CFO Barometer 2011

CFO Barometer 2011

CSC

A TIME OFOPPORTUNITIES?

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© Copyright CSC 2011. All rights reserved.

Opinions expressed by contributors are their own. Reproduction in whole or in part without written permission is strictly prohibited

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CSC IN TOUCH WITH CURRENT TRENDS

Within the framework of its I.D.E.A.S. programme (Inspiration, Debate, Executive Annual Surveys), CSC carries out a number of “barometers” every year to analyse the trends and outlook for key roles within the boardroom (human resources, finance, IT, procurement, etc.) at the European level. Each of these studies, carried out in cooperation with independent market research institutes (IFOP and TNS Sofres), involves the participation of hundreds of managers from the largest businesses and public administrations in Europe. The results of these studies are presented at high level events, organised in various European cities (Paris, Madrid, Barcelona, Milan, Brussels, Lisbon, etc.), and are also published by partners in the media sector (Les Échos, La Tribune, Challenges, L’Expansion, Liaisons Sociales, Il Sole 24 ORE, and others) and in academia (universities and leading institutes for higher education).

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CFO Barometer 2011


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26. ALEJANDRO ARANDA. Finance Manager, Spain - Weber Shandwick Spain28. DANIEL BACquEROET. Assistant General Manager, Finance and Administration - Brink's France. 30. MICHAEL BERAHA. General Manager - BNY Mellon France32. GIuLIO DELL'AMICO. Partner - McKinsey & Company34. VINCENzO MARAGLIANO. Chief Financial Officer - Elica36. JEAN-PIERRE MELLEN. Chief Financial Officer - Recticel38. TATIANA SIMONELLI. Finance Director - Bristol-Myers Squibb Italy40. FABIO TOMASSINI. Chief Financial Officer - Nuovo Trasporto Viaggiatori 42. HERVÉ VARILLON. Finance, IT and Organisational Manager - Crédit Agricole Leasing and Factoring

46. MARC BENSOuSSAN. Chief Operating Officer, South and West Europe - CSC

CONTENTS

SUMMARY 11 PAGE 9

PAGE 15

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1

3

4

PAGE 25

PAGE 45

RESULTS

TESTIMONIALS

ANALYSIS

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THE CFO BAROMETER IS A SURVEY THAT HAS BEEN CARRIED OUT FOR THE 4TH CONSECUTIVE YEAR BY CSC, IN CONJUNCTION WITH TNS SOFRES. IT IS BASED ON A QUANTITATIVE ANALYSIS OF THE TRENDS AND OUTLOOK FOR FINANCE MANAGERS FROM A SAMPLE GROUP OF LARGE EUROPEAN COMPANIES.

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PROCEDURE AND METHODOLOgY

This fourth edition of the CFO Barometer was produced in conjunction with the leading market research institute TNS Sofres, based on a survey carried out among a sample of finance leaders from European companies with over 1,000 employees. They were questioned about market position, concerns, results, the role of the finance department and information systems.

INTERVIEW METHOD

The survey was carried out by TNS Sofres using the CATI method (Computer Assisted Telephone Interview) between December 2010 and January 2011.

TARgET AND SAMPLINg

Private and semi-public companies

• With a minimum of 1,000 employees• Located in France, Germany, the united Kingdom, Italy, Spain,

Belgium and Portugal.

80 managers were questioned (no detailed criteria were applied regarding activity sector or company size). These managers represent the following target positions:

• Chief financial officer / finance director / finance manager.

The sample was adjusted in order to ensure that it was an accurate representation of European companies from within the target activity sectors with at least 1,000 employees.

CFO BAROMETER A EUROPEAN STUDYA TIME OF OPPORTUNITIES?

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SUMMARY

1CFO BAROMETER 2011


Trends and Outlook for

finance departmentsFINANCE DEPARTMENTS MUST NOW DEVELOP THEIR VISION FOR THE FUTURE, ACTINg AS A gUIDE FOR gENERAL MANAgEMENT IN MAKINg LONg-TERM STRATEgIC DECISIONS, IN ADDITION TO ENSURINg PROFITABILITY AND ADEQUATE RISK MANAgEMENT. THIS CAN BE SEEN FROM THE LATEST CFO BAROMETER, A SURVEY OF FINANCE MANAgERS FROM 80 LARgE EUROPEAN COMPANIES.

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IN CERTAIN SECTORS, ORDER BOOKS ARE ONLY FILLED FOR TWO OR THREE MONTHS COMPARED TO SIX TO TWELVE BEFORE THE CRISIS. CORPORATE CYCLES (R&D, PRODUCTION, SALES, ETC.) HAVE SHORTENED, AND TODAY IT IS THE SHORT TERM THAT DOMINATES THE DECISION MAKINg PROCESS.

A new world has arisen from the disorder of the present and the past. This global upheaval has not been caused by the crisis, however – it served only to reveal and accelerate it. Firstly, we should salute the global economy's tremendous resilience and emerging markets' enormous ability to recover. Having gone up by 4.8% in 2010, the increase in global gDP is expected to reach 4.2% in 2011, even if this growth remains unevenly distributed.

The change that we are experiencing is characterised by two main upheavals. The first shock is the upsurge in digital living and life sciences, which changes human behaviour and reveals radical changes to working, manufacturing and trading methods. The second shock is the transfer of global economic growth from the Atlantic area (uS and Europe) towards the Pacific area (China and India) and the emergence of China as a major power. The influence of emerging markets in the global economy has gone from 25% in 2000 to approximately 40% in 2010 and could represent 60% in 2030.

Not enough has been done, however, to fundamentally correct the imbalances at the source of the crisis in 2008. Economic revival policies certainly avoided a worst case scenario. Nevertheless, China's recurrent surpluses still create a global oversupply problem. The expansionist monetary policy of the united States continues to support commercial imbalances. And the global monetary base has shot up since 2007. This situation means we are confronted by two main challenges. The first challenge concerns the reduction of public debt in developed countries.

The second challenge relates to restoring growth in developed countries. We must devise new sectors of activity, new ranges of goods and services and new areas of technological progress.

BUSINESSES

In almost all sectors of activity, the crisis is being used as a driver for speeding up the necessary transformation, lowering production costs and reviewing old dogmas. In 2009, after the sharp economic slowdown, businesses drastically reduced their costs, working capital requirements and investments, with larger companies taking advantage of favourable loan conditions linked to low interest rates. In 2010, the business activity of large European groups has improved overall, with profits coming closer to their historical levels. Cash reserves testify to the speed with which businesses have adapted to a worsened environment.

This cash has not yet been reinvested, mainly on account of a lack of visibility as regards the economic upturn. Going forward, companies will have to implement a policy of active investment in order to maintain their position in the new competitive landscape, particularly in emerging countries where there is growth. In the background behind the performance of large businesses, however, many SMEs have not yet rebuilt their profits and are still experiencing difficulties. In France, savings only finance two thirds of company investments – a very low level.

FINANCE DEPARTMENTS

Finance managers were previously responsible for ensuring profitability, managing risk and monitoring the administrative processes of the companies they work in. From now on, finance managers must not only ensure the company's continuity, but they must also guarantee its reputation. They are increasingly involved more in forecasting than in reporting. They project themselves into the future so that they can present a broader vision to general management. Three quarters of finance managers claim to spend half of their time or more on the strategic aspects of their role.

CFO BAROMETER2011

SUMMARY

LARGE EuROPEAN COMPANIES HAVE RECOVERED BOTH BY CuTTING INVESTMENTS AND BY DRASTICALLY REDuCING THEIR COSTS AND WORKING CAPITAL REquIREMENTS. THIS RECOVERY HAS BROuGHT PROFITS CLOSE TO THEIR HISTORICAL LEVELS AGAIN, AND GENERATED COMFORTABLE CASH RESERVES.

