3469 CIMA Quality-Download-OpenDay275x215Ad 23/11/07 3:20 pm Page 1 financial management financial
Dec/Jan 2007/08 Dec/Jan 20 26 36 Mystical managers: Atomic numbers: the The “Wiki effect”: LOOKING FORWARD TO 2008 EXAMS why 2,000-year-old business implications how collaborative methods are making of the UK’s forthcoming web technology is a comeback in auction-based carbon turning commerce into modern businesses trading scheme a community effort
Need study advice? www.cimaglobal.com December/January 2007/08 £4.50
Come to a BPP Open Day and see why BPP trains more CIMA Prize Winners than anyone else. financialmanagement If you are wondering what to do next, whether it be starting your studies, choosing which combination of papers to take, or Technical matters which course type would meet your needs, then come along to a BPP Open Day/Evening. Strategic global Download a brochure today management GET STUDY ADVICE FROM BPP’S EXPERT TUTORS. Forecasting Open Days are held regularly – in some BPP course brochures for first half 2008 courses are now available to centres every two months. Money-laundering download.
www.bpp.com/cima/opendays Go to: www.bpp.com/cima/brochures
Qualify early with BPP
Based on BPP average pass rates, BPP students complete their studies approximately 12-18 months ahead of the average CIMA student. BPP are the number one choice for 90% of FTSE 100 companies. Well set
FLEXIBLE COURSES AND CBAs Our Certificate courses are specifically designed to From buy-outs focus on the computer based assessments (CBAs) that you will face. ■ Certificate courses run throughout the year so you can progress quickly to bat caves with through the papers. Ian Flavell, FD of ■ CBAs run at all BPP centres on a weekly basis.
EXCELLENT STUDY SUPPORT BPP’s team of over 200 qualified tutors are a key reason Castle Cement why our students achieve fantastic pass rates. EXCELLENT STUDY MATERIALS BPP’s quality study materials, supplied by BPP Learning Study notes Media, cover the syllabus and focus on the exam. Paper P1 Management PASS ASSURANCE We’re so confident that you’ll pass that, if you are unsuccessful, Accounting – Performance we’ll let you attend another course for that paper FREE of charge. Evaluation Paper P4 Organisational For more information call your nearest Course Centre or visit www.bpp.com/cima Management and Information Systems
COURSE LOCATIONS: GLASGOW & EDINBURGH LUTON & MILTON KEYNES NOTTINGHAM +44 (0) 115 924 2244 Paper P8 Financial Analysis +44 (0) 141 332 7400 +44 (0) 1582 413332 BIRMINGHAM +44 (0) 121 212 4722 READING +44 (0) 118 959 6166 LEEDS & SHEFFIELD MAIDSTONE +44 (0) 1622 687100 SOUTHAMPTON & PORTSMOUTH BRISTOL & CARDIFF +44 (0) 113 244 8822 +44 (0) 117 930 1710 MANCHESTER, PRESTON +44 (0) 2380 225700 LIVERPOOL +44 (0) 151 236 9030 & STOKE-ON-TRENT CAMBRIDGE +44 (0) 1223 309292 EIRE DUBLIN 00 3531 662 3395 LONDON UK 0845 075 1100 +44 (0) 161 288 8000 ( ) EIRE LIMERICK 00 353 6 131 0884 ® CROYDON +44 0 20 8681 2244 INTERNATIONAL +44 (0) 20 8740 2211 NEWCASTLE +44 (0) 191 232 4888 POLAND 00 48 22 50 40 700
FM1207 Gordon Grant >inbusiness CIMA president
the importance of both long-term planning and rapid flexibility cannot be overstated
Over the past year CIMA has The institute is ending 2007 citizenship so that business can taken a leading role in supporting with two exciting developments, help to solve the challenges the transformation of the finance both of which are world firsts. posed by globalisation. function. World-class business At the start of December we CIMA Sri Lanka is helping leaders highlighted the pace of become the first professional companies to implement the change in business at the accountancy body to launch a UNGC’s ten principles into their institute’s recent annual global qualification in Islamic practices. A key task will be to At the start of conference in London. It’s clear finance. We have identified train participants in how to December we from them – and from our own considerable demand from comply with the compact’s experiences – that only those employers around the world for a annual reporting requirements become the first individuals and institutions that are qualification to develop the – particularly the yearly professional prepared and equipped to change knowledge and skills required to “communication on progress”. “ constantly will be successful in service this increasingly important In another first, the UNGC accountancy the long term. Those that fail to market. The Islamic finance and CIMA Sri Lanka will host adapt will be left behind. industry is thought to be worth their inaugural sustainability body to launch We’re hearing this harsh and between £150bn and £250bn awards in 2008. This event will a global increasingly loud message and is growing at an estimated recognise businesses for their constantly right across the world. rate of 15 to 20 per cent a year. achievements in core areas such qualification in It applies as much to the CIMA has worked alongside the as promoting human rights, Islamic finance institute as it does to you as an International Institute of Islamic improving labour relations, individual member and, in turn, Finance to design a self-study conserving the environment and your employer. programme to meet the vital fighting corruption. are designed for members But, as the conference also needs of its employer and The coming year promises to operating in businesses of all highlighted, adapting flexibly to student stakeholders. deliver even more exciting sizes across every sector. change is what CIMA and its On December 13 CIMA Sri products, services and The institute’s global members have been doing ever Lanka will officially declare its experiences to contribute to advertising campaign will also since the institute was founded in sponsorship of a worldwide business success worldwide. continue to target prospective 1919 – in response to the failure initiative called the United Nations Details of an important new students in key markets, while of other professional bodies at Global Compact (UNGC). The e‑learning product to benefit all our business development team the time to meet the forward- institute facilitates the UNGC’s CIMA students will be available in will keep building relationships looking needs of business. The network in Sri Lanka. Through the first quarter of 2008, for with the world’s leading natural place for the chartered the power of collective action, example. The CIMA CPD Centre companies to ensure that CIMA management accountant is, the compact – established at the of Excellence will continue to remains the qualification of therefore, at the forefront of 1999 World Economic Forum by provide members with world- choice for business. change. This means that the Kofi Annan, the former UN class resources and expertise in May I take this opportunity future for us poses abundant secretary-general – seeks to the form of conferences, reports to wish you peace and prosperity
Ph otog r ap h: N ick cuna d opportunities for success. promote responsible corporate and online support tools. These in 2008.
CIMA is the Chartered Institute of Management Accountants, 26 Chapter Street, London SW1P 4NP. Tel: +44 (0)20 7663 5441 President Gordon Grant FCMA Deputy president Glynn Lowth FCMA Vice-president Aubrey Joachim FCMA Chief executive Charles Tilley FCA
financial management CIMA, 26 Chapter Street, London SW1P 4NP +44 (0)20 7663 5441 www.cimaglobal.com Contents Editorial and production Caspian Publishing 198 King’s Road, London SW3 5XP 12 One2one T: +44 (0)20 7368 7170 F: +44 (0)20 7368 7201 By the very nature of E: [email protected] 12 Editor Ruth Prickett its business, Castle Chief sub-editor Neil Cole Creative director Nick Dixon Cement will never Art director Erroll Jones be the greenest of Art editor Clare Meredith Account manager Tina Franz firms. But, as its FD, Advertising Ian Flavell, explains, T: +44 (0)20 7368 7117 F: +44 (0)20 7368 7112 it is investing millions E: [email protected] Advertisement manager in minimising its Ellen Pagliarulo ecological impact. Subscriptions E: [email protected] T: +44 (0)20 7368 7200 £45 (UK), £54 (Europe), £72 (rest of world). Back issues: £5.50 including postage, subject to availability. All payments should be in sterling drawn on a UK bank.
For the USA FM (ISSN 1471 9185) is published ten times a year for $60 by Caspian Publishing, 198 King’s Road, London SW3 5XP. Periodicals postage paid at Rahway, NJ Postmaster. Send address changes to: Financial Management, 20 c/o BTB Mailflight Ltd, 365 Blair Road, Avenel, NJ 07001. 20 The yin crowd Caspian Publishing 04 Letters 47 Study notes Why the application Chief executive Mike Bokaie Corporate governance; Islamic Your guide to entering, taking and Finance director Kate Andrews finance; effectiveness versus passing the CIMA qualification. of mystic disciplines Financial controller Desmond Heggie Editorial director Stuart Rock efficiency; Beyond Budgeting. 47 Student one2one: Simon such as feng shui Communications director Gardiner of BakBone Software. Matthew Rock and astrology to Commercial director Justin Khaksar 06 First in… 48 Exam tips: paper P4 All the latest news affecting Organisational Management modern business Reproduction Zebra accountants in business, and Information Systems. Printing Headley Brothers is becoming a including regulations updates. 53 Exam tips: paper P8 CIMA reserves the right to grant Financial Analysis. growth industry. permission to reproduce articles. 54 Exam tips: paper P1 Opinions expressed in FM are the 16 Opinion authors’ own and do not necessarily 16 Do terrible TV ads still work? Management Accounting – represent the policies of their 18 M&As: the board’s dilemma. Performance Evaluation. 26 Carbon dating employers or CIMA council. Caspian Publishing and CIMA accept no 58 Exam notice: important A comprehensive responsibility for views expressed by 33 Career information for candidates guide to the UK’s contributors. The publisher reserves the and passed finalists. right to refuse, cancel, amend or suspend any advert or insert. development forthcoming auction- No liability is accepted for loss arising The rigours and rewards of being 61 Institute update based carbon from non-publication, incorrect or late a CIMA member in practice. CIMA news and a diary of events. publication of any item. The inclusion of trading scheme. any advertising material does not imply that CIMA endorses the product, service etc advertised. 36 Technical 65 So you want matters to be… Delving into the detail of … a finance manager at an airline. 16 management accounting. 36 Strategic global management. 72 …Last out
Total average 42 Forecasting. Bizarre communications from net circulation 44 Money-laundering. the wonderful world of business. (Feb 2007): 155,665. All the latest news affecting accountants in business, including regulations updates
The Organisation for Economic Co-operation and Development has started publishing quarterly news releases on unit labour costs in OECD countries. The first of … these, covering the Q2 of 2007, was issued >firstin on October 25. Subsequent releases will be published in the first halves of January, April, July and October. For further details Keegan’s win visit www.oecd.org/home. CIMA has presented government finance The UK government has announced a Dame Mary Keegan, profession. Two CIMA 12-month delay to new provisions in the former head of the members and a passed Companies Act because Companies House Accounting Standards finalist also received systems and processes will not be able to Board, with a special awards: John meet its original deadline of October 1, 2008. lifetime achievement award Thornton CBE, But it has confirmed that changes scheduled for services to the accountancy profession. recently retired to take effect in April 2008 will go ahead. The accolade, given at the Government corporate financial Finance Profession Awards, recognised controller and head of Governments in developing nations are Keegan’s efforts to establish world-class finance professionalism at the increasingly using technology to support their financial management in the civil service. Ministry of Defence, received the head of economic and social development aims, “She has been an inspirational force in profession award for lifetime achievement; according to the Economist Intelligence Unit. the drive to embed value for money into the Steve Holliday, training scheme manager While past technology programmes have mindset of government departments,” said at HMRC, won mentor of the year; and focused on boosting the number of PCs, Ray Perry, director of brand at CIMA. Tessa Collings won student of the year. recent schemes are driven by a broader The institute has worked closely with Howard Orme FCMA, deputy finance public policy goal. “Wiring up: technology-led HM Treasury to promote best practice in director-general at the Department for Work development in the emerging world” is financial management. It sponsored the and Pensions, collected the innovation in available free from www.eiu.com/wiringup. awards to mark the 25th anniversary of the government award on behalf of the DWP. PKF Accountants has published guidance entitled “IFRS Illustrative Accounts for AIM Stephen Jenner FCMA, director, Criminal Justice Information Technology, has been presented with the 2007 civil service award for financial management in recognition Companies 2007” for all companies of his department’s successful approach to portfolio and benefits management. preparing their first annual accounts under His team’s winning project was instigated in late 2004, when the criminal justice system IFRS for the year ended December 31, 2007. IT programme faced escalating costs, delivery delays and falling benefits. The aim was to The illustrative accounts concern a develop and implement a set of repeatable processes integrating portfolio management fictional AIM firm, Exemplum, and show the techniques derived from modern finance theory. It established nine investment principles, recommended different presentation including minimum rates of return and standards of “attractiveness” and “achievability” to alternatives permitted by IFRS. To obtain a appraise all potential projects and reduce optimism bias. pdf of the guidance, visit www.pkf.co.uk/ifrs. The project was the subject of an article in FM’s November 2006 issue, which is available to download from www.cimaglobal.com/fm. Employees working for British Land are expected to live eight years longer than their counterparts working for Whitbread, but this has little to do with corporate health policies. World Bank endorses CIMA project Research by Pension Capital Strategies The government of Bangladesh has commissioned CIMA as its has shown that, while the number of firms “sole expert supplier” to lead a project to boost the capabilities of revealing the mortality assumptions behind the country’s main accountancy body. their pension calculations has risen The project is funded by the World Bank. “We are delighted that CIMA dramatically since an open letter from equity analysts was sent to the FT in February last has agreed to transfer its technical knowledge and capacity-building year, their assumptions vary widely. While skills to help the Institute of Cost and Management Accountants of British Land expects male staff aged 65 to Bangladesh develop as a modern management accounting professional live for a further 24.6 years, Whitbread body,” said Suraiya Zannath, senior financial management specialist at expects employees of the same age to live the World Bank, south Asia region. only 16.5 more years. The research can be viewed in full at http://snipurl.com/1ty6k.
financial management www.cimaglobal.com
CIMA annual conference round-up from collaterised loan obligation Soundbites vehicles has now dried up – “People should always be there simply is no money left. looking for another job Large buy-outs are, therefore, – we are in the busi- unfundable. I predict an era of ness of business, not significantly lower returns.” the business of ac- Jon Moulton, Alchemy. counting.” Martin Fahy. “On any measure, Hillary “The private equity market Clinton is considerably more right is slowing down markedly. A lot of wing than David Cameron – and returns have been financed by the probably more so than Norman Tebbitt.” galloping debt market. But the money John Micklethwait, The Economist. Why SMEs should think global, too Smaller firms should stay alert to the benefits of globalisation, because in some ways Frequent flyers? they should find outsourcing easier than large companies, according to Martin Fahy, The finance function of the future will be former director of development, Asia Pacific, at CIMA. “Already many SMEs are using lean and mean, according to Martin Fahy, external accountants’ services, which are increasingly sourced overseas,” he said. former director of development, Asia Pacific, John Micklethwait, editor-in-chief of The Economist agreed. “Globalisation is at CIMA. The accounting jobs being shifted heralded as being good for big companies. In fact, it’s good for small businesses,” overseas are the higher-paid ones, not the he told delegates. “You don’t need a big office – just a Harvard student with a lower-paid ones he warned. “Don’t move a bright idea and access to the web.” £30,000 job. Move a £75,000 one if you can find someone to do it for £25,000 overseas.” CIMA members aren’t being as badly affected by this trend as other accountants, Leading economists agree to differ since they are more likely to be involved in The UK base interest rate less optimistic about the prospects of the analysis than compliance, Fahy said. will probably fall to five or global economy. He pointed to a number But this state of affairs may not last, as the 5.25 per cent in 2008, of factors that could undermine world “YouTube generation” becomes more but rates in the US and trade in the near future: the rise of comfortable with longer-distance business EU will rise; sterling is China, complicated by its traditional relationships. And there are other currently overvalued and hostility to Japan and current threats: “Take a look in the job will fall sharply; but the animosity from a number of US adverts and you’ll see increasing credit crunch is unlikely to sectors; the growing disparity numbers of high-level business cause global recession unless there is between stagnant median and partner roles that don’t insist on a another dramatic international disaster. soaring top salaries in the west; formal finance qualification,” he said. These were the predictions of Trevor and disagreements between the US “There are also many ads for regional Williams (pictured above), chief and European nations over the roles of roles – for example, EMEA, which means economist at Lloyds TSB Corporate society, government and religion. ‘must be prepared to live in Heathrow’s Markets, speaking at the CIMA annual “We are in danger of complacency departure lounge’.” conference in London in November. over globalisation,” he warned. “A major This demand for flexibility is heightening “If corporate defaults had risen in the crisis – terrorism or environmental – could the recruitment war for talented professionals, credit crunch, we would have gone into a mean that trade barriers go up.” according to Fahy. “You may have to massive, possibly global, recession. That But Micklethwait admitted that he interview 10,000 candidates to staff an office didn’t happen,” he said. “The reason is could be erring on the side of caution. “In with 400 good people – and everyone else that growth is still strong because of speeches you try to inspire greed or fear,” wants these people, too,” he said. globalisation, but the global balance has he said. “I have tried to be provocatively John Micklethwait, editor-in-chief of The shifted towards emerging markets.” paranoid, but, in view of what’s been in Economist agreed. “In one Indian office I John Micklethwait (pictured, right), the news over the past week, I think that’s know, there’s a sign saying: ‘Trespassers will editor-in-chief of The Economist, was far a good position to be in.” be recruited,’” he told delegates.
