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CORPORATE GREENING WHY IT MAKES BUSINESS SENSE P. 26

CHARANJIT ATTRA THE GUITAR STRUMMING CFO p. 38

MUNICH BECKONS GERMANY’S FAVOURITE HOT SPOT p. 51

VOLUME 01 ISSUE 11 Rs.50 OCTOBER 2010

CFO INDIA CFO PROFILE : CHARANJIT ATTRA 38 | CORPORATE GREENING 26 | MUNICH BECKONS 51

CSR or CSI? Forced CSR is unlikely to work. But if corporates view this as ‘Corpo ‘Corporate Social Investment’ instead, the objectives will be met anyway pg 12

VOLUME

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+5-'()-5!6, THE GUITAR STRUMMING CFO Charanjit Attra, EVP and CFO, ICICI Securities talks about the challenges ahead and how cricket and music help him stay focussed

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44 JUST DID ‘IT’

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Yogesh Sareen, CFO, Fortis Healthcare discusses the ongoing challenge to make the hospital chain completely ‘networked’

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CSR or CSI? It is being talked about as the ‘2 per cent solution’. Will making Corporate Social Responsibility mandatory for Indian companies, work?

!'&%!"7 10 RAVI RAMU The President and CEO of Hothur Group, a Bangalore based iron and steel firm, explains why smart CFOs do ‘nothing’ special during recessionary times

6,*8,)9#':-)68 !"#!$%& VALUING SOCIAL PROGRAMMES 18 CSR activities create shareholder value, but neither CFOs nor professional investors fully include that when evaluating business projects

46 WHEN FAILURE IS GOOD Look at failure as a source of information to improve your leadership skills and the fortunes of your company

+5-'6-;"$, 48 ON WHEELS | VW VENTO

!"'()*+&!+, CORPORATE GREENING: A REVOLUTION OR EVOLUTION?26

44

Greening has matured well beyond its early focus on saving paper and reducing corporate travel

50 GADGETS | HTC DESIRE 51 TRAVEL | MUNICH 52 ART | D MUKHERJEE 54 BOOKS | FAULT LINES

),$;6*)# SPEND GOVERNANCE 34

While continous monitoring and having systems in place is good, companies need to have more electronic and automated processes in place to effectively check fraud

03 EDITORIAL 04 LETTERS TO THE EDITOR 06 O-ZONE

COVER DESIGN PC ANOOP

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Accor Inside Front Cover | Financial Executive 02 | HP 05 | Polycom 25 | Ace Data Devices 33 | Empronc 37 | Speaker Bureau 53 | Sodexo Inside Back Cover | ICICI Bank Back Cover


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MANAGING DIRECTOR: Dr. Pramath Raj Sinha

Using force seldom works!

WHEN WAS THE LAST TIME coercion led to desired results? While it may be true that many if not most Indian companies do not engage in any significant CSR activity, the government’s decision to make CSR mandatory is like using the rod to discipline a child, an action that seldom has the desired impact. The tendency for companies, as at least one CFO told us, will be to try and find ways to find loopholes in the law. Contributing editor Bennett Voyles spoke to industry experts, academics and activists across three continents and to government representatives, to put together this month’s cover story (CSR or CSI ? Page 12). What experts have to say suggests that while forced CSR may or may not work, corporate India could do well to use this as an opportunity to look at CSR as an investment irrespective of the government. There are two other articles that complete the cover package. The feature ‘Corporate Greening: Good for the soul. But is it good for the bottom line?’ discusses case studies from around the world to argue that planned CSR may ultimately be good for a company’s fortunes though it should be done voluntarily, while a McKinsey survey shows how CFOs across the world perceive CSR. Is making CSR mandatory, an order reminiscent of the authoritarian regimes of the 1970s and 80s? CFO India’s editor Anuradha Das Mathur believes so and her column will surely elicit a reaction from you. Further, while corporates are being mandated, the Not-For-Profit Organisations (NPO) believe the government is making it tougher for them to work. Read the column by Oxfam India’s director operations, Ratna Viswanathan to learn more. In our regular sections this time we have a profile of the colourful CFO of ICICI Securities, Charanjit Attra, who is equally at home with the guitar, the cricket bat and accounting problems. Also do read the thought-provoking piece on the need for automation in risk management, in our In Practice section. Many of you have recently written to us about the new look magazine and articles that you liked, while suggesting topics we should cover. We would love to keep hearing from you. After all CFO India will remain incomplete without your active participation.

EDITORIAL EDITOR: Anuradha Das Mathur MANAGING EDITOR: Dhiman Chattopadhyay ASSISTANT EDITOR: Anoop Chugh CONTRIBUTING EDITOR: Bennett Voyles DESIGN SENIOR CREATIVE DIRECTOR: Jayan K Narayanan ART DIRECTOR: Binesh Sreedharan ASSOCIATE ART DIRECTOR: Anil VK MANAGER DESIGN: Chander Shekhar SENIOR VISUALISERS: PC Anoop, Santosh Kushwaha SR GRAPHIC DESIGNER: Suresh Kumar SENIOR DESIGNERS: TR Prasanth & Anil T, Joffy Jose & Anoop Verma DESIGNER: SRISTI MAURYA CHIEF PHOTOGRAPHER: Subhojit Paul PHOTOGRAPHER: Jiten Gandhi THE CFO INSTITUTE EXECUTIVE DIRECTOR: Deepak Garg NATIONAL HEAD: Bindu Krishna MANAGER: Shreya Pilani ASSOCIATE: Priyam Mahajan SALES & MARKETING V-P SALES & MARKETING: Naveen Chand Singh NATIONAL MANAGER (SALES): Pranav Saran (+91-9312685289) NATIONAL MANAGER (EVENTS & SPECIAL PROJECTS): Mahantesh Godi (+91-9680436623) NATIONAL MANAGER (ONLINE): Nitin Walia (+91-9811772466) 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 help@9dot9.in PRODUCTION & LOGISTICS SENIOR GENERAL MANAGER (OPERATIONS): Shivshankar M Hiremath PRODUCTION EXECUTIVE: Vilas Mhatre LOGISTICS: MP Singh, Mohamed Ansari, Shashi Shekhar Singh 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 Bunglow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Silver point Press Pvt Ltd, D107, MIDC, TTC Industrial Area, Nerul, Mumbai 400706.

Copyright, All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited. SUBSCRIBER SERVICES: Call +91-11-45069999 VISIT CFO INDIA’S WEBSITE www.cfo-india.in

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More on younger leaders CFO India is certainly more attractive to read than many business magazines available on the stands. In fact, it is a magazine that I look forward to every month. Currently the magazine is about CFOs and some key financial strategies. Going forward will you also be looking at articles for aspiring CFOs and for those CFOs who have turned CEOs? Another area where you can focus on is small businesses that are shining and emerging corporate leaders heading these enterprises. We need to give coverage to young generation business leaders as well, those who are future stars. A K Bansal, CFO Cocoberry Retail, Gurgaon

10.10 CASE STUDY, A GOOD IDEA I read the September issue and found it interesting. The Case Study section is good and I think one in every issue is a smart idea. Also, corporate governance is a topic which I feel the CFO fraternity must discuss and collaborate on. We at Clark & Kent think CFOs make great potential CEOs but need to sharpen some key skills. That would again be a good topic to discuss. I look forward to features on these subjects. — Sudarshan Narayan, President & CEO, Clark & Kent, LLC, Delaware, USA

MORE ON ‘INPRACTICE’ I have been noticing the improvement in both the content and presentation of the magazine over the last few months. However, more articles in the ‘in practice’ section about issues that we face as CFOs every day, would be appreciated. — C M Sharma, Chief Financial Officer, Aegis Limited, Mumbai

INSPIRATIONAL CFOS The September issue looked great. I really appreciate

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Your voice can make a change: Share your view point on what’s happening in the community and your feedback on the magazine at cfofeedback@9dot9.in or editor@cfo-india.in

your coverage that touches upon different aspects of financial matters and the insights that the articles provide. On a personal note, I would like to read articles on CFOs who have been instrumental in turning around their companies. — Srikanth Gadepalli, Branch Manager, ICICI BANK, Anakapale

TIMELY WARNING The September issue’s cover story on managing growth was an aptlytimed piece. The storm called recession came, saw and conquered us. Now, it would be interesting to find out if we can we put together the broken pieces and emerge stronger. CFOs would surely be the torchbearers as India Inc. races ahead of their global competitors in the years to come. They would need to have firm control over resources without stifling growth opportunities. — Shekhar Vaidya, Mumbai

LADY AT THE HELM Vibha Padalkar’s profile was fascinating to read. It is important to highlight successful female business leaders in a country where there are so few of them. Ms Padalkar comes across as a true visionary. Her role during the IPO at WNS is an inspiration for young finance executives like us. — Pallavi Radha, Bengaluru


An Outsourcing Hub Once Again?

IT LOOKS LIKE THERE IS GOING TO BE some good news after all for those seeking jobs in India, particularly in the IT sector. With the H1B visa price hike and the anti-off shoring policy bills being stalled in the US Senate, India looks set to continue as the offshoring abode for American companies. A recent survey by a UK-based IT staffing and managed services firm noted that 90 per cent of the surveyed companies will be maintaining or increasing offshore outsourcing projects in 2010 and 2011. A similar 6

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study in the US noted that in the first quarter of 2010-11, financial services companies around the world reported 40 outsourcing deals, as against 26 in the previous quarter. Notable deals in early 2010 include Deutsche Bank’s $114 million contract with GFT Technologies in which GFT will take responsibility for applications that handle payment transactions, online banking, credit card management and securities transactions. Many US companies now believe in the need to be realistic about the potential for developing software within the country, recognising that it is more cost-effective to “offshore” large-scale projects to nations such as India. The best recent example is that of US-based insurer Fidelity National Title Group Inc that has decided to scale up its business by outsourcing to India. The firm feels it can cut costs by 30 per cent this way. Optimation, another IT firm, formed an alliance with Indian giant HCL – a successful marriage since the combination won a deal valued at about $100 million - to develop and support software for the US corrections department. “Large-scale builds are more economic offshore. Let us embrace that rather than try to resist,” Neil Butler, founder of Optimation told the website www.siliconindia.com recently. Things were not as rosy barely six months back, with most US firms pick-

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10.10 !"#$%#&'


WHAT’S AROUND ZONE cfobook ................................................................. Pg 08 Home loans on web ............................................. Pg 08 Betting on India ...................................................Pg 09 FII at $20bn .........................................................Pg 09

THE CFO POLL RESULT

Should CSR activity be made mandatory for companies across India?

63% Yes 30% No

7% Maybe

CURRENT POLL QUESTION

Do you think the current bull run is sustainable ? -./0$1.2$3/$222456.718/7/9/045.:;<.==

ing their home country as a destination preferred over India, as funds dried up post the slowdown and companies wanted to conserve cash. A BDO Seidman (a top US accounting firm) survey in late 2009 asked CFOs of 100 firms that had revenues of $30 billion or more about their outsourcing plans. Of them 22 said they would bring jobs back to the US, while 16 picked China as the outsourcing destination and only 13 picked India. Significantly, about half the respondents were undecided. It seems many of those have now reposed their faith in India. There has also been a return of positive sentiments among job seekers as well as among American firms who outsource jobs to India after the US Senate’s decision to block the anti-off shoring bill that sought to deny tax breaks to American companies moving jobs offshore. The Republican majority senate blocked the Bill introduced by President Obama, that sought to end tax breaks enjoyed by US firms that started offshore operations by reducing capacity at their home offices or plants. Infosys, TCS and Wipro, three of India’s biggest software outsourcing firms are set to regain double-digit growth rates during the second quarter, as customers in the US and Europe revive technology spending for addressing new markets, and start off shoring their IT and back-office projects to cut costs by nearly half. According to this year’s Global CIO survey, nearly half of CIOs - 48 per cent - spend 10 per cent of their IT budget on outsourcing.

#()*)+,

Q2 indicates slow growth THE GOVERNMENT MAY be gung-ho about growth after the International Monetary Fund projected that the country’s economy would grow at a healthy clip of 9.7 per cent in 2010, but some experts do not hold out high hopes for India Inc’s corporate results for JulySeptember 2010, which are trickling in as this magazine goes to press. “The results would largely be in line with what we had in the first quarter and we are expecting a 10-12 per cent earnings growth year-on-year for Sensex companies,” Aseem Dhru, CEO, HDFC Securities told the Hindustan Times newspaper in a recent interview. Another firm, Enam Securities, has projected a yearon-year revenue growth of 23 per cent for Sensex companies but expects the profit growth at only 13 per cent. An ICICI direct search report mentions: “Despite stronger yearon-year growth in revenues, Indian companies are likely to face pressure on their bottom line owing to rising input costs and higher provisioning costs (Banks) that will be reflected in the tepid margins in Q2.” “On the margins front, we expect the auto, cement and FMCG sectors to come under the highest margin pressure owing to a rise in input costs,” the report added. “It is unlikely that the earning can surprise us on the positive side. However the risk of a negative surprise from companies on the earnings front remains,” Dhru said in his interview to HT.

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What’s on your mind? Attach

Share Ravi Nedungadi is proud to have resisted the hard-sell tactics of investment bankers to get into exotic derivatives before their valuations tumbled. September 28 at 10:40pm · Comment · Like

Ravi Nedungadi believes the past two decades has given his finance function some sharp lessons and made them acutely aware of the importance of remaining focused on customer satisfaction.

&@&B'D The Udyog Ratan Award The CNBC TV18’s CFO of the Year, M & A (2006), The CNBC Award for India’s best CFO in the FMCG & Retail Sector (2007), The IMA Award for CFO of the Year (2007)

October 3 at 7:30pm · 5 people Commented · Like

Ravi Nedungadi was the youngest student ever to qualify in the finals of the chartered accountancy exam at the age of 20 October 6 at 1:10pm · Comment · 2 people Like this

I Read...