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THE ACCELERATION OF TIME

The short term dominates our decision making processes, be they economic, financial or political. This cult of the immediate keeps on shortening the time we have for reflection and is accompanied by collective memory loss. Both finance and the company as a whole are feeling the impact of this diktat of the short term.

The crisis played a role in accelerating timelines in all sectors of business activity. Corporate cycles (R&D, production, sales, marketing, etc.) have become even shorter. The timeline is changing the way executives make decisions. Companies must be able to react at any point in time and be capable of immediately reviewing the allocation of their resources. Risks and opportunities on a three-month horizon must be reassessed on a continuous basis in the same way as those over three years.

The crisis has confirmed the fact that managing on the basis of costs and margins alone remains inadequate. While the priority for finance departments in 2009 was to manage company cash flows and to survive, their objective going forward is to project themselves beyond the crisis and take advantage of the upheavals in progress. They must respond to accelerated cycles by more effective management over the short term and by getting more involved in the long-term strategy.

How can the short term be managed while still seizing opportunities over the long term? Executives use a dual reference as regards the time horizon in order to manage a company. There are two management methods adapted to the different company cycles that need to exist in parallel:• In the short term, reactive management aimed at keeping an

eye on risks (which most often appear to be unpredictable) and ensuring that the results are achieved;

• Proactive management in the medium to long term aimed at identifying new opportunities and steering the business while taking operational and financial factors into account.

MANAgINg THE SHORT TERM

The crisis has reinforced the changes that companies are confronted with. Visibility has been sharply reduced. Order books in some sectors are only filled for two to three months compared with six to twelve months before the crisis. Automotive manufacturers, whose business model was for a long time based on long cycles with low volatility, must adapt themselves to short cycle times with severe fluctuations in demand and high volatility in the prices of raw materials. In cosmetics, the accelerated rate of new product launches is allowing revenues to grow more quickly. Bioderma thus succeeded in doubling its revenues since 2004 by increasing the number of new product ranges.

In order to face this challenge, CFOs must be capable of responding to requests for information in real time. They have to rethink and adapt their management and forecasting processes in order to increase responsiveness and make up for the lack of visibility. They need to gain control over all the parameters that are likely to have an impact on planning so they can provide business leaders with the elements required for decision making.

The crisis has forced companies to improve the quality of their management processes and forecasting abilities. Improving the reliability of forecasts is a priority for improvement for 56% of finance managers. Achieving profitability objectives remains a major concern for 64% of them, while 66% of CFOs consider that management control and reporting plays an ever more important part in their daily role.

Finance managers need to have management tools that enable them to make strategic decisions in a very short time period. Organisation 2.0 is a response to the issue of organisational management. It enables information gathering and reporting applications and tools to be connected to collaborative portals, while still meeting the demand for increased analysis, compliance with standards and key performance indicators.

CFOs are expected to be able to respond to requests for information in real time. They have to rethink their management and forecasting processes in order to increase their own responsiveness and make up for the lack of visibility.

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AND TOMORROW…

Actual growth is not achieved by way of excessive public debt but rather through innovation, trade and profit, which remain the only ways of ensuring our development. The global economy has outstanding drivers at its disposal. The entry into the modern world of the middle classes in emerging markets, an increase of almost 3 billion in global population in a few decades, and a wave of exceptional innovation that has only just started to unfurl all mark the beginnings of a cycle of strong growth for a long period.

Some observers note that since 2000, the world has been at the centre of a new economic "super cycle". A super cycle is characterised by increased global growth for at least one generation, strong growth in international trade, rapid urbanisation and investments driven by technological innovation. Global GDP has doubled in ten years and could triple by 2030.

Large Western companies wish to gain access to the middle class markets in emerging markets, whereas companies in these countries are interested in the mature markets of Europe and America. According to experts, the major corporations of emerging markets should have collective revenues of uSD 8 trillion by 2020 compared to uSD 1.3 trillion in 2009. The battle will be over access to resources: raw materials, energy, capital and technology. The rivalry between Western powers and China will intensify in all these areas.

MANAgINg THE LONg TERM

The nature of risk and the regulatory framework have been subject to continuous change for the last two years. Increased currency volatility, skyrocketing raw materials prices, mistrust of banks, difficulties in analysing hedging operations, the emergence of new environmental risks – all of these factors make planning and forecasting activities all the more difficult. A predictive approach is essential to providing future direction for the business going forward.

One of the challenges linked to the economic upturn is the ability to redefine development and investment plans. Finance managers are taking part in strategic decisions and negotiations related to investments, acquisitions, divestments, etc. They have to be highly selective when choosing projects while still ensuring the return on capital employed.

They are now supporting operational personnel and helping them make growth opportunities a reality. They are implementing more decentralised organisations with operational personnel being given more responsibilities. Rhodia is thus giving more responsibility to the managers of its business units.

Gaining control over the time horizon in forecasting activities is a priority for 72% of finance directors. They need to take into account both short-term risks and long-term opportunities. Now more than ever, general management needs clarification on the future and needs to have alternative scenarios available. There is still demand for highly detailed reporting, but this is now accompanied by a search for forecasting tools that will provide a more strategic vision for the company. Société Générale, Biomérieux and Valéo have all revealed strategic 5-year plans. Lastly, some companies are considering implementing processes to identify and monitor risk overall, with simulations that allow developments in financial areas to be forecast in accordance with the associated risks.

IN ADDITION TO MANAgINg OVER THE SHORT TERM, MANAgEMENT FORECASTINg NEEDS TO ALLOW CFOs TO IDENTIFY NEW OPPORTUNITIES SO THAT THEY ARE ABLE TO SUPPORT THE COMPANY'S STRATEgIC DECISION MAKINg AND NEgOTIATIONS RELATED TO INVESTMENTS, ACQUISITIONS, DIVESTMENTS, ETC., BY BEINg HIgHLY SELECTIVE WHEN CHOOSINg PROJECTS, WHILE STILL ENSURINg THE RETURN ON CAPITAL EMPLOYED.

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RESULTS

2CFO BAROMETER 2011


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THE ROLE OF THE CFO

The current period is marked by the end of an unprecedented financial crisis during which finance departments were subjected to major pressures. The CFO Barometer 2011 shows that the role of the finance department has continued to develop compared to 2010. This year, the role of the finance department seems to revolve around compliance with standards and regulations (58%).A total of 54% of respondents also attach more importance to making strategic decisions, while in 2010 the CFO's role consisted mainly of enhancing the spread of a financial mindset among operational personnel.

CHANgES IN THE ROLE OF THE FINANCE DEPARTMENT

Diffusion de la culturefinancière auprèsdes opérationnels

Amélioration de la rentabilité de

l'entreprise

Prise de décisionsstratégiques

Respect des normeset réglementations

33 %

2010

2011

36 %

58 %

42 %

54 %

47 %

51 %49 %

50 %

Compliance with standards and regulations

Making strategic decisions

Improving company profitability

Spreading a financial mindset among operational personnel

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33 %

2010

2011

85 %

94 %

86 %

93 %

84 %88 %

81 % 81 %

NA

68 %

Maîtriser l’horizontemps dans les

exercices deprévision

(budget, BP, PMT)

Améliorer lapertinence des

informations à des fins d’analyse et

de contrôledes risques

Gagner en agilitépour répondre

efficacement auxquestions des

dirigeants

Simplifier lesméthodesd’analyses

et de pilotage

Gagner enautonomiefinancière

33 %

2010

2011

85 %

94 %

86 %

93 %

84 %88 %

81 % 81 %

NA

68 %

Maîtriser l’horizontemps dans les

exercices deprévision

(budget, BP, PMT)

Améliorer lapertinence des

informations à des fins d’analyse et

de contrôledes risques

Gagner en agilitépour répondre

efficacement auxquestions des

dirigeants

Simplifier lesméthodesd’analyses

et de pilotage

Gagner enautonomiefinancière

CFO BAROMETER

CONCERNS OF FINANCE DEPARTMENTS

This year, 94% of CFOs have made improvements in forecasting a priority, in terms of better control of the time horizon. This was already one of the most important factors in 2010, but in 2011, it is positioned above all other improvement actions. Following the crisis that demonstrated the limits of current management modes, CFOs have concentrated on the relevance of the time horizons being examined, and the relevance of information, in order to cope with companies' lack of visibility and effective forecasting.

