Wednesday, January 16, 2008

Profle of RBC CFO Janice Fukakusa

  
The Globe and Mail, Tara Perkins, 16 January 2008

When she returned from vacation after the holidays, Royal Bank of Canada chief financial officer Janice Fukakusa enthusiastically presented her team with a Microsoft Word document sketching out some goals for the finance department.

She had had some time to step back, get some reading done, and think about her vision for the team.

It was a luxury for a woman who arrives in her office at the country's biggest bank by 6:30 most mornings, and doesn't usually make it out until six p.m., when she leaves armed with a stack of printed e-mails that she'll spend a couple of hours poring over later in the evening.

"You spend so much time on the whole enterprise, you don't get enough time to spend on your area," she says.

So she was excited when she brought the document in. And after 20 minutes of discussion with her department, one of her colleagues said, "Couldn't you just have rested on your holidays?" she recalls with a laugh.

Ms. Fukakusa, 53, is passionate about driving the finance department into a more strategic role within the bank.

"Finance roles have got to change in today's environment from being simply recorders," she says.

One way to accomplish this, she says, is to mechanize some processes. "We're not fully automated, but I think we're trying to get there, because that's how you free up the people."

Rather than spend hours putting numbers into spreadsheets, Ms. Fukakusa believes finance employees should be able to scrutinize the data and use it to make recommendations to their organization.

In one as large and diverse as Royal Bank, it is easy to imagine scenarios where the left hand wouldn't know what the right is doing. From her position, Ms. Fukakusa can not only look out across different parts of the company, she can also drill down into them. For example, she can spot if one part of the bank has a different interest rate forecast than another, and then research why that is.

But, more than that, the finance department's ability to tap into a whole host of data across the company creates a golden opportunity for it to make itself a vital part of the bank's strategic development, she says.

But this will require a change in focus from the recent concentration on governance issues, Ms. Fukakusa says.

"I think there's a real value to understanding the numbers and making it a strategy," she says. "But it takes a large transition for a finance group.

"Two years ago, everyone was wrestling with governance and SOX [the U.S. Sarbanes-Oxley Act]. That was what it was all about, and you went right back down to brass tacks about governance and technical stuff. And now, people are coming out of this, the environment's changing, and you're thinking, 'We have to do something differently in finance.' "

While each change in direction can be a difficult process, there are rewards for the organization, Ms. Fukakusa says.

Adjusting to SOX "was a painful process," she says. It was tough to execute, partly because executives had to pressure staff to make it a priority. "But it really, I think ultimately, is a good idea because it gives transparency to the process."

Now, the bank is trying to get out ahead on the international financial reporting standards (IFRS) that it will be required to implement in a couple of years. By 2011, public companies in Canada will have to replace the generally accepted accounting principles (GAAP) with the international standards as a basis for their financial reporting.

In addition to dealing with global accounting standards, Canada's banks were required to comply with the Basel II Accord late last year, and will soon be releasing their first quarterly earnings under these new international banking rules.

Organizations need to balance transparency and making information digestible to investors, cautions Ms. Fukakusa.

"The issue with Basel is, in order to get comparability [between institutions], you add a lot of disclosure. ... It's not so much about measurement as disclosure: how you're treating certain portfolios, how you apply operational risk criteria.

"It's sort of like IFRS and the European banks," she adds. "Some of them felt that it was an opportunity to just stuff in triple the disclosure," much of which is difficult for investors to understand.

Ms. Fukakusa has been known to take out her pen and reword the Royal Bank's reports, because she likes them to be easy to digest.

As global financial institutions cope with the current fallout from the U.S. subprime mortgage crisis, transparency has become the buzzword of the day.

"From our perspective, in looking at the issues around the [recent] market disruption, we layered into our annual disclosure a lot of facts and numbers and exposure levels that are not material, not significant, from an overall financial perspective," Ms. Fukakusa says. "But they are actually [significant] for an investor, because you need to build credibility and trust."

"A lot of times, when you're working with numbers, you think that if someone has the numbers they'll have the whole story," Ms. Fukakusa says. But that's not the case. "I spend a lot more of my time now with investors than I would have, say, a year ago."

And she has been asked questions beyond the numbers, such as "How do you look at risk management? Do you have overrides at the senior level? How respected is the chief risk officer?"

Those types of questions can shed more light on an organization than the straight numbers. And while it's impossible to ensure that negative issues will never crop up, the key to being able to deal with them is having established a precedent for open and frank dialogue, Ms. Fukakusa says.

The Fukakusa file

Title

Chief financial officer, Royal Bank of Canada

Education

Bachelor of arts from University of Toronto

Master of business administration from York University's Schulich School of Business.

Career path

Before joining RBC in 1985, became a chartered accountant and chartered business valuator while working at PricewaterhouseCoopers LLP.

At RBC, began as a mergers and acquisitions analyst; subsequently held variety of positions, including vice-president portfolio management, senior vice-president multinational banking, chief internal auditor, and executive vice-president of specialized services.
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