March 23, 2022
The ways in which CFOs plan and implement their annual growth agendas are as varied as the CFOs themselves. But each company and individual must contend with this universal truth: growth is rarely, if ever, easy. It’s more difficult still during times of great change and uncertainty. Which means 2022, as we enter year three of a global pandemic, has some major challenges in store.
According to this write-up of a recent Harvard Law School Forum on Corporate Governance, based on an annual CFO Survey conducted by FTI Consulting, “This year, CFOs and finance leaders will find themselves confronting greater challenges, with their soft skills put to the test.” Effectively prioritizing and allocating time and resources is the key to success when it comes to things like employee retention and hybrid workforce, team culture and inflation, supply chain and rising healthcare costs, event readiness and strategic planning.
Although businesses and industries are rebounding from the global pandemic, a number of factors continue to complicate financial goals. Among them, PwC’s latest Pulse Survey notes, are talent shortages, pricing pressures, new COVID-19 variants and an uncertain tax policy outlook. Rising inflation and soon-to-rise interest rates aren’t helping matters.
“With these internal and external pressures converging to impact the bottom line, the CFO is in the spotlight,” the PwC survey states. “Strategic finance leaders have the opportunity to align with the tax director and their peers in other business functions to assess potential changes to US and global policy, respond to disruption and identify strategic opportunities for growth and expansion.”
The PwC survey covers several areas that will “likely be high on CFOs’ agendas in 2022.” Here are some highlights.
Taxes, risk and regulation
The pandemic has “accelerated the speed at which risk events occur and the extent to which they influence regulatory change.” Add to that ongoing political tension, “tax policy uncertainty” (not to mention rising inflation and likely interest rate hikes), and it’s a recipe for “potentially complex scenarios” to arise. That’s why, more than ever, CFOs must be proactive by communicating with fellow executives, board members and any other stakeholders to ensure that the enterprise is optimally positioned to “respond to new laws and increasing regulations” when necessary.
The future of work
Due to “a tight labor market, new working models and changing workforce expectations,” the most effective CFOs have already realized that paying more attention to employee needs (including the shift to hybrid and remote work) and focusing more than ever on improving company culture are keys to “stemming potential productivity losses,” which in turn positively impacts growth.
Accelerating transformation
A central theme for 2022 is “faster.” That means investing even more heavily in digital tools such as cloud, AI and analytics. It also means training workers through mentoring, apprenticeships and “digital upskilling” so they can learn the ins and outs of these powerful tools. CFOs need to work alongside CEOs to “pinpoint capital commitments” that will help “drive strategies for long-term growth.” Other ongoing concerns include supply chain disruptions, (which can be largely prevented by “transforming linear supply chains into autonomous supply chain ecosystems”), high turnover and competitive wage growth.
Building trust and purpose
Trust is everything in business. And if you can’t trust the CFO, 65 percent of respondents said, that’s a problem. They’re the ones who control the purse strings for vital things like cybersecurity and data privacy. They’re the ones who should coordinate and spearhead initiatives around “transparency, assurance, accounting and reporting insights.” More than anyone else in the business (even the CEO), CFOs can “help focus the entire organization on the most important trust initiatives.”
Environmental, Social and Governance (ESG)
ESG, a strong indicator of future performance, is all about “consistent reporting metrics and frameworks.” When it comes to painting a portrait of their organization’s impact, CFOs must realize (if they don’t already) that “investor-grade reporting” goes even further than their own words alone. ESG reporting, the survey says, is also the key to instilling workplace trust and deriving accurate data that informs budgetary decisions. “Businesses can take their ESG strategies to the next level by differentiating between their environmental, social and governance components.”
Enabling growth
Enabling growth — by meeting customer demand, upgrading digital tools and alleviating supply-chain issues, among other things — depends on smart planning. “Forward-looking strategies—acquisitions, divestitures and IPOs—all have the potential to ease the transition to growth….Good planning means leveraging data effectively, focusing on operating model standardization and positioning M&A to add value.”
In Deloitte’s fourth-quarter CFO Signals survey, which includes a host of challenges that CFOs face this year, 92% of CFOs said their organizations would have “more automation and technologies embedded in operations, and 34% expect to increase outsourcing of operations.”
To that end, managed IT services providers can provide on-demand IT talent and risk-mitigation expertise that may be too expensive for or unavailable to many companies—especially SMBs with tighter budgets – and especially in today’s business climate. Even with that resource, however, CFOs have a lot on their plates — more, it seems, than ever before. But great expectations often yield great results.
“It’s an opportune time to be a CFO,” FTI Consulting declared at the Harvard forum. “Gone are the days when the CFO’s role was restricted to closing the books and managing cash flow. Today’s CFO is a strategist, business partner, operator and steward—all at the same time.”
Read more about the changing relationship between the CFO and CIO in Mindsight’s recent blog: The Evolving Role of the CFO.
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The Evolving Role of CFO’s, And How Managed IT Services Providers Can Help