How to manage the demands of an evolving business environment

What current challenges are CFOs facing today?
Chief Financial Officers (CFOs) continue to face significant business-related challenges in today’s dynamic economic environment. On the HR front, these are things like the “Great Resignation” and meeting the challenges of hybrid work.

The technology side is about working with emerging technologies and automation, as well as addressing issues related to increased cyber security threats. Then there is an increased focus by regulators and stakeholders on making companies more sustainable and ESG compliant; CFOs work hard with their teams to take progressive and strategic actions to achieve these goals.

On the HR front, CFOs recognize that now more than ever, their workplaces must promote diversity, equity and inclusion while being fair for all. Finally, on the macro side, economic uncertainty persists with rising inflation and supply chain disruptions.

A recent report from the global organization Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA) identifies new priorities that will impact the future role of the CFO.

The Global Economic Conditions Survey identifies several new issues that will shape the top position of the finance function. These emerging issues include regulation, globalization, technology, risk management, financial transformation, stakeholder engagement, strategy, integrated reporting and talent.

Geopolitical issues, rising inflation, supply chain challenges, and other issues still plague businesses. How do finance leaders prioritize their goals in such a climate?
Companies act in accordance with their visions and mission statements. Currently, companies face a variety of geopolitical and economic issues that impede management’s ability to execute forward-looking plans. Forecasting financial performance for the next few months, let alone accurately evolving annual budgets and longer-term strategic plans, has become extremely difficult.

Therefore, companies need to adapt, innovate and find solutions to different types of disruptions. The first thing CFOs and their cross-functional partners need to do is remain calm and assess the situation thoroughly.

The importance of effective enterprise-wide risk management has never been more critical. CFOs — who use their ability to think strategically, analyze complex business problems, and problem-solve — should prioritize tighter cash management, fully understand their company’s financial health, strengthen their supply chain, and multiple “what-if” scenarios play through CFOs must strike a balance between stabilizing the business in the short term and focusing on identifying long-term growth opportunities.

Both are equally critical. Fortunately, rapid advances in technology are now giving CFOs and their teams the ability to reconfigure finance and other business processes and improve business insights through big data and analytics. CFOs need to play a larger role in strategy development, execution and validation. Planning, agility and execution will be crucial – along with a lot of nerve.

How do CFOs determine the risk for a company in times of crisis?
For CFOs, the Board will examine more closely the effectiveness of risk management processes and the adequacy of longer-term financial plans. Investors and other active stakeholders will also seek assurances about the financial viability of the company’s strategy to achieve longer-term financial success and growth.

New approaches to risk will place a new premium on understanding the breadth of risk organizations face. The risks and opportunities faced by the company should be viewed as a portfolio of related investments that need to be carefully managed, valued and financially forecasted. CFOs and their finance functions are better equipped to calibrate the risks the business faces and advise on appropriate responses.

For example, CFOs must ensure a highly disciplined, timely and steady cash flow process, complemented by trend forecasting. This practice needs to be done weekly and even daily depending on the situation. CFOs also need to work with cross-functional partners to ensure their business partners are aware of current challenges and feel accountable for addressing them.

Tell us how using the COSO ERM framework can help organizations prepare for the unexpected.
The Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) new framework for enterprise risk management (ERM) focuses on strategy. Risks can affect an organization’s ability to achieve its strategic goals and objectives.

There is a clear connection between an organization’s mission, vision and core values, its development of strategy, goals and objectives, its performance and ultimately its ability to create economic value.

The COSO ERM framework can enable finance professionals – across organizations of all sizes, structures and business models in the region – to contribute to strategic processes and provide value to stakeholders. Effective enterprise risk management encourages more strategic and innovative discussions about risk-taking and total value proposition management.

Adopting the framework can help an organization achieve its strategic goals, grow with confidence and integrity, while being more forward-thinking, agile, and adaptable in the face of the unexpected. The business environment is constantly changing. Our response must be agile and timely.

How can CFOs prepare for the future and their demands on finance?
CFOs and their teams need to play a bigger role in their respective organizations to develop resilient and sustainable business strategies in these uncertain times. The skills required of today’s CFO are broad and sometimes overlap with the functional areas of their cross-functional partners on the senior leadership team.

The role now requires a wide range of skills including, but not limited to, strategic agility, general business acumen, risk management, consulting, technology, data analysis, supply chain, investor management and general leadership.

At the same time, CFOs must be adaptable, depending on the nature and size of the company’s operations. CFOs should also establish sustainable business practices that have a positive impact on the bottom line. CEOs and cross-functional partners expect their CFO and finance teams to take the lead in enterprise risk management to understand the importance of strategic goal setting and risk management to the business.

It is imperative for CFOs to develop competent tools that enable organizations to effectively identify and manage risks and develop adaptable strategies to mitigate them.

How do you balance the human element with performance metrics?
Talent is the most important asset of any company. Currently, organizations large and small face challenges when attempting to measure employee capacity, skills and performance, especially with a large percentage of today’s young workforce working remotely. We need to set common goals for the hybrid workforce and evaluate individual performance.

In order for the hybrid workforce to work in tandem and at full capacity and ensure consistent performance, we need to equip them with the right work technology. This requires the establishment of clear processes and the use of relevant technologies so that both the creative process and collaboration are not hindered. This is where the right balance between using technology and talent management processes to keep employees competent and productive comes into play.