#'E(&!F)*$G$@)BH Chartered Accountant and Cost Accountant President & Group CFO, UB Group Finance Director, UB International Ltd Corporate Treasurer, UB Group Assistant Vice President, Finance, Pentagon Fasteners Ltd Regional Accounts manager, Macneill & Magor Ltd

The Next Asia: Stephen Roach The Lost Symbol: Dan Brown September 29 at 1:35pm · Comment · 3 people Like this

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RECENT ACTIVITY Ravi Nedungadi likes CFO India and 7 others

Ravi Nedungadi likes Royal Challengers, IPL, London, The Economist, Deccan Chronicle, Oriental cuisine, Rahul Dravid September 25 at 11:00pm · Comment · 2 people Like this

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Home loans on web chat MOVING AWAY FROM unsolicited calls to sell home loan products, HDFC Bank will soon be tapping customers for group company HDFC through web chats where customers wilfully log on for details. “We see the cold-calling method (unsolicited calls) going off, especially considering the way the regulation is headed. Web is the future. It is non-invasive and helps us connect with the really interested people,” says the bank’s Senior Vice-President, Unsecured Loans Business, Sanjai Raina. HDFC Bank has firmed up plans to start selling group company HDFC’s home loans from the end of October through web chat before the kick-off of the Diwali celebrations and a pilot for the same is already on. Web chat, Raina said, is a more transparent medium and there will be no ‘mis-selling’. 8

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THE DEFINITION It means proceeding with an over-abundance of caution, specially when giving out information on a sensitive issue or financial data. THE USAGE If your colleague or CEO is a jargon addict, it is good to be prepared. Now at least you know what he or she means, when you are told: “Make sure we are belts and suspenders before those quotes go out.”


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BETTING ON INDIA

Home Grown OS? INDIA-FOCUSED HEDGE FUNDS have produced nearly double the returns of the benchmark Sensex this year and are among the best performing hedge funds globally, a recent survey by Singapore’s fund research house, Eurekahedge has found. India has proved to be a high-beta market for hedge funds and managed to show a stronger growth in Assets Under Management (AUM) when compared with other countries. “Hedge funds are active in Indian equities,” says Farhan Mumtaz, Senior Analyst, Eurekahedge . “Funds with global and emerging market mandates have also increased their

allocations to India,” he adds. Eurekahedge India index was the top gainer among the geographical indices with 5.7 per cent gain between January and August. Other out-performers among the geographical indices were Latin America (onshore) index with 4.9 per cent gain and the Eastern Europe & Russia index that is up 3.7 per cent in the first eight months of this year. According to an estimate by hedge fund database HedgeFund.net, at the end of August 2010, the total assets in hedge funds investing in India’s markets were $9.53 billion compared with a peak of $18.74 billion at the end of 2007.

The Defence Research and Development Organisation (DRDO), is working on creating a futuristic computing system, including India’s own operating system (OS). Two software engineering centres are being set up for this purpose in Bangalore and New Delhi. “Various bodies, including banks and defence establishments, need security. Having our own operating system will help prevent hacking of our systems,” says V.K. Saraswat, DRDO Director-General.

India’s M&A tally touches $42bn I)B#FC*$F*-#D!+#*!

FII flows hit $20 Billion mark INVESTMENTS BY FOREIGN Institutional Investors (FIIs) in the domestic equity market have surpassed the $20 billion mark in 2010, recording the highest ever FII inflow into the economy. The impact has been felt in the domestic currency market after the Rupee appreciated by more than five per cent against the Dollar in less than one month. According to SEBI, the net FII inflows were recorded at $20.5 billion which is higher than the previous record in 2007 which stood at $17.7 billion. The Sensex surged by more than 2,500 points in the last two months with an inflow of close to $10 billion. With the index nearing its previous record high of 21,200, FIIs have been investing funds into the debt market with net investments crossing the $10 billion mark. Regulators are worried about its overall impact on the economy as capital flow boosts asset prices. “The central bank is keeping a watch on capital flows and will respond if needed,” said Dr. Subir Gokarn, Deputy Governor of the RBI.

Corporate India announced Merger and Acquisition (M&A) deals worth $601 million in September, taking the year-todate total to over $42 billion, a report by consultancy firm Grant Thornton said. However, in spite of closing 57 deals in September 2010, the deal values have been significantly lower compared to the increased momentum seen during the first seven months of the year.

Animation industry surges ahead The Indian animation industry will grow at a compounded annual rate of 30 per cent to reach a market size of $1.7 billion by 2012 and add over three lakh skilled animators, according to a recent study by Assocham. With 1.5 lakh skilled animators, it is currently a $1 billion industry.

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Facts & Trivia EDUCATION: B.Com from Loyola College, Chennai MEMBER: Institute of Chartered Accountants in England and Wales LAST JOB: Director (Finance) of Puravankara Projects Ltd PASSIONS: Rugby, Cricket, Travelling

RAVI RAMU

What should a CFO do during a financial meltdown? ‘Nothing’ says the sports-loving President and CEO of Hothur Group, a Bangalore based iron and steel firm. Sounds bizarre? Read on to learn more.

I RECENTLY SPOKE AT A conference on what smart finance professionals should do during recessionary times. I began my speech by saying they should do NOTHING. After waiting for what seemed like an eternity, I went on to explain to a stupefied audience what I really meant.

ACT DURING GOOD TIMES Those who take steps of austerity and correction only when difficult times hit them are, alas, often too late. Both the bath water and the baby have already been thrown out by then. When times were good, perhaps even exceptionally so, excesses were allowed to reach dangerous proportions. Costs went out of control and investments were made into projects which were grandiose rather than driven by economic necessity and sense. In any case no one seemed to care since revenues were 10

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growing by the minute and profits reaching unprecedented levels. Organisations and individuals begin to believe they are infallible. They think difficult times are a mere mirage and happy days, the only reality. I went onto to say that the time to act sensible is when business is booming, not when it is sinking. Businesses have

“Bad habits formed when times are good, can seldom be swiftly corrected when the dice is loaded against you.”

cycles just like sports teams. A winning streak will invariably be followed by a losing one. The time to correct excesses and act sensibly is when one is winning, not when one is losing. The secret is not to allow excesses to creep in during good times so that drastic pull backs and reversals are not required when life is not hunky dory. Bad habits formed when times are good can seldom be swiftly corrected when the dice is loaded against you.

BUILD A STRONG VALUE SYSTEM The companies and teams which exhibit the ability to recover the fastest from losing streaks are invariably the ones who build strong cultures and instil sensible norms during better times and not the ones which try to take sudden corrective steps when things are going down.


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The CFOs who excel are usually the ones who do not use the crutches of a recession to say no to spending and excesses – they are the ones who during boom times cajole the organisation into acquiring sensible spending habits and carefully foster growth through the

right doses of investments. The tendency for the head of finance to say “no” to money being spent seems to dramatically rise during recessions and conversely fall during booms. Surely it should be the other way around. The audience had got the message

by then. NOTHING needs to be done when things turn sour if, in the first place, constant prudence and sense prevails when life is sweet. Easier said than done!

OCTOBER 2010

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CSR CSI? OR


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IT IS BEING TALKED ABOUT AS THE ‘2 PER CENT SOLUTION’. WILL MAKING CORPORATE SOCIAL RESPONSIBILITY MANDATORY FOR INDIAN COMPANIES, WORK? BENNETT VOYLES

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PC ANOOP

N PARIS’ RIGHT BANK, a few hundred meters away from the Parc Monceau, a lush remnant of a guillotined aristocrat’s private pleasure garden, the secretary of India’s Ministry of Corporate Affairs, R Bandyopadhyay, sat in his dark hotel suite and worried about social instability. India Inc. is growing rapidly, but hundreds of millions of people still live far outside its manicured campuses. It is not a situation that can continue indefinitely. Right now, Bandyopadhyay says, perhaps 5 to 10 million people are direct stakeholders in the corporate sector, but to create more stability, that number needs to be “10-fold or 20-fold” larger. “Unless more and more people feel that they have stake in the development of the corporate sector, it cannot continue to grow,” Bandyopadhyay said, during a recent official visit to the city. To encourage more companies to get involved, the ministry recently proposed a rule that every company with an annual turnover of Rs. 1000+ crore spend at least 2 per cent of its profits on corporate social responsibility activities. Supporters of the plan argue that many companies have earned this coercion. In a 2009 survey of India’s top 500 companies, Karmayog, a CSR advocacy group, gave no company its top rating for social responsibility, only 13 firms its second-highest highest grade, Level 4. A total of 128 firms earned a 0. “Lack of pro-active steps by corporates

and industry associations to voluntarily come forward and contribute…resulted in the government’s proposal to make some level of CSR mandatory,” says Vinay Somani, founder and trustee of Karmayog. However, some critics of the plan see it as a reflection of public sector weakness as much as private. “I think the reason why there is even a discussion about this is because what has happened in India and many other countries: a lot of the people just do not trust business houses and they do not trust the government either. They are trying to find a third alternative,” says Aneel Karnani, an associate professor of strategy at the Ross School of Business at the University of Michigan.

BAD IDEA Opponents are not convinced that forced generosity is the best policy. Even the finance director of Tata Sons, reputedly the most open-handed company in the country, is not sure. “I think it is a rather awful idea,” says Ishaat Hussain. Although the Tata Group has been giving away money for over a century (as the old Tata ad slogan famously put it, “We also make steel”), Hussain argues that social responsibility is something a company must have in its DNA, not something that can be forced from the outside. If the impulse isn’t genuine, the response won’t be either, in his view. “People will find all sorts of ways to pass off business expenditures as CSR,” Hussain predicts. OCTOBER 2010

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& & & &#'($)!"#$% At another large MNC, Larsen & Toubro, a company also on Karmayog’s honour roll, many do not think much of the 2 per cent solution either. “I do not think it is a good idea to get prescriptive on CSR,” says Shankar Raman, senior VP for finance and legal. Even some CSR experts are unsure about the move. “The government should not force such matters,” says Priya Viswanath, a director at Catalyst Social Development Consultants in New Delhi, an advisory service for social development programmes, and senior fellow at the Synergos Institute in New York, a global development think-tank.

IMPRACTICALITIES The act of putting a specific number to the effort concerns some development experts. “At the end of the day, CSR should not be about how much you spend,” says Janet Geddes, associate director of international development services at KPMG in Mumbai. CSR should be more about how your resources are integrated, she adds. Forced-march generosity may also reduce the positive value of voluntary CSR. Samantha Taylor, president of Reputation Dynamics, a New York-based global brand reputation consultancy for companies and NGOs, says that reducing CSR to a fixed percentage might make people see the value of the programme as a “’mere’ monetary donation” reducing the programme’s value to the company’s brand and reputation. It also might encourage a “one-size

corporate managers are really the right people to make the decision about how 2 per cent of the shareholder’s money should be spent? “I think it is giving way too much power to the managers,” says Karnani.

GETTING IT RIGHT

*&+,-&,.&-/0& 10,1+0& 2,&3,-&-456-& 7568306606&932& -/0:&2,&3,-&-456-& -/0&;,<043=03-& 08-/04> —ANEEL KARNANI, PROFESSOR, UNIVERSITY OF MICHIGAN fits all” mentality regarding CSR, Taylor warns, when ideally the company should take on projects that relate to its core business. “For example, a food company should be incentivised to address obesity and malnutrition – a beverage company should be incentivised to address poverty,” she says. But this very breadth of what CSR can be points to a different kind of regulatory challenge. “The first big problem is, what is it that’s going to be defined as CSR?” says Karnani. CSR encompasses such a range of activities, from philanthropy to environmental protection, that it is not always easy to define. The second issue, he says, is whether

If the experience of India’s state-owned oil companies is any indication, compliance may actually not be too onerous. Since the beginning of this fiscal year, the state oil companies have been required to invest 2 per cent of profits in CSR. Although some argue that this is about twice as much as the companies previously donated, L. Nelson, chief manager of finance and administration for ONGC, says that the only real impact has been to make the company’s CSR activities more visible than they were before. For companies who are less active with CSR today, the rule might be more difficult. “I think a lot of corporates will face a challenge of figuring out how to spend it efficiently,” says KPMG’s Geddes. Ray Kroc the founder of McDonald’s once joked that he found giving away money harder than earning it. But these days, a whole industry of consultants has sprung up to advise and supervise corporate social programmes, and some best practices have emerged. To make sure his company handles its CSR right, Rajendra Prasad, president and CFO of chemical company SRF in Gurgaon, says he ensures they always follow a few rules. First, make investments for the long-term. Second, invest mostly in areas near where

?3+066&=,40&932&=,40&10,1+0& .00+&-/9-&-/0:&/9<0&6-9@0&83&-/0& 20<0+,1=03-&,.&-/0&A,41,49-0&60A-,4B& 8-&A933,-&A,3-8350&-,&;4,C> —R BANDYOPADHYAY, SECRETARY, MINISTRY OF CORPORATE AFFAIRS 14

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&#'($)!"#$% SRF does business so the company knows what is needed. Third, he says, work only with NGOs who are highly rated by the non-profit rating agencies that have sprung up, which assess the value and efficiency of their programmes. Finally, audit the results, so there is no question about the money being used improperly. But that is the experience of a volunteer donor. Draftees might not be as eager to do the job right, warn some CSR experts. “Forcing companies is not going to work,” says Swapan Garain, a professor of corporate citizenship at the SP Jain Institute of Management and Research in Mumbai, and founder of the Bhor Foundation for Indian development. Rather than rely on a single stick, Garain prefers dangling multiple carrots. “What works best is if there is some clear self-interest involved so it is also building business,” he explains. Garain points to a number of initiatives that try to pursue social gains and profits at once. ITC, for instance, is providing credit to farmers that supply it, cutting out traditional money lenders who prey on the farmers. Hindustan Lever, a consumer goods company, is training uneducated rural women to become entrepreneurs at the same time as they teach them to sell their products in the villages. Infosys and Wipro are teaching computer literacy to students in poor schools, which is obviously good for business over the long haul. The professor is also a fan of involving multiple-stakeholders in symbiotic networks. Long-term alliances with NGOs can help build value in CSR. The government too, might showcase small and medium sized companies’ efforts, giving them some valuable publicity. Business schools could play a role as well, by sending out students to volunteer for a month -- an opportunity that could help some job-hunting graduates’ prospects by showcasing their leadership abilities in a real-life situation, and give the country 50,000 months of work every year. L&T’s Raman is another advocate of

!"%D"%*($&'E*%*F&%$'D"G'HIHJH() It might be tempting to view corporate social responsibility as an imported management fad that will have to be endured, but CSR is actually a home-grown product for India. Beginning in the 1890s, at roughly the same time as British and American industrialists began endowing libraries, universities and doing various other good work, Indian industrialists had begun giving away their fortunes. A decade before his company first made steel, J.N. Tata had already set up his first charitable foundation. Unlike the British and American industrialists, however, their social efforts often had more explicitly political goals. In the 1920s, for instance, the Tatas aligned themselves with Gandhi’s Swaraj movement, which favoured both independence and egalitarian development. The growth of India should not be “a pyramid with the apex sustained by the bottom,” Gandhi said, but “an oceanic circle whose centre will be the individual.” Gandhi advocated that business houses develop a CSR-like attitude towards their enterprise, which he called trusteeship. As wealth is always created by a group rather than an individual, he reasoned that it ultimately belonged to the group. Owners and managers only held their assets in trust.” But even Gandhi saw that the idea had limits. “Absolute trusteeship is an abstraction like Euclid’s definition of a point, and is equally unattainable. But if we strive for it, we shall be able to go further in realising a state of equality on earth, than by any other method,” he said.

