Uniliver Case Study for Financial Management

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6/27/12

IBS Case Studies

IBS Mumbai
Date: 27/06/2012 Time: 20:46:19

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Unilever Limited: Transforming the Finance ‘Function’
This case study was written by Parveen Sultana and Fathima Reshma Taj H, under the direction of Saradhi Kumar Gonela, IBS, Hyderabad. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources.

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Unilever Limited: Transforming the Finance ‘Function’
“Top performing businesses have top performing finance functions, but few finance functions are top performing.” - Scott Parker, Head of Financial Management, KPMG LLP (UK) In an era of globalisation, increasing economic pressures and stringent regulatory norms, the role of finance function is becoming much broader than ever before. The head of finance function, the Chief Financial Officer (CFO) has become the strategic business partner to CEO and is playing a leading role in company’s decision-making process. In this context, the finance function is all the more important especially in conglomerate and multinational companies. Unilever Ltd. is one such company that has a highly diversified geographical presence and wide financial operations.

Role of Finance Function - Interface of Finance Function with other Functions In the rapidly changing business world, many CEOs are realising that achieving organisational objectives becomes impossible without the active support of finance function. It is obvious that finance function is one of the driving forces of an organisation. Irrespective of a firm’s size and scale, finance forms basis for all economic activities. As it is a scarce resource, optimum utilisation of finance is necessary and any mismanagement of such resources can prove disastrous for 115.249.252.231/casestudies/mumbai/FM0001.asp 2/12

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the company. The success of an organisation depends on how well it manages its financial resources. The optimum utilisation of finance or financial resources can be possible only by effective finance function. Even the best of the companies and CFOs go out of business, if they fail to utilise the funds effectively or implement improper financial management policies. All other functions such as marketing, production, human resources and accounting are interlinked and inter-connected through a common link i.e., ‘finance’ function. Depending on the nature of the business, it becomes the core or supporting function, but every organisation needs to focus on building sound finance function. Basically, the larger the company, the lower the cost of its finance functions as a percentage of revenues. According to a survey conducted by the McKinsey Global 2009, respondents in companies with annual revenues upward of $1 billion are more likely to estimate the cost of their finance function as less than 1% than those at smaller companies.[1] This indicates that in big companies once, the finance function establishes its capacity to perform, its size does not change or grow majorly in proportion to revenue changes. The duties and responsibilities of a finance manager vary with specific titles, which include treasurer, cash manager or controller, etc. The treasurer focuses on the organisation’s financial goals, obj ectives and involves in financial decision-making. Managing corporate assets and liabilities, planning the finances, budgeting capital, managing the investment portfolios and...
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