financial management >letters Please send letters to: Financial Management, Caspian Publishing, 198 King’s Road, London SW3 5XP. E-mail: [email protected]
Irony supplement things, so it’s important to be clear about More visits by the president and officers of I remember when my teacher in a GCSE the difference. Effectiveness is invariably a CIMA followed. We had kept the institute’s English class spent a fair bit of time trying to choice among alternatives; it is rarely a flag flying and I was one of several people explain the meaning of the term “irony”. choice between right or wrong. A key honoured with a plaque. In 2000 I was Afterwards, I felt that the concept she’d just element of effectiveness is to listen and awarded the bronze medal. tried to explain had eluded me. encourage dissenters to speak up. The In 2006 we became a members’ network Many years later, the full meaning of the Japanese have mastered this process. It and sole promotional authority was centred term hit home while I was reading the leads to consensus because the perceived on the CIMA India office in Mumbai. My heart financial news this week. Building property problems have been discussed through is open to fraternity with colleagues in CIMA, maintenance firm Erinaceous has breached sensible argument. both in India and abroad – and particularly its banking covenants and the dealings of Consider whether your organisation’s with those advanced in age. some of its senior directors are also under culture discourages participation. Be wary if S P Kundu scrutiny. This comes on top of last year’s no one speaks up – it may be that this is not Hon secretary, CIMA Members’ investigation into one of its subsidiaries, management but abdication. Network, Kolkata Dunlop Hayward, where one of its surveyors Cliff Moggs FCMA (retired) was arrested in connection with an alleged Trading futures £10m fraud. The case was settled out of Mature reflections In “Forward-looking finance” (July/August), court in July. May I say a few words to fellow members of Robert Shaw recommends avoiding the I also noted with interest that one of CIMA as I approach my 90th birthday? I was Beyond Budgeting movement and the Erinaceous’s non-executive directors (now born in 1918. I graduated in commerce 20 balanced scorecard. But he is misinformed promoted to executive chairman to try to sort years later and ten years after that I became about the issues that Beyond Budgeting out the company) is none other than Nigel a CIMA student. I then went to Croydon and addresses and also about the reasons why Turnbull – the gentleman responsible for the participated in the then Croydon branch. the balanced scorecard so often fails. His government-commissioned report on internal I joined Lacey-Hulbert & Co machinery implicit assumption is that companies can controls and corporate governance. manufacturers in Wallington, Surrey, and improve their existing – and, in our view, Now that, indeed, is irony. introduced standard costing there – an outdated – management models by adding Adeeb Usmani, CIMA passed finalist experience that has been valuable ever since. new tools or improving existing ones, rather After moving back to Kolkata in 1952, I than changing the model itself. Expression of interest formed the Students’ Society of Cost The main focus of Beyond Budgeting is The compilers of CIMA’s certificate in Islamic Accountants with Mr A H Forster FCWA. not budgeting. It is about transforming the finance (Technical matters, September) will In 1983 CIMA’s then president, David traditional command-and-control have to be deft to explain how the “mark-up” Allen, attended the Asia-Pacific Accountants’ management model (with fixed plans and added to an Islamic housing loan is anything parley in New Delhi, and the following year performance contracts at its heart) into a new but front-loaded interest. CIMA was established in Kolkata, New Delhi, model that supports, not conflicts with, Also, unless this mark-up is at the going Mumbai and, a little later, Chennai. I became today’s market conditions and competitive interest rate, investors in the institutional centre correspondent here and five years success factors. This requires a systemic lenders involved may have a “Northern Rock later was made secretary of the branch. model in which decision-making is moment” when viewing their shareholdings. In 1992 I went to London and met CIMA’s decentralised and a different set of A D McIntyre FCMA president and secretary. The following performance management year we received the president processes is used. Abandoning Efficiency driver and the secretary. budgets is a result of adopting the A couple of the contributors to FM’s October new management model, not its issue referred to efficiency – for example, primary goal. “must improve its efficiency in Many leading business thinkers providing… management support the need to transform the information”. I hope that what traditional management model – for they meant to say was example, Gary Hamel in The Future of “improve its effectiveness”. Management (Harvard Business School Commendable as it is, efficiency is no Press, 2007). Beyond Budgeting’s substitute for effectiveness. principles are central to this change, but, Management is specific work that although its relevance continues to grow, it requires skills including the ability to make is still widely misunderstood. effective decisions. Efficiency is doing things Robin Fraser, FCMA right, but effectiveness is doing the right Director, Beyond Budgeting Round Table
financial management >firstin
The 2007 Cima Financial Management awards in association with
2
3
1
4
> 1 Outstanding contribution by Insight MSC. Winner: analyst, Procter and to business performance, Oldham Primary Care Gamble financial sponsored by Hewitson Trust. From left: Sandi solutions team; Walker. Winner: Andrew Toksvig; Julie Daines, Gayle Moore, head of Higginson, group finance deputy director of business development, and strategy director finance, Oldham Primary Badenoch & Clark. at Tesco. From left: Care Trust; David Muller, 4 Financial Management Sandi Toksvig, guest managing director, award for corporate speaker; Gordon Grant, Insight MSC. social responsibility, CIMA president; Steve 3 Finance team of the year, sponsored by Financial Butler, group reporting private sector, sponsored Management. Winner: director at Tesco, by Badenoch & Clark. MAS Intimates Division, accepting on behalf of Winner: Procter and Sri Lanka. From left: Higginson; Nigel Lynn, Gamble financial Dian Gomes, managing managing director, solutions team, director at MAS Intimates Hewitson Walker. Newcastle. From left: Division; Justin Khaksar, 2 Finance team of the year, Joanne Spedding, commercial director,
public sector, sponsored accounting integration Financial Management. Photogra p hS: Nick C u n ard
financial management >firstin
5
6
7
8
5 Tutor of the year, 7 Part-qualified of the year, Witan Jardine. Winners: sponsored by CIMA sponsored by FSS. Lauren Irving, finance Publishing. Winner: M M Winner: Mark Kula, ice- analyst at BT, and Clancy Peiris, senior cream and sugar segment Richard Dewar, head of analyst, Mars UK. From lecturer/director at the economic capital 9 left: Mark Kula; Zachary Wisdom Business management at Royal & Meade, manager of the Academy, Colombo, Sri Sun Alliance Insurance banking division at FSS. Lanka. From left: M M Group. From left: Lauren Clancy Peiris; Mike Cash, 8 Innovation in management accounting, Irving; Richard Dewar; publisher at Elsevier. sponsored by EM Andy Winterburgh, 6 Employer of the year, Finance. Winner: Punch managing director at sponsored by Hays Taverns knowledge team. Witan Jardine. Accountancy and Finance. From left: Sandi Toksvig; 10 Recruitment consultancy Winner: Ford Motor Sara Shipton, director of of the year, sponsored by Company. From left: finance responsible for CIMA MY JOBS. Winner: Terry Archer, manager, the knowledge team Hays Accountancy and European project and at Punch Taverns; Finance. From left: Ross property accounting, at Sharmila Sharon Parekh, Ford Motor Company; managing director at Hetherington, MD, Hays Ross Hetherington, EM Finance. Accountancy and 10 managing director, Hays 9 TOPCIMA success Finance; Ray Perry, Accountancy and Finance. award 2007, sponsored by director of brand at CIMA.
10 financial management Ian Flavell FCMA Finance director, Castle Cement
Cement doesn’t sound like the keep things common where possible. How do you limit your impact on most glamorous of businesses. The group head office in Germany came the environment? What attracted you to the industry? up with the overall structure it wanted, Cement production necessarily creates The grey powder that we call cement but we have to work out how the UK a huge amount of dust, so controlling appears rather insignificant, but it is a side fits into this. We don’t want to end that is important. Then there are the vital part of the modern world and used up with a structure that’s theoretically emissions from the kiln. We’re widely in all manner of structures. I’ve perfect but doesn’t work in practice. breaking limestone into its constituent always wanted to be involved with parts, which produces lots of carbon organisations that make things – to What are the costs involved in dioxide. There’s not much we can have some kind of physical involvement making cement? do about this, so we have to ensure with a product – and I’ve been lucky to Our sites and equipment are large and that we produce as little CO2 as be able to do this. All of the firms I’ve expensive. We recently took out three possible elsewhere. worked for have been in the business of old kiln lines and put in a bigger one at We’ve been using alternative fuels selling to industry, not retail, so they our Welsh operation at a cost of to powdered coal, which needs to be tend to be well known in their own £70m. It costs more than £200m to imported. Many years ago, for sector, but not necessarily outside. start an entire works from scratch. example, we started using Cemfuel, Castle supplies a quarter of the Planning is also an issue. In Wales it which is derived from waste solvents, UK’s demand for cement: about three took about four years from making the ink, paint and so on. We have a million tonnes a year. We were the only application to getting planning subsidiary that recycles solvents and UK operation of Heidelberg Cement permission, including the public inquiry. passes Cemfuel on to us. The process Group, but the group has just become It probably cost us £1m to get to the is efficient because it burns completely, much larger as a result of buying point of putting the first spade in the so there’s no mess to clear up. We Hanson in September. Castle has ground. I have no issue with potential also burn paper, plastic and tyres. three works – in Rutland, Lancashire objections from local people, but I do Because the kiln system is closed, you and north Wales – and our HQ is in have a problem with the length of the don’t get the smoke associated with Birmingham. Hanson doesn’t make whole planning process. rubber. Another fuel is meat and cement, so there won’t be any day-to- bonemeal, which is cheaper than coal day overlaps here (although there will There can’t be too many viable but not as calorific, so you have to use be in the group’s US operations), but sites for quarries in the UK. more of it. We’d like to stop using coal we’re still working out what the merger They tend to be in rural areas, which altogether one day, but that would will mean for the back-office functions. can be a problem. A typical works, create other problems, because it such as our one in Rutland, covers changes the chemistry of the kiln. What does the Hanson buy-out 400 hectares including the quarry. A mean for you? cement plant can look a little like Cape Why did you end up building a Its acquisition was routed through a Canaveral – visually quite intrusive. bat cave? UK subsidiary, of which I’m a director, We need to be somewhere with a We have an obligation to manage our so the mechanics of the deal were a large supply of limestone or chalk. We quarries in the most environmentally big issue for me. Hanson is much dig it out, crush it and then blow it as a friendly way possible. This involves bigger than Castle in the UK, so it’s powder into a kiln – a 60m-long tube conserving the natural habitat as much been a huge task. We are aiming to on a slight slope that rotates about as limiting our dust and sulphur dioxide work out how we’re going to integrate three times a minute. We heat this to emissions. In Rutland we found that by January 1, so we haven’t got long. 1,400˚C so that we actually melt the the site was home to a protected We’re watching progress in the US, rock to form pebbles called clinker. It’s species of bat, so we worked with where Heidelberg and Hanson have the nearest thing to a man-made English Nature to build a new cave for similar-sized operations to merge, volcano. The clinker then is crushed them and moved the whole colony. because they’re facing many of the together with gypsum in a ball mill to It turned out that bats are very fussy y: M ichael B irt P hotograph y: same issues as we are, and it helps to produce the cement. about where they live. There was lots >
12 financial management “ entire colony moved the bat caveand to buildanew English Nature We worked with financial management financial
13 One2ONE In one quarry we had to work “ round a medieval village while the archaeologists moved in
of design work involved, because the cave to the local wildlife trust and were actively had to slope the right way to preserve the involved in its restoration. heat “of their bodies. In the end, all our local employees went to see it – they were really How do you report on these activities? proud of it. Another problem is that we Financially, we need to make restoration sometimes dig things up that need further provisions. We have to analyse what we would investigation. For example, in Rutland we have to pay now to restore everything we’re came across a medieval village and had to working on. The figure is about £5m currently, work round it while the archaeologists moved but this changes over time. We report this to in. This can be expensive, but we always tell group level and create a sustainability report the people on site that they must report each year that’s publicly available. anything they find. It’s simply another issue that we have to manage. How vulnerable is your business to changes in the housing market? What happens to the quarries when you We’re a bellwether for the construction finish with them? industry, but house price fluctuations don’t We have to restore the land after we finish affect us directly. We also provide for digging and maintain this restoration for a commerce and industry, so we tend to be number of years afterwards. For example, our OK. Other areas are becoming more former quarry at Pitstone in the Chiltern Hills important to us – for example, concrete is now a nature reserve. We handed the site barriers are being installed on motorways because they’re stronger than metal ones. Cement was seen as a poorer environmental option for buildings, but over Quick CV the lifetime of a house the CO2 impact is the same – it’s a matter of whole-life costing. 1981-88 Why did you decide to study for CIMA? Flavell qualifies as an ACMA in The qualification appealed to me because I 1980 and joins the Parsons Chain felt it was more geared to manufacturing than Company (a subsidiary of the alternatives were. Three of the six people Babcock). He becomes its finance we have working in central finance at director in 1986. Birmingham are studying for CIMA, too.
Have your job moves been part of a 1989-95 master plan? He is appointed UK finance director I don’t make long-term career strategies; I at the British arm of US company simply try to respond to things that arise in PPG Industries, with responsibility for my current role. I moved from Babcock the finance functions of its European because I wasn’t happy about the way things automotive coatings businesses. were going there, for example. I didn’t even In 1990 he becomes an FCMA. seek this job out: I was happy at PPG, but then Castle Cement approached me. I have 1996- planned job moves in order to gain new Joins Castle Cement as FD, taking experience, but have tended to rely on responsibility for the financial whatever vacancies were around at that time, oversight of UK operations. rather than aiming for a particular role at a specific company.
14 financial management >opinion Ad nauseam As consumers, our purchasing behaviour is becoming ever more sophisticated and discerning, writes Ruth Prickett. So why do so many companies continue to risk alienating us with their intelligence-insulting television commercials?
According to H L Mencken: than what? What else had they “No one in this world has ever lost put in there to start with? money by underestimating the Men don’t always come out of intelligence of the great masses of ad-land looking much better, but the plain people.” Or, as P T at least they tend to star in Barnum paraphrased the same classier-looking adverts for high- sentiment: “There is a sucker born tech cars and quintuple-bladed every minute.” razors, or as part of a good- If anyone doubts that this is looking, high-achieving, non- as true now as it has ever been, threateningly heterosexual couple. I suggest that you switch off Even when they behave stupidly – Newsnight and start watching think of James Nesbitt in the more channels that have Yellow Pages ads – they do it in a commercial breaks. If you haven’t lovable, blokey kind of way. watched any for a while, I offer a Don’t get me wrong: I like health warning: some of the adverts. I am one of those people things that you’ll see will shock who gets to the cinema when the you. They will display a level of programme starts just so that I stupidity, misinformation and poor taste any germs; admitting that their social life can see the ads and the trailers. I like to be that’s likely to damage your sense of humour, depends on the quality of the air freshener shown images of the beautiful life that could positive attitude to world progress and faith they use; or discussing their bowel problems be mine if I bought the right clothes, perfume, in human nature. Worse still, some of these with friends in the middle of a busy make-up and lived in a parallel universe. horror stories may be promoting your restaurant. In what way has our society Show me Twiggy crossing continents in M&S company’s products. progressed if women who can hold down outfits or Smirnoff purifying the sea by lifting I have no idea whether the standard of TV demanding jobs, raise families and deal more out all the junk and I will abandon my critical advertising has fallen or whether I used to be than capably with their finances are still faculties and beam happily. I admired more tolerant of poor examples. I suspect portrayed as going to pieces about the state Citroën’s ice-skating car and the Levi’s couple that some have got less interesting as they of their chopping boards? who ran through walls in 2002. try to work in many different languages and Similarly, these modern women – some of What I don’t like is being linked by the across national cultures, but I can’t prove it. whom, I assume, earn their money as powers of mystical consumerism to silly They are a hugely expensive way of accountants, doctors, lawyers and scientists women making old-fashioned boyfriend communicating the merits of your brand to a – are supposed to relate to someone waxing jokes and bonding through shared tips on vast number of people, yet too many firms lyrical about how a beauty product has bleach and bifidus digestivum. I don’t want seem to believe that the best way of doing changed their life. One company is currently Michael Winner telling me to “calm down, this is to portray consumers as greedy, advertising a foundation that is 15 per cent dear”, and I don’t feel more affectionate envious, constipated morons obsessed with oxygen at a price that seems a hefty mark-up towards a multinational because it thinks it cleaning products and miracle cures. on air. Others employ the age-old technique has a right to tell me how to live my life I find this surprising. Even if their of bludgeoning us into submission with because it’s a “family company”. assessment were correct, I would have pseudo-scientific terminology and lectures by I cannot be alone in this, surely. I have thought it a more sensible policy for them to spurious “experts”. disposable income. I buy clothes, make-up, present a flattering view of their customers. This patronising approach has extended food and drink. I go to the cinema, I take Political correctness means that we are, quite to food. Life-enhancing yoghurt drinks holidays and I like bubble bath and chocolate. rightly, becoming increasingly aware of the promise to absolve women from the sin of I like being sold to. So why am I so much pitfalls of stereotyping people by ethnic origin, feeling full after a meal – so they’ll have more likely to be alienated than attracted by religion, sex or sexual orientation. But many enough energy to force omega 3 pills down so many of the ads I see on TV? Presumably advertisers seem to have no qualms about their children’s gullets after having fed them a they are effective. Presumably companies portraying women simpering over softer toilet KFC bucket. There’s one company at the can tell how well they’re working. But paper; working themselves into near mania to moment that claims to filter its milk to make it wouldn’t they work even better if they didn’t
G ett y im a ges prevent their loved ones from encountering purer, which prompts the question: purer rely purely on the Barnum principle?
16 financial management >opinion Crying foul When a takeover bid is reported as “hostile”, it’s likely that the target company’s directors are facing a conflict of interests. After all, writes Mike Brooks, it takes a brave turkey to vote for an early Christmas.
The reporting of business activities and seems to reinforce this view: the ineffective and that their own management issues can get pretty confused sometimes. shareholders’ interest simply represents a team can run the company better. If this is Whether this is caused by a lack of cost that the company must bear in order to the basis of the bid, it’s hardly likely to receive understanding among journalists or by a keep them quiet. a sympathetic response. Alternatively, the determination to spin the facts into the most If you think this is a rather extreme bidders may have identified synergies entertaining story possible is a moot point. interpretation, then consider what happens between the two firms and argue that Whatever the reason, it’s often hard even for when what is commonly known as a hostile combining would share resources and cut seasoned followers of business to bid for a company occurs. What is the nature costs. Since the senior management team of distinguish the reality from the story and of this hostility and to whom is it directed? the target is likely to feature in the cuts, it’s make sense of what’s happening. Nowhere is There is surely no hostility between the bidder unlikely to want to vote for a takeover. this more apparent than in the reporting of and the shareholders to whom the bid is There may, of course, be other reasons for takeovers and the behaviour of the target addressed. Why, if you wanted to buy the bid that do not reflect badly on the company’s directors. something from someone, would you treat incumbent directors or threaten their The conventional view of the relationship them in a hostile manner? No, any hostility is livelihoods. Where these are the basis for the between a company’s shareholders and its between the bidder and the board of the proposed deal, it’s more likely that the target’s directors is well established: the directors are target company. board will be less resistant. there to look after the long-term interests of Some people argue that this isn’t real All this is not to suggest that most boards the shareholders. This is not to argue that the hostility; it’s simply role-playing by the board comprise mendacious, self-seeking firm’s other stakeholders don’t matter – on behalf of the shareholders, reflecting its individuals who resolutely put their own satisfying their legitimate interests will genuine belief that the bid is ludicrously interests ahead of those of the shareholders. ultimately also serve the best interests of the inadequate. This, they say, is simply the first It’s merely to draw attention to the problems owners of the business. But the reality of how round of a negotiation in which the directors they face when a takeover is proposed. many modern companies operate seems to are aiming to give the shareholders the best Sometimes the directors’ shrill calls for their differ from the theory. It often appears that value for their shares. company to remain independent sound like a the main purpose of a company is to serve Although this is undoubtedly true, there is plea to be left alone to get on with their jobs the interests of its management team. To also likely to be a conflict of interest in a without the inconvenient attention of outsiders. most outsiders, these individuals are the response that’s typically seen as a reaction to Just what this independence means to company. The shareholders are simply an a hostile bid. Many such takeovers are priced shareholders is hard to define. Surely they amorphous body of people who have well above market value. Unless the bidders would be quite happy for the money that they invested in the company – although even this are irrational – and some are – this suggests have invested to be freed up for another use is not quite correct, since most plc one of a number of things. The bidders may – particularly if they have made a tidy profit on shareholders have not invested directly but be convinced that the target’s board is the deal, of course. So how in these have instead bought their stock circumstances should they decide what to on the market. And the do? This raises another question: should conventional theory of incumbent boards be allowed to advise
Ge tt y imag e s cost of capital shareholders on takeover bids? Answers on a postcard, please.
