Archives For volatility

“Sustainable growth in competitive markets is challenging” states Alan Johnson FCCA, Chief Financial Officer & Member of the Board of Directors, Jeronimo Martins.

Alan discusses how he sees the CFO role changing and developing now and in the future and what this means for various countries and the global economy.

The Changing Role of the CFO report explains how the financial and business landscape is changing: greater uncertainty for the global economy, fluctuating energy costs, rises in commodity prices, currency fluctuations, government deficits and cost cutting.

tall building, modern CFOBy Jeffrey C. Thomson, CMA; President and CEO, IMA

According to The Changing Role of the CFO, a new report co-published by ACCA and IMA®, CFOs will face many challenges in the future, including global economic uncertainty and volatility, fluctuating energy prices, and turbulent currency markets, along with a shift in economic power. The report identifies emerging priorities that will impact the future role of the CFO and cites nine future key issues that will shape the finance function’s top job, including regulation, globalisation, technology, risk management, transforming finance, stakeholder engagement, strategy, integrated reporting, and talent.

Of course, these emerging priorities could well vary by global region depending on regulation, socio-economic factors, environmental conditions, culture, and more. But as a former U.S.-based CFO, I wonder if we in the U.S. face a couple of unique challenges associated with regulatory uncertainty and litigation. These issues exacerbate the ‘day-to-day’ challenges – and opportunities – of today’s CFO team.

First, let me tee up the uncertainty associated with regulation. Usually, when we discuss the CFO team’s lead role in dealing with uncertainty and disruption, it is in connection with consumers and competition, not regulation since that tends to be a ‘known’ quantity with exposure drafts, comments letters, discussion roundtables etc. before a regulation associated with financial reporting even goes into effect. Specifically, I am focusing on the uncertainty associated with adoption of IFRS in the U.S. Will the U.S. adopt IFRS? If not in full, what would an ‘incorporation’ model look like? The larger questions are around the degree to which U.S.-based CFO teams should begin the training process and technology changes necessary to affect a massive shift from the decades-old US GAAP. This is not the resource allocation challenge that CFOs deal with every day in trading off returns on various investments; it is a long-term decision to invest in training and technology without clarity as to ‘if, how and when.’

Smart CFOs will need to do two things: (1) Hire and nurture good technical talent, so adopting to any deviation to pure-play GAAP will be that much easier; and, (2) Stay close to the regulatory scene and be a proactive advocate for the best solution (e.g., SEC, FASB, IASB, IFRS Foundation, etc.)

The second, arguably unique challenge for U.S.-based CFOs is with integrated reporting, or, the evolution of external corporate reporting. At least in the U.S., the external disclosures are voluminous and yet do not adequately inform stakeholders as to long-term sustainable value generation and growth because they are too financially focused, too complicated, and yet not comprehensive enough. But the unique challenge in the U.S. is not so much about selecting more non-financial measures, or measures more of a leading indicator variety, or even how to source and report measures such as employee learning and growth, process improvements, sustainability, carbon footprint, societal contributions, or governance factors. It is the litigious nature of society and an often ‘unforgiving’ regulatory environment in the U.S. If this challenge is approached as ‘let’s report everything – and thus subject it to internal controls and audit – because it may be useful to some stakeholder in the future,’ then much like in the early days of Sarbanes-Oxley, integrated reporting will be viewed as a ‘social tax’ with little societal good and expensive shackles placed on corporate entities. There are no easy answers here, but leading CFOs need to be at the table to find the right balance, rather than waiting for the steam-roll effect of transforming external corporate reporting ‘to just happen.’

What do you think?

tall building, modern CFOBy Jamie Lyon, head of corporate sector, ACCA

It’s tough being a CFO these days. ACCA has just launched a paper, called The changing role of the CFO, sharing the outcomes of a number of CFO roundtables across the world – the results make interesting reading.

The big challenge facing finance leaders everywhere now, and moving forward, is volatility. More than ever before, we see greater focus on the finance function trying to support the business in decision making and forecasting, but it’s a big ask with so little certainty in the business environment.

Unfortunately this isn’t the only challenge facing CFOs, according to the finance leaders we spoke to. The other big issue is a lack of time, with many suggesting there are simply too many priorities to deal with.

The roundtables focused on how the future role of finance leaders is evolving. A number of key issues were identified: more regulatory pressure, greater risks, the increasing importance of technology, the challenges around providing business insight, and of course talent development.

The increasing breadth and challenge of the top finance job as it evolves will continue to call into play skills such as global leadership, communication and influencing skills.

Supporting the business with core finance activities is simply table stakes for most CFOs now as they seek to drive greater finance influence across the business, and critically support the organisation in its strategic approach and decision taking.

The upside of course is that this also provides finance functions and their leaders with some great opportunities.