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Volume 02 Issue 12 Rs.50



CFO India


Move you Make Fraud investigation experts and corporate leaders discuss best practices to detect and prevent fraud in India Inc





A 9.9 Media Publication

CFO December  |  2011


14 COVer story

i THINK 12 PARTHO S DATTA The former group CFO of Murugappa Group talks about the fear of a liquidity crunch and the challenges that CFOs face

PREVENTING FINANCIAL FRAUD 20 PREVENTION BEGINS AT THE TOP Detecting and preventing financial reporting fraud is no doubt a management concern, but stakeholders such as the Board and audit committees should be equally involved.



45 THE BUSINESS OF SUSTAINABILITY More companies are managing sustainability to improve processes and add value to their organisations, finds a McKinsey Global Survey.

Experts on fraud investigation and detection and those who have dealt with financial reporting fraud talk about best practices that India Inc should adopt to prevent and detect fraud

CFO profile


Sunil Kakar, Group CFO of IDFC talks about how he manages to stay focussed and driven and some of the key lessons he has picked up in his 25-year career.

Rajesh Pasari, CFO, NetAmbit, recalls the challenge of setting up the commercial function at his previous job in Spencer’s Retail and growing the retail chain by 400 per cent.

from player to coach




leader’s world 52 DOING THE DEAL Moving beyond negotiating at the table is important if CFOs have to be better leaders, says David Lim

56 GIZMOS | Lenovo Idea Pad K1 Tablet 60 M&E | Grand Hyatt Goa; Opa-Mumbai






P. 60

Every Mov e Make you Fraud investigat and corporate ion experts best practices leaders discuss

to detect prevent fraud and


AD index 02



ILLUSTRATION & Cover design Anoop PC

Bharti Realty FC | IBM IFC | Financial Executive 02

in India Inc



A 9. 9 MEDIA


| Ricoh 6,7 | Microsoft IBC | Nokia BC


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from the


dhiman chattopadhyay

Every Move you Make...

In a country where bribery is common practice and evading taxes successfully is a matter of pride for some, one cannot wish away corruption and fraud in the corporate sector. India Inc. may fare better on some ‘corruption surveys’ compared to politicians and bureaucrats, but a lot more needs to be done. It is essential therefore that we don’t just put in place systems and processes to prevent and detect fraud in our own organisations but also move towards creating central agencies and push for regulations to ensure organisations that follow a path of honesty and transparency, are rewarded. For our cover package this time (Every Move you Make...Page 14) we spoke to experts on fraud investigation and detection services, chartered accountants associations as also to CFOs who have dealt with fraud in their organisations. The intention was not to just find out what ails the system, but to look ahead and discuss best practices that CFOs can bring to their organisations, to prevent a Satyam-like scam from happening again and the steps that the government can take. What emerged was a two-fold conclusion. At the individual level, CEOs and CFOs need to ensure that the right values are instilled in the organisation, so that employees see the management as transparent and honest with zero tolerance towards fraud. Simultaneously there is a need for India Inc to join hands with the government and set up one agency to rate companies on the basis of their transparency and financial reporting standards and another, to train and retrain senior corporate leaders in fraud detection and prevention before deputing them as independent members who ask pertinent questions related to financial reporting standards. Not everything however is grim and serious in this issue. After all it is the season to be merry! So there is plenty to cheer about as well. Read our Lounge section to plan your holiday, check out a new gadget or, if you are feeling flush, to buy that new BMW! Also launching from this issue is the M&E page where we tell you about India’s newest and coolest Meeting & Eating (M&E) places. Here’s wishing you a very happy 2012.

Managing Director: Dr. Pramath Raj Sinha Editorial EDITOR: Anuradha Das Mathur managing editor: Dhiman Chattopadhyay managing EDITOR (Copy Desk): Sangita Thakur Varma SUB EDITORS: Radhika Haswani, Mitia Nath Design Senior Creative Director: Jayan K Narayanan Art Director: Anil VK Associate Art Director: PC Anoop Visualisers: Prasanth TR, Anil T & Shokeen Saifi Senior Designers: Sristi Maurya, NV Baiju & Chander Dange DesignerS: Suneesh K, Shigil N, Charu Dwivedi Raj Verma, Prince Antony, Binu MP & Peterson chief photographer: Subhojit Paul photographer: Jiten Gandhi The CFO Institute Executive Director: Deepak Garg Assistan Brand Manager: Nisha Anand ASSISTANT MANAGER: Dr Leena Narain Assistant Manager - Corporate Initiatives: Deepika Sharma Sales & Marketing ASSISTANT REGIONAL manager (sales): Rajesh Kandari (+91-9811140424) National Manager (Events & Special Projects): Mahantesh Godi (+91-9680436623) Assistant Brand Manager: Arpita Ganguli Co-ordinator (Ad Sales, MIS, Scheduling): Aatish Mohite South: Vinodh Kaliappan (+91-9740714817) West: Sachin N Mhashilkar (+91-9920348755) For any customer queries and assistance please contact Production & Logistics Senior General Manager (Operations): Shivshankar Hiremath Manager Operations: Rakesh Upadhyay Asst. Manager - Logistics: Vijay Menon Executive Logistics: Nilesh Shiravadekar Assistant Production manager: Vilas Mhatre Logistics: MP Singh, Mohamed Ansari officE addrEss Nine Dot Nine Interactive Pvt Ltd Kakson House, A & B Wing, 2nd Floor 80 Sion Trombay Road, Chembur, Mumbai- 400071 INDIA. Published, Printed and Owned by Nine Dot Nine Interactive Pvt Ltd. Published and printed on their behalf by Kanak Ghosh. Published at Bungalow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Tara Art Printers Pvt ltd., A-46-47, Sector-5 NOIDA (U.P.) 201301 All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited.

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December 2011

CFO india




December 2011


CFO Collector’s Edition

CFO India’s 2nd Anniversary special has lived up to the benchmark set by the first anniversary issue. You have published the experiences, knowledge and values picked up by some of India’s senior most CFOs, all in one edition. It is indeed another collector’s edition from the stable of CFO India. Many thanks for bringing out this exclusive edition. My congratulations to the entire team. —Shantharam Nayak TR, CFO, All Green Energy, Bangalore


That Good Feeling


ever, brings me to a big one we faced when deciding t feels great to be a year older. It really does, when the order in which the articles were to appear. you are as young as we are. It also has something The easiest way was to carry them in alphabetical to do with the go-getter attitude of the commuorder, but we wanted to put so many of the writers nity that we represent. So, we chose to celebrate up front, and unfortunately, the names of all CFOs CFO India’s Second Anniversary (it may seem do not begin with ‘A’. So we thought of bunching like we have been around forever, but we are just them according to the size of their companies and, two years old), by asking 36 of the country’s leading in some cases, according to the sectors they are in. Chief Financial Officers to become journalists for a Then we had our eureka moment: why not categorise few hours and write about two memorable moments them into four categories of athletes? After all, these in their career — a big challenge they overcame and eminent people and their companies all represent a big win — successes that made them feel ‘2 good’. something remarkable. For some it is about stamina The memories and the experiences that the CFOs or about technique while for others it is speed and have written about are as rich and varied as the list strategy, much like athletes who compete across of contributors. From IPOs that almost failed, tricky different distances. So does ‘size mergers and computerising bank matter’ or do we think ‘the best branches to turning around loss things come in small packages’? making units, creating blueprints We will keep you guessing on that for risk management and in one one, but what we are sure of is that case at least, becoming a CFO the following 70-odd pages will after spending half a lifetime in keep you interested, thanks to the programming and HR — the stofascinating experiences shared by ries you will read in the following some of the most respected finanpages are sure to keep you glued to cial leaders in India. Go ahead and this edition. Talking about challenges how—Dhiman Chattopadhyay turn the page!




Your voice can make a change: Share your viewpoint on what’s happening in the community and your feedback on the magazine at



Thank you very much for the comprehensive articles published in the second anniversary issue of CFO India. Each one of the experiences were great to read. The caricatures of course are absolutely superb. — Bhaswar Mukherjee, Director, Finance, HPCL, Mumbai

Thank you very much for coming out with an excellent 2nd anniversary issue. Apart from all the articles, I really liked the caricatures. Please do convey my sincere appreciation to the artist. He made me look 10 years younger! — Sunil Kakar, Group CFO, IDFC, Mumbai


KUDOS! I would like to take this opportunity to congratulate team 9.9 Media for putting together a comprehensive issue chronicling the experiences and challenges faced by eminent Indian CFOs. It is interesting to know about the strategies put in place by our finance leaders, how they have managed to resolve tricky business situations and emerge as winners. — Gulshan Dua, Country Controller and Company Secretary, Freescale Semiconductor India , Noida

Accept my accolades for the 2nd Anniversary issue of CFO India. It was very interesting and worthy of a collector’s issue. I found one error in page 21 though where you mention that “US GAAP is not only about accounting standards published by IASB...”  I think it should be FASB in place of IASB. —Pankaj Mundra, AGM, Finance, Hindustan Zinc Limited, Vedanta Plc, Mumbai

TIPS FOR CFO INDIA FANTASTIC ISSUE Congratulations on the fantastic anniversary issue. The perspectives you have collected from multiple CFOs is clearly invaluable. My own contribution has also received good feedback from many; thank you for the opportunity to contribute to this special issue. — Sathya Kalyanasundaram, Director Finance & Operations, Texas Instruments, Bangalore


CFO india

December 2011


CFO India is on the whole a very readable magazine. However, I find it a little too personality driven. CFOs do grapple with a number of regulatory changes in various areas. The magazine can become even more useful for us if major developments in areas like tax, corporate law, securities law, accounting and M&A are covered regularly in your magazine. — Jaimin Bhatt, CFO, Kotak Mahindra Bank, Mumbai



12.11 BUZZ

CA shortage hits India


CFO india

December 2011

There is a shortage of nearly 2 lakh chartered accountants in the country today. And with foreign investments expected in several sectors, apart from the Direct Taxes code coming into effect soon, the demand for CAs will only go up, Mr G Ramaswamy, President, Institute of Chartered Accountants of India, told The Hindu. “Big companies such as Infosys, Wipro and ICICI Bank require CAs in large numbers. And with taxes such as the DTC and GST as well as FDI to come into play, CAs have an important role to play in future,” he said on the sidelines of the National Convention for CA students in Chennai. In 2010, 1.83 lakh CA students passed out, though only around 85,000 are in practice. To improve the performance and training for CAs and bridge the need gap, the ICAI is engaged in various initiatives. ‘Project Parivartan’ seeks to bring in a paperless education system where CA course materials, notes, question papers and registration forms can be accessed online. “Already elements of this are in place. The project will be completed by June 2012,” he said. The ICAI is bringing out e-learning courses on various subjects too. It is also organising faculty training programmes and has brought out CDs on preparing for CA exams.

What’s AROUND ZONE CFO Book: Sandeep Batra..................................... Pg 10 Jargon Decoded: Meanderthal.............................. Pg 10 Resort wear: Money spinner?................................. Pg 11 People Movement................................................... Pg 11


Will the Indian economy see a further slowdown in growth in 2012-13?

6% No 15% Maybe

79% Yes

current POLL question

Have interest rates on loans reached a peak and now see a reduction? Vote now at



New App to help get jobs Facebook is probably not the first place that comes to mind when contemplating new career opportunities. But Monster. com, the career search website, hopes to change that with BeKnown, a professional networking app that allows users to build their professional identities within Facebook, reports Reuters. “People spend so much of their time on Facebook and at the same time companies are trying to find creative and productive tools to connect with potential talent,” said Tom Chevalier, Global Product Manager for Monster Worldwide. With BeKnown jobs are displayed based on a user’s work experience and network connections. BeKnown has been configured to work with iPhone and Android.

The national capital has been named as the country’s most competitive city for the second year in a row in a survey that analysed different cities on factors like their investment climate and governance matters. Delhi pipped the financial hub Mumbai and IT hotspot Bengaluru to grab the top slot in the annual survey conducted by the Institute for Competitiveness (IFC). Releasing its City Competitiveness Index 2011, the IFC said in a statement that the report was an indicator of how the corporate world selects the cities for investing and also how governance is important in assessing the level of competitiveness across these cities. In the list of 50 cities, Delhi is followed by Mumbai, Bengaluru, Pune, Chennai, Gurgaon, Kolkata, Hyderabad, Ahmedabad and Jaipur in the top 10 positions. “The growth and progress under some parametres is remarkable and if Delhi continues to grow at this pace then it may become unbeatable in some time. For instance, its physical infrastructure, its demographicsand some business dimensions are its strong areas,” the report said. “In addition its proximity to cities such as Gurgaon and Noida add an advantage to its basket,” it added. The report said that Bengaluru and Pune have moved up from their fourth and eighth ranks respectively last year, while Chennai has dropped three positions to the fifth place. December 2011

CFO india


Delhi is India’s most ‘competitive’ city

O-ZONE cfobook



Sandeep Batra Wall




What’s on your mind? Attach

Share Sandeep Batra enjoys a special bond with Calcutta (Kolkata), the city of his childhood. He still loves calling it ‘Calcutta’. December 22 at 10.30 pm · Comment · Like

March 2010 to Present – CFO, Personal Netambit. Dec 2008 – Feb 2010 – CFO Zodiac: N.A Bothli PoliticalChemicals Views: Liberal & Mining 2006-2008 – National WORK Commercial Manager, Spencer's Retail Jan 2009 to Present – DirectorFinance, Pidilite Industries 1999 – 2006 – Sr Manager, 1988-2008 – CFO & ED, ICI Seagram India Ltd First Job: ICI India Ltd

Sandeep Batra is following Trinitas (Photosynthesis) December 19 at 9.05 pm· 2 people Commented · 1 person likes this

Sandeep Batra is now friends with 264 people December 17 at 11.00 pm · 5 people commented · Like

I Read...

