Do you need stronger financial managment?
A challenging market and stricter regulation of funds- and investment companies demands high quality-, capacity- and expertise in the CFO function.
The fund industry took a beating after the global financial crisis in 2008 and 2009. In 2015 capital is again moving into the fund industry and managing capital on behalf of large and small investors is again a growth industry in Scandinavia.
Capital flows to managers with a good track-record, which can document that they can put money to work effectively and which operate a sound business with a high degree of business ethics and competence. A high quality operation includes best practices for investor communications and reporting, competent risk management and a stable and experienced compliance function.
High demands on the CFO and finance function
In the wake of the financial crisis, lawmakers also on this side of the Atlantic have been very active.The EU has introduced several directives which set considerably higher demands on managers’ internal controls than ever before. Some areas to note in this regard are corporate governance, investor protection through stricter regulation of market access, risk management and compliance and money laundering control. The two newest regulations are AIFMD and EuVECA. The latter applies to managers seeking to invest in small and medium enterprises. EuVECA is not yet implemented in Norway but has been operating in the European Union since July 2013.
Where high capital inflow, strong competition and regulatory provisions meet, the requirement for knowledge and experience in operation is raised not only for the fund managers but for the CFO, fund administration and finance departments.
Increasing need for assistance in the back office
Permian is experiencing a growing demand from fund managers seeking better administrative solutions, better control and access to the necessary expertise in financial management and compliance. Customers seek experienced and highly skilled and specialized CFO competence, experienced senior controller-capacity and back-office assistance. Many consider- and some have already chosen to outsource their entire back-office operations.
What are the requirements the CFO function must master?
The financial management function, with the CFO in control, has a strategic function that requires broad knowledge and experience to handle the challenges that lie in government regulations and operating a compliant and effective internal control system – areas where good management is essential for business success. The most important tasks are:
- Strengthen compliance and risk management in the company
- Follow up and understand the implications of regulatory requirements
- Establish routines that reduce operational and tax risks
- Meeting investor expectations
- Ongoing streamlining of operations, including IT
The objective should be that the finance function must contribute to a high level of value development by focusing on strategic aspects of the business.
Financial management function also has a more operational side where a competent controller and accounting function plays an important role. The main areas where it is important to deliver high quality are:
- Periodical and annual accounts
- Value reporting to investors
- Ensuring good financial control and reporting (controlling)
- Tax reporting at all levels, hereunder investor tax support
- Liquidity management, including currency hedging as appropriate
- Cooperation with legal advisors
- Keeping track of obligations set out in various agreements and contracts entered into by the company
Since the need for capacity and nature of competence from the finance function changes significantly over time, it is understandable that owners of investment companies are increasingly seeking assistance from companies that has made back office operation into its front office core focus area.
If you have questions or would like advice on how to further develop the finance function, please contact the article’s author.
Ben Guren, CEO Permian AS, firstname.lastname@example.org