PRIORITY IMPROVEMENT ACTIONS

Control the time horizon in forecastingactivities(budget, forecast, medium-term plan)

Improve the relevance of information used foranalysis and risk management purposes

Increase agility to respond effectively to questions from management

Simplify methods of analysis and supervision

NA Increase financial autonomy

33 %

2010

2011

83 %

92 %

80 %83 %

73 %

82 %

74 %

NA

Qualité etpertinence des

informations desentrepôts

de données

Développer desoutils d’aide à

la décision

Refonte del’organisationdes structuresdes données(référentiels)

Mettre en placedes outils de pilotage«ouvert» accessible

à l’ensemble descollaborateurs

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CONTROL

According to the majority of CFOs in Europe (59%), dashboards must concentrate more on managing profitability. The relevance of time horizons in management tools is also questioned: 45% of finance managers intend to review the time horizon in order to improve management control.

Just like last year, CFOs are showing strong interest in having greater medium and long-term visibility. In fact, half of the CFOs questioned are more interested in a 3-year horizon, and 56% of them attach greater importance to a 1-year horizon. The short-term horizon (1 to 3 months) on the other hand is considered to be more important by only 37% of those interviewed, while this figure was 49% in 2010.

IMPROVEMENTS IN DASHBOARDS EXPECTED

INTEREST IN THE DIFFERENT TIME HORIZONS BEINg CONTROLLED

33 %

2010

2011

51 %

56 % 55 %

50 %49 %

37 % 36 %

29 %27 %

23 %

Budgetà 1 an

Plan à3 ans

Court terme(1 à 3 mois)

Cycle économiquepropre à

l’entreprise

Exercicefiscal

Top 2 (5+4)

5- Très important

4- Important

3- Moyennement important

2- Peu important

1- Pas du tout important

Coût du risque

Pilotage des marges de main d'œuvre

Horizon de temps

Coût du financement

Mesure de la rentabilité

59 %

54 %

45 %

44 %

43%

Measure of profitability

Financing costs

Time horizon

Managing operational margins

Cost of risk

Top 2 (5+4)

5- Very important

4- Important

3- Medium importance

2- Low importance

1- Not at all important

1-year budget 3-year plan Short term(1 to 3 months)

Company's own economic cycle

Financial year

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2008

2009

2010

2011

Risque de défaillance client

Risque lié au marché financier

Risque opérationnel et fraudes

Risque lié à la sécurité informatique

Risque lié à la réglementation

88 %

93 %91 %

87 %

88 %

96 %

82 %

82 %

85 %85 %

82 %

73 %

NA

NA

78 %

68 %

47 %

76 %

74 %

61 %

CFO BAROMETER

Risk associated with regulations

Risk associated with IT security

Operating risk and fraud

Risk associated with the financial markets

Risk of customer default

GOVERNANCE

Since the crisis, CFOs have kept their important roles in the areas of governance and risk management. The risks associated with IT security (82%) and with regulations (87%) remain the most significant concerns for CFOs in 2011. The risks that have a tendency to surface during crises, i.e. the risk of customer default and the risk associated with the financial markets, no longer figure among CFOs' major concerns in 2011.

SIgNIFICANCE OF RISK

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COMMUNICATION

According to European CFOs, financial communication mainly serves to establish management credibility (90%) and to improve the company's corporate image (93%). Financial communication is becoming more and more comprehensive and integrated into corporate communications. Above and beyond the accounting aspects, it is becoming more concerned with economic and strategic topics, and increasingly resembles financial marketing. Attracting new investors, which was a low priority in previous years, is even less important in 2011 according to the CFOs questioned.

SIgNIFICANCE OF FINANCIAL COMMUNICATION OBJECTIVES

2008

2009

2010

2011Attirer de nouveaux investisseurs

Satisfaire les exigences des investisseurs

Renforcer la visibilité de la stratégie

Asseoir la crédibilité du management

Améliorer l'image institutionnelle de l'entreprise

78 %

87 %

87 %

93 %

87 %

92 %89 %

90 %

83 %

91 %95 %

83 %

71 %

81 %

65 %59 %

35 %

45 %

46 %

26 %

Improving the company's corporate image

Establishing management credibility

Increasing visibility of the strategy

Satisfying demands from investors

Attracting new investors

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CFO BAROMETER

PERFORMANCE OF FINANCIAL MANAGEMENT

Reducing lead times is still the priority for finance managers. However, more emphasis is placed on producing budgets (94%) than on drawing up financial statements (80%). This again confirms the priority given to budget forecasts rather than to historical accounting data. Efficiency in statutory reporting is of increased importance compared with last year for 89% of CFOs – compliance with standards and regulations is still an important point for CFOs in 2011 in this area. Process improvement is also possible thanks to process optimisation initiatives such as Lean Six Sigma. Even if these types of projects are not a priority, their importance is increasing year on year.

There have been some developments in the centralisation of various activities within the accounting and finance roles. According to the CFO Barometer 2011, general accounting (34%) and the production of statutory, fiscal and regulatory reporting (32%) are the functions that will develop the most in shared service centres in the short term. Yet, fewer financial managers want to centralise functions such as IT operations and maintenance and bank accounting than in 2010.

PRIORITY gIVEN TO PROJECTS RATHER THAN PROCESS IMPROVEMENT

DEVELOPMENT OF SSC FUNCTIONS

2009

2010

2011

Réduire le tempsd’élaborationbudgétaire

Gagner en efficacitédans la production

réglementaire

Diminuer lesdélais de

productiondes comptes

Mettre en place unedémarche d’optimisation

des processus de typeLean Six Sigma

69%

86 %

56 %

87 %83%

89 % 89 %

94 %

53 %

79 %80 %

61 %

33 %

2010

2011

28 %

34 %

24 %

32 %

34 %

30 %

27 %26 %

28 %

24 % 23 %23 %

Comptabilitégénérale

(productiondes donnéescomptables)

Productiondes reporting

de typeréglementaire,statutaire et

fiscal

Exploitationet

maintenancedes SI

Comptabilitéfournisseur

Comptabilitébancaire

(rapprochementbancaire)

Comptabilitéclient

Reducing time needed to produce budgets

Generalaccounting (production of accounting data)

Increasing efficiency in statutory reporting

Production of regulatory, statutory, and fiscal reporting

Reducing lead times for drawing up financial statements

Operation and maintenance of IT systems

Bankaccounting (bank reconciliation)

Implementing process optimisation initiatives such as Lean Six Sigma

Supplieraccounting

Customer accounting

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FOCUS ON IT SYSTEMS

The most significant IT systems issues according to the finance managers questioned are integrity (93%), security (90%) and data accessibility (90%).

The investment projects for implementing new IT systems in 2011 are aimed mainly at the quality and relevance of information from data warehouses for 92% of finance managers. The next priority relates to the development of decision support tools. The aim of these projects is to facilitate the decision making process for management and to manage performance.