Mike Brooks is a business writer and consultant.
18 financial management the Yin crowd Those of us who have spent our careers treating management as a science might find the application of methods such as astrology in business alarming, writes Scott Payton. But more and more firms are using them – even though few are ready to admit it.
The corporate world has a reputation for discipline that originated in China 2,000 Business leaders being the realm of the strictly rational, years ago. Gibbins doesn’t simply practise governed by the black-and-white rules of feng shui herself. She has used it to redesign with a mystic side profit and loss. But many business leaders, her company’s logo, refurbish its offices, Dawn Gibbins. The founder and in both the west and the east, are tapping restructure workflows, streamline product chairman of international flooring into less scientific, often far more mystical, lines and motivate her employees. business Flowcrete attributes much of sources to enhance their companies’ “In 2004 the business was getting a bit her company’s success to the ancient art prospects of success. In doing so, they are complicated – and we weren’t really making of feng shui (see main article). raising difficult questions about employment the money we should have been making,” law, the use of shareholders’ money and Gibbins says. Profit margins were narrow, Hans Snook, the half-German, cultural attitudes towards decision-making. product lines were confusing and branding half-British founder and former chief Dawn Gibbins is the darling of the UK was fragmented. executive of mobile phone network, manufacturing industry. She was voted It was at this point that she turned to feng Orange, is a fan of alternative medicine business woman of the year in the 2003 shui. The first of its principles she adopted and feng shui. (Orange is seen as a Veuve Clicquot awards and named “most was to tidy things up. “We cleared the strong colour in feng shui.) He is now the influential person in British manufacturing” company’s physical environment, electronic chairman and main shareholder of the by The Manufacturer magazine in 2006. network and brands of clutter,” she says. Diagnostic Clinic, a London-based In 2007 she received an MBE. The company The brands were the biggest task, centre that mixes western medicine with that she founded and now chairs, because the company had acquired a wli n gs complementary approaches. commercial and industrial floor maker number of different flooring firms around the Flowcrete Group, has a presence in more world. They were all eventually moved to the Dame Anita Roddick. The founder of than 20 countries and is set to generate a Flowcrete brand. The product range was The Body Shop, who died in 2007, was £2.9m profit in 2007 on sales of £42m. also reduced by about half. She then tio n: S teve R a a firm believer in astrology. What is the secret of her success? commissioned a design consultancy to
She puts much of it down to feng shui, a come up with a new company logo that I llust ra
20 financial management financial management 21 Last year the Jilin Jiangshan Human Resources Development Company was reported to have advertised for recruits, specifying that it would consider only candidates born in the year of the dog
followed feng shui principles. “Under feng shui, energy moves from left to right and from Mystical megabucks down to up,” Gibbins says. “The Nike logo, Christeen Skinner offers corporate the negotiating tables of the world, but also for example, is a feng shui designer’s dream consultancy based on analysis of the in the stock market… August 11 could be come true.” solar system at a particular time, the a significant date in terms of US dollar and She showed the proposed design to staff cycles of known planets and the euro trading. Between this date and August and received an overwhelmingly positive principles of feng shui. Her web site 21 the dollar could slide against the euro. response (although a senior business partner (www.christeenskinner.com) explains: It could then recover some ground until the was a notable exception). “In the past there “Our solar system is a busy place. The Sun lunar eclipse of September 9 when the was an element of an ‘us and them’ attitude, itself is an extraordinary generator. euro could gain again, setting a trend that but the new logo has helped to create a real Sun spots appear on its surface and over a is likely to continue for a few months.” team spirit across the world,” Gibbins claims. period of time fall into a complex pattern. Other de-cluttering activities included a This rhythm offers some correlation with Henry Weingarten, fund director of the clear-desk policy, throwing out old office known business cycles.” Astrologers Fund, is a well-known US furniture and generally getting organised. She offers a service compiling an astrologer who has been quoted on Fox “When you invest in the environment, it astrological chart for your company based News and in USA Today. His web site lists makes your people feel good,” Gibbins says. on its date and place of incorporation. past and present corporate clients Whatever your view of her faith in feng “Accurate data is essential,” she says. “It is including TNX Television, Nova Gold and shui, there is no doubt that her business has important to choose an astrologer as Minco Mining. become more efficient and successful since it carefully as you would any professional you In an example of how astrology can help adopted its principles. A £20m turnover in permit into your life.” high-tech companies, he lists “astrological 2004 increased to £26m in 2005. By 2006, Consultations can be done by e-mail, decision support” and a “financial turnover had reached £36m. Profit margins web link and telephone. astrologer” as key factors for success. are improving, too. Skinner is also the author of The “The use of financial astrology offers the Gibbins’ enthusiasm for the business Financial Universe (The Alpha Press, 2004). benefit of foresight to help companies application of feng shui is not as rare as According to the blurb, this “deconstructs build a successful business by providing you might think, according to Jon Sandifer, a the future in clear masterful strokes”. It is original and back-up confirmation decision- UK-based feng shui consultant whose clients “an absolute must-read text not only for making assistance in four areas: when include a wide range of UK companies. But professionals in financial services and (timing); who (personnel); what (mission what is rare is her openness about it. related industries, but also for anyone who definition); and how (strategic planning),” “I won’t name my clients for confidentiality relies on the future for business and he writes, giving examples such as timing reasons, because feng shui is still regarded personal planning.” It highlights periods “to major press releases, currency hedges and as a bit ‘woo-woo’,” Sandifer says. “In larger maximise investment returns and minimise property acquisitions/divestitures, locating companies, shareholders would not like it if portfolio losses through exposure to new factories and agreeing joint venture they got wind that it was being practised.” geopolitical events and circumstances and partnerships or takeover bids. Most of Sandifer’s clients are smaller firms. financial market hot spots.” It also presents Weingarten produces Wall Street, Next “Here you’re dealing with the directors “analysis of the financial astrology behind Week “the leading weekly e-mail market themselves,” he says. “On the corporate previous market events” and forecasts newsletter using financial astrology for front, I’ve not always been that successful future ones up to 2020. market timing and global stock selection”. because of the politics of it all.” An extract from her newsletter reads: Subscriptions range from $360 a year to an Having said that, he does claim to work “Mercury’s return on Friday August 11 to institutional rate for the trading edition of with a couple of “major players” in the the position held on July 5 may be $3,000 a month. Past issues are available business world, who pay him out of their own significant and could be felt not just around at www.afund.com/afundwsnw.html. pockets for advice on their personal office space. “They value their position in the
22 financial management physical structure of the office as being important,” Sandifer says. In many parts of Asia, of course, feng shui is not regarded as “woo-woo”. The practice is widespread in territories with large Chinese communities: Hong Kong, Taiwan, Malaysia and Singapore. “Here, any big boss, whether they admit it or not, is likely to use feng shui in some shape or form,” Sandifer says. On the Chinese mainland it is less prevalent as a result of Mao Zedong’s crackdown on ancient practices during the cultural revolution of the sixties and seventies. Big ch’is: HSBC’s Hong Kong HQ has been HSBC is one large company that’s designed according to feng shui principles. particularly open about its use of feng shui. The bank’s Hong Kong headquarters was built following strict feng shui principles, while HSBC Malaysia’s commercial banking web site even offers feng shui advice to clients Dressed for success (http://snipurl.com/1tket). Beyond the exotic worlds of feng shui and astrology, companies the world over are using Even sceptics would agree that using feng other unconventional methods to improve their performance. Image consultants such as shui to tidy up your office and design House of Colour and Colour Me Beautiful, for example, are being used by a growing your buildings is, at worst, harmless. number of business people – and, sometimes, entire organisations. But many business people are “Ninety-three per cent of a first impression is based on non-verbal going deeper – into the world of communication. Someone’s appearance and body language comprise 55 per Chinese astrology. cent of that,” says Audrey Hanna, business development manager at CMB “Feng shui is about time and Image, the corporate division of Colour Me Beautiful. “Because everything is space,” Sandifer says. “You’ve more competitive these days, image is one way of differentiating yourself.” got to know the dates of birth of CMB Image’s services range from graduate trainee programmes to the key players in a business. bespoke advice for senior managers. “It’s something that people really enjoy This shows up two things: doing, because everyone wants to look their best,” she claims. “The image rules individuals’ strengths and how they that apply in a working environment also apply in your personal life.” relate to other people.” Corporate use of personal image consultancy has really taken off in the UK over the According to feng shui’s astrological past four years, Hanna says. “We’re also getting more requests for workshops and principles, some dates are better for making seminars from the continent, too – especially from eastern Europe and Russia.” business decisions than others, he adds. The service is more popular with banks, law firms and blue-chip firms than with “In Hong Kong, for example, the date to cut a companies in the creative industries. This is because dress etiquette in the corporate deal or start a new company is considered world is getting more complicated, according to Hanna. “There are so many dress codes very important. There are dates in the out there now: business casual, smart casual, business formal. A lot of people are getting Chinese calendar where it’s simply not worth it wrong, often by dressing too casually.” doing anything. In fact, it is suggested that CMB Image also helps companies to develop their own dress guidelines. Spending you are best off spending them drinking wine money on ensuring that employees look smart is not something that firms are shy about. and fishing.” Indeed, CMB Image’s web site (www.cmbimage.co.uk) proudly displays the names of Other forms of astrology are in corporate blue-chip clients including Barclays, PricewaterhouseCoopers and Procter & Gamble. use in mainland China. Last year the Jilin
financial management 23 “Woo-woo” way to yes way
If you are a confirmed rationalist and base all important decisions on logic and empirical evidence, how would you deal with a boss or a board that’s happy to follow a more mystical path? We offer some tips on maintaining a healthy relationship with the other side.
n Do not get drawn into debates about the value of astrological predictions etc. You are unlikely to convert someone who believes in it and the Jiangshan Human Resources Development The biggest market for corporate astrology pointless argument could end up Company was reported to have advertised services is in the US, according to Kapoor, causing a permanent rift. for recruits, specifying that it would consider “although we’ve also got clients in the UK, n Choose the right arguments. If the only candidates born in the year of the dog. South Africa, Dubai – everywhere”. other party’s beliefs don’t make a A group of students from Shanghai’s Fudan Kapoor and his team base their significant difference to the business University complained that the move was predictions on individuals’ times and places in practice, then rein in the scepticism discriminatory, although Chinese law is of birth. “We then tell our clients whether they and go along with them. Be polite and ambiguous in this area. are suitable for a particular job,” he says. accept their beliefs with good grace. The use of astrology in recruitment also How many big companies use astrology n Keep it neutral. If you feel that a occurs in the UK, raising further questions of in this way? It’s hard to say, as most are decision based on supernatural advice legality. One CEO of a UK firm, speaking on understandably wary of publicising such could lead to financial losses, damage condition of anonymity, admits to using activities. Even in parts of East Asia, where investor relations or put you in a astrological studies of candidates’ birth dates astrology is widely accepted, many business difficult position professionally, try to as a substitute for psychometric testing. leaders are reluctant to say that they use it for argue your point purely on the “If you’re recruiting someone whom you fear of scaring off western customers, business case. State the risks clearly want to launch a project, you want to make partners and investors, according to Sandifer. without using financial jargon. Point out sure that their sequence is good,” he says. Back in the UK, Gibbins plans to improve potential negative effects on, say, PR The CEO keeps this practice quiet for two the reputation of feng shui through her work without discussing your own beliefs. reasons: first, because it is a potential breach with the British Feng Shui Society. “I’m As with all disagreements, keep a of employment law; second, because he coming at it from a corporate angle and record of discussions. fears that it will scare off potential recruits saying that we do need to change the n Compromise. Search for a way to who may find the use of astrology unnerving language a bit, because it does frighten bypass the issue. For example, if your – or just plain mad. people sometimes,” she admits. “There are CEO won’t do a deal on a certain day, Corporate astrology is widespread in India. many mystical elements, but a lot of the ask for a list of days that he feels are And, thanks to the internet, many of the basics are really only common sense.” more auspicious. If the board wants country’s astrologers are serving companies Sandifer believes that business leaders to spend vast sums on rearranging around the world. Kamal Kapoor runs a are ready to listen. “If you look at feng shui the office to suit feng shui principles, sophisticated “vedic astrology” web site from going back in time, it was used primarily by find out whether there are other Delhi (www.kamalkapoor.com). His services emperors in the Imperial Courts of China changes that would be beneficial that focus on recruiting the right people. rather than by the layman. Today, the new could be done at the same time. “For example, the head of finance and empires are corporations – and their leaders n Stay involved. Do not opt out of a accounts should have good Mercury and are the new emperors.” project just because you disagree with Jupiter,” he writes on his web site. it. You are more likely to limit risks and “Similarly, the quality-control head should Scott Payton is a freelance business maintain strategic focus from the inside. have good Mercury and Venus.” journalist and editor. n Do not put yourself at risk. If you’re unhappy with the ethos of the firm, it Further reading is probably time to look for a new job. If you feel there are ethical issues, R Rigby, “When stargazers can see corporate troubles coming”, visit www.cimaglobal.com/helplines. Financial Times, October 9, 2007 (http://snipurl.com/1tkg6).
24 financial management Carbon dating The UK government’s new carbon reduction commitment is the first mandatory auction-based trading scheme of its kind in the world. Defra’s Leanne Jones explains the implications for businesses.
26 financial management Carbon dating The UK is demonstrating its commitment market. Participants can trade the allowances How will it work? to leading efforts to tackle climate change among themselves, depending on whether Participants will buy their allowances at with a new mandatory emissions trading they can make cost-effective reductions. auction. This avoids long negotiations and scheme, expected to begin in January 2010. A cap-and-trade scheme already exists at a allows them to determine their own emissions The carbon reduction commitment (CRC) will European level – the EU emissions trading targets within the overall cap. But, to ease target energy-use emissions from large scheme (EU ETS) – and the UK ran a pilot participants into the new regime, there will be non-energy-intensive businesses and voluntary emissions trading scheme (UK ETS) a three-year introductory phase when public-sector entities, such as large retail that finished at the end of 2006. allowances will be sold at a fixed price. This organisations, offices, banks, universities, will also allow the government to collect hospitals, large local authorities and central Who will it affect? accurate data on emissions across the sector government departments. It will be the The CRC will target the highest UK parent that it can use to set the cap. world’s first mandatory auction-based trading organisation. If this meets or exceeds the The scheme is not a tax-raising exercise scheme for such organisations and will 6,000MWh consumption threshold, it will be and will be broadly revenue-neutral. All the increase their contribution to cutting the UK’s responsible for reporting on its total energy- money raised at auction will be recycled to carbon emissions. It could also save use emissions, including those of its participants via a simple annual payment them money. subsidiaries. If you are in a proportionate to average annual emissions The CRC is intended to save subsidiary of a qualifying since the start of the scheme, with a bonus 1.1 million tonnes of carbon organisation, therefore, you will or penalty depending on the organisation’s (MtC) – or 4Mt carbon dioxide need to pass on information position in a performance league table. – a year by 2020. Organisations about your energy use to your This league table is an important element will be covered by the parent company so it can report of the scheme and is designed to motivate scheme if their mandatory at the end of each year. If you are organisations through their concerns about half-hourly metered electricity in a parent organisation, you will their reputations, as well as its effect on their consumption is greater than need to collate and report on the revenues. League positions will be 6,000MWh a year, so it will generally affect mandatory half-hourly metered electricity determined by performance against up to organisations that pay annual electricity bills consumption data for your own organisation three measures. The first is the “core absolute of over £500,000. Such large organisations and your subsidiaries. metric” that will measure an organisation’s should find that the benefits gained from To minimise policy overlap, the scheme will annual emissions relative to its average energy efficiency measures should cover emissions outside the climate change emissions since the start of the scheme. outweigh the costs of participating in the agreements (CCAs) and the direct emissions Further measures could be included to scheme. It is expected to affect between covered by the EU ETS. In addition, firms recognise factors affecting participants’ 4,000 and 5,000 organisations and, at with more than 25 per cent of their energy- performance in the core absolute metric, present, this sector accounts for 14MtC use emissions in CCAs will be exempt. such as business growth and action taken (or 51MtCO2) – almost ten per cent of the UK’s economy-wide emissions. The CRC will operate as a cap-and-trade How does the CRC fit international schemes scheme, under which the government will determine the total number of emissions that and developments in other countries? can be made by the target sector and will This scheme is the world’s first mandatory auction-based trading scheme for this sector and distribute a corresponding number of demonstrates the UK’s leadership in tackling climate change. Defra is aiming to illustrate allowances to participants (the cap). The cap that environmental objectives can be achieved while maintaining a vibrant economy and a will be tightened periodically in line with fair society. Every part of our economy and society, from central and local government to environmental objectives. The certainty of the large and small businesses, individuals and communities, must do its bit. The CRC is a key environmental objective is maintained by the part of responding to the challenges we face in addressing climate change. Defra has had absolute nature of the cap – ie, the target considerable interest from policy officials and academics in other countries and it continues sector cannot legally emit more CO2 than the to keep informed on international developments and proposals.
