As part of Finance Monthly’s brand new fortnightly economy and finance round-up analysis, Adam Chester, Head of Economics & Commercial Banking at Lloyds Bank, provides news and opinions on volatility in the uncertain market and the prospect of a hike in interest rates, both in the UK and the US.
Clearly, the last two weeks have seen political shocks with potentially far-reaching consequences for the UK’s economic outlook.
The aftermath of the General Election has introduced new uncertainty over the implications for Brexit though, so far, financial markets have taken it in their stride.
However, until there is a clearer sense of what the new minority government can achieve, UK financial markets and the pound are likely to be prone to sharp bouts of volatility.
Three wishes
The outlook for the UK’s Bank Rate seems to be changing by the moment.
The surprisingly close June vote on interest rates by Bank of England policymakers saw three of the rate-setting committee back a rise.
Governor Carney seemingly attempted to put a lid on the discussion by stating that now was not the time to raise rates. However, Andy Haldane, the Bank’s Chief Economist, subsequently said he was now close to voting for an interest rate hike.
This is particularly significant as, until now, Haldane was considered to be the arch dove amongst the Bank’s rate setters. Moreover, it is the first sign of a divergence in views between the current permanent Bank employees on the committee.
Up until now it’s only been the so called external members who have voted for a hike. Is that about to change?
Markets certainly think there is something new in the air, as can be seen by the implied probability now put on a 2017 interest rate hike. That has gone up from below 10% just over a week ago to about 50%.
What is most surprising about this sudden shift in expectations is that economic conditions are arguably little changed. Once you also factor in political uncertainty, including the unexpected result of the general election, then on the face of it, the case for staying put seems strong.
But the hawks amongst Bank rate setters had previously indicated that they have limited tolerance for above-target inflation.
Close to the limit
Two factors suggest that the limit may be close to being breached.
First, Kristin Forbes, one of the hawks, has noted in recent research that the effects of an exchange rate generated inflation shock can persist. This questions whether the Bank is right to prioritise domestic pressures.
Second, the eventual impact on wages of what looks to be an increasingly tight labour market remains a concern. The UK unemployment rate is now at its lowest level since the mid-1970s and there are signs that this is having an impact.
On balance, we expect the Bank to keep interest rates on hold for now. Nevertheless, this is a closer call than for some time.
Over the next few weeks, markets will be paying particular attention to any comments from those Bank policymakers who have yet to make their position clear.
It will be an interesting run up to the next policy announcement on 3rd August.
Fed up again
In the US, a quarter-point rise in interest rates was widely expected, and subsequently delivered.
The Federal Reserve also stuck to its previous ‘dot plot’ forecast to raise interest rates, anticipating another quarter-point rise this year, and three more in 2018, with the key policy rate expected to settle around 3.0% in 2019.
In pre-announced plans, the Fed intends to start unwinding its balance sheet. For the moment, it anticipates deflating its asset holdings by $10bn a month from later this year, rising in small increments every three months to $50bn
Despite this, US financial markets may have other ideas – as they continue to pretty much ignore the Fed’s guidance. The markets are only fully priced to one more quarter-point rise by the end of next year.
With signs of more mixed growth emerging recently and a weakening of core inflation, the markets clearly think the Fed has got it wrong.
This misalignment can only last so long. Either the Fed will have to eat humble pie, or the US, and by extension global, bond markets could be in for a much more testing second half.
WILLIAM ACKMAN, Activist Investor and Hedge-Fund Manager
We all want to be financially stable and enjoy a well-funded retirement, and we don't want to throw out our hard earned money on poor investments. But most of us don't know the first thing about finance and investing. Acclaimed value investor William Ackman teaches you what it takes to finance and grow a successful business and how to make sound investments that will grant you to a cash-comfy retirement.
The Floating University
Originally released September 2011.
By Sylvain Thieullent, CEO of Horizon Software
It feels like the financial services are in a constant state of rapid evolution as regulators, leaders, active participants and vendors strive to move the industry forward. For the FinTech sector, this could be a golden age, with every challenge creating an opportunity. If the current trajectory continues, it’s a golden age that could last for some time, says Sylvain Thieullent, CEO of Horizon Software.
The financial services thrive on change. Change drives innovation, and in turn, innovation finds faster, more efficient ways of doing things. Over the last decade, FinTech has become an independent sector in its own right, increasing the pace of innovation across the entire industry.
Competition, regulatory requirements and the calibre of the teams involved are three key elements in the industry’s constant state of flux. An array of secondary factors are also adding to the mix, combining to deliver an impressive level of innovation.
Three primary elements
At every level, the industry is driven by competition. Leadership teams recognise that if they don’t keep bringing prices down, their competitors will quickly find ways to undercut them. While loyalty and relationships will always be very important for the market, price is a major consideration. This creates a constant appetite for quicker, more efficient ways of doing things.
The second element is regulatory expectations. Just as technology is changing what we can do, it is also making it easier to regulate. Trades are being tracked with a level of granularity that would have been inconceivable a decade ago, and because regulations are coming from multiple jurisdictions, institutions are expected to report on different things in different ways (as well as the same things in different ways). Making sure that the regulators are satisfied is a major catalyst for change and innovation.
