On Edge

What emerging Europe's CFOs know about the downturn that others don't.

“The group CFO now wants to know, ‘Guys, what is happening in your country? From the outside, it’s very unclear,’” says Miklos Dietz, a Budapest-based partner at McKinsey & Company. “Those CFOs who were a little bit under the radar screen have an increased presence at any western group now.”

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That’s good news for CEE CFOs who “know how to turn it to their advantage,” says Dietz. Even so, with increased visibility comes increased accountability, leading to potential tensions between headquarters and divisions.

Indeed, a growing frustration among some local CFOs is that they feel that their “voice isn’t being heard” and that the chance to make on-the-ground decisions is slipping away, with headquarters centralising more decisions as a result of the downturn. More often than not, the key to keeping the confidence of headquarters comes down to one thing: communication. In particular, the timeliness, clarity and accuracy of reports, not only to headquarters, but also to teams on the ground.

Some CFOs find this easier than others. At Henkel, Höger says that the number one mission of his regional finance crew has long been to provide “quick and reliable” information. After all, “the faster you get reliable data, the better the decisions.” Nonetheless, he notes, “in times like this, it’s even more critical that finance is faster, and only if we provide numbers quickly and reliably will we [win the respect] of the business.”

The key to the fast flow of information within finance at Henkel CEE is standardisation. Uniting finance staff on the ground and at regional headquarters is a principle of “one country, one administration, one legal entity.” What’s more, 16 CEE countries are all working from the same ERP platform.

But it’s not just the flow of numbers to group headquarters in Dusseldorf that Höger believes will guide this part of Henkel through the downturn. He’s also mindful of the narrative that accompanies the numbers, especially since the sharp currency depreciations. “Countries are doing much better in local currencies,” he points out. “And that’s something you have to sell to headquarters and locally, to keep the mindset positive that their countries are still doing well.” For this reason, he advocates publishing currency-adjusted reports for the region alongside the requisite consolidated accounts.

Fact-finding Mission

If on-the-ground finance teams need moral support, what is it that their CFOs need from them? A view of future performance that’s “not an illusion and, on the other hand, not an act of panic,” replies Han Kolff, Prague-based CFO for CEE at Danone Baby Nutrition (DBN). This often means challenging local general managers “more than in the past about their growth figures…You can’t do this from Prague for the whole region. There’s too much happening.”

Relatively speaking, the future still looks rosy for the baby food business of Danone, a €15 billion French food company. Globally, DBN’s turnover in 2008 grew 17% year on year, to €2.8 billion, and as for eastern Europe, which accounts for about 15% of total revenue, annual growth was nearly 30%. Although that growth is now slowing, “we’ll be less touched than other industries, given that we’re the last category a mother would want to [cut back] on,” says Kolff.

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