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IN THIS
ISSUE April/May 2020
Volume 36, No. 2
44
32
Defying Definition
Digital transformation—a wholesale
revamping of infrastructure, systems,
and software—is as rare as it is
difficult.
By David McCann
32
40 Cover Story
Staying Healthy
Keeping accounting in order, closely
monitoring cash, and maintaining
productivity are essential to riding out
the coronavirus pandemic.
By Anne-Lise Dorry, Perry D. Wiggins,
and Kaumil Dalal
44
Special Report: Insider Trading
Fixing Some Holes

Reforms to insider trading law could
provide clarity, but they also could
lead to more aggressive prosecutions.
40 By Bob Violino
Cover: Getty Images; this page : Getty Images (3) April/May 2020 | CFO 1
0520 TOC.indd 1 4/8/20 2:24 PM

IN THIS
ISSUE
April/May 2020
Volume 36, No. 2
13
26
Up Front challenge of leading the troops while

things are falling apart.
4 | FROM THE EDITOR By Gary Burnison
6 | INBOX
20 8 | TOPLINE: Rapid response to Good CFO/Bad CFO
pandemic | Tech grabbing larger Here are the skills a CFO needs
share of shrinking budget | Aon to have to be an effective leader
to buy Willis Towers Watson | Fed organization-wide.
shores up commercial paper | Wells By Rob Krolik and Jeff Epstein
Fargo cancels ex-CEO's $15M stock
award | and more 24 | HUMAN CAPITAL
Don’t Leave Workforce
18 | ACCOUNTING Analytics Solely to HR
FASB Turns Up the Heat on People analytics remove much of the
Goodwill Impairment Testing guesswork behind key management
The accounting standard setter's and operational issues.
apparent lean toward allowing public By Jack Freker
companies to amortize goodwill
ignores key analytical and economic 26 | SUPPLY CHAIN
consequences. Coronavirus: Five Rules for
22 By Sandra Peters Growing Customer Loyalty
The supply disruption from the
20 | PEOPLE coronavirus offers historical
Want to Be a CFO? Consider opportunities for companies to build
Some Numeric Body Art or destroy customer goodwill.
Penn Mutual's CFO has had 10 jobs at By Jonathan Byrnes and John Wass
the company over 19 years, but it was
a chance exchange with the CEO that
put him on the right path.
By David McCann By the Numbers
22 | LEADERSHIP 48 | THE QUIZ
Crisis Management: The Food, Glorious Food
Overlooked Leadership Skill Test your grocery industry
Here are five ways to rise up to the knowledge in our monthly quiz.
2 CFO | April/May 2020 Getty Images (3)
0520 TOC.indd 2 4/8/20 2:24 PM

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FROM THE EDITOR’S
EDITOR
PICKS
◗ MANAGEMENT
We Saw It Coming Worried about how your

employees are handling
the coronavirus pandem-
As the financial crisis took seed, U.S. ic? “Uncertainty can be
compared to a virus itself,
banks and other businesses were running one that is only adding
scenarios for a bird flu pandemic. A Google fuel to the anxious fires
search provides the trail of evidence. The burning in many of us,”
writes Brown professor
headlines from the time include “World Judson Brewer in Harvard
Bank Says Flu Pandemic Could Cost $3T,” Business Review. Read
“Threat of Major Global Recession Tied to Bird Flu,” and “Not more of “Anxiety Is Con-
tagious. Here’s How to
Enough Countries Have Tested Their ‘Bird Flu’ Response.” Contain It,” on the HBR
website.
My point isn’t that with the coronavi- consequences, but that doesn’t mean
rus we again were focused on the wrong C-suites will spend the money to be ◗ THE ECONOMY
risks; it’s that we foresaw the possibil- ready. What CFO wants to explain to The coronavirus outbreak
ity of something like COVID-19. So, why investors that instead of adding $100 “will be a powerful argu-
were the United States government, the million to a share buyback program, the ment for doing things that
healthcare system, and many other sec- board of directors has voted to spend the reduce income inequality
tors caught flatfooted? Nicholas Nassim capital on preparing for a global flood? and that provide a social
Taleb says the pandemic doesn’t quali- safety net in the longer
Once the coronavirus outbreak is
fy as a “black swan,” because those are term so that our society is
contained and a couple of years go by,
unpredictable. He’s right. We imagined better-placed to deal with
the fear of pandemics will fade (if we’re
the scenario, even talked about it, but we these kinds of threats,”
lucky). A new threat will emerge. Perhaps
still didn’t take much action. says Benjamin Lockwood
Part of the reason coronavirus took a large-scale cyberattack that takes down
of the Wharton School.
us by surprise (if, indeed, it did) is that our nation’s energy infrastructure? Listen to the podcast,
“perceiving risk is all about how scary It doesn’t even matter if we get it “How the Pandemic Could
or not the facts feel,” according to risk right. Large corporations just don’t have a Affect Income Inequality,”
consultant David Ropeik. “A risk in the strong incentive to be catastrophe-proof. on the Knowledge@
future feels a lot less scary than a risk Some risks just cost too much to insure Wharton site.
that’s presented right now.” (Climate against; some you can’t insure against.
change proponents, take note.) We And, after all, when a widespread risk ◗ CREDIT
scoff at the people who get ready for is realized, the government is always Think your organization
Armageddon by building underground there—as it is this time—to socialize the can’t finance at a negative
bunkers in their backyards. losses. interest rate? Think again.
In business, risk management EA Markets’ experts David
departments may surface risks that Vincent Ryan Greenberg and William
have devastating human and economic Editor-in-Chief
Kloehn say companies
can use cross-currency
swaps to take advantage
of negative base rates in
some international mar-
CFO, Vol. 36, No. 2 (ISSN 8756-7113) is published six times a year and distributed to qualified chief financial officers by CFO Publishing
LLC, 50 Broad St., 1st Floor, New York, NY 10004 (editorial office). Copyright ©2020, CFO Publishing LLC. All rights reserved. Neither this kets. They describe how
publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior permission of CFO Publishing LLC. Direct requests for reprints to do so in “Avoiding the
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Floor on Negative Rates.”
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4 CFO | April/May 2020 Mark Bennington
0220 editor's note.indd 4 4/8/20 12:12 PM

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INBOX
◗“Fractional CFOs Provide Value

to SMBs” (CFO.com, March 6)
should not lose sight of the fact that technology,
ultimately, is not a strategy, but it is a powerful tool and
discussed the experience and platform to support strategy.”
flexibility that a fractional CFO can
add to an organization at a lower
cost than hiring a permanent CFO. ◗ CFO Gregory Law outlined his four-year ordeal battling
accounting fraud charges in “The SEC Falsely Accused
“One of the most common Me of Fraud” (CFO, February/March 2020).
mistakes that small companies make is to ignore the One reader, who responded to the story on Facebook,
financial side of the business by having a mindset that thought Law’s grievances were misdirected. “They
views it as not really contributing much to the growth didn’t falsely accuse you. You are responsible for the
of the company and costing too much,” one audience firm’s numbers. You are accountable. The SEC/DOJ is not
member wrote. “What they don’t realize is that a CFO the boogeyman or villain and your underlings aren’t out
who is truly forward looking will help make sure that to get you. You’re a victim of that firm’s management
growth is of high quality.” who tried to set you up. Your anger and lawsuits should
be directed at them. The title of your article should read,
◗ “Digital Transformation: Obsolete Concept or Rare

Feat?” (CFO.com, Feb. 20) explored the phrase “digital
“My Predecessor Set Me Up to Be His Fall-Guy.”
transformation” and whether it has any real meaning.

“Digital transformation is such a pervasive claim ◗ Corrections: In “Nailing the Number” (CFO, February/
March 2020), we said Philip Peck worked for streaming
in B2B software that a company can stand out by fitness class provider Peloton. In fact, he works for
eliminating it from its vocabulary,” a reader responded. Peloton Consulting Group.
“It seems that use of digital transformation in B2B In “Can Big Retailers Be Saved?” (CFO, February/
software marketing has intensified in the last year. March 2020), we said both Kohl’s and Best Buy accept
Hopefully, articles like this begin to curb its use.” Amazon returns. Only Kohl’s accepts the returns.
Another reader added: “Change brings opportunity In CFOs to Watch 2019 (CFO, October 2019), the
for those who embrace it wholeheartedly and digital photos of finance chiefs Brian Newman and Spencer
transformation is no different. [The] finance function Neumann were swapped.
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TOPLINE
CORONAVIRUS
STATS
OF THE Rapid Response to Pandemic
MONTH CFOs moved aggressively to conserve cash as the COVID-19
outbreak choked off economic activity. By Vincent Ryan
How much damage will the coronavi- to the survey said they were taking immedi-
rus outbreak and the accompanying eco- ate financial action.
nomic downturn do to companies’ sales? In Half (50%) of the finance executives indi-
a special CFO Research survey, more than cated that their organization was “scaling
half (53%) of finance executives responding back or delaying investments,” 47% working
said they estimated a drop of between 1% and on improving their liquidity position, and
HISTORIC 20%. But about 29% of finance executives nearly 20% shutting down or idling some
PLUNGE indicated the hit to sales would be larger—a operations.
falloff of between 21% and 50%. About 17% of But they also weren’t losing sight of the
respondents expected a drop of 41% or more. human cost of the global pandemic. Many
2,997.10 The results of the late March poll of CFO
readers were clear: U.S. companies face a
finance executives said protecting employ-
ees, worries about staff becoming ill, and
Points shed by
the Dow Jones rough couple of quarters ahead, at least. staff safety when dealing with the public
Industrial Average Weak consumer demand from social dis- were their top concerns.
on March 16 tancing and state and city lockdowns pun- Still, more than one-third (34%) indi-
ished some sectors early, but it didn’t take cated that they had no choice but to lay off
long for the effects to ripple across the econ- or furlough workers. But the total impact
12.93% omy. To survive the revenue and profit im- on headcounts was still unclear. About 41%
Percentage drop pacts, the 333 finance executives responding of respondents said they didn’t know how
of DJIA on March
16
Top of Mind
What are the top three most pressing concerns for your company’s executive
12.8% management team?
Percentage drop
of DJIA on 1929’s Length of economic 68%
downturn
Black Monday
Cash flow 66%
29,551.42 Weak customer demand 43%
DJIA’s record high Supply chain disruption 31%

(Feb. 12, 2020) Government policy/ 23%
legislative response
5,700.40 Access to capital

Rising input or 4%
20%
Points lost by DJIA commodity costs

from February 12 4%
Other
to March 9
0 10 20 30 40 50 60 70
Source: Yahoo Finance Multiple responses allowed
Source: March 26-April 2 CFO survey of 333 finance executives, “The Economy in Limbo”
8 CFO | April/May 2020
20April/May_Topline 8 4/8/20 12:01 PM

many employees ultimately would be were cutting employees’ salaries, and to low-interest business loans granted
affected. More than one-third (37%) 13% suspending executive bonuses. Sev- or guaranteed by the federal govern-
said 15% or less of their employee base eral indicated that there would be “no ment—a step Congress took for small
would be laid off. But about 18% of investment of any kind” in 2020. businesses with the Paycheck Protec-
respondents said layoffs and furloughs To bolster balance sheets, compa- tion program. Only 12% of respondents
would affect 20% or more of their nies were looking to outside sources. thought direct capital injections into
workforce. Fortunately, only 19% of the finance large employers in the hardest-hit in-
To keep existing employees paid executives said they were concerned dustries should be a first step.
and business alive, of course, the name about their access to capital. While the U.S. government was
of the game is to conserve cash. Cash About one quarter (26%) said they pulling out all stops to keep capital
flow was the second most-cited worry had drawn on an existing line of credit flowing, the biggest question on many
of executive management teams. One or tapped another source of liquid- CFOs’ minds was the length of the eco-
finance executive's response showed ity, and 24% were thinking about doing nomic downturn. Many were hopeful.
how aggressive companies were early so. CFOs have clearly learned from the A little less than half (46%) said
on: his organization was cutting mar- financial crisis of 2008: one CFO said they expected a “V-shaped” recovery,
keting spending in half; eliminating their organization was drawing down all or a return to normal economic activ-
any project spending; and reducing all available credit facilities and long-term ity in the third quarter of 2020. About
other expenses to “bare bones.” debt “in an orderly way to ensure maxi- 42% projected a longer period of slow-
Indeed, when asked what their com- mum liquidity is really available.” er economic activity, extending into
pany was doing to manage cash flow and Fewer executives (23%), at least in 2021 (a “U-shaped” recovery). And
cash balances for the next six months, late March, were concerned about the only 10% expected a sustained period
77% of finance executives said they government policy and legislative re- of recession, with economic activity
were halting all discretionary spending. sponse to the massive economic shock. not picking up until 2022.
Half (50%) of respondents were stretch- But many (51%) indicated that the Unit- The finance executives were sur-
ing out their accounts payables, 16% ed States should give priority action veyed from March 26 to April 2. CFO
ANALYTICS “Management expec-

tations in the com-
Tech Grabbing
ing year may outstrip
finance’s resources,”
Larger Share of
said The Hackett Group.
The high expecta-
Shrinking Budget
tions were helping to
drive an increase of
5% to 10% in the share
Is this the year the straw breaks the camel’s back? of the finance operat-
Each year, it seems as if finance is asked to do more ing budget dedicated to
with less. This year will be no different, according to technology. The forecast uptick was the first in 10 years,
the 2020 Finance Key Issues research from The Hackett said The Hackett Group. “Our research shows that execu-
Group. In fact, budget cuts will be remarkably more than tives are setting aggressive year-over-year targets for
the initial forecast. Most finance executives expected digital technologies’ adoption.” But the coronavirus out-
to see a 3.4% decline, on average, in finance’s operating break may throw these plans into disarray.
budget. At the same time, other parts of the organization Before the coronavirus, study respondents projected
continue to expect finance to provide more value to them. a rise of 26% in the adoption of data visualization tools,
The five biggest enterprise “asks” of finance in 2020, 24% in RPA implementations, 20% in migration to next-
all of which were ranked as highly important by a gen cloud-based core finance applications, and an 18%
majority of executives, were: increase in the adoption of advanced analytics solutions.
• Support enterprise cost-efficiency improvement Said Nilly Essaides, senior research director, finance &
• Support enterprise growth strategies EPM, The Hackett Group: “The encouraging news is that
• Enable/augment enterprise analytics capability more than 70% of the finance functions that have adopt-
• Enable enterprise digital transformation ed cloud-based solutions have been able to realize or
• Support enterprise customer-centricity exceed their business [objectives].” | V.R.
Getty Images (2) April/May 2020 | CFO 9
20April/May_Topline 9 4/8/20 12:01 PM

TOPLINE
M&A
Aon to Buy Willis

Towers Watson
Aon reached an agreement to buy Willis Towers Watson in early
March for about $30 billion in an all-stock deal.
Under the terms of the deal, Willis Towers Watson shareholders
Fed Shores up
would receive 1.08 Aon shares for each Willis Towers Watson share,
representing a 16% premium to Willis Towers Watson’s closing price
Commercial Paper
on March 6.
The deal would combine the world’s second and third-largest insur-
ance brokers and would create a combined firm larger than Marsh &
McLennan, which is currently the largest broker by revenue. The Fed revived the Commercial Paper
“The combination of Willis Towers Watson and Aon is a natural Funding Facility to ease funding pres-
next step in our journey to better serve our clients in the areas of peo- sures on companies amid the coronavirus
ple, risk, and capital,” Willis Towers Watson CEO John Haley said in a outbreak. The program was first introduced
statement. during the financial crisis to maintain the
The companies said the deal will result in pre-tax synergies and flow of short-term debt that companies
other cost reductions of $800 million by the third full year. It will pro- frequently use to fund everyday expenses
duce more than $10 billion in shareholder value, net of $2 billion in such as rent and payroll.
one-time transaction, retention, and integration costs, they said. The CPFF will offer a liquidity back-
Aon CEO Greg Case said the combined firm would be better stop to U.S. issuers of commercial paper
equipped to deal with intellectual property and cybersecurity risks. through a special purpose vehicle (SPV)
“When you think about what’s going on with clients, volatility in the that will purchase unsecured and asset-
world is increasing,” Case said in an interview. “All the traditional risks, backed commercial paper rated A1/P1,
just the traditional basket, is actually bigger than ever before, and then as of March 17, 2020, directly from eligible
now you’ve got all the non-traditional stuff kicking in.” companies. The Treasury will provide $10
Aon will keep its operating headquarters in London. John Haley will billion of credit protection.
become executive chairman of the combined company, which will be “The commercial paper market has been
led by Greg Case and Aon chief financial officer Christa Davies. under considerable strain in recent days
Haley had been set to retire next year. as businesses and households face greater
Last March, Aon confirmed it was considering an all-stock offer for uncertainty in light of the coronavirus out-
Willis Towers Watson before announcing it had scrapped the idea. break,” the Fed said in a news release. By
The transaction is subject to the approval of the shareholders of rolling over maturing commercial paper
both Aon and Willis Towers Watson. The companies have not com- obligations, it said, “the CPFF should
mented whether the coronavirus crisis will affect the merger. encourage investors to once again engage
The deal was expected to close in the first half of 2021. | WILLIAM SPROUSE in term lending in the commercial paper
market.”
“While the Fed has already taken several
measures in recent days to get liquidity to
banks, there are worries banks will be re-
luctant to pass that cash onto real econo-
my businesses,” Reuters said.
Commercial paper loans generally ma-
ture in fewer than 270 days, with borrow-
ers typically pledging future accounts pay-
ables or inventories for cash. The Fed’s
purchases will last for one year unless the
Fed extends the program. | MATTHEW HELLER
20April/May_Topline.indd 10 4/7/20 3:48 PM