The third element is the calibre of the people involved in the financial services. The downsizing of the banking industry over the last ten years has meant that a number of highly-skilled and very experienced people have found themselves free to pursue some fascinating ideas. In some cases, they’ve joined FinTech ventures and turned their attention to some of the deeper structural issues in the sector that are perhaps too specialised for major institutions. This is leading to a string of innovative solutions to challenges.
As a result, financial centres around the world are buzzing with new ideas, some of which have the potential to coalesce into very interesting products and services over the next five years.
Changing emphasis
There are also a number of secondary factors in play.
The first of these is a move towards FinTech vendors as hubs of innovation. The rising importance of regulation and compliance has come at the same time as the downsizing of banks. A decade ago, banks could keep all the talent they needed and look in-house whenever they had a conundrum to solve. Now, all but the largest institutions need to look elsewhere.
Until recently one of the tried and tested routes for successful firms to grow was through leading institutions setting up a division, strategy or technology, nurturing it for a few years (while enjoying first-mover advantage) and then setting it free to operate independently, or selling the division for a decent return.
Coupled with the downsizing, this model is likely to become less common over the next few years as fewer financial institutions will have the depth of resource to support it. As a result, there will be more fledgling start-ups looking for support earlier in their development, which could encourage them to be nimbler and more innovative in responding to potentially more risk-averse clients.
Shifting politics
Another ingredient in FinTech’s cauldron of innovation is politics. Brexit could lead to major changes in the global financial markets, and even though London has long enjoyed an enviable position as the world’s centre for many aspects of financial services, the current level of uncertainty could see its primacy eroded. This could be another catalyst that helps some innovative initiatives move forward as businesses reassess their strategies.
Ultimately, irrespective of the choices of the British public and the subsequent political manoeuvring, uncertainty creates opportunity. London has a heritage of financial innovation that spans centuries, but other centres have been keen to challenge its preeminent position for almost as long.
At the same time as Britain enters a period of internal debate and financial institutions look at their positions to ensure that they are ready for a variety of outcomes, the French electorate, for example, has delivered a government with a modernising agenda. The interplay between London and Paris, those most traditional of frenemies, could be a source of innovation and new thinking over the next five years.
Other financial centres will also be clamouring for attention throughout this process. The growing importance and confidence of Australasia and Latin America, as well as the changing outlook in the US, could well create evolutionary pressure to innovate.
These changes are taking place as the importance of physical borders and location are coming to mean less. Financial services are exceptionally international, and regardless of the changes in individual countries, market participants will continue to focus on getting the quickest, most cost-effective solution that most closely matches their risk profile and meets the regulatory requirements of the countries where they are based and their clients are active.
Enhanced flexibility
But innovation means flexibility as institutions are less likely to fall into the trap of building a comprehensive in-house system that only a handful of people know how to keep working. This is not only a vast improvement from an operational perspective, it also means that regulation and compliance requests are far more easily met, and there is a far wider variety of environments in which to test models and strategies.
A further benefit of flexibility comes in the form of market participants and vendors understanding each other better, effectively reducing the risk that a system will be developed that doesn’t quite do what the traders want.
As ever, there’s risk. Some of the initiatives across the world are destined to wither and die because they are not built on sustainable business models. Businesses are going to need to evolve their strategies and possibly their focus to become sustainable. This is a route that many innovative industries follow as they grow to maturity, but institutions need to be aware of what they are exposed.
Incumbent bias
The barriers to entry as a nascent game-changer are very high, which poses yet another challenge. Incumbents have the advantage of existing relationships and proven track-records which will always weigh heavily in their favour.
Regulators are also rightly risk-averse, a stance which again favours market incumbents. With the current regulatory environment going through a process of rapid evolution, there are significant sanctions accompanying non-compliance which could make potential clients more reticent about embracing innovation.
That said, regulatory changes could help level the playing field from a data reporting perspective, again creating the conditions where innovation can thrive. The implementation process could be highly challenging for many organisations, but they could provide a shared foundation that supports innovation in the longer term.
Living in interesting times
The FinTech sector exists to help the financial services innovate and keep moving forward. Even though the last five years have been a golden age for FinTech, it is difficult to predict what the next five will bring.
The array of fascinating challenges ahead, the deep well of expertise, technology that keeps enhancing and regulators that keep changing what’s expected, all suggest that the outlook is positive.
Website: https://www.hsoftware.com/
By Bhupender Singh, CEO of Intelenet Global Services
hupender Singh, CEO of Intelenet Global Services, says AI and automation is already redefining the role of finance executives towards more strategic roles.
Digital technology is revamping business models to help organisations respond to rapidly changing market conditions. This has also impacted the finance and accounting function, where automation and AI is being used to transform business critical functions. The evolution of technology has redefined the role of finance executives from carrying out low-level tasks towards more strategic decision making. Many CFOs and financial executives are progressively turning to next generation tools to manage their workflow efficiency and encourage better governance when it comes to managing their finances.
These tools are designed to purposefully enhance business outcomes whilst meeting all operational business requirements. Bearing this in mind, a business’s accounting system is a vital component to ensuring profits are being maximised. Working from a system which encourages a more integrated and comprehensive overview of a business’s finance can help boost operational efficiency.