total number of allowances released to the Main i m age: G etty ages
financial management 27 For every tonne Who is affected? The finance team is likely to take of CO2 that an responsibility for purchasing CRC allowances, so it is important that you talk to your environment/energy/facilities organisation can reduce, team(s) to understand how your organisation uses energy and explore opportunities to it will have to purchase reduce consumption. Given that CRC will target the highest UK parent organisation, it and retire one less would also help if, before the scheme starts, you consider your organisational structure and how it will affect the way you gather before the start of the scheme. The proposed necessary CRC information. The financial measures are: an early action metric, measuring the extent to which a company Opportunities and risks responsibilities of has implemented automatic metering beyond The CRC is designed to promote energy the legal minimum; and a growth metric, efficiency and deliver carbon savings through participating entities which would measure the percentage financial and corporate social responsibility under CRC reduction in carbon emissions per unit (CSR) drivers. Participants will have to turnover since the start of the scheme. purchase and retire allowances corresponding Forecast emissions for the The government has also proposed a to their annual CO2 emissions. The financial compliance year, taking into CRC safety valve (a moderated buy-only link driver is simple: for every tonne of CO2 that an 1account energy-efficiency/carbon- to the EU ETS featuring a floor price) to organisation can reduce, it will have to abatement strategies. This information prevent the price of allowances from spiking. purchase and retire one less. The revenue will be valuable for developing a bid recycling mechanism and bonus or penalty schedule for the auction. Monitoring, reporting and audit payment will reinforce the scheme’s financial At the start of each year, purchase Organisations will be able to self-certify their driver by introducing further incentives for allowances from the auction annual emissions, in the knowledge that organisations with declining emissions. The 2(or fixed-price sale during the around 20 per cent will undergo an CSR motivators are created by league tables. introductory phase) according to your independent risk-based audit. It is proposed In addition, the monitoring and reporting abatement strategy. Note that you will that the Environment Agency, the Scottish requirements will improve information at not be legally obliged to take part in the Environment Protection Agency and the corporate level and the quantity-based nature auction (you could choose to buy Department of the Environment Northern of the scheme will encourage organisations to allowances only on the secondary Ireland will regulate and audit the scheme. set themselves an emissions reduction target market or through the safety valve). The monitoring and reporting aspects are and develop a compliance strategy. Monitor, assess and manage designed to be administratively lighter than Analysis indicates that most CRC emissions throughout the year EU ETS, but without compromising integrity. organisations should see net benefits. The 3 (January to December). If necessary (or desirable), you could also buy or sell allowances Start planning now is over the 6,000MWh threshold) will be 4on the secondary market, or buy 2008. The first stage of identifying CRC through the buy-only link to EU ETS participants will start in 2009 and detailed (the safety valve). Defra ran a consultation on the information packs will be sent out in early Report emissions and surrender implementation proposals for the CRC 2009. The scheme is expected to begin in sufficient allowances to cover your from June to October. The government January 2010. 5emissions – surrendering plans to publish its response to that At this stage, financial managers in allowances will be a legal requirement. consultation in January and to issue a potential participating organisations may You (or your energy manager) will need detailed consultation on the CRC find it helpful to start conversations with to do this via an online registry. regulations next summer. The proposed colleagues – environmental managers, Receive your recycling repayment climate change bill will be the legislative parent organisation contacts, subsidiary proportionate to your organisation’s vehicle for the CRC. It contains enabling organisations etc – to ensure that they are 6annual average emissions powers to introduce new trading schemes. in the best position to estimate the number reductions since the start of the scheme, The proposed qualification year for of allowances they will need to buy and plus or minus a bonus or penalty based assessing entry into the CRC (the year retire, and to review energy-efficiency on your position in the league table. used to establish whether an organisation measures across their organisations.
28 financial management total costs and benefits of the scheme have been calculated in the CRC regulatory impact assessment, which is available on the Defra web site. Based on a ten per cent commercial discount rate, the proposed scheme would have a £755m private net present value (NPV). Using a social discount rate of 3.5 per cent, the NPV is £1,919m. When the carbon savings and air quality benefits are also valued, the overall NPV becomes £3,245m. It is clear, then, that there are many financial opportunities for participating organisations – the most basic being lower energy bills. Other advantages will follow – for example, a firm that reduces its emissions and retires fewer allowances than it acquired at the start of the year will have allowances to sell, so allowances Hot spots can be regarded as an asset. In addition, the scheme offers incentives Martin West and Kate Terriere for long-term energy-efficiency investments, which may previously have been rejected offer advice on how to benefit from because of long pay-back periods. It provides more alternatives for an organisation seeking sustainable property performance. to manage energy usage. But it’s clear that these opportunities could turn into risks for a “It is not the strongest of the 60 per cent of the average tenant’s energy CRC organisation if they are not realised. species that survives, nor the most bills, so efficient management can cut such Penalties for non-compliance will be in line intelligent, but the one most costs significantly. with standard government frameworks. Types responsive to change.” Charles Darwin. So far, government and industry efforts of offences – eg, failure to provide information to reduce carbon emissions have tended to or to comply with an enforcement notice – Climate change affects us all. The focus on new buildings, as these account will be treated the way that the relevant government has committed the UK to for a greater proportion of the UK’s regulator uses to enforce environmental reducing its carbon emissions by 60 per emissions and are easier to regulate. But regulations. For other offences, we propose cent and has set specific targets for they comprise less than two per cent of the that CRC penalties should be similar to those different sectors. Nearly half of the UK’s total building stock, so the biggest under the EU ETS. Offences applicable for energy consumption arises from the way in challenge is to deal with older properties the CRC are likely to fall into three categories: which we light, heat and use our 25 million through retro-fitting and refurbishment. n Participation in the scheme. buildings. Non-domestic buildings The wider benefits of a sustainable n Reporting of emissions and surrender represent 18 per cent of total emissions. approach to management include: of allowances. It is clear, therefore, that the use and n Enhanced business reputation. n Sale/auction of allowances. management of our buildings has a n Improved ability to attract and retain Busy times lie ahead and we are working to significant impact on carbon emissions. high-quality recruits. build relationships with all our stakeholders. Reducing energy consumption not only n Greater employee health and productivity. reduces carbon emissions but also n Improved risk management. Leanne Jones is policy adviser for the generates cost savings. There is often n Increased profitability. carbon reduction commitment. misunderstanding about the benefits of implementing energy-saving initiatives, but How to cut your firm’s emissions Further information research has shown that simple measures, To implement effective change it is vital that such as installing energy-efficient light there is high-level commitment in the For more guidance on the bulbs, can generate typical savings of organisation and support across the firm. CRC, visit the Defra web site 25 to 30 per cent. Small changes really can You need a focused team headed by a (www.defra.gov.uk/environment/ make a big difference. practical, enthusiastic and knowledgeable climatechange/uk/business/crc/ Heating, ventilation and air conditioning leader. A project plan should set out the key index/htm) or e-mail account for around a third of total strategic drivers relevant to carbon [email protected]. energy costs in commercial buildings. management and you also need a plan for Lighting alone accounts for more than implementing change to reduce emissions.
financial management 29 You may need to explore and evaluate a number of options and assess the costs and benefits of possible interventions Case study: how Drivers Jonas became and technologies. the first CarbonNeutral property company Once this is done, you can finalise a strategy and In September buildings were the largest through the CarbonNeutral implementation plan that sets 2006 Drivers contributor to its carbon Company and invested in out the organisation’s Jonas (DJ) footprint. This led to the four projects: objectives and actions, and became the following actions: n Energy-efficient lighting in establishes the roles and first property n Converting the offices in Jamaica: tourism is the responsibilities for company Grosvenor Street, biggest employer on the achieving them. You must to be London, Slough island and its ongoing gain formal approval from accredited as and Glasgow to viability is crucial to the senior management and CarbonNeutral. renewable electricity. economy. Promoting the communicate this strategy to The firm has n Contacting the landlords use of energy-efficient key stakeholders so they can been active in of all the other buildings light bulbs in hotels agree to it. corporate social to urge them to convert cuts the amount of fossil Communication is key to the successful responsibility (CSR) for these to renewable fuel burned. implementation of a carbon management several years and energy – which led to n A new wind farm at programme. Raising awareness and becoming CarbonNeutral the discovery that the Manawatu Gorge on the educating staff about the issues and the fitted its CSR objectives. Manchester office was North Island of New need to reduce energy consumption will have It also believed that already doing this. The Zealand: Ti Apiti wind a significant impact. Research has shown accreditation would boost Birmingham location farm can generate that firms can save up to 25 per cent of their awareness of the DJ brand, converted to renewable power for up to 45,000 energy costs simply by persuading staff to promote the company in energy in 2007. average-sized homes. conserve energy by switching off lights etc. the sustainability sector and n Initiating and n A forestry project in Your building may be built to an “excellent” contribute to top- and implementing a “Switch south-west Uganda rating under the Building Research bottom-line performance – it off” campaign in that works with local Establishment environmental assessment all of which benefits have conjunction with communities to method, but how it is used and managed is been realised. The Carbon Trust. provide employment fundamental to how much it saves. DJ first became n Relaunching its recycling and a source of A number of initiatives and involved with the policy to encourage all sustainable timber. technologies can help to reduce carbon CarbonNeutral Company in employees to recycle n Northcombe Wood, emissions. These include: the summer of 2004, when more and reduce the Devon: a project using n Installing energy-efficient light bulbs. it was assessed by the amount of waste the firm tree planting to aid n Switching to a renewable or low-carbon Edinburgh Centre for sends to landfill sites. rural regeneration electricity supplier. Carbon Management n Creating a technology after more than 50 n Using energy-efficient products (such as (ECCM). But it did not act fund to reduce years of intensive white goods). on this assessment until electricity use – for farming had depleted n Generating energy on site. January 2006, when it example, by switching wildlife and forestry. n Efficiently managing heating, ventilation appointed a new COO with photocopiers off after In future the firm aims to and air-conditioning systems. specific responsibilities for two hours’ inactivity and reduce its footprint further n Improving insulation. making the company using Intelliplugs, which by converting more n Installing light fittings with built-in CarbonNeutral. switch off all PC buildings to renewable occupancy detectors. Using the carbon peripherals when the resources, reducing n Introducing sustainable transport plans. assessment as a starting PC is switched off. electricity consumption and Not all of these solutions will be point, the first task was to A reassessment by increasing its recycling. appropriate for your organisation, of course. reduce the firm’s carbon ECCM in July 2006 found This is being co-ordinated The key to achieving positive change is to footprint before starting to that DJ had reduced its by an environmental ensure that solutions are relevant and specific offset remaining emissions. carbon footprint by 15 per management system and to your business’s requirements. After analysing the report, it cent per person. On the ISO14001, which should Remember that reducing carbon became clear that carbon basis of this, DJ established exist in all DJ’s UK locations emissions is not always simply about emissions from DJ’s an offset in September 2006 by the end of 2007. reducing energy consumption. A company’s
30 financial management operations have a much wider environmental impact, so you need a holistic approach. For example, to operate in a truly sustainable manner you must factor in other issues such as emissions from the firm’s vehicles and staff transport, or your supply chains and procurement policies. Property management could be part of a Barclays Bank’s HQ in London cuts energy use wider sustainability strategy that addresses with features such as lights controlled by interrelated issues focusing on sustainability occupancy sensors, recycled heat and recycling and enhanced performance. This kind of at all desks. The site is reclaimed land and the joined-up thinking and whole life-cycle building will have its own water bottling plant. costing will ensure not only that you manage your buildings and resources three-year period and will affect both see whether they would encourage greater efficiently, but also that your business and residential and commercial property. The sustainability in UK property stock: commercial sustainability really works. certificates are broadly similar to the labels discounted non-domestic rates for that rate domestic appliances, such as sustainable buildings; widening the scope of So why change? refrigerators and washing machines, from capital allowances on energy-efficient plant Apart from the social and economic benefits A to G (where A is efficient and G is and machinery; reduced VAT on of adopting sustainability principles, there is a inefficient). There are two types of energy refurbishment and sustainable building forthcoming mandatory requirement: the certificates for new and existing commercial materials; and exempting sustainable carbon reduction commitment (CRC) will buildings – energy performance certificates properties from stamp duty. These were well apply mandatory emissions trading to cut (EPCs) and display energy certificates (DECs) received and the idea that sustainable carbon emissions from large commercial and – both of which will affect some buildings as property should be exempt from stamp duty public-sector organisations (see main story, early as April 2008 (see panel, below). received the highest vote – 73 per cent. page 27). The full impact of EPCs on the property There is increasing evidence that But before the CRC is implemented in market is uncertain, but research by Drivers organisations will pay a premium for “green” 2010, energy performance certificates will be Jonas and Kingston University indicates that, buildings, with occupiers being prepared to required for all new and refurbished buildings anecdotally, there is increasing evidence that pay up to five per cent more rent. A recent sold or leased after October 2008. The the property market is taking sustainability study surveyed a number of the largest scheme has been introduced through the seriously. In particular, firms are focusing on property investors and 94 per cent of European energy performance of buildings its effect on prices. The researchers also respondents said they considered directive, which is being phased in over a market-tested a range of fiscal incentives to sustainability issues when they considered property purchases. Property investors also clearly see publicising their green credentials EPCs DECs as an important benefit, as many were planning to do so in the future. n From April 2008 EPCs are required for n From October 2008, public buildings The reduction of carbon emissions is a the construction, sale or rent of all over 1,000m2, occupied or part- key factor in the fight against climate change. non-dwellings with a floor area occupied by public authorities or by But sustainability is about more than simply exceeding 10,000m2. institutions providing public services reducing energy and water use and cutting n From July 2008 EPCs are required for and, therefore, frequently visited by the waste. It is about a holistic approach to the construction, sale or rent of all non- public, will require DECs. addressing a number of key issues that can dwellings with a floor area over 2,500m2. n This certificate gives an help to enhance property n From October 2008 the requirement operational rating based on performance – the effective use will be extended to all non-dwellings actual energy consumption of space and the efficient sold or rented. over three years and must management of resources. n From January 2009 the first inspection of be displayed publicly. air conditioning systems larger than n The DEC is in addition to Martin West ACMA 250kW must have occurred. the requirement for an is partner, strategic n From January 2011 the first inspection of EPC when a public consulting, and all remaining air conditioning systems building is constructed, Kate Terriere is over 12kW must have occurred. sold or rented out. senior consultant at Drivers Jonas.
financial management 31 >careerdevelopment Practice makes perfect Mark Allen offers a personal perspective on the rigours and rewards of working as a CIMA member in practice.
I believe that many CIMA members are unaware that the choices available to them include becoming a member in public practice or a practising consultant. Both of these options offer you the chance to get rid of the shackles of employment, set your own goals and prices and choose the people you work with. CIMA focuses primarily on accountants in business, but two per cent of its members (about 1,350 people) are registered members in practice (Mips). This is an important career choice for a CIMA professional. Support from the institute, as well as networking, is vital. Representatives on the members in practice management group (MIPMG) are often asked what benefits come from registering as a Mip. For nearly 15 years CIMA has required members offering accountancy services to the public to register annually, and the MIPMG is dedicated to improving the visibility of, and service to, Mips. In broad terms, if you offer accountancy services to the public, including companies and other organisations, you are required to register as a Mip (there are a few exceptions under council regulation 7.1.2). It is worth noting that even part-time work can render you liable to register. This requirement applies worldwide. Do not put your membership at risk – ignoring the requirement could lead to a summons to appear before the conduct committees. The registration principle was agreed by CIMA’s governing council and by CIMA members at the annual general meeting and has been revisited and consulted on several times. A Mip, especially a sole trader, does not the only individual accolade normally available contracts in both niche and fundamental have a framework, as they would in a large to members (apart from membership). areas of activity. Some provide only enterprise, to provide support or a steadying Gaining the certificate not only shows that bookkeeping and general accounting hand in a crisis. That support is provided by you comply with CIMA’s rules on continuity services, while others specialise in areas CIMA’s regulations, the members’ handbook arrangements, professional indemnity including business tax planning, business and the MIPMG’s committee. insurance, terms of engagement and internal process improvement, cost reduction, Since 2005 Mips have also been required, complaints-handling procedures; it also cash flows and management performance after a year in practice, to apply for the CIMA demonstrates references from clients and reports. Some Mips offer specialist practising certificate. This demonstrates the recognition by fellow professionals. knowledge of particular industries or institute’s commitment to the member, as it Practising members offer a wide range organisational sectors and others are
o n : s y d bra k Illu strati shows recognition by their peers and offers of skills and can deliver projects and competent to act as expert witnesses. Not
financial management 33 >careerdevelopment
all of them are long-term Mips – some Why should I choose to percentage remains have held senior roles in large be a Mip? constant today and organisations before moving into practice. A survey by the European these businesses Most work in firms of three or fewer Commission 12 years ago need the skills we partners and some operate in mixed identified that 96.4 per can provide. practices or associations, where they can cent of employers in the Small firms can access the professional skills of non- private sector employed pay between accountants or other sorts of accountants. ten or fewer people. That £45,000 and £70,000 for an FD, while for medium- Some of the benefits of Mip sized businesses this rises to between registration and sensible regulation £60,000 and £120,000. As a result, more are turning CIMA and professional benefits entrepreneurial once they make the to professionals they can hire on n Professional standing: you can display move to self-employment or become a “pay as you use” or retainer basis. a practising certificate, once awarded, owner-managers. They rapidly develop The SME market needs our skills, not to promote your business. new skills in sales, marketing and more auditors. These businesses are being Certificate-holders can use a special business strategy management. told by their banks that they must have good CIMA logo on their letterheads, n Choose your customers: you can work financial systems and advice. brochures and business cards. with the people you want to work with. I am convinced that lifestyle choices and n Networking opportunities: you can share n Choose where you work – at home, market forces will mean that increasing practical tips with experienced Mips. abroad or a mixture of the two. numbers of students and members will go n Professional support. into practice – and I believe that it’s better to n Help in forming strategic alliances. Personal benefits choose to go into practice than to do it as a n You fix your own remuneration: there are reaction to external situations. Marketing and development significant opportunities to increase your n Discounted training courses and Mip earnings (several of these are highlighted What do Mips do for the institute? skills workshops. in Mip skills workshops). Mips show integrity and professionalism, n Relevant professional practice guidance n You choose the hours you work – constantly providing evidence of the and technical updates. whether you want more time with the benefits of CIMA. We aim to raise the profile n The Mip annual conference. family or more time on the golf course. of the qualification for the benefit of all n CIMA regulation, which shows that you n Reduce your commute: many Mips members and students. Many Mips employ conform with the institute’s professional work from a home office so save time CIMA trainees – my own practice employs and technical standards. and money travelling to work. two CIMA members and a student. n A principles-based code of ethics. n Retirement planning: take control of We have also recruited three studying for your pension provision, whether this is the ACCA qualification, despite our Career benefits through self-administered schemes, a preference for CIMA. If more students n You become your own boss – with all the stakeholder plan or your own choice of become aware of the practice option, freedom and responsibilities that brings. personal investments. perhaps more will choose CIMA. n Entrepreneurial opportunities: Mips get all these benefits for an annual accountants tend to become very fee of £64. Mark Allen is chairman of CIMA’s members in practice management group.
