The CFO’s role has been transformed during the last years. Leading CFOs’ contributions now go far beyond the traditional finance remit to encompass a strong strategic and commercial focus.2 In order to do this effectively, CFOs are collaborating more closely with other internal functions — not just from a monitoring, reporting and risk management perspective, but also as supporters and enablers of performance.
A term: business partner has become increasingly common to describe this more collaborative, enabling and supportive relationship between finance and other functional areas of the business.
Partnering for performance, a global survey by EY of 423 CFOs and heads of supply chain at companies, half of which have revenues of US$1b+, based as well as on a series of in-depth interviews with CFOs and heads of supply chain, finds that companies with evidence of strong “business partnering ” between the CFO and the supply chain leaders report better results than those with a more traditional finance model in place. Among business partner respondents, 48% report EBITDA (Earnings before income tax, depreciation and amortization) growth increases of more than 5% in their company over the past year, compared with just 22% of those with a more traditional relationship.
Business partnering is not universal — indeed, companies that have established this model between finance and the supply chain are still in the minority. Among our respondents, 26% of finance executives and 21% of supply chain executives say that the CFO’s contribution to the supply chain is primarily based around an enabling, collaborative, business partnering role. 55% of finance executives and 46% of supply chain executives say that the CFO’s contribution to the supply chain is primarily based around a traditional finance role. The remainder considers they strike a balance between the two.
Revenue: In companies with higher revenues, there is a higher incidence of a business partnering relationship. Fifty-six percent of business partners work in companies with more than US$1b annual revenue.
Growth: Companies that have a business partnering model in place tend to have higher EBITDA growth.
Sectors: Technology, consumer products and manufacturing tend to have a strong business partnering emphasis. However, in heavy industry, mining and metals, and oil and gas, it is less established.
Geography: The countries in our survey where business partnering is most established are the US, Singapore, South Korea and the UK. The story in Western Europe is very different. In France, Germany, Spain and Italy, no respondents from our sample describe the relationship between the CFO and the supply chain leader as being one built around business partnering. This was also the case in Argentina and Russia.
Other key findings:
• CFOs and supply chain leaders are most likely to take a business partnering approach if they’ve been in their role for less than 5 years.
• CFO business partners say that they spend 25% of their time with the head of supply chain, whereas those with a more traditional relationship spend 12%.
• 83% of finance business partners and 87% of supply chain business partners agree that data and analytics present CFOs with an unprecedented opportunity to drive a more collaborative, business partnering relationship with the supply chain.
• 26% of business partnering CFOs and 24% of business partnering supply chain executives see improving organizational design to aid tax effectiveness as one of the top three opportunities for the CFO to play a greater role in the supply chain.
When cost reduction leapt to the top of the corporate agenda at the height of the financial crisis, supply chains – which typically hold a large proportion of many companies’ costs – were one of the first places that CFOs turned to for savings. However, as companies looked to stimulate growth, manage economic uncertainty and the impacts of globalization, the supply chain has also become a source of competitive advantage.
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