Businesses partner with multiple suppliers, vendors and companies to support them deliver their services to customers. Turning away from a culture of late payments and pushing towards invoices being processed on time, will ensure service is well-maintained with supporting partners. This is why, the finance function needs a robust system which bridges the gap across information from both internal and external stakeholders.
Working from a single interface with all the financial data in one place, will extend access to key information amongst finance teams to ensure a more collaborative approach when it comes to planning and forecasting. Consequently, finance executives will be able to map out a business’s strategic financial objectives to make the planning, forecasting and budget processes smoother. This will allow businesses to have a better understanding of their cash flow across different areas. Pushing for more financial transparency allows finance executives to have a more holistic overview of their expenditure.
Automation continues to displace manual work, eliminating the headache from finance executives to undertake repetitive and mundane tasks such as - contract rate disagreement, missing payments and remittance advice to improve productivity. Data-entry and coding are time intensive, and so automation can unlock value for businesses as finance executives are able to redirect their attention towards better insight and growth strategies. Rather than trawling through spreadsheets they are playing a pivotal role in steering the direction of the company.
Accounting errors that affect the balance sheet can also result in hefty fines and retail losses, making it vital to avoid financial and reputational risk. As a business grows and expands, working with multiple partners, it depends on their processers keeping pace with the financial management of ongoing operations. Automation can reduce retail losses by 40% and have in one case recovered £1.7 million as a result of missing/ incorrect documents.
Data Analytics has always been aligned with better understanding of customer needs, shopping habits, and preferences. However, there is also a lot to be said on how this hard data can be used to help executives gain valuable insight to improve performance, identify growth trends, and manage errors. An automated, real-time supply of financial data across different processers, such as invoicing & billing administration, tax filing and payroll processing endorse better governance and compliance across these areas.
There is a lot of emphasis on innovation in the area. However, in order to optimize the full potential of these technologies, requires a high level of digital expertise and skill to process the financial data and streamline the financial management process to enhance the service delivery.
Website: https://www.intelenetglobal.com/
Padmasree Warrior, CEO of electric car company NIO US and former Motorola and Cisco executive, is a force in the technology world. Warrior shares three traits she says are necessary to make it in the tech industry.
Earlier this month, Finance Monthly had the privilege of interviewing the CFO of IBM UK & Ireland (UKI) – Vineet Khurana. Here he discusses his role within the organisation, Brexit implications and offers piece of advice to fledging CFOs.
You have been the CFO of IBM UKI for nearly a year now - what is your favourite thing about your role?
My favourite thing about the role has to be the breadth, reach and influence it offers.
I get to work extremely closely with our Chief Executive and the rest of the leadership team (Sales, Operations, HR, IT, RESO, etc.) not only on all financial matters, but also across a spectrum of other business matters that impact our business - both in the short and long term. As an example, I recently led a piece of work, in partnership with the Corporate Strategy team based at the Headquarters in New York, to re-define our Client coverage strategy in the UK.
As a CFO, I am also presented with opportunities to engage externally with Clients and share with them IBM’s point of view and value proposition, as it relates to Enterprise IT. I personally find this aspect of my role very enjoyable.
What would you say have been IBM UK & Ireland's major achievements in the past twelve months? What has been your involvement, in relation to them?
Our key focus over the last year has been to align ourselves here in the UK & Ireland with IBM’s transformation as a Cloud Platform and a Cognitive Solutions company.
This is absolutely key for us in order to fully leverage and benefit from the breadth of the Cloud-based cognitive offerings that are available. Associated with this, my role as the Finance Leader for UK & Ireland has been to ensure that our resources and investments are (a) prioritized and (b) deployed appropriately in support of this initiative. Of course, we’ve also had to make sure that we have a revised set of operational/performance metrics and reporting capabilities in place.
Finally, as mentioned above, the work we led as a Finance team in regards to re-defining and making our Client Coverage strategy more effective is something I am particularly proud of.
What is the best advice you could share with Fledging CFOs and Finance Directors?
With the role of finance constantly expanding and finance increasingly needing to play a central part in all business decisions, I really don’t think there has been a more exciting time to be a finance professional.
Technological advances are disrupting the status-quo. Companies are utilising technology to transform their business and the way they interact with their clients and employees. This is being done while industry convergence is producing new agile rivals at breakneck speed. With all this change afoot, the role of the CFO needs to change as well.
CFOs need to embrace business strategy in addition to the financial strategy, understand the changing market/client needs in addition to regulatory changes, and deliver business insight in conjunction with data reporting and analysis.
Therefore, my advice is to embrace this change, as it is key to ensure your increased effectiveness in the role and your ability to deliver enhanced value at the leadership table.
In light of the recent triggering of Article 50 - what is your outlook for the future of IBM UK Ireland in next twelve months and beyond?
IBM has been operating in the UK for over 100 years and as such it is an important market in the context of our global business. We have always done and continue to make significant investments here in support of our business and economy. As an example, we recently announced the establishment of four new UK cloud data centres, tripling our UK cloud data centre capability.
In summary, we are making sure that we are well-placed to help our clients as they transform their businesses by improving their competitiveness, as they prepare to exploit new opportunities.
What are the implications and challenges of global Brexit uncertainties faced by CFOs?
I think we all recognise that we are facing an extended period of uncertainty during the exit negotiations. So at this early stage of Brexit, the approach of the CFO should be to understand the potential exposures their organisations could face.