Further information If you want to discuss a project with a Mip, a You can contact me at [email protected] database of practising certificate-holders may be (01789 294484) with any queries about setting up in accessed at www.cimaglobal.com by clicking on practice, registration or skills workshops. I also edit “Members”, then “Members in practice” and “Find a the Mip quarterly newsletter, which you can find by practising accountant”. If you want to learn more searching for “Mip news” on www.cimaglobal.com. about being a Mip, you could attend a skills The full text of the relevant council regulation workshop arranged by the MIPMG committee. about who must register as a Mip may be found in These are run by practitioners for practitioners. the charter and bye-laws on the CIMA web site.
34 financial management >technicalmatters
42 Forecasting Strategic global
44 management Money-laundering In the first of two articles,Louise Ross explains the development of an open, collaborative and effective new organisational form: Business 2.0.
Developments in IT have brought about outside the organisation’s boundaries – a new mechanism for doing business – practising a number of the approaches that e-commerce – but they’ve had even more I’m going to describe. The team is interested significant consequences than the in how IT developments such as free internet introduction of new processes and channels. telephony and open-source software are They have also affected organisational design changing organisational practices and and the way that enterprises view their structures so as to promote the sharing of customers and competitive landscapes. information and the formation of relationships The old business model of hierarchies, with sometimes unexpected parties. spans of control and intellectual capital The team has identified three innovative protection is being replaced by a new model new organisational behaviours, which can be of chains, spans of communication and grouped under the following headings: knowledge-sharing. Some organisations are n “Boundaryless” behaviour, which is the mutating into new forms, often characterised focus of this first article. by their lack of boundaries. In the same spirit n New competitive paradigms. as we talk about Web 2.0 – the “new” way of n Acting globally. using the internet – we might refer to these Everyone agrees that the business world is emerging forms as Business 2.0. becoming increasingly complicated. In the CIMA’s Innovation and Development ubiquity stakes, the “change is the only team is made up of staff, academics and constant” cliché ranks right up there with CIMA members who meet both face to face “people are our most important asset”. There and virtually to access knowledge from is a school of thought which advocates that
Johnson’s and Scholes’s model of strategic alliances
LOOSE (MARKET) CONTRACTUAL FORMALISED OWNERSHIP/ FORMAL INTEGRATION RELATIONSHIPS RELATIONSHIPS RELATIONSHIPS
Networks; Subcontracting; Consortia; FORMS OF ALLIANCE Mergers and acquisitions opportunistic alliances licences and franchises joint ventures
Asset Assets do not require Asset management can Assets need to be jointly managed management joint management be isolated
Asset Assets cannot be separated Assets/skills can be separated separability
INFLUENCES Asset Low risk of asset appropriation High risk of asset appropriation appropriability
36 financial management companies shouldn’t try to predict change; of IT is another example of the shift away partnerships or other collaborative they should simply be as flexible as possible from the middle, which is also seen in the relationships. They viewed themselves and adapt to whatever comes. In their article “delayering” of middle management in differently from traditional organisations, “Where value lives in a networked world” many organisations. which define themselves with reference to (Harvard Business Review on Advances in The trend for information to become hierarchies – eg, a group and its subsidiaries Strategy, Harvard Business School Press, increasingly modular and fluid allows firms to – or to legal and employment relationships. 2002), Mohanbir Sawney and Deval Parikh pool their resources in temporary or They considered themselves part of a write that many of the upheavals taking place permanent alliances – Sawney and Parikh call network, working (often in an seem to have a common cause: the them “plug-and-play enterprises” – in interdependent manner) towards the changing nature of intelligence in networks. order to exploit specific market common goal of satisfying their They argue that, although this sounds opportunities. Owning the shared customer. abstract, it has immediate effects on how intelligence takes a back This is an emerging companies organise their workforces, market seat to orchestrating it. field that has been their products and manage their relationships. Just as the conductor largely unresearched Companies that are aware of these influences of an orchestra so far. Commentators will be able to exploit change instead of receives most of have used a variety of merely reacting to it. the plaudits, more terms to describe Sawney and Parikh identify two ways in money is made by such networks. These which new trends in network intelligence those who include virtual teams, are reshaping organisations and industries. co‑ordinate the strategic sourcing, First, they say that intelligence is “decoupling” interactions of a outsourcing, offshoring, – ie, being pushed to either end of a network. network of partners. emergent organisations, Second, they argue that it is becoming more Sawney and Parikh inter-organisational fluid and modular. Front-end IT (laptop PCs) propose four strategies to networks, “co-opetition”, has to compromise on processing power and allow companies to benefit from knowledge exchanges, business data storage, but when it is networked it can the trends they have observed: ecosystems, electronic markets and access powerful back-end IT (the servers that n Arbitrage: moving intelligence to areas organisations without boundaries. store and process huge amounts of data). where the cost of maintaining it is lower. A conventional organisation interacts with The front-end IT can thereby be liberated to n Aggregation: combining formerly isolated parties including its employees (inside the focus on specialised functions that have been intelligence into a shared pool that organisation), customers (outside), suppliers customised to suit particular customer-facing networked front-end users can access. (outside) and competitors (definitely outside). tasks. In this way, back-end intelligence is n Rewiring: creating a common information These relationships, which obviously influence consolidated into a shared infrastructure at “backbone” to connect intelligence. the organisation, are often illustrated by the the centre, while front-end intelligence n Reassembly: reorganising intelligence into value chain model (see Study notes, page becomes far more variable, taking many customised packages for customers. 48). Within this analogy, concepts are fairly forms according to the needs of the field They write: “Put simply, the digitisation of robust – eg, the status of being either part or operations. Sawney and Parikh believe that information, combined with advances in not part of the chain, or the idea that a limited most economic value will be created at the computing and communications, has number of participants are playing predictable ends of networks. fundamentally changed how all networks roles as specific links. For the boundaryless As this divergence occurs, organisations operate, human as well as technological. organisation, I prefer the image of a cloud or recognise that it creates separate That change is having profound galaxy. This represents a more amorphous businesses of infrastructure and customer consequences for the way work is done and population of independent partners whose relationship management, which require value is created throughout the economy.” boundaries are flexible and permeable – if different strategies and capabilities. At the The CIMA Innovation and Development you can spot them at all. back end, for example, economies of scale team first considered practices in the The table on the opposite page is a useful and the benefits of interconnections will tend “boundaryless behaviour” category – where model for describing the range of different to consolidate generic processing and organisations had recognised the need to strategic alliances, as proposed by leading storage functions. At the front end, the become more flexible to meet customer strategy writers Gerry Johnson and Kevan company can create highly customised needs and had engaged in offshoring, Scholes (adapted from a 1991 diagram by connections to customers. This polarisation outsourcing, joint ventures, supplier Anil Gupta and Harbir Singh). CIMA considers
financial management 37 >technicalmatters
issues concerning the management, ultimately transformed ownership and protection of assets to be the company. relatively important, which is why it mentions Wikipedia is probably them in its call for research on the subject the best-known (see “Further information”, page 40). organisation that shares Much has already been written about more than an asset: supply chains and outsourcing, so arguably the development of the most interesting arrangements among the product itself. those listed in the table are networks and Because the online opportunistic alliances. The organisations that encyclopedia’s contents have made the daunting decision to share are generated by its hitherto protected knowledge assets have users, it is also probably learned from the open-source model of Linux the most famous case of a significant A further example is the Doe Network, a and the internet itself. Both of these problem with the networked model: the ability community of like-minded individuals that applications could have earned their creators of its community to contribute inaccurate developed from a Yahoo-based discussion a fortune, but they were shared in the public material. Wikipedia has had to compromise group. Using only information available on the interest instead. It was a company from a its model, much as Google did in order to be web, these unpaid investigators match very traditional industry, mining, that made able to operate in China. It has severely unidentified corpses whose pictures are one of the first brave and successful leaps. restricted users’ ability to amend material that posted on the web sites of local morgues The case of Goldcorp is discussed by Don is particularly liable to vandalism – eg, the with missing-person cases taken from Tapscott and Anthony Williams in Wikinomics: entry for George Bush. Such controls have message boards and newspaper reports. How Mass Collaboration Changes Everything not entirely cured the quality problem. If we So far, the network has helped to solve 38 (Portfolio, 2006). The firm’s CEO knew that can rely on its own entry, Wikipedia admits cases, often stretching back many years. the business would be in terminal danger if it that most schools won’t let students cite it as Similarly, volunteers analysed satellite failed to find new gold deposits, so he took an authoritative source. images in virtual searches for Steve Fossett, the radical step of publishing the company’s The SETI@home project is another case of the aviator and adventurer whose aircraft geological data – previously considered distributed computing effort. Here the went down in the Nevada desert in proprietary and strictly confidential – on the community contributes capacity rather than September, and for the Microsoft scientist internet. He then challenged people to content. Individual domestic computer Jim Grey, whose boat went missing off the suggest which new sites and methods it owners “donate” their disk space or idle coast of San Francisco last January, but sadly should try at its mine in Red Lake, Ontario. processing power to analyse data in the without success in either case. The participants in these projects are not paid. They are motivated by other considerations – eg, the desire to express Volunteers analysed satellite their views or use their talents in support of what they consider to be their community. images in virtual searches for Problems can arise when non-experts confuse or interfere with the professionals’ activities. If your community is merely a Steve Fossett, the aviator bunch of people with time on their hands to make uninformed or malicious contributions, whose aircraft went you’ll experience the “Wikipedia problem”. In the examples above it would have been easy down in the Nevada to exclude unwanted contributions by restricting people’s opportunity to participate. desert in September But there is a big amateur-expert community that you must treat with respect: your Goldcorp, which was offering a prize of nearly search for extra-terrestrial life. Over 5.4 million customers. Ignoring them is not an option. £300,000 for the best suggestions, was users have contributed more than 2.4 million Since the advent of Web 2.0, customers staggered by the quality of the response. years’ worth of computing time to this ad-hoc have become better informed and more It had tapped a wealth of expertise it didn’t network, endowing it with a processing powerful. They use price comparison web even know existed. Of the targets identified capability many times more powerful than the sites, which often also include user reviews. by these new collaborators, more than world’s single fastest computer. Similar If they have a special interest, such as the 80 per cent yielded substantial quantities of distributive computing projects exist for other carbon emissions of different car models, the gold, which was worth $3bn in total. This key scientific studies, such as the human relevant information is out there. They can initiative started a series of innovations that genome project and FightAIDS@Home. organise themselves to lobby companies
38 financial management about issues of corporate social responsibility upgrades. Some manufacturers offer Some companies involve customers at a or to campaign for them to revive products customisation as a product attribute. For deeper level from the earliest stages of that had been retired – eg, Cadbury’s Wispa example, car makers have web sites that mix design. For example, some consumer chocolate bar in the UK – or restore the high-resolution graphics with multimedia tools electronics manufacturers are enlisting formulations of products that had been to allow potential customers to customise a volunteer developers and ordinary consumers changed – eg, Coca-Cola. new car virtually. But this is still customisation and are using open-source methods to A Business 2.0 company will use within the limited range of options offered by design their next generation of products. innovative new ways to connect with these the manufacturer, allowing customers to pick Open-source methods mean sharing the customers. Whether their opinions are their design, not influence it. development of a product so that anyone can favourable or not, if customers are motivated Business 2.0 companies know that more use, adapt or build on the work of others. enough to communicate with a company, radical consumers exist. They are the There is no attempt to protect or license this is a source of valuable intelligence. One customers who activate features on products intellectual capital. The term “open source” method is the corporate blog. Blogs are less that are covertly included but disabled was first applied to the process by which formal than many other types of business pending a future upgrade. They are the Linux software and the internet itself was communication. They seem to bridge the gap customers who somehow obtain product developed, but it’s also used to refer to a between companies and their customers in a specifications and publish them on the web general approach to accessing the technical more convincing manner. Blogs can even be to share with other enthusiasts. They are the knowledge and creativity that lie outside used for traditional purposes such as focus consumers who hacked iRobots’ automated traditional organisational boundaries. group consultations for product development. vacuum cleaners to create a robot that could Business 2.0 companies experiment with Another innovative way to connect with fetch them a beer from the fridge – or even outsourcing their creativity – a more daring customers is to use online communities such sumo wrestle. These are the consumers who process than transaction processing and as Second Life, which is already populated form communities to customise gaming call‑centre outsourcing. If a skills shortage is with professionals providing the services software and publish ways to cheat. They affecting your industry, your company may be necessary to sustain a virtual existence. create niche industries to customise products able to leap ahead of the competition if it can Possibly in reaction to calls for tax authorities – eg, cars – that are particularly meaningful to somehow tap these extra resources of to consider how to tax incomes made on their owners. They almost delight in getting knowledge. The pharmaceutical industry has Second Life, the UK’s Chartered Institute of one over on the manufacturer. faced just such a shortage. In its favour is the Taxation has just created a tax adviser avatar Firms that try to limit such activities are fact that many of its unresolved R&D to give free advice to its residents. bound to lose out. Business 2.0 companies problems can be expressed in the concise But merely gaining feedback from recognise that these represent revenue- and unambiguous language of science, customers does not maximise the potential of earning opportunities (although not which means that enthusiasts and other the resource. Business 2.0 companies also necessarily interested parties can discover them using use their customers to help design products best suited for web searches. InnoCentive, an online and services. Customers have always had a the company scientific community, advertises outstanding role in design, but it has often been post- itself to exploit). challenges to more than 45,000 biologists production. Some will customise a product They will promote and chemists. Initially sponsored by Eli Lilly for their own purposes, for example. Certain the fact that their products and now funded by venture capitalists, top of goods lend themselves to customisation – are customisable (“for those its wish list (with a £500,000 bounty particularly electronic customers who demand the attached) is the need for a biometric items to which individuality that only marker to measure the progression of someone with a customisation can bring”) and motor neurone disease. little technical may sell the tools with In this new model of knowledge can add which to do it. outsourced research and memory or other
financial management 39 >technicalmatters
vertical integrations, as dictated by the demands of each opportunity. www.authonomy.com n Earn your place in collaborative communities before throwing your weight around. Indeed, companies should consider whether they actually do have any weight in certain communities, since traditional measures of dominance – eg, market share – may not apply. The most influential members of a given community may instead be those who have gained the respect of their peers by making the most significant contributions of knowledge or by being the most active in supporting other members. CIMA is an organisation that lends itself to open-source methods. The institute is, after all, a community with shared interests and expertise. I would be delighted to hear from members who’d like to participate over the next 18 months in our research into Business 2.0 ([email protected]). We can facilitate discussions with academics, establish forums and disseminate case development, the company’s R&D role is According to Wikinomics, organisations studies (providing anonymity, if requested). redefined as setting the parameters within can adopt the following three measures in In the concluding article, to be published which the external community operates. This order to make the most of this sort of open- in the February issue, I will consider new includes identifying the overall direction of the source strategy: competitive paradigms – ie, the collaboration development programme, setting the n Focus collaborative efforts on your areas of rival companies – and chart the emergence priorities, evaluating the solutions it’s offered of weakness. Tapscott and Williams of the globally acting business. and converting them into a product. write: “IBM had already failed with web The publishing industry has the opposite servers and operating systems (OS/2), Louise Ross is a technical specialist in problem: too much “product”. UK publishers so it had little market share to lose by CIMA’s Innovation and Development team. receive thousands of unsolicited manuscripts embracing open source.” IBM estimates a week. One of them, HarperCollins, is that it has made huge savings by not seeking the help of the very resource that developing its own Linux-like operating Correction creates this problem. It’s about to launch a system and has shortened its time to web site (www.authonomy.com) on which market by adding its proprietary code to Owing to a printing error, text was aspiring authors can post substantial portions the body of Linux. This would seem a missing from central panels on the of their manuscripts and review those of particularly effective move if your illustration of the enterprise stewardship others, allowing the publisher to focus on the company’s weakness also happens to be model on page 43 of the November highest-rated submissions. It will, of course, the source of a competitor’s strength. issue. The full diagram is available on the need to harness a sufficiently large community n Adopt a portfolio approach. Use a mix of archived magazine pages at to ensure that all submissions are read by a open-source and proprietary data, and www.cimaglobal.com/fm. We apologise sufficiently diverse population of reviewers to participate in a combination of for any confusion this may have caused. give a representative, unbiased view. collaborative arrangements and traditional
Further information CIMA is seeking proposals for research projects studying the role of the accountant in innovative inter-organisational relationships – for example, collaborations such as offshoring, joint ventures, supplier partnerships, virtual communities, “co-opetition” and business ecosystems. Potential researchers can download an application form from http://snipurl.com/1t7xk. The closing date for applications is April 30. The institute would be pleased to hear from other interested parties at [email protected].
