The 2nd edition of the Future CFO programme focused on the role of finance in strategic management and enhancing creativity and innovation to stoke the entrepreneurial mindset.
CFO-India, in partnership with ACCA, organised the 2nd edition of the Future CFO programme at the Westin Hotel, Gurgaon on 12 October. Aiming to groom finance professionals as potential CFOs, the session focused on the role of finance in strategic management and enhancing creativity and innovation to stoke the entrepreneurial mindset.
Seema Menon, AVP, 9.9 Media, provided the introductory note, following which Rahul Puri, Head-Employer Relations, ACCA, spoke briefly about ACCA’s initiatives. This was followed by the four sessions of the programme, which have been summarised below:
Financial management with reference to the Black-Scholes formula
Shekar Jayan, ACCA member and tutor, conducted the first session. It was on financial management based on an understanding of the Black-Scholes formula used for valuation of call and put options, accounting for factors such as share price, exercise price, time to expiry of the option, market volatility and prevailing interest rates. He discussed the underlying assumptions, applications and limitations of the formula. But the key takeaway was the usage of real options in investment analysis.
Mr Jayan began with a brief explanation of what call and put options are and how these are determined by the underlying and exercise prices of shares. He showed that theoretically options can generate unlimited profits because profit is the value of call option minus the premium paid (profit = value of call option - the premium paid). Despite this, 95% of the derivatives trade is based on speculation as against robust risk management.
Call and put options increase in value when the underlying price becomes more volatile. Due to fluctuations in the market, the holder of an option is frequently in and out of the money. So, chances of being in the money are higher during volatility. Options also benefit from increase in time to expiration. This is because with time it is highly likely that the share price will move towards the exercise price.
The Black-Scholes method can also be implemented in a real-world scenario, as real-world options go beyond static NPV analyses and provide companies the choice to go through with a project or stop if profitability isn’t ensured. These real options are the option to expand a project, delay it, redeploy resources used in the project or withdraw from it completely. The bottom line is that the session was lucid and pithy, with options simplified and dissected for everyone’s purpose.
Finance leader as the architect of an organisation’s strategic planning
In the next session, participants engaged with four CFOs in a panel discussion. The discussion centred on how to position the finance leader or functions as the architect of an organisation’s strategic planning activity and leverage process ownership to drive better strategic planning and business results. The discussions were led by Anup Vikal, ex-CFO & General Counsel, Snapdeal; Sugata Sircar, CFO, Schneider Electric; Sonali Gupta, Strategic Programmes Head, Ericsson; and Chetan Hans, Director, Grant Thornton India. Kush Ahuja, Business Relations Head, ACCA, was the moderator.
On the unique role of the CFO and its importance, Sugata Sircar said that the CFO has the overall view of the business and value proposition of a company and the path that the company is taking or should take is as clear to the CFO as it is to the CEO; at least, this is desired. Anup Vikal concurred and said that the CFO has to manage and coordinate with all the stakeholders. The CFO must address all organizational imperatives and the books that he/she keeps must be integrated with all the systems. Sonali Gupta summed this up by saying that the CFO provides the bigger picture and connects the dots in an organization.
Sugata Sircar and Anup Vikal felt that it’s critical for CFOs to stay abreast of technology and look at how new technology can be incorporated in financial functions, while being mindful of the associated risks. Both current and aspiring CFOs also must build very good communication skills because it was their job to communicate the statistical jargon in easily understandable/palatable language for all stakeholders. Chetan Hans stressed on the need for skills and knowledge associated with the profession, as these provide the knowhow and confidence for problem-solving and crisis-management. Anup Vikal agreed and said that it’s also important to love the job, which more than anything else provides the drive to keep learning.
Finally, the aspiring CFO must be the go-to man of the company by being a chief solutions officer of sorts. He must understand technology very well because it will inevitably change businesses and markets. He must understand the industry and network with other CFOs to truly understand the nature of his profession. And he/she must be flexible enough to incorporate other ideas and have the foresight enough to anticipate change.
Business simulation programme
After two intense sessions, there was a breather in the form of a business simulation activity conducted by d’frens, which used experiential learning to accelerate and integrate leadership, business acumen and strategy execution. The participants formed teams and built their own unique version of the Rube Goldberg machine, which was a means to learning the value of trust, understanding, respect and cooperation in an organizational set-up while meeting goals and solving problems.
Creativity fostering change and ensuring survival
The final, and equally important, session was about creativity as a crucial factor determining the success and survival of oganisations. Conducting the session, T D Chandrashekhar, Chief Innovation Officer, Bennet Coleman & Company, differentiated between running a company and ensuring it changes with times. Unfortunately, most companies and people within them are either unaware of how to change or don’t have the incentive to do so. He cited the examples of successful companies like Amazon, Microsoft and Apple that have thrived on innovation, creativity and anticipating change. Unfortunately, these qualities are missing in Indian companies, as they are going about business as usual without any thought of staying ahead of the curve.
Of course, it’s easier said than done, as companies must think long-term, take risks and have visionaries that anticipate the future. This is where the idea of creativity makes its mark. Mr Chandrashekhar delineated what creativity was, while clearing many of the associated misconceptions. Creativity is not an article to be carried around with us, which can be beckoned at will to do our bidding. Creative processes often take time and creative ideas arrive like the proverbial flash of genius. As a corollary, this also involves experimentation and taking risks. But companies, especially that are old, are averse to change and taking risks; they also don’t have the luxury of time to meditate upon ideas. Unfortunately, the pace of change today will lead to the demise of many companies that are caught in a rut as far as innovation and creativity are concerned. This is where all leaders, CFOs and CEOs alike, must value creative employees and provide them the enabling environment to come up with ideas that can be disruptive. The session perfectly tied up with and was a good reference to the earlier three sessions as it emphasized that leadership is about managing change, making changes and also nurturing those who are the agents of positive change.