EDUCATION BCom from St Xavier’s College, Calcutta, 1986 South Point HS, 1983

Any good fiction work November 30 at 6.26pm · Comment · 4 people Like this

I Listen... Beatles and many others November 24 at 7:14pm · Comment · 1 person likes this Recent activity Sandeep Batra likes CFO India, Let’s spread happiness and 2 others

Let’s spread happiness, CFO India, Mrs India International 2010 December 17, 8.55 pm · 2 Comments · 7 people Like this

The meaning: This is a person who has great difficulty expressing himself succinctly, often giving long, unfocussed presentations. The Usage Next time your jargon-loving colleague says, “I want to gouge my eyes out every time the office meanderthal pulls up a PowerPoint,” it is not a pre-historic creature he is referring to. Just a difficult-to-understand colleague. And no, not you!


Sale of residential properties has dropped by 18 to 28 per cent in major metros, hit by dampened demand as a combination of higher property prices, rising home loan rates and job cuts take a toll. Data released by real estate research firm Liases Foras for Delhi, Mumbai and Bengaluru, indicates this trend. Bengaluru for instance, considered one of India’s fastest growing and most crowded metros, shows a 21 per cent drop in residential area sold in April-September 2011 compared to last year. In Delhi sales have dropped by 18.7 per cent YOY for the April-September period according to the Liases Foras data, while sales in Mumbai slowed the most, falling almost a third. 10

CFO india

December 2011

Anil t

Home sales drop across cities


snippets POLICY

Lok Sabha clears LIC Bill 2009 The Lok Sabha has finally passed the Life Insurance Corporation (Amendment) Bill 2009 on December 12, 2011. The bill seeks to raise the capital base of the state-owned insurer to Rs 100 crore from 5 crore, bringing it on par with private insurers, both in life and non-life segments, which are required to have a minimum capital base of 100 crore as per IRDA norms. Minister of State for Finance, Namo Narain Meena said the changes will not affect policy holders. The bill was introduced in the Lok Sabha quite a few years

back and referred to the Standing Committee on Finance, which had strongly opposed the provision in the bill that empowered the government to limit the extent of sovereign guarantee. The government, Meena clarified, will continue to provide sovereign guarantee to the policies sold by LIC. The bill also seeks to allow LIC to allocate 90 per cent or more such surplus — excess of assets over liabilities — for life insurance policyholders and the rest to a separate account maintained by LIC.


Resort wear: The new money spinner? CFOs, specially in the retail sector, take note: there is money to be made by investing in a resort wear division in your firm. Some of India’s leading fashion designers such as Manish Malhotra, Narendra Kumar Ahmed, Anupamaa and Babita Malkani who had come to showcase their collections at the first ever India Resort Fashion Week (IRFW) were unanimous in their view that for a majority of Indians, most of whom are overweight, the most appropriate set of clothes was resort wear — loose fitting casual clothes. As if on cue buyers from the Middle East and Europe arrived for the inaugural IRFW that was held in Goa recently. “Even if you look at what people wear almost every time they travel, it is resort wear. With billions travelling on holidays each year and a substantial number of them willing to be seen in exclusive wear during their holidays, the market for resort wear will only go up,” said Khaled Mekawi, one of the buyers who had come from Lebanon. So have the people behind the inaugural IRFW, (The Imtiaz Khatri Group along with Id8 Media, Provogue and others) pulled off a coup of sorts? Time will tell.

Ex-IAS joins Edelweiss board

Edelweiss Financial Services has inducted Sunil Mitra, former finance secretary, as independent director on its board. “The company will benefit from his sage counsel,” EFS chairman and CEO Rashesh Shah said. Mitra retired as revenue and finance secretary in June 2011.

RBNL gets new CMO Reliance Broadcast Network Ltd (RBNL) has appointed Vivek Malhotra as Head of Marketing for its radio brand 92.7 BIG FM. In his new role, Malhotra will be responsible for developing the overall brand and communication strategy for the business and implementation rollout across the stations. Prior to joining RBNL, Malhotra was with Bloomberg UTV, where he was Senior Vice President – Marketing, PR and Research.

Cantabil’s new CFO

Mr Rajesh Rohilla has been appointed the CFO of Cantabil Retail India Limited, a retail, garment and textile company, with effect from December 14, 2011. Cantabil offers a wide range of unique designer and comfortable clothing. At present, Cantabil’s stores are spread across the country and many overseas markets. The shares of Cantabil Retail India Limited were trading at Rs 15.65, increased by Rs 0.60 or 3.99 per cent at 1,253, on December 14.

December 2011

CFO india



i think

Facts & Trivia First Job: Dunlop India PREVIOUS JOB: CFO, Indian Aluminium Company In the News: Winner of several CFO awards and a member of the CFO100 Hall of Fame

Warren Buffet once famously commented “It is only when the tide goes out that you learn who’s been swimming naked.” We are in one such tide, running out of time. Several factors have come together to create this stress in the market place — projects stuck for clearances, counter-parties in legal or business troubles, drop in demand growth, cost of money in India, global tensions like the Euro zone crisis and a general sense of caution. In some companies, the finance function has been scarred by currency losses. This sets up three problems for the CFO. The first is to keep meeting current commitments on operations, debt servicing and capital investment programmes. The second is to decide on the choice of debt funding. The third is how to handle opportunities that come up in weak markets — be it in market share or buying out competition or suppliers. Unfortunately, issuing new equity, the ultimate liquidity instrument, is not easy right now. 12

CFO india

December 2011

PARTHO SARATHY DATTA The former Group Finance Director at Murugappa Group and a member of the CFO India Hall of Fame, Partho S Datta talks about the fear of liquidity crunch that has engulfed India Inc, three key challenges it throws up for CFOs and possible solutions The winners will of course be companies with mostly completed projects, flexible product lines and some financial head room. After all, it is also a question of being better off than one’s competitors. CFOs who have preserved

“A company that shows lenders...and shareholders that it is well-governed and has high ethical standards, will always be sought after”

head room will have earned their keep. They would be the ones who would be able to protect the strategic options and flexibility every company seeks.

What can the CFO do then about some of the challenges? The first job will be to trim current operations and squeeze out time from the working capital cycle. The true benefit of an ERP system should kick in here, as would the concept of simplification. Often complicated structures are raised to maximise various gains, including financing, outsourcing, long term contracts, corporate structures, forex hedges and fiscal benefits. Unthinkable as it might be, the CFO should work with the top management team to know the cost of abandoning or curtailing projects, and selling assets. Enough has been said about risk management. Every company’s annual report carries substantial updates on


that. A crisis gives us an opportunity to do a back-check — did we capture the key risks and put the right weights on them? Is the mechanism for early sighting of risk in place? Events can be sudden, or their coming together can be overwhelming. Nevertheless, a lot can be achieved by anticipating and getting to understand the interconnected-

ness of major risks. Many commonly used risk measures may prove inadequate because they are based upon past data and relationships. Useful as daily management tools, they can lull one into an unjustified sense of security. The third is to outpace the market in setting up and communicating governance standards. Surprises are always

unwelcome. Much more so in difficult times. A company that shows its lenders, partners and shareholders, that it is well-governed and has high ethical standards, will always be sought after. After all, lenders are also hunting for good quality assets, and willing to give time to good borrowers to set their house in order. December 2011

CFO india


Every move you

Make... Fraud investigation experts and CFOs who have dealt with fraud in their organisations discuss best practices and proactive steps to detect and prevent fraud in India Inc Dhiman Chattopadhyay Anil T


CFO india

December 2011

cover story

Preventing Financial Fraud


ne thing is for certain. Corporate India is now far more proactive in the way it looks at financial reporting fraud thanks to the wake up call following the Satyam scam. More companies are now looking at strengthening their internal audit teams while audit committees and boards are asking more uncomfortable questions. Whistleblower policies too are being put in place. Yet, obviously a lot more needs to be done to minimise the chances of a Satyam-like scandal happening again. The good news is that there is no dearth of global best practices to take inspiration from, nor is there a dearth of ideas from experts.

A POSITIVE CHANGE “Earlier my proactive work was just 10 to 15 per cent of the total work we handled in terms of fraud investigation, detection and prevention. Almost 90 per cent of it was reactive work, once the fraud had already taken place. In the last six months the proactive work has gone up radically to between 35 and 40 per cent. This is a clear indication that India Inc has woken up to the need to prevent fraud instead of acting only after the damage has been done,” says Arpinder Singh, Partner and India Leader of Ernst & Young’s Fraud Investigation and Dispute Services (FIDS). Mr Singh says even on the reactive side, as opposed to earlier instances when many companies would try to deal with the situation themselves and hush up matters, vigilant audit committees now demand proper external investigations. “It is no longer couched in secrecy,” he says, adding, “Not too long back most annual reports didn’t even mention fraud prevention measures in their annual report.” Mr Singh however, sounds a warning note. “The worrying thing is that the nature of fraud is changing. People are imaging documents on their BlackBerry and iPhones,” he says. Thankfully as more Indian organisations acquire companies abroad or expand their operations into other continents, corporate governance is becoming tighter as well. “The zero tolerance to fraud that most top British or American firms now have, is rubbing off on us. Give it another couple of years and things will get even better,” he says. But hasn’t the magnitude of fraud also grown over the years in India? “That is primarily because the size of the economy has grown. Also a lot more fraudulent practices are coming to light because they are being exposed unlike before,” he counters.

December 2011

CFO india


Preventing Financial Fraud THE CHALLENGES Yet, detecting and preventing financial reporting fraud is one of India Inc’s biggest worries now. One man who has worked closely with an organisation affected by fraud is S Durgashankar, the former CFO at Mahindra-Satyam under whose leadership M-Sat turned the corner after Mahindra & Mahindra acquired the scam-hit IT giant. “Fraud has to be looked at from two aspects: fraud encouraged and committed from the top; and employee fraud. As far as top level or management fraud is concerned, we should try and set benchmarks that are higher than global standards,” says Mr Durgashankar. Why? He reasons that the culture of black money, bribery and tax evasion is fairly high in India compared to most developed nations and to counter this, India Inc needs to set higher standards of ethics and honesty. Currently, EVP M&A at M&M, Mr Durashankar believes the amount of time audit committees and boards spend looking up financial records of an organisation, is not adequate to gauge and prevent fraud. “The board as well as the audit committees meet once every quarter, for about three hours. Honestly, 12 hours a year is just not enough to understand if a company is doing every thing right,” he says. On the other hand, he also feels it is unfair to expect the board to handle the entire responsibility. “Why should board members be the only ones to check for fraud? Internal auditors, external auditors and other stakeholders should shoulder the responsibility as well,” he adds. Not everyone however, is happy with the way India Inc has moved since the Satyam days. Sandeep Baldava, Partner E&Y says, “Recent surveys conducted by various organisations indicate that the level of fraud continues to rise in India. The impact (financial or reputational) has also increased substantially to the extent that in some cases it may threaten the existence of the organisation or the relevant business division. This is despite the fact that there was suppos16

CFO india

December 2011

“Do a fraud risk assessment as early as possible. CFOs in fact should demand this” — ARpINDER SINGH, Partner & India Leader, FIDS, Ernst & Young

edly an increased focus on fraud risk management after Satyam,” he says. Mr Baldava believes the biggest challenge before India Inc now is to show sincere willingness to be proactive. “Very few companies in India have put in place a formal fraud risk management framework to address the risk of fraud. Most companies take some measures for prevention or detection of fraud. However, audit committees and directors sometimes are not able to assess whether those measures are adequate vis-à-vis the fraud risk perception for that company,” he says. Mr Gulzari Babber, Global Deputy President of CIMA talks of these challenges from a global perspective. “During 2011, CIMA has worked to raise awareness of the UK Bribery Act and the fact that it has implications for business around the world. In particular, the Act includes a corporate offence of failing to prevent bribery. This strengthens the importance of strong ethical cultures and practices within organisations that wish to engage globally. The highest growth markets, such as the BRIC nations, are also at the highest risk from corruption as illustrated in Transparency International’s Corruption Perception Index,” he says.


“CFOs should reflect on the risk they run if their organisations don’t implement strict fraud detection and prevention mechanisms” —Gulzari Babber, Dy President, CIMA

So what needs to be done? Mr Durgashankar’s prescription is simple: create a national body that rates every listed organisation in India based on how transparent they are and how efficiently and credibly they have undertaken internal and external audit. “The least it will do is create pressure on the management and force them to clean up their act. Companies will realise that the ratings will determine whether they get PE funding of even foreign investments,” he says. Another best practice he says, would be to follow a policy of rotation in the finance department. “Unless people, are regularly rotated to other areas and new people brought in, the risk of fraud

Preventing Financial Fraud being perpetuated and left undiscovered till its too late will remain,” he says. “The government should set up a national body that is an authority on corporate fraud. The members of this committee should come up with a blueprint of 10-12 things that lead to fraud and then suggest solutions to these or recommend systems to be put in place to tackle these,” he adds. His final suggestion: to create an institute that trains senior corporate leaders who can then be deputed as independent directors to ask the right questions about possible financial reporting irregularities. Mr Baldava argues along similar lines. “Managements should establish a comprehensive Fraud Risk Management (FRM) Framework to tackle the risk of fraud and to minimise the resultant financial and reputational loss to their organisation,” he says. To achieve this, he has a three-step framework in mind. The first, he says is to create an antifraud environment. “Setting the tone at the top is the most crucial step in creating this environment. It can be achieved by establishing an overall culture of honesty, integrity and ethical conduct across the organisation. This should be a continuous process,” he says. Organisations also have to establish procedures for prevention and early detection of fraud. Mr Baldava feels a company should establish specific and visible procedures that are aimed at prevention and/or early detection of fraud. In addition to internal audit mechanisms, these would include mechanisms such as fraud risk assessment, background checks, behaviour pattern analysis, surprise reviews and other processes. He also suggests that the fraud risk management committee should independently oversee the investigation into internal and external frauds. Mr Singh, who, in his capacity as the India Leader for E&Y’s FIDS cell has probably seen and handled more corporate fraud cases than most others, sees a lot of positives emerging post Satyam.