40 financial management >technicalmatters
channel used his capture to explain both movements. The dull statistical forecast is no forecasting competition for these colourful but often groundless tales, so it gets adjusted. Robert Fildes and Paul Goodwin investigate All this adjustment behaviour can have the effectiveness of firms’ judgmental adjustments some odd consequences, according to psychologists. When we perform a task that to computer-generated demand forecasts. demands our skill, we normally think we can control the results. For example, if you learn Accurate forecasts of demand are crucial their calling card on forecasts by tweaking to play a musical instrument, you expect to for effective supply-chain planning, since them slightly to show that they were still make fewer mistakes as you practise more. faulty predictions lead to poor customer doing their jobs. We received anecdotal Many swings on a sales graph result from service, which is costly. In an effort to reduce evidence indicating that managers would random, unpredictable events. Yet, because error, many firms buy expensive forecasting alter more of those forecasts that were forecasters see making adjustments as skilful, software that uses statistical methods. presented earlier in a review meeting. Later they can start believing that they have some Despite the sophistication of these systems, forecasts were simply waved through as control over what they’re forecasting and, their forecasts are often adjusted by people got tired and felt that they’d already therefore, that they can predict movements managers, who use their judgment and done enough to justify calling the meeting. on the graph. This is known as the illusion of market knowledge to try to improve accuracy. Of course, people didn’t make changes control. It’s likely to cause forecasters to make Is making such changes a key function of purely to show how hard they were working. even more changes. After all, the more you the well-informed manager or merely a waste They usually felt that they had good reasons adjust, the more control you think you have. of valuable time? By looking at data from over and, in some cases, we found that this was Despite these concerns, judgmental 60,000 forecasts made by four UK so. But the problem is that people have a adjustments to statistical forecasts can still businesses, we aimed to find out what makes tendency to find an explanation for every play a useful role in improving accuracy. We so many managers override the forecasts movement in their sales graphs, including found that, on average, they reduced the produced by their software – and whether swings that really are random. This makes average absolute percentage error of the these adjustments increase accuracy or not. them overconfident that their adjustments will forecasts by 3.6 percentage points for all We studied a nationwide retailer, an increase accuracy, so they tend to adjust companies except the retailer. But this international food company, the subsidiary of forecasts even when it isn’t modest improvement masked considerable a US pharmaceutical firm and a manufacturer appropriate. We’re brilliant variations in the effectiveness of the changes. of cleaning products. We also interviewed at inventing theories for Is it possible to filter out the types of the firms’ forecasters and observed everything we observe. adjustment that are unlikely to help? Larger forecast review meetings where managers At 1.01pm one changes are more likely to increase accuracy, deliberated over their adjustments. December day in although it takes some nerve to make them Adjusting forecasts was a popular 2003, just after and risk being badly wrong. Bigger alterations activity: on average over our sample, Saddam Hussein had are, therefore, likely to be made for very good three-quarters were changed in some been captured, the reasons. For example, a forecaster might way. Forecasters at the food price of US have reliable information on an important manufacturer modified 91 per cent of treasuries rose. Half future event, such as a sales promotion, that theirs, for example. While the retailer’s an hour later the will cause the statistical forecast to have a big four forecasters adjusted only eight per price fell. The error. In contrast, the smaller changes may be cent of theirs, they had over 26,000 to Bloomberg news the type of tweak that we mentioned earlier, produce each week, so or they may be the result of a forecaster there probably wasn’t hedging their bets because the information time to make many more they have on a future event is unreliable. The changes. The lesson is clear: although small alterations, by pharmaceutical firm definition, do relatively little harm to accuracy, held 17 forecast review they’re generally a waste of time. meetings – tying up Positive adjustments are more likely to be about 80 hours of wrong than the negative ones. Psychologists management time – tell us that people have an innate bias every month. towards optimism. For example, construction Many of the changes projects usually take longer to finish and cost were small, as if the more than predicted. Some of this may be a forecasters sometimes result of deliberate misrepresentation to win simply wanted to put contracts, but there is evidence that optimism
42 financial management most likely demand. Second, they had never People have a tendency to find an determined what probability of a stock-out was appropriate in order to balance explanation for every movement inventory-holding costs against the costs of disappointing customers. Nor had they done in their sales graphs, including any analysis to see whether their adjustments were leading to over- or under-stocking. swings that really are random The adjustment of statistical forecasts is a key part of forecasting in most firms. It’s often “bias still plays a role in these poor estimates. never fit their statistical methods to data that impractical to use statistical methods to model It seems, therefore, that when forecasters are was over three years old because “the trends the effect of forthcoming events that you know asked to estimate the effects of, say, an were different back then”. So great was the are likely to have a big impact on demand. advertising campaign they cannot resist being bias towards recency that statistical methods Human judgment has to bridge this gap and, optimistic. And, of course, this is often were sometimes fitted only to the past six if applied correctly, it can greatly improve exacerbated by the infectious enthusiasm of months’ data, which didn’t give them much accuracy. But our study has shown that the their colleagues in sales and marketing. of a chance. The methods commonly found potential benefits are largely negated by A particularly damaging intervention is the in business forecasting software are designed excessive intervention and optimism. Indeed, so-called wrong-sided adjustment. An so they can adapt to changes in trends or had our non-retail forecasters been banned example of this is when you adjust the seasonal patterns if these occur, but they from making positive adjustments, their forecast upwards but should have made a need plenty of data to do this well. If you limit changes would have improved the average negative revision. Suppose that the statistical the figures available to your statistical absolute error by over 20 percentage points. forecast was for 600 units and you pushed it methods, you’re unlikely to be making Yet banning all positive adjustments is up to 650. If actual sales turn out to be 580 judgmental changes from a reliable baseline. unrealistic for most firms. The answer is first units, you’ll have made a wrong-sided When we analysed the accuracy of the to define carefully what you’re forecasting: is adjustment. Any such alteration is bound to retailer’s adjustments against its statistical it expected demand or is it the stock level reduce accuracy, yet they were common in forecasts, they looked awful. The positive required to cope with excessive demand? our sample, particularly when the change changes raised the average absolute error Then restrict yourself to key adjustments was positive. More than a third of the positive from 32 per cent to 65 per cent. Significantly, based on reliable market information and changes made by the non-retailers were in 83 per cent of these adjustments were either record the reasons for these changes. Lastly, the wrong direction. If we could remove a too large or wrong-sided. Something odd statistical methods need plenty of data to representative sample of only half of these was going on: why would the forecasters of prosper, so don’t starve them by restricting wrong-sided positive adjustments, it would this major company work so hard to make them to the past few months’ worth of data. improve accuracy by seven percentage points. mediocre statistical forecasts much worse? In the long run, better software, better The first stage in eliminating wrong-sided Most people would probably consider a market information and better-trained adjustments is to catalogue the reasons forecast to be an estimate of the most likely forecasters are needed. Companies are too behind every change. Survey evidence from future demand. It turned out that the retailers’ often satisfied by software that fails to provide US forecasters has shown that 69 per cent of forecasters were focusing on a different good baseline forecasts. CFOs need to firms claim to do this, but our experience is quantity. Often they were trying to determine ensure that their forecasts beat standard that reasons are often recorded in a shorthand a level of demand that had only a small benchmark tests. If companies are to form that makes them indecipherable later chance of being exceeded – ie, one that improve their forecasting, they need to take even to the forecasters themselves. When big would limit stock-outs. Determining this all these aspects seriously. errors have occurred, an analysis of the would tell them how much inventory they causes can be helpful. This should be done needed to hold. For example, their system Robert Fildes is professor of operational as part of a quality improvement programme might forecast a demand of 500 units but research and operations management at rather than in an atmosphere of blame. A they would adjust this to 550, reasoning that Lancaster University Management School. good forecasting support system can help by this level of inventory could cover anything Paul Goodwin is professor of management encouraging the compilation of records to but the most extreme level of demand. In science at the School of Management, make it easier to review events – sales effect, we’d measured the effectiveness of University of Bath. promotions, say – and reflect on how today’s the forecasters’ adjustments unfairly, because circumstances match those of the past. they weren’t trying to predict actual demand. Further information Many of the forecasters we spoke to But the retailer’s approach was still shared Henry Ford’s philosophy that “history problematic. First, its forecasters had never For more details about the is bunk”. In review meetings, the most recent clearly defined what they were forecasting. research, visit the Lancaster movements in sales graphs were examined They called the adjusted figures “forecasts”, Centre for Forecasting web site: closely, while earlier data was often ignored. running the risk that other managers would http://snipurl.com/1tahm. In one firm the forecasters said that they wrongly interpret these as estimates of the
financial management 43 >technicalmatters
“external accountant” used in the legislation Money-LaUNDERING is, therefore, wider than CIMA’s definition of a member in practice. It will cover students in practice and members or students in Members in practice are not the only CIMA business offering any external accountancy accountants who are affected by the UK’s tough services for reward that might not necessarily qualify them for registration as members in new law. Martin Nimmo explains its implications. practice. All such work, even if it’s additional to full-time employment, brings a member or The Money Laundering Regulations 2007 student within the scope of the regulations. come into force on December 15, giving CIMA members or students who are effect to the third EU money-laundering working as external accountants and who fail directive in the UK. Under its terms, all to register for supervision in any year will be in external accountants must be supervised for breach of the legislation. Any failure to accept anti-money-laundering purposes by a supervision under the regulations may lead to designated supervisory authority. CIMA is fines and even a prison term. among those authorities listed in schedule 3 Members in practice who decide to leave of the regulations. The description “external the institute but wish to continue in practice accountant” is not confined to CIMA will be required to register with another members who may be required to be supervisory authority. The alternative to being registered as members in practice. It also supervised by CIMA will normally be applies to some students. supervision by HM Revenue and Customs, The regulations are secondary legislation which will charge an annual fee that has been in support of laws such as the Proceeds of not a registered member in practice, he or provisionally set at £95. Crime Act 2002, the Serious Organised she must advise the professional standards CIMA intends to monitor compliance with Crime and Police Act 2005 and the various department ([email protected]) the regulations by means of an annual anti‑terrorism acts. A failure to comply with or me at CIMA, 26 Chapter Street, London declaration (on the online registration form for them will lead to prosecution and, possibly, SW1P 4NP without delay that they believe members in practice). In addition, more to fines and even imprisonment. they require supervision. detailed monitoring will be conducted on a CIMA assumes that all UK members in External accountants are covered by the rolling basis over three years as part of the practice will want it to be their supervisory regulations if they provide any accountancy institute’s practice assurance exercise. body. But, if they have other affiliations, they services for reward, including honoraria. Even Members and students who have advised may elect an alternative organisation. if a CIMA member or student is an employee CIMA that they believe they are covered by Whichever one they choose, they must in a non-accounting firm but does some the regulations but are not required to register advise all their eligible professional bodies, freelance work as an accountant, he or she as members in practice will be asked to sign including CIMA, of their decision. will be covered by the regulations. Those who the annual declaration and be subjected to Where partners or directors in a firm of provide services as volunteers entirely without this regime of detailed monitoring. accountants belong to different professional payment are not required to be supervised. The detailed monitoring process will start bodies that have been designated as The law is clear that even insignificant or in the spring. Members will be required by supervisory authorities, it’s possible for all apparently immaterial transactions fall within law to respond within a reasonable time to those concerned to be supervised by one the scope of the regulations. the institute’s correspondence. A failure to authority only, for the sake of convenience. CIMA’s definition of “accountancy services” do so may trigger a “compliance visit” – Again, all of the bodies concerned must be excludes individuals providing: with or without notice. The Money Laundering advised of this decision. n Services concerned with law or Regulations 2007 even provide for entry to Employees of accountancy firms are project management. premises without a warrant. deemed to be covered by the money- n Subcontracted services to accountants laundering compliance arrangements made where the firm of accountants is invoiced Martin Nimmo is head of policy and plans in by the firms’ directors or partners. For directly for such services. CIMA’s professional standards department. example, those employed by a large practice n Services under a contract through an may be supervised by the ICAEW or, agency supplying accountancy services Further information possibly, the Financial Services Authority. where the agency is invoiced directly. If a CIMA member has no professional n Services regulated by the Financial The Money Laundering affiliation other than the institute, it becomes Services and Markets Act 2000 or the Regulations 2007 can be their supervisory authority. But, if a member Insolvency Act 1986. viewed on HM Treasury’s web or student believes that he or she may fit the But this definition cannot be relied upon for site: http://snipurl.com/1swck. description of an external accountant and is exemption from the regulations. The term
44 financial management 48 Paper P4 Organisational Management and Information Systems >studynotes
53 SIMON GARDINER, Paper P8 Financial Analysis Director of finance, EMEA, BAkbone software 54 Paper P1 You began the CIMA qualification 28 years After five years as head of finance in Management Accounting – ago and finished your exams this autumn. Europe for another US firm, Datacore Performance Evaluation What took you so long? Software Corporation, you started your I started the course when I worked at Habitat own business. How did that go? in the eighties, but I soon left to become chief I was offering FD services to US firms wanting accountant at the UK office of US firm Knogo, a presence in the UK. That was when I realised >student a manufacturer of anti-shoplifting technology. I should have completed my CIMA studies. During that period I spent many years I also felt that running my own business wasn’t travelling. First I had to oversee Knogo’s UK really what I wanted – I need people to bounce ONE2ONE and Swedish accounting, so I was commuting ideas off. So I completed my contracts and to Stockholm every fortnight. That’s when I joined Elyo Services, a technical building stopped my CIMA studies. After three years I services firm that I’d just done some work for. was asked to move to Brussels and set up an I re-registered for CIMA, but didn’t start the internal audit function, so I joined the Institute course immediately because I was already of Internal Auditors instead. This job entailed doing a maths degree at the Open University. constant travel all over the EU helping offices Then I took a job at NDS, a manufacturer of to fix the problems I identified. I then became smart cards for Sky, which entailed work on FD of the UK business, but realised that I’d Sarbanes-Oxley and other compliance issues achieved most of what I wanted to do there, across ten entities. It involved further travel in so I moved into the software industry in 1993, Europe and to Israel and India. joining a US firm called Sherpa Corporation. I tried to combine the degree and CIMA, but That job also involved travelling around Europe. the workload nearly finished me off, so I put the degree on hold. Syllabus changes meant I had How did you end up in Silicon Valley to take papers P5, P7 and P8 as well as the during the dot-com boom? strategic level. I passed TOPCIMA in September. In 1997 the US corporate controller left and Now I’ve only got the degree to finish. Sherpa asked me to cover for him in San Jose. It was an amazing experience: I had to prepare Presumably, you have enough experience I tried for an (ultimately abortive) IPO and after three to become a member straight away. months I was given the job. For three years I I sent off my record immediately and I’ve just to combine a managed a large and dynamic department heard that I’ve been accepted as an FCMA. with accounting responsibility for the worldwide maths degree group. It meant I had to get to grips with US You’re also publicity officer of the British Gaap, which was useful. Society of the History of Mathematics. and CIMA, Mountaineering had been my main hobby in Why did you come back to Europe? the past, but I needed to spend more time with but the Sherpa was taken over by Inso Corporation my family, so I picked up an OU course directory and I was made redundant. I was within three and found something on the history of maths. workload months of getting my green card, so I was It really captured my imagination – hence the rather miffed. I briefly went to Bosnia to help a degree. I’m now organising a conference on nearly finished former colleague who had a practice in the history of financial mathematics in London Sarajevo draw up some control procedures on April 25 (visit www.bshm.ac.uk for details). me off and then I returned to the UK. Entry is free, but you’ll need to register.
financial management 47 >studynotes PAPER P4 Organisational management and information systems Doug Mchardie highlights two key models – Porter’s value chain and Mintzberg’s organigram – that focus on organisational interrelationships.
