The Resilient CFO
For business leaders, the last few years might not feel dissimilar to a series of Ironman races. Widely considered one of the most difficult one-day sporting events in the world, 140.6 miles (or more) later, you’ve managed to stay standing. Beginning with the pandemic, when every business suddenly had to pivot to prioritize the well-being of their employees and customers, while at the same time keep their P&L above water, to today, tending to the pain caused by rapid inflation, continued supply chain disruptions, and a shortage in the workforce. The last six months threw us another curveball, with so much attention on the adoption of AI and the impacts it might have on your business. We are also keeping an eye on the banking industry, monitoring to see if problems like the ones at Silicon Valley Bank or the looming commercial real estate market downturn will create a banking crisis like in 2008. With the business environment more fluid and dynamic than ever before, the need to build resilience in your organization is decisive to achieving success.
For CFOs, one of the primary functions of the role is to identify and manage financial risks for the organization. This includes internal risks, such as financial mismanagement or fraud, and external risks, such as economic downturns, banking industry changes or supply chain disruptions. By establishing robust internal controls and meaningful financial and operational KPIs, a CFO will create a stronghold for protecting the organization from internal risks. Concurrently, they must also monitor the potential for outside risks by staying informed with the most current news; relentlessly distilling down the information to understand its possible impact on the financial position of the company.
Responsible for developing and monitoring financial plans for their organization, the CFO creates budgets, forecasts, and measures financial performance to plan. When there are unexpected variances, the CFO needs not only to quantify them, but also have a clear understanding of the root causes and potential impacts. Leveraging technology is advantageous to increasing the accuracy of some of the accounting and financial processes, and information that the CFO relies on. In this new world of rapid machine learning many accounting steps are being automated or at a minimum, simplified. Tools such as PowerBI and Tableau will monitor financial metrics in real time and create rapid exception reporting, allowing the CFO to quickly identify and respond to potential risks. Another method that will ensure the organization is prepared for unplanned events and disruptions is stress tests. When the CFO creates forecast scenarios using various identified external risks, they can understand and manage the potential impacts these challenges would have on the company’s financials.
Beyond financial management, CFOs must have the ability to control human elements factored into a successful business strategy. By building strong relationships with key external stakeholders, for whom the CFO is often the main point of contact, the organization expands its access to the resources it may need to recover from unexpected events. The dynamic between the CFO, investors, lenders, and regulators is an important one that keeps a business from veering too far off course.
Additionally, clear and transparent communication is pivotal to making an organization more resilient. CFOs should have a plan for regular communication between members of the executive team and employees as a method to align all staff. When team members have an understanding of the organization's financial performance and its plans for the future, they are better prepared for change and feel more invested in their individual contributions for achieving success.
The effective CFO is one that is prepared to play a crucial role in building resilience into an organization, and ensure its ability to withstand unexpected challenges and disruptions – ones that are all too frequent in today’s world.