“Setting the tone at the top...can be achieved by establishing an overall culture of... ethical conduct across the organisation” —Sandeep Baldava,

“Internal and external auditors as well as other stakeholders should shoulder some responsibility as well” —S Durgashankar,

Partner, E&Y

EVP M&A, Mahindra & Mahindra CDP

“The company hotline system where whistleblowers are encouraged to call and register complaints, have come as a boon. Today 85 to 90 per cent of my investigations begin because someone has blown the whistle on a large scale fraud in their organisation,” he says. He also suggests that CFOs should conduct fraud risk assessment in their organisations at regular intervals. “Do not do it later and wait for something to happen. Do a fraud risk assessment as early as possible. CFOs in fact should demand this,” he says. The other advice he has for CFOs: “Practice what you preach. Punish the guilty, however big he or she maybe.” The good news of course is that many of India’s listed and well-respected organisations who value their market reputation are now employing global best practices to improve transparency in their organisation. “Many large organisations put in place various analytic procedures

to monitor and identify abnormal transactions or transactions with red flags. Some organisations are enhancing these procedures to include employee behaviour monitoring or abnormal activity monitoring. But they also need to adopt a careful approach when implementing these procedures to ensure that personal privacy of an employee is not intruded in the process,” Mr Baldava says. The message for India Inc. particularly its CEOs and CFOs are loud and clear. As Mr Babber of CIMA concludes, “CFOs should reflect on the risk they run if their organisations do not implement strict fraud detection and prevention mechanisms. After all, a multimillion dollar fine and the additional costs of reputational damage together with employee and client disengagement seems to be the wrong trigger for change. Improving business practice and strengthening performance must be a better option.” December 2011

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Fraud corporate

with internal audit Despite the wake up call after the Satyam scam, many Indian organisations are yet to realise the importance and true potential of internal audit Mritunjay Kapur


ny organisation, even by conservative estimates, can lose six to eight per cent of its revenues on an average due to the absence of internal audit, an effective control environment and strong fraud prevention mechanisms. After the Satyam scam it was felt that India Inc had realised the importance of IA. Yet, though talks of corporate governance standards have increased, the practice of internal audit being followed as a regular task is still not prevalent. Even today, many companies have a traditional mindset that internal audit is an additional and unnecessary expenditure. Moreover the methodology of corporate governance standards, risk management and oversight practices in


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India need to improve and that is only going to happen when the tone at the top improves and the promoters and the Board of Directors view Internal Audit as an tool to better manage their organisation as opposed to IA being just a compliance requirement. Internal audit can help organisations in the following ways to improve efficiency: • It helps understand and verify how activities and processes are actually operating, rather than just thinking and knowing how they are working. • It looks into known problem areas and develops a fact-based action plan to make corrections and improvements. • It helps verify if critical areas that must operate flawlessly are in fact doing so.

• Internal audit can help to strengthen the internal controls within an organisation and thereby help improve efficiency. It can help improve accounting documentations and policies, achieve proper segregation of duties and improve control over the IT systems. • It is also the biggest deterrent against fraud. Internal audit offers various advantages to both the CFO and the organisation. For fast growing, SME and in general most companies, having an internal audit function can make it easier for CFOs to raise funds for the organisation. Most investors prefer investing in businesses which have an independent internal audit function because it gives reassurance to the investors on how their money is being spent and on the governance and work ethos of an organisation. The benefits of internal audit outweigh the costs if it is considered as a tool of managing and improving a business. Internal Audit can help ensure that the strategy, process and policies for achieving organisational strategy are being followed in the organisation at a grassroots level. Internal Audit gives assurance to the CFO on what he thinks

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is what is actually on ground. It also helps organisations reduce frauds such as theft and fraud by employees and also in identifying accounting malpractices and financial statement manipulations. Regular internal audit and checks can help companies avoid unnecessary costs which may arise on account of data breach and product recalls. CFOs should also assure that resources are allocated optimally and directed towards generating right preventive mechanisms that can avoid fraud situations. Anticipatory and proactive oversight requires a strong emphasis on up front board involvement in policy setting, risk assessment and strategy formulation. Once risks are identified and sourced, boards should ensure the management evaluates the company’s options for managing the critical risks, leading to policies clarifying responsibilities, authorities and accountabilities. Internal Audit is critical for building a culture of accountability and responsibility in an organisation; I believe that is the biggest case for having an effective internal audit. Further, having an effective Internal Audit function is the biggest deterrent to fraud.

mr mritunjay kapur

Managing Director, India, Protiviti Consulting

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Financial reporting fraud

Prevention starts at the


Fraud detection and prevention is no doubt a management concern. But all key stakeholders, including the board and the audit committees, should be equally involved Mari Reidy & Jonathan Theobald

Financial reporting fraud


en years after the collapse of Enron Inc made financial reporting fraud front-page news, the issue remains a serious concern for boards, investors and the public at large. Today’s public corporations spend a significant amount of time and resources complying with complex regulatory structures that grew out of the Enron and other accounting controversies. But for board and audit committee members, as well as each and every financial executive, compliance alone is not enough. Even to-the-letter compliance with regulations is no guarantee that “it can’t happen here”. What is needed is a more comprehensive and proactive approach to reduce the risk of financial reporting fraud and mitigate its potential effects.

State of Financial Reporting Fraud Although 2001 was a year in which financial reporting fraud generated significant and notable headlines, the issue is a perennial concern of every responsible executive. Recognising this, three premier organisations — Financial Executives International (FEI), the National Association of Corporate Directors (NACD) and the Institute of Internal Auditors (IIA) — are collaborating with the Centre for Audit Quality (CAQ), a public policy organisation, in a long-term initiative to help organisations mitigate the risk of financial reporting fraud.

In conjunction with the announcement of this collaboration, CAQ released the report, Deterring and Detecting Financial Reporting Fraud, A Platform for Action. Many other organisations have also researched the issue at considerable length. Recent examples include separate studies by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and the Association of Certified Fraud Examiners (ACFE). These various studies have generated some new insights and reinforced some long-held understandings about the problem. For example, ACFE’s ‘2010 Report to the Nations on Occupational Fraud and Abuse’, found that although asset misappropriation schemes are the most common form of occupational fraud, financial reporting fraud is a dramatically more costly issue. Although 90 per cent of the cases reviewed in the ACFE survey involved asset misappropriation, the median loss in these cases was $135,000. In contrast, financial statement frauds accounted for fewer than five per cent of the cases, but were by far the most costly — causing a median loss of more than $4 mn per case. The 2010 COSO report, Fraudulent Financial Reporting: 1998-2007, An Analysis of US Public Companies, zeroes in on this particular type of fraud, reviewing 347 instances of alleged fraudulent financial reporting by registrants of the US Securities and Exchange Commission. Among the study’s findings: “The two most common techniques involved

improper revenue recognition and asset overstatements. The majority of frauds (61%) involved revenue recognition while 51 per cent involved overstated assets primarily by overvaluing existing assets or capitalising expenses.”

Legislative and Regulatory Responses Have the legislative and regulatory responses in the years since Enron had a significant effect on the problem? The 2010 COSO report was unable to reach a conclusion about the effectiveness of the Sarbanes-Oxley Act of 2002, noting that a relatively small number of frauds examined in the study involved time periods subsequent to the issuance of the Act. On the other hand, when CAQ posed this question in a series of roundtable discussions it received a positive response. The CAQ report states: “The Sarbanes-Oxley Act provisions are generally held to have helped reduce financial reporting fraud. Several CAQ discussion participants emphasised the deterrent effect of the criminal penalties for untrue certifications by the CEO or CFO.” I n p a r t i c u l a r, t h e d i s c u s s i o n participants cited requirements of Sarbanes-Oxley that are designed to raise the standard of corporate governance and mitigate the risk of fraudulent financial reporting. Examples include provisions that require all public companies to establish procedures for receipt and treatment of complaints (sometimes

At a more fundamental level, auditors must demonstrate an attitude of professional scepticism in assessing an organisation’s financial results and supporting audit evidence December 2011

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Financial reporting fraud referred to as whistleblower programmes). The act also requires the CEO and CFO to certify all periodic SEC reports that include financial statements, and it establishes criminal penalties for willful and knowingly untrue certification. Regulatory responses to accounting fraud did not stop with Sarbanes-Oxley, of course. For example, post-Enron exchange listing standards impacted the composition of boards and audit committees, with requirements for greater independence, and while Sarbanes-Oxley requires companies to establish whistleblower programmes, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, took this one step further by directing the SEC to reward whistleblowers for reporting violations of Federal Securities Laws.

The ‘Why’ and ‘How’ of Financial Reporting Fraud As effective as whistleblower programmes are, they represent only one weapon in the anti-fraud arsenal. Developing a comprehensive programme to deter and detect financial statement fraud requires a broader understanding of how and why fraud is committed. On this point, the 2010 COSO study offers some revealing insights. For

example, in the SEC reports COSO reviewed, the organisation found the most common motivations for financial statement fraud included the need to meet internal or external earnings expectations; the need to conceal a deteriorating financial condition and a straightforward desire for personal financial gain, such as maximising bonuses or the value of stock-based compensation. These findings coincide with the classic ‘fraud triangle’, developed by criminologist Donald Cressey in 1953. His study, Other Peoples’ Money: A Study in the Social Psychology of Embezzlement, revealed that three conditions typically are present when individuals commit fraud: • Perceived pressure or incentive to engage in fraud. Examples include an expectation to meet performance targets, living beyond one’s financial means, or simply the need for continued employment. • An opportunity. Examples include an accounting system that is vulnerable to manipulation, complex transactions, significant related-party transactions or a large number of estimates that are subjective or difficult to corroborate. • The ability to rationalise fraudulent behaviour. Individuals who commit financial reporting fraud generally justify or explain away their fraudulent actions. For instance, when members of management are under pressure to meet corporate financial goals, they might conclude

Fraud is not exclusively a management concern. The responsibility to deter and detect fraud is shared with others including the board and audit committee, the internal audit department and the external auditor 22

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they have no choice but to resort to fraud to save their own jobs, the jobs of others or simply to keep the company afloat “until the turnaround comes”. So what types of people are susceptible to these pressures? The history of an executive or manager often provides a few clues. In fact, most individuals who engage in financial reporting fraud have no history of fraud or criminal misconduct. As the ACFE study observed, “More than 85 per cent of fraudsters in our study had never been previously charged or convicted for a fraud-related offence.” The same study also found that highlevel perpetrators cause the greatest damage to their organisations. Not surprisingly, frauds committed by toplevel executives were more than three times as costly as frauds committed by lower-level managers and more than nine times as costly as employee frauds. Executive-level frauds also took much longer to detect. COSO’s study of SEC enforcement actions that included an instance of fraudulent financial reporting confirms this observation. In 72 per cent of cases reviewed, the SEC’s enforcement actions named the CEO as being associated with the fraud; the CFO was named in 65 per cent of cases.

Whose Job is Deterrence and Detection? Since the majority of significant financial statement frauds involve senior management, it’s logical to conclude that senior management also must play a leading role in addressing the challenge. The COSO framework notes that the CEO (top management) bears the primary responsibility for the deterrence and detection of financial reporting fraud. At the same time, fraud is not exclusively a management concern. The responsibility to deter and detect fraud is shared with other stakeholders including the board and audit committee, the internal audit

Financial reporting fraud department and the independent external auditor. Together with management, these stakeholders make up what the CAQ report calls the “financial reporting supply chain”. The IIA standards assign responsibility to internal audit for the evaluation of the adequacy and effectiveness of the company’s risk management, internal controls and governance processes. With respect to fraud, the IIA’s International Professional Practices Framework requires internal auditors to “evaluate the potential for the occurrence of fraud and how the organisation manages fraud risk.” Internal audit’s internal presence, combined with a strong understanding of the company’s operations, controls, culture and fraud risks, make them well-positioned to support management in the development of effective programmes to deter and detect financial reporting fraud. The external auditor, in particular, is responsible for planning and performing the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements caused by error or fraud. Note, however, that while “reasonable” assurance is a high standard, it is not the same as “absolute” assurance. To carry out their responsibilities, external auditors can employ a variety of tools, such as detailed evaluations of the business rationale for significant or unusual transactions, or even surprise inventory observations at unexpected locations. At a more fundamental level, auditors must demonstrate an attitude of professional scepticism in assessing an organisation’s financial results and supporting audit evidence. The Statement on Auditing Standards No. 99: Consideration of Fraud in a Financial Statement Audit, issued by the Accounting Standards Board of the American Institute of Certified Public Accountants, requires auditors to brainstorm on how and where an entity’s financial statements might be susceptible to material misstatement

The Job Roles • The top management bears the main responsibility for the deterrence of financial reporting fraud • However, this responsibility is shared with other stakeholders including the board and audit committee, the internal and external auditor • The internal audit team needs to evaluate the adequacy and effectiveness of the company’s risk management and governance processes • The external auditor is responsible for planning and performing the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements caused by error or fraud • Board of directors and audit committees must understand the company’s business and industry and ask probing questions • Ultimately, the greatest single deterrent to financial statement fraud risk is a strong, ethical tone at the top

due to fraud, which includes the risk of management override of financial controls — the single greatest risk factor related to financial reporting fraud. Participants in the recent series of CAQ-FEI roundtable discussions call the possibility of management override of controls the Achilles’ heel of fraud. As the CAQ report notes, “Management is in a unique position to perpetrate fraud because it possesses the power to override controls, manipulate records and facilitate collusion by applying pressure to employees and either enlisting or requiring their assistance.” To address this risk, boards of directors and audit committees must thoroughly understand the company’s business and industry, ask probing questions of management and exercise appropriate scepticism. The board of directors and audit committee also should assess the ‘tone at the top’ through discussions with the external auditor, the internal auditor and employees at various levels.

