Certainly, finance executives in the region are confident in the near term. Eighty-four percent of the 200 Latin American respondents in a global survey of 800 CFOs and other senior finance executives, conducted by The Economist Intelligence Unit and sponsored by SAP, expect their company’s revenue to grow by 10% or more in fiscal year 2018/19. This makes it the most confident region included in the study.
Latin American respondents are also confident of their strategic role within their organisation: nearly nine out of ten (89%) personally feel empowered to drive strategic decisions across business functions in their organisation, a higher proportion than in any other region. They are also more likely to agree that finance should facilitate collaborative enterprise planning across the company (96% v 90% globally), signalling a clear idea of finance’s leadership role.
How does this leadership role manifest in the way Latin American finance departments collaborate and interact with other functions of the business?
Nine out of ten (89%) personally feel empowered to drive strategic decisions across business functions in their organisation
Deep integration
The survey reveals that Latin American finance teams are deeply integrated into a number of operational processes around their organisations. For all operational processes included in the survey, which span the marketing and sales, procurement, operations, and HR functions, an average of 57% of Latin American respondents say they or members of their team are currently involved—the highest average level of involvement in any region.
Surprisingly, given this level of integration, Latin American finance executives spent less time, on average, meeting with other divisions than their global peers. They spend less time working with sales, operations, procurement, IT, HR and marketing than respondents in all other regions. That does not seem to impact the quality of their relationships, however, as they are just as likely to rate their collaboration with these departments as effective as their peers around the world.
One function that Latin American finance leaders spend ample time with is management/strategy. This can be seen in their approach to managing costs. For example, 59% work with management/strategy on managing government and regulatory authority fees (including taxes and licensing), compared with a global average of 45%, perhaps a reflection of the regulatory complexity in many Latin American countries. A similar preference for collaborating with management/strategy is seen when it comes to managing real-estate costs (44% v 35%), inventory costs (41% v 29%), technology investment costs (38% v 26%) and employee travel expenses (34% v 26%). This may indicate that cost-cutting has been a strategic priority for Latin American firms.
“More and more, I see myself as the operational arm of the CEO,” says Fernando Araujo, CFO for the Latin American operations of technology provider GE Healthcare. “And I think that’s the way things are moving for many leaders in finance.”
Indeed, respondents from the region are more likely to have applied across-the-board cost reduction (26%, versus an average of 18% across the other regions). But it also suggests a close proximity to company leadership. This may be what gives Latin American finance executives their mandate to drive strategic decision-making across the business. “More and more, I see myself as the operational arm of the CEO,” says Fernando Araujo, CFO for the Latin American operations of technology provider GE Healthcare. “And I think that’s the way things are moving for many leaders in finance.”
Supply chain focus
Besides this close relationship with management/strategy, the collaboration habits of LatAm finance departments also reveal a keen focus on their supply chains. There are significantly more likely to collaborate with the procurement/supply chain function on management raw material, real estate and supply chain costs than with other departments, and more likely to engage in supply-related processes like supply-chain strategy development and supply-chain disruption analysis. Nearly three quarters (73%) say they or their team members are involved in effective supply-chain finance management, the deepest level of involvement across all regions and processes.
Nearly three quarters (73%) of senior finance executives in Latin America say they or their team members are involved in effective supply-chain finance management, the deepest level of involvement across all regions and processes.
This may not be surprising when one considers the distances involved between the region’s major commercial hubs; as the crow flies, 2,500 kilometers separate Sao Paulo in Brazil from Santiago in Chile. But sheer distance is compounded by other factors: many journeys pass through largely unpopulated regions where transport infrastructure is fragile or non-existent.
Says Mr Araujo at GE Healthcare: “Supply chain is an area in which I’ve actually spent a lot of time lately, but I feel like we still have room for more visibility. The way we’ll do this is by finance becoming very specific about the output and productivity expected from each one of our supply assets.”
That will require a deep-dive into performance data relating to warehousing, transportation and so on, he says, but also requires him to maintain a personal oversight over the whole process that begins when a sales executive signals that a sale to a customer is in the offing, to that order being delivered at the customer site. In GE terms, this is called ‘ITO to OTR’; or, Intent to Order (ITO) to Order to Remittance. “This will help us maximise the existing supply-chain footprint that we have in Latin America, meaning we better allocate new capital expenditure to factories in future,” he says, adding. “You can’t achieve this level of insight without very effective collaboration.”
Technology progress
When it comes to technology, Latin American respondents are thinking ahead. They are the most likely to have introduced software to share information for better decision-making to manage costs (28% have done so, compared to a global average of 21%) and believe that predictive analytics for strategy development and decision support will most enhance collaboration in future (37% versus 29%). They anticipate considerable automation of the CFO role, in line with global expectations, expect this to free up for operational strategy development, sales strategy development and identifying more strategic investment opportunities.
In the meantime, the survey suggests, Latin American finance chiefs will rely on their deep involvement in operational processes to get the insight and understanding with which to steer the company. As Mr Araujo at GE Healthcare puts it: “Some people might think in finance we just sit back and receive reports and analyse data but that’s just not the truth. To take a leading role, I need to be involved in as many processes as I can. And to me, that means looking right across everything we do, from understanding where the market is going and where the best opportunities will lie, right through to order fulfillment and cash collection.”
“To take a leading role, I need to be involved in as many processes as I can. And to me, that means looking right across everything we do, from understanding where the market is going and where the best opportunities will lie, right through to order fulfillment and cash collection.” - Fernando Araujo, CFO Latin America, GE Healthcare