CREDIT
operations once the
economy reopens,”
Fitch Lowers Outlook

they added.
Regulators have
for Consumer Finance

been encouraging
financial institutions
to work with
Fitch Ratings lowered its credit outlook for the consumer customers to soften
finance sector, including credit card lenders, to negative the financial toll
from stable, warning that lenders’ credit performance could of the coronavirus.
“deteriorate rapidly” as a result of the coronavirus crisis. Among other
The credit rating agency said it expects most consumer moves, Ally Financial is allowing auto loan holders to defer
finance companies to follow the lead of several auto lenders payments for up to 120 days with no late fees. Fifth Third
and invoke loan forbearance policies similar to those offered Bank is waiving payments on mortgages and car loans for 90
in the wake of hurricanes Harvey and Irma, which hit parts days.
of Texas and Florida in 2017. Fitch noted that the $2 trillion emergency relief package
“Fitch believes these forbearance policies are prudent, signed by President Trump allows lenders to defer loan
given the unique nature of the crisis, and should help payments without having to categorize the loans as troubled
mitigate more severe credit loss implications, particularly debt restructurings, which would trigger special regulatory
for customers that can get back to work more quickly,” Fitch reporting, tracking, and accounting requirements that can be
analysts said in a news release. burdensome for lenders.
However, once forbearance expires, “credit performance “Still, the increase in forbearance will temporarily sup-
for consumer finance companies could potentially press charge-offs that will be recognized in future quarters,
deteriorate rapidly, particularly if displaced workers are creating a distortion in asset quality metrics beginning in the
unable to secure employment and businesses cannot resume second quarter of 2020,” Fitch said. | M.H.
COMPENSATION $1.5 million in base salary from 2019.

When Sloan stepped down in March 2019, the board chair
Wells Fargo Cancels

said he had the “full support of the board.” But as the Char-
lotte Observer reports, “Many had questioned whether an
Ex-CEO's $15M
insider like Sloan could fix a bank with the systemic cultural
issues Wells had. It appears Wells Fargo’s board now believes
Stock Award
that the skepticism was likely well-founded.”
Sloan tried to move the bank past the scandal by, among
other things, investing millions of dollars in media campaigns
Former Wells Fargo CEO Tim Sloan has lost a $15 million that touted its “re-establishment.”
stock bonus he received while he was attempting to restore But in a report released in February, House Republicans
the bank’s fortunes in the wake of its fake-accounts scandal. said Wells Fargo seemed more focused on making it seem like
Wells Fargo disclosed in a regulatory filing that it had it was making progress on handling the scandal than actually
clawed back the February 2019 award, saying it was condi- making the changes that regulators asked for.
tional on Sloan’s “role and responsibility “Tim Sloan made a series of incomplete
for the company’s progress in resolving and overly optimistic public statements about
outstanding regulatory matters.” the bank’s progress,” the report found. When
The filing said Wells Fargo did not award Sloan said in 2018 that he expected the Federal
Sloan an annual incentive for 2019 after tak- Reserve to lift its cap on the bank’s growth in
ing into account the timing of his March the first part of the next year, “there was no
2019 resignation, the bank’s performance, basis for such an optimistic prediction.”
and the status of its risk management objec- Sloan resigned after providing testimony
tives and outstanding regulatory matters. about compliance at a Congressional hearing.
The moves left Sloan, who also did not His testimony was contradicted by the Office
receive any severance pay, with only his Wells Fargo CEO Tim Sloan of the Comptroller of the Currency. | M.H.
Getty Images(3) April/May 2020 | CFO 11

TOPLINE
ing the deal value to about $31 billion.
“The current global health crisis
M&A and resulting macroeconomic and
market turmoil caused by COVID-19
Xerox Drops
have created an environment that
is not conducive to Xerox continu-
HP Hostile
ing to pursue an acquisition of HP
Inc.,” Xerox said.
Takeover Bid
The company also said it was ending
its proxy fight to take control of HP and printing industry.
took a parting swipe at the HP board. “Xerox’s move to buy a compa-
After a five-month offensive, Xerox “The refusal of HP’s board to mean- ny more than three times its size was
is dropping its hostile takeover bid ingfully engage over many months and always going to be a challenge, but at the
for HP due to the turmoil in the finan- its continued delay tactics have proven outset the company was in a stronger
cial markets caused by the coronavirus. to be a great disservice to HP stockhold- position than it is today,” The Wall Street
Xerox had sweetened its cash-and- ers, who have shown tremendous sup- Journal reported. “It had cash coming
stock offer for HP to $24 per share in port for the transaction,” Xerox said. in from the sale of its joint venture with
February, representing an equity value A merger would have combined two Fujifilm Holdings and its stock had been
at the time of roughly $34 billion. HP tech legends, with Xerox better-known rising as it continued to cut costs.”
rejected the offer, saying it “meaning- for large printers and HP bigger in PCs Since the virus outbreak, HP’s mar-
fully undervalues HP and dispropor- as well as desktop printers and sup- ket value has fallen to around $25 bil-
tionately benefits Xerox shareholders.” plies. Xerox claimed the combination lion, just below where it had been
Since then, the market caps of both could yield annual cost savings of more before Xerox’s initial bid emerged.
companies have declined as the corona- than $2 billion that would help the Xerox’s has roughly halved, falling to
virus pandemic has intensified, reduc- companies weather the decline in the around $4 billion. | M.H.
REGULATION was “sufficiently tailored to its stated purpose.”

“The exchange has not demonstrated why a 4-millisecond
Cboe 'Speed Bump'

delay is sufficient time to effectively protect a wide range
of market participants from the latency arbitrage issue,” the
Runs Into SEC

commission said.
According to The Wall Street Journal, “the SEC has put
Road Block
the brakes—at least for now—on the proliferation of speed
bumps on U.S. stock exchanges” since 2016, when the commis-
sion allowed startup IEX Group to become a full-fledged stock
The U.S. Securities and Exchange Commission has rejected exchange.
a controversial rule change that would have allowed Cboe IEX imposed a brief delay on all orders to buy or sell
Global Markets to put a split-second “speed bump” in the way shares. Cboe’s delay would only have applied to orders
of an ultrafast trading strategy known as “latency arbitrage.” that came to EDGA seeking to be immediately executed.
Cboe in June proposed delaying incoming execut- Supporters of the CBOE proposal said it would blunt
able orders on its EDGA exchange so market makers the advantage of high-frequency traders that use
would have four milliseconds to cancel or modify costly technology such as cross-country micro-
their orders in response to market-moving infor- wave networks to execute trades as quickly as
mation. The proposal sought to address concerns possible.
over latency arbitrage, a strategy used by high- But the SEC said Cboe had failed to show
frequency traders to execute orders on slightly that “liquidity takers use the latest micro-
out-of-date quotes. wave connections and EDGA liquidity
But amid opposition from asset managers providers use traditional fiber connec-
and electronic trading giant Citadel Securities, tions,” and that “liquidity takers are able
the SEC issued an order in late February finding the proposal to use the resulting speed differential to effect latency
was unfairly discriminatory and Cboe had not demonstrated it arbitrage on the exchange.” | M.H.

RETIREMENT PLANS stingy when contrasted with the $37.5 billion and $28.1
billion contributed in 2017 and 2018, respectively. Those
Plan Sponsors Slash

amounts—much of which was attributable to tax advan-
tages—were the first- and third-highest annual totals in
Contributions
the 15-year period.
With pension funding stabilization still in place, few
sponsors have significant required contributions for their
Large corporate pension plan sponsors in 2019 U.S. plans, Russell noted. And given exceptionally strong
contributed the fewest dollars to their asset returns in 2019, sponsors saw little need to
plans since recession-plagued 2008, ac- make discretionary contributions, despite his-
cording to Russell Investments. torically high Pension Benefit Guaranty Corp.
In 2005, Russell began to track a group premiums that penalize the sponsors of un-
of 20 publicly listed U.S. companies with derfunded plans, the investment firm added.
defined benefit (DB) pension plan liabili- Russell forecasts that the contribution
ties exceeding $20 billion, dubbing it the level will continue to be low this year among
“$20 billion club.” While several other $20 billion club members, at $13.9 billion. But
plans also now have liabilities over that that was before the outbreak of coronavirus
threshold, Russell continues to focus on the in the U.S.
original 20 club members to facilitate observa- The total funding deficit for the 20 plan spon-
tions and comparisons. sors increased last year to $151 billion, from $137 billion
Last year’s plan contributions by the 20 companies in 2018. Aggregate assets at year-end were $830 billion,
totaled $11.9 billion, compared with $11.8 billion contrib- while liabilities totaled $981 billion.
uted in 2008, which was the lowest annual level across The deficit spike was largely a result of lower interest
the 15 years since the $20 billion club was established. rates that translated to a big hike in future plan obliga-
The contribution level in 2019 looked particularly tions. | DAVID MCCANN
LEGAL Currently, in addition to Illinois, only California, Tex-

as, and Washington have biometric privacy laws, which
Facebook Settlement
are intended to regulate the collection of computer data
based on people’s identifying physical characteristics.
May Trigger More

The Illinois law, enacted in 2008, is the oldest among
them and the most stringent, according to Canty. It has
Privacy Laws
stirred controversy because
it’s the only biometric privacy
statute that allows consum-
Facebook’s $550 million settle- ers to bring suit for monetary
ment of a class-action lawsuit in damages if their rights are
Illinois over alleged privacy viola- violated.
tions may lead to a wave of privacy Hundreds of lawsuits have
legislation across the country. been brought in the state un-
The largest-ever cash settlement der BIPA. In fact, some observ-
resolving a privacy-related issue will ers argued that the law has
establish a fund to be shared by Il- unleashed excessive litigation
linois Facebook users. In the case, Patel v. Facebook Inc., and may have a chilling effect on technology innovation.
plaintiffs alleged that the social media giant violated the However, it’s working as intended, said Canty.
state’s Biometric Information Privacy Act (BIPA) by its “Illinois wanted a private right of action and has got-
use of facial recognition software without users’ consent. ten results,” he said. “We all want to move forward with
Michael Canty, a partner at law firm Labaton Sucha- innovative technology, but consumers need to have pro-
row who served as plaintiffs’ co-lead counsel, predicts tections with teeth.” He added, “As technology advanc-
that the settlement will be a point of reference for law- es, corporations must be mindful of the privacy of their
makers in many other states as well as Congress. customers.” | M.H.
Getty Images(4) April/May 2020 | CFO 13

TOPLINE
suffer today,” it said.

CAPITAL MARKETS The SEC had asked ex-
changes in October 2019
Nasdaq Offers
for suggestions on how to
reduce market complex-
Exclusive Home for

ity, saying a suspension or
elimination of UTP may be
Small Cap Issuers

a worthwhile idea.
As S&P Global Market
Intelligence reports, the eligible companies “are considerably
Nasdaq is seeking to become the exclusive trading venue smaller than the household names that represent 53% of Nas-
for the small cap companies that are listed on the exchange. daq’s listed securities,” accounting for 2.6% of the total mar-
Currently, small caps have “unlisted trading privileges” ket capitalization of all of its listings.
(UTP), which allow their shares to be traded on any of the 13 But Nasdaq believes its proposal would encourage more
national securities exchanges. small to midsize companies to tap the public equity mar-
But in a letter to the U.S. Securities and Exchange Com- kets, citing its First North Growth Market in the Nordic
mission, Nasdaq said companies that have an average daily states as a model.
trading volume of less than 100,000 shares in each of the pri- Rival exchanges, however, are concerned that listing ex-
or six months should be allowed to opt out of UTP and trade changes would have outsized influence over the stocks ex-
exclusively on Nasdaq. clusively available on their venues.
“Nasdaq proposes to establish a tier nestled within the “[Nasdaq’s] proposed fix is to limit trading to a single
U.S. public equity markets that is better tailored and far national securities exchange, offering a single market struc-
more hospitable to thinly-traded securities than is the all- ture,” Cboe Global Markets told the SEC in December. “The
purpose, undifferentiated market environment in which they irony of this solution is not lost on Cboe.” | M.H.
RISK MANAGEMENT The new standard also increased the proportion of

companies with foreign exchange (FX) hedging pro-
More Companies Opt

grams that applied hedge accounting to them, from 63%
in 2015 to 70% in 2018.
for Hedge Accounting

Hedge accounting allows companies to avoid earn-
ings volatility associated with the fluctuating value of
assets underlying derivative contracts ne-
Early adopters of the new hedge ac- gotiated with financial institutions. Com-
counting standard that took effect panies enter into them for the purpose of
for public companies’ 2019 fiscal years hedging financial exposures. Gains and
drove an uptick in the use of hedge ac- losses on derivatives are deferred into
counting in 2018, research shows. “other comprehensive income,” a balance
Chatham Financial’s analysis of sheet line item reflecting as-yet-unreal-
corporate hedging in 2018 indicates ized financial items.
that 53% of U.S. public companies with The company does not then realize
commodities hedging programs ap- such gains and losses until the derivative
plied hedge accounting to them. contract is settled, which can be years af-
That was up from 45% in 2015, when ter it was entered into.
Chatham last performed the research. However, not all companies that hedge
“The most substantial change in the hedge account- financial exposures use hedge accounting, which can
ing standard is related to commodity hedging,” Chatham be complex and challenging to apply correctly.
said in its report on the study, which looked at the hedge Many companies with financial exposures don’t
accounting practices of 1,402 companies. “Companies even hedge. For example, among the 91% of companies
can now look to identify specific components within com- facing interest rate risk, just 43% addressed it by
modity contracts to apply hedge accounting.” hedging. | D.M.
14 CFO | April/May 2020 Getty Images(3)

LEGAL Wednesday that actual knowledge “requires more than
evidence of disclosure alone.”
U.S. Supreme Court

Intel’s contention that Sulyma had the requisite
knowledge because he effectively held the information in
Sides With ERISA

his hand would turn the law into “what it is plainly not: a
constructive-knowledge requirement.”
Plaintiff
The case has been closely watched by retire-
ment plan sponsors and providers. Allowing
Sulyma’s suit to proceed “would mean that it
The U.S. Supreme Court rejected a would not be enough to provide plan docu-
timeliness challenge to an ERISA ments, but sponsors would have to prove
class action against Intel, potentially participants read them, and perhaps prove
making it easier for retirement plan that they also understood them,” William
beneficiaries to sue administrators for Delany, an employment attorney at Holland
investing plan funds imprudently. & Knight, told BenefitsPRO.
The plaintiff in the case, former Intel “That’s a much harder burden of proof to es-
engineer Christopher Sulyma, alleged Intel’s tablish the three-year limitation period,” he noted.
plan administrators breached their fiduciary duty Sulyma testified he did not “remember reviewing”
to beneficiaries by over-investing in alternative assets the investment disclosures while he worked at Intel and
such as hedge funds, private equity, and commodities. that he was unaware that his plan contributions had
Intel argued the case was untimely because Sulyma been invested in hedge funds or private equity.
filed it more than three years after he had “actual knowl- Intel urged the Supreme Court not to allow an ERISA
edge” of its investment strategy from notices it had plaintiff to sustain a lawsuit simply by asserting “that he
posted on the NetBenefits website and other disclosures. did not read the relevant plan documents, or simply that
But in a unanimous decision, the Supreme Court ruled he cannot recall whether he saw them.” | M.H.
Access valuable
finance information.
Anytime.
Anywhere.
Download the CFO Mobile App Today
April/May 2020 | CFO 15

