Stulb reckons that the regulatory pendulum will swing towards stricter enforcement for at least the next three to five years. To prepare for this, what can CFOs learn from the past ten years? The “hype and fear” created by harsh new regulations like Sarbox created an environment in which companies employed armies of auditors and consultants to get “the best level of compliance ever, when all you needed to do was pass,” says Norma O’Callaghan, European CFO of Trend Micro, a Tokyo-based technology company. Having only recently delisted from Nasdaq, the company went through Sarbox compliance, and is currently dealing with its local equivalent (known as J-SOX), while also facing myriad EU laws.
“The question every company needs to ask itself,” O’Callaghan says, “is ‘What is the incremental cost and the incremental value of being over-compliant versus ensuring that you’re just compliant enough?’” For CFOs in today’s ever-changing compliance environment, that means walking a fine line between efficiency and enforcement.
Supply Chain Management:
A CFO Europe poll of finance chiefs in 2004 found that nearly two-thirds of respondents thought they would play a greater role in supply chain management in the future. That future is now.
There once was a time when finance could have got away with taking a bird’s eye view of the supply chain. From that vantage point, CFOs could thump on their desks and demand faster inventory turns, tougher agreements with suppliers or shorter payment terms for customers. But as suppliers, partners and customers now stretch around the globe, CFOs need their finance teams to get to grips with the intricacies — not to mention the risks — of supply chain management.
Just ask Jan van den Belt. When he joined Océ as CFO in 2000, supply chain management at the €3.1 billion Dutch document-management and printer company was relatively straightforward — manufacturing, and to a large extent sourcing, was done in Europe. It made a lot of sense, especially given currency trends at the time. “We had relatively high production costs, but with the currency working to our advantage, we felt our products had such a plus over our competitors’ products that we could afford to be slightly more expensive,” he recalls. “Even though we knew we would not be living off a strong dollar forever, we had this feeling that we could manage it.”
But when the euro began its steady climb against the dollar, Océ decided — “quite late,” the CFO concedes — to shift its manufacturing from the Netherlands to Singapore, Malaysia and, to a lesser extent, eastern Europe, while keeping its German plants for orders requiring heavy customisation. Having started this shift four years ago, 80% of the relocation is now complete, with the rest to come this year.
Manufacturing isn’t all that’s going global. Sourcing, for example, is now also done largely in the Far East — “in countries that I hate to refer to as ‘low cost,’” van den Belt says — while logistics management has been centralised into three regional hubs, rather than being handled country by country, as in the past. Van den Belt’s finance team, meanwhile, is “very much involved” in synchronising these hubs.
Despite various efficiency improvements, however, supply chain management “doesn’t become easier, but totally different. There’s been so many changes that it’s been quite complicated to get to grips with,” he says. But, he adds, get the basics right, “and things should fall into place.”
Tim Burke is senior staff writer, Jason Karaian is deputy editor, Janet Kersnar is editor-in-chief and Eila Rana is senior editor at CFO Europe.