This year’s CFO Summit, organised by Economist Conferences, saw expert speakers discuss strategies to help finance leaders tackle their increasingly complex roles.
Turbulent economic times require finance leaders to deal with issues ranging from developing talent and engaging with the media to the more traditional aspects of supply chain. This article examines the main themes discussed at the summit including managing risk and uncertainty, how CFOs are now expected to contribute in the boardroom and play an active role in developing talent and media relations to add value to business.
Managing Risk in an Uncertain Environment
Managing risk has always been a key aspect of the CFOs role, however volatile markets and frequent natural disasters mean it is now more important than ever. Ed Ainsworth, Managing Director at 4C Associates, highlighted unstable commodity prices, reputation risk due to supplier failure and supply risk as key concerns for businesses.
Supply risk in particular has made headlines due to natural disasters affecting Japan and Southeast Asia, however Ainsworth was quick to point out that small scale events, such as a warehouse fire, could have just as devastating effects for a business.
Wolfgang Kniese, CFO at T-Mobile Austria underlined the need for effective and flexible risk control which he referred to as the “flip-side” of management. Kniese called for businesses to look past their own suppliers and explained how events in Japan affected handset manufactures and in turn T-Mobile. “Usually we look at our vendors, not the vendor’s vendors, but if all your vendors have the same supply chain behind them then that is a huge risk,” he said.
Luca Zaramella, Senior Vice-President, Finance at Kraft Foods Europe, also stressed the unpredictability of the current business environment. “There is no such thing as fundamental analysis,” he said. “Always have a plan to stop losses in place as commodities are very volatile and whereas one day you might find yourself on a high, the next it may well be a low.”
Speaking on the Eurozone crisis, Arnab Das, Managing Director, Market Research and Strategy at Roubini Global Economics, warned that there were no comparable examples of successful monetary integration without political union. Das went on to predict the exit of several European countries from the Eurozone. A poll conducted amongst the attendees revealed that the vast majority believed Greece would leave the Eurozone and that other countries would follow. The ramifications of such an event are difficult to predict however Ainsworth suggested companies may need to drop their pan-European approaches to risk and replace them with country specific strategies.
Bringing Value to the Boardroom
In times of economic uncertainty, boards have been quick to look to their CFOs to help stabilise balance sheets. A number of sessions throughout the CFO Summit considered how finance leaders can embrace these new responsibilities. David Tyler, chairman at J Sainsbury and Logica, believes the current climate is a golden opportunity for CFOs to bring value to their businesses. Business judgement and emotional intelligence, explains Tyler, are the two key elements which allow CFOs to drive their companies forward.
“[Business judgement] is the ability to help set the strategic direction of the firm,” said Tyler. “It’s being hands on across the key commercial day to day, month to month activities of the organisation.” Tyler warns against taking a “helicopter view” of the company and suggests that placing the right people in the right jobs, understanding and balancing the need for innovation and being able to negotiate are all essential requirements.
Emotional intelligence is relevant to effectively working with top management. CFOs are required to play the role not only of a technical expert but also of a leader, trusted by the CEO to make important decisions. Tyler believes influence, determination and above all enjoying the job are key requirements of the modern CFO.
Tyler also shared his concerns regarding the current trend for promoting CFOs to CEO. The danger, according to Tyler, is that if CFOs are unsuccessful in their new roles this might influence the thinking of boards in future, when deciding whether to select a CFO for a CEO position.
Various discussions throughout the conference highlighted the increased expectations being placed on CFOs. Two areas where CFOs are now required to play a more active role are forming future leaders and communicating with the press.
Developing Talent the right way
Jackie Hunt, CFO at Standard Life stressed the need for finance leaders to get more involved in developing talent. “As functional leaders and more importantly as broader Business leaders, CFOs do have a significant responsibility for generating the next level of talent and leadership through the organisation,” she said.
Hunt explained that the traditional approach to developing talent is to single out someone performing well, move them to another more demanding role and then watch to see if they sink or swim. This often does not work as the new position requires a different set of skills and Hunt believes organisations must facilitate employee progression by creating the right environment for people to grow. Hunt advocates a varied blend of experience across development plans and suggests that employees benefit greatly from exposure to a non-finance related element in their development.
In purely financial terms Hunt underlined the fact that it is cheaper to develop current employees than to constantly recruit and train up new ones. This approach also provides a more engaged work force which will in turn provide better service. Customers are more likely to trust people they have developed a rapport with over the years.
Effectively Communicating with the Press
Another emerging facet of the modern CFOs role is engaging with the media. Recent economic events have substantially raised the profile of business news, prompting an increase in public interest. Andrew Harvey, partner at HarveyLeach and former BBC and ITN presenter, discussed how and why CFOs should speak to the press.
Harvey asked attendees why they might be reluctant to talk to the media. A lack of trust regarding journalists was the first issue raised. Harvey pointed out that CFOs often depend on news outlets for information and that therefore there is already a certain degree of trust. “Not all journalists are clean but most just want to tell a story which simplifies something complex for the reader,” said Harvey. Another issue which was raised by attendees was the perceived ignorance of journalists covering their sector. Harvey believes this is the very reason CFOs need to talk to reporters.
“The benefits of talking to the media are huge; CFOs can create relationships with journalists, share their stories and get their messages out,” said Harvey. “However CFOs can’t expect the media to come to them; [CFOs] need to make the first step.”
The CFO Summit highlighted the growing importance of finance leaders as individuals with a duty to provide both stability and growth for businesses. Uncertain economic times mean stakeholders will look to CFOs more than before to provide leadership, both in terms of the day to day running of the company and in more wide ranging roles including media relations and talent development. Alongside these extended responsibilities, cost transformation and managing risk remain at the heart of the CFOs role. Successful CFOs will continue to blend and develop a wide range of skills to enable them to drive their businesses forward.