H&-/83@&8-&86&9&49-/04& 9C.5+&8209>>> D0,1+0&C8++&.832& 9++&6,4-6&,.&C9:6&-,& 1966&,..&75683066& 0K10328-5406&96&!'%> — ISHAAT HUSSAIN, FINANCE DIRECTOR, TATA SONS the carrot. “Companies will do their bit and even more if the cause is compelling—commercial interest included,” says Raman. The carbon credit mechanism, he says, is one good example of how social and private interests can align.

CSR BUILDS VALUE The good news is that coerced or not, CSR does seem to create some financial value. Although it is difficult to measure

success, Jaideep Prabhu, a professor of Indian business at the Judge School of Business at Cambridge University, says some studies have found that CSR may actually be better for the company’s brand-building than advertising. While he’s never measured its value, Hussain says that Tata’s outreach has clearly won it a lot of goodwill, particularly in the communities where it operates. Outside India, many CFOs also find OCTOBER 2010

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15


& &#'($)!"#$% value in CSR. A 2008 McKinsey study found that 79 per cent of CFOs surveyed thought that CSR, combined with good governance, could enhance brand equity and attract, motivate and retain employees. A minority also saw operational gains as well, including improving operating efficiency (39%), developing growth opportunities (35%), and risk management (24%). A 2008 University of Bath study also found reason to believe CSR was worth doing for financial reasons: while in the short run, companies that invest in social work do as well as companies that do not give anything, in the long run, companies that do more socially tend to outperform all their peers.

TIME RUNNING OUT In the end, however, SRF’s Prasad says, many companies really have no other choice than to participate. “It is not just for the welfare of society, it is for your own sustainability that you do CSR,” says Prasad, whose company supports a variety of activities in the communities where it does business, from rebuilding dams to sponsoring schools. Social activists, however, say the level of self-interest at many companies is not sufficiently enlightened yet. “CSR is not really at a stage in this country where you think in terms of the larger society, where you think of what happens... it is still very restricted to ‘my plant, my business, my area,’” says Amit Kaushik, Chief Operating Officer at Pratham Education Foundation in New Delhi.

GL"'&*'&D*%(G$%'&M"%&!'% Sixty seven per cent of India’s domestic companies have chosen non-government organisations (NGOs) as partners to undertake their Corporate Social Responsibility (CSR) projects, while others prefer government departments for the spread of CSR obligations - a survey by the Associated Chambers of Commerce and Industry of India (Assocham) conducted earlier this year, reveals. The study found that at least 21 of the surveyed companies were working with multilateral organisations for CSR activities. More importantly, 37 percent of the firms had a well-structured foundation for implementing their CSR, while 58 percent domestic companies had formed a separate department to implement CSR. Twenty one percent of companies have come up with a separate CSR report, the survey found, though only 8 per cent reported their CSR activities in their annual report. This, as an Assocham spokesperson confirmed, is substantially lower than the rate for most international firms. “Some companies chose to narrow their focus on a few thematic areas while other companies took a broader view and undertook a large scope of areas to focus on,” the report mentions. Of the 24 cases analysed, it was found that there were as many as 16 companies focusing on 3-5 thematic areas, whereas four companies catered to 1-2 thematic areas of work and the remaining four stuck to six or more thematic areas.

“We can no longer speak about 8 per cent or 9 per cent growth and leave a whole generation of Indians behind who have no access to basics – food, education or health care. In evolved societies ‘giving’ which is a private act, should not have to be mandated or controlled by government. Companies and individuals should feel responsible enough to act on their own,”says Viswanath of Catalyst Social Development Consultants. Karnani at the University of Michigan also thinks that more personal philanthropy is a good idea. At the same time, however, he says companies should be less apologetic about their role in

H-&86&3,-&N56-&.,4&-/0& C0+.940&,.&6,A80-:B& 8-&86&.,4&:,54&,C3& 656-983978+8-:&-/9-& :,5&2,&!'%> —RAJENDRA PRASAD, PRESIDENT AND CFO, SRF 16

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society. “There is a general feeling that business is somehow bad, that making money is not good,” he says. “We should stop apologising for business.” After all, he says, business creates jobs and pays a lot of the taxes that fund the social programmes. But Somani of Karmayog is impatient with the level of India Inc.’s current social efforts and argues that the government plan is a good first step. “Sure, there will be some unintended consequences, as there are with all laws. The important thing now is to however, ask ourselves: Do we agree that every company must be engaged in CSR? If yes, then, let us get down to doing it, and doing it well. The moment for keeping CSR voluntary and self-driven has passed, as not enough corporates came forward voluntarily to make it meaningful enough.” For his part, Bandyopadhyay says that his ministry is open to other more positive approaches down the line, but argues that this is a good first step. “We have not stopped thinking. But let us start somewhere.”


!"#$%&'("%)&

!"#$#!$

%&'()*+,&--*./0*$/(1./01 "0/23(*!04',35'(3/,56 RATNA VISWANATHAN

(

he Government of India seems to have decided to become conscience keeper to India Inc. That is the only way one can explain its decision to order all companies to keep aside 2 per cent of their profits for Corporate Social Responsibility. The merit of the decision is debatable. What, however, I find confusing is that while it is seeking to regulate the CSR agenda of the corporate sector, it is simultaneously amending statutory provisions that will effectively squeeze out the ‘Not for Profit’ (NPO) sector in the not so distant future. The contrariness of approach is bewildering to say the least. India has a robust and still growing civil society, whose primary focus is working with marginalised communities and sectors. Several NPOs have partnered with the government in its development agenda in the past and continue to do so. The sector raises a large part of the funds that go into sustaining such work in the form of grants and donations, both from Indian and foreign sources. The fact that such funds are committed to definite developmental agenda and programmes implies that this money is not income. Unfortunately the government does not share this perception. Instead it has addressed this anomaly in the tax net by seeking to tax the ‘income surplus’ of NPOs if it is not spent within the year in which it has been received. The new Revised Direct Taxes Code Bill has been passed and the Act comes into effect from the year 2013. What the new Code effectively does is try to push NPOs into a corner. While as of now, NPOs are permitted to expend 100 per cent of their income over the next 5 years, the new code specifies that they have to spend at least 90 per cent of gross receipts or 85 per cent of income for charitable purposes during the year of receipt. This is not practical for several reasons. Further, NPOs are not allowed to accumulate income! So no long term planning, no corpus building, live from year to year and hey! if you drive yourself into the ground, so be it. The sector being diverse, players of different capacities exist across the spectrum which impacts absorptive capacities. Donor money does not come

in one single tranche at the beginning of the year. Individual donors, for instance tend to give towards the end of the year to avail tax benefits. And what about government departments that give grants for the current year on March 31? Is one expected to spend this on the same day? Developmental work is impacted by political exigencies, social attitudes of people, ability to put in place advocacy to leverage the funding that is going in to create awareness and the erratic fund flow pattern. How realistic is it then to expect such a spending pattern? Grants cannot be used to pay taxes, so this imposes an additional burden of generating the money for the tax from other sources. Foreign currency donations received by NPOs is governed by the Foreign Contribution (Regulation) Act 1976.

7)'(*'8/9(*4/:&0,;&,(* <&='0(;&,(5*()'(*43:&*40',(5* 2/0*()&*>900&,(*?&'0*/,*@'0>)* AB6*#5*/,&*&C=&>(&<*(/*5=&,<* ()35*/,*()&*5';&*<'?6 This requires NPOs to seek a registration with the Ministry of Home Affairs before such contribution can be received. This is well appreciated. What is incomprehensible is if one observes due process, furnishes all relevant paperwork and is ready to be inspected down to the last shred of paper, why does the process take an inordinate amount of time? Till recently, once this hard fought battle was over, one could sit back and get on with work as usual. The powers that be have woken up to the fact that this too easy a win. So now, we have a amended version of the Act that stipulates that one needs to re–register every 5 years. Considering all of what has been said above, it seems the death knell has been sounded for the NPO sector. Is that the ‘gap’ the government is now seeking to fill by regulating CSR? — RATNA VISWANATHAN, DIRECTOR OPERATIONS, OXFAM INDIA, IS ALSO A FORMER BUREAUCRAT. THE VIEWS EXPRESSED HERE ARE PERSONAL AND NOT NECESSARILY THOSE OF OXFAM INDIA. OCTOBER 2010

C F O

17


!"#!$%&'

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VALUING CORPORATE SOCIAL RESPONSIBILITY Environmental, social, and governance programmes create shareholder value, but neither CFOs nor professional investors fully include that when evaluating business projects or companies. ROBERT I. SUTTON

PHOTOS.COM

T

he perceived importance of corporate environmental, social, and governance programmes has soared in recent years, as executives, investors, and regulators have grown increasingly aware that such programmes can mitigate corporate crises and build reputations. But no consensus has emerged to define whether and how such programmes create shareholder value, how to measure that value, or how to benchmark financial performance from company to company. This McKinsey survey* asked CFOs, investment professionals, institutional investors, and corporate social responsibility professionals** from around the world to identify whether and how environmental, social, and governance programmes create value and how much value they create. The survey also examines which metrics are the best indicators of value and how they can be communicated most effectively. The results indicate that environmental, social, and governance pro18

CFO INDIA

OCTOBER 2010

*+,(-(.'/

.//*01&2345, ()

678*934 )*+,-

Effect of environmental, social, and/or governance programmes on organisation’s shareholder value in typical times1

% of respondents CFOs, n = 84

18

Investment professionals, n = 154 Corporate social responsibility professionals, n = 87

0 19

Adds 2–5%

21 27

No effect

15

Don’t know

5

27 53

7 4 11

Adds >11%

10 9 22

10 Adds 6–10%

6 Excludes any changes stemming from current economic crisis.

1

6 7

Reduces value

13 10

Adds 2%


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grammes do create shareholder value, though the current economic turmoil has increased the importance of governance programmes and decreased that of environmental and social programmes. Nonetheless, a significant proportion of respondents do not fully consider these programmes’ financial value when assessing the attractiveness of business projects or companies. Some think the value is too long-term or indirect to measure, and others just are not satisfied with the metrics available. Moreover, there are notable differences between CFOs and professional investors in a few areas, including how

much value these programmes create, which specific environmental, social, and governance activities create value, and whether such programmes are a proxy for good management. Solid majorities of all respondents expect environmental, social, and governance programmes to create more value in the next five years. That potential highlights the importance of developing better metrics and solving the understanding gap between CFOs and investors.

WHAT VALUE—AND WHAT EFFECT DOES IT HAVE? Among respondents who have an

opinion, two-thirds of CFOs and threequarters of investment professionals agree that environmental, social, and governance activities do create value for their shareholders in normal economic times. However, they do not agree on how much: investment professionals are likelier to see more value than CFOs, for example (Exhibit 1). Further, a full quarter of respondents don’t know what effect, if any, these activities have on shareholder value. Notably, Corporate Social Responsibility (CSR) professionals themselves appear to be the most unsure about putting a number on the value added by environmental, social, and governance OCTOBER 2010

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:;(:<=6 *+,(-(.'E

>?,@,&2345,&9A+,-&B@A+ % of respondents

CFOs, n = 45 Investment professionals, n = 91 Corporate social responsibility professionals, n = 33

Ways in which environmental, social, and/or governance programmes improve companies’ financial performance1 79 75

Maintaining a good corporate reputation and/or brand equity

79 52 55

Attracting, motivating, and retaining talented employees

61 43

Meeting society’s expectations for good corporate behavior

30

Improving operational efficiency and/or decreasing costs

29

39 39 42

35

Opening new growth opportunities

36 24 24 24

Improving risk management

18 14

Strengthening competitive position

Improving access to capital

27 24 3 2 9

Excludes any changes stemming from current economic crisis.

1

activities, with more than half reporting they do not know what effect these programmes have on value creation. Of those who do have an opinion, their estimates are roughly similar to those of CFOs. The lack of certainty may reflect a tendency among corporate social responsibility professionals to focus on the social or other benefits of their programmes rather than their financial value. By wide margins, CFOs, investment professionals, and corporate social responsibility professionals agree that maintaining a good corporate reputation or brand equity is the most important way these programmes create value (Exhibit 2). The separate group of socially responsible investors are significantly more focused than other groups on improving risk management. Though professional investors and CFOs agree on how environmental, social and governance programmes cre20

CFO INDIA

OCTOBER 2010

01234)51).2'.4'.,(2'267819':71' 23;(.'4817'<,1.,17'36..()=':'>():)? @(:;'8:;61'4)'24@(:;'374=7:AA12' <46;5'7156@1'.,1'7136.:.(4):;' -1)1>(.2'.4'@4A3:)(12B'C471' -1;(181'2.:D1,4;5172'8(1<'>():)? @(:;'8:;61'@71:.(4)':2'(A347.:).' .,:)':2':'3422(-;1'5(2.7:@.(4)B ate value, they identify different activities as most important to their definition of such programs (Exhibit 3). Fourteen percent of all respondents rank creating new revenue streams as their number one priority, indicating how infrequently environmental, social, and governance programmes are seen as direct sources of financial value.

VALUE IN THE CRISIS AND IN THE LONG TERM Investment professionals generally agree that the global economic turmoil has increased the importance of governance programmes—and decreased the importance of environmental programmes—to creating shareholder value. Corporate social responsibility


:;(:<=6 *+,(-(.'G

C,B*0*01&8@A1@3++,% of respondents1

CFOs, n = 84

Activity ranked most important for defining environmental, social, and/or governance programmes 50

Compliance and transparency

Investment professionals, n = 154 Corporate social responsibility professionals, n = 87

48 25 29

Changing business processes

10

Creating new revenue streams (eg, new products/ markets)

27

16 12 5

Charitable giving to community

15

9 14

11

Long-term investments to address social issues

17 10

Respondents who answered “other” are not shown.

1

*+,(-(.'F

$BB,9)-&AB&)?,&9@*-*% of respondents1

How current global economic turmoil has changed importance of given programme relative to shareholder value

CFOs, n = 84 Environmental Investment professionals, n = 154 Corporate social responsibility professionals, n = 87

Increased importance

Social

2

Governance 37

14 15 15

21 20

56 39

43

No change

25

32 55

59

45

Decreased importance

47

37

51 9

46

44

25

14 13

48 14

1

Respondents who answered “don’t know” are not shown.

1

professionals are likelier than the other groups of respondents to say that environmental and social programmes have at least held their ground (Exhibit 4). Respondents do, however, largely agree that environmental and social programmes will create value over the

long term, and that governance programmes create value in both the short and long terms (Exhibit 5). Some twothirds of CFOs, investment professionals, and corporate social responsibility professionals also believe that the shareholder value created by environ-

mental and governance programmes will increase in the next five years relative to their contributions before the crisis. Expectations of social programmes are more modest; half of respondents say these programmes will contribute more value. OCTOBER 2010

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:;(:<=6 ACCOUNTING FOR VALUE Both CFOs and professional investors see the existence of high-performing environmental, social, and governance programmes as a proxy for how effectively a business is managed; more than 80 percent of both groups say that is at least “somewhat” true. Europeans are more likely than Americans to make that connection. Surprisingly, although CFOs see less value in these programmes, they are more likely than investment professionals to integrate environmental, social, and governance considerations into their evaluations of companies and projects, at least to some extent (Exhibit 6). This may be because CFOs are closer to the activities—and have more transparent data—than investors, especially if factors such as environmental savings are integrated into overall operational cost data. When doing a valuation, CFOs and

C42.'71234)51).2'@(.1':..7:@.? ()=H'A4.(8:.()=H':)5'71.:()()='.:;? 1).15'1A3;49112':2'4)1'<:9'.,:.' 1)8(74)A1).:;H'24@(:;H':)5'=48? 17):)@1'374=7:AA12'(A37481':' @4A3:)9I2'>():)@(:;'317>47A:)@1H' -6.'>1<'71234)51).2'.,()D'@4A? A6)(@:.(4)2'@46;5'-1'(A374815' -9'71347.()='5:.: ()'.,(2':71:B investors alike say they count the effects on some stakeholders much more than effects on others; further, different stakeholders matter to the two groups (Exhibit 7). Most CFOs and investment profes-

sionals who do not integrate environmental, social and governance considerations into their evaluations of corporate projects—or who do not do so fully—agree that the contributions are either too indirect to value or that the

*+,(-(.'J

DA01'),@+&9A0)@*E5)*A0&)A&-?3@,?A4/,@&2345, % of respondents,1 n = 150

Contribution of programme to shareholder value Short term

Substantially positive/positive Neutral/can’t evaluate

29

22

10

Long term2 4

Environmental 85

Negative/ substantially negative

49 6 20

37

20

Social

74 43 15

Governance

12

22 64

Figures may not sum to %, because of rounding. Respondents who answered “don’t know” are not shown.

1

2

22

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OCTOBER 2010

84

4


:;(:<=6 available data are insufficient. Indeed, few CFOs or investment professionals found value in external rating, ranking, or reporting standards or guidelines to assess the effects of environmental, social, and governance programmes, with the exception of certain certification or accreditation standards.

TOWARD MORE EFFECTIVE COMMUNICATIONS Given that they don’t see eye to eye on how much shareholder value is created, or by what activities, it is not surprising to find that CFOs and investment professionals differ on how to communicate that value. Just over half of both groups say integrated reports including financial and other data would improve communications. However, even more investment professionals say reports that integrate the financial value of environmental, social, and governance into corporate financial reports would be valuable. Among all respondents, the metrics they would find most helpful for understanding the financial value of environmental, social, and governance programmes are those that quantify financial impact, measure business opportunities as well as risks, and are transparent about their methodology. Corporate social responsibility professionals add that metrics should reflect differences in company sizes, industries, or regions. LOOKING AHEAD CFOs see less potential for shareholder value from environmental, social, and governance programmes than investors do. By learning where investors see value, CFOs themselves may change their views and will be able to communicate more valuable information to investors. A clear first step would be to develop metrics that focus on integrating the financial effects of environmental, social, and governance programs with the rest of the company’s finances. A few companies see environmental,

*+,(-(.'K

:0),1@3)*01&)?,&2345, Do you integrate environmental, social, and/or governance considerations into your evaluation of corporate projects? % of respondents1 CFOs,n = 84

Europe, n = 80

Investment professionals, n = 154

North America, n = 67

18

No

16

21

32

Yes, fully

37

60 50

53 24

22 11

35 58

59 53

Yes, somewhat

Publicly owned companies, n = 84 Privately owned companies, n = 137

6

14 13

Respondents who answered “don’t know” are not shown.

1

#4A1'.<4?.,(752'4>'LMN2H'()812.? A1).'374>122(4):;2H':)5'@47347:.1' 24@(:;'71234)2(-(;(.9'374>122(4):;2' :;24'-1;(181'.,:.'.,1'2,:71,4;517' 8:;61'@71:.15'-9'1)8(74)A1).:;' :)5'=4817):)@1'374=7:AA12'<(;;' ()@71:21'()'.,1')1+.'>(81'91:72'71;? :.(81'.4'.,1(7'@4).7(-6.(4)2'-1>471' .,1'@7(2(2B social, and governance programmes as an opportunity to create new revenue streams. Given investors’ demand for financial data, companies could benefit from explicitly including these programmes and their revenue streams in planning and reporting. Corporate social responsibility professionals can help their own companies and their investors fully value their environmental, social, and gov-

ernance programmes by understanding how various stakeholders see them and by learning to communicate their value. — Contributors to the development of this survey include Sheila Bonini, a consultant in McKinsey’s Silicon Valley office; Noémie Brun, a consultant in the Brussels office; and Michelle Rosenthal, a consultant in the New Jersey office.


:;(:<=6 *+,(-(.'O

#3@7*01&*+839)&3+A01&/*BB,@,0)&-)3F,?A4/,@% of respondents1

CFOs, n = 84

Investment professionals, n = 154

Extent to which the impact of companies’ environmental, social, and/or governance programmes on stakeholders is included in valuations (asked of investment professionals)or tracked by company (asked of CFOs) Current employees

Prospective employees

Current customers 52

18 Not at all

9 45

34

44

34

33

To a great extent

Not at all

Somewhat

Entirely

Regulators/other influencers

23 10

32

37

50

23

10

48 24 27

37 45

27 3

4 25

26

Investors

26

24

43

27

12

40

12

3 13

46

34

36

4

16

To a great extent

22 48

5

17

24

13

3

Nongovernmental organisations

37

56

43

5

12 10

10

28

25

0

Communities in which organisation is located

38

27

58

48

7

Media

9

39

13

37 4

Entirely

14 10

11

Somewhat

Prospective customers

3 17

13

Respondents who answered “don’t know” are not shown

1

Copyright © 2010 McKinsey & Company. All rights reserved. *This survey was in the field in December 2008 and includes responses from 238 CFOs, investment professionals, and finance executives from the full range of industries and regions. The survey was conducted in conjunction with Boston Col-

lege’s Centre for Corporate Citizenship, along with a survey of 127 corporate social responsibility professionals and socially responsible institutional investors. The institutional investors are members of the Sustainable Investment Research Analysts Network, who are dedicated to advancing the concept, practice, and growth of socially and environmentally responsible investing.

**Boston College defines “corporate social responsibility professionals” as senior corporate executives with dedicated responsibilities for managing corporate citizenship issues and staff in the areas of community and public affairs, communications and reporting, and environmental health and safety.


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CORPORATE GREENING: GOOD FOR THE SOUL, GOOD FOR BOTTOMLINE? Greening has matured well beyond its early concentration on saving paper and reducing corporate travel. In fact, documented savings from these practices serve as the impetus for moving forward. BY SCOTT LADD

PHOTOS.COM

I

t is not easy being “green” — on Sesame Street, Main Street or Wall Street. No one appreciates that more than corporate executives striving to balance environmental demands with a healthy revenue stream while also building investor interest. For many in corporate leadership, achieving that kind of equilibrium over the years has often been a vexing task. Along the way, however, the business community is learning a valuable lesson. Greening offices, production plants, manufacturing processes and supply chains is beginning to translate into a greener bottom line. The business case for environmental responsibility, experts say, is no longer in dispute. Greening has matured well beyond its early concentration on saving paper, cutting electric bills and reducing corporate travel. Not that these practices have stopped. In fact, documented savings from these practices serve as the impetus for moving forward. Increasingly, financial executives are weaving 26

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environmentally sound and cost-cutting operating procedures into their overall business plans— not only for their own employees,products and facilities, but insisting that suppliers and trade partners meet the same eco-standards they are imposing at home. They represent the companies most willing to dive into the deep end of the sustainability pool, confident they will come out in better shape. Certainly many executives, especially those in industries where going green is a much harder road, are finding the transition more difficult. But doing the so-called

“right thing”and making it work financially is an idea whose time, most would agree, has arrived. And it is reshaping the business community.

IS ‘GREENING’ A REVOLUTION OR EVOLUTION? Sustainability initiatives have been a ‘work in progress’ for a decade or so, marked initially by corporate resistance, lack of applicable data and concern from investors as to its long-term value. Some would characterise it as a revolution in the way businesses operate; others

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aren’t quite that convinced, preferring to describe it as an evolutionary process. But one thing is certain: The economic melt-down of the past two years has refocused the energies of investors and the companies they support. For occupants of the C-suite, regardless of company size and scope, the issue inevitably comes down to two questions: Does greening work for their businesses? And,what impact does it have on enterprise profitability? Most American businesses have embraced social and environmental responsibility as intrinsically valuable to their budgetary considerations — in many cases because the original concerns and trepidation about adapting such measures while continuing to work to maintain a strong revenue stream has eased. The demands of a changing marketplace and the promise

B+#8*1;4*8#8*+6+#-54*8# C+#./#.C./,1/-+/8#12# 965/359:+0#52#8*+#-.67+8# 8;6/+,#,1D/E#C;8#5/#2.38# 8*+#1991058+#133;66+,># !2#)AF#G+/=561/-+/8.:E# 0135.:#./,#41=+6/./3+H# 50#5-9168./8#81#I1;E#8*+/# I1;J::#25/,#.#D.I#81# -.7+#58#D167> — HANK BOERNER, CHIEF EXECUTIVE, GOVERNANCE AND ACCOUNTABILITY INSTITUTE

OCTOBER 2010

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)*&+%,!-)!$ of tighter regulation make corporate greening an imperative and no longer simply an intriguing concept. “A lot of it is people perceiving barriers that aren’t there,” says Todd Larsen, director of corporate responsibility programmes for Green America, an organisation that provides economic strategies and tools to businesses that seek outside counsel in helping them go green. “It is not always a question of whether it is too costly to go green. The burden of proof of doing something new can be a challenge to any company.” Michael Muyot, the founder and president of CRD Analytics, which maintains the Global Sustainability50 Index that highlights best environmental, social and governance practices, says the growth in ecofriendly businesses was inevitable. “A lot of these companies came kicking and screaming to it, but they had to,” he says. “Since they’ve gotten through that process, they have found it a benefit. They have all found ways to make money from it.” Jeffrey Hollender, the chief executive of Seventh Generation — an environmentally friendly cleaning and personal-care products company with sales of more than $100 million annually — says a growing corporate reliance on meaningful environmental standards is good sense. “You generally make more money when you do the right thing. Pollution is waste, waste represents inefficiency and inefficiency is simply not profitable. It is that simple,” Hollender said in an interview on Kleercut. net, a web site for environmental activists. Muyot says he believes the recent “Great Recession” is compelling investors to ask more questions and be more careful about their investments. “The overall crisis had a massive impact,” he says. “Investors started saying ‘we want more transparency, how did we miss these risks?’ It became clear we need to go beyond the balance sheet.” That attitude pervades much of the discussion about greening and financial investment, internally and externally. 28

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&#:18#12#8*+0+# 31-9./5+0#3.-+# 75375/4#./,# 036+.-5/4#81#58E# C;8#8*+I#*.,#81># #A5/3+#8*+I#*.=+# 4188+/#8*61;4*# 8*.8#9613+00#8*+I# *.=+#.::#21;/,#58#81# C+#.#C+/+258> — MICHALE MUYOT, FOUNDER AND PRESIDENT OF CRD ANALYTICS

Despite pressures to curtail business costs and staffing, companies generally have kept to their environmental path. Hank Boerner, chief executive of the Governance and Accountability Institute in New York, was one who worried that the demands of an unforgiving economy might undercut such efforts. “We thought there might be an abandonment of principles if the market turned down, but in fact the opposite occurred,” he says. “If ESG (environmental, social and governance responsibility) is important to you, then you will find a way to make it work.”

MEASURING PROGRESS Over the past two years, several aspects of the sustainability movement have advanced —– the number of measurement tools that detail steps companies are taking to become more environmentally sensitive and the number of executives assigned expressly to direct corporate greening efforts, to name

two. Investors have responded to such sustainability indexes, as they provide a much clearer examination of successful programmes, where they shine and where they may fall short. Among other measurement techniques, the Green Confidence Index is one that solicits information on companies doing more to build sustainability. A representative monthly snap shot of more than 2,500 Americans on their attitudes about environmental responsibility, the index is a joint venture of three information-services companies. Many executives have reacted to growing public pressure by establishing distinct business units to assess waste and act to reduce cost, not only to the environment but to shareholders and within the company itself. A growing number of companies have added a C-suite-level executive dedicated to sustainability and determining how it can generate income for the company and investors. Ten years ago, the position of chief sustainability officer was rare. While more popular today, it


)*&+%,!-)!$ is still not commonplace. Choosing a CSO is not an uncomplicated process. The Hudson GainCorp., a consulting firm that tracks executive trends, found last year that of 1,200 companies examined, only 200 or so had positions dedicated to sustainability. The issue for many executives is how to find senior leaders who bring specific knowledge, higher vision and hands-on experience to the development and management of greening programmes. Often, they would select leaders who had excelled in other facets of the business. “There’s a danger in creating a chief sustainability officer, because it places all the responsibility of that issue on to one person,” Michael Kobori of Levi Strauss & Co. told the Los Angeles Times in December. Kobori, the company’s vice president for social and environmental sustainability, added that “we are successful when sustainability gets embedded in all the roles in the company.” With the US economy struggling

to recover and placing a premium on smart, cost-efficient strategies, experts say companies that can aggressively cut costs and limit their carbon footprints through greening are best positioned to succeed in the years ahead. Indices that reflect carbon-reduction efforts are on the rise. Standard & Poors and the International Finance Corporation recently joined ranks to create a carbon efficiency index for global companies,measuring the performance of about800 stocks in 21 markets. The S&P/IFC Carbon Efficient Index, it is estimated, could encourage more than $1 billion of investment globally in companies that reduce their carbon footprints over the next three years, IFS predicted at the time of the launch. The association also believes it could serve to stimulate competition among companies in emerging markets. The global index came on the heels of a United States carbon index, which also grades companies on how efficiently they were decreasing their output of pollutants.

B+#-.66I#+/=561/ -+/8.:#9+6216-./3+ #D58*#+31/1-53# =.:;+>#B+#.:D.I0# .07E#KD5::#8*50#6+0;:8# 5/#.#-16+#25/./35.::I# 0;08.5/#.C:+# 31-9./ILJ#B+#D./8# 81#-.7+#+=+6I#8*5/4# D+#,1#+31/1-53.::I# M;08525+,># — AL KABUS, PRESIDENT, THE MOHAWK GROUP

CREAM OF THE CROP The examples cited in most of these reports and listings of successful ESG initiatives include some of the nation’s biggest companies. They understand that not paying attention to environmental concerns, altruistic motives aside, can dissuade a more enlightened and focused investor pool from investing in their companies. Wal-Mart Stores Inc., for one, has aggressively initiated and promoted sustainability not only in its own stores and production facilities, but in the processes of its U.S. and global suppliers. In July, it launched a Sustainability Index, designed to create more transparency in its supply chains and afford consumers enough product information to make enlightened choices. The company is beginning to survey its tens of thousands of global suppliers on issues of energy and climate,the resources they use and how green their materials are. U.S. suppliers for Wal-Mart and its subsidiary Sam’s Club were given a raft of questions over the summer that went to the heart of their production processes and how environmentally sound they were —had the supplies measured greenhouse gas emissions, the levels of emissions and if they were setting specific targets for emissions reductions, for instance. Suppliers were also questioned about waste levels and water use, and what reduction goals they had set in those areas. Wal-Mart officials say they intend to use the results to reward suppliers taking concrete steps toward reaching sustainability objectives. On its end, Wal-Mart has announced plans to reduce greenhouse gas emissions by 20 percent at its current facilities by 2012, and cut back by five percent the amount of its packaging by 2013. As part of a company-wide sustainability plan, Wal-Mart says it is committed to ultimately being fully powered by renewable energy sources. Larsen, of Green America, notes that companies such as Wal-Mart —depending as it does on suppliers and factories worldwide that don’t necessarily subscribe to OCTOBER 2010

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)*&+%,!-)!$ strict greening standards — may find it difficult to be seen as a thoroughly green entity. “Can they ever been seen as a green company?” he asks. “That’s the challenge. Their stores here [in the U.S.] are arguably green, but the rest is unknowable.” In 2007, Procter & Gamble Co. — another company consistently cited in independent surveys for its progress — set five objectives to achieve broad sustainability within five years. One is to develop and market at least $50 billion in cumulative sales of product regarded as environmentally sound by the end of 2012; the company says it is more than 25 percent toward that goal. In addition, P&G says it is committed to a 20-percent reduction in energy consumption, waste disposal from its plants, water consumption and carbon emissions over the same period. Newsweek magazine has joined with noted environmental researchers such as KLD Research & Analytics, Trucost,and CorporateRegister.com to rank the 500 largest U.S. companies based on environmental performance, policies and reputation. In its 2009 Green Rankings, technology companies fared best, with Hewlett-Packard Inc. and Dell Inc. named as the two best U.S.-based firms for innovative sustainability programming. Intel Corp., which placed fourth overall in the rankings, was cited for an initiative that ties annual employee bonuses directly to the attainment of specific greening objectives. Others are relying more heavily on alternative energy sources to keep costs down and facilities more environmentally friendly. Boerner notes that Google is creating one the largest solar installations in the US to power its California headquarters. Concern with water over-use, pollution and recycling is driving many of the newest greening initiatives. B. Braun Medical Inc. in the US makes more than 2,000 medical products and, like many manufacturers, faces obstacles in maximising production efficiency and maintaining a strong environmental presence. It created an all-employee 30

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!8#50#085::#.#:1/4#D.I# 261-#C+5/4#2;::I#5/8+ 46.8+,#5/81#C;05/+00# 19+6.851/0>#(*+6+J0# .#:18#12#461;/,#81# 31=+6#C+8D++/#/1D# ./,#8*+/> — ERIC OLSON, AUTHOR & SENIOR MANAGER, ERNST & YOUNG LLP

“Green Team” that crafted a company agenda with initiatives such as reusing waste water from its manufacturing plant — saving an estimated 4 million gallons of water annually — and aggressively recycling plastic waste. Larsen notes that some companies are unusually involved in the environmental and social quality of the sources of their ingredients and products. For instance, Aveda, the hair and skin care products company, wants to know who is producing the raw ingredients, the labour conditions in place at the supplier facilities and whether the workers are treated well. The company is also careful about its advertising — its executives want the magazines in which they advertise to use recycled paper, Larson says.

FACING NEW CHALLENGES Corporations involved in heavy manufacturing industries can find it comparatively difficult to meet the demands of investors and regulators, as well as their own greening standards. But many believe they are making positive strides. The Mohawk Group, a global commercial carpet maker, is one of those large manufacturers that has imple-

mented major changes in its production process, while continuing to investigate updating its procedures to reduce waste. Mohawk’s president, Al Kabus, says the business rationale for imposing sweeping changes is persuasive. “We marry environmental performance with economic value,” Kabus says of the Calhoun-based company. “We always ask: ‘Will this result in [a] more financially sustainable company?’ We want to make everything we do economically justified.” In terms of being green enough, Kabus doesn’t believe his industry is there yet. “More needs to be done in the area of grey water processing, heat generation, filtering dangerous air particulates and adding more earthfriendly materials to the final product,” he says. And, like many manufacturers, Mohawk has been hobbled by the poor economy. “That has made all of us do more with less. In a lot of ways, our spending has not slowed down on process improvement,” he says. “We are basically taking processes and making them more efficient.” Gree nw ork s, t he co mpa ny’s 40,000-square-foot recycling facility located in Chatsworth., is the latest step toward Mohawk realizing that goal of


)*&+%,!-)!$ mass recycling. The facility recovers about 90 per cent of all material used in carpeting products. Some of it is rechannelled into new carpeting, Kabus says. Some may wind up as liner in new auto mobiles or as circuit housing in computers. While American companies, by and large, have done a competent job collectively in growing their greening operations, they still tend to lag behind global competitors, particularly in Western Europe, in effectively marketing them as business imperatives. “American companies generally have not done as good a job in communicating their approach to the carbon footprint,” Boerner says. A more complicated picture emerges of foreign businesses dedicated to improving their carbon footprint, but facing difficult obstacles in doing so. China and other large, rapidly developing markets, are doing a great deal from a sustainability standpoint, but are frequently saddled with technology that is old, inefficient, outdated and not environmentally friendly. US corporations, especially in the consumer goods industries, face challenges in selecting global business partners to make or process products they in turn sell to American consumers who expect the quality of the product to be high, and meet their personal environmental standards. Apparel companies, for instance, contract much of their work without completely understanding the quality of the work they contract. They risk not only the purchase of inferior goods, perhaps prepared in facilities that fail to meet minimum greening standards, but also a backlash from consumers. That is why oversight by Wal-Mart and other major US corporations through sustainability indices that exert pressure on foreign suppliers might one day prove the best means of policing suppliers. If American businesses show little patience for inferior supplies and goods, and threaten a cut-off, that will either force the supplier to improve quality or risk losing a big chunk of their income. But not enough companies have adopt-

ed tough standards with their suppliers, a situation that sustainability advocates say has to improve.

INVESTMENT IMPACT, EMERGING TRENDS The full range of sustainability proposals enacted by US businesses has become an important factor in how people invest their money. Greening has had a beneficial effect on business growth and investment, industry

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observers agree. Boerner believes the market is becoming much more selective about where it parks its investment capital — in part driven by a public wariness over company policies that invite excessive risk and don’t reflect enough cost-cutting ingenuity. Corporate emphasis on ESG factors, when it comes to appealing to stakeholders, “is exploding in popularity,” he says. For years, European investors have widely placed their faith in companies that champion reduced carbon output, for instance. That dovetails with the global rise in greening measurement tools. “When you deal with investors, you are more data driven,” he says. “American companies are still not there.” Larsen describes the American investing public as “becoming more discerning.” They even break down into shades of green, he notes: “True greens are the most demanding, lighter greens want meaningful change but are not as demanding.” Consumers, he says, tend to be suspicious of claims that a company is doing all it can to be responsive environmentally without the information to back it up. But those that document their efforts tend to invite increasing investment. And studies indicate the greener the company, the better its performance tends to be over time. “It is really a brand new world when it comes to investing,” says CRD’s Muyot. “I think there’s a revolution going on in investing. People are taking more control of their own finances, of their own companies, of their advisers and wealth managers — how are you going to protect my money going forward?” To experts in greening and sustainability, the next decade is likely to present much more in the way of innovation, strategic advancement and greater adherence to environmental and social planning as an integral piece of a company’s business philosophy and planning. Some companies, such as General Electric Co. through its “Ecomagination” division, have found the means to turn sustainability into a profit-generating business. That undertaking and OCTOBER 2010

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)*&+%,!-)!$ others, such as IBM Corp.’s “Big Green Innovations,” were created not only to bring about environmental improvements, but to supplement existing business objectives and become distinct lines of business. There is also movement on the regulatory front that recognises changes in the business environmental landscape. The US Securities and Exchange Commission in January voted to publish interpretive guidance on climate change disclosures,which could provide impetus to both corporate and investment interests by encouraging companies to consider climate change disclosure as a material issue covered by SEC rules. With the SEC’s actions and the potential for greater federal regulation in the area of greenhouse gas emissions being championed by the current administration, corporate executives must anticipate more intensive scrutiny of their

greening initiatives, programmes and results. Industry experts say they should be opportunistic in pursuing greening incentives as they materialise. Today, more companies are producing sustainability reports for shareholder consumption, and more are having them audited as part of that reporting process to verify accuracy. But more still needs to be done,experts say. “It is still a long way from being fully integrated into business operations,” says Eric Olson, an author specialising in corporate greening practices and a senior manager with Ernst & Young LLP. Olson believes that greening will finally reach its potential when it becomes fully embedded in company business plans — when its carbon foot-print is just another measure of corporate performance, along with growth and profitability. Over time, he says, branding of environmental process should become more common

place. Eventually, consumers should have the opportunity to make choices based in environmental labelling, akin to the nutritional labels used today. But, he cautions: “There’s a lot of ground to cover between now and then.” SCOTT L ADD IS A NEW JERSEY-BASED COMMUNICATIONS CONSULTANT WHO WRITES ABOUT THE FINANCIAL SERVICES INDUSTRY AND ISSUES AFFECTING CORPORATE GOVERNANCE AND SUSTAINABILITY.

financial executive | march 2010© 2010 Financial Executives International | www.financialexecutives.org


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SPEND GOVERNANCE AUTOMATION IS THE KEY While continuous monitoring and having systems in place is good, companies need to have more electronic and automated processes in place to effectively check fraud. JAYANT DWIVEDY

S

pend Governance is a key pillar in the corporate governance framework. This is one area that involves heterogeneous categories of expenses and also, in most cases, a diversified set of beneficiaries. The geographies, complexities of the business and the changes add to the problem. An unattended problem invariably becomes a risk. It is the onus of the leadership team to ensure that a risk management model is in place to detect and prevent spend frauds. It is also the responsibility of the same team to communicate the philosophy and the corporate spend model of the organisation, both externally and internally. Simple and well-stated messages go a long way in governing and in having the right culture to sustain improvements. The translation of the corporate model to operational processes is a difficult task. The processes then need to be practical, business friendly, integrated and repeatable.

PHOTOS.COM

REPEATABLE PROCESSES Repeatable processes are best achieved through electronic systems and automation. They however, need to be flexible and configurable to support the entire organisation and also take into account future changes. Organisations often go wrong when they believe from a central perspective that adequate controls exist and transactions are automated. The problem can be worse when the risks and options have not been debated and “out-of-the-box” ideas have not been brought in. 34

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The integrity and ethical values of the enterprise as a whole are influenced by each employee. The top management of an organisation sets the standards and in this way influences employees in general, to follow ethical means. Protecting and empowering the organisation is a management function. Risk workshops with external facilitation and cross-functional representation are good starting points. However, in my experience, such exercises done by internal staff that were given time and space (to use data, questionnaires, specialist software etc.) have shown positive results. The management decision on what the acceptable level of risk in spend governance should be, is based on the risk appetite of the organisation (e.g. this should determine the electronic delegation matrix). However, there should be no room for “fraud risk appetite”.