Economic Development ADVERTISEMENT
A Capital for Capital

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commercial bank- access), while executives are able to see,
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over, Iowa’s high- to mid-size businesses, Cowbell’s found-
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lowest state insurance premium taxes in or considering expansion to Iowa.* from across the U.S., as well as Canada,
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ronment to expand, relocate, or launch we were founded in 1879. It has remained many, Serbia, Brazil, and Australia.
a business. And though a wide variety of so, even as we evolved into a global com-
industries have found success in the state, pany, because of the access to a talented, Iowa’s Key Business Advantages
the financial services and insurance indus- highly productive labor pool,” said Dan • Iowa was ranked first in workforce
tries have a longstanding and lucrative Houston, chairman, president, and CEO, quality. (Chief Executive, 2018)
history in Iowa. Home to 6,700 finance and Principal Financial Group. “Iowa is afford- • Iowa has the second-lowest cost of doing
insurance companies and boasting GDP able, with great education and a quality business. (Business Facilities, 2017)
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of Economic Analysis, 2018), Iowa is one also emerged as a hub of innovation, an- second among the 50 states. (U.S. Bureau
of the nation’s top hubs for insurance and other reason companies should have Iowa of Economic Analysis, 2017)
finance, attracting companies such as at the top of their list as they look to start • Iowa has a premium tax of 1 percent—
Nationwide, Prudential, Principal Financial up or expand a business.” one of the lowest rates in the nation.
Group, and Transamerica, each of which • Iowa does not assess any additional sur-
contribute to Iowa’s vibrant economy. Accelerating Insurance Innovation taxes or income taxes on insurance carriers.
Beyond the operational advan- Building upon the state’s extensive history • Iowa has the fourth-highest
tages Iowa offers—including a central and experience in the insurance indus- concentration of commercial banking
geographic location that can conveniently try, Iowa is the birthplace of numerous employees of any state.*
serve clients on both coasts—two key advancements in insurance technology • Four Iowa metros are in the top 25
qualities set Iowa’s finance and insurance (insurtech) that are showing early signs nationally for concentration of financial
industries apart from the rest: a skilled of revolutionizing the industry. A num- activities employees.*
workforce and an unwavering commit- ber of these advancements can trace their • Iowa has the second-highest concentra-
ment to innovation and growth. origins back to Iowa’s Global Insurance tion of insurance workers in the U.S.*
Accelerator (GIA), the world’s first busi-
Bankable Talent ness accelerator geared toward insurtech. These qualities, combined with a low
Iowa businesses benefit from advanced Founded in 2014, GIA is a mentor-driven cost of business and a high quality of life,
technologies that help unleash the creative program designed to foster innovation create a perfect climate in Iowa to culti-
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Iowa’s talented workforce. Currently, more companies with startups driving innova- and financial services industries.
than 94,000 professionals drive Iowa’s tion for the global insurance industry for a ____________________________________
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*Source: Bureau of Labor Statistics, 2018

0420 Iowa advertorial.indd 16 4/1/20 11:11 AM

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renowned for other fields too. In fact, Iowa is one
of the nation’s top destinations for finance and
insurance, with 6,700 companies and more than
94,000 talented professionals across the state.
But make no mistake, there’s plenty of room to grow.
And with one of the lowest insurance premium
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low real estate costs and a pro-business regulatory
environment, it’s easy to see why the smart money
is on Iowa. Learn more at IowaEDA.com.
/ Ames, IA
Iowa.indd 7 3/31/20 2:38 PM

ACCOUNTING
& TAX
FASB Turns Up the Heat on

Goodwill Impairment Testing
The accounting standard setter's apparent lean toward allowing public companies to
amortize goodwill ignores key analytical and economic consequences. By Sandra Peters
The Financial Accounting Standards Board has elevated would be a problem, because it would
schedule the write-off of this goodwill
goodwill accounting to the top of its agenda, after political against equity.
pressure stemming from high-profile company failures in The letter also highlights the $560
the U.K., notably Carillion’s, pushed the International Ac- billion impact amortization would
have on S&P 500 earnings, and that for
counting Standards Board to address the topic. ¶ In the United some companies goodwill amortiza-
States, the significant goodwill write-offs at General Electric tion would exceed their profits over
the 10-year period.
and Kraft Heinz have been political
fuel for FASB. The standards body was Zero-Information
already considering whether to revisit Approach
the idea of permitting or requiring pub- Amortization of good-
lic companies to amortize goodwill. will presumes that it is a
Going a step further, last July wasting asset and sched-
FASB issued an Invitation to Com- ules its write-off. If FASB
ment (ITC) that assumed the high allowed public compa-
cost of goodwill impairment testing nies to amortize, inves-
exceeded the benefit to investors, and tors wouldn’t be able
that change was necessary. The ITC to distinguish between
referred to the current private com- good and bad manage-
pany accounting for goodwill, which ment as related to their
allows amortization over 10 years, acquisitive activities.
again and again. It would appear that The Dramatic Impact on When companies do an impair-
FASB is leaning in that direction. S&P 500 Financials ment, which is the current approach
We think the debate in the U.K. The ITC didn’t put the impact of a to goodwill accounting, they’re writ-
and the politically appealing nature change in goodwill accounting into con- ing off some goodwill because the
of applying the private company text. In 2018, U.S. public companies had forward-looking cash flows of the
approach in the U.S. have resulted in $5.6 trillion of goodwill on their books. acquired entity don’t look good. That
FASB undertaking this issue without That amounted to 6% of their total as- goes to the income statement. It says
considering the analytical and eco- sets and 32% of their equity. S&P 500 something to an investor or analyst.
nomic consequences. companies accounted for $3.3 trillion of But with amortization, the income
Further, FASB has not justified a such goodwill, representing 9% of their statement would not change.
change in the definition of goodwill, total assets and 41% of their equity. Further, amortization of goodwill
which carries the presumption that CFA Institute’s comment letter would lead to greater proliferation of
it would be a wasting asset if amor- highlights the S&P 500 companies with non-GAAP profit measures. Companies,
tization were adopted. Nor has FASB the largest goodwill balances (see list professing that investors want it, would
justified the basis for a change in the on page 19) and notes that 25% of S&P eliminate amortization, indicating that
prior logic that supported impairment 500 companies have goodwill in excess earnings without amortization is a more
testing. of equity. Changing to amortization useful tool and simultaneously demon-
18 CFO | April/May 2020 Getty Images
20_april_Accounting.indd 18 4/6/20 10:57 AM

strating how amor- A Globally Consistent Solution S&P 500 Companies
tization has made In a world where capital flows freely With Goodwill Balances
GAAP reporting across borders, investors need glob-
less relevant. ally consistent information on the
Exceeding $20 Billion*
Ultimately, accounting for goodwill. While com- (in billions)
there is no rel- panies prepare financial statements as
evant information required by their jurisdiction of domi- AT&T $146.3
for investors in cile or listing, investors make invest-
goodwill amor- ments across borders and should not Bershire 81.0
: Sandra Peters Hathaway
tization. We call be left with the job of reconciling dif-
it the “zero-information approach.” By ferent accounting rules for goodwill CVS Health 78.6
contrast, when impairment is taken in a under U.S. GAAP and International
timely manner, it provides investors with Financial Reporting Standards. Bank of America 68.9
insight into whether management’s ac- If investors are those for whom Comcast 66.1
quisitive activities were successful. accounting standards are prepared,
Impairment testing done properly their need for value relevance, consis- Unitedhealth 58.9
also provides forward-looking informa- tency, and comparability should have Group
tion to both the company and investors primacy.
Pfizer 53.4
and gives recognition to both the finite
and indefinite elements of goodwill. Backward or Forward? United Technologies 48.1
Costs and complexity surrounding In a world where intangibles are be-
impairment testing have surfaced as coming even more important to the JPMorgan Chase 47.4
issues that augur for the amortization economic value of U.S. public compa- Allergan 45.9
of goodwill. This argument rings false. nies, the overlay of a rote amortization
While we recognize that impairment process would be taking a step back to Cigna 44.5
tests can be challenging to perform, the accounting of 20 years ago.
Oracle 43.7
especially if acquisitions are substan- It would reduce the relevance of
tially integrated with existing business- financial statements as well as the Microsoft 42.0
es, managements should be providing professionals that support their pro-
their boards with assessments of the duction. For investors, the value of Procter & Gamble 40.2
performance of the acquisitions under- accounting and audit profession- Medtronic 39.9
taken. Accordingly, there should not be als lies in their skill at evaluating
substantial additional cost for providing estimates and issuing judgments in Kraft Heinz 36.5
this information to investors. impairment testing. Such skills and
International 36.2
Investors are unified in their view value are likely to lay fallow with rote
Business
that what they want from goodwill processes such as amortization that Machines
assessments are measures of the perfor- can increasingly be automated.
mance of acquisitions. For that reason, FASB must step back and evaluate Dupont de 34.4
we believe requiring new disclosures— the economic impact of impairment Nemours
something IASB is debating—likely testing relative to its cost. In our view,
General Electric 33.9
is a better first step than abandoning improved disclosures—and a survey
impairment testing for amortization. on the cost of impairment testing— Cisco Systems 31.7
If a zero-information amortization would provide investors, who are
approach were adopted, we would rec- paying for impairment testing, as well Walt Disney 31.2
ommend that it be combined with a as standard setters with more useful Walmart 31.1
range of objective, quantified, and com- information in evaluating the way for-
pany-specific disclosures that permit ward on this issue. Johnson & Johnson 30.4
independent conclusions about acquisi- The magnitude of goodwill balances
Charter 29.5
tions. Immediate write-off of goodwill warrants careful consideration of the Communications
is another option that we support over impact of a switch to amortization. CFO
the amortization approach, given that CentryLink 28.0
amortization would be a routine non- Sandra Peters is head of the financial
*End of 2018
GAAP adjustment and distort trends. reporting policy group at CFA Institute.
Courtesy of the author April/May 2020 | CFO 19
20_april_Accounting.indd 19 4/7/20 3:50 PM

PEOPLE
Want to Be a CFO? Consider

Some Numeric Body Art
The new finance chief of Penn Mutual has had 10 jobs at the company over 19 years,
but it was a chance exchange with the CEO that put him on the right path.
By David McCann
There are all kinds of ways to get on an upwardly mobile track an open hedging quantitative analysis
position.
that may culminate in a CFO appointment. ¶ Even getting a He landed the job. “I actually found
tattoo. ¶ Just ask Dave Raszeja. He’s got one on his right arm it a little daunting to go there and talk
to those folks,” he says. “It was a whole
that sports the first 100 digits of pi. ¶ “Getting the pi tattoo new area of financial mathematics that
was probably one of my better career moves,” says Raszeja, I hadn’t been exposed to. But they did
a fantastic job teaching me about de-
who began his first CFO role on March Raszeja recalls. “He said that was in- rivatives and quantitative analysis.”
1 at Penn Mutual Life Insurance, a $3.3 teresting, because he’d been thinking Raszeja was taken with the lively
billion revenue company that manages the company could do a lot more with atmosphere in the investment depart-
some $33 billion in assets. mathematics to become more data ment, compared with the more staid
He’d been at Penn Mutual for four driven and analytically focused.” one in actuarial. It was often loud and
years when, in 2005 at age 30, he His colleague thereupon said, “Hey, raucous. There were lively congratula-
donned the tattoo to memorialize his this guy’s got pi tattooed on his arm.” tions after good trades were made. He
passion for mathematics. A few years Chappell asked to see it, so Raszeja and the other young quants learned
earlier he’d been enthusiastically pur- rolled up his sleeve. about derivatives in part by creating
suing a graduate degree in theoreti- The CEO then relayed the story to derivative “contracts” between them
cal math, studying such knotty topics the head of Penn Mutual’s investment and betting pennies on stock market
as algebraic topology. After he got his function, who contacted Raszeja and results. “It was a fast-paced mindset,”
degree, though, he switched his career asked him to come and interview for he says.
focus. He already knew he enjoyed the
“At some point it became obvious stimulation of taking on different roles.
that I was going to have to work much He’d left the actuarial area a couple
harder or become much smarter, and years earlier to fill in for a recently
neither seemed imminent,” Raszeja departed employee in reinsurance ad-
says. “I had to get a job, so I decided to ministration. It was largely a clerical
follow the actuarial career path.” job, involving the preparation of billing
That’s what brought him to Penn reports, for example.
Mutual. By 2005, he’d been an actuary- “It might seem that it was a snoozer,
in-training for most of the past four but I found I could help people design
years. One day, while having lunch slick spreadsheets to get the billing
in the company cafeteria with a col- done [more quickly],” Raszeja says. “It
league, then-company CEO Robert was pretty cool to make that sort of
Chappell, who had a habit of randomly impact early in my career.”
sitting with people at lunch, plopped He didn’t specialize in staying in
down next to them. roles for long periods of time. Rasze-
“He asked what we did, and we ja has performed 10 different jobs at
explained that we were actuaries,” : Dave Raszeja Penn Mutual. The headquarters build-
20 CFO | April/May 2020 Courtesy of the author
0520 Dept. People.indd 20 3/31/20 2:50 PM

tality management. It was a The ethics position was important
bit “wonky,” he says, but he for his career. While the jobs he’d had
spent ample time with the before were analytical in nature, this
company’s lead underwriter, was largely a people-focused post. “It
from whom he learned a lot really set me up to hone my leadership
about sales. skills for the future,” he says.
There were also some In 2019, while still chief risk officer,
granular but interesting Raszeja was named senior vice presi-
issues to handle. At the time dent of financial management and
the company Raszeja was designated as the successor to CFO
debating whether to allow Susan Deakins, who was planning to
life insurance customers retire in early 2020. “She’s a mentor
to smoke “celebratory and I’ve been looking over her shoul-
cigars”—as one might do, der,” he says. “She’s been very gener-
say, when playing golf once ous with her time and has set me up
a month—without being for success, so it should be a smooth
charged smokers’ rates. “It
transition.”
was an interesting job on the
The first priority in his new post
practical side,” he says.
will be to continue moving forward
After a couple years, he
with data architecture upgrades. The
found himself back in an ac-
financial operations ramifications of
Raszeja’s piece of pi tuarial role, but he decided
having legacy systems is an issue for
he preferred the broad view
most of the insurance industry today.
ing has six wings, and he’s worked in of enterprise risk management. The
Raszeja says he’s been fortunate to
five of them. “If I could get a job in company, though, had recently decen-
spend his career with Penn Mutual, be-
sales, I’d really round out my résumé,” tralized ERM, so Raszeja left to take a
cause moving around the company is
he jokes. risk management position in Cigna’s
highly encouraged. “It’s a good fit for
When the company started an en- international group. The job gave him
terprise risk management department, global experience, including frequent me,” he says. “You hear a lot that you
its first leader had been head of fixed trips to Asia, and the opportunity to can’t get ahead unless you change jobs,
income in the investment area. He see how a much bigger company dif- and I agree, but that doesn’t mean you
brought Raszeja along with him, again fered on an operational basis. have to leave the company—if you’re
in a quantitative analysis role. in the right company.”
“It was the first time I looked Ethics and Risk He notes that an interesting aspect
across the whole company, as well as After he’d spent 13 months at Cigna, of his career has been that in each
the broker-dealer affiliates, trying to Penn Mutual, which was planning to job he’s had to use “different parts” of
broadly understand not just finance reverse course and go back to central- himself.
but also people and strategy and how ized risk management, brought him “I’m hearing more lately about
all of those things worked together,” he back as chief risk officer. In 2014, he people bringing their whole selves to
says. “I was about eight years into my was asked to take on the additional work, and I’m happy that you can do
career, and I don’t think many people role of chief ethics officer. “I’m the that here,” he says. “And if a tattoo can
get that view of a company the size of only person I’ve ever heard of who give you some upward mobility, I think
Penn Mutual that early.” had both of those roles at the same that’s a pretty progressive and inclu-
His next stop was as leader of mor- time,” he says. sive workplace.” CFO
Editor’s Choice
FEDEX CFO TO RETIRE AFTER 22 YEARS

FedEx announced that CFO Alan Graf (pictured) will retire at the end of the year and be
replaced by treasurer Mike Lenz as the company continues its effort to adapt to the rise
of e-commerce. Lenz will move into his new role on Sept. 22, with Graf staying on until
Dec. 31 as senior adviser. Graf joined FedEx in 1980 and has served as CFO since 1998.
0520 Dept. People.indd 21 3/31/20 2:50 PM