PRIORITY OF IT ISSUES

PRIORITY PROJECTS FOR IMPLEMENTINg NEW IT SYSTEMS

Top 2 (5+4)

5- Très important

4- Important

3- Moyennement important

2- Peu important

1- Pas du tout importantEvolutions réglementaires

Accessibilité aux données

Sécurité

Intégrité

93 %49 %

44 %4 %

1 %1 %

90 %59 %

31 %6 %

2 %1 %

90 %45 %44 %

9 %0 %1 %

78 %29%

49%17%

5 %1 %

Integrity

Security

Data accessibility

Statutory developments

Top 2 (5+4)

5- Very important

4- Important

3- Medium importance

2- Low importance

1- Not at all important

33 %

2010

2011

83 %

92 %

80 %83 %

73 %

82 %

74 %

NA

Qualité etpertinence des

informations desentrepôts

de données

Développer desoutils d’aide à

la décision

Refonte del’organisationdes structuresdes données(référentiels)

Mettre en placedes outils de pilotage«ouvert» accessible

à l’ensemble descollaborateurs

quality and relevance of information from datawarehouses

Developing decision support tools

Overhaul of the data structure organisation (databases)

Implementing “open” management toolsaccessible to all employees

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CFO BAROMETER

HR ASPECTS

Expert profiles are increasingly in demand within finance departments (according to 45% of CFOs): this is the result of a desire on the part of CFOs to concentrate on high value added roles. Expert profiles that are capable of responding to fast environmental changes contribute the most to value creation and performance improvement. At the same time, the importance of so-called operational roles remains stable.

PROFILES AND SKILLS IN gREATEST DEMAND WITHIN FINANCE DEPARTMENTS

Importance accrue

Importance stable

Importance réduite

Experts(trésoriers, analystes

financiers, experts métiers…)

Productifs(analystes quantitatifs,

comptables…)

Chargés de missions(recrutés pour mener àbien des projets et/ou

coordonner des fonctions)

45 %48 %

4 %

21 %20 %

67 %

54 %

11 %

22 %

Increased importance

Stable importance

Reduced importance

Experts (cash managers, financial analysts, expert roles, etc.)

Operational staff (quantitative analysts, accountants, etc.)

Project managers (recruited to manage projects and/or coordinate functions) (quantitative analysts, accountants, etc.)

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TESTIMONIALS

3CFO BAROMETER 2011


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"OUR CHALLENGES REMAIN THE SAME: GETTING ACCESS TO FINANCING AND MANAGING THE PRESSURE ON LIQUIDITY."

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TESTIMONIALS

ALEJANDRO ARANDA FINANCE MANAGER WEBER SHANDWICK SPAIN

WHAT CHALLENGES WILL THERE BE AND WHAT STRATEGIES WILL COMPANIES IMPLEMENT TO IMPROVE THEIR GROWTH AND STRENGTHEN THEIR MARKET POSITION? INTERVIEW WITH ALEJANDRO ARANDA, FINANCE MANAGER AT THE SPANISH SUBSIDIARY OF ONE OF THE WORLD'S LARGEST PUBLIC RELATIONS COMPANIES.

HOW DO YOU SAFEgUARD THE CONTINUITY OF YOUR ACTIVITIES OVER THE LONg TERM WHILE STILL MANAgINg THE SHORT TERM?

Considering the economic slowdown, which is not conducive to risk taking, I believe that we must remain attentive to short-term opportunities while still drawing lessons from the work carried out during these recent years of the crisis. At Weber Shandwick, we have tried to optimise and maximise available resources so as to guarantee a healthy economic and financial balance. We have also worked on minimising the impact of this unstable economic situation on our business activities and have defined the company strategy for the long term. Today we find ourselves confronted with a double strategic challenge: on the one hand, we have to review our approach to activities by creating new departments and product lines and by involving new professional experts; on the other hand, we need to adapt to new consumption habits, a direct consequence of globalisation and new technologies, so as to meet the new needs of our clients and requisitioners. While we do not intend to abandon our defensive strategies, we still need to recognise that the leaders of tomorrow will be those who have made their balance sheets healthier and have defined coherent growth strategies that allow them to face new market realities more nimbly and flexibly. An ability to adapt to change will thus be a key factor for success in an economic environment marked by strong competition and major instability.

HOW CAN COMPANIES PROTECT THEMSELVES FROM FUTURE CRISES AND STILL gUARANTEE THEIR FINANCIAL INDEPENDENCE?

Several articles support the theory that the main reasons for the economic recession were a financial sector that has run out of steam plus a lack of responsiveness on the part of the financial regulators in taking appropriate corrective measures. At present, our challenges remain the same: getting access to financing and managing the pressure on liquidity. Financial conditions continue to be restrictive and companies

find that they have excessive debt, which forces them to resort to divestment of assets in order to generate liquidity. It seems clear that reform of the Spanish financial system is essential; it is not insignificant that savings banks in this country are restructuring to become private entities, allowing them to remain outside the sphere of influence of the public authorities. We must draw lessons from this turbulent period so that we can know clearly where and how loans are granted.

STAgNATION OF WESTERN MARKETS VERSUS STRONg gROWTH IN EMERgINg MARKETS: HOW SHOULD COMPANIES REACT WHEN FACED WITH THIS NEW ECONOMIC SITUATION?

Over the last few decades, emerging markets have gradually increased their share of the global market to the detriment of developed countries. It is logical that the arrival of new, more competitive economies on the market means that we are confronted with greater sector-based specialisation. Nevertheless, without this representing a threat, the rapid growth of emerging markets creates increased purchasing power there, which improves per capita revenue and will also result in increased internal demand for goods and services. This represents a real opportunity for growth for many companies that wish to adopt a policy of international expansion. Weber Shandwick's presence grows stronger from year to year in these markets, particularly in the Asia-Pacific region and Latin America, and currently represents 10% of the total volume of our global activities.

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"TOWARDS AN ENTREPRENEURIAL ATTITUDE."

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TESTIMONIALS

DANIEL BACQUEROET ASSISTANT GENERAL MANAGER, FINANCE AND ADMINISTRATION BRINK'S FRANCE PRESIDENT ASSOCIATION OF FINANCE MANAGERS AND MANAGEMENT CONTROL (DFCG)

AT BRINK'S, THE FINANCE DEPARTMENT IS NOT SATISFIED WITH JUST SUPPORTING STRATEGY IN THE SHORT AND LONG TERM. IT MUST ALSO CULTIVATE AN ENTREPRENEURIAL SPIRIT IN ORDER TO CONTRIBUTE TO THE DEVELOPMENT OF THE BUSINESS.

HOW IS YOUR BUSINESS EMERgINg FROM THE RECENT TURBULENT PERIOD?

We have the advantage of operating in a niche market: managing the monetary chain for banks and large retailers. For our various lines of business - cash transportation, counting, management of ATMs and also remote surveillance and airport security – the fundamentals have remained good overall. We have however recorded a slight drop in revenue as contract renegotiations have become tougher.

HOW HAVE YOU REACTED TO THESE NEW CONDITIONS?

Faced with the pressure on volume and prices, we have adopted a new pricing approach and have developed new products. Our goal is to ensure end-to-end management of customer needs rather than one-off services. It's a matter of placing ourselves as far upstream as possible in the value chain and getting closer to the customer, to the point of processing currency on the customer's premises. So we’ve put in place a true integration strategy.

AND HOW DO YOU SUPPORT THAT STRATEgY?

We model the scenarios for the launching of new activities. That enables us to anticipate market reactions and to better assess the accounting and financial impact of new products on both us and our clients. In doing so, we gain a better understanding of the activities themselves and increase our proximity to operational staff. For example, we supply them with operational indicators that enable them to evaluate their performance in respect to their goals (revenue, customer satisfaction, etc.) and to take corrective actions.

HOW ARE YOU RESPONDINg TO THE ACCELERATION OF DECISION MAKINg CYCLES?

In order to be very responsive in our action plans, we need to be able to project trends on the basis of an analysis of the past. Our concern is to improve performance measurement, by reinforcing cost monitoring and by implementing instant indicators. To achieve that, we have intensified information gathering in real time (volumes produced, hours worked, etc.) in order to be able to generate projections even before this data is taken up as figures in the income statement.

