Thu, Mar 04, 2004 - Page 10 News List

Companies urged to outsource their financial processes

By Amber Chung  /  STAFF REPORTER

Taiwanese companies need to outsource their financial transaction processing work so that chief finance officers (CFOs) can be more deeply involved in decision-making, a business consultant said yesterday.

"The [outsourcing] move could help companies cut costs while having their CFOs more focused on the business decision-making and strategy support," said Vincent Li (李滄修), manager of business consulting services at IBM Taiwan Corp.

Outsourcing or centralizing a company's transaction processing and speciality services -- such as tax and internal audit -- could provide a more viable cost structure and is a business model that IBM is promoting to its customers.

"Some local enterprises, including one financial holding company and a high-tech manufacturing group, have been engaged in the work of outsourcing their transaction processing," Li said, without naming the companies.

This business model is a new concept in Taiwan as only large companies can make it worthwhile.

Family-run companies that take the finance section as the core of their organization would not easily release their control to third parties, Suhas Bhide, partner of business consulting services in IBM China/Hong Kong Ltd, said yesterday at a press conference.

However, Bhide said, to deal with the increasing complexity of business and establish business models for future development, the role of CFOs should evolve to "chief focus officer," focusing on developing core competences as well as building unique strength.

According to a survey that IBM conducted last September -- which polled 450 CFOs in companies with annual revenues of US$8.4 billion located in 35 countries -- 68 percent of CFOs regarded shareholder value as the highest priority, with managing the balance sheet the last in their ranking of the top five priorities.

The survey also showed that decision support and performance management activities were expected take up most of CFOs' workload over the next three years, at 37 percent, while transactional activities would shrink to 34 percent from the current 50 percent.

"The Enron scandal is indeed a strong stimulation to enhance the significance of the CFO's role, especially after the passing of the Sarbanes-Oxley Act in 2002, which demands the disclosure of control and processing," Bhide said.

A local scholar agreed, adding that the passage of the Sarbanes-Oxley Act places a great deal of responsibility on CFOs in terms of corporate governance.

"Though external governance -- such as endorsement by accountants or supervision by credit rating companies -- still functions, the most significant element lies in the companies' internal controls," said Shiue Fu-jiing (薛富井), chairman of the department of accountancy at National Taipei University.

Companies should invest more in ensuring information is authentic and transparent and disclosed on a timely basis, which requires the CFO's deep involvement," Shiue added.

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