Jul 12, 2011

Know your post MBA Career: Corporate Finance

It's a blast of the obvious that companies make money. Some of them make a lot of money. Of course, someone has to manage that money or else the company doesn't stay in business very long. That's where the corporate finance team comes in. A company's size, complexity, industry, and stage of development-for example, whether it's a startup or established business-determine its corporate finance department's specific responsibilities.

What “type” of Corporate Finance are we talking about?

Let’s get that right first. The term “Corporate Finance” is often used to describe two separate areas. The first is within a corporation, where finance professionals work on a wide variety of projects pertaining to the financial needs of their firm, including financial and cost analysis, internal audits, Treasury functions, and business development. This work can be characterized as a combination of cyclical work (i.e. budgeting) and project work.

The other area is within commercial and investment banking. The corporate finance divisions of these banks serve the financial needs of corporate clients by providing financing, investing options and other services (see Career Path handout on Investment Banking). This post focuses on the non-banking side of corporate finance.

What is the work profile of a typical Corporate Finance professional?

Corporate finance is a broad heading encompassing accounting, commercial and investment banking, financial services, investment management, insurance, venture capital, and corporate development and strategic planning. Corporate finance professionals are responsible for managing a business's money-forecasting where it will come from, knowing where it is, and helping its managers decide how to spend it in ways that will ensure the greatest return. They pore over spreadsheets that detail cash flow, profitability, and expenses. If you enter one of these fields, your job will center around helping companies find money to run and develop their businesses, manage their assets, acquire other firms, and plan for their financial future. A person’s experience in corporate finance depends on the size and complexity of the company for which they work, but jobs are relatively stable and include many benefits, including high salaries, travel, and numerous networking opportunities.

Few of the responsibilities of a mid-level (post MBA) manager are as follows:
  • Create and monitor company budgets
  • Explain financial data to company managers
  • Write company financial policies
  • Hire and supervise junior analysts
  • Monitor company cash flow
  • Build financial forecasts

What are the different functions within Corporate Finance?

Corporate finance is a very broad field and there are multiple career options within corporate finance. Some of these are:
  • Treasury: The treasury department is responsible for all of a company's financing and investing activities. This department works with investment bankers who help the corporation raise capital with stock or bond sales or expand through mergers and acquisitions. Treasury also manages the pension fund and the corporation's investments in other companies. The department also handles risk management, making sure that the right steps are taken to safeguard corporate assets by using insurance policies or currency hedges.
  • Divisional Financial Services : In this area, you work with each division's business team to prepare financial plans, make forecasts, and compare actual financial results to forecasts. You may also evaluate the financial consequences of alternative strategies. Responsibilities include everything from analyzing new business opportunities to restructuring a business or developing a capital spending program.
  • Financial Analyst: Duties involve determining financing needs, analyzing capital budgeting projects, long-range financial planning, analyzing possible acquisitions and asset sales, visiting credit agencies to explain firm's position, working on budgets, analyzing competitors, implementing financial plans, etc. Often you will be assigned to a specific area such as revenue, planning, capital budgeting or project finance. This challenging job requires good analytical skills, computer skills and a broad understanding of finance.
  • Investor Relations: Duties involve dealing with the investing public by disseminating financial information, responding to queries from institutional investors, issuing press releases to explain corporate events and organizing teleconferences with investors. This challenging job involves contacts with top-level executives and requires understanding of finance and public relations.
  • Controllership: Duties involve financial planning, accounting, financial reporting and cost analysis. Will get involved in property, revenue, benefits, derivatives, lease and joint interest accounting. This job requires extensive accounting experience.
  • Cash Management : This is a company's piggy bank. The cash management group makes sure the company has enough cash on hand to meet its daily needs. The group also sees to it that any excess cash is invested overnight by picking the best short-term investment options. And it negotiates with local banks to get regional business units the banking services they need at the best price.
  • Tax : Activities in this area involve administering taxes (i.e., paying taxes on time-or finding loopholes to avoid paying them) and determining how to decrease the company's tax burden. Responsibilities include working with attorneys on tax litigation, researching tax laws and reporting requirements by nation (if the company is international), and keeping up with new government rules and regulations.
  • Internal Audit : When most people think of an audit, they think of an outside audit-a large accounting firm like Ernst & Young checking the corporate books on behalf of the shareholders. However, most large companies have an internal audit group that regularly visits individual company branches and checks the company's accounting systems. Internal auditors perform the investigative and corrective work that ensures the external auditors don't find anything.
  • Corporate Development and Strategic Planning / Business Development : Corporate development involves both corporate finance and business development. Finance experts in corporate development study acquisition targets, investment options, and licensing deals. Often they assess the best firms to buy or invest in, such as pre-IPO cutting-edge technology companies with complementary products that could either extend the company's product line or mitigate competition.
What are the job requirements for a Corporate Finance job?