In addition to increasing security and strengthening controls, an effective fraud programme typically will employ a variety of standard deterrence and detection methods such as segregation of duties, background security checks and fraud awareness training. Ultimately though, no matter how many such tools and controls are applied, no programme can completely eliminate the risk of financial statement fraud or completely prevent collusion and circumvention of controls. The goal of an effective system of internal controls is to provide reasonable assurance that material financial statement fraud will be deterred or detected on a timely basis.

A Multifaceted AntiFraud Programme Ultimately, the greatest single deterrent to financial statement fraud risk is a strong, ethical tone at the top, which December 2011

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Financial reporting fraud is reinforced by management example and employee awareness training. This point was driven home by the CAQ-FEI roundtable discussions and interviews, in which participants agreed overwhelmingly that an organisation’s ethical culture is decisive in mitigating the risk of fraudulent financial reporting. “While there is no ‘silver bullet’,” the CAQ report noted, “discussion participants consistently identified three themes” that organisations draw upon to effectively mitigate the risk of financial reporting fraud. These three elements are: 1. A Strong, Highly Ethical Tone at the Top. An ethical corporate culture cascades down through the organisation to generate other factors and tools that help further mitigate fraud risk. These include a code of ethics visibly supported by management at all levels from the top down, regular anti-fraud training for employees, anonymous surveys to obtain feedback about the effectiveness of the training and antifraud efforts and, of course, the vital whistleblower hotline. Beyond its important role in helping to establish an ethical tone, a welldesigned ethics hotline programme also serves as a hands-on detection function. The ACFE report noted that tips were by far the most common detection method in its study, “catching nearly three times as many frauds as any other form of detection”. Overall, tips were responsible for the initial detection of more than 40 per cent of the fraud cases cited in the study. Significantly, this number increased to more than 47 per cent in organisations that had established fraud reporting hotlines. To be effective, such a programme must offer the opportunity for anyone reporting a suspected case of fraud to maintain anonymity, if desired. Ideally, a tip line will be available 24 hours a day, seven days a week, staffed by professionally trained interviewers. In addition, the existence of the hotline should be publicised with consistent messaging to encourage its use. 24

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In addition to increasing security and strengthening controls, an effective fraud programme typically will employ a variety of standard deterrence and detection methods, such as segregation of duties, background security checks and fraud awareness training 2 . S c e p t i c i s m o n t h e Pa r t o f Management, the Board and the Audit Committee. The goal is not to create a hostile or confrontational environment, but rather to demonstrate a questioning mindset that uses probing questions, with consistent follow-up until the response is complete and persuasive. This is often summarised with the familiar proverb, “Trust, but verify”. Such healthy scepticism is demonstrated by management periodically testing assumptions about financial reporting processes and controls, and remaining alert to the potential for fraud, especially when

the organisation is under financial pressure. Boards and audit committees must employ a similar sceptical approach, which means they must be thoroughly knowledgeable about the company’s business and key risks. 3. Robust Communication about Fraud Risk Among All Involved. This applies to management, the audit committee, internal audit and the external auditors. In addition to structured reports and formal communication vehicles, audit committee members and auditors should also use direct, one-on-one communication to discuss fraud risk with each other and with management. Though email and telephone calls are vital time-savers, they should not be the exclusive communication method. Whenever possible, face-toface meetings are best, since they encourage open discussion and provide the opportunity to assess nonverbal communications such as body language. While the risk of financial reporting fraud can never be completely eliminated, a clear understanding of the risks coupled with a proactive approach can help greatly reduce the risk and increase investor confidence at the same time. The critical first step is simply to acknowledge that regardless of an organisation’s reputation and existing controls, “fraud can happen here”. To address this threat, all the stakeholders in the financial reporting supply chain must undertake an assertive, active and ongoing evaluation of the organisation’s fraud risk management programme. Mari Reidy (, CPA, CFF and CFE, is a partner and Jonathan Theobald (, CPA, is a manager in the Forensic Services Group of Crowe Horwath LLP. © 2011 Financial Executives International |

in practice


Reinventing Retail Branch Banking for the future To remain financially viable and sustain its growth, retail branch banking must look toward leveraging technology and device strategies to attract both corporate and Gen-Y customers Saraswat Sarkar


Charu dwivedi

ranch banking is at a crossroads. Although it is still the single largest mode of banking, the proportion of branch transactions to the total is falling, thanks to the rising popularity of channels like the internet and mobile, which are quicker to use, easier to reach and always open. On their part, banks too, are vigorously encouraging customers to migrate routine transactions away from the branch to self-service channels, because that way they cost far less to support. That being said, the branch is still the first choice for some customers and for certain types of transactions. Senior citizens are generally more comfortable with face-to-face in-branch interaction, and less with self-service technology. Moreover, they draw confidence from the physical environment of the branch. Even young customers, who regularly use alterative channels for routine December 2011

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in practice transactions, prefer to conduct complex or high-value business within the branch, in consultation with an advisor. This explains why, despite the emergence of other channels, the branch has held its own, and as per a recent survey, even expanded by 10 per cent over the last decade. Another study predicts that branch technology will account for a significant proportion of banks’ IT investment over the next few years — this can be taken as a reflection of the industry’s belief in the channel. So, it is clear that retail branch banking will not go away anytime soon. It is equally clear that it needs to change in order to stay relevant. But there are many questions about its future. To begin with: What role will the branch play in an environment dominated by newer channels? How will the branch drive growth? What will the footprint of the future branch look like? What role will technology play in its progress?

Major Challenges A look at the major challenges of retail branch banking may provide some answers. Tough market conditions

arising from the financial crisis have brought the banking industry’s focus back on efficiency. At the same time, advances in internet and communication technology have completely redefined consumers’ expectations of service, convenience, choice, and quality of experience. In its traditional form, branch banking suffers on both counts: it is the most expensive channel by far, and its service delivery is hampered, among other things, by the size of the network, hours of operation, a usually high workload and limited human resources. While transforming the traditional branch to a modern format and enlarging its scope of activity to make it more relevant seems an obvious course of action, it’s easier said than done. Breakeven dynamics are tricky to manage. The time taken to recover the investment depends on a host of factors and varies from branch to branch. Studies across several developed and emerging markets indicate 12 to 15 months as the benchmark, achieved by well-run banks offering the widest range of services. This challenge is compounded by bank managements’ self-imposed target of a six to eight month break even. Staffing poses another problem. First, banks must allocate optimal

human resources — carrying the required expertise and experience — for various roles. Finding the right people is the harder part. Around the world, banks are staring at a talent shortage. A study conducted in 2008 by a global consulting firm predicted that by 2013, European banks could struggle to fill between 25 and 40 per cent of key positions. So far, branches have mainly enacted a transaction-fulfillment role, remaining isolated from the banks’ sales and merchandising efforts. So they have not been able to spread enough awareness about their full range of offerings within the customer community.

Reinvention of branch banking From the above, it is clear that in order to sustain, branches must transform their cost structures and processes. Gen-Y customers rarely visit the branch, preferring to conduct most of their activities online or over the mobile phone. However, once they mature into their 30s, their financial needs will go up significantly as they look to buy a home, make various investments, and

Points to Ponder • A 2009 survey shows that nearly half of the worldwide Gen-Y population lacks financial literacy and has little understanding of how to budget and save efficiently • By proactively reaching out to younger customers and strengthening the advisory capability of their branches, banks can attract business from existing and new customers in future • The future could belong to the multi-line branch, one that is part of a full system of banking comprising all services and all modes of delivery • Branch employees should be given cross-functional training, spanning operations, sales and service, it could noticeably improve productivity and quality of service

in practice provide for the family. And this is where branches have an opportunity. According to a 2009 survey by the National Foundation for Credit Counseling, nearly half of the worldwide Gen-Y population lacks financial literacy and has little understanding of how to budget and save efficiently. Therefore, it is very likely that many Gen-Y customers will feel the need to consult their bank advisor while making important financial decisions, which will drive them to the branch. By proactively reaching out to younger customers and strengthening the advisory capability of their branches, banks can attract business from existing and new customers in future.

Customer Relations Banks have leveraged technology to simplify, standardise, automate and centralise their operations en route to creating a one-stop branch. In doing so, they have managed to reduce transaction processing time and paperwork and greatly improved the in-branch experience. But they can still do a lot more to better the branch experience. Today, branch staff are only trained in and assigned to specific responsibilities, which not only limits their personal growth but also increases the time that customers must wait before a specific staff member becomes available. If branch employees could be given cross-functional training, spanning operations, sales and service, it could noticeably improve productivity and quality of service. Cross-functional training could be imparted in several ways — by rotating people on the job; getting employees with diverse specialisations to work within a team; providing social platforms, such as blogs and wikis to facilitate knowledge sharing; and of course, delivering formal lessons in a classroom environment.

Leverage Technology Banks are already highly technology driven. They must continue to stay at

“By proactively reaching out to younger customers and strengthening the advisory capability of their branches, banks can attract business from existing and new customers in future” the leading edge of technology in order to satisfy the expectations of future techsavvy customers. Banks must construct a new image for their branches, improve product communication to customers, increase productivity and reach, and above all enhance customer service and experience. Despite establishing branches in high traffic urban markets, retail banks rarely manage to tap their full potential. Their transaction-oriented approach is undoubtedly a factor. The future could belong to the multi-line branch, one that is part of a full system of banking comprising all services and all modes of delivery. The focus of the multi-line branch will be to right sell, rather than achieve transaction volumes, and it will do so by ensuring that the best suited products — be it loans, payments, financial advice, brokerage services, investments or insurance — are made available to each customer.

Network Management In many markets, there are several customers with high value needs, albeit not in sufficient quantity to justify an elaborate physical branch network. In these places, a thin network of attractive branches backed by a strong network of ATMs might be able to achieve a high level of efficiency and also manage to adequately serve customers. The branches will need to focus on drawing

incoming traffic and capitalising on each customer interaction to generate cross sales. In this way, banks can rewrite their branch strategy, and rather than building the most number of outlets, create just the right number, with the right capabilities, in each market. While the adoption of multichannel banking and cost advantage of selfservice channels has eroded the dominance of bank branches, it would be a mistake for banks not to focus on them. Branch banking is still the heart of the retail banking experience. The need of the hour is a comprehensive review of branch needs along with informed and systematic action. By adopting some or a combination of the measures described here before their competitors do, banks can differentiate their branches from the run-of-the-mill. At the same time, they need to remain lean organisations in order to maintain peak performance, especially during an economic downturn. Rather than expand relentlessly, banks must maintain optimal branch density for a particular market and align sales and service capacity with market opportunity. Given these ministrations, the heart of retail banking will continue to beat strongly. S araswat S ar k ar is a Consultant at Finacle-Infosys. The view expressed here are personal December 2011

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in practice


Managing risk in the cloud – a CFO’s perspective What are the key issues that CFOs need to address when it comes to cloud computing?


ABOUT the AUTHOR: Samiron GHOSHAL is a Partner with Ernst & Young’s Advisory Services and heads the IT Advisory practice in India. The views expressed here are personal and do not necessarily represent the views of Ernst & Young Global or any of its member firms.


CFO india

recently conducted Global Information Security Survey by Ernst & Young reveals that 61 per cent of respondents are currently using or planning to use cloud computing-based services within the next year. With its ability to deliver on-demand and rapidly elastic services, cloud computing has been able to significantly lower if not eliminate IT related competitive barriers that businesses faced in past. In India, with high-speed internet connectivity becoming ubiquitous, businesses are recognising the speed and efficiencies that the cloud computing model delivers.

Why is cloud computing important for CFOs? Adoption of cloud computing entails resolution of various financial as well as governance, risk and compliance related issues – many of which require the CFO’s attention or intervention. A variety of business benefits are put forth while making a cloud computing business case. The key ones include: a. Business agility b. Improved quality of services c. Cost savings and d.Improved security due to centralised management.

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These benefits notwithstanding, CFOs need to take an objective view of their specific cloud opportunity and risk profile while evaluating the business case. In this article, we have made an attempt to put forth a few key factors that CFOs can take into account to develop a risk profile for cloud computing solutions, and measures that can be taken to manage cloud exposure.

