Opinion:Today’s CFO is the protector of tomorrow’s business resilience

By Sherman Gunatillake

With market uncertainty and disruptions across different business verticals christened as the ‘New Normal’, the chief financial officer (CFO) of the modern-day has many elements to balance across the business. In such a context, strengthening business resilience is a crucial responsibility that a CFO has on his agenda. But has a CFO’s focus become too narrow, making the company’s short and long-term plans unbalanced?

What are the true components of business resilience?

A recent study conducted by McKinsey[1] analysed more than 1,000 global organisations during the first wave of COVID. Out of these publically traded organisations, McKinsey found out a smaller populace of 10% had performed extremely well during this economic downturn. How did they manage to ensure business resiliency during these challenging times?

They had three aspects. Firstly, these companies had put strong measures to empower Finance as an active function of the business effectively. This means that conversations stemming from the finance function have become more relevant for employees, and these discussions have become immediately actionable across the business. Throughout the organisation, financial professionals have been placed strategically to unlock the value of siloed data to provide fresh perspectives to reimagine the business in challenging times.

Secondly, the finance function would have always been tested against a series of probable scenarios. These scenarios could include historical data analysis (an analysis of past events), assessing future-related disruptions and more. These help the CFO identify and discuss what the risk factors are for the business. Sharing these insights across the business elevated the Finance function as the true guardian of the organisation.

Finally, the CFO has been able to create values and manage the topline and bottom line of the business perfectly and, at the same time, unravel the full potential of the business. This was a crucial aspect that the Finance function had to get right – to progress amidst challenging times, the CFO needed to ensure that the organisation’s cash flow did not get disrupted. “Stay liquid” has been the name of the game in most organisations that were successful during the pandemic.

Data-driven business visibility empowers business resiliency

We can learn from the McKinsey study that business resilience and clear, actionable insights sync perfectly; they go hand-in-hand. If you look closer, the three aspects of becoming a truly resilient organisation do not only mean that a business continues to operate normally during times like these. It also means shining a guiding light across the whole business to strengthen the Finance function further.

In such a context, it would be great if we, the financial professionals, ask ourselves some crucial questions to embed business resilience within every process of our enterprises. Several questions come to mind – how swiftly and consistently can your business react to events like COVID? What can you do to enable your employees to stay attentive and inspired during challenging times?

Of course, we will not have all the answers at our fingertips. But organisations could go a long way if they have a clear view of the business. A clear vision helps the finance department analyse relevant insights to identify opportunities and challenges to craft long-term goals and plans. This can be particularly useful to support business-wide scenario planning.

Most importantly, an insight-driven approach will help a business tally its business data with human capital insights. This helps the CFO understand how different business units are responding to the test of change. These insights can be embedded into an organisation’s long term strategy where they will be useful when safeguarding business value in varying markets and situations like market diversification. The CFO can play a crucial role by utilising next-gen digital technologies like AI, machine learning and blockchain, together with human innovation, to reimagine their businesses to fit into the new normal. By doing that, they can craft an internal strategy for business resiliency to support the organisation.

Graduating from cost optimisation to wealth creation

Most people are of the view that CFOs or finance professionals are there to save cost. I believe and continue to believe that cost optimisation is a fundamental yet generic function of any business organisation. Hence, the most important role of a CFO is to create wealth within the organisation, which allows the business to absorb any internal and external shocks while supporting the business model to reach new heights. The value creation within the organisation enables fulfilling the aspirations of all stakeholders, irrespective of the unforeseen risks and tough times the business may have to go through.