LEADERSHIP
Crisis Management: The

Overlooked Leadership Skill
Here are five ways to rise up to the challenge of leading the troops while things are falling
apart. By Gary Burnison
No one thinks much about a certain leadership quality—un- crisis management in action.
Start at the Bottom of Maslow’s
til the you-know-what hits the fan. ¶ The quality I’m refer-
Hierarchy. In a crisis, you first need
ring to is crisis management. ¶ Thankfully, true crises are to meet people where they are. Their
relatively rare occurrences. They are the black swans of most basic needs must be met and
they need to feel safe. Naturally, no
leadership. ¶ We’ve done nearly 70 million assessments of one is interested in talking about the
executives, so we know what makes a great leader—the company’s strategic plan when they’re
out buying hand sanitizer
best-in-class who are among the top and toilet paper. Once
20%. Our research shows that three of their essential needs are
the four qualities of a great business addressed, then the focus
leader are largely intuitive: (1) sets vi- can shift to alignment,
sion and strategy; (2) drives growth; common purpose, elevat-
and (3) displays financial acumen. ing others, and even op-
The fourth is effectively manag- portunities for growth.
ing crises. It’s underappreciated, over- Earthquakes and
looked, and often not even one of the Aftershocks. In Los An-
top requirements—until a crisis hits. geles, where our firm is
This is one of those times. A couple based, we’re accustomed
of months ago, when the stock market to earthquakes and know
was making all-time highs, only the that when one occurs,
rare few could have predicted univer- aftershocks are coming.
sities would close, companies would Other crises also demand
tell employees to work from home across organizations, leaders must man- that you anticipate the consequences
en masse, and the NBA season would age their own responses to ambiguity. of the initial shock. Too often, people
abruptly be suspended, followed by How do they do that? By following don’t consider all the possibilities. An-
museums, cathedrals, and Broadway. our 6 steps of leadership: ticipation becomes a Monte Carlo simu-
While it’s natural in uncertain 1. Anticipate—predicting what lies ahead lation in action.
times for people to turn to the leader 2. Navigate—course correcting in real time For example: what if travel bans ex-
for definitive answers, sometimes 3. Communicate—continually pand, commerce slows, or a liquidity
the authentic answer is “I don’t know 4. Listen—hearing what you don’t want crisis develops? What is the impact on
right now”—quickly followed by, “And to hear all aspects of my business? What are
here’s what we are going to do.” In a 5. Learn—learning from experience to the implications for employees, cus-
crisis such as today, leaders need a Plan apply in the future tomers, and investors? Strategy is mak-
B—and a Plan C and Plan D as well. 6. Lead—improving yourself to elevate ing a bet, and the skill of anticipating
Leaders always deal with ambigu- others improves one’s odds.
ity. It’s timeless and comes with the job. Urgent vs. Important. Day to day,
During crises, ambiguity becomes ex- Let me provide some color com- leaders face a multitude of issues, both
ponential. As fear becomes contagious mentary on what leaders can do to put urgent and important. I’ve found that
22 CFO | April/May 2020 Getty images
0520 Dept Leadership.indd 22 3/31/20 2:50 PM

many leaders have difficul- soldier.” This reveals a deep By running the “unknown” of the
ty distinguishing between mindset of humility and ac- current crisis against the “known” of
the two. When a crisis hits, countability, rather than hu- previous ones, leaders gain perspec-
though, everything blurs bris and bravado. tive, identify patterns, connect the
as events and their impli- Know What to Do dots, and determine appropriate and
cations constantly change. When You Don’t Know timely responses. The eventual recov-
What’s important often be- What to Do. There’s noth- ery may be a V or a U or some other
comes urgent, and what’s ing like a crisis or a complex alphabet letter, but there will be a new
urgent becomes critical. : Gary Burnison problem to accelerate learn- normal—thanks, ultimately, to the sci-
Leaders must delegate the ing. This is learning agility entists, innovators, and dreamers.
urgent by empowering others to lead to the “Nth” degree—applying past The natural inclination in a cri-
around a common purpose. lessons to new and unfamiliar situa- sis may be to go into command-and-
Leave No One Behind. In a crisis, tions. It really is knowing what to do control mode. That’s not leadership.
leaders must connect with, motivate, when you don’t know what to do. Leadership is creating a “bottom-up”
and inspire others, and show genuine Amid uncertainty, leaders need to be culture of world-class observers to
compassion. In the military, for ex- hyper-focused on past experiences and accurately perceive today in order to
ample, leaders put the safety and well- synthesize and apply them to real-time, predict tomorrow.
being of others before themselves. fluid conditions. Clarity comes from
I’ve met a number of military leaders finding a close comparison. Is it like the Gary Burnison is the chief executive
who led during periods of conflict and Great Recession? The 1987 stock market officer of management consulting and
voluntarily told me, “I’ve never lost a crash? The outbreaks of SARS or MERS? recruiting firm Korn Ferry.
Good CFO/Bad CFO those needs. A good CFO reads the tea expert but a strategic partner.
leaves of the sales team and the over- A bad CFO gives engineering,
Here are the skills a CFO needs all market, then helps course-correct to product, or marketing advice to the
to look at when considering ensure the company has future viability. respective executive. A good CFO
their effectiveness as a leader. A bad CFO blames others, “The provides valuable data, insights when
By Rob Krolik and Jeff Epstein executives spent too fast.” “The CEO is another executive is over or under bud-
too optimistic.” get, and unbiased analytics that will help
There's a stark contrast between an A good CFO does the opposite. solve problems and respect boundaries.
effective finance chief and an ineffec- He or she understands the root cause of A good CFO speaks visually, with
tive one. Here are the major differences. what goes wrong by highlighting the is- pictures and analogies, not just analyti-
A good CFO knows how to com- sue and proactively providing informa- cally. Using short, pointed, nontechni-
municate and manage teams, and tion to the board of directors, cal accounting or financial explana-
knows the details behind the num- CEO, and other executives tions is key to making a point.
bers. A good CFO manages all the areas who will help them see A bad CFO wraps himself
no one else wants but still needs, in- the path forward. or herself in jargon and
cluding accounting, tax, facilities, insur- A good CFO is a focuses on what people
ance, financial planning, and treasury. great manager. He or can’t do and is always
A good CFO paints a financial she hires all-stars in ready to say, “no.”
picture of the company’s next 12 to 24 their respective fields A bad CFO looks for
months to help the senior executives and trust them to do a loopholes and manipu-
see the future and plan accordingly. great job while maintain- lates the numbers to tell
A good CFO is responsible for ing open communication whatever story they want.
cash. He or she understands when the and having regular check- A good CFO has high integrity
balance will be low and what to do ins—trusting but verifying. and factually reports the numbers. He
about it (whether to slow down cash A good CFO provides a vision or she is a risk manager and helps man-
burn or raise capital). of where the finance organization age the lows and highs. CFO
A good CFO obtains input from should be in 18 to 24 months to help
other senior-level executives, helps the company scale and then he or she Rob Krolik is a managing partner at
them understand the needs of the supports the finance team to get there. Burst Capital and Jeff Epstein is an
company versus the executives, and ar- Other executives do not consider a operating partner at Bessemer
chitects a financial plan that balances good CFO an accounting expert or tax Venture Partners.
Top: Courtesy of the author; Bottom: Getty images April/May 2020 | CFO 23
0520 Dept Leadership.indd 23 3/31/20 2:50 PM

HUMAN
CAPITAL
Don’t Leave Workforce

Analytics Solely to HR
People analytics remove much of the guesswork behind key management and
operational issues. By Jack Freker
With access to reams of financial data and the tools to turn business performance
• Targeting better ways of captur-
the information into insight, CFOs are certainly no strangers
ing ROI from HR development and
to the power of big data. ¶ But finance chiefs may be less well-being programs
• Determining and addressing signs
up to speed on workforce data, covering employee perfor-
of faltering performance
mance, compensation, demographics, career history, benefits, • Isolating mismatches in areas
like benefits
employee behaviors, time utiliza- utilization
tion, and attrition. • Detecting
There’s no excuse for less rigor and implement-
in understanding such data. For a ing process
typical company, worker pay and improvements
benefits total up to 70% of the cost across the work-
of doing business. In fact, several force
studies performed a few years ago
told a convincing story: Data and
• EY found a strong link be- people analytics
tween CFOs’ level of involvement remove much of
in strategic workforce planning and the guesswork
broader business performance. behind key
• Bersin by Deloitte found that management
the share prices of companies with and operational
“mature” talent analytics exceeded issues, help-
those of their competitors by 30% ing companies
over a three-year period. trends to identify workforce patterns make smarter talent decisions, boost
• A survey by CEB (now Gartner) and talent risks. They can also forecast performance, and even challenge con-
found that organizations could in- productivity, uncover recruitment and ventional wisdom that can blind orga-
crease gross profit margin by an retention challenges, project ROI from nizations over time.
average of 4%, and save roughly $12 HR initiatives, and pinpoint leadership
million for every $1 billion in reve- opportunities that could otherwise be Linking Performance
nue, by taking a leadership position in missed. Data analytics also creates new
workforce analytics. CFOs can use talent data to bring opportunities for insight into the
strategic insight to talent acquisition return on HR programs. For example,
Strategic Insight and deployment by: a company can look at population
Early adopters of workforce analytics • Identifying ways to lower the cost health and absentee data alongside
aimed their effort at simply managing of hiring, assigning, and engaging a plan participation and rewards
the total cost of workforce (TCOW). productive workforce data, and then compare the findings
Today, finance chiefs working closely • Ensuring compensation, benefits, with productivity data to identify
with HR can use market and industry and other rewards are aligned with compelling corollaries between well-
Dept - human capital.indd 24 3/31/20 2:50 PM

being and business main areas to tap into: big picture and become less engaged
impact. Health care analyt- in the work. The company’s overall
Finding out a par- ics. The combination performance suffers.
ticular demographic of population health,
poorly utilizes health care absentee, plan par- Analytics at the Right Time
screenings allows a com- ticipation, wellness, Leaders should be looking for a single,
pany to design responsive and related financial intuitive, and responsive reporting
and more effective well- data can help better system that eliminates the task of data
ness campaigns. influence the physical validation and gives the CFO the tools
People analytics health of a population to start driving business performance.
can identify cost and help people ef- One-off reports from disparate
anomalies, especially in fectively manage their talent data sources—accomplished
multinational operations health. through spreadsheets, manual pro-
where jurisdictional Financial analytics. cesses, IT coding, and the like—won’t
regulations vary : Jack Freker Defined benefit plans, provide the strategic insights needed
widely. For example, defined contribution to understand, predict, and monitor
staffing costs can vary plans, equity, business risks.
significantly by geography due to compensation, and other personal Find a workforce analytics platform
variations in salary ranges, benefits financial data, coupled with business that:
costs, and employment laws. Modeling data, helps assess the ROI on reward • Consolidates both financial and
allows decision-makers to analyze spend and helps employees better people data
these costs and determine the best manage their short- and long-term • Doesn’t solely rely on HRIS
geographies for specific roles. financial goals. analytics for the evaluation of people
Predictive analytics can reveal oth- Diversity analytics. Talent man- data
er management decision-making blind agement, learning and development, • Gathers full people data across
spots. Suppose a company is contem- succession planning, and related performance, talent, population health,
plating a hiring freeze as an answer metrics can help to build work envi- engagement, and rewards inputs
to declining profit. That’s a common- ronments and reward structures that • Establishes current-state baseline
enough scenario, but by applying pre- meet the needs of a multi-generational as a control measure
dictive analytics it may become clear workforce and support diversity and • Assesses and predicts true “return
that a reduced workforce and greater inclusion goals. Predictive analytics on people” analysis with total cost of
workload would not meet production can also help to improve recruitment labor along with perceived and actual
demands. and retention strategies. value derived from that labor, with
Further analysis may reveal that Engagement analytics. Similar to the ability to segment to any business
hiring contingent staff, along with external marketing efforts, internally function
paying overtime, could cost more than focused employee engagement analyt- • Benchmarks this data against
the savings reaped through a hiring ics allow organizations to measure and peers and ideal state
freeze. predict how people react to program • Allows both HR and finance to
design, communication outreach, and model business and people scenarios
The Right Information market forces. for informed workforce decisions
Managing unstructured data is a grow- This combination of health, wealth,
ing challenge as employers try to career, and engagement analytics pro- Through the Right Lens
extract “signals” from diverse data vides the insight needed to make the Today’s CFOs are not just on point
sources, data management packages, most effective investments in people to guide company financial perfor-
and integration and forecasting tools and gives them the tools they need to mance. They need to touch everything
and methodologies. remain healthy and productive at work in the company’s value chain, most
The question is what specific data and in life. definitely including the workforce.
and analytics CFOs and CHROs should Without that clear connection Talent analytics must become a strate-
prioritize to manage financial risk and between employee performance gic priority. CFO
ensure adequate return on labor costs. and the organization’s performance,
How should companies break down managers can’t properly evaluate Jack Freker is CEO of Buck, an integrated
workforce analytics to provide stra- and reward individuals. Employees HR and benefits consulting, technology,
tegic insight? We think there are four lose sight of where they fit into the and administration services provider.
Dept - human capital.indd 25 3/31/20 2:50 PM

SUPPLY
CHAIN
Coronavirus: Five Rules for

Growing Customer Loyalty
The supply disruption from the coronavirus offers historical opportunities for companies
to build or destroy customer goodwill. By Jonathan Byrnes and John Wass
Much is being written about how to manage the supply chain all-in P&L in every transaction (invoice
line), and couple it with powerful
threat of coronavirus. The problem is that virtually all of it
data analytics that can combine
focuses on disruption threats to inbound supply chains from these transaction P&Ls to show
the profitability of every customer,
suppliers. The equally important, longer-lasting challenge is
product, and operational process. It is
managing customers through the crisis period to maximize particularly important to avoid relying
on common partial measures like gross
their long-term loyalty and profitability. Today’s supply chain disruptions margin. Gross margin does not align
If you get this right, the upside is from tariffs, viruses, and other factors with net profits because factors like
enormous. If you get this wrong, you offer an opportunity to lock in long-term order pattern, delivery costs, and other
will suffer the consequences for years gains with the most profitable custom- operating costs are so important.
to come. ers. The disruptions are also leverage to The prioritization below is based on
Five rules form the cornerstone of reverse your relationship with your large profit segmentation. It is a particularly
an effective customer management profit-draining customers. The key is to effective way to maximize your long-
program in a time of supply disruption: identify your profit peaks (large, high- term benefits so your company exits
1. Prioritize your customers by profit customers), profit drains (large, this crisis in better shape with respect
profitability money-losing customers), and profit to both its profitability and its customer
2. Incorporate your emerging deserts (small, no-profit customers) loyalty measures.
channel strategies using profit mapping. (See "Customer Profit-peak customers. The single
3. Align sales compensation with Product Mapping," page 28.) most important initiative a compa-
your priorities The objective of profit mapping is to ny can make is to give priority to its
4. Develop product substitution break apart the aggregated categories profit-peak customers. These critical
groups of revenue and cost in your company’s customers warrant working aggres-
5. Prevent over-ordering income statement. In the past, when sively to make products available, even
markets were homogeneous, costs were if it costs more to support them. Also,
Together, these rules will ensure that relatively uniform. Companies sought to this may be an opportunity to lock in
your company will emerge from this dif- maximize their revenues from all cus- longer-term contracts.
ficult period in a much better position tomers in order to gain economies of These customers may only represent
than when it commenced. You will hur- scale. Those aggregate categories were 10% to 20% of your customers, but they
tle past your scrambling competitors. adequate to grow profits. Today’s busi- provide the vast majority of your prof-
nesses are profoundly different: markets its. Moreover, they generally are less
Prioritize Customers are fragmented, costs vary depending price sensitive; loyal; and eager to try
The key to customer prioritization is on customer relationships and supply innovative products and services.
profit segmentation: focusing resources chain integration, and profitability var- In all times—especially in difficult
on accelerating relationships with your ies hugely from customer to customer times—you should dedicate a set of
high-profit customers, while using the and product to product. teams to these profit-peak customers
shortage of products to re-negotiate Today, the only way to understand and not serve them through a general
your relationships with profit-draining the actual profitability of every nook sales force. The dedicated team can
customers. and cranny of a company is to create an focus on building extended contracts
Dept. Supply Chain.indd 26 4/7/20 3:50 PM

with supply chain integration and oth- standing their potential and carefully constraints on product availability,
er operating ties that ensure steady, curating their product availability. Im- should be aimed. This is also the time
long-term profit growth for both the portantly, some of these customers to enforce limits on free services that
customers and for you. are large companies for whom you are have been neglected (e.g., minimum
Profit-draining customers. The a minor supplier. You may be able to order sizes for free shipping).
second priority is counterintuitive. award these customers with secure sup- It is important, however, to be very
A supply shortage presents a perfect ply access in return for a contract for a transparent and to work with these
time to use the disruption to change bigger share of wallet. The objective is customers to ease their difficulties as
the nature of your relationship with to convert these customers into large, much as possible.
your large, profit-
draining customers
by approaching
them with propos-
als to increase the
profits they generate
for you.
The wrong way
to do this is to gouge
them with large price
increases, generating
lasting bad feelings.
It is much more
effective to increase
the profitability of
their business by
working with them to
decrease your (and
their) operating costs.
In our experience,
most profit-draining
customers can
be turned around
through smart,
targeted supply
chain and category
management
measures that create
joint efficiencies.
Examples would be increasing order profit-peak customers; digital marketing Incorporate Channel
size by reducing order frequency probes are particularly effective at this. Strategies
and developing proactive substitute Many other profit-desert cus- The current era is characterized by
product. tomers, however, are simply small the emergence of critical digital chan-
This requires clarity of purpose but companies that do not have the ability nels and omnichannel management.
does not cost much, and has a huge to grow significantly. These custom- The digital giants are gaining prodi-
permanent, positive impact on both ers typically generate the majority gious market share in industry after
companies. Doing this requires very of your operating costs because they industry through their web-based
capable teams dedicated solely to this issue a large number of very small or- capabilities. Most companies are
customer segment. If a profit-draining ders (it generally takes the same time sprinting to catch up, at the risk of
customer refuses to work with you, it and cost to pick an order line with a their very survival.
makes sense to reduce your supply to it. small number of items as it takes for It is critical, therefore, to incorporate
Profit-desert customers. The an order line with a much larger num- your channel strategy into your cus-
third priority is to carefully manage ber of items). This category is where tomer supply prioritization. This will
your profit-desert customers by under- your cost reduction, or aggressive ensure that your crucial new strategic
Getty Images April/May 2020 | CFO 27

