Aakif H.Khan is the CFO of the Gulf Union Foods Company. He has over 10 years experience as a finance professional, including experience with PWC Pakistan (6 years) and Olayan Group (one of the largest groups in Middle East).
We sat down with him ahead of his presentation at CFO Rising West, taking place in San Francisco this October 19-20.
Q. How did you get started in finance?
A. I started as a public accountant with PWC where I was exposed to the largest and the best companies in my country. Luckily, soon after I joined PWC, it implemented the new risk-based audit approach in my country, which required a better understanding of the client’s business environment and overall risks. This provided me with the opportunity to understand the overall business environment and risks of some of largest companies in that part of the world.
After my stint with the audit department, I worked as a consultant with PWC for a couple of years implementing ERP, where I got a chance to interact with some of the most dynamic CEOs and finance personnel. I call them dynamic because they were the first ones to embrace ERP technology in the country; it was during this period that I began to appreciate that how these dynamic business leaders are spinning innovation to their advantage to get on to the top and how such change is being managed.
The role that helped me shape my career towards a CFO was that of an FP&A role in the corporate office of one of the largest conglomerates in KSA. This role helped me shape my career and finally led to CFO role. I was exposed to variegated businesses in the Middle East, their business models, challenges, strategies, etc. I also came across both successful CFOs and not so successful CFOs and was able to identify the real role of a CFO in different companies. It was during this role that I realized that how critical is the role of a CFO in making or breaking a company. In recognition of my potential for future and performance of almost six years with this department, I was appointed as a CFO in one of the subsidiaries of this group, which is my ongoing role.
Q. What do you see as the finance function’s role in innovation? What do you think are the specific challenges around innovation at Gulf Union Food?
A. Finance has a strategic role within organizations, i.e., to collaborate with other departments in the innovation related to various different areas, including; product innovation, processes innovation, business model innovation, IT-related innovation, etc. and these are the areas where the finance department in our company is collaborating with other departments. The challenges are more or less similar to any other organization, but finance department is playing a pivotal role to overcome these challenges.
Q. What specific challenges do you face as a finance leader in the Middle East?
A. Politico - Economic challenges
The geopolitical situation in the Middle East is fluid and volatile, which makes it difficult for the finance leaders to plan the future, and in some cases to carry out business. The bogeyman is the ISIS and nobody knows which direction it will take, whilst the elephant in the room is the impact of oil price changes. Where the former has impacted the confidence of business leaders, the latter has affected the overall economic environment, which in turn is having an impact on the business performance. Another impact of the oil prices is that governments have increased the utility and fuel costs, and since some governments borrowed internally, the borrowing costs have started going up as well in some of these countries. The GCC (Saudi Arabia, UAE, Qatar, Oman) governments are further planning to implement VAT to increase revenue.
All of the above changes are influencing the finance leaders in the following ways;
- Planning and forecasting has become more difficult, though most of the finance leaders have resorted to defensive strategies
- Slippages vs. the previously agreed plans / forecasts have started resulting in higher pressure as well as interference from investors especially in private companies
- Revenue Collections are being impacted because some companies had to close altogether whilst others are laying off workforce.
- Managing liquidity and arranging funds has become a bigger challenge
- Mostly finance leaders face the issue of availability of good resources.
- Maintaining a balanced ethnic diversity in the team, which is very important in Middle East.
- Meeting the targets and managing the employee productivity.
Since a large part of the workforce is expats in the private sector, who are not in queue for passports or immigration, it’s not uncommon for employees dealing with cash collection to abscond to their home countries with cash.
Lately there have been some major corporate failures and investor setbacks due to non-compliance, which have made governments more active and stringent, demanding further compliance.
Further, in KSA, IFRS are being introduced in next couple of years, which will be one of the other challenges of finance leaders.
Q. How has the role of the finance function changed over the last decade? Do you think the CFO role has changed to become more of a generalist? What do you see as having been the main drivers behind this?
A. The way I see it, the role of CFO has metamorphosed a few times.
The role of CFO traditionally was that of bookkeeper, whose main focus was ensuring compliance (with accounting standards, GAAP or IFRS, local company laws, tax etc). This role was more of a back office. The CFO was only expected to get the external audit done successfully and to ensure that no compliance issues arise, so much so that in my part of the world even annual bonus was linked to successful completion of annual external audit.
However, over the course of time, this role has evolved into what we might call a T model, where the vertical bar of the T represents the depth of knowledge in finance and related matters whilst the horizontal bar represents the breadth of general knowledge about different areas.
However, then the role of CFO moved beyond that T-shaped model. Imagine if we add another vertical bar to this T, which represents good understanding of company’s overall strategy, another representing understanding of purchasing, and so on which represent the understanding of the following:
- supply chain,
- competitors and business environment,
- IT related systems / ERP
- changes in the geopolitical situation,
All these legs joined to the vertical bar would give the image of a ‘centipede’, the main body of centipede is now the ‘business understanding’. All these legs help the body to move forward and the strength of each leg will determine how fast this centipede can move in the ever-changing business environment.
The important word to notice is ‘understanding’ of business vs. ‘Knowledge’. I kept wondering that today almost every information is available on google, so what is the difference between a fresh graduate and an experienced person, because a fresh graduate can google things and is at par in terms of knowledge…the answer lies in the word ‘understanding’ which needs experience and reflection and feeding in from all the aforementioned legs.
This to me is a major difference, between today’s CFO and a CFO from few decades back…previously a very good knowledge of Debits and credits was a must…but today a very good understanding of business and a good analytical mind is a must. This can be substantiated by the fact that there are several examples of successful CFOs who are not from hardcore accounting backgrounds but they understand the business really well.
Another evolution in this role is that previously a typical CFO may have spent a lot of time on capturing and discussing historical results, but today’s successful CFO needs to spend most of his time analyzing and discussing the future and preparing for that timely, while using past as a reference point, so the focus has shifted from recording past to timely and wisely preparing for future.
Q. Do you think executives’ perceptions of finance leaders as accountants still prevent them taking up a role as a strategic partner in their organizations? If so, how can they overcome this?
A. It varies from company to company…sometimes in my part of the world in traditional family based businesses or private companies this perception still prevails …but even the successful family based business have changed their way of thinking and consider CFO as a strategic business partner.
In cases where it exists, the CFO himself/herself can play an important role by stepping up his efforts to demonstrate his/her ability to become a strategic partner. A good grasp of business dynamics and its environment, reflection, and fact finding will lead to a point where one can stand on one’s own two feet and give a balanced opinion on how to move forward.
Q. Do you see any technologies as having a major impact on the finance function in the near future? How do you incorporate these? How important is it for the CFO and CIO to work together?
A. With the advent of ERPs and other online IT systems, CFOs are swimming in large sea of data, but at times they do not have access to the right information so that is where we need to have very close coordination between the two to separate noise from the signal, to sift out the correct information for analytical purposes. A CFO would ask the right questions of what he or she needs whilst the CIO will help in getting that.
Q. What do you think presents the greatest challenges for finance leaders over the next year? Do you have strategies in place to overcome these?
A. As far as Middle East is concerned the major challenges are:
- Foreign currency fluctuations and impact on international investments as well as business
- Forecasting and planning with fast changing geopolitical situation
- Compliance with Stringent govt. policies
- Liquidity management and arranging the funds
- VAT and taxes in middle east
- Implementation of IFRS in KSA,
It might be a good idea to resort to a defensive strategy, with a focus on reducing costs, building up cash flows and caution on all forms of spending.
You can hear more from Aakif, as well as other industry leaders, at CFO Rising West this October. Register here to receive your pass today.