HAVE THE EXPECTATIONS OF TOP MANAgEMENT CHANgED?

The major expectation concerns not only constant improvement of the performance measurement tools, but also a proven ability to be a source of ideas to support the development of the company. That is achieved first of all by even closer control of financial and operational flows, by the reinforcing of our internal control processes, and by way of increasingly refined analysis. At the same time, we need to develop an entrepreneurial attitude which implies fighting against our natural rigor and caution in order to develop other skills – such as boldness, creativity and vision.

30

"UNDERSTANDINGCUSTOMER NEEDS."

31

TESTIMONIALS

MICHAEL BERAHA GENERAL MANAGER BNY MELLON FRANCE

COMING OUT OF THE CRISIS, THE BANK OF NEW YORK MELLON IS SHOWING POSITIVE RESULTS. MICHAEL BERAHA, THE GENERAL MANAGER OF BNY MELLON FRANCE, EXPLAINS THE BANK'S STRATEGY AND BREAKS DOWN THE ROLE OF THE FINANCE MANAGER.

HOW DO WE RETURN TO gROWTH?

The customer has to be at the centre of our strategy. We didn't suffer too much from the crisis: with uSD 25 trillion of assets under management or administration BNY Mellon is the world number one in this area, and is 8th or 9th in the world for assets under management with uSD 1.1 trillion (as at December 31, 2010), and our revenues are split 3/4 - 1/4 between these two areas of operations. In the united States, we have a triple A financial rating. Today, we're concentrating on the location of our business activities so as to be closer to our customers, and on understanding their needs. Our regions for development are first of all in Europe, then in Asia and Latin America. Seventy-five percent of our revenue comes from the united States: we are aiming for a balance between this and the rest of the world.

HOW CAN THE COMPANY BETTER PREPARE FORMARKET FLUCTUATIONS?

The market situation is an intrinsic part of our strategy. The more markets fluctuate, the more we profit: we like volatility and volume. Their increase is integrated into our business model. If the global financial market does not take off again this year, then we will be able to take advantage of the situation. We have liquidity we can invest wherever seems relevant to us: in Europe in 2010, we acquired Insight Investment, BhF Asset Servicing GmbH and PNC GIS. Each of these transactions allowed us to expand our expertise and get closer to customer needs. These are our guide and knowing where we want to go allows us to benefit from the crisis.

WHAT ARE THE PRIORITIES FOR FINANCE DEPARTMENTS IN THIS UNUSUAL PERIOD?

It's all about showing that there will be a return on investment, and ensuring that financing secured will be used wisely. An important indicator is positive operating leverage: revenue growth must be higher than any growth in costs, even though our operations require much investment; each year a large part of our revenues are spent on IT investment. In addition, the rising cost of capital is something we monitor very closely.

WHAT IS THE ROLE OF THE FINANCE MANAgER?

Apart from their traditional remits (rigour, financial control, regulation, etc.), they direct cash into investments that are going to generate the best positive operating leverage. BNY Mellon's image is a highly reassuring one: the market players who choose us know it’s safe to work with us. Our balance sheet has grown during the crisis because they have invested their liquid assets with us. The CFO's role is central in selecting the investments that will be made. We’re not too adventurous, and it’s precisely that which makes us different and makes us successful.

HOW ARE COMPANIES REACTINg TO THE STAgNATION OF WESTERN ECONOMIES AND STRONg EMERgINg MARKET gROWTH?

For us, Europe is a growth region: it is a market that remains highly fragmented, but is flourishing thanks to structural and regulatory changes. We want to continue setting up activities there, knowing that I already have roughly 10,000 colleagues in Europe, and that together we have managed European customers for over a century! Asia interests us in the longer term: it's a gamble, whilst Europe is a strategy which is at the centre of our hopes and desires, and is where we see new opportunities in the short term.

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"NOWADAYS, THE CFO MUST PLAY THE ROLE OF A PEER IN MAKING STRATEGIC DECISIONS, WITH AN ABILITY NOT ONLY TO INTERPRET THE WEAK SIGNALS COMING FROM THE MARKET BUT ALSO TO REACT PROMPTLY TO EXTERNAL AND INTERNAL FACTORS."

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TESTIMONIALS

GIULIO DELL'AMICO PARTNER McKINSEY & COMPANY

THE ROLE OF THE CFO IS UNDERGOING RADICAL CHANGE TO BECOME A FIGURE THAT CAN COMBINE PLANNING AND ANALYSIS, BUT ALSO ONE THAT IS INCREASINGLY INVOLVED IN STRATEGIC DECISIONS AND ABLE TO CONTRIBUTE DECISIVELY TO THE VALUE CREATION PROCESS OF THE COMPANY.

WHAT CAN THE CFO DO NOWADAYS TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH? WHAT MEASURES HAVE BEEN TAKEN BY YOUR COMPANY TO gET THROUgH THIS DIFFICULT PERIOD?

What is fundamental is the progressive evolution of the role of the CFO. From being a process manager who carefully controls the business, he is turning into a business partner who focuses on planning and analysis, is deeply involved in business decision making and who takes a forward-looking approach in order to become a value partner who brings distinctive competencies to company. Nowadays, the CFO must play the role of a peer in making strategic decisions, with an ability to interpret the weak signals coming from the market and to react promptly to external and internal factors. In addition to the normal functions of the CFO, he/she plays a key role as a value partner regarding:• Active management of the company's asset portfolio: decisions

related to the managing the company’s presence, in terms of geographic location, product range and distribution channels - the determining factors for growing the business. In the last 10 years, the expansion of market presence together with M&A activity represented 95% of the growth generated by a sample of 720 large companies;

• Investor relations and communication, which requires a good understanding of the nature of the company's investors and the management of adequate communication with them;

• Measurement and performance management at a high level of granularity (every single element of performance), which links the metrics of the profit and loss account and cash flow to the allocation of capital employed and thus the creation of value.

WHAT CAN THE CFO DO TO PROTECT THE BUSINESS FROM POSSIBLE FUTURE CRISES AND, AT THE SAME TIME, ENSURE THE COMPANY’S FINANCIAL INDEPENDENCE?

In addition to the actions already mentioned, nowadays it is fundamental to have a proactive approach to risk management, through the identification and the prioritisation of key business risks, the measurement thereof, and the adoption of appropriate measures for mitigating or covering critical events. One must not neglect the importance of strategic planning that takes into account alternative scenarios derived from the trends associated with various macroeconomic variables that are relevant for the business, and identifying for each scenario the various actions to take. Last but not least, it is important to think of and implement stress tests that take into account not only possible changes in the key drivers of the business, but also the occurrence of critical events.

HOW ARE YOU REACTINg TO THE NEW ECONOMIC SITUATION, CHARACTERISED BY THE STAgNATION OF WESTERN MARKETS AND STRONg EMERgINg MARKET gROWTH?

It is important to seek and to achieve growth by leveraging one’s own distinct competences and identifying at a granular level (in terms of geography, product or channel) the opportunities for growth that exist in Western markets. It is also necessary to invest in those high growth markets that prove to be more compatible with the presence and the characteristics of the company, and into which it can more easily export its own distinct competences.

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"THE CFO PLAYS A KEY ROLE IN SPREADING A MINDSET OF PERFORMANCE MEASUREMENT, WHILE AT THE SAME TIME MAINTAINING RIGOROUS COST CONTROL THROUGHOUT THE BUSINESS."

