CFO FUNCTION 19/8/09. Ambrosini held their 1st CFO function dedicated to addressing issues facing the finance arena. Please see below Caroline Ambrosini and Rose Cummins's speech that was made on the night.
Welcome to you all – and thank you for coming to the 1st of a series of events dedicated to addressing issues facing you in the finance arena.
To kick start proceedings, we thought best to have a quick introduction of the team.We have Lauren, Michelle, Jane, myself and Caroline – and yes, for the record we do not have a policy against male recruiters… females are just better! ;)For those don’t know me, I have been overseas for the past few years recruiting into Singapore, Hong Kong, China and Indonesia (basing myself in both Singapore and Hong Kong).Prior to that I was recruiting finance professionals here in Perth and I’ve been lucky to return home and join Ambrosini in more of a strategic consultant function.We thought tonight, that I might start off by highlighting some of the international or macro-economic issues facing the ‘Modern CFO’.After which, Caroline will outline the key aspects to the role and identify the change that has occurred in recent years and how that will shape your role in the future.A recent report suggests that the average tenure of a CFO now stands at a little over 3 years… when I looked at that I was absolutely staggered, however, I must admit there are only a few of you still in the roles / companies I remember you being in – so I am starting to believe!The corporate collapses of ENRON, WorldCom, HIH, Ansett, OneTel, Harris Scarfe prompted one of the first major changes to the Modern CFO – transparency, internal controls, Sarbanes-Oxley, audit, regulation and compliance became buzz words early in the decade… and despite all your collective praying that they’d disappear, they never did and probably never will!Throw in the mix the March 2009 collapse of Babcock & Brown, ABC Learning, Midas, and even the James Hardie findings and its subsequent accountability issues and it’s clear to me that you guys are feeling the strain and burden!In market and recruitment terms and thinking about the significant forces and economic fluctuations, the period between 2001 and August 2009 has certainly had its ‘ups and downs’.WA has experienced a boom that saw property prices and employment markets at their tightest in recent history, an influx of overseas and interstate talent and an economy that seemed almost limitless.Of course, we remembered the 80’s – “don’t fall into the same trap”, “the boom and bust of WA”, and similar such notions were poised in our consciousness but were easily put aside to focus on our wealth and prosperity.However, since the murmurings in late 2007 of “sub-prime”, the global community has been in a ‘holding pattern’, almost waiting with baited breath for the inevitable to occur.This brings me to my discussion on the international financial & banking markets and the day that ‘moral hazard’ was imposed - the 15th September 2008.This will go down as one of the most fascinating days I have ever experienced, or am ever likely to experience, in my recruitment career.From 8am, sitting in the Hong Kong office, the energy and activity was mind-blowing.From a recruitment stand-point, the word goes out – speak to every single Lehmans employee you can get your hands on and get them over to your clients – NOW.24 hours later the investment banks, fund houses, asset management firms and any other feasible future employer of these poor redundant souls were inundated and helpless against the onslaught of prospective staff.Lehman’s employees were (and some still are) considered some of the most highly sought after, skilled and highly paid professionals in the international banking community.Imagine what that means for the market?Almost overnight ‘talent churn’ was enacted, but this only lasted a week, things moved so quickly that 2 weeks later the finance workforce were almost completely displaced, somewhere in the area of 3,000 people were affected.Largely, these were people removed from their roles in commercial finance, and were replaced by these highly trained and skilled banking sector candidates.Another fascinating event was the solidarity that came from the Human Resources departments of the various banks – as a collective group; they effectively quashed any ‘external agency’ presenting a Lehman’s employee.They demanded every agency from the 16th September, that fee’s payable would only amount to 15% (remarkable in the HK market which generally sits at 25%).Literally 2 days later, the banks then stated that they would not accept any Lehman’s employee from any agency – based on the theory they could get them easily enough on their own.This is still absolutely extraordinary to me the cohesiveness and organisation involved for every human resources department to react so quickly and decisively – I am not sure we would ever see that in Perth?So for us in HK, over-night the market was flooded, unemployment jumped and property prices & occupancy fell.The instant and immediate effect on Hong Kong was astonishing.Literally in the space of a week unemployment spiked and redundancies were swift & ruthless.The indicators were there, and something had to give, you think about Merrill Lynch, Bear Stearns, Freddie Mac, Fanny May – all saved by the Reserve Bank.AIG came along and if someone didn’t act, we could have been far worse off.Henry Paulson will either go down as a hero or a villain… or both! Here in WA and thinking about the economy, I can only wonder what the future holds and what that means for us, and you, as captains of industry.If the housing market and the debt/ lending required to finance that sector created ‘sub prime’, I query the ‘first home buyers’ policy – I think we’ve already seen an artificial market created so the result of this will be very interesting indeed. The good news is, WA’s downturn is shallow, we have a resilient resource sector, we have a relatively robust banking system…. and we have Gorgon!But where does that leave us, here in Perth, and what does it mean for our collective of Senior Finance representatives here this evening.The truth is there is a direct relationship when we consider the positions you hold – CFO’s, Heads of Finance and finance executives, your role and function within your organisations has subtly (or in some cases, not so subtly), changed.You’re faced with your international corporate headquarters handing down revised budgets and cash flow forecasts, you are seen through a micro-scope as any decision