Factors to be considered in risk profiling of cloud computing solutions Two aspects define any cloud computing solution. The category of cloud service being procured — Software-as-a-service (SaaS), Platform-as-a-service (PaaS) or Infrastructureas-a-service (IaaS). The deployment model for these services can be private, public or hybrid cloud deployment. Each combination of the category of service and deployment model presents a different risk scenario. Three key factors need to be considered in risk profiling any proposed cloud scenario. These are: 1. Data protection, non-disclosure and confidentiality: Data protection is one of the complex issues associated with cloud enablement. In a cloud-enabled scenario, it is


Charu dwivedi

CFOs need to take an objective view of their specific cloud opportunity and risk profile while evaluating the business case

inevitable that personal and sensitive data would be processed by the cloud service provider. Depending upon the cloud service and model adopted by the business, such data may reside in geographies falling under multiple legal jurisdictions. In the Indian context, the data privacy regulation under the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, is expected to have a pan-industry impact on how IT manages data. Given this scenario, it would be useful for CFOs to ask the following questions: a. What data is likely to be moved to the cloud? b. W hat is the likely change in the existing information security controls over data? c. What forensics and evidence gathering mechanisms are offered by the cloud provider (‘CP’)? d. Does the move impact any of the existing regulatory compliances or any future compliance needs the business may have? e. In the event of a future change in the CP, what safeguards are available to port the data to a new provider or back to the in-house IT team? 2. Outsourcing contract and changes in control: Outsourcing in the cloud context needs to be looked at from multiple angles:

a. The core contract between the business and CP b. The various sub-contracts that the CP may have with other service providers and c. The possibilities of the CP being engaged in other business transactions such as mergers or acquisitions. From a legal standpoint, the contract with cloud service provider itself would require special attention. Unlike traditional outsourcing services, standard contract clauses may deserve additional review because of the nature of cloud computing. Particular attention should be paid to: • Rights and obligations related to notifications of breaches in security • Data transfers • Creation of derivative works • Change of control, and • Access to data by law enforcement entities. Because the cloud can be used to outsource critical IT infrastructure, the parties should carefully consider the December 2011

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The Information Technology Act along with the associated data privacy regulations and the proposed cloud computing regulations from TRAI are expected to be the defining set of guidelines allocation of liability in the contract. As cloud services become more widespread, the threat of malicious insider is increasing and abuse of high privilege access is a definite possibility. The sub-contracting aspect, therefore, deserves special attention. It is inevitable that the CP has one or more sub-contracted service providers. Such sub-contracts are also likely to change frequently. Therefore, it is useful to establish a higher degree of transparency within the contractual framework and extend some of the key contractual clauses to cover sub-contractors as well. 3. Vendor lock-in/Data and service portability: Vendor lockin and difficulties in data and service portability are important risks to be considered in evaluating a cloud offerings. As of today, few standards exist for enabling such data and service portability. Indeed, cloud providers have an inherent incentive to prevent such portability. The extent and nature of lock-in varies according to the cloud type: a. SaaS model: The SaaS model by its nature can create data and application lock-ins. While data migration may still be made possible, migrating to a new software environment without affecting the customer experience can entail very high costs for the business. In addition, where the business has developed programs to interact with the cloud providers API directly (e.g., for integration with other applications), these will also need to be rewritten to take into account the new provider’s API. b. PaaS model: Lock-in in the PaaS model will be more severe than in the SaaS model as the cloud provider would have invested significantly in optimising the platform. To recreate such a platform or to move to a similar platform would require significant efforts application re-engineering in addition to the data lock-in issues. c. IaaS model: The degree of lock-in will depend on the nature of solution purchased. In a nutshell, there are non-trivial technical challenges and costs associated with migrating to another player. Given that the cloud computing provider market is still evolving, there exists a high risk of having to migrate mid-way through a cloud-enablement contract. These could be due to bankruptcy of the provider or mergers and acquisitions. 30

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Hence, strong due diligence of the cloud provider is recommended as part of any outsourcing contract. Managing risk in the cloud-enabled scenario As a consequence of the above risks, the role of CFO is vital in not only finance related aspects of outsourcing to a cloud provider but also the governance, risk and compliance issues. Addressing GRC issues is made more complex for the CFO by the fact that the regulatory framework for cloud computing is still evolving in India. The Information Technology Act along with the associated data privacy regulations and the proposed cloud computing regulations from TRAI are expected to be the defining set of guidelines. In addition, risks derived from industry and geography specific regulations such as Safe Harbor, COPPA, PCI, SOX, GLBA, HIPAA, etc., would need to be evaluated prior to proceeding with acceptance of cloud computing solutions. In brief, CFOs can take the following measures to manage business risks due to cloud exposure: 4. Establish a robust enterprise information classification and controls mechanism: A strong information classification framework will help in faster assessment of the cloudenablement proposal and ensure that adequate measures are available for safeguarding confidentiality, integrity and availability of your data. 5. Develop cloud opportunity profile specific for your organisation: The core value proposition of cloud migration is business agility and better quality of services. While a host of benefits are provided by cloud solutions, it is important to view them relative to the extent of agility and quality of services that the migration offers. 6. Develop cloud risk profile specific to the identified opportunities: Considering that the risks of cloud computing extend beyond IT itself, it would be useful to link the cloud risk profile to the overall Enterprise Risk Management initiative of the organisation. Cloud computing provides CFOs with a host of new opportunities to help the enterprise grow, provided, an objective evaluation of the opportunities that cloud migration presents against the potential risks is carried out.


Profile Sunil Kakar Group CFO, IDFC

Player to Coach

Life is a game, albeit a serious one, for Sunil Kakar, the CFO of IDFC. “Every time I go out to play, I hit a century — and I don’t mean cricket,” he says

rakhi agarwal


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He could have been a doctor. Instead he became an engineer. And then went on to become a CFO. That’s how Sunil Kakar, Group CFO at IDFC sums up his life at the beginning of our interview. Not surprisingly, we are keen to know more. A student of St Xavier’s School in Kolkata, Mr Kakar was a regular at school debates and a keen follower of all sports, especially cricket. A good student, he dreamt (like many teenagers back in the 1970s) of being a doctor. In the end though it was perhaps his fear of needles, or, the opportunity to study at IIT Kanpur with a scholarship that decided his fate. Since then his career, he believes, has been one amazing joy ride. “I felt as if I was acting in the film Sholay, in my first job at the Indian Aluminium Company,” he says. Why so? Standing in the midst of the bauxite and aluminium mines, Mr Kakar realised that this was not where he wanted to be, professionally. But he did not quit, choosing instead to work for two years to save money and do an MBA

Jiten Gandhi


Milestones First Job Indian Aluminium Company, Ranchi A HA! MOMENT When I hit an ‘eagle’ on the golf course TOUGHEST CHALLENGE Computerisation of a bank branch in Kolkata in the late 1980s LESSER-KNOWN FACT My cell phone screen saver is a picture of my pet beagle, Ginger Dream To teach finance at the MBA level

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cfo Profile from XLRI, Jamshedpur. His first learning gave him an insight into the ways of people, blue collared versus white collared, and the ability to deliver as a team. His next job at the Bank of America made him, by now married, very happy, as it brought him back to his family in Kolkata. The year was 1983, when foreign banks brought with them an ethos of excellent work culture. Here, Mr Kakar got the opportunity to work abroad for two years and understand worldwide banking processes. “There were no computers then, and we had to do trial balance on a daily basis. This helped build a strong foundation and strengthened my basic skills in finance and accounting,” he recalls. He spent the next 18 years in this job, facing several challenges on the way. What kept his interest going was the chance to do something different every few years. In 1994, at the time of the Harshad Mehta scam, there was a major overhaul and he was parachuted treasury management under the scope of risk management. Cleaning up the mess the scam had generated, he learnt how to walk the tightrope. “This stint made me realise that short-term gains only lead to long-term pains. I also learnt not to take good times for granted; because when you run too fast, you will fall. Slow and steady is the way to sustainable performance,” he says. The next phase of his career had him shift base from Kolkata to Delhi. And this is where he discovered a new love — golf. Every morning, except for Tuesdays, he would leave home at 5.30 am to ‘play the field’. Later, at work, he had to again learn a new game — wholesale life insurance at Max New York Life. “Here I worked as if I owned the company. If you want to enjoy work, you need to be passionate about what you’re doing. But if you want to succeed, you have to take ownership. So I worked myself up from scratch, building a sincere team in place. I was like a money manager, ensuring that all our decisions stay responsible to the money of the investors. The policy holders had placed their life’s earnings and trust in us, and that is a huge responsibility,” he says. The gestation period in the insurance business is longer, but he and his team helped the company turn the corner sooner, so that when he left the company 10 years later as its CFO, it continued to do well as planned. “I believe one must work to leave behind a legacy, which 34

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Times Of India MAGAZINE Business Week/

Bloomberg FILM 3 Idiots (As I am an IITian) MUSIC/MUSICIAN


Contemporary/ AR Rahman DESTINATION Mauritius ROLE MODELS No one (Am a self-made man)

can carry on much after the person has moved on. An institution or process is more important than an individual,” he adds. At Max, Mr Kakar learnt that being a coach of the game is more important than being a player. And that success of an organisation lies in its people. Therefore, he has always desired to build systems in which the people aim for a common goal. His mantra being that people plus processes always lead to profit in the financial services industry. Mr Kakar moved to IDFC as Group CFO in February 2011. “At 50, one is resistant to too many changes. So what I don’t understand, I don’t take a risk with. Because when

cfo Profile

“One must work to leave behind a legacy, which can carry on much after the person has moved on. An institution or process is more important than an individual”

you gauge a risk wrongly, there is a problem, and money flows into risky assets without the right price.” So he makes sure that capital flows in the right direction at the right price. He believes the better you are at allocating capital proportionate to the perceived risk, better is the bottom line. And his aim is to make IDFC the largest and the best in the field of infrastructure and to reach a target of Rs 1 lakh crore. The good news is that IDFC is already halfway there. In the lending business, it is imperative to allocate money to the

right project and convince the lenders of the performance of the company. “To make them believe that we are the experts for infrastructure financing is important,” he reveals. In the few months that he has worked here, he has realised that one does not always measure oneself by his Form 16; but by the kind of contribution one has made within the organisation. He believes that a CFO represents the shareholders; and acts like a stakeholder delivering value to the shareholders. So he is cautious and acutely aware of the risks, because, as

he says, “unknown risks blow me off. Unless I get a loose ball, I’m not going to hit a lofted shot.” His biggest worry: To be successful in plugging the loopholes when he is given a task. “I first try and identify things that can go wrong. At IDFC, money is the oil that runs the engine. So when I can channelise this money to the right end use, I feel I have contributed towards building a nation.” His dream: to transfer his learnings to the younger generation so that they are better prepared to handle the corporate world. December 2011

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in practice

Face to Face

“Average is officially over” Tom Friedman Kick-starting preparations for the 2nd Annual CFO100 in 2012, 9.9 Media and Microsoft India brought together some of India’s most respected CFOs and finance leaders for a discussion with Pulitzer Prize winning author Tom Friedman. Excerpts from his talk... TEAM CFO INDIA


he global curve has risen and what that means is that average is officially over. Whatever you do you better not be average, because your boss has access to above average automations, labour, robots and deals, more than ever before. I call it the great inflection.

ON REINVENTING & RE-ENGINEERING JOB ROLES The 2008-09 recession actually ushered in this change even faster than it normally would have happened. Recently, I met this banker in Dallas and he said something that really stuck in my mind: “You only hire someone if you absolutely have to”. That is the mindset now. You only hire someone if the alternative software automations 36

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and cheap labour are not available. If you are in that 1 per cent, you really have a global audience and globally competitive skills. You can come to Mumbai or go anywhere and compete with the best. The 99 per cent who haven’t yet made the shift are really suffering and that’s what we are seeing right now. One of the chapters in our new book is called ‘Up in the Air’. It is a name inspired by the movie Up in the Air, where George Clooney plays this man whose job is to go around the world firing people face-to-face on behalf of a multinational. He loses his job when his assistant invents a cheaper way to do it over the internet. This really is what hyper connectivity is all about. Then we have a chapter called

‘Helpline’. We went around to companies of all kinds, and we interviewed all their heads. We found that all the people are the same. They said the employee who can do critical thinking and reasoning is the ideal employee. What they are really looking for are employees who can invent, reinvent and re-engineer their jobs. The world has become hyper connected, the pace of change much faster. The CFO or the CEO often has no clue as to what’s happening across all levels. If you don’t have employees who can invent, reinvent and re-engineer the jobs, whatever they are doing in this fast paced world, it can be a burden. Everyone has to show that he or she has a unique value proposition, wherever you are in the company.

in practice

“Everyone has to show that he or she has a unique value proposition, wherever you are in the company” Because if you can’t grow with the rising curve, the pressure on you is much higher. Back in January 1995 I heard my predecessor at New York Times speaking about competition. I knew every morning the first thing he asked himself was “I wonder what my seven competitors are doing?” And he knew who all the seven were. Today, I assess myself everyday similarly and ask, “I wonder what my 70 million competitors are doing”.

Recently, I was in Hong Kong and my column for New York Times went online at 10:30pm local time. Within minutes, there were feedback emails from all over the world. Years ago, if I wrote about Yasser Arafat, a copy of NYT would not reach Palestine till a week later by which time I would be out of the country. Now it’s instant. So if I write anything wrong I’m going to get an immediate feedback. So my advice to all mothers and fathers is to tell your

kids that they better find excellence because average is not there. The truth is it’s not enough to say “I am in a job, I’m a lawyer’ or a doctor”. Now you have to be creative, create a job, be innovative. Imagine, recently this law firm I know of, hired a chief innovation officer. If you want to see this game at its unbelievable best, look at America. Look at Google, Amazon, Apple and Facebook. Each one of them are into each other’s businesses. They December 2011

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in practice are all making phones and selling e-commerce. They all offer similar services. They are going to kill each other. I think they are absolutely fantastic for the consumer, but they are just killing each other and everyone else. I would not want to be No. 2 to any of these companies.

ON INDIA’S PROGRESS The situation in India is similar too. The high-tech, connected people constitute just one per cent of the Indian population. They are the ones making international headlines. Only by leveraging technology in every way possible can India make sure the other 99 per cent also get there. What excites me is that between 2004 (when I first visited India) and today, I can see the emergence of Indian engines to make India unpoor. India’s getting unpoor not because it has more IMF or World Bank backing. Rather, because you invented and nurtured Indian engines to make Indians unpoor. Indian companies are now solving India’s very specific problems, whether its banking or agricultural prices or leveraging.

