New Research Finds Finance and R&D Must Work Together When Identifying Risk
Thursday, September 28, 2017
Stern Strategy Group
Anat Gerstein, Inc.
(on behalf of ACCA USA)
New York and Montvale, N.J., September 28, 2017 – CFOs and their finance departments need to be included in the early phases of research and development (R&D) to identify risk, but without stifling innovation, finds new research from Association of Chartered Certified Accountants (ACCA) and IMA® (Institute of Management Accountants). To see the full report, visit here.
The report, published today, confronts the important issue of how the CFO can add discipline to the R&D process, especially in highly innovative industries, and use Technology Roadmaps to better identify the link between risk, investment and spending. Technology Roadmaps are documents that can be used as a reference point when choosing and managing R&D projects. They provide an overview of the future needs and technical challenges facing an industry and outline possible solutions.
The report finds that success in R&D is not solely dependent on the amount of time and money spent, but is also about collaboration and cross-departmental teamwork. It reveals that CFOs often leave important decisions, such as the selection of strategically worthwhile projects and how to reduce the likelihood of project failure, to others.
“R&D in the fast-moving tech sector needs to be well funded and aligned with the company’s strategy. CFOs need to be involved earlier in the R&D process,” said Narayanan Vaidyanathan, head of technology insight at ACCA. “This is where the use of Technology Roadmaps as a management tool can help identify risk, and ultimately, support the growth of an industry.”
Raef Lawson, Ph.D., CMA, CPA, vice president of research and policy and professor-in-residence for IMA, adds, “R&D and finance departments often have to meet half way. A Technology Roadmap can help bridge the monetary risk versus innovation gap that can sometimes happen when R&D is racing ahead and CFOs want to check the spend.”
The choice of appropriate R&D projects is highly interdependent on the future strategy of an industry. CFOs can use the information in the Technology Roadmap to evaluate their firm’s project appraisal process and consider if it gives a clear picture of the risks. The Technology Roadmap provides a basis for:
- Engaging other C-suite executives in conversation about how a business’s strategy aligns with industry forecasts
- Rebalancing investment strategies by signalling to firms which projects are high risk and those that are lower risk
- Validating the firm’s strategy with less effort
- Increasing collaboration through multi-agency R&D initiatives and achieving conjoint technical and cost targets that support growth and development of the industry
- Helping to identify the likelihood of various R&D outcomes and the risks that could affect the achievement of those outcomes
- Accelerating the “time to market” of new products
About the report
This report draws on a case study of the semiconductor industry to help improve executives’ knowledge of Technology Roadmaps. The semiconductor industry was the first industry to develop a Technology Roadmap, which has been the lifeblood of that industry for more than 20 years, allowing it to continually improve the performance-to-cost ratio of wafer chips.
Other industries, such as biopharmaceuticals and energy, have drawn on the experience of the semiconductor industry to learn how to plan and develop Technology Roadmaps.
About IMA® (Institute of Management Accountants)
IMA®, the association of accountants and financial professionals in business, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) program, continuing education, networking and advocacy of the highest ethical business practices. IMA has a global network of more than 90,000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/India. For more information about IMA, please visit www.imanet.org.
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
ACCA supports its 198,000 members and 486,000 students in 180 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 101 offices and centres and more than 7,291 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. ACCA’s core values are aligned to the needs of employers in all sectors and it ensures that through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers. More information is here: www.accaglobal.com