If businesses are to succeed within today’s perilous operating environment, CFOs will need to equip themselves for a testing journey. They must use tech-enabled finance functions to identify where the real risks lie and then challenge the rest of the business to respond.
In a poll conducted on Day One of Criticaleye’s 2019 CFO Retreat, held in association with Capita, Antworks, Brewin Dolphin and E.ON UK, 44 percent of attendees admitted to feeling increasingly overwhelmed by the complexity of their role. To avoid being pulled in too many directions, CFOs need to plot the route ahead carefully and get the rest of the leadership team onboard.
Ben Gutteridge, Research Director at wealth management firm Brewin Dolphin, set this need to prioritise into a planning context. He explained that while Brexit in the UK, societal unrest in Hong Kong and the gilets jaunes movement in France are flooding news channels and social feeds, they may not be overly influential outside their own regions. “Despite the level of attention they can command from the media, their economic impact globally is actually quite contained,” he said.
More concerning for Ben would be a geopolitical event coming from leftfield that led to a sustained spike in the oil price. “This type of event would be far more wide reaching and would, in effect, become a tax on every consumer and raise input costs for most businesses. So, of all the geopolitical risks, those that bring about a swift and sustained oil price spike would make us most cautious,” he said.
It’s an uncertain business landscape, which CFOs need to find a way to navigate. Patrick Gormley, Head of Consulting at Capita, explained: “A CFO now needs a function that is staffed by people with a wide range of capabilities, from strategic thinking to an aptitude for creative problem solving and a nitty-gritty understanding of data, advanced analytics and other skills that previously might have been found in other departments such as technology.”
However, in this unfolding age of 5G and automation, Finance will also need to constantly reinvent itself. “AI will be much cheaper, smarter, faster and a lot more accurate in creating things like hyper-personalised marketing and services than we are. In 2029 you won’t need most of your department that’s currently there,” Patrick predicted.
Some things will of course remain the same, such as the relationship between the wider leadership team. Matthew Blagg, CEO of Criticaleye, said: “Trust between the CEO and CFO is absolutely crucial; that doesn’t mean always agreeing with each other.
“CFOs need to bring their knowledge of the business, financial insight and independence into conversations with the chief exec and use them to provide real challenge.”
Barbara Richmond, Group Finance Director of Redrow, agreed that today’s Finance leader must exert influence and that the days when they “just added up the numbers” were long gone. “The CFO must be providing challenge in the sense that when new ideas are proposed they are supported by facts and information, as otherwise it’s easy to waste money and find yourself going down a cul-de-sac,” she said.
Barbara also urged caution: “We need to be clear that the policeman element of the role still exists and must not be forgotten. If a business suddenly finds a big hole in its inventory or is aggressive in revenue recognition, it will be the CFO who gets asked: ‘What’s going on?’”
Debbie Hewitt, who is Non-executive Chair of Visa Europe and other businesses including Moss Bros and Restaurant Group, highlighted the value that a high-performing CFO brings to both the leadership team and the Board. “When you have a curious CFO, who brings different information, you tend to get a shift in perspective and therefore a better quality of challenge,” she said.
“This can transform the way the Board looks at an issue and brings new insights, simply because it allows people to think differently. That’s high-quality challenge.”
According to Matthew, “The reality of great CFOs is that they can lead the strategic debate and have a forward conversation. That means you’re not constantly looking back at the lagging indicators, but rather you’re focused on what’s coming next for the business to drive performance,” he said.
This insight can inform decision-making at the top table well beyond the numbers. “The CFO plays a critical role here, not just with financial data, but on non-financial metrics and on softer elements relating to the company’s culture,” Debbie said. “The CFO can play a critical, early-warning role in identifying that culturally something is amiss, for example with the way that a CEO may be operating.”
For Patrick, while the Finance Function may be transforming, “the role of the CFO is more critical than ever in steering the companies you work for away from the icebergs that are facing us”.
Emma Carroll, Senior Editor, Criticaleye
Next week’s Community Update will review Day Two of Criticaleye’s CFO Retreat 2019.