Balancing Risk and Performance with an Integrated Finance Organization: Implications for Chemical and Petroleum Industry CFOs

In the globally interdependent marketplace, Chemical and Petroleum (C&P) organizations need to deliver consistently strong growth and big profits. They need to be adaptable to change and seize the opportunities, but they also need to be especially resilient to risk. Many companies let their business units and geographies conduct Finance activities according to specialized standards and provincial preferences. But, according to the IBM Global CFO Study 2008 (CFO Study) of more than 1,200 cross-industry CFOs and senior Finance professionals, including 51 C&P executives, this is often ineffective.

Rethinking business models, operations and the impact of risk
Nothing is constant in C&P businesses today - nothing, that is, but change. Markets restructure as new players enter the field, companies merge, joint ventures are launched or commodity markets spring up. And the cus-tomer influence is stronger. Emerging nations increase demand for fuel and products. Customers want more for less. Feedstock prices and availability of reserves are volatile. Operational complexity is high - as companies move into increasingly remote, technologically and logistically complex locales. On top of the business com-plexities are the geopolitical dynamics from facility investments in new countries, nationalization of companies by governments, political instability and health, safety, and environmental influences. And most of these changes can be tied back to globalization - the fact that the world is truly a single global market.

Global business presence is key
The notion of being “global” is evolving beyond a multinational structure or mere presence in different coun-tries and is moving toward the establishment of an interdependent network of worldwide assets with the abil-ity to optimize resources horizontally and vertically. Enterprises are transforming their business models to take advantage of this new way of defining a global presence. The CFO Study found current enterprise management structures (for example, holding companies, decentralized operating companies and integrated operating companies) show little differentiation in revenue and stock price growth in the global study sample across all industries.

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