Growing Demand for Compliance-Driven CFO and CHRO Advisory Services

Evolving financial, regulatory, and stakeholder requirements are increasing the complexity of stock-based compensation accounting, reporting, and compliance for public and private businesses of all sizes across industries. To better manage these challenges while focusing on core strengths, C-suite executives are turning to outside advisors to provide clarity, control, compliance, and automation in the management and reporting of their stock-based compensation programs. 

The Office of the Chief Financial Officer (OCFO) and the Office of the Chief Human Resources Officer (OCHRO) have an especially strong need for such solutions. Below, senior professionals in our Business Services Group share what’s creating investor interest in companies providing tech-enabled and compliance-driven solutions that solve these obstacles, and how recent client Equity Methods exemplifies the qualities of attractive opportunities in this sector.

Managing Complexity, Mitigating Risk

An ever-shifting regulatory environment is a key factor driving OCFO demand for these technical and strategic advisory services. For example, the introduction of several accounting and reporting standards like Pay vs. Performance, ongoing updates to ASC 718, and updates to FASB accounting standards are all increasing regulatory and financial reporting complexity for businesses.

“Companies need an expert who can blend accounting and regulatory expertise, workflow automation, and scalable processes,” says Derek Lewis, a managing director. “This can help them stay ahead of ever-changing regulatory requirements, maintain compliance, and avoid the significant organizational, reputational, and financial risks associated with inaccurate and disjointed plan design and reporting.”

It can also be difficult and costly for internal teams to manage today’s dynamic environment, making outside experts even more valuable. Similar difficulties exist in the OCHRO. “Across organizations, talent shortages and the criticality of human capital are generating greater urgency to hire and retain top professionals while ensuring alignment between a company’s board, investors, and management teams,” says Lewis.

Stock-based compensation (SBC) and incentives are often integral to securing this talent, and the design, valuation, and reporting of such programs are complex and regulated. “Experienced outside advisors in this category, with analytical capabilities and repeatable proprietary algorithms, are much better equipped to handle these essential, high-cost-of-failure processes in a streamlined, cost-efficient, and compliant manner,” he adds.

In addition to these appealing themes, businesses providing advisory solutions to the OCFO and OCHRO often benefit from the non-discretionary nature of their services and long-term client relationships. “Many of these services are mandated by a complex web of multi-jurisdictional regulations, creating sustained demand through economic cycles, strong client retention, and healthy growth potential, all of which are very attractive traits to investors,” explains Bryce Walker, a managing director.

Equity Methods: Synergistic Dual-Competency Connects the OCFO and OCHRO

Equity Methods is a compelling example of the power of delivering a synergistic and comprehensive set of technical and advisory solutions to help the OCFO and OCHRO manage complex, high-cost-of-failure processes in an integrated and differentiated way.

This dual focus on fully managing the SBC function across stakeholders is a key differentiator. “The SBC value chain requires efficient and effective handoffs between finance, HR, tax, treasury, and the board of directors,” says Lewis. “Equity Methods works at the intersection of these groups, bringing integrated solutions, proprietary technology, and deep accounting knowledge to design and report on complex awards that attract and retain talent.”

Demand for Equity Methods’ services will remain strong due to increased regulatory compliance, reporting, and disclosure requirements, as well as the growing use and complexity of SBC programs. “SBC expertise is more important than ever due to the introduction of multi-metric performance-based equity awards, efforts to invigorate more broad-based equity participation, and an increasing investor and stakeholder focus on transparency,” says Walker.

“Advisors like Equity Methods that combine technical and domain expertise, workflow and process automation, and world-class technology and talent will continue to be mission-critical and long-term partners to many organizations,” adds Lewis.

Navigating Complex, Multifaceted Challenges

Across the OCFO and OCHRO, there are many challenges that require external subject matter expertise. And due to growing complexity from constantly changing financial, regulatory, and stakeholder requirements, demand will remain strong for a wide range of these strategic advisory services.

“C-suite executives will continue to seek long-term partnerships with experienced advisors in compliance, accounting, financial reporting, valuation, and other vital categories,” says Walker. “That bodes well for leading companies in the space and their investors.”

To further discuss M&A opportunities in C-suite advisory solutions and other professional services, please contact our senior professionals.