How To Future Proof Your Enterprise The CFO Way

The past couple of years have been challenging for enterprises due to several factors, including the pandemic, geopolitics, logistics, and inflation. The world has seen a series of disruptions that have forced enterprises to rationalise costs. In such a scenario, the role of CFOs has become even more critical and strategic to the business.

In a recently concluded roundtable organised by SAP Spend Connect in association with BW Businessworld, industry veterans shared their experiences on how to deal with complex business challenges to help companies scale and grow, and ensure their mid- and long-term visions are on track.

Spend management is of key importance: 

SAP India, Head of Marketing, Intelligent Spend & Business Network, Anshul Gupta pointed out that the coronavirus pandemic continues to be a monster, and there are now several other factors at play, including the geopolitical environment, overall business volatility, a shortage of raw materials, high input costs, and inflation pressure.

Gupta said, "All these are going to be the new norm. As a result, spend management is important. How does one save by prioritising spend? I am sure everyone is now using some mechanism or tool to keep a check on that."

Develop supply chain within India:

Wipro Consumer Care and Lighting, India, CFO Sachin Bansal mentioned that though they were never dependent on China, they were earlier heavily dependent on imports.

Bansal said, "At one point in time, 90 percent of our supply chain was outside India. It was in Europe and the US. Over the years, thanks to the support, we were able to develop precision steel within India, and we are now able to develop 90 percent of the supply chain within India itself."

Gupta mentioned that commodities are difficult to manage just by developing alternate vendors. He commented, "One can of course manage the supply chain better but cannot control the prices. From a cost perspective, we keep driving multiple initiatives."

Page Industries, CFO, Chandrasekar, remarked that they learned a lot during the coronavirus pandemic. He said, "Typically, we used to hike selling prices by about 4% annually in the pre-pandemic years, to compensate for cost inflation; however, in the last couple of years, the price of cotton has gone up by 30 to 40%, so we had to increase our selling prices by 17-18 percent in FY22, and in FY23 we have so far increased it by 3.8 percent."

Chandrasekar highlighted that Jockey is the largest premium player, but in the overall consumption space, still small and therefore, subject to market forces."

He commented, "One of the things we did was implement RXIL, an invoice trading platform for SME’s, on which Page vendors can discount their Bill for supply."

Chandrasekar said that during the pandemic, Page went frugal on advertising, which usually amounts to 4-5 percent, held back on CapEx, froze hiring too, and still spent on the essential tasks of growing the business.

Digital Transformation, the Way Ahead:

LTIMindtree's CFO, Vinit Teredesai, said that when he joined the firm, the mandate from the management was to go to the customers and stabilise everything.

Teredesai said, "As soon as we were ready to put the foot on the accelerator, the pandemic came in, and within one week it dented 10 percent of our revenues, as we have exposure to travel, and we were generating 200 million dollars in revenue. We all thought the pandemic would end soon."

Teredesai highlighted that while the travel segment showed a decline, the other segments performed very strongly. He said, "The Company soon understood after 2-3 months that digital is the way ahead, and that is how the digital transformation got a boost."

Teredesai mentioned that 70 percent of their costs are people. He commented, "What we did was focus on inefficiencies within the system and eliminate them.” There was also a lot of skill mismatch because what the customer wanted and what actually happened in terms of hiring were mismatched."

"We also cut down on clients where there was no strategic match, but at the same time we increased our revenue per customer from 3.2 million to 5.5 million."

The best time for the manufacturing industry is now:

Bharat Fritz Werner, CFO, Sujoy Dasgupta highlighted that the best time for the manufacturing industry is now, thanks to the number of initiatives taken by the government.

Sujoy said, "40 percent of our imported inputs are from Taiwan, and 30 percent from Japan. In the past year, the Japanese currency, the Yen, has fallen, and several Japanese companies,  from whom we were earlier importing, are now setting up manufacturing facilities in India."

Sujoy mentioned that even during the pandemic, they did not reduce costs. He said, "Now we are playing a different ball game; we are looking at profit and not purely at cost." We did lose margins during the pandemic, but we are now making up for it. The manufacturing segment is an interesting one to be in, as customers are now placing orders for machines which have a long lead time for deliver,” he added. 

The real fortune lies at the bottom of the pyramid:

SAP India's Director of Procurement Solutions, Nitin Sharma, observed that the real fortune lies at the bottom of the pyramid. Sharma said, "20 percent of 4000 crore rupees would amount to 800 crores, and if one can save just 10 percent of that 800 crores, they are touching something around the range of 80 crores. For me, this is a low-hanging fruit that organisations can look into."

