New York

Most CFOs of 265 large U.S.-based corporations indicate that, while accounting scandals and the recession are driving the transformation of financial departments, their departments may not be able to meet the challenge. Inadequate processes, legacy information technology, insufficient skills sets, and the need to build senior management support are the key issues that need to be addressed, according to a Cap Gemini Ernst & Young study entitled CFOs: Driving Finance Transformation for the 21st Century.

The survey also included 31 responses from the CFOs of 19 energy and utility companies.

While 81 percent of the CFOs agreed that accurate revenue and earnings forecasting is either a "high or the highest priority" in the present business climate, and 93 percent believe they are complying with all external reporting requirements, 63 percent indicated they are saddled with inadequate budgeting, forecasting and decision support IT systems.

"Today's CFO needs to provide senior executives with insightful financial and operational information-the tools that can help them make effective decisions and defy current economic volatility," said Rich de Moll, vice president in the finance and employee transformation practice at Cap Gemini Ernst & Young.

"CFOs also need to build CEO and board support for a transformation blueprint that will enable finance to adapt to immediate and future demands," he added.

General findings

The survey stated that, according to CFOs, the roadblocks to change are near-term pressures such as the need to navigate a weak economy, increased scrutiny of accounting practices and reporting, greater demand for actionable information, and demand for an almost immediate positive return on investment.

Many financial executives feel challenged to do much more with much less, the survey concluded.

The survey's findings included:

• Accounting scandals and recession drive focus on reporting accuracy. Fifty-eight percent of CFOs cited financial reporting transparency as a priority. CFOs believe they are following the external reporting process as defined today, and that they are not perpetrating an Enron- or WorldCom-type accounting fraud. They do, however, recognize the need to provide more transparency detail and accuracy.
  
  
• CFOs are committed to long-term company growth, but doubt finance's ability to meet the challenge. Sixty percent of those polled cited their role in the development of corporate strategy as a priority. Senior finance executives report they are personally involved in strategic activities; however, only 25 percent say the rest of the organization views finance as a value-added function to be consulted on all important decisions. Similarly, only 39 percent are very satisfied that finance consistently influences the decisions that drive shareholder value.
  
  
• Finance remains bogged down by transaction processing. Increased financial reporting demands aside, too much of finance's time (39 percent, on average) is still spent on transaction processing, according to the survey. Over the next three years, a large majority of CFOs are committed to shared services and/or partial outsourcing to accomplish a reduction to 27 percent of time allocated to transaction processing.

Energy specific findings

Four key survey findings for the energy, utility and chemical companies (EUC) area included:

• EUC leads a cross-industry group in understanding the need for internal and external transparency to support shareholder value. Currently, only 38 percent of EUC respondents had fully-integrated enterprise resource planning (ERP) financial systems in place while over 90 percent plan to have them within the next three years.
  
  
• EUC respondents have more confidence in their ability to manage all types of risk-credit, data and physical security. Opportunity: This may be a service that EUC organizations can "sell" both inside and outside the industry.
  
  
• EUC lags behind a cross-industry group in its priority on the capability to segment profitability by customer, product, channel or other dimensions. Opportunity: Finance organizations should develop capabilities to optimize the top line through revenue and profit segmentation.
  
  
• The two biggest challenges facing EUC respondents in transforming their finance organizations are developing the right personnel skills and aligning measurement and compensation with transformation goals. Opportunity: Finance organizations need to explore both ways to leverage both internal and external resources to obtain the skill set desired.

More information about the report can be found at Cap Gemini Ernst & Young's Web site: www.cgey.com/transformfinance.