SUPPLY
CHAIN
capabilities will continue to develop

and grow. This has to be systemati- Customer Profit Mapping
cally integrated into your customer
management strategy to ensure To effectively manage customers in a time of supply disruption,
they must be segmented by profitability into three groups.
long-run viability.
Profit-peak customers. These customers may only represent 10%
Align Sales Compensation to 20% of your customer base, but they provide the vast majority
There is an old adage that a sales of profits. Moreover, they generally are less price sensitive, loyal,
rep might understand your priori- and eager to try innovative products and services. Serve them
with dedicated teams, not through a general sales force.
ties and buy into your priorities, but
he or she will (and should) do what Profit-draining customers. A supply shortage presents a perfect
you pay him or her to do. Another time to use the disruption as an opportunity to change the nature
way to put it is that the fundamen- of your relationship with profit-drainers. Increase the profitability
tal rule of sales is, “work your pay of their business by working with them to decrease your (and
their) operating costs.
plan.” If the pay plan is wrong, it is
not the salesperson’s fault. Profit-desert customers. Manage your profit-desert customers
This means that sales compen- by understanding their potential and carefully curating product
sation (e.g., commissions, quotas) availability. You may be able to award the large companies in this
has to be adjusted to reflect priori- segment with secure supply access in return for a contract with a
ties. The root problem is that all too bigger share of wallet. Many in this grouping, however, are small
companies that are expensive to service. This is where your cost
many companies fail to develop re-
reduction efforts or aggressive constraints on product availabil-
alistic priorities, as explained above.
ity should be placed.
This leads to the counterproductive
scramble for product and the first-
come first-served processes that
are so harmful to short-run profitability Inventory hoarding is a natural supplier’s systems interpret this as incre-
and longer-run customer loyalty. response to supply shortages. The core mental demand and award more scarce
logic is that purchasing departments try stock to the over-ordering customer.
Develop Substitution Groups to grab product whenever it is available The solution is to develop a set of
Substitution groups are sets of products as a protection against later shortfalls. agreements with customers to allo-
that perform the same function. They are This causes extreme problems for sup- cate products relative to historical
important in the normal course of busi- pliers because they cannot forecast demand, unless the customer noti-
ness both to enable sales reps to move actual customer demand. Instead, sales fies you that its product demand has
customers to a higher-profit product mix reps scramble to grab tight supplies actually changed. For example, profit-
and to ensure high fill-rates when a prod- to meet their customers’ accelerat- peak customers could be supplied at
uct stocks out (and the customer has ing requests, leading suppliers to short their historical demand; profit-drain
agreed to a specific substitute). other customers—especially their large customers at 75% to 80% of their his-
These groups are essential in times profit-peak customers with whom they torical demand; and profit-desert
of supply disruptions because they typically have vendor-managed inven- customers at 60% of their histori-
can ensure steady supplies, even if the tory or other operating ties that ensure cal demand (unless they contract for
disruptions are intermittent. However, the correct order flow. a larger share of wallet). It is very
this needs to be agreed to with cus- The second cause of over-ordering important to develop explicit agree-
tomers in advance. is unadjusted replenishment algorithms. ments with customers so they can
If products are allocated to customers, make similar agreements with their
Prevent Over-Ordering most replenishment systems will simply own customers. CFO
Over-ordering is a typical difficulty in recognize the shortfall in product avail-
times of product shortage. It has two ability and endlessly order more. We Jonathan Byrnes is a senior lecturer at
main sources: customer hoarding, and have seen cases where replenishment MIT, and founding chair of Profit Isle.
unadjusted automated replenishment systems order the same product multiple John Wass is CEO of Profit Isle, a profit
algorithms. times per day. The problem is that the acceleration SaaS company.

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Untitled-2 1 9/23/19 1:13 PM
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are a Settlement
Bank of America
Bank of Corporation
America Corporationand Bankand of America,
Bank of America,
N.A. N.A.
Class Member
Class Memberif you transacted
if you transacted
in Eurodollarin Eurodollar
futures futures
(collectively
(collectively
“BOA”), “BOA”),Barclays Barclays
Bank plcBank (“Barclays”),
plc (“Barclays”), contracts contracts
and/or options and/or options
on Eurodollar on Eurodollar
futures on futures on
CitigroupCitigroup
Inc., Citibank,
Inc., Citibank,
N.A., and N.A.,
Citigroup
and Citigroup
Global Global exchanges, exchanges,
includingincludingwithout withoutlimitation,limitation,
the CME, the CME,
Markets Markets
Inc. (collectively,
Inc. (collectively,
“Citi”), Deutsche
“Citi”), Deutsche
Bank AG,Bank AG, between between
January 1, January
2003 and1, 2003Mayand 31, May
2011.31, Excluded
2011. Excluded
Deutsche Deutsche
Bank Securities
Bank Securities
Inc., and Inc., DB Group
and DBServicesGroup Services from thefrom Settlement
the Settlement
Class are: Class(i) are:
Defendants,
(i) Defendants,
their their
(UK) Limited
(UK) (collectively,
Limited (collectively,“Deutsche“Deutsche
Bank”), HSBC Bank”), HSBC employees, employees,
affiliates,affiliates,
parents, subsidiaries,
parents, subsidiaries,
and alleged and alleged
Bank plcBank (“HSBC”),
plc (“HSBC”),
JPMorganJPMorgan Chase &Chase Co. and & Co. co-conspirators;
and co-conspirators;
(ii) the Releasees
(ii) the Releasees
(as defined (as in defined
the in the
JPMorganJPMorgan
Chase Bank, Chase N.A.Bank, (collectively
N.A. (collectively
“JPMorgan”), “JPMorgan”), Settlement Settlement
Agreements Agreements
describeddescribed
below); and below); (iii) and
any (iii) any
and Sociétéand Générale
Société Générale(“SG”) (BOA, (“SG”) Barclays,
(BOA, Barclays,Citi, Citi,
Settlement Settlement
Class Member Class Member
who fileswho a timely
files aand timely
validand valid
Deutsche Deutsche
Bank, HSBC, Bank,JPMorgan,
HSBC, JPMorgan,and SG are andreferred
SG aretoreferred to
request for
request
exclusion.
for exclusion.
Notwithstanding
Notwithstanding
these exclusions,
these exclusions,
collectively
collectively
herein asherein the “Settling
as the “Settling
Defendants”).Defendants”).
These These and solely andforsolely
the purposes
for the purposes
of the Settlements
of the Settlements
and the and the
SettlementsSettlements
impact persons,
impact corporations
persons, corporations
and otherand legalother legal
Settlement Settlement
Class, Investment
Class, Investment
Vehicles Vehicles
shall notshall be not be
entities that
entities
transacted
that transacted
in Eurodollar in Eurodollar
futures contracts
futures contracts excluded excluded
from the from Settlement
the Settlement
Class solely Classon solely
the basis on the
of basis of
and/or options
and/or on options
Eurodollar
on Eurodollar
futures on futures
exchanges,
on exchanges, being deemed
beingtodeemedbe Defendants
to be Defendants
or affiliates or or
affiliates
subsidiaries
or subsidiaries
includingincluding
without limitation,
without limitation,the Chicago the Chicago
Mercantile Mercantile
of Defendants.
of Defendants.
However,However,to the extent to the
thatextent
any Defendant
that any Defendant
ExchangeExchange
(the “CME”), (the “CME”),
between betweenJanuary 1, January
2003 and 1, 2003 or andany entity
or any thatentity
mightthat be might
deemed be todeemed
be an to affiliate
be an or affiliate or
May 31, 2011
May 31, (the2011
“Settlement
(the “Settlement
Class Period”).
Class Period”). subsidiarysubsidiary
thereof (i)thereof
managed (i) managed
or advised, or and
advised,
(ii) directly
and (ii) directly
or indirectly
or indirectly
held a beneficial
held a beneficial
interest in, interest
said Investment
in, said Investment
The lawsuitTheasserts
lawsuit that
asserts
the Defendant
that the Defendant
banks (listed bankson (listed
the onVehiclethe during
Vehicle theduring
Class the
Period,
ClassthatPeriod,
beneficial
that beneficial
interest ininterest in
settlement settlement
website, www.USDLiborEurodollarSettlements.com)
website, www.USDLiborEurodollarSettlements.com) the Investment
the Investment
Vehicle isVehicleexcluded is excluded
from the from Settlement
the Settlement
artificially
artificially manipulated manipulated
U.S. Dollar U.S. LIBORDollar LIBOR and and
Class. Class.
Eurodollar Eurodollar
Futures during Futures theduring the Settlement
Settlement Class Period Class byPeriod by
misreporting
misreporting their borrowing
their borrowing costs to the costs to the organization
organization that that What do What the Settlements
do the Settlements
provide?provide?
calculatedcalculated
LIBOR. LIBOR. The alleged Themanipulation
alleged manipulation
of the U.S. of the U.S.
In order toIn resolve
order tothe resolve
claimstheagainst
claimsthem,against thethem,
Settlingthe Settling
Dollar rate
Dollar LIBOR LIBOR rate allegedly
allegedly caused Eurodollar
caused Eurodollar Futures Futures Defendants Defendants
have separately
have separately
agreed to agreed
individual
to individual
settlementsettlement
prices to prices to be suppressed
be suppressed and/or inflatedand/ortoinflated
artificialto levels,
artificial levels,
amounts amounts
totaling $187,000,000
totaling $187,000,000
in the aggregate
in the aggregate
for the for the
therebySettlement
thereby causing causing Settlement
Class Members Class Members to pay artificial
to pay artificial benefit ofbenefit
the Settlement
of the Settlement
Class in exchange
Class in exchange
for releases forofreleases of
prices forprices for Eurodollar
Eurodollar Futures during Futures theduring the Settlement
Settlement Class Class
the claimsthe against
claimsthem, against
as fully
them,detailed
as fullyindetailed
the Settlement
in the Settlement
Period. Period.
Plaintiffs Plaintiffs
have asserted have asserted
claims under claims the under Agreements.
the Agreements.
Specifically, Specifically,
BOA hasBOA agreed hastoagreed
pay $15 to pay $15
Commodity Commodity
ExchangeExchange
Act and ShermanAct and Sherman
Antitrust Antitrust
Act and Act million;
and Barclays
million; Barclays
has agreed hastoagreed
pay $19.975
to pay million;
$19.975 Citi million; Citi
for unjustfor unjust enrichment.
enrichment. The CourtThe hasCourt
issuedhas at issued
least eightat least eight
has agreedhas to agreed
pay $33.4 to pay
million;
$33.4Deutsche
million; Deutsche
Bank has Bank agreedhas agreed
publishedpublished opinions addressing
opinions addressing various legalvarious legalraised
matters matters raised
to pay $80tomillion;
pay $80HSBC million; hasHSBC
agreedhas to agreed
pay $18.5 to paymillion;
$18.5 million;
by the
by the parties in parties in thisThe
this action. action. TheDefendants
Settling Settling Defendants
have have
JPMorganJPMorgan
has agreed hastoagreed
pay $15 to paymillion;
$15 andmillion;SG has and SG has
entered
entered into theseinto these proposed
proposed Settlements Settlements
to resolveto the resolve agreed
the to agreed
pay $5,125,000.
to pay $5,125,000.
The SettlementThe Settlement
Agreements Agreements
are are
claims against
claims asserted asserted them.
againstThe them. The Defendants
Settling Settling Defendants available available
for reviewforonreview the settlement
on the settlement
website referenced
website referenced
deny all
deny all claims of claims of wrongdoing.
wrongdoing. below. The below.Settling The Defendants
Settling Defendantshave alsohave agreed also toagreed to
provide certain
providespecified
certain specified
cooperation cooperation
to the Plaintiffs
to the Plaintiffs
that that
ClaimsNon-Settling
Claims against against Non-Settling
Defendants Defendants
have beenhave been limited
limited can be usedcan be in theusedprosecution
in the prosecution
of claimsofagainst claims the against the
by the prior
by the Court’s Court’srulings.
prior The rulings.CourtThepreviously
Court previously Non-Settling
Non-Settling
Defendants. Defendants.
dismisseddismissed
claims againstclaimscertain
againstdefendants
certain defendants
for lack of for lack of Continued on next page
1 The aggregate Settlements, if all receive Final Approval from the Court, will create a $187,000,000 Settlement Fund. Settling Defendants have separately
agreed to settlements as follows: BOA has agreed to pay $15 million; Barclays has agreed to pay $19.975 million; Citi has agreed to pay $33.4 million;
Deutsche Bank has agreed to pay $80 million; HSBC has agreed to pay $18.5 million; JPMorgan has agreed to pay $15 million; and Société Générale has
agreed to pay $5,125,000.
Edgewood.indd 16 3/31/20 2:36 PM