Sharma pointed out that, when looking at indirect spend, the dollar value might be low but the volumes remain high. He commented, "As an organisation, you need to manage that. One will not buy even something amounting to 10 rupees without a purchase order coming from the organisation."

"Very little technological intervention has happened in this segment. Going ahead, there is a lot of potential in this segment to save money and create more value for the organisation," he added.

Unless we innovate, we cannot move ahead:

AnthemBioSciences, CFO, Gawir Baig mentioned that in their sector, several innovations are happening actively.

Baig said, "We are looking forward to future-proofing ourselves for the long-term sustainability of an organisation. There are three pillars one should focus on: ensuring revenue growth, optimising costs, and corporate governance."

"Unless we innovate, we cannot move ahead, I feel that the younger generation is technologically advanced, but in biotech, what we have seen is that most innovation happens in Europe and the US. In the past 5 years, 400 billion dollars of funding has taken place in the biotech space, of which the US accounts for 80 per cent and Europe for 15 per cent."

In order to be relevant to them, one needs to move to greener and cleaner technologies.

Baig pointed out, "The evolution of the pharmaceutical industry has happened in such a way that most of the dirty chemistry has come to India and China, the developed world has passed it to the developing world."

Baig highlighted the fact that, as an organization, they have evolved in chemistry, which is green, with a lesser carbon footprint, which enables them to sell the technology to the customers.

Digitalization should be a scalable solution:

WakeFit, CFO, Sharad Sodhani suggested that digitalization should be a scalable solution. He said, "Digitalization should enable 100 percent compliance and governance. It should be something that enables us to rationalise and optimise the cost. Technologies like robotic process automation (RPA), optical character Recognition (OCR) etc. are still note matured and a lot of evolution is required.

"So if there are solutions available that can solve these problems, enable cost savings, rationalisation, and optimization, that would become the next focus area for CFOs and companies after core materials and service parts," he added.

Tata Communications Global Supply Chain Head, Siva Periasamy, pointed to the biggest benefit of implementing digitalisation in spend management. It is the visibility of spends which becomes easily available. A plethora of cloud-based platforms are available to help you navigate this. Siva said, "It gives one complete insight and also provide them with ample opportunities to develop sourcing strategies.

Siva highlighted that compliance management is equally important through the entire value chain saying, "It is critical to ensure whatever strategies are defined, are complied with to realise the benefits fully."

Spend management has become smarter:

SAP, Vice President & Business Head - Intelligent Spend and Business Network- Indian Subcontinent, Ashwani Narang said, “In today’s volatile business environment, spend management has become a strategic priority for modern enterprises. An effective spend management not only helps in optimizing the organizational spend, but provides better visibility into supply chains, improves processes & supplier relations, reduces costs and minimizes financial risks.”

Axio CFO, Akshay Sarma, underlined that global incidents such as the coronavirus pandemic, international conflicts and rising oil prices are driving inflation in the country, affecting everyone.

Sarma said, "Since I have taken over, I have not focused too much on pure-play cost-cutting because revenue generation is an important line to manage your margins."

Sarma pointed out that if one’s customer acquisition cost is marginally increasing because one is acquiring more customers at a faster pace than originally planned, that is a good increase in cost.

He added, "Spend management has become smarter in our organization over the last six months."

Navi, Director of Finance, Vishal Garg, mentioned that most of the spend is attritional. He said, "It is difficult to have control over everything unless and until it is systematically organised. For instance, if we are building new offices, as a result, whatever CapEx we are doing, we need to ensure that everything is completely negotiated, the same thing goes for people and technology expenses."

"Whenever you are starting something thing, one is a little inefficient on cost, as they are more focussed on starting and getting the revenue generated. My job is to ensure that once we have achieved our revenue target, optimising costs and ensuring the bottom line are equally important. And this is not just a one-time thing but an on-going exercise for every month, every quarter," added Garg.

Change is happening at an unprecedented scale:

Nitin Sharma acknowledged that changes are now taking place at an unprecedented scale, which even scares him. Sharma said, "As an organisation, we endeavour to go deep in every function as the core technology itself is changing; it is an evolution for us." 

"The biggest priority is not cost savings but governance and compliance; people want to have transparency in the system and also control it." 

Sarma added that, from a technology perspective, they are focusing more on the UX aspect of it. He remarked, "We are investing heavily in this direction so that we can make things simpler such that anyone can easily work with the system. We are trying to design the system in such a way that one is only looking at what one is supposed to look at.

The discussion concluded with the leaders agreeing to the fact that, going forward, the focus on spend management is of key importance.