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The Chief Non-Financial OfficerJeff Henley, Chairman of the BoardOracle Corporation
Oracle Corporation
• World’s largest enterprise software vendor• $18 billion revenue, FY07• 300,000 global customers• 37,500 applications customers• 53,500 Fusion Middleware customers• 74,000 employees; 7,500 support personnel • 19,500 partners• 9,100 Independent Software Vendors (ISVs)• Operating in 145 Countries
“The future of financials is non-financials”
David TweedieChairman International Financial
Reporting Standards
David TweedieChairman International Financial
Reporting Standards
It’s More CompetitiveEmerging Markets are Driving Massive Change
0
1,500
3,000
4,500
US
,E
U,
JAP
,C
AN
CH
IN,
IND
,B
RA
Z,
ME
X,
RU
S,
PO
L
Total population
4X
~950
~2,900
With large work forces
Source: EIU; Ministry of Education Annual report 2005–06
Building skill setsCreating massive new
purchasing power
Driven by low wage rates
40.0
25.0
3.0 1.0 0.90
20
40
Germany US Mexico China India
Wages ($/hour)
Driving innovation
Enabled by access to everything
Free trade
TransportationIntellectual
capital
Internet/communications
86 120
443548
775
0
200
400
600
800
US UK India ChinaMexico
% increase in personal disposableincome per capita (1990–2006)
4% 5% 11% 15%CAGR 12%
510450
380360290
210
0
200
400
600
00–01 01–02 02–03 03–04 04–05 05–06
Intake in engineering in India (K)
CAGR = 16%
Embraer“double bubble”
fuselage
Apple Ipod
Source: PWC, 9th Annual Global CEO Survey
EXTENT TO WHICH VALUE CREATING ACTIVITIES INCREASE COMPLEXITY
39
39
34
36
33
26
29
26
29
33
36
35
33
42
10
11
16
16
23
32
23
0 20 40 60 80 100
Outsourcing
Business Process Localization
Offshoring
Strategic Alliances
New Product Launches
M&A
Expansion into New Territories
Percent
Some Extent
Large Extent
Very Large Extent
77% of global CEOs say the level of complexity in their organizations is higher than 3 years ago
It’s More Complex
And It’s Riskier
FACT: Between 2004-2007, 62% of global companies experienced risk events* • 87% of those risks were non-financial• Almost half were not prepared• Only half manage risk formally
Environmental• Climate change• Water, energy shortages• Natural disasters
Societal• Pandemics• Food, product liabilities• Infectious diseases
Geopolitical• Terrorism, War• Crime, Corruption• Breakdown in
information
infrastructure
Economic• Oil shock• Fall in US Dollar• China hard landing
*Source: IBM Global CFO Study 2008
Finance Challenges
RISK
EFFICIENCY SUSTAINABLEGROWTH
• How can we meet all of our fiduciary and statutory requirements more efficiently?
• How do we predict, measure, monitor and report on our business performance and social responsibilities in a sustainable manner?
• How can we effectively manage risk across the global enterprise?
World-Class
Finance
Drive Efficiencies
Drive Efficiencies
Outsourcing or shared services can lower costs 25 to 35 percent.
- Gartner, January 2007
Manage RiskManage Risk 61 percent of CFOs are expected to lead risk management within their organization.
- IBM Global CFO Study 2008
Drive Sustainable Growth
Drive Sustainable Growth
Effective finance organizations have 4 to 5 percentage point higher stock price appreciation.