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TESTIMONIALS

VINCENZO MARAGLIANO CHIEF FINANCIAL OFFICER ELICA

IN ORDER TO CONTINUE TO GROW IN A MATURE MARKET, ELICA LEVERAGES ITS CAPABILITIES IN PRODUCT AND PROCESS INNOVATION TO SUPPORT A STRATEGY OF INTERNATIONAL EXPANSION AND HIGHLY SELECTIVE M&A, FURTHER REINFORCING ITS TOP OF THE RANGE POSITIONING.

WHAT CAN A CFO DO TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH?

Personally, I believe that there can be no sustainable business growth without increased attention to asset strength and financial flexibility. In this regard, the CFO plays a key role in spreading a mindset of performance measurement and rigorous cost control. Moreover, the CFO has to steer investments in the core business, while safeguarding financial flexibility and selecting the best opportunities in the M&A market.To overcome the crisis, Elica took numerous governance measures in terms of both the business and finance. In particular, Elica pursued process and product innovations, thus increasing market share in every market segment in which we operate. In addition to this, we achieved very good results in terms of cost management, capex rationalisation, working capital optimisation and financial risk management.

WHAT CAN THE CFO DO TO PROTECT HIS BUSINESS FROM POSSIBLE FUTURE CRISES?

In a mature sector like ours, either the business has the strength and capabilities necessary to grow in a sustainable manner, or it is inexorably destined to fold.


Since 2006, Elica has pursued a path of internationalisation by opening a business unit in Mexico, aimed at serving American markets (both North and South) and by opening a factory in Poland near the production plants of our main OEM clients and Eastern European markets. This trend accelerated over the last two years, during which Elica completed an acquisition in the very high-end segment of kitchen hoods in Germany in 2008, and one in China in September 2010. In May 2010, Elica also signed a joint venture agreement in India. In Germany, the acquisition had as primary goal the development of the sales of Elica brands in the German-speaking markets. The operations carried out in Asia will promote our expansion in markets with the fastest growth rates in the world.

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"EVOLVING TO AN OPTIMAL CAPITAL STRUCTURE, SO WE CAN TAKE ADVANTAGE OF STRUCTURAL MEGATRENDS."

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TESTIMONIALS

JEAN-PIERRE MELLEN CHIEF FINANCIAL OFFICER RECTICEL

IN RECENT YEARS RECTICEL, WHICH MANUFACTURES VARIOUS POLYURETHANE BASED PRODUCTS, HAS FOCUSED PRIMARILY ON THE AUTOMOTIVE SECTOR. IN THE WAKE OF THE ECONOMIC CRISIS AND LOWER MARGINS IN THE SECTOR, THE COMPANY IS NOW CHANGING COURSE. AS OF NOW THE EMPHASIS WILL BE ON NON-CYCLICAL SECTORS WITH STRUCTURAL GROWTH TRENDS, AND NEW NICHE PRODUCTS TAILORED TO CUSTOMER REqUIREMENTS. THE TASK OF CFO JEAN-PIERRE MELLEN IS TO ENSURE THAT THE CAPITAL STRUCTURE AND INTERNAL ALLOCATION OF FINANCIAL RESOURCES SUPPORTS THIS NEW STRATEGY. CASH FLOW OPTIMISATION AND SYNERGIES WILL PLAY A KEY ROLE IN THIS.

HOW IS RECTICEL PLANNINg TO gROW FURTHER IN THE CURRENT ECONOMIC CONTEXT?

In 2010 Recticel changed its strategic direction, moving away from our overdependence on the automotive sector. In future we will focus on four growth areas in which we can take advantage of structural megatrends, thanks to our knowhow and technological capabilities. The first is energy saving. Recticel’s insulation products are an ideal response to the growing awareness of the need to reduce energy consumption. Our bedding activity capitalises upon the trend toward wellness and comfort during sleep. The market for water conservation is also very promising. Water absorbent polyurethane foam is ideally suited for agricultural applications in countries where water is scarce. And lastly, even the automotive sector is a growth area, although one which doesn’t require investment in additional capacity. Our polyurethane films for among others dashboard coatings fit perfectly in the context of continuously reducing the weight of cars – and thus also their fuel consumption. We intend to geographically diversify the insulation and bedding activities, also by way of acquisitions. In addition, we’ll focus on China, which represents significant growth potential for all our activities, and where Recticel has already been present for many years, albeit on a limited scale.

WHAT ROLE DOES THE CFO PLAY IN THESE PLANS?

From the beginning, as CFO I was deeply involved in the development of this strategy. Its success depends on rigorous performance management. The strong emphasis on cash performance was a necessary evolution for Recticel, given our traditionally high debt ratio in the past. Today we examine every investment to determine if it fits with the strategy and offers sufficient financial return. Risk management is also essential. Recticel is driven by a very strong entrepreneurial culture, but the urge to take on new challenges should be accompanied by a thorough understanding and management of risk. As CFO I rely on a well-developed internal control system to manage these things.

SO YOUR FUNCTION IS PRIMARILY ONE OF CONTROL?

Absolutely not! I see myself in the first place as a challenger, a catalyst. As CFO I have the considerable advantage of being above the divisions. And it’s from that perspective that I can stimulate the business managers – for example, to seek synergies – which is also one of the pillars of performance management. When an investment is being considered, it’s also the role of the CFO to ask the right critical questions.

WHAT ARE THE MAIN CHALLENgES FOR RECTICEL IN THE NEARBY FUTURE?

First of all, to cope with continuously increasing raw materials prices, among others by way of synergies, so that we can make the most of economies of scale. In addition, we need to roll out our projects in the area of product development as quickly as possible. The water absorbent foam is a nice example of this. In future we intend to offer even more tailored niche solutions to our industrial customers, but that will only be feasible if we can generate enough volume in the more traditional sectors.

AND MORE SPECIFICALLY, IN FINANCIAL TERMS?

My most important objective is the further optimisation of our capital structure, partially thanks to a less volatile and stronger cash flow. Recticel’s new strategy is focused on growth. Now that we have clearly defined our areas of activity, we need to have the necessary financial room to manoeuvre so we can seize growth opportunities!

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"A CFO CAN AND MUST BE THE CEO'S BUSINESS PARTNER, HELPING HIM IN THE DEVELOPMENT OF STRATEGIES."

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TESTIMONIALS

TATIANA SIMONELLI FINANCE DIRECTOR BRISTOL-MYERS SQUIBB ITALY

BRINGING TOGETHER PHARMA AND BIOTECH BUSINESS SINCE 2007, BRISTOL-MYERS SqUIBB HAS FOCUSED ON A STRONG M&A STRATEGY AND ON A THOROUGH RATIONALISATION OF ITS PRODUCTION NETWORK, BECOMING THE PHARMACEUTICAL COMPANY WITH THE MOST INNOVATIVE PIPELINE, AS RECOGNISED IN THE R&D DIRECTIONS REPORT.

WHAT CAN THE CFO DO NOWADAYS TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH? WHAT MEASURES HAVE BEEN TAKEN BY YOUR COMPANY TO gET THROUgH THIS DIFFICULT PERIOD?

In my opinion, business continuity and growth are not in conflict with each other, but rather must be part of a single holistic strategy.Analysis of the pharmaceutical sector, and specifically the Italian one, shows that it is currently characterised by a fall in growth rates and lower margins, for reasons that are not entirely attributable to the global crisis. In order to meet external market requirements and create a foundation for future success, at the end of 2007, Bristol Myers Squibb (BMS) decided to transform itself into a biopharmaceutical company, by combining the best of the traditional pharma model (strong competence in clinical trials and the approval process, financial solidity, geographic scope and penetration) with the best of the biotech model (innovative research, agile and entrepreneurial culture). Since then, BMS has always operated in a coherent manner, focusing on prescription drugs (leaving aside all the other secondary businesses that it was previously engaged in) and concentrating on the development of innovative molecules for curing serious diseases with a strong social impact. The pipeline has continued to evolve and, as financial analysts have confirmed, it has become one of the most promising in the sector, in the five therapeutic areas in which it competes. In addition, we have pursued a very innovative approach by integrating internal research with a selective acquisition strategy called “String of Pearls”, which has led to ten important acquisitions in less than three years. In addition, the decision to enter into partnerships has allowed the company to reduce the risk of clinical trials and, at the same time, to share the cost of development and marketing, leveraging the competencies acquired from each partner. In short, it’s a win-win approach that optimises return for partners by avoiding extraordinary financial operations (mergers and/or acquisitions), which do not generate immediate value for shareholders, as has been widely demonstrated in various cross-sector analyses.

