Richard Farber, CFO Discovery: "They don't teach you how to deal with people at university"

“I make a special effort to meet all new staff, within Discovery’s Finance division, before they are hired. Partly because I want to personally feel if they are ‘good’ new employees, but also because I find it very important that they feel welcome in the company. The fact that the CFO has taken out the time especially to meet them, contributes greatly to that sense of ‘feeling at home’.” Richard Farber, CFO of Discovery, is a firm believer of the open-door culture that is very vivid in Discovery. “If people have a problem, I want them to know my door is always open – and that my being the CFO does not form a barrier for stepping into my room and talking to me.”

Richard (41) joined Discovery in 2003 and was previously the group accountant at Investec Limited. He also worked as a partner of the audit firm Fisher Hoffman PKF, where he served his articles, and was a lecturer at the Accounting Department at Wits University. Richard also chaired the audit committee of the Discovery Health Medical Scheme from 2000 until September 2003 when resigned to accept appointment as Chief Financial Officer of Discovery Holdings Ltd. In June 2004, he was appointed to the GAAP Monitoring Panel of the JSE Securities Exchange in South Africa. In July 2009 he was promoted to Financial Director for Discovery Holdings.

Discovery is a leading financial services institution founded on the principles of consumer engagement and wellness. In South Africa, Discovery operates in the health insurance market through Discovery Health, the life assurance market through Discovery Life, the financial services market through Discovery Invest and Discovery Card, the short term insurance market through Discovery Insure and in the wellness arena through Discovery Vitality. Discovery has operations in the United Kingdom, United States and China. Discovery Holdings ordinary shares were listed on the JSE in 1999 and in 2011, Discovery listed R800 million of perpetual preference shares on the JSE. The company employs 6,500 people and has its head office in Sandton, Johannesburg.

What do you enjoy most about your job and why?
What I enjoy most about being CFO is the variety of new things I face on a daily basis. Our business is fast moving, which entails doing new things constantly - albeit new business, new products, different countries and different industries. They ensure different challenges we have to deal with, within our business lines and with staff and investors.

How do you perceive the role of the CFO has changed in the last five to ten years?
What personally strikes me as having changed the most over the last years is the quantum of regulatory changes, and the rapid pace in which they have changed. Things just have happened quicker - the internet, the global financial crisis - causing changes to occur quicker as well. Coming out of the financial crisis the government wants to be more involved in the financial industry and changed regulations accordingly. These changes have changed the job of the CFO into being more time-consuming and a bit more complicated - but it's still manageable. There is more time spent in research and you are now dealing with more layers and people - auditors and lawyers for instance - within the daily CFO-operations.

Many CFOs we interviewed in this series mentioned how they found the role of the CFO having become more to that of a strategic partner to the CEO. You don't mention that, how come?
For me personally that extra dimension isn't really new. As the CFO of Discovery for the past nine years, being the right-hand of the CEO and playing a strategic role in the business has been part of my role since day 1. I can definitely understand for other CFOs where it's coming from, but it's not my experience.

How do you see the role of the CFO evolving in the next say five to ten years?
I think ultimately there will be a swing back to more normal CFO-operations and less regulatory issues - but it will take time. Five years is a bit tough to guess, but I think over the next decade the world will recover from the crisis and people therefore will be more relaxed, and the pace of (regulatory) changes in the industry will slow down.

Would you say that accurate forecasting and budgeting is still feasible for a financial department in today's tumultuous financial markets? How do you deal with the volatility?
Budgeting and forecasting accurately has definitely proved to be much more difficult with financial markets being all over the place. For us, we decided to focus on the things that you have control over, and to not by all means try to manage the stuff that you cannot control. At Discovery we make this distinction and based on that, decide the items that are easier to budget, as opposed to the ones that are out of our control. Investment returns is a good example of something that you can't manage, since markets go up and down. Try and manage the budgets before investment returns, because investment returns are out of your control.

