This article was first published in the July 2012 Malaysia edition of Accounting and Business magazine.
‘This particular theme looks at how CFOs and business leaders are changing finance to drive operational excellence and make finance a strategic partner to the business,’ remarked ACCA chief executive Helen Brand, who singled out shared services and outsourcing (SSO) as a means to change finance. ‘The true prize of successful finance transformation is to unlock value, improve shareholders’ return and create competitive advantage.’
A highlight was the exchange of a memorandum of understanding (MoU) between ACCA and the Multimedia Development Corporation (MDeC). The MoU aims to raise the profile of Malaysia as the preferred destination for finance and accounting shared services and outsourcing (SSO) centres. Both parties will collaborate to enrich talent and develop the Malaysian accountancy profession to meet the growth of the SSO sector. According to Brand, Malaysia’s position as one of the ‘fastest-rising destinations of choice’ for finance SSO will create ‘a surge of demand for accounting and finance professionals in the country’.
In her keynote address, Ng Wan Peng, chief operating officer of MDeC, said that the finance and accounting (F&A) shared services market in Malaysia is expected to grow from US$537.78m in 2011 to US$997.39m in 2016 with a compound annual growth rate (CAGR) of 13.1% over the forecast period. Malaysia’s market share for F&A shared services is expected to grow from 5% in 2011 to 7% in 2016, making it one of the fastest-growing markets in the Asia Pacific region.
ACCA also launched its latest report on SSO – Finance Leaders on Sourcing Success – at the summit. Conducted for ACCA by HfS Research, the report gauges the views of finance leaders from Ernst & Young, KPMG, General Electric and Sony among others. While the report sees greater opportunities to drive improved business results, there are a number of challenges which must be overcome to unlock future value, said Brand, including capability shortfalls, misalignment between service providers and clients, and cultural differences.
The challenge of talent
Talent is a constant challenge. Raj Chandrashekar, CFO of Group Technology and Operations for Standard Chartered Bank, said that it is necessary to change the perception of the sector to attract talent. ‘If finance is a difficult sell, finance shared services is a more difficult sell. But you could work for 20 years in SSO and you’re still learning. The breadth of exposure and learning is just fantastic. It offers tremendous opportunities where finance professionals are concerned.’
In future, it is projected that one in two accountants will work in F&A SSO, a scenario being played out in Shell. ‘The Shell Global Finance Function employs 11,000 people and more than half of the finance people in Shell are in shared services,’ said David Burgess, vice president for revenue at RDS finance operations and lead for FO KL Centre, Shell Business.
Burgess said that from the technical perspective, Shell seeks out finance or accountancy qualifications when recruiting. Since Shell requires SSO talent to be business partners, candidates should also have ‘the right leadership characteristics’ and ‘care about the people they’re managing’.
‘The real challenge once you get the talent is: how do you keep it? One of our focuses is to move the discussion away from pay towards creating relationships between individuals and employers.’ Shell also creates a fun work environment emphasising social life, which is important for Generation Y.
Moving up the chain
There is no doubt that F&A SSO is moving irrevocably up the higher value-added chain. ‘This decade from 2010 to 2020 will be about data and the rise of analytics to support cost-benefits analysis and determine capital allocations for scarce capital,’ advised Dr Martin Fahy, Asia Pacific practice leader for the Hackett Group. Nick Milton, senior manager at Ernst & Young’s Asia Pacific global compliance and reporting centre, said ‘an increasing number of organisations are looking at what else can go into shared services – for example, preparation of tax returns, supporting strategic tax planning and statutory compliance.’
To enhance organisational performance, it is critical to define roles of the retained finance function. Ho Sai Weng, director of CFO Services at Deloitte Consulting Southeast Asia, noted that a best practice implemented by a global client was to establish a global finance academy which ‘defined what the retained finance function looked like, the skillsets needed and devised the necessary training programmes and plans’.
Joe Melhem, centre manager for finance and global services at Schlumberger, listed management commitment and support, preparation and knowledge transfer as key success factors. ‘Migration should not be optional, every country has to work and prepare for it; success must be borne by both parties (the SSO organisation as well as the country of operations).’ Melhem brings in teams from Kuala Lumpur which stay between six to eight weeks in every country affected to enable the knowledge transfer process.
CFOs will need new skillsets to play their roles in finance transformation. ‘CFOs today are seen to be value creators, the voice of reason and the master of analysis,’ said Subathra Ganesan, senior executive director at PwC. ‘CFOs must be very good compliance executives and project managers. You must be able to identify gaps in the system and be able to bring all activities together to meet the objectives of the CEO. More importantly, CFOs must be master of analytics. With accounting functions and processing gone, it is important that CFOs are able to provide strong business intelligence to the top decision-makers.’
How can Malaysia maintain its position as a preferred SSO destination and tap higher-value services? Mark Grill, executive at IBM Corporation Malaysia shared services, said that many countries offer similar advantages. ‘Why choose Costa Rica, Malaysia or Poland? The key is how you differentiate them based on the type of work, the language and the people. It really comes down to the value proposition of what it is you’re trying to achieve, what’s the goal of the centre you’re trying to set up, finding the best match.’
What are the expectations for Malaysia in the short timeframe? ‘Many shared services here are in different stages of the journey. For the larger shared services, they are moving towards the higher-value services, for example, analytics. But for the many of the shared services operations, which have begun operations in the past two or three years, over the next few years we will probably start seeing a shift towards management reporting and business analysis type of work. There will be a strong push for value creation, automation and centralisation,’ said Jason Crimson, director of Asia Pacific shared services for Kimberly-Clark Regional Services (Malaysia).
The caveat: Malaysia is hampered by limitations in business acumen and English fluency. ‘If an organisation running shared services does not focus on the need to build up an advantage in business acumen, you’ll miss the boat,’ said Crimson. ‘And although we speak predominantly English here in Malaysia, I think the ability to convey your ideas or suggestions is an area where Malaysian shared services organisations must ramp up.’
‘The important thing to ask for Malaysia is: how do we remain vibrant to continue to attract business? We are doing very, very well on the demand side, but we have to work on the supply side,’ concluded Grill.
Nazatul Izma Abdullah, journalist