If You Transacted
If You Transacted
in Eurodollar
in Eurodollar
Futures Futures
Contracts
Contracts
and/or Options
and/or Options
on Eurodollar
on Eurodollar
Futures Futures
on Exchanges,
on Exchanges,
such as the
suchChicago
as the Chicago
Mercantile
Mercantile
Exchange,
Exchange,
betweenbetween
JanuaryJanuary
1, 2003 and
1, 2003
Mayand
31,May
2011,31, 2011,
1 1
You MayYou
Be May
Eligible
Be Eligible
to Receive
to Payment
Receive Payment
of a Portion
of a of
Portion
Aggregate
of Aggregate
Settlement
Settlement
Funds Totaling
Funds Totaling
$187,000,000
$187,000,000
ContinuedContinued
from previous
from page
previous page
How canHow I get can I get a payment?
a payment? If you want to keep
If you want your
to keeprightyour
to individually sue the sue the
right to individually
If you Iftransacted
you transacted
in U.S. in Dollar U.S. LIBOR-based
Dollar LIBOR-based Settling Settling
Defendants or their oraffiliated
Defendants persons persons
their affiliated and and
Eurodollar
Eurodollar futures futures
contractscontracts
and/or and/or
options options
on entities,
on you must
entities, exclude
you must yourself
exclude from the
yourself Settlement
from the Settlement
Eurodollar
Eurodollar futures on futures on exchanges
exchanges such as such as the CME
the CME Class for Class
that Settling
for that Defendant(s) by Augustby27,
Settling Defendant(s) 2020,27, 2020,
August
between between
January 1, January
2003 and1, 2003
May and31, May
2011 31,
and2011 and doinnot
do not the manner
in the and formand
manner explained in the detailed
form explained in the Full
detailed Full
exclude yourself
exclude yourself from the from the Settlement
Settlement Class, youClass, Notice. All
mustyou must Settlement
Notice. Class Members
All Settlement who havewho
Class Members nothave not
file a and
file a timely timely
validand validofProof
Proof ClaimofForm
Claimto Form
be to betimely and
timelyvalidly
and requested
validly exclusion
requested from
exclusion thefrom the
potentially
potentially eligible
eligible for for any payment.
any payment. You mayYou Settlement
maya obtain
obtain a Class willClass
Settlement be bound
will bebybound
any judgment entered entered
by any judgment
Proof ofProofClaimof Form
Claim onForm the on the settlement
settlement in the lawsuit
website website in thepursuant to the Settlement
lawsuit pursuant Agreements.
to the Settlement If
Agreements. If
referenced
referenced below and below
submitanditsubmit
online itoronline Themail. you
or by
by mail. The properly and timely
you properly and exclude yourself yourself
timely exclude from thefrom the
amount ofamount of any payment
any payment under theunder will be willSettlement
the Settlements
Settlements be Class, you
Settlement Class,willyounot will
be not
boundbe by any by any
bound
determined
determined by a Planbyofa Distribution
Plan of Distribution by the byjudgments
approvedapproved the or orders or
judgments entered
ordersby the Court
entered pursuant
by the to the to the
Court pursuant
Court. ACourt.
copy of A the
copyproposed
of the proposed Plan of Distribution
Plan of Distribution is Settlement
is Agreements
Settlement and you and
Agreements will you
not be
willeligible
not be toeligible to
availableavailable
for review for onreview
the on the settlement
settlement website website
at receive
at any payments
receive from the Net
any payments fromSettlement Fund if the
the Net Settlement Fund if the
www.USDLiborEurodollarSettlements.com.
www.USDLiborEurodollarSettlements.com. Settlements are approved
Settlements by the Court.
are approved by the Court.
The proposed
The proposed
Plan provides Plan for
provides
distribution
for distribution
of 75% ofofthe 75% ofAthe fairnessAhearing
fairnesswill be held
hearing willon beSeptember 17, 2020 17,
held on September at 2020 at
Net Settlement
Net Settlement
Fund on the Fundbasis of pro
on the rata
basis pro rata “Recognized
of “Recognized 11:00 a.m. before
11:00 thebefore
a.m. Honorable Naomi Reice
the Honorable NaomiBuchwald,
Reice Buchwald,
Net Loss”Net andLoss”
25% and on the25% basis of pro
on the basisrata pro rata “Recognized
of “Recognized United States
UnitedDistrict
StatesCourt Judge,
District Courtin Judge,
Courtroom 21A, at 21A, at
in Courtroom
Volume,”Volume,”
subject tosubject a guaranteed minimumminimum
to a guaranteed payment payment
of theofDanielthePatrick
DanielMoynihan United States
Patrick Moynihan UnitedCourthouse,
States Courthouse,
$20. Only $20.Eligible ClaimantsClaimants
Only Eligible may participate in the inlocated
may participate the atlocated
500 Pearl Street,
at 500 PearlNew York,
Street, NewNew YorkNew
York, 10007,
York 10007,
distribution of the Net
distribution Settlement
of the Fund. An
Net Settlement Eligible
Fund. for the purpose
An Eligible of determining,
for the purpose among other
of determining, among things,
other things,
Claimant Claimant
is a Settlement Class Member
is a Settlement whose proof
Class Member whose of proofwhether
of to approve
whether the proposed
to approve Settlements,
the proposed the
Settlements, the
claim is found
claimto is be
foundtimely, adequately
to be supported,supported,
timely, adequately properly properlyproposedproposed
Plan of Distribution, Class Counsel’s
Plan of Distribution, request request
Class Counsel’s
verified verified
and otherwise valid pursuant
and otherwise to the Plan
valid pursuant to theof Planforofattorneys’ fees of up
for attorneys’ to of
fees one-third of the Settlement
up to one-third of the Settlement
Distribution all as all
Distribution determined
as determinedby the by Settlement
the SettlementFund, plus reimbursement
Fund, of litigation
plus reimbursement expenses,expenses,
of litigation and and
Administrator. At this time,
Administrator. it istime,
At this unknown how much,
it is unknown howif much,payment
if of service
payment of awards
service to the Settlement
awards Class
to the Settlement Class
anything,anything,
each Eligible eachClaimant may receive.
Eligible Claimant may receive. representatives of no more
representatives of nothan $25,000
more each. Youeach.
than $25,000 or You or
your ownyourlawyer
ownmay appear
lawyer mayand speakand
appear at the
speakhearing
at theathearing at
To be timely,
To be alltimely,
Proof of allClaim
Proof Forms
of Claim must be postmarked
Forms must be postmarked your ownyourexpense.
own expense.
by mail orbysubmitted electronically
mail or submitted by December
electronically 1, 2020. 1, 2020.
by December
THIS ISTHIS ONLY IS AONLY SUMMARYA SUMMARY OF THEOFFULL THE FULL
What areWhat my rights?
are my rights? NOTICENOTICE AND SETTLEMENT
AND SETTLEMENT AGREEMENTS,AGREEMENTS,
You haveYou the have
right theto remain
right toa remain
membera of the Settlement
member of the SettlementWHICH WHICH CONTAIN CONTAIN MORE MORE DETAILED DETAILED
Class or to exclude
Class or toyourself
exclude fromyourselfthe from
Settlement Class. If Class.
the Settlement If
INFORMATIONINFORMATION THAT YOU THAT SHOULD
YOU SHOULDREAD. THE READ. THE
you remain youa remain
membera of the Settlement
member Class, and
of the Settlement if theand ifFULL
Class, the NOTICENOTICE
FULL AND THE AND SETTLEMENT
THE SETTLEMENT
Settlements are approved,
Settlements you mayyou
are approved, be mayeligible to
be eligible to
AGREEMENTS AGREEMENTS ARE AVAILABLE
ARE AVAILABLE AT AT
share pro ratapro
share in therataNet Settlement
in the Fund by Fund
Net Settlement timelyby timely
submitting a valid Proof
submitting of Claim
a valid Proof of Form.
Claim If Form.
you participate
If you participate
in the Settlements, you will, you
in the Settlements, however, lose yourlose
will, however, rightyour
to right to
Settlement Class Members
Settlement should continue
Class Members to reviewtothe
should continue review the
individually sue any of
individually suethe
anySettling
of the Defendants or their or their
Settling Defendants settlementsettlement
website website
for important updates updates
for important about theabout the
affiliated affiliated
persons and personsentities
andfor the alleged
entities for theconduct
alleged at conduct at
Settlements and the litigation.
Settlements You may You
and the litigation. also may
contact
alsothe
contact the
issue in the lawsuit,
issue in theand will be
lawsuit, andbound by bound
will be the Court’s
by theorders
Court’s orders
Settlement Administrator
Settlement below (A.B.
Administrator Data,
below Ltd.)
(A.B. to obtain
Data, Ltd.) to obtain
concerning the Settlements.
concerning If you stay
the Settlements. in the
If you staySettlement
in the Settlement
additionaladditional
information.
information.
Class, you may you
Class, object mayto object
one ortomore one or of more
the proposed
of the proposed
Settlements, the proposed
Settlements, Plan of Plan
the proposed Distribution, the
of Distribution, the USD LIBOR USDEURODOLLAR
LIBOR EURODOLLAR FUTURES FUTURES
requestedrequested
attorneys’attorneys’
fees, expense reimbursement,
fees, expense and
reimbursement, and SETTLEMENT SETTLEMENT
service awards
servicementioned below bybelow
awards mentioned Augustby27, 2020.27,
August Any2020. Any c/o A.B. DATA,
c/o A.B.LTD.
DATA, LTD.
objectionsobjections
must be filed mustwith the Court
be filed with theandCourt
delivered to the
and delivered to the
P.O. BOXP.O. 170990
BOX 170990
designated representative
designated for Settlement
representative Class Counsel
for Settlement ClassandCounsel and
counsel for the Settling
counsel for theDefendants in accordance
Settling Defendants with the with the
in accordance MILWAUKEE, WI 53217
MILWAUKEE, WI 53217
instructions set forth set
instructions in the Full
forth in Notice.
the FullThe Settlements
Notice. The Settlements www.USDLiborEurodollarSettlements.com
www.USDLiborEurodollarSettlements.com
will not will
releasenot your
release claims
your against
claims any any Non-Settling info@USDLiborEurodollarSettlements.com
Non-Settling
against info@USDLiborEurodollarSettlements.com
Defendants, and the lawsuit
Defendants, and thecontinues against them.
lawsuit continues against them. 1-800-918-8964
1-800-918-8964
1 The aggregate Settlements, if all receive Final Approval from the Court, will create a $187,000,000 Settlement Fund. Settling Defendants have separately
agreed to settlements as follows: BOA has agreed to pay $15 million; Barclays has agreed to pay $19.975 million; Citi has agreed to pay $33.4 million;
Deutsche Bank has agreed to pay $80 million; HSBC has agreed to pay $18.5 million; JPMorgan has agreed to pay $15 million; and Société Générale has
agreed to pay $5,125,000.
Edgewood.indd 17 3/31/20 2:36 PM

AM20_CFO_Digital_V2.indd 32 4/6/20 10:58 AM

Defying
Definition
Digital transformation—a wholesale
revamping of infrastructure,
systems, and software—is as rare
as it is difficult.
>> If your company is not in the midst of a “digi-
tal transformation,” it’s an outlier.
McKinsey estimates that 80% of large
companies are, or at least believe themselves to
be. Ditto many smaller organizations.
But what exactly is digital transformation?
Depending on a company’s circumstances and
vision, something as innocuous as a website
makeover could be called a digital transforma-
tion. But that doesn’t mean it is one. >>
By David McCann

McKinsey outlines four digital transformation that’s a change-the-business type of
archetypes (the labels are CFO’s): approach, or moving into an adjacen-
cy, or a competitive dynamic.”
1. Portfolio Transformation. “It’s too hard to Like many tech companies, Dell’s
really transform, so we’re just going to buy stuff,” transformation encompasses chang-
Defying is how McKinsey senior partner Peter Dahlstrom es to both its internal infrastructure,
Definition characterizes the mindset that gives rise to this systems, and solutions, and the
most basic of the archetypes. A company’s busi- products and services it provides to
ness model is threatened, so the company buys other compa- customers that are themselves digi-
nies that are operating their own technologies “and that’s their tally transforming.
digital transformation,” he says. “They don’t transform their Filling both roles is the Dell
Technologies cloud platform,
core but rather their portfolio of activities.”
an infrastructure modernization
2. Digital Doppelganger. A company creates a new digital launched in 2019. Developed joint-
version of itself and cannibalizes its existing business. “Lots of ly with VMware, the platform lets
businesses create second brands and attack themselves with users migrate workloads seamlessly
digital and become digital-mostly businesses,” says Dahlstrom. between public and private clouds.
The product is a boon for
A change in customer behaviors and preferences usually
companies that want to create a
necessitates the shift.
hybrid cloud environment. For
3. Functional Digitalization. The company finds broad digi- example, a company might move
tal transformation appealing, but rather than take on the diffi- a number of workloads to a public
cult task of formulating a plan that encompasses everything IT- cloud, then later pull them back
related, it starts with a great e-commerce site and instills some inside its private cloud as part of a
cost-reduction initiative.
digital capabilities into the sales force and supply chain.
With a huge mass of installed
4. The Real McCoy. A wholesale revamping of infrastructure, hardware and systems at customer
systems, and software along with new intelligent automation sites, Dell also is increasingly digi-
and analytics capabilities. Most casual observers perceive this talizing its services business.
as true digital transformation—yet, acknowledges Dahlstrom, “We’re using real-time tool sets
“there aren’t that many great cases.” with artificial intelligence algo-
rithms that feed data back from
Of course, there are some. Because of competitive and mar-
those installations—not customers’
ket realities, the following three companies have invested a
private data, but system perfor-
large amount of people and resources to effect digital change.
mance data,” says Sweet. From that
data, Dell can predict which systems
show signs of stress and may fail.
Dell is also using AI to optimize
Dell’s Journey how its storage solutions are compressing, cleansing, and
Among companies in the “Real McCoy” category is Dell organizing data in real-time.
Technologies. Dell finance chief Thomas Sweet agrees that Within Dell’s finance area, AI-driven functionality pre-
there are several definitions of digital transformation, but dicts which customer orders are most likely to be subject
he points to a common denominator. to past-due payments. Meanwhile, a machine learning mod-
“There’s an evolution or transformation happening with- el draws from a number of data sets to establish pricing
in companies as they think about the role of technology parameters that factor in, for example, customer size and
in enabling their business models,” says Sweet, “whether geographic location.
At Dell, digital transformation also includes upgrading
team members’ skill sets and providing them with new col-
“What we’ve laboration tools and mobile capabilities.
done has given us a “The journey we’ve been on for the past two or three
years has been all about improving the business and
more productive the experiences of customers and team members,” says
culture …” Sweet. “What we’ve done has given us a more productive
—Tom Sweet, CFO, Dell Technologies culture, and we’re seeing real improvements in each of our
businesses.”
34 CFO | April/May 2020 Courtesy of the company

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Vertex.indd 10 3/31/20 2:42 PM

A transformation was
Flowing With
The Customer Digital sparked in 2016, when the
company’s then-IT direc-
At consumer facing firms, digital Disappointment tor by chance met some
change is often sparked by innovations McKinsey consultants
Defying in web platforms. 91% through a friend of a friend.
Definition Take Pizza Hut U.K. A few years ago, Of executives expected Soon there were formal
digital transformation
it had a big problem: a clunky website. efforts to create better
meetings, which led to a
It had outsourced the site’s development and management customer experiences proposal from McKinsey for
a few years earlier, but more and more customers— Pizza Hut to develop and
accounting for 45% to 50% of total business—were ordering 71% manage a website in-house.
home delivery online. On busy weekend nights, the site Of executives said their The consulting firm pro-
digital transformation
crashed. had actually created
vided talent-recruitment,
“I don’t think we had anticipated how important online better customer research, and site-testing
would become,” says Neil Manhas, who was CFO of Pizza experiences expertise.
Hut U.K. at the time and is now general manager of the “Those guys really chal-
business as well as finance chief of Pizza Hut Europe. 55.8 lenged our preconceived
Executives’ average
Site outages were hardly the only problem. “There were rating of their
notions,” Manhas says. “It
long lead times for updates. It wasn’t particularly cost- organization’s digital became a very customer-
efficient, it offered a poor user experience that was quite IQ (scale 1 to 100), 2020 led, data-driven process that
survey
hard to change, and what little data it had was very hard was highly iterative. They
to extract or do anything with,” says Manhas. Franchise
owners were not happy.
71.8 spun up a lot of hypoth-
eses, did the research, and
Executives’ average
rating of their tested elements of the new
organization’s digital site in real-time.” By 2018
“You’re really investing IQ (scale 1 to 100), 2018
Pizza Hut U.K. emerged
more in people that will survey
with a site that represented
operate a new platform 25% a complete turnaround for
customers and franchisees.
than you are buying a Of executives said digital
transformation would Manhas says he’s
new IT system.” “never” be completed
“obsessed” with the new
—Klemens Hjartar, senior partner, Source: “2020 Global Digital IQ: site’s data capabilities.
Payback Ahead,” a PWC survey
McKinsey & Co. of 2,380 global executives He now knows things like
where traffic to the site is
coming from, how traffic on
a particular day compares
What It Takes with a year ago, how much
the company is paying for
Which digital technologies, tools, and methods have organizations
traffic (by channel), how
successful at transformation deployed?
customers are purchasing
online, and the impact of all
Traditional web technologies 85% of that on return on assets.
Cloud-based services 81% A particular highlight
has been a feature called
Mobile internet technologies 68% “DealBot.” Online custom-
Big data architecture 56% ers can click on DealBot
while placing items in their
Internet of things 45% shopping cart. It gives them
Artificial intelligence tools 31% access to relevant deals
without having to search
Robotics 21%
around the site.
Advanced machine learning 17% Conversion rates are
highest for customers
0% 20 40 60 80 100% using DealBot. However,
Source: McKinsey & Co. survey, October 2018 for unknown reasons, the
36 CFO | April/May 2020 Photos courtesy of the company. Getty Imges

conversion rate for customers that see DealBot but don’t
click on it is higher than for those who don’t see it. The “I’ve learned to be
feature is quite dynamic; deals can be ramped up and slightly less rigid
down daily depending on how aggressive or generous the
company wants to be.
in my desire to have
“I’ve learned to be slightly less rigid in my desire to have a very clear plan,
a very clear plan, and to sometimes just see where the data and to sometimes
takes us,” Manhas says. “We just flow with what the cus-
tomers seem to be wanting.”
just see where the
McKinsey’s Dahlstrom suggests that Pizza Hut U.K. has data takes us.”
had strong gains in revenue and market cap since the new —Neil Manhas, CFO, Pizza Hut Europe
site was launched. Manhas declines to confirm that, but
notes that the share of sales via the site has reached 75%. business unit formed to design, build, market, and operate
Getting funding for the project from Pizza Hut parent digital platforms, is in the process of expanding the U.K.
Yum! Brands was conditioned on a commitment to take success to Europe, Asia, and beyond.
the concept global. Pizza Hut Digital Ventures, a separate “We’re an entirely digital business now,” says Manhas.
No End to Change In fact, the disappointment in

the effectiveness of digitaliza-
Finance chiefs still await the payback they anticipated from tion applied across the board—for
digital transformation. improved decision-making (90%
expected that result; 66% say it has
A new PwC report, “2020 Glob- happened), increased profits (80%
al Digital IQ: Payback Ahead,” vs. 45%), and improved talent reten-
suggests that many companies tion and recruitment (75% vs. 49%).
thought the return on investment Another alarming survey result
they were looking for would have was that only 25% of respon-
more robustly materialized by now. dents said they believed digital
The survey asked more than transformation would “never” be
2,300 executives globally to rate completed. In other words, the
their organizations’ “digital IQ” on other 75% either believed digital
a 1 to 100 scale, with 100 being the 91% of executives transformation had an endpoint or
highest intelligence. The average they weren’t sure.
surveyed expected that
response was 55.8. Digital transformational efforts
That number could be viewed implementing digital aim to maximize technology’s capa-
as a rather shocking result. When initiatives would bility to raise up the business and
PwC asked executives the same “create better customer set it on a new, more productive
question in 2015 and 2018, the experiences.” Only 71% course. But technology develop-
average response was 71.8 and ment isn’t going to come to a halt
65.6, respectively.
said that expectation at any point. That any executive
You’d think companies that have had been realized. would expect the transformation
been engaged in “digital transfor- imperative to cease in the future is
mation” for years would be getting Not that there hasn’t been any puzzling.
better at it, wouldn’t you? payback; just not nearly as much as “The 25% [figure] is a bit shock-
“Companies expected a cer- had been expected. ing, because we’re at a point where
tain return in a certain time, but A vast majority (91%) of exec- there’s no real end anymore to
digital is bigger and broader than utives surveyed expected that how we’ll have to change,” Clarke
companies imagined, and the implementing digital initiatives says. “The question really is, ‘How
level of confidence in mastering would “create better custom- aggressively are we willing to
it is slipping,” says David Clarke, er experiences.” As it turns out, change? How fast are we willing
global chief experience officer at though, only 71% said that expecta- to change our operating models or
PricewaterhouseCoopers. tion has been realized. how we engage customers?’” | D.M.

