How to manage the demands of an evolving business environment

What are the current challenges facing chief financial officers today?
Chief Financial Officers (CFOs) continue to grapple with significant business-related challenges in today’s dynamic economic environment. On the people front, these are things like the ‘Great Resignation’ and addressing hybrid work challenges.

On the technology side, it is about working with emerging technology and automation, as well as facing problems regarding heightened cyber security threats. Then there is a greater regulatory and stakeholder focus on making businesses more sustainable and ESG compliant; CFOs are working hard with their teams to take progressive and strategic actions to meet these goals.

On the people side, CFOs are cognisant that their workplaces, now more than ever, need to foster diversity, equity and inclusion while making it equitable for all. And finally, on the macroeconomic side, economic uncertainty continues with rising inflation and supply chain disruption.

A recent report by the global body, Association of Chartered Certified Accountants (ACCA), Institute of Management Accountants (IMA) identifies emerging priorities that will impact the future role of the CFO.

The Global Economic Conditions Survey cites several emerging issues that will shape the finance function’s top job. These emerging issues include regulation, globalisation, technology, risk management, transforming finance, stakeholder engagement, strategy, integrated reporting and talent.

Geopolitical issues, rising inflation, supply chain challenges and other issues still plague companies. How are finance executives prioritising their objectives in such a climate?
Businesses operate in accordance with their vision and mission statements. Currently, businesses are facing a multitude of geopolitical and economic issues that are hindering management’s ability to execute forward-looking plans. Forecasting financial performance over the next few months, let alone accurately developing annual budgets and longer-term strategic plans, has become extremely difficult.

Therefore, with different types of disruptions, businesses need to adapt accordingly, innovate, and find solutions. The first thing CFOs and their cross-functional partners need to do is stay calm and make a thorough assessment of the situation.

The importance of effective enterprise risk management has never been more crucial. CFOs – using their ability to think strategically, analyse complex business issues and solve problems – should prioritise tighter cash management, fully understand their organisation’s financial position, strengthen their supply chain, and run multiple “what if” scenarios. CFOs need to balance between stabilising the business in the short term and focusing on identifying opportunities for growth in the long term.

Both are equally critical. Fortunately, rapid advancements in technology now provide CFOs and their team the opportunity to reconfigure financial and other business processes and improve business insights through Big Data and analytics. CFOs must play a greater role in strategy development, execution, and validation. Planning, agility, and execution will be key – along with a lot of nerve.

How do CFOs determine the risk to an organisation during times of crisis?
For CFOs, there will be greater scrutiny of the effectiveness of risk management processes and the adequacy of longer-term financial plans from the board. Investors and other active stakeholders will also look for assurances over the financial viability of the business’s strategy for delivering longer-term financial success and growth.

Emerging risk approaches will place a new premium on understanding the breadth of risks faced by businesses. The risks and opportunities faced by the business should be viewed as a portfolio of linked investments that need careful management, estimation, and financial projection. CFOs and their finance functions are better equipped to calibrate the risks faced by the business and advise on appropriate actions.

For instance, CFOs need to ensure a very disciplined, timely, and steady cash flow process supplemented by trend forecasting. This practice needs to be exercised on a weekly and even a daily basis depending on the situation. CFOs also need to work in tandem with cross-functional partners, ensuring their business partners are aware of current challenges and feel ownership in overcoming them.

Tell us how using the COSO ERM framework can help companies prepare for the unexpected.
The emphasis of the new Committee of Sponsoring Organizations of the Treadway Commission (COSO) Enterprise Risk Management (ERM) framework is on strategy. Risk is what could impede the ability of an organisation to achieve its strategic goals and objectives.

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

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

Adoption of the framework can help an organisation achieve its strategic goals, grow with confidence and integrity, and, at the same time, be more anticipatory, agile, and adaptive amid the unexpected. The business environment is constantly changing. Our response needs to be agile and timely.

How can CFOs prepare for the future and its demands on finance?
CFOs and their teams need to assume a greater role in their respective organisations to create resilient and sustainable business strategies in these uncertain times. The skillsets required of today’s CFO are broad, at times overlapping the functional areas of their cross-functional partners on the senior leadership team.

The role now requires a wide range of skills, including strategic agility, general business acumen, risk management, consulting, technology, data analytics, supply chain, investor management, and overall leadership, among others.

At the same time, CFOs must be adaptable according to the nature and size of the company’s operations. CFOs should also establish sustainable business practices that are good for the bottom line. CEOs and cross-functional partners expect their CFO and finance teams to take the lead in enterprise risk management, to understand how strategic goal setting and risk management are crucial for the business.

It is imperative for CFOs to build proficiency tools that allow businesses to effectively identify and manage risk and create adaptable strategies to mitigate them.

How do you balance the human element with performance metrics?
Talent is the most important asset of any business. Currently, organisations large and small are facing challenges as they try to measure employee capacity, capability, and performance, especially with a large percentage of today’s young workforce operating remotely. We need to set shared objectives for the hybrid workforce along with evaluating individual performance.

For the hybrid workforce to work in tandem and to their full capacity, and to ensure consistent performance, we need to enable them with the right set of work technology. This requires establishing clear processes and using relevant technologies so that both the creative process and collaboration are not hindered. This is where the right balance between the use of technology along with talent management processes to keep the workforce proficient and productive come into play.