Cfo Leads

Cfo Leads

Strengthening the CFO’s role in strategic risk management to lead Capital Intensive business in Market Volatility. Most of the major companies have Risk Management Process in place to identify, assess and respond to ongoing and emerging Risk to the Business. One crucial gap is STRATEGIC RISK MANAGEMENT – understanding of the critical enterprise – wide risks affecting the company’s ability to reach all of its strategic aspirations. cfo leads The role of Chief Financial Officer (CFO) -and the structure in which CFOs operate-varies significantly across organizations. Market complexity, revenue sources and budget size are important factors that drive how the CFO role is configured-and how the role evolves over time.The past decade has seen dramatic changes to the role of CFO – an evolution from a “bean counter” who reported the numbers and controlled over-all costs to a dynamic, strategic member of the management team. The responsibilities of today’s CFO have gone well beyond the finance function as more time is expended on strategy and operating issues and less on budgeting and accounting. Increasing business pressures, government regulatory intervention, the tight economy and a need to measure the operating performance of a company in order to stay ahead of the competition has transformed the “green eye-shaded” CFO into a key business partner of the CEO.

“The average tenure of a  CFO right now is less than three years,” said Michele Heid in , co-managing partner of the finance practice at Heidrick & Struggles. “Five years ago, it was closer to five years.” In today’s dynamic environment, even a temporary vacancy at the CFO position can leave a company vulnerable to considerable adverse exposure. An interim CFO can fulfill a vital role in keeping a company on track, both in terms of day-to-day operations as well as longer term strategic objectives during these transitions. According to The CFO Expert, Samuel Dergel, even if a company is truly serious about hiring their next CFO and makes the search a priority, it could take up to 3 months to complete the search. “Can a company afford to leave this position unfilled for up to 3 months or more”?In order to answer that question, let’s look at some of the responsibilities of the CFO on which organizations have become very dependent.Cash flow is of utmost importance for all companies, and a tight economy really exacerbates managing the cash flow situation. To be successful, today’s CFO needs to manage both sides of the balance sheet.CFO email list

On the asset side, managing the company’s accounts receivable balance becomes critical. How many days’ sales are outstanding compared to a year ago, compared to industry standards, compared to the company’s best ever? Has the company’s aging deteriorated? What can be done to accelerate collection? How much will it cost? What has been written off and why? Does the credit extension policy need revision in light of economic conditions? No business can afford to lose sight of any credit extension factors and the collection of outstanding accounts receivable balances. Who is the key to all this? —-the CFO and the financial staff.

Again, on the asset side of the balance sheet, a potentially huge use of cash that needs to be managed is inventory level. In a tight economy, consumer spending habits change. In response, production output probably needs to be reduced. However, cutback production too far and sales may be missed. A lot of analytical work needs to be done by the CFO and the financial staff to understand which SKUs are moving on a regular basis and which ones have started to stagnate. If production is cut, what facility is most efficient and has the capacity to meet new needs? What are the economics of the labor agreements in the plants where downsizing would occur? No business can afford to lose sales, build inventories without demand or make bad decisions on plant cutbacks. Who is the key to all this?  the CFO and the financial staff.

One last area of concern on the asset side of the balance sheet is capital improvements. Even in good economic conditions, capital investment decisions are somewhat subjective. There are always a lot of assumptions that need to be made and challenged. A tight economic environment only intensifies the decision making process. And when funds requested are for an intangible like software, assumptions are difficult to challenge and evaluate. No business can afford to forego ROI and Payback analysis at any time, let alone in a tight economy. Who is the key to all this?  the CFO and the financial staff.