you make has a direct link to the performance of the business, and squeezing everything possible out of your revenue generating projects and divisions (or even seeking new ones) has fallen on your shoulders.The competition for a CFO role in Perth has increased immeasurably, think about all those outstanding people who came into the market over the past few years, combine that with the exemplary talent we already had and then, just for good luck, throw in the international CFO’s who are returning to the security of WA.The up-shot of this brings us to our discussion this evening… the challenges facing you in this changing market. CFO NIGHT – AUGUST 19, 2009(CAROLINE AMBROSINI)Good evening to everyone who’s joined us tonight.For those haven’t yet met me, and there’s a few of you here tonight, I’m Caroline Ambrosini, and Ambrosini was founded by myself way back in November 2001 – and hasn’t the world we operate in been through some interesting and memorable events since then.Most notably, and alluded to by Rose, the one we’re all still grappling with, is the crippling effects of the GFC.For our business this began back in November 2008, where almost overnight we had a 38% fall in sales to November, and then a further 48% in the following month.But we’re not alone.We’re reading horror stories everywhere as corporate profit (or more often losses) are announced, and seeing great companies collapse under the strain.It began back with the iconic Wedgewood Group, and most recently here in WA, we saw the collapse of Great Southern.But we’re also seeing more frequent glimmers of hope in these many forms of economic data.Whilst we know that there’s a recovery on the way, we don’t know when, or at what pace.So we’re still not clear if it’s time to switch from survival mode to recovery mode – but if we get it wrong – we risk missing out on the growth that could be ours.Is it 18 months away…….or less?Will it be a fast paced one making it harder to react and take advantage if we’re not prepared?Or will it be a long slow recovery that requires caution in escalating costs at a faster rate than we should?What effect will the significant amounts of idle capacity have on the commodity prices recoveries?Some things we do know, is that Of the 30 big companies that reported results last week – more than half came in better than expected..The ASX is now at its highest level since October last yearThe RBA is saying our recession will be much shallower than previous recessionsOur investment Banks are hiring again, with Deutsche Bank taking on 35 new brokers, analysts and bankers across the group last week.Overseas, Wall ST rallied over the last three weeks, but fell again on Friday last week based on negative retail figuresAnd France and Germany showed economic growth rates of .3% quarter on quarter, pulling their economies out of recessionThe Asian economies are showing clear signs of improvementSo today’s CFO is faced with more uncertainty and risk than ever before.With all these mixed signals, it’s never been more difficult than now to forecast.Few of us, if any, were prepared for the fact that the future could be so dramatically different from the past.And now, with many once-stable macro economic factors now in a state of flux, we need to factor in so many more variables, including access to capital, country specific risks, and structural changes in the industry.In reaction to this, FORECASTING has become something many companies now do over shorter time periods– and more frequently.Some companies are re-forecasting as much as weekly, others monthly.In my business, we’re taking it quarter by quarter at the moment.We’re also spending more time on building scenario analyses into our forecasts.We need to learn from the past, and make sure to incorporate an optimistic, expected, and pessimistic case – and then examine the impact of each on the business’s requirements for capital, cash flow, staffing and any potential risk areas.Another key issue for today’s CFO is the RESTRICTED ACCESS TO CAPITAL, both debt and equity.Our bankers are now totally governed by risk committees, and our equity markets have all but dried up.Banks want more and more information than ever before, and are still saying ‘no’ more than ever before.Which is why we have to be abreast of our capital needs much earlier.And we have to be constantly working on strengthening those networks, and opening up channels to access funds much more often than we ever have.We also need to be focused on POTENTIAL BUSINESS RISKS – and mitigating them, more than ever.Many businesses are using business heads across the group in compiling extensive lists of potential risks to recovery, and then appointing a Chief Risk Officer to investigate and plan for these.This can include risks at the micro level in unstable suppliers, or at a macro level, in terms of the Chinese Recovery being slower than needed to help keep our economy buoyant.But I’ll keep this presentation short, and just quickly touch on some other issues that a CFO shouldget on top of now to ensure companies are prepared for and will prosper in the recovery;We should be analysing where the areas of pressure will be if rapid growth is required – and how quickly we can respond – it’s too late once it’s happeningMaking sure we’ve adjusted our cost base enough for the long term – as we all know, it’s never easier than in a recession to do so – once we move out of it – it gets a lot harder to apply pricing pressure on suppliers and to restructure work forces.It’s critical to be strengthening your position in the market now by re-opening any previous alliance discussions you were having pre-crash.Whilst they may have been put on hold in October November, taking market share in the boom will be much easier if you complete these first…We should get any underperforming businesses ready for divestment now, so that they can be divested into the boom at a prosperous priceAnd we should battle plan as to where we’ll get equity and debt to fund the growth that will come – growth requires capital and you can get left behind if you can’t access it on time.So in a nutshell, today’s CFO is busier than ever, faced with more uncertainty and risk than ever, and also about to faced with the opportunity to make his or her company a key beneficiary of the recovery – are you ready?We’ll now leave the rest of the night to informal discussions. Rose and I will be happy to have any questions as we walk around and share a wine or beer with you.Thank you for coming along to this event from all of us at Ambrosini.