“In terms of activities we’re now a national bank, and
Front and Back you have to be in a digital world,” Woods says.
Banking is an industry in which Citizens has earmarked $50 million over the next two
becoming a digital business is para- years to migrate its data, applications, and back office
mount. The race is on to digitalize both infrastructure to a cloud environment. Part of that large
Defying the front end and the back end. investment is to deploy AI in the digitalization of end-to-
Definition Citizens Bank is in the “early end, previously manual processes. Anticipated benefits
innings” of a digital transformation, of the cloud migration include long-term cost savings and
says CFO John Woods. He intends to be careful about more efficient data processing and risk mitigation.
what things get transformed, though. The AI-driven process digitalization has already begun.
“Our objective is to be more innovative and agile in For example, in the commercial loan underwriting pro-
responding to rapidly changing customer needs,” says cess, the traditional use of long narrative analysis and
Woods. “Digitalization is one of the tools we use, and a spreadsheets has given way to more concise digital analy-
big one, but I hasten to add that if a highly manual pro- sis. The use of more tools that organize, aggregate, and
cess is not well-optimized and not delighting customers, leverage available data throughout the loan origination
merely digitalizing that process won’t magically begin to process provides a broader set of data to decision-makers
delight them.” earlier.
A centerpiece of Citizens’ transformation so far is Citi- Combining automated and standardized data visual-
zens Access, an online platform launched in 2018. Through izations with discrete and consumable narrative analysis
it, the nominally regional bank can take deposits nation- enhances the speed and accuracy of underwriting deci-
wide. The platform also provides savings products and sions, Woods says.
certificates of deposit. By early 2021 the platform will In addition, advancements in robotics, natural lan-
offer checking accounts and loans. At some later point it guage processing software, and AI allow electronic files
may provide fee-based services, such as mortgage origina- to be read, organized, and stored in a virtual environment
tions and sales and wealth advisory. with minimal need for manual intervention. Virtual data
Courage Required Asked to describe their

digital transformation, some
It’s safer to perpetuate a mediocre company than bet CFOs would probably cite their
everything on a new business model. company’s most recent ERP
implementation, Callé laments.
Craig Callé is a self-described is as bold and transformative as “ERP implementations can
digital transformation warrior. Jeff Bezos. be expensive, absorb a lot of
About a decade ago, as finance “It takes immense courage management time, and drive
chief of Amazon’s digital media to reinvent a corporation,” says productivity when configured
and books businesses, he was at Callé. “Most succumb to inertia— properly, but they’re not really
the center of one of the largest it’s safer to perpetuate a mediocre transformative,” he says.
transformations ever. Still,
Amazon’s Kindle was changing “But here’s what Callé adds,
the way people read, upending happens if businesses a steady
centuries of publishing industry don’t disrupt themselves: increase in
conventions. At the same time, the number
the company was in the early
they create space for an of compa-
stages of transitioning consumers emergent disruptor.” nies with
from DVDs and CDs to streaming Craig Callé, CEO of Source Callé LLC positions
services. like “chief
Today, through Source Callé, company than bet everything on digital officer” and “chief data
his own consulting firm, Callé a new business model. But here’s officer” is a welcome trend that
pursues clients that want to make what happens if businesses don’t promises to ramp up the pace of
a similar (if perhaps smaller) dent disrupt themselves: they create “true” digital transformations for
in the universe. But not every CEO space for an emergent disruptor.” years to come. | D.M.
38 CFO | April/May 2020 Photos courtesy the company.
AM20_CFO_Digital_V2.indd 38 4/7/20 3:51 PM

libraries staffed by bots continue to “learn” as they index,
organize, and maintain millions of electronic records with
speed and accuracy.
The CFO’s Opportunity
Citizens Bank is also using advanced analytics and Four roles a finance chief can play in
machine learning to personalize offers to customers. In enterprise digital transformation.
platform marketing, a customer browsing a home furnish-
ings website might receive a digital home equity loan offer 1. Digital Business Model Evaluator
from Citizens. Determining which business models may be
The approach has led to significant increases in market economically viable for the organization.
share for some products that have “outpaced some of the
banks’ other channels by multiple times,” Woods says. 2. Cross-Functional Digital Innovation
Machine learning and analytics also are reducing costs Promoter
by automating the loan-approval process for the majority Showing the potential financial returns from
of loans that don’t require escalation to elevated screen- cross-functional data sharing and digital process
ing. Meanwhile, the defect rate—referring to underwriting reengineering.
mistakes a human might make—is decreasing. 3. IT Operating Model Adviser
Helping CIOs make a rigorous economic case for
keeping or shifting computing applications,
“In terms of IT-enabled business processes, IT infrastructure,
activities we’re now and more.
a national bank, 4. Finance Automater and Analyzer
and you have to be in Determining which manual and knowledge
a digital world.” work in the finance department could be
automated using artificial intelligence and other
—John Woods, CFO, Citizens Bank
technologies.
Source: Krishnan Ramanujam, president of business and technology
Applications of the same principle for fraud manage- services, Tata Consultancy Services
ment, money-laundering prevention, and delinquent

account collections (identifying borrowers who are like-
ly to self-correct their delinquency) are expected to be
implemented later in 2020. McKinsey senior partner. However, he adds, finance chiefs
Citizens has told investors that these moves are going may not fully understand the crucial role that people play
to generate $200 million to $300 million of run-rate in a successful transformation.
savings by the end of 2021. “CFOs understand the strategic context,” Hjartar says.
Citizens is also reaping big benefits from having “A retail CFO, for example, understands that consumers
switched product development coding to Amazon Web are going to different channels and the economic conse-
Services and Microsoft Azure. Previously, it would have quences of that. Where they lack sometimes is in just say-
taken months for the bank to procure and receive from ing, ‘OK, we have to invest in new solutions and systems.’”
IBM the physical servers needed to create such a produc- “For most companies,” he continues, “the big question
tion environment. is not about buying new technology. It’s building an orga-
Now developers can start innovating “in a matter of min- nization that can continuously use the new technology to
utes,” Woods says. Transitioning to the cloud environment pursue the company’s strategy and become more produc-
enabled Citizens to also create a library of genericized ap- tive. You’re really investing more in people that will oper-
plication programming interfaces that can be reused over ate a new platform than you are buying a new IT system.”
and over as the team develops new software applications. One slight problem in some organizations, he adds, is
“If a developer wants to pull interest-rate information that the CFO has been trained in a management system
from our databases into a production environment, they that requires strict business cases and rigorous request-
don’t have to type out queries and develop code to do for-proposal processes for large-scale procurements.
that,” explains Woods. Not that those are bad things. But for digital
transformation, “the most brilliant thing you can do is
People Power attract the people with the right skills or train people, and
Where do people fit in these large-scale digital initiatives allow them to work in the right way,” Hjartar says. CFO
at Dell, Pizza Hut, Citizens Bank, and other companies?
Front and center, according to Klemens Hjartar, a David McCann is deputy editor of CFO.

AM20_Covid.indd 40 4/8/20 2:30 PM

Staying Healthy
Keeping accounting in order, closely monitoring cash, and maintaining
productivity are essential to riding out the coronavirus pandemic.
Will the COVID-19 outbreak and

the social isolation and quarantines Closing the Books
it has required shove the world’s BY ANNE-LISE DORRY
economies into a recession (or Corporations are not just con-

even a depression)? How long will cerned with public health, but
the very real financial volatility that could linger
any economic downturn last? Will long after the virus’s spread comes to a halt.
the U.S. government’s aggressive That leaves tax and finance professionals grap-
actions allow businesses to recover pling with some important questions they need
to answer when closing the books. The following
more quickly? How quickly? are some important considerations.
It’s not smart to try to predict any precise outcomes
when faced with great uncertainty, according to Nassim Does the organization have assets that have
Nicholas Taleb, author of “The Black Swan: The Impact to be impaired? While we can hope that the
of the Highly Improbable.” What CFOs can do, though, is coronavirus won’t affect things long term, there
consider the consequences of an event. “We can have a may still be some impairment required, especial-
clear idea of the consequences of an event, even if we don’t ly if some suppliers or customers go out of busi-
know how likely it is to occur,” writes Taleb. And if you ness or experience significant financial difficul-
know the consequences, you can mitigate them. ties. Bad debt may increase, and finance may
Managing for the consequences of the coronavirus pan- have to test goodwill for impairment, along with
demic has had CFOs looking at their companies from all investments and inventory.
angles the past two months. In the following collection of
stories, three experts tackle some of the most important Will market volatility affect the company’s
issues that need attention, whether the economic effects of hedging strategy and pensions or other
COVID-19 last just a few months or considerably longer. retirement funds? The financial markets are
volatile and so are
foreign currencies.
“Bad debt may
Breathing Room increase, and
That volatility
could leave busi-
On March 25, the Securities and Exchange Commission finance may have nesses exposed to
extended deadlines for certain public company filings. to test goodwill a level of risk that
Among other measures, the SEC is giving public compa- for impairment, is outside their
nies an additional 45 days to file certain disclosure reports along with accepted guide-
that would have been due between March 1 and July 1, 2020. investments and lines and could
“At the same time, the commission requires a registrant trigger unexpect-
inventory.”
taking advantage of this relief to disclose the reason for ed gains or losses,
the delay, the estimated date by which the delayed report realized or not.
is expected to be filed, and company-specific risk factors Hedging strategies may have to be revisited. Vol-
explaining any material impact of COVID-19 on its business,” atility may also affect the measurement of cer-
points out Marc Leaf, a partner at law firm Faeger Drinker. tain pension and other post-retirement plans.
AM20_Covid.indd 41 4/8/20 3:02 PM

Is finance evaluating subsequent the average number of days that it takes an organization
events the right way? Some events to pay its creditors. DPO is a metric directly linked to
occurring after the end of a report- cash management and liquidity.
ing period may trigger additional Data from APQC’s Open Standards Benchmarking®
disclosures, but others may require database shows that organizations falling within the 75th
Staying an adjustment to the financial state- percentile for this metric have an average DPO of 53 days,
Healthy ments. Conditions that existed before while the median have a DPO of 40 days. (See chart below.
the end of the reporting period but These readings were taken before the onset of the corona-
that come to light between the financial statement date virus outbreak.) The fastest-paying organizations are those
and when the financial statements are made available in the 25th percentile, with an average DPO of 30 days.
must be reported within the reporting period. These numbers have risen across the board since 2017.
Had we found ourselves in a typical April, my advice
Is your organization disclosing the effects of the would have been that a good DPO is, all else being equal,
coronavirus on its business? Securities and Exchange somewhere in the range of the median. This April is no
Commission Chair Jay Clayton has expressed several ordinary one, however. To preserve the ability to keep
times that the SEC will watch company disclosures paying employees and
closely. In particular, the commission will be looking better manage operating
“Waiting too long expenses, companies may
at disclosures as they relate to an issuer’s financial
exposure to the virus as well as how the issuer plans to pay suppliers need to consider extend-
for uncertainty and reacts to events as they occur. could potentially ing DPO as long as rea-
damage sonably possible to ensure
Anne-Lise Dorry is senior director of editorial in the tax relationships or optimal cash flow.
and accounting business of Thomson Reuters. lead suppliers to Lengthening a compa-
put in place credit ny’s DPO requires a deli-
cate balancing act. While
restrictions.”
there are good reasons for
Increase DPO, If You Can extending DPO, waiting
too long to pay suppliers could potentially damage rela-
BY PERRY D. WIGGINS
tionships or lead suppliers to put in place credit restric-
A couple of months ago, few people tions. Extended payment terms tend to hurt the ability
could have fully anticipated the scenario of suppliers to grow and run their businesses, which also
in which we now collectively find ourselves: Businesses have operating expenses to cover and employees to pay.
and borders shuttered throughout the world, economic COVID-19 is not the first major disruption to global
uncertainty for many workers, and a global economy business and it certainly won’t be the last. In times of
edging toward or in recession. Many organizations are disruption and uncertainty, relationships with suppliers
understandably concerned about liquidity and cash flow, can make or break a company’s ability to continue sell-
as they evaluate how they can continue to pay their oper- ing to customers.
ating expenses. As a finance chief considers adjustments to DPO,
This month, AQPC’s metric of the month examines he or she should coordinate with suppliers—especial-
days payable outstanding (DPO), a measure that reflects ly those with whom they have strategic and mutually-
beneficial relationships. Having transparent conversa-
tions with suppliers about the current revenue stream
is the best play; suppliers will appreciate being party to
53 Days payable
the organization’s major business decisions.
60 Days
days Outstanding
As a company increases its DPO in coordination
50 40 with suppliers, it will want to couple this move with a
days decrease in days sales outstanding (DSO) to bring cash
40 30
in more quickly. If a business can extend DPO while
days
30 decreasing DSO, its liquidity and cash reserves will
improve. But it is also no easy feat, especially with large
20
sectors of the economy virtually shut down.
10
Perry D. Wiggins, CPA, is CFO, secretary, and treasurer
0
75th Median 25th for APQC, a nonprofit benchmarking and best practices
percentile percentile research organization based in Houston.
AM20_Covid.indd 42 4/8/20 2:30 PM

