The CFO is gradually developing into a specialist in creating business value, that is a chief value officer. Anastasia Vinner (Unicon Outsourcing) told what this means for modern CFOs and what are employers’ expectations from them
Coronavirus restrictions have changed the mood of financial market participants. According to a study by Euler Hermes, the proportion of CFOs who feel fear about the year performance almost tripled during the pandemic, rise from 9 to 23%. The focus was on anti-crisis priorities, which forced investments in new digital solutions to back away to second place. The tasks of the CFO as a whole have become completely differen
Setting New Priorities: from Profit to Value
First of all, it should be taken into account that the market has not finally overcome the crisis. Amid the pandemic, many companies have ceased their operations, and some are suffering difficulties. No one can be sure that their key customers will retain their solvency.
Therefore, most organizations today have focused on how to reduce the risk of non-payment and find additional ways to back up their own business. They include, for example, scenario planning and credits. The market is expecting a certain change: the main focus of companies before the pandemic was aimed at increasing profits, but today they are striving to preserve the existing working capital.
A number of CEOs recognize that the modern CFO needs to be a specialist not only in finance, but also in value creation, i.e. a chief value officer. This approach requires executives to be able to analyse the business in its entirety. In particular, they should understand which channels generate margin and which generate turnover in order to enter new markets and increase sales. This requires good analytics. Therefore, the CFO should be great at working with various indicators — both financial and operational — and be able to offer effective tools for collecting data.
Requirements for candidates in the HR market
Talking about changes in requirements for applicants, two important trends should be noted. On the one hand, the CFO has to manage the value creation process, i.e. they should understand business processes at leastat a basic level. Employers are looking for specialists who, first of all,know the specifics of thecompany;shareholding ratio principles, benchmarks, understand to which extent debt financing is available for the industry. Generally, the CFO gains this kind of knowledge out of their past practice, so candidates with experience in a particular industry are in demand. The exception is specialists of consulting firms since their experience in interacting with different client organizations ensures adequate breadth of their proficiency.
On the other hand, the candidate should understand multiple related areas at once — they should not only control cash flows, but be also good at strategic planning, be able to evaluate the marginality of distribution channels and the prospects of industry markets, to manage their unit’s activities, and also to apply modern technologies.
Companies automate business processes, including operations of the financial service. To make effective decisions in the new environment, executives needs correct information. This includes, in particular, such indicators as financial performance, accounting transparency level, information about which data is tracked in the organization and how soon they are received.
Thus, one of the CFO’s tasks is to choose financial function optimization tools from among the many solutions available in the market. For example, some classes of systems help assess the actual financial condition of a company, facilitate scenario planning and building up financial models. At the same time, CFOs should understand the specifics of the business since the concept of medium-term and long-term planning horizon varies depending on the industry.
But the requirements for the personal qualities of candidates have changed little: CFOs are still expected to exerciseflexibility of thinking and developed soft skills.
Now the Russian economy is shrinking, the GDP is reducing, and the market is experiencing a certain deficit in terms of revenue, working capital and solvent customers. Given that, business revenues are declining: even if a company manages to entice customers away from competitors and increase its turnover by expanding the service segment, the domestic market as a whole is not growing. Therefore, today business seeks to optimize the budget as much as possible.
If direct costs — the ones that go to the production and creation of a specific product — cannot be cut, then the cost reduction takes place in all areas that do not directly bring value to the business. Such “overhead costs” include the costs of a variety of support functions: HR, finance and accounting, marketing, logistics. This is a complex problem related to the post-pandemic economic situation.
Therefore, CFOs are often overloaded with tasks. It is up to the CFO to find a solution that would both reduce the cost of operating their unit and relieve the burden on their staff. In that context, various method of automating and digitalizing processes, outsourcing of functions may become helpful. But there is no universal tool, and again it is important for the CFO to be able to understand both the specifics of business processes and the solutions available in the market. This understanding will help to select an option that can best meet the challenges of the company.