11 Things That Keep CFOs Up at Night

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The functions of the Chief Financial Officer go beyond balancing the books and comparing inflows and outflows. Increasingly, the CFO has become a crucial partner in determining the direction of the firm, especially in terms of what it invests in and how soon it realizes returns.

11 things that keep CFOs up at night

In the pandemic’s immediate aftermath, Chief Financial Officers have had to reconsider nearly every aspect of how they conduct business, setting and resetting their priorities and expectations. In many cases, after shoring up liquidity, they also had to pause some projects, prioritize planned investments, balance layoffs with salary cuts and furloughs, and apply for government relief.

Many companies were also forced to not just go virtual, but to accelerate their digital transformation. And CFOs, along with IT, had to move quickly, implementing front-and-back-office tools, and platforms to enable virtual selling and remote services.

In some cases, financial planning and analysis teams required more training, so finance leaders could swiftly ramp up operational improvements in budgeting and forecasting. Meanwhile, management demanded more granular data and, as much as possible, real-time visibility into key metrics, especially those related to the pandemic-induced recession.

In a 2020 survey, consulting company Deloitte found that only a little more than a third of the 155 respondents, who represent many of North America’s largest and most influential companies, said they expected to achieve 95 percent or more of the revenue originally budgeted for the year.

Moreover, 25 percent said they won’t reach or exceed their pre-crisis operating level until Q1 2022 or later. Top concerns included new waves of infections, more shutdowns, and the possibility of a longer-term recession.

Specifically, the CFOs surveyed were concerned about:

  1. Rationalizing globalization. Supply chain disruptions, sparked by the pandemic, have led many finance leaders to cast a fresh, critical eye on the role and impact of their global ecosystem. Deloitte’s survey found that nearly 40 percent of the respondents expected their supply chains to be more diversified post-crisis. As they reconfigure their supply networks to boost resilience, CFOs may decide to swap their extended supply chains for more regional versions. They may also accelerate their investment in automation, adding online risk-sensing tools to increase traceability and transparency, and illuminating the entire supply chain ecosystem—areas in which cloud-based enterprise solutions can play a key role.
  2. Leveraging liquidity. When the pandemic first hit, liquidity and cash flow became paramount, with a number of companies scrambling to shore up debt and diversify financing sources. For companies whose sturdy balance sheets withstood the pandemic’s onset, however, now may be the time to raise debt, deploying funds to target increasingly affordable acquisitions in areas ripe for consolidation. CFOs may also decide to divest assets to raise capital for transformational transactions that can catapult them over their rivals.
  3. Accelerating digitalization. The most-cited strategic shift cited by CFOs was toward more and longer-term remote work, but many also cited an acceleration of business digitalization. The crisis has also served as a catalyst for the finance function to expand its own use of automation, including in the annual planning process and financial planning and analysis, with powerful tools such as cloud-based enterprise resource planning systems.
  4. Preparing for a long-term recession. Many CFOs rated China’s economy as good and expected conditions to be better there a year from now than those expressing a similar sentiment for North America. In the most recent survey, 7 percent of CFOs rated the North American economy as good; 60 percent rated it as bad. Only 43 percent expect conditions to be better a year from now.
  5. Sustaining a virtual culture. For many finance departments, the COVID-19 pandemic introduced virtual work to a function that traditionally required all hands on deck. Now, a large majority of CFOs say they expect more of their company’s workforce to work remotely in the future, and that more finance work will be conducted remotely on cloud-based systems even after the crisis.
  6. Preventing creative exhaustion due to incessant connectivity. CFOs need to learn how to lead a virtual group, paying special attention to the tone and inflection in their voices, speaking openly, and reinforcing desired behaviors.
  7. Retaining talent. While talent is a perennial worry, many CFOs express heightened concerns about retaining their already-remote colleagues and preventing them from migrating to a different employer. Other financial leaders, having shown themselves capable of leading through a crisis, are in demand by boards who might find their current CFOs lacking.
  8. Cultivating calmness. To drive crisis management, and help the organization make plans to re-engage customers in the post-COVID marketplace, CFOs have had to make an effort to lead, as one surveyed finance chief noted, by “being transparent and empathetic.”
  9. Finding the outsourcing/automation balance. With demand wobbly, CFOs will inevitably look to improve efficiencies and achieve cost reduction in nonessential or repeatable processes. As a result, companies may increase their outsourcing of some activities.
  10. Projecting performance. The level of uncertainty that surrounds the future of the economy will likely require CFOs to forecast and re-forecast, testing different scenarios on an almost continuous basis. Powerful cloud-based tools with built-in AI and access to real-time data can greatly enhance a company’s ability to make accurate forecasts on which to base their plans.
  11. Championing practical innovation. In addition to agility—and the likelihood that today’s assumptions may need to change tomorrow—CFOs need to lead the organization in championing new revenue streams through innovation.

COVID-19 has ushered in new ways of doing business, and business executives like CFOs need to find new ways to address their concerns. Technology such as cloud-based ERP solutions are on hand to resolve these pain points, and it is up to the business decision maker which solution would best respond to their needs and their overall growth plan.

Source: https://www2.deloitte.com/us/en/pages/finance/articles/cfo-insights-whats-keeping-cfos-up-at-night-in-2020.html