Latest News  

EY: Private equity CFOs rank operational efficiency as top priority, but need technology, talent management and outsourcing to achieve it

Private equity chief financial officers (CFOs), facing pressures including increased investor scrutiny and intensifying market competition, are seeking operational success via different pathways, according to the EY 2018 Global Private Equity CFO survey, Operational excellence: one path or many? released at the beginning of this year.

2018-02-28 16:45:39

The fifth annual survey of 110 private equity (PE) CFOs finds many firms, especially larger firms over $2.5 bn asset under management (AUM), consider technology transformation and talent development as key priorities, while smaller firms (under 2.5 bn dollars AUM) are also more likely to view outsourcing as an alternative.

Mike Lo Parrino, Partner, Ernst & Young LLP said: "While ideal operational maturity may be defined differently for private equity firms by size, it is clear that this needs to be their focus in order to compete for talent and investment capital. CFOs are increasingly confident that they will be taking major strides toward operational efficiency in 2018."

Private equity CFOs are looking for various ways to improve operational efficiency

The asset management industry as a whole continues to face investor pressures around fees, and the private equity industry has not been immune. Seventy-three percent of PE firms said they have experienced significant pressure from investors to reduce management fees, and as a result, 31 per cent of CFOs report they have experienced some form of margin erosion.

To protect their margins, private equity firms have had to take action. Nineteen percent of CFOs neutralized margin erosion by strategically cutting expenses and growing top line revenue. Growth remains a top priority for PE firms, with record fundraising in 2017. Therefore, it's no surprise that 55% of CFOs said they expect to raise a new fund in 2018, and 60% of CFOs expect the fund to be larger than the last fund raised.

To achieve operational efficiency and revenue growth, forward-looking CFOs are reevaluating where they want teams allotting time, preferring value-add activities such as investment portfolio analytics, technology transformation and investor relations. CFOs intend to steal time back from tactical, routine areas such as fund accounting, treasury and human resources.

Next-generation technology is a valuable opportunity for PE firms

CFOs said that they are still in the early stages of next-generation technology development for practically every finance function, especially management reporting (51 per cent) and valuation services (53 per cent). Similarly, while PE firms understand that harnessing and managing data is a top priority, 62 per cent of CFOs feel their data is not well-integrated across the organization.

There was also a marked lack of confidence from CFOs that their organization could easily implement new technology solutions. The most highly cited roadblocks they identified were updating fund accounting systems (83%) and management reporting solutions (75 per cent), followed by valuation (65 per cent), investor relations (64 per cent), and cybersecurity (59 per cent).

Despite the difficulties in incorporating new technology, over two-thirds of CFOs (66 per cent) said they currently invest or plan to invest in next generation technology. Firms are currently investing in emerging technologies such as digital data delivery (37 per cent) and advanced analytics (20 per cent). While they are just beginning to delve into robotic process automation (4 per cent), more CFOs said they are planning to do so in the future (14 per cent).

Talent management is still the highest strategic priority besides growth for PE firms
Despite larger firms' reliance on technology, talent management remains one of the highest strategic priorities for CFOs across the board, according to the survey. They see human capital as a valuable asset, but on average, 48% also identified talent attrition as a top risk. A trusted CFO with a capable team that exceeds investor expectations and upholds the firm's reputation is an important piece that investors consider during due diligence.

While an average of 41 per cent of CFOs said they prefer a 3:1 ratio of investment professionals to finance professionals, only an average of 20% said that this is their current ratio – which indicates many have yet to find the optimal technology or outsourcing solution as a viable option for their finance function. Likewise, in passing the leadership baton, CFOs are more confident that they have a strong pipeline of future investment leaders (76 per cent) than finance team leaders (54 per cent).

Although CFOs are trying to engage millennials and tech-savvy individuals to stay within finance functions, 35 per cent said it is difficult to attract talent in these functions. As a result, firms are increasingly offering other incentives beyond compensation to retain talent such as expedited title changes/promotions (62 per cent) and flexible work arrangements (51 per cent).

CFOs view outsourcing as a way to shift finance teams' routine responsibilities to more value-add activities

While full scope outsourcing is largely confined to firms that lack the scale to handle key business functions in-house, outsourcing enables smaller PE firms to gain operational efficiency and remain competitive without having to make significant investments in technology or talent.

If a "perfect" outsourcing model existed, CFOs believe that shifting routine finance areas such as fund accounting (67 per cent), tax (67 per cent) and regulatory compliance (62 per cent) to a third-party would be most valuable to their ongoing success. This allows internal employees to focus on client facing functions that require a more personal touch, with an average of 37 per cent of CFOs saying they will continue to handle investor onboarding internally, and 37 per cent saying they will do so for investor tax questions.

Cybersecurity breaches are a reality for which PE firms are preparing

In the pursuit of operational perfection, CFOs are raising awareness of a very real threat: cybersecurity breaches. The increasing sophistication of cybercriminals pose a risk to private equity firms, regardless of size. Twenty-two percent of private equity firms surveyed reported they have experienced a cybersecurity breach, but many more could have gone unreported. Over half (58 per cent) of those who had a breach considered it at least moderately serious.