ON AUTOMATION There’s a revolution going on at Wall Street and there is another, much larger, but silent revolution going on elsewhere in the country. Together, Facebook, Apple, Amazon, Zynga and Groupon may be worth half a trillion dollars. But think of it, you could probably put all their employees across the world into Times Square and there would still be space left. Together the five of them, I believe, don’t have more than 30, 000 people. So these companies are anticipating incredible valuations but not a lot of work to be done by humans. They are actually creating an enormous amount of work but not how we classically think of work. We think of ‘work’ as the Ford factory coming with 5,000 new jobs. Today, many of the jobs that are being created, 38

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can’t be seen because it’s one person creating jobs for 10 in one country and 20 or 50 in another country in a very different industry! Just look at Linkedin as a case in point. They do not employ that many people, but they create jobs for thousands of others. I went to this company in Delhi whose employees are all sourced from Linkedin. There is a huge amplification that many of these new age companies are creating. I think we are in the middle of a huge revolution but no one’s talking about it

ON PROTECTIONIST SYSTEMS AND THINKING INNOVATIVELY For all the talking about job protection, I think that game is over. You cannot protect your way. Technology will defy you. When I graduated college in 1975, I got a fine day job. Today, new graduates will still get their first job, but to keep that job they will have to invent and re-invent and re-engineer the job. During the recession, a law firm in the USA was laying off people. So I asked how it

That Used To Be Us tHE BOOK TALKS about how America has fallen behind and how they can regain lost glory. The authors argue that America has a huge problem. It faces four major challenges, on which its future depends, and it is failing to meet them. In That Used to Be Us, Thomas L Friedman, the celebrated New York Times columnist, and Michael Mandelbaum, a leading foreign policy thinker, analyse those challenges — globalisation, the revolution in information technology, the nation’s chronic deficits, and its pattern of energy consumption — and spell out what USA needs to do now to ‘rediscover America’. They explain how the end of the cold war blinded the nation to the need to address these issues. They show how American history, when properly understood, provides the key to addressing them, and explain how the paralysis of the country’s political system and the erosion of key American values have made it impossible for the nation to carry out the policies the country needs. They offer a way out of the trap into which the country has fallen, which includes the rediscovery of some of the most valuable traditions and the creation of a new, third-party movement. That Used to Be Us is both a searching exploration of the American condition today and a rousing manifesto for American renewal. “As we were writing this book,” Friedman and Mandelbaum explain, “we found that when we shared the title with people, they would often nod ruefully and ask: ‘But does it have a happy ending?’ Our answer is that we can write a happy ending, but it is up to the country — to all of us — to determine whether it is fiction or non-fiction. We need to study harder, save more, spend less, invest wisely, and get back to the formula that made us successful as a country in every previous historical turn. What we need is not novel or foreign, but values, priorities, and practices embedded in our history and culture. That is all part of our past. That used to be us and can be again — if we will it.”

in practice

Mr Tom Friedman (in white) discusses a point with the group of CFOs and senior finance leaders at the session

“Indian companies are now solving India’s specific problems whether its banking, agri prices or leveraging” was being done and whether it was the last-in-first-out policy. What I learnt was fascinating. Each employee was given a job to do. Those who completed the task in a routine manner didn’t make the cut. Those who thought and found a newer, faster, more efficient way to do the job, were retained. That is why I have three very simple pieces of advice to people: Think like an immigrant, think like an artisan and think like a waitress. How does an immigrant think? He knows there is no legacy, no certain seat waiting for him at IIT Delhi. Either he does really well and grabs

the opportunities or he doesn’t have enough to eat, to survive. So he values every opportunity a lot more. So think like an immigrant. Be hungry. Why an artisan? Artisans make each item with a lot of love and care. Every piece of furniture individually and they carve their initials on their creations because they are proud of what they do. Do your job everyday as if you are ready to carve your signature on it. So think like an artisan and be proud of what you do. Finally, why a waitress? Here’s why. Some years back, I was writing a book and went to a restaurant for break-

fast with my friend Ken on a Sunday morning. I ordered three pancakes and scrambled eggs and Ken ordered three pancakes and a bowl of fruit. After about 15 minutes when the waitress came with our orders, she whispered to Ken “I gave you extra fruit”. She got a 50 per cent tip. Why? She showed that she did not control much but she controlled the fruit supply and that was her extra to a valued customer. She was thinking entrepreneurial. Every person has to think like an entrepreneur. That is the only way to survive in this new world. December 2011

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in practice


“Connect Everything, Empower Everyone” The role of a CIO is constantly changing with disruptive trends in the space of technology. Kevin Johnson, CEO, Juniper, shares his views on the key technological disruptions in recent times Pramath Raj Sinha


What according to you are the key emerging trends in information technology? The key trends in technology that are shaping business currently are mobile, social and cloud. Starting with mobile, we’re in an era where phones, tablets and mobile internet, etc., are being used by consumers and businesses to access information and data. This is creating some interesting opportunities and challenges for the CIOs. To begin with it creates a new class of applications. Starbucks, for instance, has built a mobile payment application for loyalty card holders wherein you just pull out your iPhone or Android device and pay using it, while keeping track of all your personal information. While many CIOs say they do not allow personal devices at work, studies reveal, about 90 per cent employees have carried their personal devices to work and over 80 per cent have used that to access corporate data. Either CIOs put up restrictions on such behaviour or look for a solution to allow this in a secure manner.


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At Juniper, we did the latter. We changed our device policy and instead of Juniper paying for the device, we have the employees paying for it. So they get to pick their device, but we have a solution that allows these devices to connect securely to the network. For this, we created a product called Junos Pulse that runs on most mobile platforms and allows secure connections to corporate data. If an employee loses the device, we can centrally wipe that device and also locate the lost device using GPS. Social is the second main technology trend shaping business. It is making inroads into the business in two key ways. First, businesses are using social tools to reach their customers better, evangelise better and to stay connected to their opinions. Companies are thinking how to utilise and leverage the social — the fact that people are connected. The other place where the social is helping is by enabling employees to collaborate. For example, at Juniper we use’s Chatter. Chatter is like a business version of Facebook and allows

employees to have a page that is within the company firewall. And it allows us, as a company, to put all the relevant content up there for the employees. It also allows employees from different geographies to gain from each others’ experience and collaborate. It is different from email, as it works in the Facebook manner. Cloud, in many ways is just a buzzword and every technology company in the world is putting up the term in some or the other product. But there are some fundamental drivers for cloud computing. In its simplest form it can be seen in the the infrastructure of the data centre — by centralising the storage and servers and by virtualising them for higher utilisation and then by automating the data centre. There are significant economics to be derived by just doing that. In addition to that, if you’re a midmarket firm and do not have the critical mass or scale to centralise and automate your data centre, you will consider someone else to do it — a ser-

in practice cloud computing, or is the network that enables the mobile internet, using which billions of devices are connected. We are, therefore, mindful of such trends. We are also conscious that security becomes an important issue when you have everything connected, and the fact that these devices and technology are in many more hands around the world, and not all are secure. Cyber threat is real and the changing technologies and threat vectors are evolving. Today, there is economics behind cybercrime and well-funded entities are indulging in it.

The interesting thing about mobile, social and cloud is that it could not have happened without the network vice provider or a SaaS-based application. There is a lot more to unfold in terms of applications, to enable more advantage of cloud. The three trends also bring in a host of accompanying security

challenges for a CIO. What do you have to say about this? The interesting thing about mobile, social and cloud is that it could not have happened without the network. The fact is that the network is within the data centres and connects the data centres together for

Are you genuinely convinced about the economics of cloud? Is India just behind the curve for cloud computing? If you do the mathematics behind the economics of virtualisation, centralisation and automation, it is easy to prove that the economic benefits of this model are significant. If you then try to apply these economics to your IT operations, it is very difficult. Our Co-founder, Pradeep has this principle — centralise whatever you can, but distribute only when you must. And it is mathematically proven that when you distribute things, it costs more and centralisation costs less. That’s the principle on which we engineer our technology. So when you look at cloud in that way, it seems simple to justify the investment. However, when the IT team says that we need to invest a few million dollars before we can save from this technology, it is a tough decision for the management. Given the trends, CIOs have too many trade-offs to worry about. Do you think life has become complicated for the CIO? Whatever market trends there are today, are creating the most complicated situation for the CIO. In my 30-year career, I’ve seen many significant technology evolutions and disruptions. You may say that they are accelerating, but they do build upon one another. So, while the number is much higher, they were still very significant even 20-30 years ago. December 2011

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Project Map The challenge: Set-up Spencer’s commercial function and lead a project to grow the retail chain from 90 to 400 stores. Time Period: 2006-2008


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People Involved: Entire commercial team along with the IT and business teams Key Takeaways: Honest and timely communication will resolve most bottlenecks

Case Study


Challenges of a Retail Revolution

When Spencer’s Retail wanted to scale up operations rapidly, the company fell back on its finance department to lead the charge. That is when Rajesh Pasari and his team stepped in. Now CFO at NetAmbit, Mr Pasari recalls how the challenge was successfully overcome

Subhojit Paul


Mitia Nath

rom working in a leading beverages firm and setting up the commercian function for a retail giant to being the CFO of a startup financial products distribution company, Rajesh Pasari has traversed a long path in his two-decade-long career. So when we meet him for a chat in NetAmbit’s plush new office in Noida on a foggy December afternoon, we expect him to tell us about one of his more and exciting experiences. And he doesn’t disappoint us. Among the various challenges, including obvious ones that a CFO faces in a start-up situation, Pasari singles out his experience at Spencer’s Retail a few years back, as one that he values most. It was a time when the

Indian retail industry was booming. “There was a massive thrust on retail and some of the biggest names like Reliance, Goenka, Birla, and Tata were involved,” he recalls. Taking on the role of the head of the commercial function of Spencer’s Retail naturally implied a head-on competition with the ‘big guys’. Spencer’s plans were ambitious: grow its chain from the 90-odd stores it then had, to about 400 stores in the next two years.

The Challenge

recalls. If this was not enough, he knew he also had to get all internal stakeholders on his side. “ Normally finance guys are looked upon as bottleneck builders. Even the Operations, Merchandising and Business teams presumed we would only delay things,” he says. However, having been brought up in Kolkata where doing business needs a lot of quick thinking, he realised that it was imperative to get into the good books of stakeholders if they were to work together. Beyond that, he’d have to let his work do the convincing.

When he joined Spencer’s in 2006, he not only had to head the commercial division, he also had to establish it! “I was the first person who joined that function. I was told that the company had massive expansion plans,” he

“The first thing I did was to get my team in place,” says Mr Pasari. This meant not just appointing team members but also conceptualising the role of

How It Was Tackled

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Case Study

“My zonal managers were equally important in helping the regional centres take the business forward. They contributed a great deal in putting a lot of systems in place, increasing the bottom line and revenues” each member. He began by appointing five zonal commercial managers, two analysts and one national stock controller. “When I moved on about two and a half years later, the team size was 110,” he says. The note of pride in his voice is hard to miss. As the coffee arrives, we drag him back to the unfolding story. So what happened next? “I personally met all the stakeholders and merchandisers, and gave them an insight into the plans and objectives we had envisioned for the growth of the company.” He believes that personally meeting each of them worked as an icebreaker. Thankfully, he was quick to spot the icebergs which could potentially threaten the journey. Recovery of few crores towards an old compliance issue was an early breakthrough for Mr. Pasari and was highly appreciated by the merchandising team. Pilferage, a persistent menace in the retail industry across the globe, was one 44

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such ‘iceberg’ that Mr Pasari managed to control to a large extent. It meant tighter controls over stocks and inventories. To put a system in place he brought the IT team into the picture. The idea was to get the IT team to design packages and softwares to enable the business function to have more stringent controls over stocks — absolutely essential in retail. “The commercial function of the company became the interface between the IT and business functions,” he remembers. Over time, the IT team at Spencer’s customised a lot of softwares that made business processes easier. As pilferage rates dropped, it became a benchmark for the industry. An additional feature that led to greater revenues was the introduction of the shop in shop or the ‘concessionaire’ concept. Named ‘Concessionaire Viability Template’ (CVT), it involved commercial evaluation of having an independent outlet of another popular

brand within the store. It was an instant hit. It helped the company increase its revenues and more importantly, satisfied the stakeholders. “It gave us clear, visible results,” he says. And clear results he had. Spencer’s had 96 stores at the time Mr Pasari joined in 2006. By the time he left , the number had grown to over 400. Another interesting initiative by Mr. Pasari was the introduction of a concept called RDDD (Revert, Divert, Dilute and Dispose) which reduced the working capital blockade in inventory from 68 days to 43 days for the company When one has numbers to back up one’s success story, there is little else to say, but Mr Pasari is quick to point out that none of this would have been possible without his team. “My zonal managers and analysts were equally important in helping the regional centres take the business forward. They contributed a great deal in putting a lot of systems in place, increasing the bottom-line and revenues,” he adds. T h e c o m m e r c i a l f u n c t i o n a t Spencer’s was the only one that remained untouched by the ups and downs of retail. He admits that the kind of function he established and developed in Spencer’s exists only in very few retail companies. “You will find a commercial function of this sort — one which partners with the business function to ensure that processes are in place — only in, say a Levers or a Marico.”

Lessons Experience, they say, is the best teacher. Did his stint at Spencer’s have anything new to teach him? His answer is unequivocal. “It is absolutely necessary to be upfront about things and be clear in your communications. It is a key lesson that I learnt at Spencer’s.” Looking back upon his days at Spencer’s, he says, infuses in him a sense of deep satisfaction. “It was a great achievement,” he says. With a growth rate of nearly 400 per cent during his stay, it sure was some achievement.



The Business of Sustainability: McKinsey Global Survey results More companies are managing sustainability to improve processes, pursue growth, and add value to their organisations rather than focussing on reputation alone


any companies are actively integrating sustainability principles into their businesses, according to a recent McKinsey survey, and they are doing so by pursuing goals that go far beyond earlier concern for reputation management — for example, saving energy, developing green products, and retaining and motivating employees, all of which help companies capture value through growth and return on capital. This year’s results show that, since last year, larger shares of executives say sustainability programmes make a positive contribution to their companies’ short and long-term value. This survey explored why and how companies are addressing sustainability and to what extent executives believe it affects their companies’ bottom line, now and over the next five years. On the whole, respondents report a more well-rounded understanding of sustainability and its expected benefits than in prior surveys. As in the past, December 2011

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insight they see the potential for supporting corporate reputation. But they also expect operational and growth-oriented benefits in the areas of cutting costs and pursuing opportunities in new markets and products. Furthermore, respondents in certain industries — energy, the extractive industries, and transportation — report that their companies are taking a more active approach than those in other sectors, probably as a result of those industries’ potential regulatory and naturalresource constraints.

