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It took a while, but many CFOs finally seem to be looking forward—with anticipation, not anxiety. Worries over the currency crisis in Europe and possible slowdowns in China and the U.S. appear to have eased. Moreover, many companies have the means to grow organically and internationally. Little wonder that the latest Global CFO Signals, which provides highlights of recent CFO survey results from Deloitte Touche Tohmatsu Limited member firms, shows improved optimism among CFOs in many of the 16 countries and/or regions reporting.
Driving that optimism is a palpable sense of relief. CFOs’ perceptions of macroeconomic and financial uncertainty in the UK, for example, have dropped to a two-and-a half-year low. But it’s not all good news. In Belgium, a quarter of CFOs do not expect growth there before 2015. And more than half of China’s CFOs expressed doubt about a recovery in U.S. and Europe—although most were confident their own country could meet its annual GDP target.
Still, CFOs may have no choice but to move forward. And given this current window of financial and economic “stability,” CFOs finally have the comfort level to pursue expansionary tactics—as well as the long memories to remind them to remain vigilant.
"Convergence of tax into the wider finance teams and processes means that tax isnt an add-on at the end, it's actually part of the mainstream financial close". Rachel Taylor, Partner, UK Tax Finance Transformation Leader, Deloitte.
"There are a number of dynamics in the changing role of finance that are putting particular pressure on talent management for CFOs.” – Sally Fisher, Partner and People & Programmes Finance Transformation, Deloitte
"To build momentum around finance’s role in creating value comes down to focused interventions in priority areas that are going to drive the most value.” - John Haughey, Partner & UK Finance Advisory Leader, Deloitte
"The big thing that CFOs can do now is to help the organisation look for market share and growth opportunities. A lot of that is about innovation and risk taking, persuading the organisation, despite the mood music that’s here at the moment in the media and elsewhere, that we do need to take risks and that we need to invest capital for the future, and start to grow.” Marcus Boyle, Deloitte EMEA Finance Transformation Leader
The first quarter's Deloitte CFO Survey, published on 16 April 2013, shows a sharp fall in uncertainty and rising optimism and risk appetite among UK corporates.
Key findings
CFO optimism has risen for the third consecutive quarter, taking it above its average for the last five and a half years. Corporate risk appetite is at its third highest level.
Fears of a euro breakup have receded, despite the survey period having coincided with the crisis in Cyprus.
Perceptions of economic and financial uncertainty have fallen to the lowest level since early 2010.
Credit availability is at its highest level in five and a half years.
CFOs' balance sheet policies are becoming less defensive, with less emphasis on cost cutting and cash. Breaking the results down we find that this has been driven by companies with strong overseas exposure which have become markedly more expansionary in the way they run their balance sheets. UK-facing corporates remain in defensive mode.
We are now all using smartphones and tablets to access information, when and where we want in our personal lives. Increasingly, the same smartphones and tablets are starting to make an appearance in the office, as business people no longer want to be restricted to consuming information from a printed report or while using a PC back at their desk.
This shift is causing a headache for Finance as decision makers are now demanding information in real time without the restriction of the month-end timetable, and on the road; in the back of taxis, on trains and at the airport departure gate.
The challenge for the CFO is how to enable access to management information out on the road.
Recent events in Parliament and associated media coverage confirm that businesses operating in the UK need to navigate a new tax landscape. Amid all the noise, the public debate on tax avoidance is leading to some tangible changes. Companies that do not have, and as importantly are not perceived to have, a responsible tax approach can run the risk of losing out on government contracts, losing stakeholders through brand damage or finding themselves out of pocket.
The OECD released a report into base erosion and profit shifting of corporate taxes. There has also been a UK ministerial statement confirming the Government’s intention to put rules in place to ban companies, partnerships and individuals which take part in tax avoidance schemes from being awarded Government contracts. Companies, whether headquartered here or overseas, now find themselves under pressure to publically defend their contribution to society at large at the same time as continuing to deliver value to their customers, investors and others.
How should CFOs prepare? Executives in large organisations that are responsible for the management of taxes need to play a key role in shaping and driving their organisation’s strategic direction and response to public attention. CFOs will need to assess their tax profiles, benchmark their current position to where they want to be and create a roadmap of how they will get there.
CFOs need to be aware of the evolving regulatory environment which can provide companies with opportunity as well as compliance and reporting pressures. For example, the implication of the OECD’s base erosion and profit shifting of corporate taxes may lead to a restructuring requirement affecting more than the just the Tax department.
Are you ready to respond? In considering whether your business is ready to respond to this evolving tax debate, you might want to consider the following questions:
Tax strategy: Is there engagement from the Board/outside Tax around the organisation’s tax strategy? Has the strategy been fully implemented and communicated?
Risk of scrutiny: What is the potential risk of scrutiny of the business, both from the public and from HMRC/other tax authorities? Does your organisation have attributes which could attract attention and are not easily explained by reference to publicly available documents?
Impact of scrutiny: Should your organisation be subject to scrutiny, what might be the financial and other impact of key stakeholders (investors, suppliers, customers etc) withdrawing their support?
Readiness for scrutiny: How ready are you to respond in a controlled and robust manner to scrutiny? Are there clear accountabilities and standards for tax? Do you have controls over key risks associated with your tax position which are periodically monitored? Is there coherent reporting to both internal and external stakeholders?
In this rapidly evolving environment, the key to achieving sustainable tax outcomes is by having a responsible approach.
Towards a responsible future To achieve this outcome CFOs and their teams must be prepared. This includes having an understanding of the public debate and what it would mean for stakeholders through to setting of goals, maintaining the people, process and systems and reporting tax positions clearly and effectively. Benefits that could be evidenced from this forward planning range from tax savings from efficient planning through to managing stakeholder expectations; impacting sales, investments and staff members.
For many companies, tax planning continues to move up the priority list using this as an opportunity to plan for a responsible future.
Rachel Taylor Rachel is a Partner in Tax Management Consulting, specialising in tax technology and the tax aspects of Finance Transformation programmes. One of the key aspects of her work involves business process improvements and reporting enhancements covering corporate and indirect tax reporting, transfer pricing and withholding taxes.
Juggling the demands of shareholders, analysts, bankers and ratings agencies is enough to make even a seasoned CFO cringe. For new CFOs, those demands can be intimidating, if not terrifying. Still, there are lessons CFOs should understand about investor relations (IR) before taking the reins—lessons veteran CFOs should revisit on a regular basis.
Think about the most recent time your business encountered volatility. At those moments, the first things experienced leaders seek out are facts. Because they know that to make informed decisions when it matters most, they need the right information.
But in many organisations, that’s precisely the moment when they start seriously questioning the quality of their information, their ability to interpret the signals coming from that information, and the mechanisms in place for transmitting data-driven insights throughout the organisation.
Whether the problem is outdated, incomplete, or inaccurate information, too much information, not enough, the wrong people getting the right information or vice versa—to name a few familiar challenges—information is at the heart of the issue.
