Today’s CFOs Walk Tightrope of Growth, Caution

As part of a multi-event series, a select group of chief financial officers (CFOs) recently met in a CFO Forum facilitated by Riveron. The leaders shared considerations and prevailing trends, including CFOs’ efforts to:

• work with their chief executive officers (CEOs) and operational leaders to align financial and enterprise goals;
• communicate effectively with their boards and stakeholders; and
• balance the pursuit of growth strategies versus delaying certain initiatives due to economic uncertainty.

Balancing financial caution with growth and innovation

CFOs are managing a tenuous balance between planning for long-term growth strategies and navigating the choppy waters of cash flow and operational excellence in the short term. The members discussed how they are working closely with executive leadership, particularly their CEOs and COOs, to ensure informed decision making from a financial lens, while also including the larger vision for the enterprise, plus expertise from an operational standpoint. One leader noted that — while it is important to include the CFO at the decision-making table — many of those decisions fall in the area of operations.

How much a company is growing and how resilient it is to an economic downturn can vary greatly by industry and sometimes even from company to company. Risk management and resilient financial strategies will differ as well. Industries such as brick-and-mortar retail may have been especially hard hit in recent seasons, with those companies needing to maintain property leases, inventory, and staff. On the other hand, B2B companies offering necessary services, such as cybersecurity, may be better positioned for ongoing growth in the current macroeconomic environment.

Resiliency strategies

Finance leaders revealed strategies their companies are using to weather short-term risks, including:

• refinancing debt,
• restructuring property leases,
• increasing the ROI metrics (i.e., IRR) for investment decisions,
• investing in fewer growth initiatives (prioritizing those strictly relevant to the overall strategy),
• and being very judicious about hiring.

Regardless of industry or company, many CFOs are finding themselves stepping into a “connector” role, where they are bringing the right people around the table to inform company decisions in a holistic, collaborative fashion.

CFOs have also formalized or enhanced their companies’ risk management processes. In response to a request by their audit committee, one executive’s company held its first formal Enterprise Risk Management kick-off earlier this year, and the risk management team has achieved successful alignment and ongoing, actionable check-ins across the business. Rather than carve out time for a new program exclusively anchored to risk management, this approach layered into meetings and follow-up touchpoints that had already been scheduled enterprise-wide to ensure alignment and efficiently address key risks with relevant stakeholders throughout the year. Actionable alignment is paramount, as one CFO forum participant shared: “The balance with ERM is making sure it’s actually productive…making sure we’re talking about the four or five things that are actually important — and that we have plans to address them.”

Communicating with the board and key stakeholders

The leaders discussed how much of their job involves communicating with their board of directors, ownership, and employees. In the current environment, boards are desiring more frequent updates and check-ins. Many of the CFOs meet with the board quarterly or monthly to report about current financials, but, in some cases, this has accelerated to bi-weekly touchpoints. One CFO believes it is better to err on the side of more communication rather than less. Another described how they work with their CEO to craft a short email with bulleted highlights that they send to the board on a regular basis.

Not only are boards more concerned about the financials during this uncertain economic period, but many of them also want to be more engaged in understanding the “nuts and bolts” of the businesses they’re serving. One CFO forum participant shared, “In general, they’re trying to be constructive and give us the resources, but mainly they just want to be more informed.”

One executive stressed the importance of sharing the same information with the board and employees rather than two different messages or narratives. They shared that they meet with leadership and operations managers to go over the financials and conduct planning and troubleshooting on a regular basis; then, they give the same information — albeit on a higher level — to the board.

Several leaders mentioned that their companies are putting together different analytics and dashboards to measure and track financial KPIs and help to provide forecasting and accelerate reporting to key stakeholders. One CFO forum participant pointed out that for smaller companies, it can be prohibitive in both time and money to put together a host of data analytics on a regular basis. Here, a tailored automated reporting solution can accelerate success.