China Syndrome

Readers comment on new options for doing business in China and other current finance issues.
CFO ReadersSeptember 1, 2011

Hopefully, the fact that multinationals can now trade with Chinese customers and suppliers in renminbi means that China will allow its currency to float more freely, which will allow it to realign itself versus the U.S. dollar (“China’s Currency Conversion,” July/August). While this may cause a devaluation of the dollar somewhat, it would make U.S. goods more competitive internationally. Further, if China wants to take its place alongside other economic powers, as it has already stated, then it is critical that it not continue to provide itself with this artificial currency-derived advantage. China cannot, in my opinion, have its cake and eat it, too.

Jeffrey B. Kraut
Certified Public Accountant
Commack, New York



Misery Loves Company

Having been directly involved in conducting conflict-minerals audits/program development since summer 2010, I caution readers to maintain the perspective of “reasonable assurance” and “representative sampling” as companies look to conflict-minerals traceability (“Sources of Misery,” July/August). Indeed, the law itself reflects this directly.

Not only should companies be concerned about this from an audit point of view, but there are also contractual liabilities from representations and warranties made about material sourcing based on “absolute certainty” versus “reasonable assurance.”

Unfortunately, emerging frameworks such as the OECD (Organization for Economic Co-operation and Development) Guidance — and others — were developed with little, if any, professional auditor input and seek absolute certainty for all materials, no doubt responding to the NGOs and the emotional nature of the matter (human-rights atrocities).

Further, the OECD Guidance contains numerous internal conflicts and impairments that make it untenable for an auditor and place a company at odds with the Securities and Exchange Commission.

Lawrence M. Heim
The Elm Consulting Group International LLC
Marietta, Georgia



The Training Myth

In my opinion, analysis that correlates investment in training-and-development programs to positive impacts on a company’s stock price [are erroneous] (“Measured Response,” June). I am not disagreeing with the importance of continued spending on such programs for a company to maintain a competitive edge, but coming up with a set of metrics to suggest that the boost in stock price is due to investment in these programs is ludicrous.

I am not opposed to labeling dollars spent on training-and-development programs as an investment; however, these dollars must be classified as discretionary, with little or no tangible future benefit. A public company’s performance should be based on hard, measurable facts intended to help novice investors make investment decisions — not on confusing and hard-to-measure metrics.

Furthermore, public companies are spending millions of dollars on employee development, but losing twice as much through lost productivity and unnecessary delays in bringing new technologies to market, due to bureaucratic management styles and a lack of knowledge transfer. Innovation and agility are almost nonexistent in public companies these days. The workforce is shrinking and being replaced with layers of ineffective middle management, whose primary purpose is to push paper and produce PowerPoint presentations.

Najeeb Khan
Via E-mail



Give Budgeting a Chance

While budgeting remains an arduous process at many companies, there isn’t a compelling reason to abandon it — and most companies have not (“Let It Roll,” May). In fact, for companies that can tie this “19th-century tool” more effectively to their strategic plans and create the dynamic quality necessary in this uncertain economy, the budgeting process can be a powerful asset. It is more effective, of course, if the process is tied to a clear strategic plan — something many companies still struggle to articulate.

This is where the CFO can be particularly effective, by (a) identifying the disconnect and committing to changing it; and (b) creating the tie-in by asking the right questions, such as “How will we compete and in which businesses?” and “Which choices will make us more money?”

Armed with the right plan, CFOs can then address some inherent problems in the traditional process. Take sandbagging. Leading companies demand face-to-face target negotiations to eliminate the need for top-down adjustments. This approach is effective, as these negotiations tend to address tactics, challenges, and opportunities that could affect the company’s ability to hit the targets. CFOs then build those scenarios into the plan.

When finance is able to focus the business on the key metrics that matter, there is less potential for detail to get out of control. Steve Player of Beyond Budgeting Roundtable is absolutely correct when he says, “Now, the CFO stands on the bridge looking forward and adjusting for variables.” The main variable, however, is the budget itself. It doesn’t have to be abandoned; it just needs to be customized to a company’s operating model, time horizon, and level of needed detail.

Steven Ehrenhalt
U.S. and Global Consulting Leader, Finance Transformation
Deloitte Consulting LLP
Via E-mail



With Apps, Consider a Mix

There is an important consideration not mentioned in “Can Cloud Computing Clear the Air?” (April): the differential, net present value of cash streams for the full range of impacts is the best basis for comparing the economic impact.

Rarely would a company consider a single cloud offering as a simple binary alternative to a single, on-premise legacy application. The likelier, and more productive, evaluation would include a [more comprehensive] view of the full process, support organization, and related technology investments. That does not necessarily imply that a solution that includes the cloud will be more or less efficient — the characteristics of the entire solution will determine the efficiency opportunity.

Not surprisingly, many organizations will find that a mix of on-premise, cloud, and perhaps even some remaining legacy applications will work best for them.

Patrick Slattery
Managing Director
New York