WHISTLE BLOWING Whistle-blowing is an acceptable practice in a number of organisations. This allows employees, vendors, customers, suppliers and business partners to express their doubts, suspicions and comments on integrity to be submitted to a committee/ top management. While this is an agreed best practice, the success of the programme is still dependent on the culture of the organisation and may give varied results. In these circumstances the effectiveness of an electronic system being your “whistle blower” could be examined and applied.


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!*#+,#*-.#/01,#/2# *-.#3.45.6,-+7# *.48#*/#.0,16.# *-4*#4#6+,9#840: 4;.8.0*#8/5.3# +,#+0#734<.#*/# 5.*.<*#405#76.: =.0*#,7.05# 26415,># FROM MANUAL TO AUTOMATION A team of “soldiers” should keep a check on manual operations that can be automated - even if most divisions have already become networked. There would invariably be areas where work would be going on through paper formats and spread sheets and where an integrated spend management solution will become necessary.

KEY ISSUES The Board Directive: It often states that the person who is authorised to buy or acquire goods and services, carries the responsibility to ensure that all risks in each phase of the spend process receives due consideration. This should not absolve the management, finance function or any other cross-functional representative who influenced the acquisition or was a part of the transac-

tions flow, directly or indirectly. It is a collective responsibility. Only effective risk management that is applied to the enterprise in its entirety, across all levels, functions and activities, can ensure fraud control. Is your current electronic system doing that? Probably no. That is where the risk resides. Manual controls: Many organisations make the mistake of managing risk through a set of people in their role as controllers, auditors and “super cops”. OCTOBER 2010

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'%)!"+.&'.# This has a limited effect both in terms of coverage and duration. The reasons being: Monotony of the task Availability of information (scattered, requiring manual compilation) Familiar faces: people learn how to deal with them When they are looking at a particular area, they are not simultaneously covering what could be critical at that point of time in another part of the organisation People move on – exits, transfers, promotions Not available on account of meetings, training programmes, leave, travel etc. The “super cops” are after all human! Leaving things to chance: While it is to be believed that the directors understand that they are responsible for implementing an effective and ongoing process of risk assessment and for measuring the potential impact of risk on the enterprise, different surveys have pointed towards the fact that frauds in enterprises are discovered by chance. A post incident investigation invariably reveals that control systems (many of them manual) appear to be in place but are ineffective since the management has unknowingly overlooked the controls or has colluded in circumventing them. Capital Allocation for fraud control: Fraud risk financing is a vital step in fraud risk management. It is important to consider the cost and advan-

Steps

Typical situations in most organisations

Recommendations

1) Spend philosophy and model

No consistent communication internally and externally

1.Use company home page, induction programmes, vendor forums, training sessions, company newsletters/ hand books and visual displays on the wall to speak about the philosophy/ model 2.Invest in systems that enable eSpend Governance

2) Organisational processes and policies

Not operational; not available at “grass root”

Use spend management solutions that bring in best practices from the industry and other verticals; provide user friendly work-flows to employees that ensure processes/ policy deployment

3) Electronic systems and automation of transactions; Control mechanism

Limited licenses of procurement/ financial systems; many of the process steps still manual across the organisation

Use bridging technologies to go beyond ERP and electronically connect all who influence or transact spend; minimise paper work; have and automated Spend Management Framework

4) On-line reporting and continuous improvement

Month end reports (post-mortem); Reports not granular enough to detect fraud

Granular online reports that are used extensively to run the business in a compliant fashion; auto generated “red flags”

tages associated with managing the risks. The director responsible may use return-on-investment criteria to evaluate the financial acceptability of the control measures. Monitoring the fraud risk management process: The implementation and operation of the risk management system always needs attention. Technology solutions demand a fair amount of training and unlearning. Continuous internal evaluations and separate external interventions are necessary to keep the system sharp. In summary, an agreed spend philosophy that is well publicised is absolutely necessary. Best practices need

SPEND PHILOSOPHY & MODEL; AGREE & PUBLICISE REPORTING & CONTINUOUS IMPROVEMENT

SPEND MANAGEMENT SOLUTION MAXINISE ELECTRONIC TRANSACTIONS

36

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PROCESSES & POLICIES; AVAILABLE ORGANISATION WIDE

to be brought in through effective systems that enable good processes and policy deployment at the “grass-root level”. Systematic elimination of manual operations using automation/ low cost automation is an absolute necessity. This enables organisations to maximise their electronic transactions and thereby compliance. Intelligence reports can be a good thermometer for fraud control. At the same time system generated “red flags” can effectively sound out the management on potential fraud. A system that can be easily configured to cope with organisational changes, business requirements and the regulatory landscape and also ensure granular spend governance is the right way forward. —BAZ is the flagship product of Empronc Solutions and is a very effective Enterprise solution for Spend Management and Governance.

JAYANT DWIVEDY is CEO, Empronc Solutions. He can be contacted at jayant. dwivedy@empronc.com


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-3<<=>> On the back of a good year when his firm saw an upswing in its fortunes, Charanjit Attra, EVP and CFO at ICICI Securities talks about the challenges ahead and how cricket and music help him focus on his job. DHIMAN CHATTOPADHYAY

38

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AT 20, CHARANJIT ATTRA, then a sprightly young club-level cricketer and a budding guitarist, realised that playing for the Mumbai cricket team would probably remain a pipe-dream for him, with a certain Sachin Tendulkar and other younger men already regulars in the rather powerful Ranji side. Nor would (he reckoned) he achieve the same fame as that man they called Mick Jagger, if he continued to strum his guitar. The scion of a ‘musical’ family (his father is a well-known music composer) therefore decided to pursue his ‘third passion’ – accounting. “I had just passed my B.Com from Narsee Monjee College of Commerce and, with nothing better at hand, joined Blue Dart, bringing home a princely sum of Rs 1300 every month. I was happy with life, till my father politely reminded me that such a salary would not be enough to sustain my own needs, let alone run a family. That is when realisation dawned, better sense prevailed and encouraged and egged on by my friends, I started studying to become a CA,” recalls Attra. That was 1991. Nearly two decades later, as


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/%&'0-#+'0 BIG BREAK When I got selected as a manager in the finance team of ICICI Bank Ltd. THE FIRST JOB Even before joining Blue Dart, I worked with Anupam Chemical and Colours as a part-time accounts executive. A HA! MOMENT I had promised my parents that I would send them on an American holiday with my own money. Seeing how happy they were after the holiday was the best moment of my life. LITTLE KNOWN FACT I was a decent cricketer in my college days and also play the violin

JITEN GANDHI

CURRENT DREAM I wish to see I-Sec become an Asian giant, as India becomes a global economic hub

OCTOBER 2010

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we sit across each other in his plush office at Mumbai’s Churchgate area sipping a cool drink on a particularly warm October morning, the CFO of ICICI Securities admits that life has been good to him, even if challenging at times. Today, the chartered accountant says finding accounting solutions and tackling financial problems excite him almost as much as one of his ‘express’ bouncers would, back in the early 90s. “It is the same thrill that runs down your spine,” he laughs. His track record over the past two years at I-Sec, India’s largest equity house, is testimony to his ability as a team player who can unite diverse talents and mould them into a well-knit unit. Having seen out the downturn and the introduction of tougher norms for investment banks, I-Sec has seen a major turnaround under his financial leadership, showing a PAT of Rs 122 crores in 2009-10 – a huge jump from the Rs 4 crores PAT in the previous fiscal. As executive VP and CFO his role today includes all strategic financial activities, business planning, forecasting and analysis, setting up the internal control framework and management of all operating funds containing working capital of the company. It is not just his financial skills however, that make Attra popular with his colleagues. “One of his key achievements here has been to unite people from different teams (another arm of ICICI merged with I-Sec in 2008), create a uniform database and accounting system and most importantly, to make the entire team come together and work as one. There were insecurities and fears of job loss when the merger happened and then the slowdown hit home. Charanjit tackled the challenges with amazing dexterity. His man-management skills and the fact that he is always accessible, make him effective, just as his financial skills help the bottom line grow,” says his colleague Swapna Bhandarkar, an assistant vice president at I-Sec. Attra’s knowledge of banking is deep and he is an expert of IFRS norms – qualities which he says he picked up early in his career as a chartered accountant. Indeed, Attra spent his first five years on the field (1995-1999) with the CA firm Shankar Aiyer and Co mostly auditing accounts for banks. His experience with knowledge of how banks 40

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$*1#2"%-'.

!%(30

NEWSPAPER Economic Times MAGAZINE None, in particular, MUSIC Surendra Singh, my father. His compositions are amazing MOVIE “Jaane Bhi Do Yaaro” BOOK “The Secret” by Rhonda Byrne

ON THE BALL: ATTRA HOPES LESSONS FROM THE DOWNTURN WILL HELP HIM TAKE I-SEC AHEAD

QUOTE “When the going gets tough, the tough get going” HOLIDAY DESTINATION Orlando, USA

and their various arms function, was further enhanced when in 1999 he took up an offer to work with KPMG, working on and auditing the accounts of banks such as ICICI, Standard Chartered and Deutsch Bank. The stint at KPMG however, was short, thanks to a project that ironically enough KPMG sent him to. “It was early in 2001 when I was assigned to audit the accounts of ICICI. At the


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“2008-09 was one of the most challenging times for the entire industry, but today I remember that phase more for the key lessons that we learnt.” end of the auditing exercise when I met the CFO of the bank, he chatted with me for a while and then sprung a surprise by asking ‘Will you work for us at ICICI?’. Needless to say I accepted. But if I thought it would be an easy first few months, I was in for a shock, for within a month of my joining as a manager in the finance team, there was a reverse merger!” says Attra as we sip our coffee. Since 2001 however, there has been no looking back and at ICICI Attra has gone from strength to strength, spending 6 years with the banking arm before being elevated to the position of CFO at I-Sec. As we discuss Attra’s career path, it becomes evident that one cricketing quality, ‘sense of timing’ has been his constant companion. So if he got his KPMG job because he happened to be having lunch with a senior partner at V Shankar Aiyer on a day the latter had come to know of a vacancy at KPMG, then he landed the ICICI offer because he met the CFO just when there was an opening at his level. “Even the I-Sec posting was a matter of being at the right place at the right time,” he quips. How so? Attra loves telling stories and he launches into this one with gusto. “In April 2008, we were discussing a possible IPO for I-Sec. Remember those were boom times. I was attending the meeting and when someone suggested that we should look for a CFO from within the ICICI family itself, I offered to take up the challenge. The management debated the offer and agreed that

I probably had the wherewithal to handle the job,” he says. The fact that he had played an important role during the merger of ICICI Ltd and ICICI Bank and the public issues of the bank in the previous five years, must have swung the decision in his favour. Little did he know though, that within months of taking over, he would have to use not just all his financial skills but also delve deep into his past to bring out traits picked up as a youngster – to follow one’s gut instincts like a sportsperson and to stay calm at all times. “2008-09 was one of the most challenging times for the entire industry, but today I remember that phase more for the key lessons we learnt. Our revenues are extremely market linked and they fell heavily when the downturn hit. Cost-cutting was my biggest challenge. We spent days and weeks re-negotiating rates with vendors and finding ways to maximise productivity while keeping costs in check,” recalls Attra as he plays with a shiny new cricket ball that (he tells us) has been a permanent fixture on his desk for the last seven years, an object which makes him relax. A ‘fast’ bowler in his younger days, the 39-year-old is now preparing to take on challenges much harder than figuring out how to bowl out an opening batsman. “2011 promises to be a big year for us with the Direct Tax Code (DTC), the Goods and Services Tax (GST) and the new International Financial Reporting Standards (IFRS) norms hanging over our head. We do need more

clarity. However, my job will be to prepare myself and my colleagues to quickly adapt to these new norms once they come into force. Another thing that has me thinking hard these days is how to manage growth in view of the proposed government guidelines which do not allow a daily put-and-call option,” says Attra. The challenges are many but after two decades of tackling crises and challenges, Attra is game for whatever is thrown his way. Interestingly enough, despite being an IFRS expert, a trained auditor and now CFO, Attra doesn’t consider himself much of a number cruncher. “That is part of my job. But what really excites me is when I am given a problem and asked to solve it. Nothing compares to working as a team and coming out with an effective solution to a problem,” he says in earnest. This is not to say that he eats, sleeps and thinks finance at all times. An avid music lover he still enjoys strumming his guitar though he says he’d rather not sing. “My father tells me I am an atrocious singer, so I stick to playing instruments,” he laughs. He also plays the occasional game of cricket and when he gets a few days off from work, Attra enjoys travelling and seeing the world with his family. These passions and hobbies however, have had to take a back-seat for the time being as Attra prepares for his big task, taking I-Sec, already India’s largest equity house, to the next level – hoping to match the continent’s biggest.

