As the economic outlook deteriorates in the UK, businesses are becoming understandably cautious and keeping a tighter leash on expenditure. More than half (52%) of CFOs responding to a recent survey by Deloitte said that cost management would be one of their top priorities this year, for instance.
Previous polls highlighted priorities such as digital transformations and other longer-term strategic initiatives, highlighting how the finance chief’s remit had tended to broaden over the preceding years. With the economic pressures on business only likely to increase in 2023, must CFOs assume more of a traditional stewardship role in the effort to ensure their firms’ immediate survival?
Not necessarily, according to Sharof Sharipov, CFO of open-banking platform Token.
“It very much depends on the overall health of the business,” he says. “CFOs at companies with well-optimised operations and a firm grip on unit economics will be able to continue allocating their time to transformation projects, say. But, if their business has more pressing issues in other areas that need attention, then such projects may indeed be viewed as a luxury that one can ill-afford.”
While finance chiefs will need to reprioritise certain tasks as a downturn approaches, they should still be able to devote some time to longer-term strategic-level projects for the wider business, irrespective of any firefighting they’re obliged to do. So says Amanda Bennett, CFO at fintech firm Moneyhub, who reveals that strategic matters are likely to remain her top priority in 2023.
“CFOs should not retreat from this part of their role,” she argues. “They may well need to re-evaluate calls on their time if they must focus more on financial matters, but other parts of their job could probably be delegated more easily, and with less impact, than strategic planning. CFOs will continue to focus on cost management and cash preservation, but this should not be to the detriment of their work on product development, for instance.”
‘A critical voice for all strategic initiatives’
For finance chiefs whose responsibilities have expanded in recent years, their involvement in broader strategic decision-making is unlikely to wane even as trading conditions become more testing.
“CFOs are a critical voice at the table for all strategic initiatives,” stresses Kate Vacovec, CFO of Pizza Hut’s operations throughout Europe. “They need to remain both a commercial and strategic thought partner to their leadership teams to ensure the best outcomes for the business.”
Maintaining that guiding influence is, arguably, even more important in a downturn that’s accompanied by myriad other factors – from energy price inflation to supply chain disruption – that could push any business off course.
“All of these things mean that you must be really agile and adaptable,” says Teresa Cameron, FD at payments provider Clear Junction. “You have to look continuously at what’s happening externally and consider how this might affect the organisation, ensuring that you’re supportive as a business partner, whether that’s to the commercial team or to the CEO on a strategic level.”
Delegating some of the routine tasks
Time management is an important skill for CFOs who must juggle day-to-day financial concerns with matters of longer-term strategic importance, Vacovec notes.
“You must be ruthless in prioritising your time, focusing on the most essential, high-impact objectives,” she stresses. “Equally, you must dedicate some time to motivating your teams by giving them clear direction on what’s critical to the business. Agile leaders who think holistically are likely to fare better than those with a narrow vision, a limited scope and a fixed mindset.”
It’s much easier for a finance chief to maintain a holistic overview when they have a reliable team in place. They’re far less likely to get sucked into the day-to-day financial minutiae when they can depend on their accounting colleagues’ ability to handle such matters unaided.
Jim Moylan is CFO of Ciena, a specialist in networking technology. He says: “If you think about the nuts and bolts of the CFO’s task, it’s really tax, treasury and control. I have a very strong controller, a very strong tax guy and a very strong treasurer reporting to me. I hire the best people I can and they enable me to do my job, whatever that happens to entail at a given point.”
Moylan’s current job entails overseeing two strategic projects – involving supply chain optimisation and bandwidth demand monitoring – neither of which is taking a back seat as the economic outlook deteriorates, he says.
Dynamism in a downturn
Finance chiefs who have an extended remit and are therefore more engaged with the wider business are likely to be better equipped than average to lead in a downturn. That’s the view of Razzak Jallow, CFO at FloQast, a specialist in accounting workflow automation.
“The best decisions come from understanding your company’s entire value proposition to customers and knowing which activities generate the most value,” he says. “If a CFO is already at this point, it’s a lot easier for them to know which areas to scale back on when times get tough and which areas to protect.”
Indeed, some people would question whether a modern CFO could ever do their job properly if they weren’t involved in influencing the strategic direction of their company, whether the economy is tanking or not.
“CFOs need an understanding of their business that goes beyond the numbers,” Bennett stresses. “I don’t think they can make judgements in the best interests of the business without this. Recognising the real issues outside the latest spreadsheet is always important, but especially so during a recession.”
A lack of contextual appreciation could also lead a CFO to make decisions that might seem financially prudent at first glance but end up doing more harm than good in the long run.
“CFOs with a narrow focus and remit can fall into the trap of overemphasising certain actions that might advance pure financial measures at a non-financial cost to the wider business,” Sharipov says. “Excessive cost optimisation might be viewed as beneficial by ‘extending the runway’, but that risks putting the company into a spiral of workforce deterioration, which would ultimately destroy that business.”
So, while CFOs will focus more on their finance-centred responsibilities when times are hard, anyone who ignores the bigger picture while doing so is putting their firm’s longer-term prosperity at risk.