Exploring the CFO's Role in Information Security

Wednesday, July 14, 2010

Rahul Neel Mani


Vijay Sethi, CIO of Honda Motors, India, interviews the company's CFO Ravi Sud on the critical role of IT in the organisation, and how he uses IT to solve others problems:

Q:CIO: What according to you is the key role of IT in the industry and the economy?

A: CFO: If you see the last decade and a half, the global economy has integrated. The concept of decoupling of one country from others in the world does not exist anymore. If somebody sneezes in the US, we get a cold in India. That is why I am a very strong advocate of coupling. The world is becoming one, as far as business is concerned. It is boundry-less.

This is where IT is the biggest enabler – it reduces the boundaries and makes the systems seamless. For instance, in our case, starting from the time we supply the goods to the time the money reflects in dealer accounts, the whole process is seamless and fully automated.

There is hardly any human intervention, irrespective of the location of the dealer. IT has simplifed to an extent that we do not have to bother about the nitty-gritties. But, it is important that you have good processes and controls to ensure that you can get the most out of IT.

Q:CIO: Once every year we discuss the annual IT budget requirements in details and then follow up with monthly reviews. In my three years experience in this organisation, I have noted that you have not cut even a single rupee. What are the criteria that you keep for sanctioning IT budgets while consolidating the budget requirement across the company?

A: CFO: I do not think of IT as an expense, I think of it as an investment. If you invest correctly, it will definitely pay back. It may not be in the next three to six months, but definitely in the next couple of years.

Whenever there is a crunch, CFOs cut costs. When they have to do this, they look at their biggest expenses. When you look across the board, what are the expenses that appear noncore? Advertising, brand building and IT. In reality, IT is actually the function that can help you save costs across the board.

During the 2008-2009 time period, when we were going through the downturn, we made one of our largest investments worth more than 70 crores in a DMS.

I would rather use IT to enable me in looking into my processes further where I can cut costs smartly. For instance, I can use my dashboard to look into travel and conveyance expenses of every single employee– this enables me to ensure that there are no inappropriate expenses. We could also use IT to cut travel costs by using solutions like video conferencing.

Q:CIO: Let’s talk about things in Hero Honda: how does IT enable in achieving top and bottom line targets and how does it help in CSR?

A: CFO: As far as top line is concerned, it is basically concerned with growing your business on a sustainable basis. To achieve this you must understand customer requirements so that you are able to direct your internal processes and R&D, you are able to cut short the time to market and launch your product.

You also need quick and accurate feedback. If something is going wrong you should be able to rectify it soon. This is where IT has helped Hero Honda cut short the gap between its customers and suppliers and brought them closer to the company. This directly affects the top line of the business.

Q:CIO: Let's come to the CSR part – how has IT helped to help the environment or community? I know you have a personal interest in this and this is something you have initiated.

A: CFO: Needless to say, we all must take care of the society and the environment. As a small initiative, we analysed the number of cheques that we issued as an organisation. We issued 34,500 cheques in the financial year 2008-9. We aimed to reduce them to zero and were able to bring the number down to 9,600 a year in the last fiscal. This has been largely due to the efforts of the IT department.

Q:CIO: There is a debate that goes on in IT circles: is IT a support function or is it a business enabler? What are your views?

A: CFO: According to me, IT is a very important business enabler rather than just a support function. It is often IT that helps discover new strategic options, though it is up to the management to use these options. For a manufacturing company, we have grown pretty fast in the past decade. Timely IT investments has contributed a lot to make this happen.

Q:CIO: Managing risk for the company is one of your important portfolios. How does IT help you there?

A: CFO: We are developing software that would help us in setting controls that meet all these statutory requirements. For instance, if an employee has to deposit the EPF by a certain date of every month, he would need to submit the scanned copy of the proof of submission when he is asked for it by the software. Otherwise, his senior would be immediately alerted of the failure. This will ensure that we are as close to compliance as possible in all regions.

Q:CIO: From your perspective, how important is it for the IT head to be finance-and legal-savvy?

A: CFO: According to me, all of these are specialised areas. If you ask me, whether I have expert income tax knowledge, I would reply in the negative; I only have working knowledge. Similarly, all senior people in the organisation should have working Knowledge of parallel specialised areas.

When I am making a presentation to the core group they should understand terms like EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortization), profit after tax, operating margin, return on capital employed and return on equity. Basic knowledge is very important. Similarly, I must know a few fundamental things about IT.

Q:CIO: There is another debate that goes on in IT circles – should a CIO report to a CEO or CFO. What do you have to say?

A: CFO: The assumption is that IT should report to the CFO because it started as the computerisation of accounts. But, IT is not only computerisation. It is an integral part of the system that needs the understanding of business needs and strategy. According to me, reporting to the CEO is a much better option. It is also better because many CFOs do not go out of their domain.

Many CFOs are just accountants (CIO says: just like many CIOs are IT managers), there are very few people in the industry who look beyond their function. According to me, it will restrict the CIOs role if he reports to the CFO in the current environment.

Fifteen years back when it was just the EDP it made sense, because accounts was its only user. I have had EDP heads report to me at that time only because I was the only person being affected by the systems the most.

Q:CIO: Finally, what should the CIOs do to ensure a great relationship with the CFO.

A: CFO: Unfortunately, the CIO from my company does not drink (laughs). We must have a good time together, meet more often and have a smooth relationship.

On a more serious note, they should communicate openly and transparently with each other. That is the biggest driver for any good relationship in an organisation.

Cross-posted from CTO Forum

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