CFO

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.

At a recent CFO of the Future Summit, the senior vice president of finance of a multinational food processing and packaging company shared some insights into what value creation means today, two years since the outbreak of the COVID-19 pandemic

Bruce Burrows, the SVP, and Lily Fang, professor of finance at INSEAD, one of the most prestigious non-profit business schools in the world, explored how chief financial officers need to play their part in integrating value creation with their organization’s broader purpose.

While the fundamental economic principles behind value creation remain the same after the pandemic, delivering on value creation requires new thinking to leverage new ways of working and new macro realities. Two specific new realities stand out: work arrangements—where and how people work, and supply chain issues, in particular the relevance of just-in-time or lean management.

A poll conducted among participants in the first session of CFO of the Future Summit, organized by INSEAD and Accenture, revealed that four in 10 participants consider working two days from home and three in the office to be the ideal blend. Nearly seven in 10 said their company plans to redesign the layout of their office space because of these evolving working patterns, without reducing the amount of office space used. Given these changing preferences, CFOs should optimize the space available by activity and function to improve employee wellbeing, enhance the office experience and ultimately raise worker productivity.

The second topic discussed in detail was the growing problem of supply chain disruptions across sectors, and whether the just-in-time or lean management model is still relevant. For some critical and non-perishable supplies such as microchips and semiconductors, even “just if available” has become a practice.

CFOs need to remember that being lean doesn’t mean holding zero stock. Some 80 percent of the CFO of the Future Summit participants said they have not practiced just in time. However, they also believe that after the pandemic, the principle of just-in-time still applies. This is an interesting perspective when one considers that companies that have thrived during the pandemic have done so by building up strategic inventories, using balance sheet strength to support members across the value chain and accelerating the development of AI-based simulation capabilities.

These leaders have effectively channeled growing data flows from connected supply chains, point-of-sale capture, and multiple external data sources to drastically increase the speed and accuracy of decision making. Another important point raised during the CFO of the Future Summit was the relevance of just-in-time in a business climate where capital is widely available, the cost of capital is low, and the urgency to receive goods from suppliers is low.

When capital becomes scarce and the cost of capital is high, just-in-time is much more important and beneficial. The era of abundant capital offers an opportunity to re-profile capital expenditure portfolios and systematically gear towards zero-based, more responsible, and more digital supply chain operations to drive long-term performance. Supply chains have been thoroughly disrupted by the pandemic crisis, but classic tools such as just-in-time should remain relevant if they can be supplemented by the development of new analytics capabilities and skills.

The CFO of the Future sessions showed there are opportunities for value creation everywhere one looks. But people are a company’s most important asset and value creators. Looking ahead to a post-pandemic world, it is critical for companies to focus on their people and create the proper business and work environments to unleash their drive, creativity, and productivity to seize the opportunities created by the accelerated disruption and change.

Source: https://www.accenture.com/us-en/blogs/business-functions-blog/cfos-create-value-post-pandemic

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