What’s the Solution? Transform Finance
- IBM Global CFO Study 2008
Operational Excellence in Finance
Governance, Risk and Compliance
Performance Management
Oracle’s Financial Management Solution
Governance, Risk and Compliance
Financial Accounting
Performance Management
Fusion Middleware
With Oracle’s Financial Management Solution, you can set the standard for:
Integrated financial, human resources, and projects operations spanning 68 countries
Reduced invoice processing time by 33%, cutting outstanding receivables by EUR 8 million
Executed multi-dimensional collections strategies using credit risk factors
Cut quarterly close from 21 to 4 days and reduceddays sales outstanding (DSO) from 80 to 50 days
Reduced time to prepare financial plans from 5 to 1.5 days
What Customers Are Achieving….Operational Excellence in Finance
Governance, Risk, and Compliance (GRC) At-a-Glance
CultureCulture
GovernanceGovernance
Risk
Risk
Com
plia
nce
Com
plia
nce
Governance
• Set and evaluate performance against objectives
• Authorize business strategy & model to achieve objectives
Risk Management
• Identify, assess, and address potential obstacles to achieving objectives
• Identify / address violation of mandated and voluntary boundaries
Culture
• Establish an organizational climate and individual mindset that promotes trust, integrity, and accountability
Compliance
• Encourage / require compliance with established policies and boundaries
• Detect non-compliance and respond accordingly
Source: Open Compliance and Ethics Group
Only Oracle Delivers a Comprehensive
Platform for Governance, Risk, and Compliance
Management
Oracle’s GRC Solution
Infrastructure Services
Data Security
Identity Mgmt
Content Mgmt
Change Mgmt
Data Audit
Processes
Applications
Risk & Compliance Mgmt
Controls Management
Policy Mgmt
Industry Specific
Oracle SAP Custom Legacy Other
Insight
Risk & ControlIntelligence
OperationalIntelligence
PerformanceManagement
Repository
Automated financial and environmental compliance reportingReduced compliance process management time by 28%Recovered license and implementation costs in first year
Implemented 200 controls in 8 weeksEliminated SOD conflicts to meet SOX compliance requirements on timeAvoided 6-month customization effort, saved millions of dollars
Ensured secure application access and compliant provisioningReduced helpdesk tickets for employee on- / off-boarding by 60%Fulfilled auditor requirements for secure access to corporate assets
Aligned structured & unstructured content with compliance initiatives
Applied document management and retention policies to 350 million documents at 1/6th the cost of comparable solutions
What Customers Are Achieving…Governance, Risk, and Compliance
Automated compliant user provisioning & enforced access control
Eliminated 90% of rogue accounts and privileges across managed systems within 2 weeks of rollout
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An Enterprise Performance Management system brings the management processes under a single umbrella, connecting financial and operational decisions and activities with transactional systems to form a comprehensive management picture.
Enterprise Performance Management: Connect the Dots
An Oracle White Paper, October 2007
Oracle’s Enterprise Performance Management System
BI Applications
OLTP & ODSSystems
Data WarehouseData Mart
SAP, Oracle, Siebel,PeopleSoft, Custom
ExcelXML
BusinessProcess
OLAP
EPM WORKSPACE
Web AlertsOffice MobileDesktop Search
SOA
FUSION MIDDLEWARE
DataQuality
DataIntegration
MDM IdentityManagement
ContentManagement
Business ProcessManagement
PERFORMANCE MANAGEMENT APPLICATIONS
StrategyManagement
BusinessPlanning
ProfitabilityManagement
FinancialReporting &Compliance
Sales Svcs. Mktg. OrderMgmt.
BI APPLICATIONS
SupplyChain
HR FinanceContactCenter
BUSINESS INTELLIGENCE FOUNDATION
Essbase BI Server Predictive Analytics
Common Enterprise Information Model
Operational data is expected to take upa bigger portion of financial reporting
“The story behind the numbers”, A report prepared by CFO Europe Research Services in collaboration with Oracle, Dec 2007
The biggest barrier to gather and consolidate nonfinancial operational data
“The story behind the numbers”, A report prepared by CFO Europe Research Services in collaboration with Oracle, Dec 2007
Relationship Between Financial And Non-Financial Metrics
Travel& TransTravel
& TransAutoAuto
Comms& MediaComms& Media
ComplexMfg
ComplexMfg
ConsumerSector
ConsumerSector EnergyEnergy Financial
ServicesFinancialServices
HighTechHighTech
Insurance& Health
Insurance& Health
LifeSciences
LifeSciences
Public SectorPublic Sector
SalesService &Contact Center
MarketingOrder
Management& Fulfillment
Supply Chain
FinancialsHuman
Resources
PipelineAnalysis
TriangulatedForecasting
Sales Team Effectiveness
Up-sell / Cross-sell
Cycle TimeAnalysis
Lead Conversion
Employee Productivity
Compensation Analysis
HR Compliance Reporting
WorkforceProfile
TurnoverTrends
Return on Human Capital
A/R & A/PAnalysis
GL / BalanceSheet Analysis
Customer & ProductProfitability
P&L Analysis
ExpenseManagement
Cash FlowAnalysis
Supplier Performance
Spend Analysis
Procurement Cycle Times
Inventory Availability
EmployeeExpenses
BOM Analysis
OrderLinearity
Ordersvs. Available
Inventory
Cycle TimeAnalysis
BacklogAnalysis
FulfillmentStatus
CustomerReceivables
Campaign Scorecard
Response Rates
Product Propensity
Loyalty andAttrition
Market Basket Analysis
Campaign ROI
Churn Propensity
Customer Satisfaction
ResolutionRates
Service RepEffectiveness
Service CostAnalysis
ServiceTrends
Pearson reduced the time to close from 15+ days to 5 days. Realized 67% ROI with 1.5 year payback
Overcame major liquidity crisis with a $4 billion debt restructuring and restored credit rating back to investment grade
Reduced first budget iteration to 4.5 weeks and reorganizations to 24 hours. Produces a detailed expense budget utilizing over 700 accounts
What Customers Are Achieving…Enterprise Performance Management
Heineken Asia Pacific implemented planning solution in 40 days. Reduced P&L reporting from two weeks to two days
Reduced the monthly Finance book report generation process from 7 hours to 15 minutes
Logitech Improves Business Performance and Meets Aggressive Reporting Goals with Hyperion
Kirsten OnkenChief Financial Officer & SVP
“Our executives are now able to access and analyze up-to-the-minute information on what is happening in their areas. Not only does this ensure we meet company-wide directives, but also it helps build a performance-accountable organization, where each business unit and employee can align individual goals with the strategic objectives of the company.”
