CFO, Compliance, Financial, Outsourcing

Compliance fears inhibits financial outsourcing

10 Apr 2007 | (Survey)

The burden of handling compliance and regulatory issues has become a major obstacle to outsourcing finance and accounting (F&A) business functions, according to research among UK CFOs by LogicaCMG, a leading business consulting and IT services company.

Increased regulation and emphasis on governance was identified by CFOs as the most significant barrier to outsourcing. Only seven per cent currently outsource any F&A functions, with 68 per cent stating that the burden of current financial regimes is holding them back. The severity of sanctions as a result of a regulatory infringement is an overriding factor in the CFO’s desire to retain direct control of their finance function.

Kevin Radley, UK COO & finance director at LogicaCMG, commented: "CFO time is being tied up with the management of work that could potentially be outsourced. They are currently dealing with day-to-day tasks when time could be spent focusing on medium and long-term issues. This could leave companies short of resource to manage mission critical business opportunities. The number of recent M&A deals, and the prevalence of approaches made by private equity companies mean that CFOs need time to develop and defend their business position. They need to be focusing on the future not managing the minutiae."

Over 50 per cent of the CFOs questioned had outsourced at least one area of their business, and a further 19 per cent planned to use outsourcing in the near future as a means of reducing costs. But the same CFOs are 66 per cent less likely to outsource their own finance and accounting function than they are to outsource other business areas, citing regulation and compliance as the restricting factor.

The large amounts of financial management resource devoted to compliance and regulatory issues, combined with day-to-day work means that senior finance executives’ time for other mission critical activities is limited.

"CFOs face a difficult choice. There is general acceptance at board level that outsourcing is a very valuable business tool. Our research has found that outsourcing is on the agenda of 84 per cent of leading UK companies and companies that outsource their F&A functions have shown savings of up to 35 per cent. CFOs who introduce outsourcing have more resource and time to manage the increased regulation and compliance demands. But concerns over the loss of direct control and existing work load pressures are stopping them from making the change," added Radley.

Related Content: