Change is needed in finance: survey

The KPMG-produced survey, ‘Insights from Leading Finance Functions’ also shows that nearly four-fifths of respondents lack a holistic view of key finance processes and allow local systems, manual processes and spreadsheets to pervade management reporting, business planning and project accounting.
Jonathan Smith, KPMG director in the business performance services group, said, “Our research indicates that high performing finance functions in Australia and globally anticipate the needs of the business throughout the commodity life cycle. They respond to this by refining their role and modifying the finance operating model to meet the needs of the business.”
KPMG surveyed 20 leading mining and upstream oil and gas organisations, many of whom have significant operations in Australia. The survey analysed their views on the latest trends, priorities and challenges for finance in the Energy and Natural resources (ENR) sector.
In addition responses to the current global economic crisis were examined and compared. The findings reveal that there is a significant gap between the high performers and average respondents; with some startlingly differences in how finance functions in the companies surveyed operate and at what efficiency levels.
“The best finance functions break the circle and burden of complexity by standardisation, simplification and automation. Australia’s best mining, oil and gas organisations have adapted to these turbulent times by altering their focus to help the business. They are now perceived as business advisors rather than just scorekeepers.” said Smith.
However, high performers are in the minority. Less than one in five respondents in KPMG’s survey have a leadership role as a business advisor and nearly all have a contributing rather than a leading role for advising on operating decisions and asset management, capex initiatives, controlling costs, working capital management, and scenario planning.
The survey’s findings also reveal that poor systems and inefficient processes have helped to create a vicious circle hindering finance’s performance with otherwise unnecessary effort that is being spent on data collection, duplication and re-work in order to gain confidence in the integrity of the data. The survey also found standardisation across key processes to be very low with less than one in 10 respondents managing all key finance processes on a global level. Of concern is that the survey also found that only one in 10 respondents envisaged a change to global process standardisation in the next three years.
"What we see here in Australia in relation to these findings is the top performers have finance functions operating at the asset level and are driving standardisation and simplification programmes. In the current economic climate they have a strong focus on cash and working capital management" said Smith.
The survey has identified that the sector is developing a bespoke shared services model which is narrower than in other industries. This is being driven by a lack of key enablers prevalent in other industries - global technology platforms, strong functional reporting lines, global process governance and standard finance organisation design. These issues appear to have been exacerbated by complex sector characteristics such as remote locations and diverse regulatory environments. However, implementation levels among respondents remain low; representing a missed opportunity to gain efficiencies and enable finance to focus on more value added activities.
"Only a third of the companies surveyed have successfully established shared services to drive cost efficiencies in transactional processes. In contrast the high performers identified by the survey make greater use of shared services and centres of excellence and benefit from being freed to provide a greater focus on business planning, management reporting and analysis at the Asset level," said Smith.
Attracting and retaining quality employees at the Asset level was identified by the survey as being the major stress point in the finance operating model. Nearly two thirds of respondents cited a lack of technical and commercial skills together with low levels of employee mobility. Finance have an increased focus in the current financial climate on working capital management, cost control, budgeting, forecasting and scenario planning and two thirds of respondent identified these areas as some of their top priorities.

For more information visit: www.kpmg.com.au/Portals/0/Energy-natural-resources-finance-survey.pdf