A More Active Agenda There are some noteworthy changes since our 2010 survey, in the actions executives report their companies are taking on sustainability and their reasons for doing so. For instance, the share of respondents saying their companies’ top reasons for addressing sustainability include improving operational efficiency and lowering costs jumped 14 percentage points since last year, to 33 per cent. This concern for costs replaces corporate reputation as the most frequently chosen reason; at 32 per cent, reputation  is the second most cited reason, followed by alignment with the company’s business goals, mission, or values (31%) and new growth opportunities (27%), which climbed 10 percentage points since last year. Therefore, it’s not surprising that the areas where most executives say their companies are taking action are reducing energy usage and reducing waste in operations, ahead of reputation management (Exhibit 1). Fewer respondents report that their companies are leveraging the sustainability of existing products to find new growth or committing R&D resources to bring sustainable products to market. Yet both of these are important ways sustainability can drive growth. These results suggest that companies may be better able to find a competitive advantage when 46

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pursuing growth activities than operational activities. Companies are also integrating sustainability across many processes, according to respondents: 57 per cent say their companies have integrated sustainability into strategic planning (Exhibit 2). The most integrated area is mission and values, followed by external communications, while the least

integrated areas are supply chain management and budgeting. That said, about the same share of respondents say they have formal programmes to address it (Exhibit 3). The share of respondents saying their companies effectively manage sustainability has even shrunk somewhat. Starting last year, we used these three characteristics to define a group of “sustainability leaders”, companies that are more

insight adept at capturing value through sustainability along various measures that the survey asked about.

Leading the Way In general, respondents from companies in the leaders’ group say their companies do more on every aspect of sustainability; this is especially true in the areas of growth and risk management that, along with return on capital, are three ways in which sustainability can create value based on McKinsey research (Exhibit 4). For example, 94 per cent say their companies have integrated sustainability into strategic planning, versus 53 per cent of all other respondents. Compared with the integration of sustainability into other processes, however, the leaders’ supply chains and budgets are less integrated; respondents at other companies report this pattern as well. In addition, respondents in the leaders’ group are more likely than other respondents to report that their companies are pursuing each of the 13 actions related to sustainability listed in the survey, and they rate themselves more effective at taking action, relative to competitors, more often than the rest of respondents do. Executives in the leaders’ group are also more likely to say their companies are taking higher-level, more strategic actions: much higher shares of leaders are managing their business portfolios to capture trends in sustainability and committing R&D resources to sustainable products. Furthermore, just nine per cent of respondents at these companies say they have sustainability programmes in place to respond to regulatory requirements, compared with 25 per cent of all other respondents. Those in the leaders’ group are more likely to say instead that sustainability is aligned with their goals, mission, and values (59% versus 28% of all others) and that it strengthens their competitive position (43% versus 24%). December 2011

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insight It’s likely related that executives in the leaders’ group are more than twice as likely as all others to say their companies capture value from sustainability opportunities. Indeed, 30 per cent say they are capturing all the value they can, versus nine per cent of all others. And while all respondents struggle with the pressure of short-term earnings performance as a barrier to value creation, the leaders struggle less with leadership, systems, and processes that enable organisations to drive value through sustainability (Exhibit 5). Executives whose companies fall into the leaders’ group also report that employees at all levels are far more knowledgeable about their companies’ sustainability activities — and that sustainability is more important for attracting and retaining employees — than respondents at other companies. This finding suggests that the integration of sustainability extends far beyond business practices at these companies. It’s important to note that the mix of industries represented in the leaders’

group differs from the full group of respondents to the survey. A handful of industries — arguably those with a higher impact on environmental issues such as resource use and emissions, whose need to be more proactive on sustainability to effectively manage their future business is more urgent — are over-represented: energy, extractive industries, manufacturing, and transportation. Relatively few respondents from finance, retail, and business, legal, and professional services are in the leaders group.

Value Creation and Industry The fact that some industries are overrepresented in the leaders’ group highlights differences in emphasis on and effective management of sustainability across industries. This carries over to value creation. Overall, the relationship between sustainability and quantifiable value is still somewhat unclear, executives indicate: about one-third of

respondents say they don’t know how much sustainability initiatives add to shareholder value at their companies. In addition, the share that rate sustainability’s contribution to short-term value as positive has only inched up since last year’s survey, to 48 per cent. However, respondents do cite several different levers for value creation over the next five years. Among the top are managing corporate reputation, capturing sustainability trends in the business portfolio, and committing R&D resources to sustainable products; across industries, the relative importance of each effort varies (Exhibit 6). Respondents at consumer and B2B companies diverge on the levers that could drive longer-term value creation. Respondents in both groups expect reputation to add a similar level of significant value, or more than 11 per cent of shareholder value — indeed, it’s the most frequently selected action by respondents at consumer companies. Among B2B respondents, however, the highest share (23%) say

57 per cent of the respondents say their companies have integrated sustainability into strategic planning 48

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insight managing their business portfolios to capture sustainability trends adds significant value to companies in their industries, compared with 15 per cent of consumer respondents. Achieving higher prices or greater market share through sustainable products, committing R&D resources, and responding to regulations has more value potential for B2B companies, executives say, while those at consumer companies see more potential in managing sustainability through the value chain, water use, and waste. Across industries, executives also differ in how they view barriers to value creation. Those at extractive firms point to a lack of capabilities (25% versus 15% of all respondents) and lack of incentives tied to sustainability performance (42% versus 32%) as being bigger barriers than they are for respondents in other industries. Higher shares of transportation respondents than the average also cite lack of incentives (45%), while fewer executives at energy firms select most of the barriers presented, perhaps suggesting that they’ve been thinking about sustainability and value longer than others. Some in the energy sector do still cite key performance indicators (KPIs) and integrating sustainability into their performance management systems as concerns. Executives at retail firms are more likely to report barriers — except for organisational structure and a disconnected sustainability department — than the average.

Looking Ahead Companies are not doing as much to integrate sustainability into internal communications or employee engagement as they are into other areas of business, such as strategic planning. With 53 per cent of respondents saying company performance on sustainability is at least somewhat important to attracting and retaining employees, companies that take action are more likely to gain an advantage in

employee retention. The leaders are better at engaging employees on this issue (and at keeping employees at all levels more informed), suggesting that it’s possible to make the most of this opportunity in sustainability. Our experience in working with companies in different industries on sustainability aligns with the survey findings that different industries use different levers (growth, return on capital, and risk management) to create significant value. There’s no single way to create value from sustainability, so knowing where the biggest opportunities for value creation are in an industry — and where the risks and barriers lie — can serve as a guide for developing sustainability strategies.

Coupled with the shift in reasons for pursuing sustainability, from reputation management to operational improvements and new growth opportunities, the overall high degree of integration seems to indicate that companies have become more businesslike about their sustainability agenda. Most companies, however, are still struggling to factor sustainability into the ‘hard’ areas of their business, such as supply chain and the budget, so there is still a lot of potential to drive further integration and increased value creation. Where leaders and all others diverge most is around KPIs, organisational structure, and leadership engagement; these may be high-potential areas for companies striving to become sustainability leaders. December 2011

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Putting it into Practice Companies should integrate environmental, social, and governance issues into their business model — and act on them Sheila Bonini and Stephan Görner


ustainability has long been on the agenda at many companies, but for decades their environmental, social, and governance activities have been disconnected from core strategy. Most still take a fragmented, reactive approach — launching ad hoc initiatives to enhance their ‘green’ credentials, to comply with regulations, or to deal with emergencies. That’s no longer enough. Material r i s k s n o t o n l y t o a c o m p a n y’ s reputation but also to the bottom line come from many, often unpredictable directions. Where such challenges arise, opportunities also lie: McKinsey estimates that the clean-tech product market, for example, will reach $1.6 tn by 2020, up from $670 bn in 2010. Our research finds that a handful of companies are capturing significant value by systematically pursuing the opportunities sustainability offers. We believe the trend is clear: more businesses will have to take a long-term strategic view of sustainability and build it into the key value creation levers that drive returns on capital, growth, and risk management (Exhibit 1), as well as the key organisational elements that support the levers.

Approaching Sustainability Our survey produced insights into the specific practices of a small group of companies that treat sustainability holistically. At all of them, it is a top-tier item on the CEO’s agenda, a formal programme is in place to address it, and executives embed it in business practices. Make no mistake, however: capturing sustainability’s full value potential is complicated. In essence, a company must first determine its baseline performance on sustainability issues and then decide on a portfolio of initiatives to create value in those areas. Opportunities to create or preserve the most value vary greatly among industries (Exhibit 2). An extractiveservices company, for example, could significantly reduce its costs through better management of energy and water. A retail company could reduce its resource intensity and costs by revamping its supply chain, since the biggest environmental impact within that sector can often be traced to raw materials. An energy company may have more opportunities than companies in other

Most companies...look first to improving returns on capital, which means reducing operating costs through improved natural resource management

industries to create value through new products — for example, by commercialising investments in smart grids.

Creating Value Integrating sustainability into strategic initiatives is especially important because these issues play out over the long term. It’s easier for companies where they are core concerns to understand trends and make strategic bets in advance of consumer preferences, stakeholder pressure, or regulation. GE, for example, placed early bets on climate change: in 2004, before Al Gore and Hurricane Katrina made this a topof-mind issue, the company resolved to double its research investments and sales in clean technology. It also promised to ‘green’ its own operations. As a result, GE’s Ecomagination division has been a tremendous growth engine, with product sales reaching $18 bn in 2009.

Returns on Capital Most companies creating value through sustainability look first to improving

insight returns on capital, which often means reducing operating costs through improved natural-resource management (such as energy use and waste). Dow Chemical, for example, reported that it invested less than $2 bn since 1994 to improve its resource efficiency. To date the company has saved more than $9.8 bn from reduced energy consumption and water waste in its manufacturing processes. In 1996, through a separate initiative, Dow also created a set of goals for environmental, health, and safety issues, and it has ensured their integration into the company’s processes by tracking progress with clear metrics. As a result Dow, with a 20 per cent reduction in absolute greenhouse gas emissions, has gone well beyond Kyoto Protocol targets. Companies are also driving down costs by systematically managing their value chains. Wal-Mart, for example, expects to generate $12 bn in global supply chain savings by 2013 through a packaging ‘scorecard’ that could reduce packaging across the company’s global supply chain by five per cent from 2006 levels.

Growth Companies that rigorously pursue sustainability also regularly revisit their business portfolios to determine the potential impact of trends (such as existing or potential climate change regulations) that could lead to new growth opportunities. Companies also screen rigorously for unmet needs created by sustainability trends in line with their strategies and identify potential customer segments. ArcelorMittal, for example, embedded sustainability in its organisational design through a department for scientific analyses of the life cycles of steel products. The department creates offerings that minimise steel’s negative environmental impacts — one result of the company’s investment in innovative solutions. GlaxoSmithKline is looking to its business model in addressing diseases in lessdeveloped markets. By adopting a range

of flexible pricing models for patented medicines and vaccines so that they’re affordable for customers in those countries — yet still profitable — the company hopes to garner a significant share of sales in potential new markets.

Risk Management Better management of risks that arise from sustainability issues begins with detecting key risks of operational disruptions from climate change, resource scarcity, or community issues (such as delays in getting permits for manufacturing). Faced with potential supply constraints, Nestlé, for example, launched a plan in 2009 that coordinates activities to promote sustainable cocoa: producing 12 million stronger and more productive plants over the next 10 years, teaching local farmers efficient and sustainable methods, purchasing beans from farms that use sustainable practices, and working with organisations to help tackle issues like

child labour and poor access to health care and education. The mining giant BHP Billiton managed its exposure to emerging regulations by systematically reducing its emissions. The choice for companies today is not if, but how, they should manage their sustainability activities. Companies can choose to see this agenda as a necessary evil — a matter of compliance or a risk to be managed while they get on with the business of business — or they can think of it as a novel way to open up new business opportunities while creating value for society. About the Authors Sheila Bonini is a consultant in McKinsey’s Silicon Valley office;  Stephan Görner is a director in the Sydney office. This article was originally published in McKinsey Quarterly. Copyright (c) 2011 McKinsey & Company. All rights reserved. December 2011

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Doing the Deal: Be


ABOUT THE AUTHOR David Lim, Founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be reached at his blog http:// theasiannegotiator., or


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Negotiating is one of the most underrated skills that a CFO must have. For each kind of challenge, one would probably have to modify their tactics David Lim

In the past year, I’ve written extensively on one of the most underrated leadership skills for CFOs — namely negotiating skills. Our company Everest Motivation Team, conducted a global survey on negotiation skills with over 1000 respondents, of which about a quarter had a C-suite designation. We asked them to rank (out of five) the most common mistakes in negotiating, and the winner (with 40% of the votes) was “not having enough tactics” and the second (at 22%) was “inability to respond to tactics”. That being said, it’s worth moving away from the classic across-the-table type of negotiation scenario to deal with negotiation from at least two more angles. When we deliver workshops and coach people in this arena, we emphasise the PINE acronym for structuring a negotiation, starting with the ‘P’ – standing for ‘prepare’. The other elements of the acronym are ‘I’= gather Information, ‘N’ = negotiate and ‘E’ = execute the necessary actions post-negotiations. In our experience, a huge let down for most would-be negotiators is the wanton illregard they often have towards the “P”, or preparation. The first of the multi-angle approach is as follows:

leader’s world Negotiation Set-up My friend Jim had a friend who had smashed her car up in a traffic accident, and was to meet the insurance assessor. Fearing that she would be taken advantage of, she asked him to sit with her at the meeting. When the assessor arrived, she introduced Jim as a ‘negotiation expert’. By setting up the negotiation this way, she guaranteed greater transparency of information from the assessor, and also thwarted any possible attempts to give her less than her due. A well-known compensation lawyer was negotiating on the behalf of an incoming CEO of a large corporation. Early in the negotiations, he took his client aside and assured his client that he would get everything he wanted. He was right. The prospective employer sent their in-house counsel, an experienced lawyer and negotiator. But they failed to get the all-important negotiation setup right. The in-house lawyer knew that this guy would be his new boss. There was no way he was going to adopt a tough stance on the new boss’ compensation package. The lesson here is that you will need to think about the set-up way before you even consider what tactics you will deploy to get what you want.

