We asked six FDs, interviewed by Financial Director over the past year, to tell us about the challenges they and their peers will face in 2004. Most FDs think only large companies will be ready for the 2005 IAS deadline, while others think that maintaining a sense of humour will help them through an uncertain year.
WHAT ARE THE BIGGEST ISSUES YOU FACE IN 2004?
hton: Finding the right acquisitions for us to continue our expansion programme.
Lever: Preparing for compliance with Sarbanes-Oxley (as we are US-listed). Preparing for the transition to International Accounting Standards.
Nish: Ensuring that our team does not suffer project fatigue from IAS and Sarbanes-Oxley implementations.
Pettigrew: Working with management to continue ICAP’s impressive growth rate and share price performance, and maintaining the correct balance between entrepreneurial spirit and control.
Symonds: Managing transition to IAS, implementing Sarbanes-Oxley, and ensuring that the business delivers value and improves productivity.
Tracey: Not knowing where I will be. Which FTSE company is going to need an interim FD most? Also whether or not to apply for the job of All Blacks rugby manager.
HOW WELL PREPARED FOR IAS WILL COMPANIES BE BY THE END OF 2004?
Dighton: It would help if we knew their final format. There is a lot of detailed work to be done here. We have more time than others as we have a September year-end, but we have already started a restatement exercise for last year as a trial.There is quite a high level of awareness and certainly plenty of consultants who are anxious to help.
Lever: I suspect that large companies with ample resources will be well prepared; smaller businesses will find it a challenge and may well underestimate the effort involved. Professional firms of accountants will do very well out of it (and are well prepared).
Nish: Preparations will be influenced to a large extent by the timely completion of the standards – in particular IAS 39. Scottish Power’s experience of applying US GAAP gives me strong confidence that the group will be prepared to comply with IAS by the deadline.
Pettigrew: The breadth and depth of the implications of adopting international accounting standards have yet to be fully understood by all the relevant parties. I anticipate difficulties ahead.
Symonds: We are well prepared, but waiting for pensions, share-based payments and hedge accounting.
Tracey: FTSE-100 companies will score about eight out of 10; others will be less well prepared. One question is, how well prepared are the analysts?
THE FTSE-100 STANDS AT 4,400 AT THE END OF 2003, UP FROM 4,100 AT THE BEGINNING OF THE YEAR. WHAT DO YOU THINK ITS VALUE WILL BE AT THE END OF 2004?
Dighton: 5,300 (but I’m always accused of being an eternal optimist).
Lever: Never bet on the direction of stock markets. You would expect it to continue to improve as the world economies do, but rising interest rates may put on the brakes. I reckon around 4,800.
Nish: I don’t believe finance directors should be predictors of stock market movements.
Pettigrew: Up 10% to 4,800. US recovery in their election year will assist, although on the downside there is the continuing worry about global terrorism, which could knock things back below 4,400.
Tracey: 4,900
WHAT ADVICE DO YOU HAVE FOR FDs IN 2004?
Dighton: Enjoy yourself.
Lever: Retain a sense of humour – you may need it.
Nish: Demands on the finance director are growing through IAS, the strengthening of corporate governance requirements, Sarbanes-Oxley and management of risk in a challenging environment. FDs must be on the front foot to deal with these proactively, and to recognise the consequences on resources and skills. Expect and be prepared for the unexpected.
Pettigrew: Keep as close as possible to the business and continue to trust your instincts. Resist the temptation to go down a 100% rule-driven, box-ticking approach, thereby eliminating the use of judgement. The cornerstone of the UK accounting profession has been, and should be, based on the proper exercise of judgement.
Symonds: Take governance and IAS seriously, but don’t forget that the principal role of a CFO is to add value and improve the quality and sustainability of high-business performance.
Tracey: Always back your own judgement on integrity issues. They are not for compromise.
FD INTERVIEWEES:
Trevor Dighton, Securicor, interviewed December 2003;
Ken Lever, Tomkins, April 2003;
David Nish, Scottish Power, May 2003;
Jim Pettigrew, ICAP, July-August 2003;
Jonathan Symonds, AstraZeneca, November 2003;
Eric Tracey, Amey, October 2003.
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