OCTOBER 2010

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PHOTOS.COM

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ne Billion Dollars. That is what crystal ball gazers expect the size of the nascent cloud computing market in India to be by 2014. While the billion dollar figure may sound disconcerting to those heading the finance functions of their firms, since this will mean a not so insignificant re-organisation of the annual budget, studies and surveys carried out by at least three independent agencies seem to confirm that Chief Financial Officers (CFO) and Chief Information Officers (CIO) of over 70 per cent of Indian companies are keen to see this new technology being adopted. Surveys carried out by Ernst & Young, Gartner and Zinnove Management Consulting over the past two months, have come to more or less the same conclusion: that an overwhelming majority of CIOs, (in many cases, after receiving the support of their CEO or CFO) have given a thumbs up to the platform where software applications and related resources can be shared online. Interestingly, the surveys also come to another similar conclusion - that cost is not the decisive factor for adoption of cloud computing in a company. “India’s cloud computing market is expected to be around USD 1 billion over the next five years,” a spokesperson for consulting firm Zinnov Management said, commenting on the study findings. The cloud computing platform is expected to mainly benefit enterprise SMB (small and medium business), SOHO (small office, home office) and consumer segments. The results of an unrelated survey, carried out this September by Ernst & Young, agreed that over 72 per cent of India’s

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IT infrastructure companies are set to adopt cloud computing in a big way over the next 2-3 years and that at least 81 per cent of CIOs were already familiar with cloud computing concepts. The study titled “Cloud adoption in India - Infrastructure as a Service (IaaS)” is based on interviews with 50 CIOs and CFOs from leading SMB, enterprises and IaaS ecosystem players. According to Milan Sheth, Partner, Technology Advisory Practice, Ernst & Young, “We have seen significant interest in the potential of IaaS for the Indian market across industry segments. Virtualisation, often seen as the first step in a cloud strategy, has begun to be more widely implemented across data centres and this could contribute to a rapid implementation of IaaS in India.” “The ongoing impact of open source, the whole concept of IaaS meeting the cloud, will prove to be a major trend for cloud adoption in India. High awareness levels and the positive perception of cloud indicate a market that will see robust growth rates in the next two years,” Sheth added. While moving to a cloud computing platform will mean

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of Indian CIOs are familiar with cloud computing concepts.

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of Indian CFOs and CIOs cited data privacy and security issues as a concern area for their business while adopting cloud computing services

greater efficiency and accuracy in data storage and address security concerns, it will also obviously mean higher costs, at least in the short-run. A global survey published in August by Gartner Inc. noted that cloud-computing services consumed from external service providers (ESPs) are estimated to be 10.2 percent of the spending on external IT services for firms. From April through July 2010, Gartner surveyed 1,587 respondents in 40 countries to understand general IT spending trends and spending on key initiatives such as cloud computing. Participants were IT and general budget management professionals (CIOs, IT directors and CFOs.). Four hundred eighty-four respondents participated in the drill-down on cloud computing and were asked how their organisation’s current budget for cloud computing was distributed, as well as what their estimate was for spending next year. “The cloud market is evolving rapidly, with 39 percent of survey respondents worldwide indicating they allocated IT budget to cloud computing as a key

initiative for their organisation,” said Bob Igou, research director at Gartner. “One-third of the spending on cloud computing is a continuation from the previous budget year, a further third is incremental spending that is new to the budget, and 14 percent is spending that was diverted from a different budget category in the previous year.” More importantly for the CFOs, 46 per cent of respondents with budget allocated to cloud computing indicated they planned to increase the use of cloud services from external providers. Gartner analysts said there was a clear shift toward the “utility” approach for non-core services, and increased investment in core functionality, often closely aligned with competitive differentiation. With both the manufacturing and the service sectors doing relatively well in the previous two quarters and with India’s growth story on track, this is perhaps as good a time as any for CFOs across India Inc. to set aside a tidy sum in the budget for this purpose, so that they are part of the ‘cloud revolution’ when it finally does happen.

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consider the ability to focus on core activities and usage based payments as the top business benefits of cloud computing services

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of India CFOs and CIOs want to buy cloud services from data centre service providers and IT systems integrators

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of finance function heads said they allocated IT budget to cloud computing as a key initiative for their organisation

A third of this spending is incremental and is spending that was diverted from other areas

14 per cent OCTOBER 2010

CFO INDIA

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ortis Healthcare has been on an acquiring spree for some time now with one precise aim – to be the largest hospital chain not merely in India but in Asia. The company temporarily achieved its objective in March 2008 by acquiring a 24 per cent stake in Singapore’s Parkway Holdings before giving up the temptation to wrest majority control at Parkway and eventually selling off its 24 per cent as well. Yogesh Sareen, CFO, Fortis Healthcare Limited led Fortis’ financial team during the entire negotiation battle. He was also at the financial helm at Fortis when the company acquired 10 Wockhardt hospitals and then the Malar Hospital in 2009. But, it was none of the above that he would cite as the biggest challenge in his three- year stint.

THE CHALLENGE Sareen had joined Fortis at a time (2007) when the healthcare sector was witnessing an Information Technology upris44

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ing. “We were sure that if we managed to connect all our hospitals on a single software platform, it would usher in a new era where patients would be able to walk into any Fortis Hospital knowing that their medical records would be available to the doctors at the click of a mouse. Without Information Technology, the above results would remain a mere pipe dream,” admits Sareen. Luckily for the CFO, his dream project received enthusiastic backing from the top management at Fortis. “With the support of the IT department we set out to achieve what would, eventually, become the lifeline of the healthcare sector in the country,” he says, looking back.

THE PROCESS Setting up a software system that stores such complicated and cumbersome data was no easy task. Doubts about whether it would lead to job cuts had to be assuaged and setting up the software was a complicated, tedious

and expensive process. “We knew it would take time before we became truly health IT-savvy. We brought in HCL as an expert and set aside a large sum of money ($15 million) that would fuel the dream over the next five years,” Sareen says. The most popular technologies that are currently being used in hospitals around the world include e-prescribing, electronic clinical notes systems, electronic lab orders and results, electronic images available throughout hospital chains in multiple cities and electronic reminders for guidelinebased interventions. “We will, over time, bring in all these technologies to every Fortis hospital. But a beginning has been made. We have already achieved a centralised information system on every patient’s demographics, medical history, physician notes and follow-up orders. If any of our patients come back to us, we don’t have to waste time manually digging up records,” he says.


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(')*"&%+,#( NATURE Setting up health information technology infrastructure across all branches of the hospital TIME FACTOR On going TEAM The entire Finance and IT team

$15 PROJECT COST

MILLION

END RESULT Apart from the regular benefits such as enhanced quality of treatment, timely clinical information, reduction of medical errors and improvement in patient safety, Fortis has reported rise in the EBIDTA margins

THE LEARNING Sareen says there were quite a few take-aways from the excercise: being patient if things do not always move at a fast clip, being one. The fact Fortis has reported a rise in their EBIDTA margins in the last fiscal, has justified his and the

management’s support to the venture. “Being connected and electronic data sharing has helped us achieve optimum operational level. Now we can figure out the most favourable price point and maximise revenues per bed by tracking down cases when it isn’t important to

admit a patient,” he says. The lesson here too is clear: If a project is planned and executed well, the Returns on Investment (RoI) will surely justify the expense over a period of time.

OCTOBER 2010

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)**+ Look at failure as a source of information to improve your leadership skills and the fortunes of your company. DAVID LIM

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. wordpress.com, or david@ everestmotivation.com

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RECENTLY A NEWSPAPER reported the demise of a once-lauded business award called the Phoenix Award. The prize, at one-time administered by a well-known publishing group, recognised outstanding business people who had bounced back from failure. Like the mythical phoenix rising from the ashes, the business person awarded this accolade was praised for his resilience and ability to learn from failures. However, in recent years, the number of nominees fell to a point when it became unsustainable to continue with the annual award. The main reason given: Asians are reluctant to talk about their failures. So, when can failure be good? There are basically two kinds of failure: ‘smart’ ones and ‘dumb’ ones. Smart failures are where you did everything right, had a great team, but perhaps, like a mountaineer, were thwarted by a sudden shift in weather patterns, or an unexpected illness. A ‘ dumb’ failure is where your sloppiness and negligence contributed to the failure. In reality, though, the reasons for failure and success are often complex. It is the interpretation of failure that can determine how resilient you are at leading yourself through turbulent times. Assume, you had done remarkable planning, displayed great leader-


!"#$"%&'(78%!$ ship and had a great team. However, you met with a negative response from the client owing to some people making an irrational decision. What happens next determines your ability to bounce back and thrive as a leader. A ‘good’ failure is when you have not only done all that is possible within your competencies and commitment, but also one where you interpreted the failure appropriately. Studies and research by the University of Pennsylvania’s department of positive psychology shows that people who attributed failure to external factors, tended to do better after a failure. They were also those who did not see failure as all pervasive and alldestroying. They also saw failure as a temporary state. Conversely, those who took it personally, believed the failure struck at their core as worthy people, and that they would be totally and permanently devastated, did not have good outcomes post-failure. In short, the interpretation of failure was integral to how well you did thereafter. People who avoid taking calculated risks and thus the chance of failing ‘cleverly’, can seldom learn powerful lessons that failure can bring. I was recently delivering a leadership presentation to a European private equity firm in the south of France. One of the challenges faced by many of the teams involved in the long and arduous process of buying out a company, was that the seller sometimes made emotional and illogical decisions and would sell to another bidder. The team would then have to regroup and start all over again with another prospective target. The people who seemed to do best at this high-stakes financial game were those who only felt sorry for themselves for a limited period, and took it in their stride. In short, their reactions mirrored those subjects that Dr Martin Seligman from the University of Pennsylvania studied. Those able to bounce back from failure had these valuable attributes, and having successive failures, in my opinion, only made them even better at their game. After all, as Winston Churchill said: “ Success is the ability to go from one failure to another without any loss of enthusiasm” Edison was said to have failed thousands of times on his way to creating the first incandescent light bulb. A long time ago, I had the privilege of sitting next to an Israeli innovation expert on a long-distance flight. I asked him how he came up with all his good ideas and he said: “By coming up with a lot of stupid ones first.” So here, perhaps, is a practical guide in using failure effectively in your organisation: Calibrate the fear of failure by picking projects and goals where failure will not be fatal to the organisation, but where a great pay-off could be an outcome. In short, pick the

“The reasons for failure and success are often complex. It is the interpretation of failure that can determine how resilient you are at leading yourself through turbulent times.”

1

long-shot goals that may make the risk worthwhile, but with a modest downside. Fail quickly and early. Prior to my first Everest expedition, we chose stretch goals that would boost our learning curve prior to the Everest climb. In the three preceding years, we tackled peaks that were often a bit harder than our perceived abilities at the time. When we failed, we studied the failure, always taking the stance that failure provided valuable information. The quicker you fail, the more time you have to recover before your actual main event, or goal. Reward success, reward the ‘smart’ failures, and punish inaction. It is stultifying to have people always playing it safe when an organization has to take calculated risks to grow and succeed. And yet, many companies have compensation structures which punish failure, and reward inaction. Treat failure as information allowing you to succeed better the next time. Remove, as much as possible the emotional content of failure (read: fear, sadness, anger and resentment), and look at what were some of the best things you learned from it on a purely factual, objective basis. These could be certain structural weaknesses in your plan, unproductive behaviour of a team member, or even weak teamwork. Remove the emotions and you will be left with valuable data. If your organisation is not failing fast enough, you are not winning fast enough.

2

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OCTOBER 2010

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VOLKSWAGEN VENTO

The holy Vento! It is no head-turner. But courtesy great engineering, the Vento drives like a breeze, says Anoop Chugh IN THESE SINFUL times, there is nothing like a holy trip to cleanse the soul. To be honest, our road trip was not exactly meant to be one showing too much reverence. Nor was it for the purpose of fulfilling any religious obligations. It was quite simply a harmless way to rejuvenate the body and soul. Accompanying me on this hallowed journey was the new Volkswagen Vento. For the first time the Germans have engraved the entire word ‘Volkswagen’ on

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the boot along with a ‘VW’ badge. Now, at least, we will not get the spelling wrong!

Design The Mephistophelian NH58 was the litmus test for German engineering. The VW’s ‘affordable’ and ‘entry level’ sedan was upto it and how!

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VW launched the Vento in India with ‘world’s first talking newspaper’ advertisement in the leading dailies. A little box pasted on the print ad played a recorded message everytime somebody unfolded a newspaper.


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#"&$'(()* In the Vento, the unholy highway (till then only used to cranky and rickety trucks) witnessed the best dressed and designed piece of steel for some time. The rare arrangement of both form and content was enough to appease tarmacdeprived traffic on the way. Thank God (and designers), for a proper three-box sedan and not merely a boot added to a hatch. Ugly thoughts of the Dzire and the Indigo had started to distract me till I was enamoured by the elegantly designed headlights and the chrome accented front grille of the Vento. On the inside the Vento is actually the Polo. The dash is quite drab for a sedan that is competing directly with likes of machines that would substitute the most stunning women ever known to mankind – the City and the Linea. The Vento’s interiors can be best described as sophisticated, while the City’s interior are modish and in-tune with the times. But, nobody expects a VW to be a drop-dead gorgeous machine (unless you are a hippie and talking about the Beetle); instead the Vento is being praised for its engineering rather than gadgetry, looks or space. When compared to the Polo, the sedan sibling sits on a bigger wheelbase hence more space in the back row. The gadgetry like rear seat AC vents, the front seat lever (at the rear) and the rear reading light are a plus for a C segment sedan.

Performance The pick was between petrol and diesel; highline and trendline; automatic and manual. I picked diesel highline manual (for the lack of automatic option in the diesel variant). Even before putting my foot on the pedal I knew the diesel Vento would be a winner for VW especially since the Honda City is without a diesel variant, while the other players with diesel options don’t sell like hot cakes (the Verna, the Fiesta and the Linea). Also, you could buy a Vento diesel by

INTERIORS OF THE CAR AREN’T REALLY YOUR PERSONAL REFUGE FROM THE CARES OF THIS WORLD. THE EXCESSIVE USE OF BEIGE WOULD KEEP EXECUTIVES HAPPY.

+$&+(",# @DHIHF(CD?CFDGH Price

Rs 9,24,000

Engine

1598cc

Max Power

105bhp

Max Torque

250Nm

Gear Box

5speed MT

Wheelbase Ground clearence Top speed Cylinders Fuel efficiency Turning circle 0-100kmph

2552mm 168mm 185kmph four 16-18kmpl 5.4m 11.30sec

POSITIVES

Ride quality, comfort, pricing, fuel-efficiency, rear space, gadgetry NEGATIVES Noisy, dull interiors, looks when compared to the competition VERDICT The Vento diesel drives like the baby ‘Jetta’, yet priced like the grown-up ‘Polo’. The best of engineering 9-lakh can buy.

shelling the same amount of money as you would for a City petrol. What about the performance though? The first and long-lasting impression of the Vento was its sound. The sound of the diesel engine made me wonder if it really was an amplified Indigo. Once the windows were rolled up, the well-insulated cabin felt like the way a German car should feel – quiet as the Bahai temple. The engine sounded a little harsh at first but ran as smoothly as a knife running through butter. The 1.6 litre common rail direct injection engine delivers the same horsepower as its petrol counterpart but it is the sheer torque (250Nm@2000rpm) that makes the highway sprint gratifying and the city stroll flattering. Like any other automobile with a VW badge, the Vento is unwavering and absorbs any undulation with great grace. The gear stick brought a lot of joy too; not a pain-in-the-arm for sure. The ride quality is where the German beats the Japanese (Honda), the Italian (Fiat) and the American (Ford). I returned home like a gentle wind through a valley, only to realise Vento in Italian means wind. How apt!