To identify vulnerabilities and manage risk, most private equity firms (70%) rely on externally-developed intelligence products to monitor cybersecurity. In addition, firms are beginning to recognize the effectiveness of a multi-pronged approach, taking steps to improve employee training (87 per cent), email monitoring (80 per cent) and using external vendors to perform ethical hacks (80 per cent).


0 COMMENTS ^ Go back to Top
WRITE A COMMENT ^ Go back to Top
 
Your email address will not be published.
Nickname
Email
Comment
Validation Code
   
 
 
NEWS
Cushman & Wakefield Echinox: StreamWIDE joins the new IT hub created in the Timpuri Noi Square project

StreamWIDE, a company specialized in the software and telecommunications industry, realocates its office in Bucharest in the Timpuri Noi Square project, joining the new IT hub created in the business park devel

 Read Full article »
CBRE: Office deliveries expected to bring new stock of 635.00 sqm, Bucharest to reach 3.9 mln sqm modern office spaces

During 2020–2021 to approx. 635,000 sqm of modern office space are expected to be delivered on market, increasing the Bucharest modern stock at approx. 3.9 million sq m, a step closer to a new a threshold and

 Read Full article »
Uber opens at Bucharest the largest support center to drivers and business partners in CEE

Uber company launched this week in Bucharest the largest center in Central and Eastern Europe that offers assistance to drivers and business partners in Romania, a center where they can contact directly Uber re

 Read Full article »
Samsung and Orange Romania activated the 5G VR Live streaming at Untold Music Festival in Romania

Samsung Electronics and Orange Romania have successfully deployed a 5G New Radio (NR) network to demonstrate a series of 5G use cases at Untold Festival 2019, the largest annual dance music festival in Romania,

 Read Full article »
MVP Lab in Sibiu named as one of Europe's best in the "Ones to Watch" list at European Business Awards

Ropardo MVP Lab has been named as ‘One to Watch' in Europe in a list of business excellence published by the European Business Awards, one of world's largest and longest running business competitions.

 Read Full article »
Endava marks one year since IPO

Endava, one of the most important software companies, present on the local market with 7 delivery centers, reaches an almost double capitalization, 2.07 billion USD, on July 26, 2019, one year after listing. Th

 Read Full article »
Infosys opens cyber defence centre in Bucharest

Infosys, a global leader in next-generation digital services and consulting, announced the launch of its Cyber Defence Centre in Bucharest, Romania. The Defence Centre is an expansion of services delivered thro

 Read Full article »
QuEST Global completes integration of IT Six Global Services

QuEST Global, a global product engineering and lifecycle services company, has successfully completed the integration of IT Six Global Services SRL. QuEST Global acquired IT Six, a software engineering services

 Read Full article »
RE MAX Romania opens three more offices

RE/MAX Romania has expanded its network, adding three new offices – RE/MAX Partners in Cluj, RE/MAX Quality in Sibiu and RE/MAX Prestige in Targu Mures.

 Read Full article »
Microsoft and OpenAI form exclusive computing partnership to build new Azure AI supercomputing technologies

Microsoft Corp. and OpenAI have partnered to further extend Microsoft Azure's capabilities in large-scale AI systems, according to a release of Microsoft.

 Read Full article »
 
 
 
MOST READ ARTICLES
» Six reasons why you need a single clou...
» Coresi Business Park obtains the first...
» BSA study shows that IT security threa...
» Two new managers appointed in the Boar...
» TELUS International: Meeting Millennia...
» Ymens launches new ERP for Romanian mi...
» Stefanini: Using Agile in Brazil, or h...
» Jacek Levernes: Promoting Romania and ...
» New technologies will accelerate digit...
» BP expands Wipro contract, possibly by...
 
EDITOR CHOICE
Workplace of the Future conference to take place on November 20th at Bucharest

The Diplomat-Bucharest together with Outsourcing Today organize the 3rd Edition of WORKPLACE OF THE FUTURE, on 20th of November 2019, in Bucharest, at Capital Plaza Hotel.

 Read Full article »
Strategic Talent Acquisition at People Empowering Business Forum on October 30 in Bucharest

Latest trends like demographic upheaval, globalization, digital technology, and changing social values and worker expectations, are disrupting business models and radically changing the workplace. These are req

 Read Full article »
Informal IT School and UiPath launch an educational program for RPA development to start in October

Informal IT School announced a partnership with UiPath to launch an RPA development educational program of five months, 100 hours of courses, five days a week. The program will run in Cluj-Napoca.

 Read Full article »
Impact Hub Bucharest joins 3house to manage three coworking spaces in the city

Impact Hub Bucharest, a coworking spaces manager and developer of accelerator programs and events merged with 3house, a new concept of workplace launched in 2018. By this, Impact Hub reaches 3 locations and 6.7

 Read Full article »
JLL: Total office space in Bucharest to reach 3 million sqm

The second quarter of 2019 reconfirmed the increased interest for the office market in Romania. Over 115,000 square meters of office space were leased over this period at the national level, a value similar wit

 Read Full article »
Latest News  
 
about us | newsletter | contact | members area | GDPR policy
Copyright © 2015 by Diplomat Media Events Design by Diplomat Media Events