You may be tempted to consider the advantage. To achieve such a 2 Mintzberg’s organigram Organisational Management and Information perception, the organisation’s Systems syllabus as a series of unrelated activities need to be things that will topics that can be learned in isolation. The enhance customer value in an Strategic apex reality is that paper P4 emphasises the basic economical and efficient way. building blocks of a modern business and, If you visit a restaurant, you can more crucially, how they relate to each other. compare the experience with the Techno- Support Michael Porter, a leading authority on alternative of eating at home. The structure staff competitive strategy, has developed a range restaurant adds value by making of pragmatic strategic models. His value the meal, delivering it to your table Middle line chain (1985) is covered in the P4 syllabus. and washing up afterwards. Other It serves as an overview of the activities that elements of customer service are occur in an organisation (see diagram 1). also provided while you are its It’s based on a manufacturing company, but it guest – ambience, for example. Operating core can be adapted for other contexts. The basic The activities that create the dining idea of the value chain is that a company experience – buying food makes its products by performing a series of (procurement), making meals (operations) customers. The primary activities include interrelated activities that will combine to and waiting on customers (service) – incur a inbound logistics (the management of raw generate a customer perception of value. cost to the restaurant. You place a value on material stocks); operations, including the The higher the value placed on the products, the meal, which will influence your decisions manufacturing process; and outbound the more likely it is that the customers will: on whether to dine there again, what tip to logistics (the warehousing and dispatch of n Pay a higher price for the products. pay etc. The extent to which this value goods). The support activities include IT and n Buy the company’s products again. exceeds the cost of the activities in providing R&D (under the “technology development” n Tell other people that the company’s it is the profit that the restaurant makes. heading), procurement and HR management. products are worth buying. The value chain is split into organisation- A business can use the value chain to All of these factors contribute to sales wide support activities and primary activities identify ways to increase its profits. These growth and can be a source of competitive related to making products and dealing with could include continuing existing activities but at a lower cost – eg, by achieving procurement 1 Porter’s economies – or performing different activities Firm infrastructure S value chain that will also be valued by customers. U Porter highlighted the importance of the P HR management connections between activities – the value P chain is only as strong as its weakest link. O Technology development R Poor co‑ordination between parts of the business could lead to costly mistakes and a T Procurement loss of customer satisfaction. For example, the sales team might promise an order that the Inbound Operations Outbound Marketing Service production department can’t deliver on time. logistics logistics and sales The interrelatedness of a business’s activities reflects the approach taken by P4, which will often require you to discuss linked areas – eg, capacity management and marketing. Henry Mintzberg, a keen observer of organisational behaviour, created the organigram, a visual description of the key PRIMARY Margin elements of an organisation (see diagram 2)
48 financial management >studynotes PAPER P4
Parallels between Porter and P4 (outbound logistics). It affects the production process (inbound logistics and operations) Value chain activity Syllabus area and supply-chain management. Infrastructure Change management HR management Managing human capital 3 Downsizing and delayering Procurement Operations (purchasing) A firm that has decided to downsize and delayer can use the value chain to identify: Inbound logistics, operations, outbound logistics, service Operations (other) n Activities that require greater control or Marketing and sales Marketing could be delegated downwards. n Links that could be strengthened. in 1979. The model starts with the strategic research. Co-ordination with technology n Activities that add no value and so can apex of senior managers, from which the development is also essential to ensure that be stopped. direction of the organisation is set. That the systems are in place to support the The primary target for delayering will be direction is converted into tasks, which are flexible manufacturing (operations) required. the middle line in the organigram. We can overseen by the middle line of managers. Training interventions and reward systems consider how effective this is and the role Their staff, known as the operating core, can be implemented (by HR) to support the played by the other elements – is the actually produce the goods and services. skills and attitudes required to make TQM techno‑structure helping or hindering, for Support staff – eg, finance and HR – assist work effectively. The emphasis moves away example, or does the main problem lie in the the rest of the organisation. And the from quality control (techno-structure) and strategic apex? (The difficulty in the latter techno-structure strives for standardisation – towards a constant process of review at case, of course, is that those at the apex will eg, compliance and quality control. every stage (entailing the co-operation of the be making the key decisions.) The organigram can be used to assess middle line and the operating core). Change management requires us to whether the balance of these elements is identify those who will resist the changes and appropriate for a particular business. For 2 The marketing mix those who will drive them. By looking at example, financial services companies need a Product, price, place and promotion comprise organisational activities or elements, we may strong techno-structure to ensure their the marketing mix for a product. For a determine the appropriate management style compliance with financial regulation. service, three other Ps become relevant: to adopt in order to turn resistors into drivers Clearly, both models have been around for people, processes and physical evidence. – or to remove the resistance. some time and it should be noted that there If a company changes its marketing mix to In each of the scenarios above, the two are now more flexible views incorporating an reposition a product or react to changing models can be used to identify points that emphasis on virtual organisations, supply- customer needs, it can have an impact on may be relevant to an answer and, in chain partnerships and networks facilitated many parts of the business. A change to the particular, how parts of a business interact. largely by technological developments. Even product requires a redesign (technology The P4 syllabus topics are highly interlinked so, the value chain and organigram provide a development), the capability to produce to and the exam often specifically requires useful framework for P4 candidates. From the the new specification (operations) and candidates to discuss these links. table above, it is easy to see the link between perhaps a training need to familiarise staff The value chain identifies the activities in the value chain and the syllabus, for example. (support) with the redesigned product. The an organisation and the organigram identifies These two models can be applied to some training need may be identified and dealt with the elements of the organisation. These scenarios typically found in the P4 exam. by the HR function and will feature as part of models can provide a useful overview of the the performance measures and, ultimately, organisation and, therefore, the P4 syllabus. 1 Total quality management (TQM) the reward framework to reinforce the They can be used to: TQM is an approach to fulfilling customers’ required performance (techno-structure). n Help with revision. needs that aims for flexibility, continuous Pricing will be determined by market n Gain an overall picture of an organisation. improvement and zero defects. It’s an research (marketing). It will also inform financial n Identify how parts of the organisation incremental method that features planning (infrastructure/techno-structure). are interlinked. commitment from the top; a universal The promotion effort will feature a range of n Provide a framework for answering some concern for quality; technological solutions; activities, including the use of a corporate of the longer questions in the exam. an emphasis on preventive measures rather web site (technology development). than cures; and just-in-time production. The place aspect includes stockholding Doug Mchardie is a subject specialist at It’s essential that the strategic apex is levels of finished goods and warehousing BPP Professional Education. committed to TQM, and that it communicates this fact to all parts of the business via the P4 further reading middle line. Product design and development are an important aspect of TQM. These M Porter, Competitive Advantage, Free Press, 1985. functions need to work with marketing to H Mintzberg, The Structuring of Organisations, Prentice Hall, 1979. determine customers’ needs through market
50 financial management PAPER P8 >studynotes Financial analysis Candidates have tended to struggle with questions on US Gaap versus IFRS. The examiner for paper P8 offers her guidance on the topic.
The P8 learning outcome “identify major to their progress. Some May 2007 P8 impress the examiner with the depth of differences between IFRS and US Gaap” has candidates could name a few of their joint their knowledge – and the examiner will be been tested twice so far. The November projects, but many could not. impressed – several other information 2005 paper asked candidates to cite Despite all this work, there are still many sources can be consulted. examples of the two systems’ differences and differences that are likely to last. The one that The following web sites are useful: similarities, while a question in May 2007 everyone seems to know is that the use of n The International Accounting Standards asked for a brief paper describing the LIFO as an inventory valuation method is Board: www.iasb.org. progress of the convergence permitted under US Gaap but not under n The Financial Accounting Standards project. These IFRS. Some others were described in a Study Board: www.fasb.org. questions were notes article in the June 2007 issue of FM*. n The US Securities and Exchange answered badly in Currently, foreign Commission: www.sec.gov. most cases – issuers listed on n Deloitte, which produces comprehensive many candidates the US markets updates: www.iasplus.com. didn’t even attempt must submit a n PricewaterhouseCoopers, which has an answer. reconciliation of published a booklet entitled “Similarities The biggest their financial and differences – a comparison of IFRS weakness was a statements with and US Gaap”: http://snipurl.com/1t01q. sheer lack of US Gaap to the Once they have gained an outline knowledge. Some US Securities knowledge of the key issues, candidates candidates were and Exchange should aim to improve this by keeping their unaware that Commission (SEC). eyes open for news of developments and convergence was But the SEC consulting some of the above sources. occurring at all. In May 2007 they were asked recently proposed dropping this rule, so it’s The May 2007 post-exam guide included to describe how it was progressing, giving likely that filing a reconciliation will no longer the following observation: “Candidates should examples. Many did the opposite by listing be required by 2009. Even more striking is an be aware (but, on the evidence of this paper, the continuing differences between IFRS and SEC proposal, now out for comment in the are mostly not aware) that this is not a trivial US Gaap. Others repeated the few relevant form of a “concept release”, to allow US or marginal topic. On the contrary, it could be points that they did know in different guises – companies to file statements using IFRS argued that the issue of US Gaap/IFRS also a waste of valuable exam time. rather than US Gaap. It’s unlikely that many of convergence is the most important The use of the verb “identify” in the them would take advantage of this change, contemporary issue in financial reporting.” learning outcome means that the outcome is but the fact that it’s being discussed at all The question of whether or not the pitched at the level of “comprehension” in indicates how much more acceptable IFRS learning outcome is likely to be examined CIMA’s hierarchy of learning objectives. This has become in the US. again in the foreseeable future should, is a relatively low level, which means that Chapter 21.3 of the Financial Analysis therefore, be relatively easy to answer. advanced analytic and evaluative skills are CIMA Learning System covers the not required to tackle questions in this area. background to convergence, the Norwalk * One of the differences identified in that article So, although the differences between the agreement, current developments and the is no longer valid: changes in accounting policy sets of regulations are often extremely key remaining differences. For the 2008 under US Gaap are now handled in the same complex, for the purposes of P8 it’s exams, any changes made up to and way as they are under IAS8 – that is, there is a necessary only to know the key issues. including December 1, 2007 are examinable. requirement to make a full prior period At a meeting in Norwalk, Connecticut, in So, as long as you use the latest edition of restatement. (Thanks to Malcolm Greenbaum 2002 the International Accounting Standards the learning system, you shouldn’t have a of BPP Professional Education for highlighting Board (IASB) and the US Financial problem. For those students who wish to this development.) Accounting Standards Board (FASB) agreed to start the convergence project. The P8 further reading Norwalk agreement set out their plan to reduce the differences between IFRS and US C Gowthorpe, Financial Analysis CIMA Learning System (2007 Gaap. Today, a list of standards, exposure edition), CIMA Publishing, 2006. drafts and discussion papers bears witness
financial management 53 >study notes
Global contact details n CIMA Contact n Poland contact point E: cima.contact@ Warsaw Financial cimaglobal.com Centre, ul E Plater 53, T: +44 (0)20 8849 2251 Warsaw 00-113 F: +44 (0)20 8849 2450 T: +48 (0)22 528 6890 F: +48 (0)22 528 6701 n Australia office E: thierry.lovane@ EXAM NOTICE Level 3, The Plaza cimaglobal.com Building, Australia n Visit www.cimaglobal.com regularly for updates Square, 95 Pitt Street, Republic of Sydney, New South Ireland Division 45-47 Pembroke Road, Wales 2000 Ballsbridge, Dublin 4 November 2007 exam results three strategic level papers and TOPCIMA. E: sydney@ E: dublin@ cimaglobal.com The results for the strategic level and The service is available only if you received cimaglobal.com TOPCIMA papers will be sent out by first- between 40 and 49 marks in the paper for T: 1800 679 996 T: +353 (0)1 6430400 (toll-free within Australia) F: +353 (0)1 6430401 class post or airmail on January 17. The which you want a script review. or: +61 (0)2 9776 7982 results for the managerial level papers will be F: +61 (0)2 9262 5979 n Singapore office sent out on January 24. Managerial and strategic level 16 Raffles Quay, n Log into your “My CIMA” account administrative review CIMA Botswana Unit 33-03 B, Physical: Plot 50676, Hong Leong Building, (www.cimaglobal.com/cimaonline) by January A new administrative review service is Second Floor, Block B, Singapore 048581 9 to register to receive your results by e-mail. available for all managerial and strategic level BIFM Building, E: singapore@ Select “My personal details” and then papers. For more information about these Fairgrounds Office Park, cimaglobal.com Gaborone T: +65 6535 6822 “My communication preferences”. Results will services and how to apply for a review, visit Postal: PO Box F: +65 6534 3992 be e-mailed on the same day as they are www.cimaglobal.com/scriptreview. 403475, Gaborone n CIMA South Africa posted/airmailed. E: gaborone@ cimaglobal.com Physical: Second Floor, The institute cannot give out results on May 2008 exams T: +267 395 2362 South Block, Thrupps the telephone or to personal callers at any The May exams will take place on Tuesday F: +267 397 2982 Centre, 204 Oxford Rd, Illovo, Johannesburg CIMA office. 20, Wednesday 21 and Thursday 22. n CIMA China office Postal: PO Box 745 Online exam entry for these will be available Unit 1905, Westgate Northlands 2116 E: johannesburg@ Attendance slips at www.cimaglobal.com/examentry from Tower, 1038 cimaglobal.com Nanjing Road (W), You will have received attendance slips for February 1. T: +27 (0)11 268 2555 Shanghai 200041 every exam you sat. You should keep them The standard closing date for entry is or: 0861 CIMASA/ E: CIMA-China@ 0861 246272 as your proof of attendance for four months. March 14. If you enter after this date it will be vip.sina.com F: +27 (0)11 268 2556 accepted only as a late entry and you will T: +86 (0)21 5228 5119 Exam question papers have to pay a late entry fee. The deadline for F: +86 (0)21 5228 5120 n Sri Lanka Division 356 Elvitigala Mawatha, Visit www.cimaglobal.com/studyresources late entries is March 21. n Hong Kong Division Colombo 05 to download copies of the exam papers. Suites 1414-1415, E: colombo@ Choose your subject from the left-hand side Exam fees 14th Floor, Jardine cimaglobal.com House, Central T: + 94 (0)11 250 3880 of the web page. You must pay your exam fees online when Hong Kong F: + 94 (0)11 250 3881 You can also buy the questions and you enter for them. E: juliee.tan@ answers from www.cimapublishing.com. The 2008 fees are as follows: cimaglobal.com n CIMA Zambia T: +852 2511 2003 Physical: Plot Number n Managerial level: £61 per paper. F: +852 2507 4701 6053, Sibweni Road, November 2007 post-exam guides n Strategic level: £66 per paper. Northmead, Lusaka Postal: Box 30640, Post-exam guides for each subject will be n TOPCIMA: £89. n India liaison office DBS Corporate Centre, Lusaka available three to four months after the Second Floor, Raheja E: lusaka@ exams. These are essential reading for Computer-based assessments at Chambers, 213 Nariman cimaglobal.com Point, Mumbai 400 021 T: +260 (0)1 290 219 unsuccessful candidates and for those certificate level F: +260 (0)1 290 548 E: [email protected] studying a new subject. They contain: For full information on entering for a T: +91 (0) 22 5630 9200 n The exam questions. certificate-level computer-based assessment, n CIMA Zimbabwe Physical: Sixth Floor, n n The rationale for each question. visit www.cimaglobal.com/certificateentry. Malaysia Division Michael House, n Lots 1.03b and 1.05, 62 Nelson Mandela Suggested approaches. If you wish to take managerial level exams Level 1, KPMG Tower, n Avenue, Harare The outline marking scheme. in May, you must have completed all of your First Avenue, Postal: PO Box 3831, n The examiners’ comments. certificate level subjects by March 1. Bandar Utama, Harare 47800 Petaling Jaya, E: harare@ Selangor Darul Ehsan cimaglobal.com Strategic level and TOPCIMA script Queries E: kualalumpur@ T: +263 (0)4 708600/ review service Visit www.cimaglobal.com or get in touch cimaglobal.com 250475 CIMAZIM After the exam results are released CIMA will with CIMA Contact or your nearest office T: +60 (0)3 7723 0230 F: +263 (0)4 708600/ F: +60 (0)3 7723 0231 250475 be offering a script review service for the (see panel, right).
58 financial management >instituteupdate
cima allies with Lalani: UK needs migrants’ skills Hanif Lalani FCMA, group finance director at BT, has challenged Bath university business leaders in the City of London to make more use of the growing talent pool in developing countries to ensure that the The institute has teamed up with “The research developed capital remains a world-class business centre. the University of Bath to launch through this collaboration will Speaking at CIMA’s annual president’s dinner in Merchant the CIMA Centre of Excellence chart the future of the finance Taylor’s Hall, he praised the government for allowing in so many at the University of Bath School function and provide skilled foreign workers. of Management. organisations and employers with “I am proud that London has opened its arms wider than The centre, which opened on independent, international data anywhere else on the planet to globalisation,” Lalani told the November 20, will conduct that is both practical and group of finance high-flyers. “But here is the challenge: let’s independent research into best relevant,” said Robert Jelly, recognise the resource of global talent that’s suddenly become practice in the development of director of education at CIMA. available to us. Let’s harness it to enhance London’s position as finance professionals in order to Philip Cooper, the centre’s a world leader. Let’s stop recruiting what we see in the mirror maximise the value they add to director, said he believed that and build a future on world-class, worldwide talent.” their organisations. The results the collaboration was unique. He added that the UK should be applauded for becoming will help employers to identify “As far as we are aware, no truly cosmopolitan. “I am proud of the fact that Britain has practical ways to run their finance other professional body and enjoyed a bigger wave of immigration in the past decade than at functions and form change academic institution have come any time in its history – and that most people agree that we are strategies to ensure that they together to investigate these better off for the skills that our new citizens have brought with keep up with the pace of finance issues with such a focus on them,” Lalani said. transformation across the globe. financial professionals,” he said. But he also pointed out that the global competition for The research will include input “The centre will investigate the skills was increasing in intensity. “There is a massive reservoir of from the global business knowledge and skill needs of talent in the developing world and the dam that held it back has community, ensuring that it is finance professionals, how burst,” Lalani said. “In the old days we looked at the labour relevant to employers worldwide. these develop over their pool in the city, the country and, perhaps, in Europe. But we The centre will work on several careers and best practice in now have at our disposal the brains and energy of anyone, streams of research and the meeting these needs so that the anywhere in the world, who wants to work. This opportunity results will be published in an finance function maximises the never existed before.” annual report after the first year. value it adds to its organisation. Other guests included Douglas Flint FCMA, group finance More specialised reports relating All of these issues are not static, director of HSBC; Helen Weir FCMA, group FD at Lloyds TSB; to geographical areas or so the research will also and Alan Brown FCMA, chief financial officer at ICI. business sectors will also be encompass expected future produced, along with articles, developments in finance roles Elections to council 2008: papers and related conferences. and the finance function.” retirements by rotation Notice is given that, as the term of office of the council members in areas 1, 2, 3, 4, 5, 6, 7, 11 and 12 expires at the Presidential engagements end of the annual general meeting in June 2008, elections will be held in February 2008. Nominations for candidates (fellows) Dec 4 IFAC reception, London. to fill the vacancies may be made by any six or more members Dec 7 CIMA Christmas party. (three of whom must be fellows) whose official addresses are in Dec 11 ICSA dinner, London. the area concerned. Dec 11 CCAB presidents’ group dinner, London (deputy Nomination forms for candidates for election may be president attending). obtained from Erica Lee, head of secretariat at CIMA, (call Dec 12 CCAB presidents’ group, ACCA. 020 8849 2506 or e-mail [email protected]). Forms may Dec 13 CIMA council dinner. also be downloaded from www.cimaglobal.com/council2008 Dec 14 CIMA council meeting. where further details regarding the ballot process and the role Jan 10-12 ICAI conference, India. of a council member may be found. Jan 18 CIMA appointments committee meeting. Nominations must be received on the prescribed form by Jan 23-25 BPO symposium, Sri Lanka. the chief executive at 26 Chapter Street, London SW1P 4NP Jan 28 SE Ireland branch dinner (immediate past by noon on Monday January 7, 2008 (faxes are acceptable, president attending). but must be followed by the signed original). If more than one Feb 2 CIMA Midlands student conference. candidate is nominated for a vacancy, a postal and online ballot Feb 6 London and Central Government branch meeting. will be conducted.
financial management 61 Forthcoming Visit www.cimaglobal.com/events for updates and a full list of events local events (all branch events are free unless otherwise stated). To book places, get in in the UK touch with the contact for the relevant area, unless otherwise stated. To book places on CIMA Biz.Net events, e-mail [email protected].