I believe two significant uncertainties centre around import/export of goods and data and the free movement of resources across the continent. The magnitude of these uncertainties will obviously vary by sector and individual organisation. CFOs should look at mapping the relative exposure of their organisations to these elements by carrying out the data analytics work now. This analysis will then allow for quicker action and informed business decisions to be taken, once the negotiations are concluded and changes in regulations are clear.
We’re living in a data rich world. IBM estimates that 90% of the data in the world today has been created in the last two years alone. This means it’s crucial that businesses keep control of their sensitive customer data. Tanmaya Varma, Global Head of Industry Solutions at SugarCRM, illustrates to Finance Monthly the true potential of data use in the financial services sector.
For banks in particular, the safe and efficient storage of data is not just a ‘nice to have’ but a requirement governed by legislation and industry standards. I believe that whether on-premise or in the cloud, banks should strive to capture all their customers’ data together in one place. Why? Because it will empower employees with the right information to give customers the best experience possible.
Bringing together data streams
Perhaps more than any other industry, financial services firm have a huge number of channels to collect customer data from; in-branch, over the phone, via social media platforms. This means they need to have the right data systems in place which can bind together all of their data to build a complete picture of a customer.
The right system needs to bring together front-office data – calls, meetings, leads, opportunities – and back-office data – accounts, transactions, delivery schedules, fulfilment and so on. There is also a need, particularly for capital markets, to have external data integrated, for example LinkedIn data (where did this prospect use to work?) and trading figures.
In terms of where the data is stored, in my experience banks generally choose to keep their customer data in the cloud. No modern business – bank or otherwise – should keep their customer data in siloes, as this immediately breaks a 360-degree view of the customer.
Meeting customer expectations
Today’s customers expect the best experience possible. The instantaneous pace we now live at doesn’t leave much time for patience – so consumers expect an instant response to their demands. This means customer-facing employees need to have easy access to their customers’ background as soon as the interaction begins, if they are to stand a chance of delivering the best possible experience.
Customers need to know that, regardless of the channel, they’ll receive the same level of service and understanding of their needs and expectations. This all amounts to the overall customer experience, which is crucial when customers are faced with so much choice. The threat of losing customers because of bad service is very real. According to Accenture’s UK research, 34% of customers who switched financial providers in 2014 did so because of a poor customer service.
All customer-facing teams (sales, marketing, customer service and so on) therefore need to have the right tools in place. Technology should empower employees in their interactions with customers; giving them all the information they need, when they need it. For example, providing clear information on the customers’ previous interactions (when did they last contact us? What other products do they hold with us?) – to enable a seamless experience which proves to the customer they are valued and understood.
Turning to technology
Looking ahead, AI will become increasingly important for banks when it comes to the customer journey. Many banks are already open to the possibilities of machine learning – and it has to be said, the capabilities of chatbots is becoming very impressive. Swedbank’s web assistant Nina, for example, now has an average of 30,000 conversations per month and can handle more than 350 different customer questions.
But the customer experience depends on both the quality of the data, and how well employees can use it to then bring insight to their interactions. In my opinion, customer-facing employees and technology should work side by side to enrich the customer experience. The role of chatbots, virtual reality, NLP and so on should be to bring efficiencies to business operations, particularly when it comes to automating tasks and processes where humans don’t add value. In fact, a recent report by Accenture found 79% of banking professionals agree that AI will revolutionise the way they gain information from and interact with customers.
If banks rise to the challenge to store and manage all their data together, and their employees are supported with the right training and technology to quickly access customer data and understand – and even pre-empt – their needs, they’ll be on the path to success.
Finance Monthly’s May CFO Insight section looks at the work of Dr Stephan Hardt – the Financial Director of one of Deutsche Telekom's subsidiaries and one of the largest IT service companies in Europe – T-Systems. Here Stephan, who’s been the company’s director of finance since 2012, talks about the finance function at the company, his own role, challenges that ICT providers are faced with and the future of T-Systems and its parent company.
What have been your major achievements since becoming T-Systems’ Director of Finance in 2012? How have your role impacted the company’s performance in the past 4 years?
After my first 100 days, the Finance team began focusing on two major topics: Making sure that the company is profitable and that this profitability is sustainable. Secondly, the Finance team itself required a transformation process to become a high-performing business team, as well as the provisioning of proper finance tools.
The turnaround was achieved by various measures, e.g. restructuring the company to increase its productivity and increasing the transparency on customer projects. Furthermore, we started with a rigor cost management approach, which included the operative business units and the cross-function units like Finance, Human Resources and internal IT. In addition to those measures, the Finance team developed and implemented two tools which were essential for the productivity increase of the business units: A forecast and an order-to-cash tool. Both tools enabled the business units to have access to accurate data to manage their business properly.
Early in 2013, the Finance management team developed and established a performance improvement programme for the Finance team: the HIP (HIgh Performing) team. The main intention of this programme was a mind change throughout the entire team. It was all about collaboration inside and outside of Finance and transforming the team to business partners for the operative business units.
Overall the turnaround for T-Systems has been achieved and the Finance team has been transformed into a lean and efficient cross-function unit which acts as a business partner for the business.
The finance function at T-Systems has spent the last three years investing in a forecasting tool – could you tell us a bit about it?
