ECONOMY

The changing role of the CFO

KPMG is organizing today and tomorrow the 5th Chief Financial Officers’ Forum in Athens, aiming to contribute to the development of financial management in Greece. Keynote speaker will be Edward Altman, an authority in the domain of corporate bankruptcy, high-yield bonds, distressed debt and credit risk analysis. He is best known for his Z-score work, the model forecasting bankruptcy risk. This conference, with Kathimerini among its sponsors, is also important due to the timely issues to be developed by experts in financial management, finance and consultancy. It will also feature workshops on issues concerning financial management professionals. One of the most poignant subjects to be discussed is that of compliance, so Kathimerini invited the head of KPMG’s consultancy branch, Nikitas Constantellos, to analyze it. «This is a topic that has multiple and complex dimensions; we have included it in the forum in response to the call by CFOs for discussions and exchanges of views, so as to identify the best practices,» he said. Constantellos refers first to the multiple challenges stemming from the business environment and the legal framework, which financial managers come up against: He mentions the transparency of financial reports, international financial reporting standards (IFRS), the regulations by monitoring authorities and the new informatics systems. «Mergers and acquisitions, the ever-increasing alertness of the investing public and the institutional investors, and the rules of corporate governance, which now are compulsory for listed companies, add more responsibilities on financial managers,» noted Constantellos. Several unfortunate incidents such as the crumbling of Enron have been added, while the increasing requirements of investors for accurate and comparable information have created a series of regulations and clauses. One such case is the Sarbanes-Oxley Act (also known as SOX), the adoption of IFRS and the obligation-compliance with the rules of corporate governance. At the same time, the rapidly changing and competitive business environment imposes an intense mobility by companies trying to improve their financial position. Therefore the financial manager is placed at the center of developments that lead to the improvement of the company’s image, the search for new markets and the creation of new corporate ventures through mergers and acquisitions. More tasks «Until recently the CFO mainly had the responsibility to monitor the financial results and ensure that the financial data published represented the actual position and asset structure of the company,» said Constantellos, describing the role of the financial manager. «He would also place particular emphasis on surveying financial terms and finding funds or cutting expenses,» he said. «Now the financial manager has to continue operating as before, but his role has expanded and he also has to play the part of the entrepreneur, too. He must fulfill the coordinator’s tasks as well,» argued Constantellos. The new duties of CFOs today include «participation in selecting and installing new advanced informatics systems, monitoring the application of SOX regulations across all of the company’s operations, and being able to assess and contain business and operation risks,» he explained. The head of KPMG’s consultancy branch further notes that most companies proceed to the moves required in order to reorganize their operations, because they have to. They consider all these obligations as factors that limit their flexibility. Nevertheless, he considers compliance as «an investment» and the creation of value through it as absolutely feasible. «As in every investment, initially, it is the cost that stands out during the effort for compliance and not the benefit. Yet once the difficult period of adjustment is over, the company can choose and secure many benefits,» he suggested. The application of new specialized informatics systems, such as the Enterprise Resource Planning system (ERP), «after the painstaking process of installing them» help financial managers be better informed while procedures are simplified, therefore reducing the time required and the risk for human errors. Another benefit is that with the application of IFRS in the long term, the processing of Greek books for updating the management accounts is considerably reduced. This facilitates the preparation of financial reporting as IFRS impose more analyses in the appendix. «Of course, with the application of IFRS companies and investors can compare more efficiently the financial figures of companies that may or may not be in the same sector, both in Greece and abroad,» stressed Constantellos. For more information visit www.kpmg.gr.