Preparing Future-Ready Professionals

Case Study: Maersk - Future of the CFO and Finance Function

Presentation by Rex Gu, CFO, Maersk Far East Operations | November 2, 2020

A.P. Moller–Maersk is an integrated container logistics company headquartered in Copenhagen Denmark with 76,000 employees in 130 countries (2019 revenue $41 billion).

It serves customers with frequent departures on all major trade lanes and inland services. Its main business lines are ocean, logistics and services, terminals and towage, and manufacturing (e.g., producing containers).

Maersk’s finance function transformation journey started five years ago with the advancement of an ERP system that has allowed transactional work to be fully managed in global shared service centers in the Philippines, India and China (where the majority of its finance employees are based).

The retained finance team is positioned as a business function to drive value creation in a trusted business partner role.

How does the finance team drive value creation?

The finance team has achieved status as a trusted finance business partner in three areas:

Finance: “provide and recommend”

  • Indicators: own and drive performance management process and data
  • Information: Provide meaningful and relevant reports to decision makers
  • Insights: Tell the story behind the numbers and recommend next steps

Business: “ask and drive”

  • Inquire: ask, and ask again, to ensure deep understanding of the business
  • Impact: drive future business decisions by building and implementing models for decision makers
  • Integrity: be objective and always represent the interests of the entire business

Partner: “challenge and own”

  • Inclusion: be an active member of relevant business teams, meetings and committees
  • Influence: enable, challenge and influence decision makers by driving all performance management discussions
  • Integrate: sit with the business, be available, build relationships, take ownership and responsibility

The finance team’s involvement in value creation focuses on the tangible and actionable areas to create and protect value, and the specific activities they can perform as partners. The actionable areas are captured in a value creation framework for the finance team that provides inspiration and direction on

  • Where they need to contribute: identifying value drivers, commercial excellence, cost leadership and capital efficiency.
  • What they can contribute to: data, reports, analysis, insight, influence, and impact.

Rex provided a specific example in relation to achieving cost leadership. Key actions from the finance team captured in their value framework are in the table below.

 

Data

  • Control the data quality of the cost management tool
  • Own the use and business relevance of data from the tool
  • Own the use and business relevance of data for regular meetings such as daily stand-ups or weekly meetings

Reports

  • Provide weekly reports
  • Create visibility on cost saving programs’ benefits
  • Create visibility on various operational drivers

Analysis

  • Analyze profitability and trade-offs
  • Analyze relevant costs, sunk costs and total cost of ownership
  • Analyze and prepare forecast of cost developments
  • Analyze root cause analysis
  • Analyze empty stock and dwell time
  • Target setting for operational drivers
  • Analyze feeder utilization, inland positioning cost and impact of volume changes

Insight

  • Present cost developments, cost saving initiatives and changes in operational drivers, and reasons for changes
  • Present insights on cost of rolling containers and the relationship between volume changes and cost

Influence

  • Recommend actions to deliver cost saving programs
  • Recommend actions to improve operational drivers and efficiencies
  • Challenge procurement for improved contract terms
  • Recommend opportunities to optimize operations e.g., empty positioning
  • Challenge business to drive down cost by bringing reefer boxes as close to the vessel as possible

Impact

  • Drive follow-up on cost saving programs and cost saving projects
  • Drive initiatives to mitigate cost increases
  • Drive contract management compliance
  • Drive hub partnership in accordance with the governance model

 

Maersk Finance Talent Compass: Defining Talents

The finance talent compass helps identify required talent and potential future finance business partners and leaders. It covers five key areas:

  • Self-awareness – Leveraging awareness of strengths and weaknesses, whilst actively adapting own behavior to different situations.
  • Intellectual ability – utilizing mental abilities, whilst learning quickly and adapting to change with ease.
  • Strategic thinking – thinking ahead strategically by implementing strategic actions, hence mastering both complexity and ambiguity.
  • Followership – Creating strong followership and sense of direction through which collaboration is enabled and talents build.
  • Aspiration and determination – seeking more responsibility and complexity, hence embracing challenges, whilst being curious and emotionally stable.

Maersk’s Competency Framework

A competency framework identifies four core competency areas finance business partners need to create value:

  • Technical: planning and forecasting, business analysis, performance management
  • Partnering: communication, influence, relationships
  • Analysis: problem solving, creativity, decision-making
  • Leadership: myself, people, change.

Finance transformation has been accelerated by the mindset of experimentation which is encouraged throughout the organization.

Experimentation is how Maersk validates new ideas – de-risking the exploration of opportunities by validating the most fundamental aspects in terms of desirability, feasibility and viability of the project.

The key experimental mindset principles that its finance staff have embraced in their work are:

  • Starting small: running small-scale experiments to test new ideas
  • Learning fast: gathering customer feedback, collecting data and evidence to increase confidence in new products
  • Falling forward: learning to benefit from failed experiments and sharing this valuable knowledge.

Two examples of this mindset approach and the finance team’s digital and data competency below demonstrate how the finance team is delivering its value creation promise in business partnering.

Bringing data to decision making

Combining financial and non-financial data has been a priority in operational and contingency planning, particularly in relation to adverse weather events or COVID-19 related restrictions, and in enhancing procurement contracts.

In one example, Far East Finance has enabled the business to improve its operational planning by combining cost information related to changes in routing with customer experience data on customer preferences in terms of how they wish their containers handled. They have been able to provide data-driven insights in a “sandbox” environment to help operational managers apply their judgment in dealing with particular events in a way that maximizes customer satisfaction and optimizes cost . Finance team has truly breathed life to the culture of making informed decisions on daily basis.

In another example, Far East Finance has been able to help significantly reduce the $1.5bn procurement budget by implementing a digitized contract repository and algorithm that supports live scenario and sensitivity simulation and evaluation that helps support contract negotiations. A digital “total cost of ownership” tool was developed to:

  • ensure a standard presentation for all procurement projects,
  • extract data directly from the ERP system,
  • provide automatic scenarios, and
  • reduce maintenance and manual intervention.


The tool allows the identification of scope, targets and team members; variables sensitivity analysis; scenario simulation; and evaluation.

 

This was a presentation to the IFAC Professional Accountants in Business Advisory Group during their September 2020 meeting. See here for the full meeting report: Accountants Supporting Sustainable Recovery

 

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