The Table I won’t cover this in detail, but all the negotiations that happen face to face, for example, and involve all the usual tactics and strategies. However, some common mistakes include jumping to conclusions, where you may assume you know that the other party wants to get out of a negotiation. This can often lead to people taking entrenched positions. For example, you make a hasty assumption that a large salary increment from his last job is what a prospective hire wants. However, upon probing, you discover he has made some commitments which need to be covered by a small lump sum payment, and he was hoping to make that from a few months’ of higher salary. A possible better option for the company would have been to offer him an interest-free loan for the same amount, payable within a few years, to tide him over his cash flow problem. Understanding interest versus positions is a key part of this aspect of negotiations.

Deal Makers and Breakers Read these comments closely: “It’s too expensive”… “We have budget constraints this year”…“That’s not feasible

“You will need to think about the set-up way before you even consider what tactics you will deploy to get what you want” with the current structural arrangement”…“ We would never get a permit from the farmers association to build there...” In each example, you need to consider what aspects of the position or statement could be modified so that a negotiated agreement can be reached. “It’s too expensive” is a deal breaker type of statement, but could a deal be struck if we took another approach where we spaced out payments for the service or item? Similarly budget constraints could be tackled from the perspective of seeking to spread payments over two financial years. Could the ‘structural arrangement’ be modified to get an outcome the other party clearly wants? What are the farmers’ interests? Is it to leave the fields fallow, or are they open to construction but worried about the environmental impact on their community? In summary, negotiating on the basis of tactics and such approaches only address one aspect of a possibly complex issue. Taking a multi-angle approach on the set-up, deal makers in addition to table-top negotiations is the way to go to get the maximum mutual outcomes of a negotiation. David Lim is a leadership and negotiation coach, best-selling author, and two-time Mt Everest expedition leader. Check out a free e-book segment of his latest book How Leaders Lead at Contact: david@ December 2011

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This Christmas we test drive the new BMW 530d and then travel to Santiniketan for the iconic Poush Mela. Do check out our new page: that tells you about India’s newest and coolest meeting & eating (M&E) places. This month: The new Grand Hyatt at Bambolim, Goa. Happy holidays!

BMW 530D

In Fifth Heaven

The new BMW 5-series loses some of its previous generation quirks to emerge as a more polished product. Amit Chhangani checks it out The new BMW 5-series, or the F10, as it is codenamed, is a sharp aberration from its predecessor in terms of design. In its newest avatar, the 5-series has turned to its tradition as far as the aesthetics go. With the inclusion of a fully electric power steering the car has embraced technology more than ever, but has been criticised by some purists who think that the new inclusion had bereaved the legendary label of its most likeable aspect, a connected driving feel. But is that really the case?

We found out with a comprehensive road test review which spanned more than 600 km.

The Looks The new 5-series may not have the ‘devilmay-care’ attitude of its predecessor which looked sinister with its twin front moustache



The 5-Series got its name by being the fifth of the ‘new series’ cars after the V-8 and Isetta. The first 5-series body was styled by Marcello Gandini, based on the 1970 BMW Garmisch 2002ti.

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on Wheels lights and twin rings surrounding the main illumination units, but it looks mean and sharp enough from plenty of angles. It looks longer, lower and leaner than the earlier version, and when you look at it in profile, that snout does seem to have a really mean and evil air about it. Some may call the new 5-series conservative, but start appreciating the details, and you’ll fall deeply in love with its form. The 530d is powered by a 3.0-litre straight six diesel, which incidentally is the same unit as found on the lower spec 525d. On the 530d, however, the engine is tuned to deliver reasonably more power and torque. And the effect that those three liters of cubic capacity nicely packaged by one of the best engine makers in the world today has on you once you are behind the wheel is simply mind boggling. 0-100 km/h comes in a very quick 6.3 seconds and 200 km/h shows up before you could even start appreciating the acceleration fully. All that firepower from the engine is mated with an eight speed automatic sports transmission with Steptronic. The 530d comes with BMW Efficient Dynamics which uses clever tech such as brake energy regeneration for better efficiency and less emissions.

The Feel From the moment you get into the new 530d’s cabin, you feel at home, if you have driven a BMW earlier that is. Controls fall within easy reach of hands, and the visibility through the windscreens and windows is good. Push the ‘start’ button, and with the very first inch the car moves you realise that there is something different about the steering wheel. Not just is the wheel all new in terms of design, but it is first ever fully Electric Power Assisted unit here. It feels lighter and you don’t need to wrangle with the wheel anymore while trying to maneuver your way out of small streets which abound in India.

Amazing firepower and smooth to drive, the new bmw 530D also boasts of great safety features

BMW 530d Price: BMW 530d

48.5 lakh

(Ex-showroom) Engine:

2993cc turbo diesel



4000 rpm

Torque          540Nm@

1750-3000 rpm

Positives 3.0 litre engine is a true performer. Quality of the interior is great and it has more space than the previous 5-series. Loaded to the brim with features Negatives Styling not as bold as its predecessor. Run flat tech is good, but a spare tyre doesn’t hurt VERDICT Loaded with features and technology, the 530d is the most expensive 5-series you can buy in the country. But if you have the money, this is the car to buy

I drove through rough and smooth roads, including the stretch on the Mumbai Pune highway, and the winding roads leading up to Panchgani and Mahabaleshwar. Not once did I find the new set-up lacking in terms on feedback or control.

The Features The 530d is the top of the line BMW 5-series available in India. It’s loaded to the gills with features, and no other 5-series model in India boasts of as much technology and as many toys as the 530d. One feature, however, which needs a special mention, is the Head Up Display. The fighter aircraft style display on the windscreen lets the driver keep track of certain critical information without having to take his eyes of the road. The system can also be turned on and off using a button. Overall it was sheer pleasure driving the new 530d across some of the better Indian roads. If you have the money to buy this baby, go for it. december 2011

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Gizmos new launches

Kindle Fire

Amazon’s “iPad killer” tablet has hit the shelves. It sports Android 2.3 OS and runs a dualcore 1000 MHz processor with 8 GB storage and 512 MB RAM. The dimension of the tablet is 7 inches. Approx price is `15,000.

Hot Spot

Lenovo IdeaPad K1 tablet Impressive performance, rough persona

ASUS Zenbook UX31

Vishal Mathur Everyone is jumping on to the tablet bandwagon — and Lenovo is no exception. The K1 appears to be competing with Motorola Xoom. It has a unique physical button for Home, something we haven’t seen on Android 3.0 and beyond devices. This doubles up as a touch sensitive button, and will work as a back button when you use that gesture. The K1 back has a pattern on the plastic to aid grip, but the plastic quality used feels cheap. The camera is placed badly, and is easily smudged when holding it in landscape mode — similar to the Acer Iconia Tab A501. All ports and slots are on the side panels, and the quality of buttons feel inferior. Not something you expect when you spend well over `30k for a tablet. We received the 32 GB version, and what we love most is the memory slot to further expand storage space. The tablet performed magnificently, delivering a smooth Android experience, with no slowdowns under app load. After a system update though, the tablet slowed to a crawl, but a couple of restarts later it was

back to its blazing self. The display is quite crisp and bright, and can get too bright if you don’t activate the auto brightness setting. Viewing angles are decent, but not really as good as on the Galaxy Tab 750. The tablet heats up quite a bit after a mere 15 minutes of web browsing on Wi-Fi — terrible. The battery life isn’t the best, but we can’t complain too much. We were concerned that the battery seems to fall pretty quickly even on standby, meaning you will find yourself charging it everyday unless you shut it down every night, or at least turn off Wi-Fi. For a box price of `31,990 it’s not the ultimate package. The Xoom is cheaper, and for just `1.5k more, you can get the excellent Galaxy Tab 750. Specifications: ARM Cortex A9 dual core 1GHz processor; 1GB RAM; 32 GB storage; 10.1-inch display; 5 MP camera (2 MP for video calls); Android 3.1; Wi-Fi + 3G Price: `31,990 Features 6.0 Performance 7.5 Value 5.5

ASUS announced its latest line of ultrabooks. Featuring second gen i7 processors, 4 GB of RAM, a 256 GB SSD and a chiclet-style keyboard. This premium device will retail at approximately `89,900 in the Indian market.

Samsung Galaxy Note Sporting a super AMOLED display, the Galaxy Note is a brick-sized phone. It’s packed with features such as 8 MP rear and 2 MP front camera and 16 GB of in-built memory. Priced at approx `35,000.

powered by


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ad Re Y st OG Mo L E ’s NO ZIN dia CH GA In TE MA

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IN TAGORE’S LAND A few days at Santiniketan during the famous Poush Mela is enough to mesmerise you, says Anil Mulchandani Since my wife is a great admirer of Tagore’s work, we decided to spend a long-weekend at the poet’s hometown of Santiniketan, during the famous Poush Mela which always coincides with Christmas vacations. It was morning when we started out for Santiniketan from Kolkata. Less than four hours later, after checking in at our hotel and enjoying a traditional Bengali lunch, we walked to the fair ground, a few kilometres away. The historic Poush Mela was started by Maharshi Devendranath Tagore more than 150 years ago. The fair ground was brightly decorated and had many of the usual carnival stalls selling musical instruments and a variety of items; food stalls offering Bengal’s favourite street-food like Kathi Rolls, Mughlai Parathas and Puchkas and sweet vendors. The fair begins with shehnai music, usually on December 23, and the Vaitalik group goes around singing songs. The university organises a Upasana Sabha at Chatimtala where Maharshi meditated. On December 24, the university organises a display of lights and fireworks, a custom started by Rabindranath Tagore. On Christmas Day, the university organises the Christo Utsab, which is meant as a mark of respect for all religions. At the fair ground, we met a troupe of the Bauls, the mystic minstrels from Bengal. The Baul musical tradition expresses 58

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the Baul thought, which is a faith based on simplicity in life and love, with elements of Tantra, Sufi Islam, Vaishnavism and Buddhism. Baul music also influenced Rabindra Sangeet. On the first evening that we were at the mela grounds Shibsundar Das Baul and members of the Bhirbhum Rangamati Baul troupe were singing while strumming their ektara and dotara (single and dual stringed wooden instruments). Others played the flute.

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travel Below: there are multiple staying options at santiniketan. one can opt for a home stay, book a room at the luxury marks & meadow cottages, or stay at the tourist lodge

Above: udayan complex, where rabindranath spent most of his time Left: handicrafts on display at amar kutir Extreme left: the posh mela in full bloom

Next morning, we set out to visit the Visva Bharati University and the Patha Bhavan school. Rabindranath Tagore started Patha Bhavan with five pupils, and the classrooms were under a tree, as he believed learning in a natural environment would be more enjoyable and educational. After he received the Nobel Prize, the experimental school was expanded into the Visva Bharati University in 1921. By 1951, it had become one of India’s most prestigious universities. Iconic figures such as CF Andrews and Alex Aronson have taught here and its alumni includes such names as Maharani Gayatri Devi, Indira Gandhi, Satyajit Ray, Abdul Ghani Khan and Amartya Sen.

We walked around the Uttarayan complex where Tagore lived and saw each of his ‘homes’ — Udayan, Konark, Shyamali, Punascha and Udichi. The Bichitra or Rabindra Bhavan is a research centre and museum, where the poet’s personal belongings, paintings and various editions of his works are exhibited. We walked through the campus to a building with the famous artist Nandlal Bose’s paintings of some of Tagore’s dance dramas. The campus has many abstract structures, and classrooms which, in keeping with Tagore’s vision, are still alfresco. After lunch, we drove to Amar Kutir, which has a large shop where local artisans can display and sell their wares. Sriniketan took over the work of Santiniketan in promoting handicrafts with the objective bringing back life in its completeness to the villages, and help people to solve their own problems instead of solutions being imposed on them from outside. We watched artisans at work on kantha, batik, leatherwork and pottery. After shopping, we drove to Ballavpur which has been developed into a natural sanctuary for deer. Walking around, we saw a herd of spotted deer. Further ahead, we saw a large male spotted deer with velvety antlers. The trees trilled with bird calls. It was a fitting finale to a lovely holiday in the land of one of India’s greatest sons.

GETTING THERE: You can get here by train or road from Kolkata PLACES TO STAY: Mark & Meadows, Hotel Camellia, Chutti Holiday Resort, Hotel Royal Bengal are some of the hotels. There are many attractive homestays December 2011

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Go Goa

The Grand Hyatt at Bambolim is perfect for an offsite or a conference. Planning an offsite or a conference where colleagues or delegates can take their families along? Look no further than the brand new Grand Hyatt in Bambolim, Goa. This resort and spa on the beach, 25 km from the airport, is spread across 28 acres of tropical gardens and lawns. It has 314 guestrooms and suites, seven restaurants and bars and an outdoor pool complex. The Shamana Spa has 19 suites offering Thai, Balinese and Indian treatments. All rooms have large balconies. The conference rooms are located across two floors and include the Grand Ballroom(12,400 sq ft). Six function rooms are on the ground level and the lobby level houses two meeting and two board rooms. The restaurants offer cuisines and beverages from across the world. If the group includes children, there is Camp Hyatt where kids can have their own vacation under expert supervision.

THE GRAND HYATT Location: Bambolim Beach, Goa Telephone: +91 832 3011234 Airport: Dabolim By road: 650 km from Mumbai USP: Ideal for conferences; superb food & leisure options. Reservations: www.


Greek Symphony OPA - a Greek word used to describe a jubilant emotion during celebrations is exactly what this new 4000 sq feet restaurant in Mumbai’s Juhu area is all about. OPA’s a-la-carte fare is a combination of food from across

the salads and the sea food are amazing at opa. vegetarians also have a plethora of options to choose from at this cool new restaurant


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OPA Location: Juhu Tara Road, Mumbai | Telephone: +91 22 6769 9999 | Seating capacity: 80 covers | Food: Mediterranean | Bar: Open all day

the Mediterranean region. Try the Martinis here, the Grape Mélange, the Tamarin Margarita or one from their rich collection of single malts. Our recommendation from the extensive food menu would include must-have’s such as the the Lobster Risotto, the Shepherd’s Pie and the Baba Ganoush with grilled pita & lavash. Opa is open for lunch and dinner and a great place to meet a business associate over a quiet, enjoyable meal.

CFO India - December 2011