Corporate Finance
Corporate Finance Overview
"Corporate Finance" is an umbrella term for different finance-related positions that exist within non-financial services industry businesses. A career in Corporate Finance means you would work for a company to help it find money to run the business, grow the business, make acquisitions, plan for its financial future, and manage any cash on hand. You might work for a large, multinational company or a smaller player with high-growth prospects. Because finance pervades every aspect of business, playing both supporting and leading roles at different times, positions in Corporate Finance are numerous and highly diverse. No two Corporate Finance positions are the same. Moreover, being successful in Corporate Finance means more than just being a finance wiz or an Excel jockey.
It is a great misnomer that Corporate Finance employees "dim-witted" pencil-pushers in short-sleeved shirts that are held captive in the back office. In today's organizations, finance plays a highly visible and valuable role working directly with the business and setting the corporate agenda. To be successful in the field, one should be just as adept at problem solving, communicating, and influencing as he/she is at building a financial model.
"[Corporate Finance's] biggest weakness is a lack of people skills. Finance types are often curt and colorless. By contrast, the best CFOs are master persuaders with a streak of the salesperson. They read people as surely as balance sheets."
- John Dasburg, CEO of Northwest Airlines, Fortune Magazine (Nov 18, 1995)
It is important to emphasize that Corporate Finance professionals are critical to the day-to-day operations of the business they support, much more so than financial services professionals. Potential candidates should ask themselves how they measure up in the traits below, as these are some of the. primary characteristics recruiters and potential employers seek out:
Analytic nature /puzzle solver
Comfortable with ambiguity and changing environments
Strong communicator with influencing skills
A “patient go getter"- demonstrate initiative while navigating bureaucracy
World traveler preferably with foreign language abilities
Computer/Excel literate
Individuals contemplating a career in Corporate Finance should consider these factors in the light of their personal interests and career goals. Do not approach Corporate Finance recruiting as a "fall back plan" while recruiting other finance areas (i.e. investment banking, asset management, sales and trading). Those who demonstrate a passion for this corporate unit will be far more successful than those who do not.
What are the different Corporate Finance Roles
In general terms, Corporate Finance professionals evaluate and manage the money associated with their company's businesses. This section provides a basic overview of the core set of functional duties of a Corporate Finance professional according to convention. The areas discussed are Business Unit, Treasury, Controller, Internal Audit, Mergers and Acquisitions, and Strategy. Keep in mind that this list is not complete, and companies might refer to areas using different names.
Business Unit: Analysts working in a business unit will generally work on cross-functional teams that focus on a common project or area. Duties involve determining financing needs, analyzing capital budgeting projects, performing long-range financial planning, analyzing possible acquisitions and asset sales, analyzing competitors, implementing financial plans, and supporting monthly financial projections and reporting.
In a business unit, finance professionals must be able to analyze and understand the unit's performance and communicate stories of success, failure, and risk to upper management. Finance employees are affected by and must understand how their team manages relationships with supply chain, marketing, research and development, sales, etc. Finance employees in business units (more so than in the other areas listed below) are more likely to work closely with employees in non-finance functions and need to understand concepts from other MBA courses (marketing, operations, etc.).
Treasury: Treasury departments are involved in financial planning, raising funds, cash management, acquiring and disposing of assets, and identifying and hedging risk for the company as a whole. Experienced professionals’ measures spend time on setting strategy for the department and managing relationships with investment banks, rating agencies, analysts, and investors. New analysts in treasury will work on the details of individual areas, such as credit risk, pension management, foreign exchange, debt management, leases, etc.
Controller: Duties involve financial planning, accounting, financial reporting, and cost analysis. Analysts will get involved in property, revenue, benefits, derivatives , lease, and joint interest accounting. Analysts may need to develop forecasting models to project revenues and costs, and they may be called on to implement or work with a complex costing system, conduct financial reengineering, work with transfer pricing issues, or interface with auditors. This job is very accounting intensive.
