India, 14th March 2022: The Finance and Accounting Area at FORE School of Management organized the third seminar under the Global Leadership Lecture Series. Mr. Ajay Seth, Chief Financial Officer & Member Executive Board of Maruti Suzuki India Limited, addressed the session and shared his thoughts on the evolving role of finance.
Almost 50 years ago, there were measured parameters expected from a finance executive and head. These included delivering numbers, tallying books of accounts, doing compliance, ensuring that the budget targets were met. Finance’s early involvement was small, and the expectations were not particularly collaborative. Its primary priority was ensuring that profits and goals were reached. Finance has evolved over the last few decades as the worldwide economy grew. There was an increase in financial scams and a rise in regulatory compliance. Also, as the companies went public, there was a rise in investor activism and expectations because investors wanted to know if the companies were working efficiently, whether there was transparency in their work, good corporate governance, etc.
The rising expectations of management and board saw CFOs as a business partner to ensure that their final objectives and goals were met. Standards have changed in terms of compliances and the number of observations one has to adhere to. Businesses have become so dynamic that if a CFO does not give the right advice at the right time, there can be a significant fall in the profitability and revenue of the business.
Finance is shifting its focus from shareholder value to stakeholder value. Today a company cannot be successful on its own. It has to make sure that the entire ecosystem of the dealers, suppliers, shareholders, and customers are flourishing – that is how a company creates value for its business. The pillars of finance are different from the past. They include – policy advocacy, harnessing big data and investing in digitization, management accounting and information, stakeholder value generation, governance risk and compliance (GRC), business partnerships, strategy building advisory, and communicating with stakeholders.
Speaking about the Automotive Industry’s evolution, Mr. Ajay Seth said, “The auto industry has evolved largely. Phase 1 (1940-1970) was characterized by License Raj and very few players; phase 2 (1970-1990) was characterized by Green Revolution, growing urban population, and low car penetration. This phase also saw the entry of Maruti Udyog Ltd. Post liberalization; the automotive industry was characterized by free entry, rising competition, growing regulatory landscape, formalized emission standard, and growing average per capita income. Today the industry is very competitive. There is a lower product life cycle, changing consumer trends, rising ESG activism, stringent regulatory landscape and dynamic business landscape.”
To pursue an active role in finance, students have to go beyond the essential finance rules. Students need to improve and invest in their soft skills. These include communication skills, developing leadership traits, having commercial and business acumen. Students also need to invest in technical skills – build software skills, learn about regulatory compliance, have in-depth knowledge of reporting standards, develop analytical skills – especially Business Intelligence and Data Analytics.
Mr. Ajay Seth concluded the session by discussing the necessary components that companies need to focus on to establish value. Environmental, Social, and Governance (ESG), is very important for companies. Consumers value a company that has a strong ESG practice. Components under ESG include CSR, Risk Management, controlling pollution and climate change, promoting anti-corruption, etc. Similarly, good corporate governance is essential for long-term success. Components under corporate governance include broad independence and constitution, executive compensation, shareholder rights, etc.
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