Company— Designs, manufactures
and markets personal peripherals for PCs and other platforms
Products— Hyperion Analyzer,
Hyperion Essbase, Hyperion Financial Management, Hyperion Planning, Hyperion Reports
Implementation— Up to the minute
information and analysis by operating executives and decision-makers; implemented by TopDown Consulting and Quest Industries
ManagementAccountingand Control
FinancialAccountingand Control
EnterprisePerformanceManagement
• Financial• Looking back
• Financial• Also looking
forward
• Also nonfinancial• Also looking
forward
The Evolution of Finance
Executing Managing Coordinating
… The Management Processes
Management Excellence Makes The Difference
Time
StrategicDifferentation
CompetitiveAdvantage
OPERATIONAL EXCELLENCE
MANAGEMENT EXCELLENCE
Business
operation
Business
plan
Business
model
Market
model
Business
results
Stakeholder
Environment
Enterprise Performance Management
OperationalFinancial
Strategic
• EPM integrates strategic, financial and operational management processes
• EPM should be an outside-in process, focused on the market, instead of inside out, focused on the budget
24
The EPM Menu - Breadth and Depth
Market
Model
Business
Model
Business
Plan
Business
Operation
Stakeholder
Environment
Market Cap, Employer attractiveness, Sustainability reporting, Compliance
SCM, CRM, HCM, PLM, ERP monitoring
Profitability, Planning/Budgeting/ Forecasting, Variance Analysis
ROI, EVA, Channel Partner Performance, Sourcing Relationships
Market share, Customer Satisfaction, Competitive Intelligence
The Hackett Group World-Class EPM Drives Profitability
Enterprise Performance Management (EPM) World-class EPM organizations deliver 2.4 times the equity market returns of industry-peer companies
1.0
2.40
Peer Group World-Class
Source: CFO Challenges and Opportunities in the Flat world, Wayne Mincey, Hackett Group
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"There is a growing body of evidence that companies which
manage environmental, social, and governance risks most effectively
tend to deliver better risk-adjusted financial performance than their
industry peers.”
J. Frijns
Former Chief Investment Officer of ABP, one of the largest pension
funds in the world
Increasing Focus on Sustainability Reporting
• > 2000 companies publish a sustainability report*
• 25%-30% growth in GRI adoption
• 75% of S&P 100 companies have CSR websites (34% increase)♦
* Business for Social Responsibility♦ CSRwire
Profit
People Planet
Direct Economic ImpactCustomers, Suppliers, Employees, Providers of capital, Public sector
SocialLabor Practices and
Decent WorkHuman Rights
SocietyProduct Responsibility
EnvironmentalMaterials, Energy, Water
BiodiversityEmissions, effluents, and wasteSuppliers, Products and services
Compliance, Transport
CSR Reporting Resembles Financial Reporting
• Hierarchies of accounts• Data collected by entities per
period• Data aggregated according to
rules• Processes and data may need
to be audited• Needs to support analysis and
scenario planning• Documents may be associated
with particular values• Ultimately needs to be
publishable
However…• Many different data sources
• Operational systems, financial systems, documents, published reports
• Many kinds of raw indicators• Numeric, categorical,
textual• Many different units
• Pounds/Kg , Miles/KM , Mg per litre…• Many unit conversions
• Many kinds of aggregations• Weighted averages,
conditional sums, modes
• First software company to participate in the U.S. EPA Climate Leaders Program
• Member of the U.S. EPA Green Power Partnership Program
• Member of the Climate Savers Initiative
• Participate in Demand Response Programs
• 14 European and South African operations are certified to the ISO 14001 environmental standard
• Best Workplace for Commuters Award Winner
• Conservation and recycling programs ranging from water, paper, waste, etc.
Oracle: Industry Leader in Environmental Issues
Source: PricewaterhouseCoopers
Increasing Demand for Non-Financial Information
New metrics for valuation
Board-level focus on reputation, social responsibility and sustainability
Publishing of key non-financial information along side financial data
What’s Inside? Metrics and TextCommon SDR Indicators
Indicator Units Value Environment Index 75 Air impact Index 65
SO2 Metric tons 860
CO2 Metric tons 14919.5
Dir CO2 emissions Metric tons 12,934.6
Indir CO2 emissions Metric tons 1,985.0
Accident_emission Count 0
Energy Impact Index 75
Electricity consmp 1000 gigajoules 300.3
Ngas & fuel oil cons 1000 gigajoules 101.2
Emp air travel Million miles 8.7
Water impact Index 85
Water use 1000 Cubic meters 482
Water Ph Integer 6
Social Index 60 Health impact Index 60
Injury days lost Count per 1000 25
Education impact Index 50
Community teaching Hours per 1000 10
Diversity impact Index 70 Female leaders ratio 0.3
Oracle’s Green Strategy Council
Customers want a platform solution that addresses challenges around:
1. Eco-Efficiency: resource utilization, carbon footprint
2. Eco-Innovation: product design, green processes
3. Eco-Transparency: reputation, brand
Enabling the Eco-Advantage
Eco-Efficiency Eco-Innovation Eco-Transparency
• Protect business reputation
• Promote green brand
• Optimize resource utilization
• Minimize carbon footprint
• Design green products
• Implement green processes
OpportunityCost Brand
Product Lifecycle Management
Strategic Network Opt.Manufacturing
Business Intelligence & Sustainability Reporting
Transportation Management
Asset Lifecycle Management
Reverse Logistics
Self Service Governance, Risk & Compliance
Data Center Management
Service Execution
Procurement
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Or Are Non-Financials Financial Anyway?
Socially Responsible Investment Funds Control 14% of Fund Capital
• Acuity Investment Management• Australian Ethical Investment Trust• Calvert Group• Citizens Funds • Domini Social Investments • Ethical Funds, Inc. • Green Century Funds • Neuberger & Berman• New Alternatives Fund• Pax World Fund• Sierra Club Mutual Funds • Winslow Green Growth Fund• Women’s Equity Mutual Fund
… And Sustainability
Indices Emerge
Case Study: Metso
• Metso’s strategy has leverage, it improves sustainability of its customers
• GRI reporting on• Environmental aspects• Social aspects• Economical aspects
• Interesting: Stakeholder P&L
Generation of value added• CustomersNet sales
• SuppliersProcurements
• Added Value Sales – Proc. Distribution of value added• Employees Salaries• Public sector Tax, Social
Costs• Creditors
Financing exp.
• Shareholders Dividends Retained in business• Added value – Distribution
Generation of value added• CustomersNet sales
• SuppliersProcurements
• Added Value Sales – Proc. Distribution of value added• Employees Salaries• Public sector Tax, Social
Costs• Creditors
Financing exp.
• Shareholders Dividends Retained in business• Added value – Distribution
Roundtable Discussion
Non-financial are the new financials…• Do you agree?• In your organization, what portion of management
reporting is non-financial?• Which non-financials are you reporting on?• Which non-financials do make a difference in your
organization?
Roundtable Discussion
The best defense is a good offense. Even in economic tough times, it makes sense to grow…
… from 'pressure' to 'performance',
… from 'cost control' to 'fueling growth',
… from 'compliance' to 'governance‘
… from 'finance as controller' to 'finance as the enabler'
How?
Roundtable Discussion
How do you feel about Sustainability Reporting:
(1) Nonsense,
(2) Good for PR,
(3) Important because of the hype,
(4) Important, part of your license-to-operate.
Why?
Roundtable Discussion
How will the role of the CFO look like in 2015-2020?
(1) Not really different,
(2) Typically combined with that of the CEO, being both at the same time,
(3) With the focus on management excellence, much more like the role of the COO,
(4) Much more finance-oriented, due to even increased pressure of regulations
(5) …
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