In 2013 the Finance team implemented a forecast tool that was redesigned accordingly to meet the business requirements of the UK senior management team. The forecast tool is designed in a way that it can be used as a planning tool, as well as a forecasting tool. Its design is based on a data cube which allows business owners to review their business units from various perspectives: It provides a view on the level of the business unit and its cost centres and projects as well as its services/products and finally its customers. In addition, the tool provides a country specific breakdown for international customers. Since the forecast tool was implemented, we recognised a strong reinforcement of the entrepreneurial ownership of the business. Due to the fact that the business owners are responsible for populating the planning and forecast data into the forecast too, the quality of the data has increased significantly. The managers are thinking and acting more and more as entrepreneurs. Finance has moved away from the classic role and common understanding of populating data into reporting tools - it is now acting as a business partner, providing management consultancy to the business by reviewing data. To strengthen and foster the knowledge and financial understanding of the business, the Finance team has built up a Finance Academy which offers the management appropriate training sessions to develop their entrepreneurial ownership.
Currently, the Finance team is working on extending the forecast tool to a rolling 18-month view. This is a further step towards a more anticipating management style. The business owners have to think in mid-term views, instead of being focused strictly on the year-end. We need to move away from being reactive to a more pro-active thinking and acting.
Given the dynamic nature of the sector, what would you say are the biggest challenges that ICT providers are facing in 2017? How are you and T-Systems working towards overcoming them?
ICT providers will be facing various challenges over the next years; not only in 2017. On the one hand, the ICT market is a highly competitive market. The number of competitors has increased significantly the last 5 to 7 years. The picture of the typical classic competitor has changed as well: Who would have thought 10 years ago that companies like Amazon, Microsoft or Google will become new competitors in the ICT market? Furthermore, you see a huge number of start-up companies with a highly specialised service or product portfolio bringing new advanced solutions around cyber security and artificial intelligence to the ICT market.
Secondly, the so-called classic business of an ICT provider is going to change. The number of classic outsourcing deals is diminishing. Companies have started to in-source their former IT departments, rather than outsourcing them. To overcome those challenges, T-Systems has started to invest in new technologies like SAP HANA Cloud, Software-as-a-Service (SaaS), Infrastructure-as-a-service (IaaS), Internet of Things (IoT) and Managed Security Services.
The Finance team itself underwent a reshaping programme which focused on topics like lean and efficient finance processes, near-shoring certain finance and controlling tasks, modern and advanced reporting system and new qualification requirements for the Finance team. Another aspect is moving the Finance team into the new era of digitisation: Using artificial intelligence for the treatment of supplier invoices (accounts payables) and a state-of-the-art dashboard for the (senior) management available on multiple devices like notebooks, tablets or smart phones.
What differentiates T-Systems from its competitors?
In comparison to other ICT providers T-Systems’ big advantage is its capability to provide global ICT services out of one hand: As the IT business unit of Deutsche Telekom Group T-Systems can offer telecommunication services as well as IT services around the globe.
T-Systems’ legacy is based on a strong salient DNA which is made of Telecommunication, Transportation & Logistic and Automotive.
During the last few years, Deutsche Telekom and T-Systems have established global strategic partnerships with numerous leading companies, either in the Telecommunication sector or in the IT sector. One of those strategic partnerships enables T-Systems to provide mobile services or network services around the globe: ngena – the Next Generation Enterprise Network Alliance formed by leading international telecommunication companies offer global network services on shared partner networks; and Freemove – an alliance of top mobile telecommunication providers delivering high-quality international mobile services to multinational customers by synchronising the know-how and capabilities of its members.
Additionally, Deutsche Telekom is paving the way for the next communications standard by building up the next-generation communications standard - 5G.
T-Systems is one of the leading Cloud providers by using new IT factories which meet the highest security standard. That’s why Deutsche Telekom and T-Systems are seen as the most trusted company when it comes to the handling of personal information in comparison to other big IT and TC companies. With its Telecommunication and IT services, T-Systems is also supporting the development of sustainable profitable growth not only for large enterprises, but also for the typical German Mittelstand (mid-market), which represents internationally operating small and medium enterprises.
Last but not least, according to recent research, T-Systems has top marks in multiple categories like SAP HANA Cloud, Software-as-a-Service (SaaS), Infrastructure-as-a-service (IaaS), Internet of Things (IoT) and Managed Security Services.
What lies on the horizon for you and T-Systems in the near future?
For Deutsche Telekom and T-Systems, it’s important to have a strong footprint in the UK. Therefore, one of T-Systems highest priorities is to improve its brand awareness in the British market. Deutsche Telekom has already a good position in the UK, as being the biggest shareholder of BT. Having said that, T-Systems has established several Sales Push Programmes to continuously enlarge its market position in the UK by providing excellent, leading services with Zero Outage. As a Finance Director, it’s part of my responsibility to ensure that the operative business units get the best financial support to enable them to achieve this overarching business target. Therefore, I have taken the personal sponsorship for two Sales Push Programmes: Pushing the Automotive Business and the Data Migration Business in the UK.
Adaptive Insights recently released its global CFO Indicator report, which explores the pace of finance, its impact on agility, and what CFOs need to do to shorten their organisations’ time to decisions. Alarmingly, 77% of CFOs admit that major business decisions have been delayed due to stakeholders not having timely access to data and report significant delays with respect to tasks like reporting and ad hoc analysis.