  • Puzzle-lovers Wanted : Most corporate finance jobs involve solving problems using a combination of intuition and analytics. If you are good at problem-solving, this may well be the job area for you. 
  • Team Player Thrives: It is crucial that a financial officer be a team player, whether at the bottom or the top of a company. At the top, relationships are especially important. For a CEO, the chief financial officer is financial whiz, strategist and partner. The relationship needs to be tight.
  • Crunching Numbers: These jobs require strong analytical and quantitative skills. If you have a knack for using numbers to understand patterns that influence business, you'll be of great value to your employer. If you can't crunch and analyze numbers, this isn't going to be the right job for you.
  • Attention to detail: To make wise business decisions, your employer will be depending on you to get the numbers right-every time. In order to do that, you'll also need to have an understanding of and interest in business.
  • Excel, Computer skills, System knowledge: You have to be computer literate with spreadsheets, word processors, presentation packages and large-scale data management tools. This is especially true for entry level positions where you will need to crunch numbers as you get involved in the details of corporate financial planning, accounting and capital-raising.  Be prepared to talk about your computer skills; fluency with Excel, VBA macros, and Reuters and Bloomberg stations are necessary.
What are the benefits  and compensation of a Corporate Finance job?

The company's size, industry and location affect compensation levels in this industry. A corporate finance professional’s pay package may include wages as well as cash or stock bonuses. The U.S. Bureau of Labor Statistics indicates that median annual wages for corporate financial analysts were $73,150 in 2008, excluding cash and stock bonuses, with the lowest 10 percent of the occupation earning less than $43,440 and the highest 10 percent earning more than $141,070. The same research shows that median annual wages for corporate financial managers were $99,330 in 2008, excluding cash and stock bonuses, with the middle 50 percent of the profession earning from $72,030 to $135,070.

Jobs in corporate finance are relatively stable, while performance in these jobs counts. But it's not like your job is going to depend on whether you're selling enough this week or getting good deals finished this quarter. Rather, the key to performing well in corporate finance is to work with a long view of what’s going to make your company successful. Many would argue that corporate finance jobs are the most desirable in the entire field of finance. Other benefits inclue:
  • You generally work in teams, which helps you work with people. 
  • It's a lot of fun to tackle business problems that really matter. 
  • You'll have many opportunities to travel and meet people. 
  • Great work life balance, closer to a 9 to 5 work schedule.
  • The pay in corporate finance is generally quite good.
With inputs from www.careeroverview.com, www.careers-in-finance.com, www.wetfeet.com, www.ehow.com, careers-in-business.com

Need help to get the best application out there for your dream Business School? Come to BizSchoolPrep Consulting. Whether you are a domestic applicant or an international one, our process is uniquely designed to understand your background, and then create a strategy whose sole aim is to get you to the business school of your dream. Know what makes us different.
Like this post? +1 us and share it with your friends using any of our sharing widgets below!

1 comment:

  1. I absolutely adore reading your blog posts, the variety of writing is smashing.This blog as usual was educational, I have to bookmark your site and subscribe to your feed in i feed. Your theme looks lovely.
    Thanks for sharing.
    with regards:

    Best B Schools in india