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
Berg Software Romania: Reasons to outsource your software services to Romania in 2019

According to an opinion published by Berg Software, a company that specializes in technology consulting, software development and nearshoring/ offshoring, for both SMEs and large enterprises, with offices in Ti

 Read Full article »
Arvato CRM Solutions rebranded under the name Majorel

Bertelsmann and Saham's customer experience business, "Majorel" has been recently launched, according to a press release of the company.

 Read Full article »
Banca Transilvania launches BT Open Banking platform dedicated to fintech companies

Fintech companies and start-ups in IT can test the new BT Open Banking platform (BT Api Store), launched by Banca Transilvania, for online integration with banking services such as: display of online balances,

 Read Full article »
Techcelerator and Google Developers Launchpad sign a partnership for growing startups in Romania

Techcelerator, the acceleration program in Bucharest and Cluj and one of the relevant catalysts of the local tech ecosystem's growth and development, announced a partnership signed with Google Developers Launch

 Read Full article »
Bogdan Pelinescu, president of ABSL: At least 6.000 people to be enrolled in outsourcing industry in 2019 in Romania

Around 6.000 professionals are estimated to be hired in the outsourcing sector in Romania this year, according to a study conducted by Romanian Business Service Leaders Association (ABSL) and consultancy compan

 Read Full article »
Tremend expands its expertise in the financial area, through a new unit coordinated by Stefan Patra

Tremend, one of the fastest growing Romanian software companies, enriches its team of professionals. Stefan Patra joins the team as Vice President of the newly established unit of Financial Services and will co

 Read Full article »
Infosys officially opens new digital innovation center in Romania

Infosys a global leader in next-generation digital services and consulting, announced this week it will be opening a new Digital Innovation Center in Bucharest, Romania at an event attended by local government

 Read Full article »
Atos supports the OneWeb Constellation Program primed by Airbus OneWeb Satellites

A new era of mass producing satellites was achieved when Atos supported OneWeb in the successful launch of six satellites on February 27th. Atos' contributions included providing all of the Assembly, Integratio

 Read Full article »
Romanian Startup Barometer by EY Romania: Half of entrepreneurs says fiscal and regulatory environment deteriorated in 2018

Mentality and fear of failure rank first in the top barrier for those who want to start and develop a business in Romania, according to the Romanian Startup Barometer by EY Romania, Impact Hub Bucharest and Sta

 Read Full article »
Tower 3 of Globalworth Campus is now under construction

After delivering the first two office buildings within Globalworth Campus complex, the company announced it started the construction of Tower 3, with a total leasable area of 35,000 sqm.

 Read Full article »
 
 
 
MOST READ ARTICLES
» Capgemini: Investing in people is the ...
» Molson Coors started to grow its busin...
» TELUS International Europe: Three ways...
» KPMG study: Big data needs a big re-th...
» Deloitte's Tech Trends 2019 report: B...
» Romania ranks above EU average in gend...
» The Outsourcing industry announces its...
» Committed to growth
» CBRE study: Post-millennials, the happ...
» ROMANIAN OUTSOURCING AWARDS FOR EXCELL...
 
EDITOR CHOICE
The voting procedure for the BRAND OF THE YEAR 2019 IN ROMANIAN BUSINESS SERVICES is open!

This is the fifth edition of the event and the second year to select the public's favorite brand in the business services BPO, ITO and SSC in Romania.

 Read Full article »
Romania ranks above EU average in gender employment gap

In Romania, the employment rate measures the number of people who have a job as a percentage of the working age population. This page provides - Romania Employment Rate- actual values, historical data, forecast

 Read Full article »
Steven Hunt, SAP SuccessFactors: Tectonic movements in the world of work

The world of work will be shaped by five tectonic movements – or global megatrends – over the next few years. As you may guess from the geological analogy, the effects could be dramatic.

 Read Full article »
EY: European companies are divesting to future-proof growth

According to the EY Global Corporate Divestment Study, 84 per cent of European companies surveyed intending to divest within the next two years (the majority planning to do so in the coming 12 months), executiv

 Read Full article »
Knowledge-sharing presentation on latest trends the industry deals, in the program of Romanian Business Services Forum and Awards

Part of the upcoming joint half-day event, Romanian Business Services Forum and Awards to be held at JW Marriott Hotel on May 7th, the discussion agenda comprises a complex Knowledge-sharing presentation on lat

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