“Corporate agility requires that organisations plan for multiple outcomes, particularly as economic conditions become increasingly uncertain, turbulent, and competitive,” said Robert. S. Hull, founder and chairman at Adaptive Insights. “CFOs can improve their organisations’ agility by accelerating the speed of scenario planning and analysis. By giving key stakeholders more immediate access to data, finance can dramatically improve decision-making—the key to maximising corporate performance.”
The report warns CFOs that the current pace of finance could threaten corporate agility and provides views on the practices that should be adopted to create a more forward-looking, agile environment.
Key findings in the report show that:
- The finance team is spending over half (53%) of its time on reporting and data gathering alone. This leaves many organisations looking back at history, rather than forecasting forward
- CFOs would like their teams to spend less time on report preparation and data collection (36%) and more time on forecasting and scenario analysis (40%). More and better analysis will lead to improved agility
- CFOs (49%) believe predictive analytics will most contribute to agility, followed closely by dashboards and analytics (45%). CFOs desire to transition away from historical reporting, and toward a more forward-looking approach
The need for speed…in reporting and ad hoc analysis
This quarter’s report reveals that key decisions around such things as capital expenditures, resource allocations, and investments have been delayed because stakeholders don’t have timely access to data. With shrinking product and innovation cycles—not to mention ever-increasing global competition—these delays can mean the difference between the success or failure of the business.
CFOs (47%) report that it is taking 11+ days to get reports into the hands of stakeholders, yet they (56%) would like it to take no more than five days. Ad hoc analysis is also taking longer than desired, as CFOs (60%) say this task takes up to 5 days, yet they would like it to take no more than a day. Reporting and ad hoc analysis represent two key areas that can be improved to enable better agility.
The impact of technology on agility
The desire to move toward a more analytics-driven organisation appears to be impacting CFOs’ decisions when it comes to implementing technology. Dashboards and analytics top the list of future purchases, with 45% of CFOs saying they will invest in this type of solution by 2020, followed closely by budgeting and forecasting tools (40%).
Discouragingly, it appears that most organisations continue to depend on point solutions that do not provide the integrated access to data that SaaS solutions can provide. CFOs report that, on average, only 33% of their organisations’ infrastructure is SaaS today with a desire to get to 60% by 2020.
(Source: Adaptive Insights)
Luke started his career in Sheffield, working as Finance Officer for Sheffield Union before moving to London to work for Tesco PLC. During his time at Tesco, Luke worked in Central Finance with responsibility for weekly management reporting and working capital, before moving to China with Tesco’s property business in Beijing. Luke’s next move was to Thailand, to work on a series of finance and business development projects as part of Tesco’s local subsidiary, Tesco Lotus. In addition to Luke’s financial responsibilities in Bangkok, he also took on the role of deputy project manager for the launch of the first Tesco Extra in Asia. In 2012 Luke left Tesco to join Tough Mudder in the USA. At this point, Tough Mudder was only 18 months old, but it was already reaching revenues of $70m. In 2014 Luke returned to the UK, working in a senior finance role for Marks & Spencer, focusing on Marketing & Strategy, as well as undertaking a secondment with HRH Princes’ Accounting for Sustainability Project. Here he talks to Finance Monthly about the accounting company he co-founded less than a year ago - Tech & the Beancounters.
Tell us about Tech & the Beancounters. What were its beginnings and how did it develop into the company that it is today?
We set up Tech & the Beancounters to make finance simple, professional and accessible for everyone. Coming from an industry where I’d seen so many firms supplying outsourced finance at high cost with junior staff, this meant that many start-ups and SMEs could not afford their services or received a sub-standard service. My co-founders and I wanted to change that.
What have been the company’s top accomplishments thus far?
Our greatest accomplishment to date has been helping a distressed client through a tough period of trading, helping them to win back the confidence of investors and produce a credible financial plan that allowed the firm to raise debt and equity to secure its position as a going concern.
From an internal perspective, a key achievement for me has been the recruitment of our founding team; we have a fantastic Head of Analytics and Head of Business Development, Tech & the Beacounters would not be growing at the rate it is without them.
What are your goals for the future?
Our short-term goals all involve client care and team development. We have experienced rapid growth to date, but we want to ensure we are constantly developing the service clients receive, as well as make sure we are providing value-add analysis and decision making tools that distinguish us from high street accountants.
In the medium term we are focusing on improve the “tech” in Tech & the Beancounters. We are developing our website into a more interactive platform that should include online client accounts. Furthermore, we are using some of the latest reporting software, including Microsoft Power BI to improve our interactive financial reports to give client even greater insight into their businesses.
What challenges would you say you and the firm encounter on a regular basis? How are these resolved?
The most frequent challenge we face as a firm is time pressure. We have been resolute from our founding that our reach does not exceed our grasp, and we are incredibly loyal to our clients. We understand that as we grow, we will need to empower a wider team to take over some of the front-line interactions with clients.
The most frequent challenge we have observed amongst our clients is in forecasting/budgeting: some obsess about plans, some do not plan at all. We have seen several clients de-rail themselves because they cannot decide on a specific budget/business plan or course of action. In response to this, we have developed robust scenario planning tools that complement our budgeting and forecasting models, allowing clients to visualise the different possibilities for their firms and the decisions that will accompany them.
