Q&A

The expanding amount of data now available to

companies to analyze and sometimes monetize is changing how many do business in big and small ways.

The Business Journal’s Michael de los Reyes asked some locally based chief financial officers how data is affecting their duties and creating challenges and opportunities as companies accumulate information about risk, regulatory compliance, mergers and acquisitions transactions,

information technology, cybersecurity and more.

Edited excerpts of their responses follow.

Chris Lawrence

American First Credit Union
La Habra

Data is both good and bad. There is so much out there that one could get paralyzed in spending all of every day reading reports and digesting data, much less making any decisions from it. I used to come into the office and look at a few summary reports, read a few articles and get on with my day. Well, things have changed. I have handled this in two ways: higher caliber employees and narrowed information sources.

For my employees, I am careful to hire people whom I think can do my job. I collaborate with both my peers and subordinates to determine the best course of action. There are too many important aspects of my role to have just one mind. Of course, everything cannot be collaborative, so for less impactful decisions, I delegate to the people who are strong in that field and usually more knowledgeable than me. I strongly agree with the Hewlett Packard adage that decisions should be made at the lowest level possible.

Lastly, my data team is clever. It isn’t enough anymore to just have a quant running numbers for me. I need someone who can converse with the data and figure out what the data is trying to say. There are often hidden gems in the thousands of lines of data. Being able to listen closely and call ‘baloney’ when appropriate are developed skills. There are many examples when the data said something and the listeners should have called BS but didn’t and ended up making a bad decision. Many AAA securities in 2006 were in fact not AAA.

For information sources, I have adopted a narrow data feed to the following three unbiased sources: Orange County Business Journal, Bloomberg, and SNL Financial. I have found these to be informative without pushing an agenda. I skim headlines and read the articles that pertain to my institution. Having a competent team and an information funnel is the only way I can continue to focus on the most important aspects of my job.

John Michel

First Foundation
Irvine

The CFO serves as one of the primary administrators in any organization due to their expertise and skill set. As more focus is put on risk assessment, compliance and information technology, my involvement in these areas requires more of my time. In response to this use of my time, we have had to expand staff in our risk assessment, compliance and information technology areas and in the finance and accounting areas.

As a result, I have a need to rely on highly qualified individuals in each of these areas to provide me with information needed to participate in the decision-making processes and to delegate more of my primary responsibilities.

These additional duties have also required me to become more knowledgeable in the areas of risk assessment, compliance and information technology. In particular, the threats posed in the cybersecurity realm have required all our executives and staff to become more cognizant of these threats and vigilant in following guidelines to minimize these threats.  

Bill Torzolini

Allied Universal
Santa Ana

The role of the CFO has migrated significantly in recent years, with the availability and necessity of data being a significant driver.

The traditional responsibilities of the CFO, which include accounting, financial reporting, tax and treasury, have been focused on the reporting of historical data. With the proliferation of data, this focus has been redefined and now includes real-time, as well as predictive, analysis and reporting. The CFO is in a position to view all aspects of the company through the numbers, placing the role in a unique position, similar to the CEO, at the center of the company and its operations.

In particular, Allied Universal has a highly trained workforce that is responsible for protecting tens of thousands of work sites across the country. This responsibility drives the need for accurate, real-time information in order to support not only the business but also its clients. From a business perspective, the CFO is responsible for ensuring data is not only available to the finance staff, but also front-line operations, legal/risk teams, human resources, etc., to support day-to-day decision making. With the availability of data constantly increasing, the desire on behalf of the business for more information grows every year, which is a good thing, because when our associates are armed with data, they are in a better position to make more effective and timely decisions for the company and its clients.

Additionally, data is critical to making sound strategic decisions. With businesses moving as fast as they are today, a sound strategic plan is a necessity in order to stay competitive. It is the CFO’s responsibility to understand and work with data, making it available to the business to support the strategy and ensure strong collaboration and alignment across the company.

The amount of data which companies are now capable of producing grows each year through investment in technology, and this investment will not slow down if companies want to keep pace.

Since CFOs are trained to act upon data, the diversity of information becoming available has pushed the role of the CFO and that of its finance department well beyond being the traditional “scorekeeper” into a new and more dynamic direction.

Tom Varvaro

ChromaDex
Irvine

My role as the CFO of a public company has changed more over the last two years than in my previous six years in that role. I view the changes in the regulatory environment and the increased speed at which these changes have been occurring as having had the biggest impact on the change in that role.

As the Public Company Accounting Oversight Board and Financial Accounting Standards Board continue to strive to increase the quality of the financial statements and the audit function, this has led to an increase in documentation requirements, not only for annual audits, but even for quarter reviews. The proliferation of accounting memorandums has increased the amount of time the company spends on each close cycle substantially. Audit risk, as well as the increase in regulatory scrutiny related to IT and cybersecurity, has also increased the amount of time spent in these areas.

The burden on a smaller public company like ChromaDex is the same as larger companies when it comes to Sarbanes-Oxley Act compliance and risk around these items. Given our size and limited staffing, the cost of compliance in not only dollars, but time spent as compared to larger companies is dramatically higher.

As a CFO, I find myself spending more time staying current with the risk and regulatory environment than I ever have in the past. One of a CFO’s roles has always been to manage the expenses of a company, but trying to manage compliance costs without compromising the quality of in-house work, as well as third-party consultants, is becoming increasingly difficult. I have always viewed my role as the CFO as a person who should add strategic and tactical value to all functional areas of the company, and while I still think that should be one of my highest priorities and will always be, finding the time to do so effectively is becoming increasingly difficult.

Donald Voska

Goodwill of Orange County
Santa Ana

Over the past 17 years, my job as CFO of Goodwill of Orange County has changed from being primarily involved in accounting, reporting and tax issues to include a rapidly increasing emphasis on strategic planning, risk management and compliance. 

The speed of change in the external operating environment, as well as the internal operating environment, resulting from growth and expansion, continues to accelerate. Consequently, my role as CFO includes acting as a consultant to all operating divisions, with the responsibility of ensuring that they are aware of emerging risks resulting from regulatory and other changes that may adversely affect the results of operations if not addressed. 

I am now more involved in identifying and implementing new and improved management information systems to monitor and control risk. The cost of such systems is decreasing while the sophistication of the technology increases, yet with an extremely diverse range of programs and social enterprises, achieving the “power of one” remains an ongoing financial and practical challenge. 

Promoting integrated systems, improving internal controls and increasing efficiency by decreasing reliance on manual labor-intensive systems is now a top priority. 

As payroll expense continues to increase in California, the efficiencies from integrated workflow will decrease the amount of resources dedicated to administration and increase the funds available to help people with disabilities and other barriers, which is the primary reason for our existence.