Rajiv Singh

The Indian CFO is evolving as the bean counters of yore are becoming business partners. With the growing complexity of the business environment, the CFO's role has expanded dramatically, says Praveen Kadle, CFO, Tata Motors

Before 1995, the CFO was more of a financial controller, a glorified accountant who would report on the financial health and well-being of an enterprise. Post-1995 as businesses began to grow and compliance with new statutory requirements began to gain importance, CFOs found themselves getting involved with business plans, strategy formulations, fund raising exercises, enabling robust risk management processes and planning new financial products.

They also played an important role in the induction of IT technology within the organisation, as IT support began to become vital for multi-location / multi-national operations.

Post 2001-02, the CFO was more focused on issues of corporate governance. What was even more exciting, and in a way daunting as well, was the expansion of businesses overseas. The CFO's responsibilities have since multiplied. Tough as it is dealing with regulations in one country, now there were many more and with it came issues of compliance.

Other issues and concerns involved fund raising exercises and efficient tax management across the globe. When M&A activity is involved, financial restructuring, risk management and integration become priority areas on a CFO's agenda.

CFO? And growth?
In today's dynamic environment the CFO must be more proactive than ever before. In companies with international operations, risk profiling of countries, assessing country profitability and ensuring compliance with multiple regulatory environments have become a part of the CFO's roster of duties.

How "cross-functional" does today's CFO need to be? I would say that the CFO needs to understand the nuances of business, be they related to marketing, HR, administration or products. He should be involved with strategy formulation, and it is important that he be well acquainted with many of the functions in an organisation. He certainly needs to understand IT and the nuances of financial derivative products which involve significant complexities.

Yet all this is still a support role within the enterprise. Can the CFO get involved with the growth of business? Not only is that possible, it's happening.

Take for instance, Tata Motors. Here, as with other automotive companies, the manufacturing and selling of vehicles are only two parts of the value chain, which also includes financing, insurance, servicing and warranty. Vehicle financing business captures part of this value chain. At Tata Motors this activity is managed by the CFO, as an extension of the treasury function. We are now creating outlets to provide vehicle finance. These outlets will either be owned by us or be part of a franchise operation.

Tata Motors has dealers in nearly every district in India. Through this extensive dealer network, we will build a good database of the financial worthiness of our customers across the country, which will be valuable information for the entire Group, especially our newly mushrooming retail businesses.

This perspective can also be deployed in our global operations — in South Africa, South Asia, South Korea and the Middle East. In overseas markets, however, we may adopt a partnering strategy.

Individual countries have their own financial regulatory requirements and so we could partner with a local bank. In other cases we could partner with Indian banks which have operations in foreign countries. The State Bank of India, for example, is already present in many African countries, a region that we are looking at with active interest. So, perhaps, we could partner with them.

Accounts!? Ask the computer!
If all this sounds a little breathtaking, don't get carried away. CFOs will continue to be responsible for certain statutory functions. Where growth-oriented functions require the financial manager's insights and expertise, the CFO's role may well get bifurcated into business growth area and the traditional areas of financial control, treasury and compliance.

Should a CFO grow into a business growth role and relinquish his traditional functions? I don't know. But you could think of a future scenario in which technology will automate the traditional accounting and finance processes so much that very little effort may be needed to maintain systems and exercise control.

Two decades back, finance managers were content with managing annual accounts. In 1988 or 1989 we moved to a six-monthly accounting and reporting system, as required by the stock exchange. In 1998 we moved to quarterly accounts. Fifty years down the line the statutory requirement will probably be monthly, and the CEO may need to know his profit and loss account on a daily basis!

Think also of a scenario in which a CFO's role becomes so big that it has to be divided amongst three or four CFOs, especially if in complex businesses. But can you really split the finance function? Maybe not. You may well need a Super CFO, who will preside over the finances and other functions across 50 or 100 countries the organisation is operating in!

Isn't that what has happened to the role of the CEO in a multi-national environment — where a multitude of country managers, or local CEOs report to a supreme chairman or CEO at headquarters? That may well be a portend of things to come for the CFO too…

	Ratan Tata: Vision of the future
	Dr JJ Irani: Towards a new dawn
	Alan Rosling: Business in a borderless world
	Prasad Menon: Rural vistas open out
	Kishor Chaukar: Byte that reality
	S Ramadorai: Keep it simple
	Ravi Kant: Through the windshield
	Raymond Bickson: World Traveller 2015
	Satish Pradhan, S Padmanabhan, Dr Sangram Tambe, Yogi Sriram: The workplace of the future

Uploaded on August 28, 2006