BMS has also reported excellent financial results thanks to the implementation of initiatives aimed at increasing productivity, by rationalising the production network, focusing on core competences and outsourcing those activities which specialised players can do better than in-house organisations.

WHAT CAN CFOS DO TO PROTECT THEIR BUSINESSES FROM POSSIBLE FUTURE CRISES AND, AT THE SAME TIME, SAFEgUARD THE COMPANY'S FINANCIAL INDEPENDENCE?

There is no panacea, but one can, and indeed must, prepare for the future in the best possible way, making the most of not only products and services, but also of the business and management models.The analysis of success stories illustrates the importance of thinking and acting on a medium-term basis, striking a balance between immediate and future investments, forecasting developments in reference markets. Of course, we don’t have a crystal ball, but there are various types of what-if analyses that can be used to identify possible future scenarios. Occasionally some outcomes may seem absurd and disastrous, but it is necessary to make an effort to understand the underlying rationale. Of course, failure is possible; for this reason, it is fundamental to measure and monitor risk, to have alternative plans, and to have the courage to stop new projects whenever they prove to be inadequate.Through long-term financial forecasts, risk adjusted models, choice management and the development of alternative plans, the CFO can and must be the CEO's business partner, helping him in developing strategies. Added value is created by a thorough knowledge of the business, the company's operational business context and its business partners. Regarding financial independence, there is definitely no guarantee of avoiding possible acquisition by another company. It is also true that companies that are capable of planning their own future and of fully exploiting their potential enjoy good ratings not only from financial analysts, but also from investors. ultimately, I don’t think one should be scared of acquisitions, as they are often nothing more than the recognition of the company’s value, and invariably whoever is buying will integrate the best parts of the acquired company: products, business models, and staff. Excellence is a winning card even in this case!

HOW IS YOUR COMPANY REACTINg TO THE NEW ECONOMIC SITUATION, CHARACTERISED BY THE STAgNATION OF WESTERN MARKETS AND STRONg EMERgINg MARKET gROWTH?

Innovation and excellence are always rewarded. One should not give up when confronted by an unfavourable macroeconomic context. At a global level, even BMS is looking carefully at markets with high growth rates (we operate in China, India and Brazil), developing strategies and deploying adequate resources. In addition, I must insist on the fact that notwithstanding the stagnation of our domestic market, Italy still offers many opportunities!

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"CFOs HAVE A LARGE RANGE OF PRIORITIES. CERTAINLY, THEY MUST BE ABLE TO MAINTAIN A CONSTANT FOCUS ON THE GROWTH DRIVERS OF THE BUSINESS."

41

TESTIMONIALS

FABIO TOMASSINI CHIEF FINANCIAL OFFICER NUOVO TRASPORTO VIAggIATORI

NTV IS THE LEADING ITALIAN PRIVATE OPERATOR ON THE ITALIAN HIGH-SPEED RAIL NETWORK. IT IS ALSO THE FIRST PLAYER TO OPERATE IN A SECTOR OPEN TO COMPETITION. NTV IS A COMPANY BORN OUT OF THE DRIVE TO INNOVATE, IN WHICH STRATEGIC PLANNING IS CONSIDERED TO BE A FUNDAMENTAL COMPANY ASSET.

WHAT CAN THE CFO DO NOWADAYS TO ENSURE BOTH BUSINESS CONTINUITY AND gROWTH?

A great deal of uncertainty surrounds the traditional markets, which are characterised by increased competition and the evolution of major macroeconomic factors, in turn increasingly influenced by new international political balances and the steady rise of emerging markets.In this context, CFOs have to juggle numerous priorities. Certainly, they must be able to maintain a constant focus on the growth drivers that enable the business to generate profit and thus ensure its existence in the marketplace. At the same time, the CFO must participate in formulating corporate strategy, by helping identify business opportunities. Lastly, the CFO must safeguard the long-term continuity of the business by monitoring the conditions in which it operates, and making sure neither internal nor external factors change those conditions in a manner that threatens the company’s existence. The current crisis has had a significant impact on the number of players in the market, and has rewarded the leading companies able to ensure their continuity. These businesses have also been able to capitalise on the opportunities for growth linked to market consolidation. Another significant effect of the crisis was to heighten awareness of the need to closely monitor the evolution of risk factors. This implies being able to develop alternative scenarios that enable the rapid implementation of measures required to safeguard the company’s resources.

WHAT ABOUT NTV?

Nuovo Trasporto Viaggiatori (NTV) is the leading private Italian high-speed rail network. It has several distinctive features, as it is the first player to operate in a sector that is open to competition, in which the liberalisation process is still underway, and it is there thanks to the strong commitment of its shareholders and banks who have provided significant amounts of capital and credit. In this context, the priority of the finance department was to define an efficient financial planning process to ensure the availability of the resources needed to develop the business, and to put in place a management control model that would enable quick corrective action to be taken.The choice of focusing on planning activities implies two major elements: a widespread awareness within the company of the key operational drivers of the business, and the support of top management to ensure the implementation of a structured and objective financial planning process.

WHAT CAN THE CFO DO TO PROTECT HIS BUSINESS FROM POSSIBLE FUTURE CRISES?

Financial resources are increasingly considered to be a real production factor and the corresponding suppliers demand – in addition to an adequate compensation for the risk associated with the project or company – a certain stability and continuity of the business. To ensure business continuity and proper remuneration for risk, it is crucial for the company to focus on pursuing long-term objectives while maintaining sufficient flexibility to enable it to seize opportunities for growth and to withstand volatility and turbulence in the short to medium term. The CFO can help top management define a method to measure value creation in order to reconcile two requirements: firstly, to guarantee the implementation of the right strategic plan in order to achieve long-term goals; and secondly, to be able to react to unexpected events.


NTV is currently operating in a national market and, given the specific nature of its business, its supply markets are not located in the emerging markets such as those collectively called the BRIC countries. I believe that the stagnation of European markets can only be overcome through structural measures at the Eu level.

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"SECURING THE MEANS TO SUPPORT OUR DEVELOPMENT."

43

TESTIMONIALS

HERVÉ VARILLON FINANCE, IT AND ORGANISATIONAL MANAGER CRÉDIT AgRICOLE LEASINg AND FACTORINg

CRÉDIT AGRICOLE LEASING AND FACTORING IS STRENGTHENING ITS RISK MANAGEMENT AND MANAGEMENT CONTROL PROCESSES TO SUPPORT BUSINESS GROWTH

IS A RETURN TO gROWTH AN ADEQUATE INDICATOR OF THE COMPANY'S DURABILITY?

In our two lines of business, leasing and factoring, the recent period has not resulted in a slowdown in activities despite the difficult economic climate and the increased cost of finance. In fact, periods of economic stress are favourable for specialised financing. To manage their short-term cash flow, companies use techniques such as assigning accounts receivable, like factoring, and turn to leasing to finance their investments. For banks, these two products provide greater security in periods of increased risk (credit secured by factoring and ownership of leased goods). As the French leader in these two lines of business we have taken advantage of this economic context and recorded 10% growth in our exposure in 2009. So for us, the question does not apply in quite the same way.

WHAT IS YOUR MAIN CONCERN?