The risk is definitely higher now. As a company you just have to make sure that you keep better - and more - buffers in terms of money on the bank or, in our case, capital. You can spend your life behind your computer screen and waiting to see what's going to happen, but that's not going to help you. This is reality - deal with it.

What do you see as the greatest challenge for South African companies in the global economic situation and for your industry in particular?
The challenge for South African companies to a large extent lies in Europe's hands, since Europe is one of the biggest trading partners for our country. A meltdown in Europe will cause strain for many South African companies.

With respect to our business and where macroeconomic environment could impact us negatively, is in our UK operation in London. However, as I said before, there is very little we can do in preventing a meltdown - that is out of our control. Instead what we do is focusing on our products and service for our customers, and make sure they are of the best quality. On the other hand we assure that there is sufficient capital and our balance sheets are strong - up to meet any short-term crisis if they do happen to come along. At the end of the month, we always need to be sure we can pay all salaries. You will find that many international companies take the same approach.

Which skill(s) do you think a finance professional should master to be most successful in his work?
In general I would say that for particular jobs - particular skills are needed. A technical professional needs to master all technical skills, just as the person in auditing needs to be up-to-date on all regulatory issues. However, at the CFO-level I feel probably the most important skills are based on getting the team working and representing the company. To me that comes down to two soft skills which are critical:

1. People skills - the ability to manage people. Given the breadth of what's going on in terms of regulations, you have to have good people around you can trust fully. To deal with people and how to get the best out of them is something they don't teach you at university, and is critical at a CFO level.

2. Secondly: presentation-skills are vital. The ability to convey a message as the representative of a company is very important - regardless of who you have to deal with. It's important to get the message across and to convey trust when you speak to people. Again, this is something you have limited training of in university.

Which achievement or project in your business career are you most proud of?
Actually, only very recently we celebrated a major achievement which I am particularly proud of: our 2011 financial reporting accounts were awarded best on the JSE by the Investment Analysts Society of Southern Africa. The remarkable thing about it - which makes me even more proud - is that about a week before they were supposed to go to print, the Board expressed their worries whether we would get the job done in time, which we did. Returning from the brink of disaster to turning it into such a big success felt like a great achievement.

Please name something - a procedure or process for instance - that was implemented in your company before you were appointed CFO, which you changed after you took the position of CFO.
When I was appointed CFO of the company, I immediately stated that from that point on I wanted to meet all potential new staff across the Finance area before they were actually hired. As an extra round of interviews for these candidates, they get to meet me. Before I became CFO, this wasn't necessarily always done that way at Discovery. However, I find it extremely important to meet these people beforehand for various reasons: A) By speaking to this person I get the feeling if he or she might make a good candidate and is a good person or not; B) For a CFO wanting to meet them and making time for them especially, it helps people feeling important and part of a company; C) At Discovery we have an 'open-door' culture and philosophy, which at these meetings I take the chance to explain to them personally and directly. If a member of my team has issues, I want them to know my door is always open for them to come and talk to me. In short: by meeting with them I want them to feel at home at our company and within my team. True, it takes a lot of time but I just think it is very important.

Who is your role model in life and why?
My boss, Adrian Gore, who started Discovery, is someone I really admire. While running a big company, he still takes out the time for his family and friends. Notwithstanding that he been exceptionally successful in setting up this big company from the ground up, as a person he is still humble. Many big corporate executives lose their family and friends in the process; he hasn't. I think that is very important and something I aspire to do just the same.

What vital piece of advice would you give young ambitious finance professionals?
I would tell them to keep your social network open; and to always leave a company on a good basis. As I climbed up the corporate ladder I have always landed in jobs and places via somebody I knew or somebody who knew somebody. The finance industry in South Africa is just particularly small, so you just never know who you are coming across again, and where. The guy who once was your boss; you might need him again - or vice versa. Just always keep all social networks open.

If you also would like to share your ideas with the CFO community, please get in touch with us to arrange an interview with you.Please contact Jurriën Morsch on [email protected].

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