What does the future hold for you and Tech & the Beancounters? Do you have any upcoming plans or projects you would be willing to share with us?
Our focus will always be on sustainable growth – we want happy customers who stay with us for the long-term. We are also developing a new online portal for our clients so they can check their reports and financial information in real-time. There are also a couple of opportunities in China and New York emerging, but I’d like to keep that under my hat for now...
Finance Monthly’s May CFO Insight section looks at the work of Dr Stephan Hardt – the Financial Director of one of Deutsche Telekom's subsidiaries and one of the largest IT service companies in Europe – T-Systems. Here Stephan, who’s been the company’s director of finance since 2012, talks about the finance function at the company, his own role, challenges that ICT providers are faced with and the future of T-Systems and its parent company.
What have been your major achievements since becoming T-Systems’ Director of Finance in 2012? How have your role impacted the company’s performance in the past 4 years?
After my first 100 days, the Finance team began focusing on two major topics: Making sure that the company is profitable and that this profitability is sustainable. Secondly, the Finance team itself required a transformation process to become a high-performing business team, as well as the provisioning of proper finance tools.
The turnaround was achieved by various measures, e.g. restructuring the company to increase its productivity and increasing the transparency on customer projects. Furthermore, we started with a rigor cost management approach, which included the operative business units and the cross-function units like Finance, Human Resources and internal IT. In addition to those measures, the Finance team developed and implemented two tools which were essential for the productivity increase of the business units: A forecast and an order-to-cash tool. Both tools enabled the business units to have access to accurate data to manage their business properly.
Early in 2013, the Finance management team developed and established a performance improvement programme for the Finance team: the HIP (HIgh Performing) team. The main intention of this programme was a mind change throughout the entire team. It was all about collaboration inside and outside of Finance and transforming the team to business partners for the operative business units.
Overall the turnaround for T-Systems has been achieved and the Finance team has been transformed into a lean and efficient cross-function unit which acts as a business partner for the business.
The finance function at T-Systems has spent the last three years investing in a forecasting tool – could you tell us a bit about it?
In 2013 the Finance team implemented a forecast tool that was redesigned accordingly to meet the business requirements of the UK senior management team. The forecast tool is designed in a way that it can be used as a planning tool, as well as a forecasting tool. Its design is based on a data cube which allows business owners to review their business units from various perspectives: It provides a view on the level of the business unit and its cost centres and projects as well as its services/products and finally its customers. In addition, the tool provides a country specific breakdown for international customers. Since the forecast tool was implemented, we recognised a strong reinforcement of the entrepreneurial ownership of the business. Due to the fact that the business owners are responsible for populating the planning and forecast data into the forecast too, the quality of the data has increased significantly. The managers are thinking and acting more and more as entrepreneurs. Finance has moved away from the classic role and common understanding of populating data into reporting tools - it is now acting as a business partner, providing management consultancy to the business by reviewing data. To strengthen and foster the knowledge and financial understanding of the business, the Finance team has built up a Finance Academy which offers the management appropriate training sessions to develop their entrepreneurial ownership.
Currently, the Finance team is working on extending the forecast tool to a rolling 18-month view. This is a further step towards a more anticipating management style. The business owners have to think in mid-term views, instead of being focused strictly on the year-end. We need to move away from being reactive to a more pro-active thinking and acting.
Given the dynamic nature of the sector, what would you say are the biggest challenges that ICT providers are facing in 2017? How are you and T-Systems working towards overcoming them?
ICT providers will be facing various challenges throughout the next years; not only in 2017. On the one hand, the ICT market is a highly competitive market. The number of competitors has increased significantly the last 5 to 7 years. The picture of the typical classic competitor has changed as well: Who would have thought 10 years ago that companies like Amazon, Microsoft or Google will become new competitors in the ICT market? Furthermore, you see a huge number of start-up companies with a highly specialised service or product portfolio bringing new advanced solutions around cyber security and artificial intelligence to the ICT market.
Secondly, the so-called classic business of an ICT provider is going to change. The number of classic outsourcing deals is diminishing. Companies have started to in-source their former IT departments, rather than outsourcing them. To overcome those challenges, T-Systems has started to invest in new technologies like SAP HANA Cloud, Software-as-a-Service (SaaS), Infrastructure-as-a-service (IaaS), Internet of Things (IoT) and Managed Security Services.
The Finance team itself underwent a reshaping programme which focused on topics like lean and efficient finance processes, near-shoring certain finance and controlling tasks, modern and advanced reporting system and new qualification requirements for the Finance team. Another aspect is moving the Finance team into the new era of digitisation: Using artificial intelligence for the treatment of supplier invoices (accounts payables) and a state-of-the-art dashboard for the (senior) management available on multiple devices like notebooks, tablets or smart phones.
What differentiates T-Systems from its competitors?
In comparison to other ICT providers T-Systems’ big advantage is its capability to provide global ICT services out of one hand: As the IT business unit of Deutsche Telekom Group T-Systems can offer telecommunication services as well as IT services around the globe.
T-Systems’ legacy is based on a strong salient DNA which is made of Telecommunication, Transportation & Logistic and Automotive.
