in some In addition to this analysis, Okonkwo
markets are creating local digital service emphasised the importance of working
providers, and international companies are closely with artists and rights holders and
Ifeoma Okonkwo, ACMA,
focusing a lot of their effort on Africa as a educating them around the risks of
CGMA, finance director
growth opportunity for streaming,” he said. elements such as neglecting to sign a split
at Mavin Records,
The continent’s unique digital sheet (a legal contract that stipulates the
emphasises the
evolution has been propelled by the rapid rights holders’ and collaborators’
importance of finance
growth of mobile telephony, whereby percentage financial share on a recording)
expertise and processes.
mobile phones have revolutionised — which makes it difficult to fully account
banking and trade — while ushering in for royalties and the disbursement of
access to previously inaccessible social, revenues.
cultural, and business communities. “I am constantly interfacing with the
“Most of this happened on basic phones artists through various reports of interest very exciting industry to be in right now.”
and feature phones, but the introduction to them, the most important being the For Okonkwo, who has overseen Mavin
of affordable smartphones and growth in Artist Profitability report, which they Records’ expansion into the broader digital
smartphone penetration has created space receive monthly, to see their contribution media sphere, the journey has yielded both
for streaming to grow,” Watson added. “It’s to the organisation’s profitability or personal and professional growth.
the growing infrastructure and organised otherwise,” she added. “It is intriguing to see how many
distribution that will continue to formalise aspects of a creative’s talent can be
the streams and revenue in Africa.” Ripe for innovation explored and monetised, and I am
Although the music industry is rife with constantly blown away by the many new
Understanding the value chain challenges and a degree of disorganisation verticals that can be discovered,” she said.
While the streaming market is showing compared to other industries, Ratnayake “I have also had to appreciate the value of
considerable growth in the continent, highlighted that for skilled management interpreting financial indices and bringing
Ratnayake said that, as with online events accountants, it presents an opportunity to them to life in text that readers of financial
and other virtual formats, there is lots of create new systems and models from reports — who are rarely financial people
work still to be done before streaming can scratch — and in this way, to become one themselves — can understand and
PHOTO BY BABALOLA JOSEPH I. (JINIUS)
become a “fair and profitable” model for all of the principal architects of innovation. appreciate that, indeed, figures speak.” ■
stakeholders. “It’s a sector in which typical ERP
For example, when collecting revenues programmes and existing financial
from advertisements displayed before systems don’t necessarily address the
Jessica Hubbard is a freelance writer
music videos on YouTube, what portion of unique needs of the industry and its
based in France. To comment on this
this advertising revenue must be conceded stakeholders, and that’s why a CGMA
article or to suggest an idea for
to artists, copyright holders, music labels, skillset becomes especially important,” he
another article, contact Oliver Rowe,
producers, etc? explained. “You really have to think on
an FM magazine senior editor, at
“This requires developing an your feet every day, and for professionals
Oliver.Rowe@aicpa-cima.com.
understanding of the value chain from end that like change and evolution, this is a
FM-MAGAZINE.COM September 2021 I FM MAGAZINE I 25You can also read