Given the above, our number one problem is not recovery after the crisis, but rather continuing to grow, and thus supporting companies in a time of economic recovery. Our main challenge is thus obtaining the liquidity required to fulfil our role as a financier of the real economy and of investment and working capital requirements of businesses at a reasonable cost. Naturally, we benefit from the strength of the Crédit Agricole group in this area, but the constraints are becoming increasingly severe, particularly in the context of Basel III, both in terms of the availability and cost of this liquidity (which has tripled between the end of 2007 and the end of 2010). Our objective is thus to use our resources as best we can. In other words, to optimise the profitability of our investments and of our products.

WHAT IS YOUR STRATEgY FOR ACHIEVINg THIS?

We are prioritising dynamic management and greater selectivity of our assets and of our resources, capital and liquidity. We do this by way of more detailed analysis of the profitability and financial performance of our lines of business, by territory and by activity – so through ever more efficient management control. We are also strengthening our forecasting and controlling capabilities to ensure our ability to secure refinancing over shorter or longer time horizons. This will enable us to improve our risk management and better prepare ourselves to meet the requirements of Basel III.

WHAT WILL THE RESULT OF THIS BE IN PRACTICE?

In order to be more vigilant and responsive, we have further developed our processes and tools, and will continue to do so with the aim of increasing productivity but above all of improving the quality of our service. In terms of IT systems, this occurs mainly through management in real time, interfaces with external data (databases, web clients, etc.) and enhancements to our data warehouses in order to improve the depth of the databases and the quality of our forecasting. In addition, we have also reinforced our financial communication toward our customers, in cooperation with similar efforts at group level.

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ANALYSIS

4CFO BAROMETER 2011


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"BUSINESSES ARE FACED WITH THE ACCELERATION OF TIMELINES."

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The new world that we see unfolding each day was not caused by the crisis. The crisis only served to reveal and accelerate it. Businesses are in the vanguard of the changes which characterise this new world. The first shock sustained concerns the emergence of digital technologies and life sciences, which herald profound disruptions in our ways of working, producing and interacting. The second shock is related to the shift of the engine for global growth from the Atlantic area towards the Pacific and the emergence of China as an economic superpower. In almost all business sectors, the crisis has been used by businesses in a very relevant manner to accelerate transformations, lower production costs and to re-examine a certain number of old dogmas from every angle.

CONTROLLINg THE TIME HORIZON

In 2009, after the brutal downturn in the global economy, businesses made drastic reductions in their costs, working capital requirements and investments. Larger companies benefited from favourable borrowing conditions with low interest rates. Their priority was to manage their cash flow and to survive. In 2010, the performance of large European groups improved overall. Their profits are close to historical levels and demonstrate an ability to rapidly adapt to a deteriorated environment. For the most part, their cash reserves have not been reinvested because of lack of visibility as regards the economic upturn. However, in the background behind the performance of large businesses, many SMEs have not yet rebuilt their profits and continue to experience difficulties.

We know that short term considerations drive the decision making of our companies, be they political, economic or financial. For a long time already, the operations of businesses have been impacted by a cult of the immediate, which never ceases to reduce our thought horizon. The last CFO Barometer survey conducted by CSC among European finance managers shows that the crisis has contributed to the acceleration of timelines in every business sector. Business cycles, such as those in R&D, production, marketing, sales, etc., have again been shortened. This shifting timeline is also changing the way in which managers make decisions. Businesses must be able to react at any time, to immediately revise the allocation of their resources, to constantly re-evaluate risks and opportunities over a three-month horizon as well as those over a three-year time span. 72% of European finance managers consider mastering the time horizon to be a priority. The question all managers ask themselves is: how best to manage the short term while seizing opportunities in the medium and long term?

MANAgEMENT MODES ADAPTED TO DIFFERENT CYCLES

In order to steer their businesses, managers use a dual reference as regards the time horizon. Two management modes must coexist, adapted to the different cycles of the business. For the short term, a reactive management mode intended to monitor risk and ensure results are achieved. For the medium and long term, a predictive management mode to identity new opportunities and steer the business while taking operational and financial elements into account. From now on, the goal of CFOs is to project themselves beyond the crisis and to be involved in the changes underway. Businesses must respond to the acceleration of cycles with more effective short-term management and deeper involvement in long-term strategy. They must improve the quality of their steering and their ability to anticipate. Firstly, visibility is greatly reduced. In certain sectors, order books are only filled for two to three months compared with six to twelve months in the past. Managers thus need tools that enable them to make strategic decisions in a very short time period. Secondly, the nature of risk and the regulatory framework are constantly changing. Planning and forecasting are thus even more difficult. Yet, an approach based on management forecasting is indispensable in order to give the business a direction for the future.

True growth cannot be achieved by way of excessive public debt but rather by way of innovation, investment, trade and profit, which remain the only means of safeguarding our further development. The global economy has outstanding growth drivers at its disposal. The entry into the modern world of the middle classes in emerging markets; an increase of 3 billion in global population in a few decades; and a wave of exceptional innovation that has only just started to unfurl. All mark the beginnings of a cycle of strong growth for a long period. One of the challenges linked to the upturn is the ability of businesses to redefine their development plans. In order to maintain their position in the new competitive landscape, they will need to implement an active investment policy, especially where there is growth. Their expansion and success are vital for our society.

ANALYSIS

MARC BENSOUSSAN CHIEF OPERATING OFFICER, SOuTH AND WEST EuROPE CSC

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CFO Barometer 2011


Designed and produced by CSC’s South and West Region Marketing & Communications department.© 2011 CSC. All rights reserved.

About CSC

The mission of CSC is to be a global leader in providing technology-enabled business solutions and services.With the broadest range of capabilities, CSC offers clients the solutions they need to manage complexity, focus on core businesses, collaborate with partners and clients and improve operations CSC makes a special point of understanding its clients and provides experts with real-world experience to work with them. CSC is vendor independent, delivering solutions that best meet each client’s unique requirements.

For 50 years, clients in industries and governments worldwide have trusted CSC with their business process and information systems outsourcing, systems integration and consulting needs.

The company trades on the New York Stock Exchange under the symbol “CSC.”

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FranceImmeuble Balzac10, place des Vosges92072 Paris-la Défense Cedex+33 1 55707070

Axe Liberté14, place de la Coupole94227 Charenton+33 1 43 53 57 57

AéropôleBâtiment 5,2e étage5, avenue Albert-Durand31700 Blagnac+33 5 67 69 89 00

Luxembourg12D Impasse DrosbachL-1882 LuxembourgTel: +352.24.83.42.60

PortugalLagoas Park, Edifício 12740-264 Porto Salvo+351 21 00 40 800

ItalyCentro Direzionale MilanofioriStrada 3, Palazzo B120090 Assago (MI)+39 0257775.1

Via Paolo di Dono 7300142 Roma+39 06 515061

Via San Crispino 2835129 Padova+39 049 6983111

Strada Pianezza 28910151 Torino+39 011 4904768

SpainAv. Diagonal, 545 Planta 608029 Barcelona+ 34 93 493 09 00

C/ Pedro Teixeira, 8 - 5ª PlantaEdificio Iberia Mart I28020 Madrid +34 91 555 35 00

CSC Asturias IT Service CenterValle de Tamón, s/n33469 – Avilés+34 985 12 41 01

CSC HEADQUARTERS

The Americas3170 Fairview Park DriveFalls Church, VA. 22042united States+1 703 876 1000

Europe, Middle East,AfricaRoyal PavilionWellesley RoadAldershot,Hampshire Gu11 1Pzunited Kingdom+44 (0)1252 534000

Australia26 Talavera RoadMacquarie Park, NSW 2113Australia+61 (0) 29034 3000

Asia20 Anson Road #11-01 Twenty Anson Singapore 079912 +65 6221 9095

Economy & Finance

CFO Barometer 2011