During the last few years, Deutsche Telekom and T-Systems have established global strategic partnerships with numerous leading companies, either in the Telecommunication sector or in the IT sector. One of those strategic partnerships enables T-Systems to provide mobile services or network services around the globe: ngena – the Next Generation Enterprise Network Alliance formed by leading international telecommunication companies offer global network services on shared partner networks; and Freemove – an alliance of top mobile telecommunication providers delivering high-quality international mobile services to multinational customers by synchronising the know-how and capabilities of its members.
Additionally, Deutsche Telekom is paving the way for the next communications standard by building up the next-generation communications standard - 5G.
T-Systems is one of the leading Cloud providers by using new IT factories which meet the highest security standard. That’s why Deutsche Telekom and T-Systems are seen as the most trusted company when it comes to the handling of personal information in comparison to other big IT and TC companies. With its Telecommunication and IT services, T-Systems is also supporting the development of sustainable profitable growth not only for large enterprises, but also for the typical German Mittelstand (mid-market), which represents internationally operating small and medium enterprises.
Last but not least, according to recent research, T-Systems has top marks in multiple categories like SAP HANA Cloud, Software-as-a-Service (SaaS), Infrastructure-as-a-service (IaaS), Internet of Things (IoT) and Managed Security Services.
What lies on the horizon for you and T-Systems in the near future?
For Deutsche Telekom and T-Systems, it’s important to have a strong footprint in the UK. Therefore, one of T-Systems highest priorities is to improve its brand awareness in the British market. Deutsche Telekom has already a good position in the UK, as being the biggest shareholder of BT. Having said that, T-Systems has established several Sales Push Programmes to continuously enlarge its market position in the UK by providing excellent, leading services with Zero Outage. As a Finance Director, it’s part of my responsibility to ensure that the operative business units get the best financial support to enable them to achieve this overarching business target. Therefore, I have taken the personal sponsorship for two Sales Push Programmes: Pushing the Automotive Business and the Data Migration Business in the UK.
Graduation is an exciting time but it can also bring high financial expectations that don't always match reality. A competitive job market, lower-than-anticipated income and higher-than-expected costs are just some of the realities facing post-secondary graduates, leaving many with a negative 'grad-itude'.
A TD survey found that the top financial pressures facing recent working post-secondary graduates are desires to become financially independent (52%), to save money so they can live on their own (39%) and concern over re-payment of their student debt (23%). In addition, 60% often felt guilty spending money on things they wanted versus using the money for other financial commitments, such as debt repayment, when they first started working.
"Today's graduates are ambitious and motivated, but the realities of the job market can lead to feelings of financial pressure and guilt when they're unable to afford many of the things they want," said Sue MacDonald, Associate Vice President of Everyday Banking Products at TD Bank Group. "Setting realistic and manageable goals and seeking advice from a trusted source such as a financial advisor is key to tackling new financial realities and starting off on the right financial foot."
One of the biggest challenges for new graduates is the fact that two in five (41%) found that it took up to one year to find a job. Once employed, 41% say they earned less than they had anticipated, with many facing unexpected expenses, such as transportation or commuting (33%), meals (25%) and buying a work-appropriate wardrobe (23%). It's hardly surprising then, that almost half (47%) of recent graduates say they feel anxious or overwhelmed at having to manage their finances on their own.
TD offers the following advice to help graduates reduce stress and still be able to have some fun as they transition to the next phase of life:
Make a plan: What are your short- and long-term financial goals? These can include paying down debt, such as student or personal loans, saving enough money to get a place of your own, or building up a nest egg so you feel financially independent. Decide what's most important to you and build a plan and speak to a financial advisor at your local branch who can help you with a strategy to achieve your goals.
Set and stick to a budget: Living within your means is always important, especially when discovering new financial realities of post-student life. Remember, you'll no longer be eligible for student discounts on things like transit passes, memberships or bank accounts. Setting and sticking to a budget and really asking yourself what is essential – like rent and debt repayment – versus what is a want – like travel or a new car – will help keep you on track. Once your budget is set, remember to track your spending. Money management apps, like the TD MySpend app, can be helpful tools since they help keep TD customers aware of certain types of transactions on eligible TD accounts and credit cards, and also provides notifications of spend transactions in real-time to help stay on budget.
Look for fun ways to save: Now that you're earning an income, it's an ideal time to establish new financial habits to help you save extra money that will help you reach your long term financial goals. When it comes to creative ways to stretch your dollar, below is some food for thought:
- Plan and prep your meals for the week to reduce the temptation of eating out, or try creating your favourite restaurant's dishes at home
- Go for a coffee date instead of dinner or drinks
- Sign up for an old-fashioned library card instead of buying books; most libraries also have apps for digital book rentals
- Fake it till you make it by buying gently used or vintage clothing instead of expensive designer outfits
- Work part-time at a gym or fitness studio in exchange for free classes
- Rent a car only when you need it instead of leasing or buying one
- Keep living like a student and save the rest of your money; if you didn't need the lavish lifestyle before, there's no reason to start it now
Don't try and keep up with others: Everyone's financial reality is different. Avoid trying to keep up with friends or colleagues who may be posting their lavish lifestyles on social media. It's important to know how much discretionary spending you can afford based on your own situation, rather than trying to keep up with everyone else.
(Source: TD Canada Trust)