Central London February 20 February 13 February 6 January 22 And North Thames Relationship and Discussion event on risk Winning words: Career profile workshop Contact: area.one@ audit management Time: 7.30 for 8pm bringing professional Time: 6.30 for 7pm cimaglobal.com. Time: 7.45 for 8pm Venue: Holiday Inn (J4/ services to life Venue: Putteridge Bury Please book online, Venue: County Hotel, M40), Handycross, High Time: 7 for 7.30pm Conference Centre, Hitchin where possible, at www. Rainsford Road, Wycombe HP11 1TL Venue: Thistle Hotel Road, Luton LU2 8LE cimaglobal.com/central Chelmsford CM1 3PZ Brighton, Kings Road, londonandnorththames February 13 Brighton BN1 2GS February 19 February 20 Motivational momentum ACMA to FCMA January 23 The building of a in the workplace February 12 Time: 6.30 for 7pm Unleash your global brand Time: 7 for 7.30pm Associate to fellowship Venue: Bedford Swan personal potential Time: 7 for 7.30pm Venue: The Winchester Time: 7 for 7.30pm Hotel, The Embankment, Time: 7 for 7.30pm Venue: Ramada Jarvis Hotel, Worthy Lane, Venue: Hilton Gatwick, Bedford MK40 1RW Venue: Ramada Jarvis Hotel, Ealing Common Winchester SO23 7AB South Terminal, Gatwick Hotel, Ealing Common W5 3HN Airport, Crawley RH6 0LL February 19 W5 3HN February 19 Challenges facing Central Southern The HeartMath stress February 20 mature accountants January 24 England management programme Career profile workshop Time: 6 for 6.30pm Money-laundering Contact: area.eleven@ Time: 7 for 7.30pm (in association with Robert Venue: Novotel Nottingham/ Time: 7 for 7.30pm cimaglobal.com Venue: Reading Moat Half Finance & Accounting) Derby, Long Eaton, Venue: Royal Chace Hotel, House, Mill Lane, Time: 6.45 for 7.15pm Nottingham NG10 4EP The Ridgeway, Enfield January 11 Sindlesham, Wokingham Venue: Hilton Gatwick, EN2 8AR CPD going forward RG41 5DF South Terminal, Gatwick North-east Time: 7 for 7.30pm Airport, Crawley RH6 0LL England January 29 Venue: Henley Cima North West Contact: area.five@ Life after oil Management College, Contact: area.six@ February 26 cimaglobal.com. Time: 6 for 6.30pm Greenlands, Henley on cimaglobal.com Career profile workshop Please book online, Venue: CIMA, 26 Chapter Thames RG9 3AU Time: 6.45 for 7.15pm where possible, at Street, London SW1P 4NP January 24 Venue: BPP Professional www.cimaglobal.com/ January 16 IFRS: new reporting Education, Sunley northeastengland January 30 Dispelling the myths of passes to SMEs – House, Middle Row, Private equity internet search are you ready? High Street, Maidstone January 29 Time: 7.45 for 8pm Time: 7 for 7.30pm Time: 6.30 for 7pm ME14 1TG Confidence building and Diary Venue: County Hotel, Venue: Hilton Cobham, Venue: Daresbury Park assertiveness in business Rainsford Road, Seven Hills Road South, Hotel, Daresbury, East Midlands Time: 6 for 6.30pm Chelmsford CM1 3PZ Cobham KT11 1EW Warrington WA4 4BB and east anglia Venue: Blackwell Grange Contact: area.three@ Hotel, Darlington DL3 8QH February 5 January 22 January 29 cimaglobal.com Career profile workshop E-billing: the paperless Creating powerful January 30 Time: 6 for 6.30pm office – a reality? new futures – the January 17 Managing yourself, Venue: CIMA, 26 Chapter Time: 7 for 7.30pm human dimension of Pension planning being more assertive Street, London SW1P 4NP Venue: Holiday Inn, strategic change from the employee’s Time: 6 for 6.30pm Herbert Walker Avenue, Time: 6.30 for 7pm perspective Crowne Plaza, Wellington February 6 Southampton SO15 1HJ Venue: Daresbury Park Time: 6.30 for 7pm Street, Leeds LS1 4DL Question time with Hotel, Daresbury, Venue: De Vere Dunston CIMA’s president January 29 Warrington WA4 4BB Hall, Ipswich Road, February 11 Time: 6 for 6.30pm Knowledge café Norwich NR14 8PQ What workflow Venue: CIMA, 26 Chapter for students February 5 technology can do for Street, London SW1P 4NP Time: 7 for 7.30pm CIMA North West charity January 17 accounting and finance, Venue: Hampshire Rose forum – the hallmarks of CPD going forward followed by the February 7 Bowl, Botley Road, a well-run charity Time: 6 for 6.30pm Sheffield branch AGM An update on West End, Southampton Time: 6.30 for 7pm Venue: Thistle East Time: 6 for 6.30pm employment law SO30 3XH Venue: The Barton Grange Midlands Airport Hotel, Venue: Holiday Inn, Time: 7 for 7.30pm Hotel, Garstang Road, Castle Donington, West Bawtry Road, Venue: Royal Chace Hotel, January 30 Barton, Preston PR3 5AA Derby DE74 2SH Rotherham S60 4NA The Ridgeway, Enfield Companies Act 2006 EN2 8AR Time: 7 for 7.30pm CIMA SOUTH EAST Venue: Apollo Hotel, Contact: area.twelve@ February 19 Aldermaston Roundabout, cimaglobal.com Career profile workshop Basingstoke RG24 9NU Time: 6.45 for 7.15pm January 31 Venue: Stratford Library, February 12 Tax investigation: is The Grove, Stratford Working for yourself HMRC looking at you? E15 1EL Time: 7 for 7.30pm Time: 6.45 for 7.15pm Venue: Hilton Cobham, Venue: Best Western February 19 Seven Hills Road South, Russell Hotel, 136 Boxley Emotional intelligence Cobham KT11 1EW Road, Penenden Heath, Time: 7.30 for 8pm Maidstone ME14 2AE Venue: Park Inn Watford, 30/40 St Albans Road, Watford WD17 1RN 21
62 financial management Student conferences February 12 February 26 February 21 February 20 Lowering the cost of Coaching for success Success in the Cost reduction in February 2 doing business Time: 6.30 for 7pm job market a small or medium- CIMA Midlands student conference Time: 6 for 6.30pm Venue: Best Western (in association with Robert sized business (in association with Kaplan Financial and BPP; sponsored by Venue: The Royal York Queen’s Hotel, Leonard Half Finance & Accounting) Time: 6.30 for 7pm FBT and Badenoch & Clark) Hotel, Station Road, Street, Perth PH2 8HB Time: 6.30 for 7pm Venue: Holiday Inn, Clayton Time: 9.30am to 5.30pm York YO24 1AA Venue: Almondsbury Road, Newcastle under Venue: Sir Dennis Rooke Building, Holywell Park, South-west Interchange Hotel, 6 Lyme, ST5 4D Loughborough University, Loughborough LE11 3TU February 19 England AND Gloucester Road, Cost: £15 (includes refreshments and lunch) Dos and don’ts south wales Almondsbury, Bristol February 26 Contact: [email protected] or area.four@ of employing Contact: area.two@ BS32 4AA Essential employment cimaglobal.com (book five places and pay for only four) temporary staff cimaglobal.com. law – are you up to date? Time: 6 for 6.30pm Please book online, February 21 Time: 6.30 for 7pm February 23 Venue: University of where possible, at www. Visit to L’Oréal, Llantrisant Venue: Village Hotel and CIMA North West student conference Teesside, Borough Road, cimaglobal.com/southwest Time: 7.30pm Leisure Club, Dolomite Time: 8.45am to 3.45pm (approx) Middlesbrough TS1 3BA englandandsouthwales Venue: L’Oréal, Lanelay Avenue, Coventry Venue: Manchester Conference Centre, Weston Building, Road, Talbot Green, Business Park, Coventry Sackville Street, Manchester M1 3BB Northern Ireland January 17 Pontyclun CF72 8HY CV4 9GZ Cost: £15 (includes refreshments and lunch) Contact: area.eight@ CPD interactive workshop Contact: [email protected] cimaglobal.com Time: 6.30 for 7pm WEst midlands Cima Venue: Room 3S705, Contact: area.four@ Mastercourses January 26 Faculty of Education, cimaglobal.com T: 020 8849 2489 January 30-31 February 13 Working for yourself University of West of F: 020 8849 2460 Corporate governance Understanding Time: 9.30 for 10am England, Frenchay January 16 E: mastercourses@ and risk management, commercial contracts to 1pm Campus, Coldharbour Introduction to neuro- cimaglobal.com Dublin Venue: The Grand Opera Lane, Bristol BS16 1QY linguistic programming The following are a February 14 House, Great Victoria for business selection of events in January 30-31 Achieving process Street, Belfast BT2 7HR January 24 Time 6.30 for 7pm December, January Professional excellence – How to avoid being Venue: Westley Hotel, and February presentation skills Six Sigma process February 7 corralled by coyotes or Westley Road, Acocks (for the full list visit improvement Changes in the swallowed up by a whale Green, Birmingham www.cimaglobal.com). January 31 rates system (joint event with B27 7UJ Courses are in London MS Excel advanced February 15 Time: 6 for 6.30pm Chartered Institute of unless otherwise stated Smarter thinking, Venue: Holiday Inn, Marketing and Chartered January 22 February 4 smarter working Ormeau Avenue, Belfast Management Institute) Delivering the message January 25 Company law update: BT2 8HS Time: 6 for 6.30pm with impact Time management how the changes February 19 Venue: DVLA Development Time: 6.30 for 7pm affect you Funky finance – February 27 Centre, Upper Fforest Way, Venue: Holiday Inn, St January 28 focus on retail Corporate tax and Swansea Vale, Swansea Quentin Gate, Telford Time management, February 5 (book before January 25 VAT update SA7 0AA TF3 4EH Edinburgh Enterprise risk to receive a discount) Time: 6 for 6.30pm Cost: Members/students management Venue: PwC, Waterfront £4, guests £10 January 23 January 28-29 February 25 Plaza, 8 Laganbank Road, Contact: Chartered Six Sigma Advanced negotiation February 6 Hidden costs and Belfast BT1 3LR Institute of Marketing Time: 6.30 for 7pm skills for senior managers Key management lean accounting (01628 427120) Venue: Holiday Inn, London accounting techniques Scotland Road, Ryton on Dunsmore, January 28-29 February 26 Contact: area.seven@ February 7 Coventry CV8 3DY Professional February 7 Is marketing profitable? cimaglobal.com. Career profile workshop presentation skills, Bristol Commercial skills for Please book online, (in association with Robert January 29 finance professionals February 26 where possible, at Half Finance & Accounting) Career profile workshop January 29 Investment appraisal www.cimaglobal.com/ Time: 6.30 for 7pm – recording your Group accounting under February 7 scotland Venue: Prince of Wales practical experience UK Gaap – fundamentals, Pricing strategies – February 27 Hotel, Berkeley Road, (in association with Robert Manchester principles Getting more value January 30 Berkeley GL13 9HD Half International) from overheads Wine-tasting evening, Time: 7 for 7.30pm January 29-30 February 8 preceded by the February 12 Venue: Great Barr Hotel, Persuading and Pricing strategies – February 27 Edinburgh branch AGM Challenges and changes Pear Tree Drive, Great Barr, influencing people, practice Dark art of budgeting Time: 6 for 6.30pm in NHS finance Birmingham B43 6HS Birmingham Venue: Great Grog Wine Time: 6 for 6.30pm February 8 February 28 Bar, 43 Rose Street, Venue: Devon Hotel, January 29-30 Management accounting International financial Edinburgh EH2 2NH Exeter Bypass, Matford, February 12 Persuading and – developments at the reporting standards: Exeter EX2 8XU Money-laundering influencing people, cutting edge, Manchester comparison and update February 13 Time: 6.30 for 7pm Manchester Enterprise governance February 21 Venue: Westley Hotel, February 11 February 28 and CIMA’s Business strategy: Westley Road, Acocks January 30 Financial management Better management Strategic Scorecard planning Green, Birmingham Group accounting under in SMEs reporting, planning and Time: 6 for 6.30pm Time: 7.15 for 7.30pm B27 7UJ UK Gaap – advanced, control, Nottingham Venue: Hilton Edinburgh Venue: De Vere Hotel, Manchester February 12 Grosvenor, Grosvenor Whitehill Way, West Spreadsheet skills for February 29 Street, Edinburgh EH12 5EF Swindon SN5 7DW January 30 forecasting, planning The balanced scorecard, 21 MS Excel intermediate and budgeting Leeds
financial management 63 >so you want to be… Financial manager at an airline Corinne Dauncey explains what it takes to manage an accounts department at a world-class firm of high-flyers.
This particular vacancy is at a world-class airline, so it’s likely to attract many applicants. Role: Finance manager. The travel industry is seen as glamorous and Salary: £50,000, plus benefits. usually offers attractive benefits such as Location: central London. upgrades on flights, discounted holidays for One of the world’s most prestigious airlines is looking to recruit a you and your friends and relatives, plus the finance manager to join its central London finance team. The role will possibility of travelling around the world and involve overall responsibility for all accounting and finance functions. staying in five-star hotels on business. The successful candidate will lead and develop the team and provide CIMA accountants would have a huge timely and accurate financial information to the directors. On top of this, advantage applying for this role, because the the role requires treasury function management and the preparation of qualification is so business-focused. This annual budgets. means that you should stand out from other The candidate will be an accountant who has qualified through CIMA, qualified accountants at the same level. It is ICAEW, ACCA or an equivalent body. It is essential that he or she can crucial, therefore, that you don’t just tell the work independently in an established framework, has strong interviewers about your accounting abilities. management skills and is innovative and practical. Experience in the You should also highlight the business travel industry would be an advantage. management skills that you have developed. It would help if you could cite examples from your past roles, such as new processes you have introduced, motivational techniques you’ve used or successful software implementation projects you have managed. This role is for someone who wants to figures for reporting and have sufficient take charge of a finance department, interpersonal skills to present them effectively Corinne Dauncey is marketing manager assuming full responsibility for its accounting to the top management team. The role is and careers expert at online job portal processes and procedures. It calls for a clearly not for a shy, retiring type who finds it TheAccountancyJob.com. confident, bold character who is practical and difficult to explain information. able to drive a dynamic team. If this job interests you, but you don’t yet To run the department mentioned in this have the right skills or experience, there are On the move advert, you’ll need all the basic skills required some things you can do now to work in any managerial position, including towards it. The ideal applicant would already Have you changed jobs? E-mail leadership; teamwork; communication; time be a more junior accountant in the airline [email protected] management; delegation; planning; and industry, or, second best, in the wider travel with news of your move. co‑ordination. The successful candidate must sector. This would mean that you already also be logical and analytical, with a strong know the industry terminology and the sorts Howard Bryant, FCMA, who spent eight understanding of accounting – which of figures and processes involved. If you have years as CFO/COO at Figleaves.com, shouldn’t be a problem for CIMA members. never worked in travel, it would be sensible to helping to turn it from start-up to The advert mentions providing “timely and do some research into, for example, airline profitable dot-com, has joined Radcliffe accurate information to the directors”, so finances, company statements, the Denim as chief executive. His new you’ll need to be able to extract the relevant competitive environment, industry news and company is a luxury fashion brand trends if you do get to the interview stage. founded by Suzy Radcliffe in 2005. Nothing can replace real managerial Need to know experience, but there are courses you can Paul McCunn ACMA has been attend on leadership, management and appointed finance director of Hoare Lea, Job level: managerial. communication skills. The CIMA qualification an award-winning firm of consulting Salary: £50,000, plus benefits. should mean that you are ideal for this role, engineers. He has previously worked for Where: London. but you will be expected to have several Unilever, Deloitte and KPMG Consulting Essentials: proven leadership years’ accounting experience. Different and he speaks on behalf of CIMA on abilities; communication skills; companies require different periods of enterprise governance and the CIMA business acumen. experience so, before ruling it out, try to learn Strategic Scorecard. more about what they are seeking.
financial management 65 >...lastout Mangled metaphors We rummage through in-box and postbag to bring you astonishing Shooting the breeze (at the ballpark) insights from the business world. If you’ve been on the receiving “There are early signs of end of such wisdom and would like to pass it on, please send the a wind of change in many most obvious and the most obscure in corporate communications countries around the to [email protected] clearly labelled “Last out”. world… Yes, it will take time, as there is no silver bullet, but Grant Thornton is more than ready to This week on Penguin UK’s step up to the plate.” press office bulletin: Grant Thornton. The Lodger by Charles Nicholl. Popism by Andy Warhol and Mastication for the nation Pat Hackett. God Explained in a Taxi Ride “Commenting on the by Paul Arden. continuing problem of Who Writes This Crap? by personal debt, Mike Joel Stickley and Luke Wright. Gerrard, head of personal Colonic intuition insolvency at Grant “Many companies have found to their cost Thornton, says: ‘In spite Solutions, that choosing and employing the wrong of relatively benign schmolutions person for the job can be an expensive economic conditions over affair… Now, however, help is at hand thanks the past decade, personal “Bibby Financial Services is a market- to a new service available from specialist leading specialist in the provision of a agency Intuitive Profiles. Brian Snellgrove and insolvencies have gone range of business cash flow solutions.” his team use a sophisticated development of through the roof and this the ‘gut feel’, which has proven successful in recent drop is simply the “GL Trade, the global provider of front- achieving a highly impressive 95 per cent calm before the storm to-back office integrated solutions.” accuracy with assessments. Clients provide Intuitive Profiles with a small amount of as the credit crunch “Microgen is a market leader in the general information on the individual, such begins to bite.’” provision of multi-channel billing solutions.” as name, birth date, age Grant Thornton (clearly on a roll). and the position they are “Etap-On-Line, the European applying for. Handwriting Buffet cars leader in travel and expense samples and a sight of “The fleet industry needs management solutions.” the CV may be required.” to beware of entering into Intuitive Profiles. a cut-price feeding frenzy, according to Mike Holleran, To boldly stretch an analogy… head of broking at ING Car “In the immortal TV series Star Trek, the Klingons were often fearsome adversaries of Captain James Kirk, his crew and the Lease. With the end of Federation. But on occasion, and especially during the year approaching and crucial times, they could be useful allies. Today, another a flood of deals likely to type of Klingon – people who cling on to old, outmoded ways of doing things when new ways are needed – can come from manufacturers, dramatically slow the successful progress of an organisation or he warns that brokers even stop that progress completely. Corporate Klingons need could be tempted to slash careful handling if they are not going to cause your organisation serious damage.” commission rates in a bid Da Vinci PR. to win business.”
y: M ovie store collection , I stoc k photograph y: ING Car Lease.
72 financial management