Internal Audit: Audit positions generally require a lot of travel. Employees visit company locations to test systems and processes to make sure that they are in sync with what has been reported to headquarters. This position is also very accounting intensive.
Mergers and Acquisitions (M&A): Companies vary a lot in this area, as some companies and industries are involved in a lot of M&A activity, while others are not. M&A analysts will be involved in identifying and evaluating targets for acquisition, and working with other groups (treasury, legal, investment banks, etc.) to discuss and negotiate the deal terms. There are generally fewer of these positions available in comparison to areas such as business unit finance.
Strategy: Companies vary a lot in this area as well, both in terms of what role strategy positions play and where they are located within the company. Some companies have finance positions within business units that are devoted to evaluating and setting strategy for their business units, while others may have separate strategy departments.
Strategy finance professionals step back from the day-to-day management and think about where the company should go in the future, evaluate how best to get there, and ensure that business plans adhere to strategy over time.
How do these positions vary by company?
Even more important than understanding these generic Corporate Finance roles is to understanding how companies think about finance (what and who drives their business), how they organize their positions , how they develop the careers of their employees, and finally-how big are the companies and what is the nature of there industry. Some companies rely upon certain areas of finance more than others, and it is important to understand this when talking to companies. The best way to determine what kind of environment you want to work in is to hear what people have to say about their companies. With that in mind, it will be helpful to note the following.
The role finance plays in the company makes a difference.
The drivers of the business of the company - and business unit - you work for (finance, marketing, technology, R&D, etc.) will affect the type of work you will be doing in any of these finance roles. For example, a finance position in a business unit whose success is driven by marketing might look more like a marketing position than a finance position. There are finance professionals that would like this, and there are those that would not. Therefore, it is important to pay attention to how finance jobs may differ in this way.
Candidates should ask about the role of finance within each company and try to get a sense of the differences between companies and industries. Knowing the variances in finance roles between companies will help you make informed decisions about your preferences during recruitment.
How companies organize their finance positions makes a difference
Companies and company divisions organize the responsibilities of finance professionals in different ways sometimes in ways dictated by convention, but other times according to the company' s own needs or the business relationships/politics that exist within the business. Therefore, determining the characteristics of a certain finance position- and beyond that, applying for the job--can be extremely confusing. So, ask questions.
How (and whether) companies facilitate career development makes a difference
Because Corporate Finance roles differ so much from one role to the next, a single company can offer one person a huge number of different work experiences and opportunities - without ever leaving the finance function. Most finance professionals want to be able to move around and experience different jobs during their careers, but not all companies facilitate this flexibility for their employees. Therefore, it is important to do your research and find out how people move around the company and what are the benefits and costs of doing so.
Keep in mind that it can be costly for a company to allow for a lot of employee mobility, but at the same time facilitating that flexibility enables them to meet an employee' s professional development goals and keep that employee happy. Furthermore, employees with experience in several areas of finance will likely add significant value to the company.
Company size and industry make a difference.
Finally, a company's size and its industry have a huge impact on what its Corporate Finance professionals do. As an extreme example, if you are working as part of a company of 50 people - you might be working in all finance functions. If the company has 30,000 employees, there could be 20 first-year analysts working just in a treasury function. Again, there are pros and cons to both, so it is important to keep asking questions to see what type of environment is best for you and your development.
Long-Term Career Options
Generally, people interested in Corporate Finance are either aspiring to be a general manager, VP Finance of a business unit, Treasurer, Controller, or CFO. Depending upon the goal, it may or may not be important for you to spend time in specific (or multiple) areas of Corporate Finance. For example, a CFO must have a solid of both business unit finance and also corporate areas like the treasury and controller. A general manage of a business unit might not have to have expertise in corporate areas. You will learn more about what is important to you by talking to people and asking about their experiences.
Also, it should be noted that Corporate Finance professionals with experience from highly regarded and well known finance organizations (e.g . Fortune 50 firms) are generally in high demand by smaller, higher-growth organizations.