Managing the Remote
Digital Workplace
BY KAUMIL DALAL
CFOs had little time to make investments

and decisions as workplace and travel restrictions were
imposed. Now that many workforces have been homebound
for a few weeks, CFOs should ensure they continue to be
productive. A key part is checking that the information tech-
nology teams have addressed the following five questions.
Do employees have the hardware they need to be

successful? Once the workforce is equipped with the
right computers and peripherals, broadband connections
become important. Do employees have the right internet Millions of workers turned to video conferencing app Zoom after the
speed while working from home for the kind of work that’s coronavirus outbreak forced them to work from home.
expected? Conduct an inventory of employees’ broadband
connections and pay attention to their downloading and need to be flexible with a potential shift in working hours.
uploading speeds to ensure there is adequate capacity for Managers will also have added pressure to ensure their
telephony, video, and screen sharing. teams can perform well while remote. They will need to
For some employees it may be necessary for the com- make sure their teams have an adequate understanding
pany to invest in mobile hotspots and related data plans of tools. They must encourage collaboration, foster open
to establish adequate internet access at home. Work with communication, and measure productivity. Microsoft’s us-
employees to get at least a minimum-viable capacity in age analytics is a good built-in tool to see how people are
place. And if the company relies on a virtual private net- working. Third-party tools, like Brainstorm’s QuickHelp,
work and all employees are working on it simultaneously, can also help with monitoring and shaping effective usage
current hardware may not be able to handle the load. through learning, support materials, communication cam-
paigns, and analytics.
Virtual collaboration, While this data is helpful information, managers still
part 1: Are the right tools have the task of clearly crafting and communicating expec-
“Managers will and technology in place? tations for how their teams should interact and collabo-
also have added Does the company have tools rate—for instance, being available and online during
pressure to such as Microsoft Teams, normal work hours.
ensure their Slack, WebEx Teams, or Zoom
teams can that allow the ability to chat, Can the company’s support desk handle a higher
perform well co-author documents, ac- volume of requests? When the workforce is remote and
while remote.” cess important files, and host trying to figure out new processes and tools on their own,
meetings with video? Are support desk requests surge. Are there self-service resourc-
there intelligent workplace es and knowledge bases to provide support before requests
tools such as Beezy (social business software) to help peo- occur? Are there enough IT resources to cover increased
ple stay connected and productive? demand? Evaluate—today—the company’s ability to trou-
There is a good chance this is the first-time employees bleshoot remotely (if you haven’t already).
are using such tools as intended. Are there documentation IT may have to get creative if it can’t meet and diagnose
and best practices that can easily be shared as employees technical issues in-person. Consider increasing self-service
navigate these platforms? capabilities by using a tool like ScreenSteps to easily create
and publish guides that help avoid many of the issues that
Virtual collaboration, part 2: Does the company have go to support. It’s even possible to create workflow articles
the culture to support remote working? Using video that mimic the troubleshooting process that people would
helps employees stay connected, regardless of distance. If get from a first-tier agent. CFO
the company didn’t have a remote working culture before
the coronavirus pandemic, it will be even harder to change Kaumil Dalal is lead digital workplace director at West
and teach employees how to use digital workplace collabo- Monroe, a national management and technology consulting
ration tools while remote. firm. Frank Lesniak, Rick Sabatino, Alex Foucre-Stimes, and
Traditional ways of working will also change. Teams will Ryan Milton contributed to this article.
Getty images April/May 2020 | CFO 43
AM20_Covid.indd 43 4/8/20 3:02 PM

AM20_Special Report.indd 44 4/7/20 3:28 PM

SPECIAL
REPORT
Insider Trading
Fixing Some Holes

Reforms to insider trading law could provide clarity, but they could
also lead to more aggressive prosecutions. By Bob Violino
Within a couple of weeks of the COVID-19 outbreak area of law and our securities markets,
has benefited no one.”
in the United States, the Securities and Exchange Com- Specifically, the task force conclud-
mission issued a warning to corporate executives and ed that a legislative solution, in the
the wider public about trading on insider information. form of a new statute expressly setting
out the elements of an insider trad-
“Corporate insiders are regularly proposed revisions could make it easi- ing offense, would be the best vehicle
learning new material nonpublic infor- er for prosecutors to bring cases and for change. But not everyone sees the
mation that may hold an even greater convict violators. necessity for an overhaul.
value than under normal circum- There’s been much discussion
stances,” the commission said. “Given over the need for reform since the Sticky Points
these unique circumstances, a greater Bharara Task Force on Insider Trad- Insider trading is illegal trading of a
number of people may have access to ing published a report in January 2020 company’s stocks or other securities
material nonpublic information than in recommending ways to improve and by individuals with access to confiden-
less challenging times.” clarify existing statutes and case law. tial or nonpublic information about the
In the SEC’s view, more material “Our nation’s insider trading laws company, according to the Legal Infor-
insider information plus stocks bounc- have for too long lacked clarity, gener- mation Institute at Cornell Law School.
ing around like a super pinky ball ated confusion, and failed to keep up Taking advantage of this privileged
equaled temptation. (Several Congres- with the times,” Preet Bharara, chair of access to information is considered
sional representatives were already the task force and former U.S. attorney a breach of an officer’s or director’s
being investigated for allegedly ditch- for the Southern District of New York fiduciary duty. Illegal insider trading
ing stocks after getting classified brief- (SDNY), said at the time. “This lack of includes tipping off others to MNPI so
ings on the threat of COVID-19.) It clarity and certainty, in this important they can trade on it, a common occur-
was also somewhat surprising, since rence in famous insider trading cases.
in fiscal year 2019, the SEC brought 21 The primary criticism leveled at
fewer insider trading cases than the “Our nation’s U.S. insider trading law is that it is
year before (see chart, page 47). premised on decades of judicial deci-
insider
The SEC’s warning was one that sions predicated upon the general
most finance chiefs took seriously: trading laws antifraud provisions of the Securities
CFOs often manage or help manage have for too Exchange Act of 1934, rather than a
the corporate trading window and long lacked precise statutory framework, says John
approve or reject proposed trades clarity, Sylvia, co-chair of the securities litiga-
when employees possess material tion practice at Mintz.
nonpublic information (MNPI). But
generated confusion, and “This approach has resulted in
there’s another reason for CFOs to be failed to keep up with the inconsistent standards within the
hyper-cautious: Some legal experts times.” circuit [courts],” says Sylvia, particu-
and attorneys are pushing for a reform —Preet Bharara, former U.S. attorney, larly with respect to liability for insid-
of insider trading law, and some of the Southern District of New York ers who tip others and for those who

SPECIAL
REPORT
Insider Trading
receive the tips. That inconsistency

has made it more difficult to pursue
these “downstream actors” who trade
on shared material nonpublic infor-
mation (MNPI), he adds.
For example, in 2017, professional
golfer Phil Mickelson avoided being
charged with insider trading after
receiving second-hand information
about Dean Foods. Prosecutors could
not charge him with a crime because
they could not find any evidence that
Mickelson knew his tipper had inside
information or knew that the tipper
benefited in any way from passing
that information along to Mickelson—
a quirk in existing insider trading law.
Other aspects of insider trading law
need clarity also. For example, courts
have gone back and forth on whether
the law requires that the tipper receive
a personal benefit in exchange for dis- Pro golfer Phil Mickelson avoided being charged with insider trading after receiving second-
closing MNPI to someone else. They hand information about Dean Foods.
have also differed on what precisely
constitutes a personal benefit, says
Greg Baker, a partner in white collar a tip] to know specifically how MNPI The bill also addresses questions
defense at Lowenstein Sandler. was obtained or whether a personal that have arisen in the digital era, such
Indeed, the Bharara Task Force rec- benefit was paid or promised”—the as if a cyberthief who steals corporate
ommended that the “personal benefit” issue in the Mickelson case. The stan- data and then trades on that informa-
requirement of existing law should dard would be whether the person tion violates insider trading laws.
be eliminated. It also recommended who received the tip was “aware, con- Instead of a strict breach of duty
changes to the “knowledge require- sciously avoided being aware, or reck- or “intent to defraud” standard, H.R.
ment” that was key in Mickelson’s case. lessly disregarded that such informa- 2534 uses a “wrongfully obtained”
tion was wrongfully obtained.” standard. “Wrongfully obtained” is
New Bill defined to include MNPI obtained
While it is unlikely, given the coro- by: (i) theft, bribery, misrepresenta-
navirus pandemic, that Congress will “Merely tion, or espionage (or other electronic
make headway on insider trading because the means);” (ii) “a violation of any Fed-
law in 2020, there is legislation in the SEC becomes eral law protecting computer data or
pipeline. H.R. 2534 (the Insider Trad- the intellectual property or privacy
displeased
ing Prohibition Act) passed the U.S. of computer users;” (iii) “conversion,
House of Representatives in Decem- with the misappropriation, or unauthorized
ber 2019 and was then referred to the direction of and deceptive taking of such informa-
U.S. Senate Committee on Banking, judicial interpretation of tion;” or (iv) “a breach of any fiducia-
Housing, and Urban Affairs. the law does not mean that ry duty, a breach of a confidentiality
The bill addresses some of the nag- agreement, a breach of contract, or a
ging problems in insider trading law.
Congress must provide a breach of any other personal or other
For purposes of establishing a viola- legislative bailout.” relationship of trust and confidence.”
tion, for example, it says “that it is not —Jacob Frenkel, securities enforcement Some experts and attorneys think
necessary for [a person who receives attorney, Dickinson Wright H.R. 2534 is dangerous and unnec-
46 CFO | April/May 2020 Sam Greenwood/Getty Images

essary. “Merely because the SEC regarding tippers and tippees, he
“The broader
becomes displeased with the direc- says, and likely would lead to more
tion of judicial interpretation of the scope of the convictions. (Prosecutors and the SEC
law does not mean that Congress ‘wrongfully presumably would not charge cases
must provide a legislative bailout,” obtained’ and that did not fit squarely within the
says Jacob Frenkel, securities enforce- ‘recklessness’ statutory framework.)
ment attorney at law firm Dickinson “But the overall number of cases
standards,
Wright. While the bill on its face charged under current standards
appears to provide clarity, “greater if approved, presumably presumably would decline, as ques-
confusion and more aggressive pros- would result in a greater tionable cases would be rejected or
ecutions are the likeliest results,” number of insider trading charged as civil—and not criminal—
Frenkel says. prosecutions.” violations,” says Sylvia.
He says “the zones of uncertainty”
—Greg Baker, partner, white collar
in the bill outweigh what is currently a
defense, Lowenstein Sandler
Being Vigilant
relatively understandable prohibition Any changes in insider trading law,
under the antifraud provisions of the obviously, could potentially affect
securities laws. For example, says Fren- if approved, presumably would result finance chiefs and other corporate
kel, "establishing express liability for in a greater number of insider trad- executives. “H.R. 2534 would potential-
trading derived from cyber intrusions ing prosecutions … This is particularly ly make it easier to prosecute corporate
easily could be a valuable amendment true insofar as the statute envisions executives who communicate MNPI in
to existing cybercrime statutes.” liability for information obtained by breach of a duty, because the proposed
Other attorneys disagree on wheth- theft or espionage.” bill expands upon the types of duties [a
er the reforms would result in more Mintz’s Sylvia sees a more complex breach of a confidentiality agreement,
cases or convictions. Says Baker: outcome: a well-defined standard a breach of contract, or a breach of any
“The broader scope of the ‘wrongfully would lead to more informed other personal or other relationship of
obtained’ and ‘recklessness’ standards, prosecutorial charging decisions trust and confidence] … that ultimately
give rise to liability,” Baker says.
Certainly, H.R. 2534 could make
Not a Priority? current law clearer. But it also may
In a year it prioritized protecting retail investors, the SEC brought 21 fewer make things harder for CFOs and
insider trading cases. (Number of standalone SEC enforcement cases, fiscal year 2019) corporate attorneys monitoring
employees’ compliance.
Investment adviser 191 A CFO at almost all times is in
possession of some material nonpub-
Securities offering 108
lic information, Frenkel says. “The
Issuer reporting/accounting 92 issue is, how ‘material’ is that infor-
mation? By eliminating the require-
Broker dealer 38 ments that the person trading acted
Market manipulation 30
with an intent to defraud or had a
duty not to use the information for
Insider trading 30 personal benefit, any public company
CFO trading stock could potentially
FCPA 18
be in the SEC’s or [Department of Jus-
Public finance 14 tice’s] cross-hairs."
With the SEC watching closely the
SRO/exchange 3
next few quarters, the best advice is to
Transfer agent 1 say informed. CFO
0% 50 100 150 200%

Bob Violino is a freelance writer based
Source: SEC Division of Enforcement 2019 Annual Report in Massapequa Park, N.Y.
Photos courtesy of the company April/May 2020 | CFO 47

THE QUIZ
Food, Glorious Food

It would seem painfully obvious that if a pandemic were going
to force people to isolate at home, grocery stores would become
essential businesses. Clearly, however, it wasn’t. As a tribute to the
cashiers, stock clerks, food preparers, and order-takers keeping
shopping carts filled and the nation’s pantries stocked during a
global pandemic, we present a quiz on the grocery industry.
1 Which is NOT one of the top four largest

grocery store chains in the United States? 5 Which company is generally considered the first
online grocery store in the U.S.?
A. Kroger A. Peapod
B. Albertsons Companies B. Webvan
C. Wegmans Food Markets C. Homegrocer.com
D. Publix Super Markets
D. Fresh Direct
2 In what year did German grocery giant Aldi

open its first U.S. store, which was in southeast-
ern Iowa? 6 What is the average hourly wage for a grocery
store cashier?
A. 1982 A. $10
B. 1991 B. $20
C. 1965 C. $18
D. 1976 D. $15
3 What was the original name of the Safeway

grocery store chain? 7 What was the original name of the Trader Joe’s
chain of stores?
A. Food Lion A. Central Market
B. Food Town B. Pronto Market
C. Sam Seelig Grocers C. Von’s
D. Ralph’s
D. Food Bazaar
4 Which grocery chain was NOT on Food &

Wine’s 2019 list of the 10 best supermarkets in
the United States?
8 About how many supermarket stores are there in
the U.S.?
A. Sam’s Club
A. 38,000
B. 14,000
B. Whole Foods
C. Trader Joe’s C. 25,000
D. Lidl D. 19,000
Answers: 1-C; 2-D; 3-C; 4-A; 5-C; 6-D; 7-B; 8-A
0520 quiz.indd 48 4/8/20 12:02 PM

Ink runs out.
Learn how lifetime income from TIAA doesn’t.
Give your employees the confidence

of monthly retirement income for life.
Learn more at TIAA.org/IncomeForLife INVESTING ADVICE BANKING RETIREMENT
In retirement, employees can convert savings into a stream of lifetime income payments. Some payments are dependent
on market performance. Guarantees are subject to TIAA’s claims-paying ability. TIAA-CREF Individual & Institutional
Services, LLC, Member FINRA, distributes securities products. Annuities issued by Teachers Insurance and Annuity
Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible
for its own financial condition and contractual obligations. This material is to inform and educate. It is not investment
advice. It does not reflect specific goals and needs of any individual investor, which should be considered when making
personal investment decisions. Consider the investment objectives, risks, charges and expenses carefully
before investing. Call 877-518-9161 or go to www.TIAA.org/prospectuses for current product and fund
prospectuses that contain this and other information. Read the prospectuses carefully before investing.
©2019 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue,
New York, NY 10017. For institutional investor use only. Not for use with or distribution to the public. 969140
TIAA.indd 2 3/31/20 2:39 PM

FINANCE LEADERSHIP
Virtual Summit
June 4, 2020
Designed for enterprise senior-level
finance executives
The Argyle Group, in collaboration

with CFO Magazine, presents the
Finance Leadership Virtual Summit,
an intimate online gathering
for CFOs and senior-level finance
executives. As finance leaders, over
the past weeks and months you’ve
had to steer your organization
through unprecedented turmoil,
while at the same time focus on
future growth opportunities. Attend
this event for insight into how EARN UP TO 6
to move your organization forward CPE CREDITS!
into 2021. Participants of our live
Finance Channel events
have the opportunity to
earn continuing professional
education (CPE) credits.
CPE certificates will be
awarded on a per request
basis and according to
NASBA standards.
For more information, visit us at: Presented by

https://bit.ly/ArgyleVirtualSummit
646.380.9200
sponsorship@argyleforum.com
Argyle_Ad_Finance Leadership.indd 1 4/8/20 12:03 PM

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APRIL/MAY 2020

AM20_Cover.indd 1 4/7/20 4:22 PM

When every connection counts, you can count on us.

CFO Ad Template CS5.5.indd 1 4/1/20 10:57 AM

Fixing Some Holes

0520 TOC.indd 1 4/8/20 2:24 PM

Up Front challenge of leading the troops while

2 CFO | April/May 2020 Getty Images (3)

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Two things on the mind of every executive

TripActions is your trusted partner to help you move forward.

“Employee safety and well-being is always something that’s at the forefront of

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TripActions is trusted by nearly 4,000 organizations globally to ensure

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We Saw It Coming Worried about how your

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Tired of the “hot takes” and

An essential piece of any finance chief’s toolkit.

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◗“Fractional CFOs Provide Value

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29,551.42 Weak customer demand 43%

DJIA’s record high Supply chain disruption 31%

5,700.40 Access to capital

Points lost by DJIA commodity costs

20April/May_Topline 8 4/8/20 12:01 PM

ANALYTICS “Management expec-

Getty Images (2) April/May 2020 | CFO 9

20April/May_Topline 9 4/8/20 12:01 PM

Aon to Buy Willis

10 CFO | April/May 2020

20April/May_Topline.indd 10 4/7/20 3:48 PM

Fitch Lowers Outlook

for Consumer Finance

COMPENSATION $1.5 million in base salary from 2019.

Wells Fargo Cancels

Getty Images(3) April/May 2020 | CFO 11

20April/May_Topline.indd 11 4/7/20 3:48 PM

REGULATION was “sufficiently tailored to its stated purpose.”

Cboe 'Speed Bump'

Runs Into SEC

12 CFO | April/May 2020

20April/May_Topline.indd 12 4/7/20 3:48 PM

Plan Sponsors Slash

LEGAL Currently, in addition to Illinois, only California, Tex-

May Trigger More

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suffer today,” it said.

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