new Asian CFO, The

Global Finance, May 1998 by Hanes, Kathryn

Until the meltdown of Asian markets and the consequent landslide of corporate bankruptcies, senior management typically dismissed finance directors in Asia with a certain cavalier disdain as glorified accountants. Now, ready or not, chief financial officers are at the forefront, leading investors through Asia's corporate wreckage. In the space of a few months, "their job has gone totally beyond accounting," says Alice Au, director of Executive Access in Hongkong. "Profit is more important than growth in Asia today. The CFO's role is essential."

In Asia's new cutthroat markets the quality of treasury can literally determine the survival of a company. Yet finance departments in Asia are generally small backroom outfits. But today, on top of managing the books, Asia's finance directors are suddenly responsible for risk control, management strategy, public and investor relations, and often radical restructuring. Seemingly from out of nowhere, "CFOs now need to be commercially oriented; they need a complete understanding of the business, not just the figures," says Au.

Given the complexity of the CFOs' new role, not everyone believes they are up to the task. "Essentially, today's finance directors in Asia need to be able to do more with less," says Harold Mandel, a financial services consultant with executive recruiter Ray & Berndtson.

"They're taking on more of a controlling, planning, and leadership function."

Andrew Tsui, managing director of financial services practice at headhunter Korn/Ferry International, identifies four major concerns for today's CFO operating in Asia: corporate governance (investor relations and communication); strategy (mergers, acquisitions, and divestitures); risk management and control (which Tsui refers to as "running a tight ship"); and change management (tackling new issues and managing a volatile situation).

Perhaps most obviously, CFOs are pushed into the limelight by investors hungry for information about companies' financials. "The CFO must represent the company to analysts and potential investors around the world-they need a flair for public relations," says Au.

Phillip Ginges, a partner at Bennett Associates Executive Search, says not all finance directors have grasped the importance of investor relations. "They must understand what the press, fund managers, and brokers look for when assessing a company's viability. Many companies would have coped better with the Asian crisis if they had had investor relations people who knew how to respond to a damaged share price."

Investors certainly are more meticulous in their Asian stock picking now. "International investors don't relate well anymore to simple nice stories," says Jean-Marc Poullet, a partner in the corporate finance practice of McKinsey & Company. "They also want a clear story in terms of disclosure and management. CFOs have got to learn to be more open about their aspirations. They have to provide much more accurate and relevant information."

Controlling risk in Asia, where currencies and stock markets have toppled like dominoes, also means CFOs must become regionally focused. To foresee where the next crisis may loom, "they must be aware not only of what's going on in Hongkong, but all over Southeast Asia," says Trevor Sunderland, human resources executive search managing director at Ernst & Young in Hongkong. "The CFOs that get their companies through this are worth their weight [in gold]."

Poullet argues that regional focus is not enough-a finance director's scope must be global. "Asia's CFOs have to increasingly play by international rules and standards. They have to learn how to handle international investors and bankers who are now in a position to impose tougher conditions."

Conditions are indeed tough. Capital has all but dried up, so "local Asian companies need CFOs who can work with bankers to find innovative ways of financing," says Au. And the power dynamics between corporates and bankers have changed. "A year ago most large international banks in East Asia were lining up at CFOs' doors to promote their services," says Poullet. "But many of those companies are now in financial trouble. Banks are cutting credit lines, and CFOs now have to engage in delicate and tough negotiations with bankers. Many don't have these skills." Where funds are available, skittish investors are insisting that Asian companies hedge their foreign currency exposures to guarantee future cash flows. "CFOs need to understand the parameters of the risk instruments available," says Ginges. "Many are still not technically skilled in using hedging instruments offered by banks."

Companies fighting to survive are restructuring their business lines and focusing on core strengths-activities that require insight from CFOs. "It's all about identifying and hanging on to the jewels in the crown," says Tsui. And before selling noncore businesses finance directors must determine the value of assets, "not at 1996 or 1997 standards, when companies were generally overvalued, but at a price that takes into account the Asian crisis and the finance that's left in Asia," says Poullet.