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Samsung WB600 Samsung WB600 is the industry’s first digital compact camera to combine a 24mm ultra-wide angle lens with 15x super-zoom control. It incorporates a 14.2 megapixel CCD image sensor that adopts a point and shoot mechanism. Price: Rs 19,900

The New Temptation

AstroStar Laser Cosmos Light

HTC Desire strikes you like lightning. You just cannot slow the phone down THE HTC DESIRE is a brilliant example of the current-generation hand-held technology. Nothing is perfect though, and we found a few flaws in what is otherwise one of the best mobile phones that money can buy. If you demand the best hardware in the sleekest package, the Desire should be on top of your shopping list. The Desire is slim and sleek with contours enough to give others phones an inferiority complex. The keys have a matte chrome finish that oozes its appeal. The rest of the body including the rear has the same pearl grey, smudge-resistant finish. Its display also lives up to the hype. All of 3.7-inches, it is not as large as the 4.3-inch one on the Touch HD2 but comes with a Super LCD in lieu of the AMOLED that the Desire was orginially supposed to come with. This HTC has a fast Snapdragon Q8250 CPU running at 1 GHz and added 576 MB of RAM to feed it with data and instructions. The Desire is 50

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lighting quick – the interface, switching between applications, switching through photos, browsing – you just cannot slow the phone down. The camera records videos up to a resolution of 720p. The videos are clear, although there is blur when moving due to the lack of a proper image stabilisation system. The price we got for the Desire was an MRP of Rs. 28,900. This is the price being offered by Tata Docomo, who is bundling the device with a data plan that offers 500 MB of free data usage every month for the first six months. So it is not cheap! But the best of the lot in terms of value for money. The Motorola Milestone also has a QWERTY keypad, but the display and capacitive interface are not as good, and it has less exciting innards. The Nexus One is about as good, but its trackball and lack of the Sense UI are deterrents for us. The Desire is an exciting proposition. Price: Rs 28,900

We cannot really tell if it is accurately depicting the night sky, or if it is just a bunch of randomly shaped and placed points of light. Either way, it is an eyeball-catcher. Price: Rs 700 (on ebay)

All-in-one PC

Dell Inspiron Zino HD Dell has refreshed its Inspiron Zino HD HTPC offering with AMD Athlon processors The base configuration packs a 2.3GHz single core AMD Athlon II Neo, DVD drive, THX 7.1 surround sound, and integrated graphics. Price: Rs 13,750 POWERED BY

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Munich likes you! Anoop Chugh pens a tribute to

the most sought after holiday destination in Germany

IT WAS A CLASSIC SEPTEMBER-END, a pleasant summer giving way to a harsh winter. An announcement by the captain woke me up from a slumber at the fag end of a 9-hour flight from New Delhi, “We are landing at the Munich Franz Josef Strauss Airport. The temperature outside is 4 degrees centigrade.” It wasn’t the warmest of welcome messages to hear, especially since I had forgotten to pack heavy woolens before leaving home. A few trench coats shopping later I sat gazing at the to-do list - a) Watch FC Bayern play at Allianz Arena, b) watch Beemers come out of its headquarters and drive one if Valet allows, c) drink beer (at Hofbrauhans Am Platzl) with 6-million people at the world’s biggest beer festival and, d) do a 100km bicycle tour of the city. It was time to explore the city that ‘likes you’. (Translation of Munich’s Moto: München mag Dich). I started off my tour-de-Munich (forgive my French) from where all tourists do – the city centre. It is like visiting Piazza Della Signoria when in Florence or London Eye when in Great Britain. The City Centre, mostly known for the Marienplatz Square, street shopping area, some well-carved statues and a lot of “say cheese” sounds, is easily accessible through the U-Bahn (Subway system) and S-Bahn (Metro) services. Get a few pictures clicked here as there’s a high probability of it being your profile picture on social networking websites. My next destination was what most men would trade their life for – the elusive visit to the Hofbrauhaus Am Platzl. It’s one thing to attend Oktoberfest, get happily drunk and convert to a hippie and completely another to relish a mug of beer at the historic Hofbrauhaus, a celebrated hall where Adolf Hitler was apparently a part of many such drinking events. After satiating my thirst, it was time to give the liver a day’s rest, before I sat behind the wheels of a freshly assembled BMW. The visit to the 331-feet historical BMW tower made me wonder if it was designed by Chris Bangle

THE CITY CENTRE, MOSTLY KNOWN FOR THE MARIENPLATZ SQUARE (LEFT), AND SOME WELL-CARVED STATUES (ABOVE) IS EASILY ACCESSIBLE THROUGH THE U-BAHN (SUBWAY SYSTEM) AND S-BAHN (METRO) SERVICES

too. The trivia book later revealed the four-cylinder shaped tower is work of an Austrian architect. The next two days were all about pretending to be Lance Armstrong, sans thigh muscles. In fact, the most Herculean task of them all was to ride around the city on a rented bike (with attire). The breathlessness was compensated by the breathtaking landmarks. The City Museum, Statue of the Bavaria, Schloss Nymphenburg (the city castle) and Nymphenburg, all played equal parts in building up an overwhelming feeling of reverence. The last bit was to watch the star-studded German football club – FC Bayern – in action at their home stadium. Schweinsteiger’s goal that night completed an extraordinary week at Munich. BEST TIME TO VISIT: October to January BEST FLIGHTS: Lufthansa, FinAir BEST HOTELS: Königshof, Anna, Excelsior BUDGET HOTELS: Jaeger’s Hostel, Cosmoplitian OCTOBER 2010

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The Green God In his latest series, Dhananjay Mukherjee attempts to blend nature and the omnipotent with a spalsh of green By Anoop Chugh

Dhananjay Mukherjee has been painting for last 25 years. Having inherited an artistic tradition, his love story with the canvas started at a young age. Working with Jamini Roy’s Kalighat pot paints on terracotta horses, elephants et al, he created human and animal figures in the style of pot paintings. He launched himself as an artist in 1984. He completed his graduation in fine arts from Rabindra Bharti University, Calcutta. He has been involved in more than 75 shows (solo and group) in India and abroad.

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ABUNDANT IN NATURE, the colour ‘green’ signifies growth, renewal, health, and environment. But, for veteran artist, Dhananjay Mukherjee, the green signifies God. “We all have witnessed, how at times the shape of mythological figures embossed on the tree trunk or dangling leaves ignite our faith in nature and divine power. This is what has inspired me to come up with my latest series of paintings - The Green God,” explains Mukherjee. One would relate the colour green with the nature; and nature with the almighty. ‘The Green God’ is an attempt by the artist to blend nature and the omnipotent. It is a beautiful convergence of the two forces that are often deemed as one. The fact that he has been painting for the last 25 years is obvious from the clarity of his thoughts and strokes. This 24-painting series plays with light and shades of green, resulting in graphical and structural uniformity on the canvas. His depiction of God’s personification using tree stem and leaves as a canvas, is a rare mixture of the abstract and the realistic form of art. Some of his paintings in the present series are an example of modernism with a touch of old mythological art. Be it the Krishna-Radha Raasleela, the union of Shiv-Shakti or the elephant God Ganesha, his work borrows liberally from Hindu mythology only to be splashed with various shades and hues of green as the Gods and Godesses become one with nature.

OCTOBER 2010

THE SHAPE OF MYTHOLOGICAL FIGURES EMBOSSED ON THE TREE TRUNK HAS INSPIRED THE 24-PAINTING SERIES

HIS WORK BORROWS LIBERALLY FROM HINDU MYTHOLOGY ONLY TO BE SPLASHED WITH VARIOUS SHADES AND HUES OF GREEN

“In my paintings I imagine the divine inside every green form, be it a plant, a tree trunk or even a leaf. In the dense forests, one can actually see the shape of nature forming faces in the dark,” says Dhananjay. The faces in the artist’s paintings are carved out of leaves with motifs forming the eyes and lips, all to inculcate faith in nature. The main reason he chose this theme, he says is because he wanted to create awareness on the need to respect and conserve nature. He paints with oil & acrylic colours on canvas.


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The extra one per cent Dr Yeung discovers the critical mindset that allows high-achievers to generate creative ideas By Anoop Chugh THIS ONE IS A MYTHBREAKER on what makes a successful man (or woman). And, no, the answer isn’t a rich dad. Dr Rob Yeung, the author of over a dozen self-help books, has a major idea on the subject and he has let the most well-kept secret out in his latest – The extra one per cent (How small changes make exceptional people). How did he get the secret? Dr Yeung, after interviewing hundreds of high-achievers from various walks of life, has identfied subtle yet crucial differences that distinguish exceptional people from everyone else – something perhaps even exceptional people weren’t themselves aware of. No pun intended, but the author believes that superstar performers can rarely articulate what they do in detail to help others follow in their footsteps. Yeung claims if you ask five random celebrities (only if you get to meet them) - what qualities make you so successful? They all may talk about vision, passion, confidence, creativity, luck, risks and instincts. These are great qualities to possess but are not a sure-shot success recipe. “I am sure you know people who think they are visionary, creative, determined, adaptable and all that. But they don’t get the same results as the people they would like to emulate,” the book says. The author has divided the book into eight broad ‘capabilities’ that super humans possess. These are the skills that distinguish exceptional people from everybody else.

Publisher: MacMillan Author: Dr Rob Yeung Price: Rs 495 54

CFO INDIA

OCTOBER 2010

Fault Lines Raghuram Rajan was one of the few economists who had warned of the global financial crisis before it hit. Now, as the world struggles to recover, it is tempting to blame just a few greedy bankers who took irrational risks and left the rest of the world to foot the bill. In Fault Lines, Rajan argues that serious flaws in the global economy are also to blame, and warns that a potentially more devastating crisis awaits if they are not fixed.

Publisher: HarperCollins Price: Rs 499 #-.)0$0)%)12)2

The squeeze EXPLOITING UNPRECEDENTED access to the lives of traders in New York, oiloligarchs in Moscow, corporate chieftains in Dallas and London and wily politicians floating in jets across the globe, Tom Bower presents the untold story of the most important quandary of our times: why, if there is plentiful oil reserves with us, does mankind face a dire shortage ? Self-interest is propelling the squeeze and there seems to be no salvation.

Publisher: HarperCollins Price: Rs 499

Yoga in the workplace IN “YOGA IN THE WORKPLACE”, acclaimed yoga practitioner Shameem Akhtar has come up with a simple and efficient way of using yogic practices at the work station. These adapted yogic practices – which can be neatly integrated into the office environment – demand very little in terms of time, yet promise to infuse you with health, both mentally and physically. PUBLISHER: WESTLAND

Price: Rs 295


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Enough and more has been said about the Government’s suggested move to make CSR mandatory for companies. Specifically, it is suggesting that companies with a turnover of over Rs 1000 crores must contribute 2% of their profits towards social responsibility. It would be tough to find an idea more out-of-line, even if I tried. First, let us consider the moral right of a Government to dictate how corporates should spend their money. Having failed miserably to deliver on its “core responsibilities” in many areas, it is somewhat presumptuous of the Government to decide what others should do with their money post-taxes. As a resident of Delhi and a witness to the Commonwealth Games, I have been exposed to unprecedented corruption at one end to gross mismanagement at the other; yet another sad example of a Government that has little to show for fulfilling its “core responsibilities”. Under the circumstances, my willingness to be guided by them on how to run organisations – and invest beyond the core business – is at an ebb. Second, a more serious concern – do you think this trend could ultimately target the individual? In the foreseeable future, we could be asked to contribute our already substantively taxed salaries (for very little in return) towards social causes. Even worse, we might be forced to donate to what the Government believes is the right social cause! Philanthropy has emerged as a differentiator over time – with no instigation or incentivisation from the Government. Why then is there need for coercion? The manner is scarily reminiscent of the authoritarian 1970s and 80s. Next, who defines what CSR is? What is social for one company could be core business for another. Example – public toilets and Sulabh International. Also, if companies indeed benefit from CSR in the long-run, they will set aside funds for it in the interest of their businesses anyway. Perhaps the Government doesn’t know that the term becoming popular is Corporate Social ‘Investment’ as opposed to ‘Responsibility’. 56

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What is worth considering though is the cost of stopping CSR activities. Take an example. A prosperous company (under mandated CSR) supports a special school in its neighbourhood. When recession strikes, what will it do? Even by the Government’s suggestion – CSR should be from corporate profits. If there aren’t any profits in a quarter, can you pull back from committed activities? Will the government step in at such times? And if not, then who will compute the cost of pulling back such support – both materially for the organisation in question and reputationally, for the private enterprise. A quick look at companies over Rs 1000 crore in turnover (from the ET 500 list) suggests profits of Rs 250,000 crores; 2 percent of that amounts to Rs 5000 crores. If the money is given to the Government, we all know what a small fraction will reach the end user. Needless to say, the money is probably much better left in the hands of the private sector. There are a million other reasons why the idea to mandate CSR is offensive. I hope we do not end up with a new central Ministry for CSR; an almost perfect way to move back into a discretionary zone where a government official will assess whether you undertook appropriate CSR. We would then have to hail the return of the Inspector Raj! Humour aside, it is a suggestion that must be treated with serious concern and nipped in the bud with such severity that it doesn’t raise its head again... What do you think? Anuradha Das Mathur, Publisher CFO India


CFO India - October 2010  

CFO India October 2010 Issue 11