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Downturn will be the golden age for the CFO

THE current worldwide downturn is shining a spotlight on the role of the modern chief financial officer (CFO). Companies are now placing far greater reliance on the CFO&rsquo;s advice and understanding than they have done in the past. Finance leaders and their teams are now seen as a valuable resource to guide companies through the economic maelstrom, and this has placed great demands on CFOs, who have never been so busy.<br /><br />Dr Steve Priddy, director of technical policy and research at ACCA UK (Britain&rsquo;s Association of Chartered Certified Accountants) says: &ldquo;We have witnessed an extremely reckless decade, where people thought we could carry on forever. We are in a different world, but a world that is better suited to the CFO.&rdquo; Dr Priddy considers that 2009 marks the beginning of a golden age for accountants in business, a view backed up by recent research from ACCA. This study sought the views of 450 CFOs around the world about their thoughts on the impact the new economic environment was having on their jobs. The findings in the report, called The CFOs New Environment, show how important the CFO has become for both a company&rsquo;s success and its survival.<br /><br />ACCA director Wyn Mears adds: &ldquo;The results showed that CFOs are now expected to be more hands-on, controlling costs and monitoring cashflow. They are also more involved in risk management, business strategy and communications than they were before. This is a good thing and I hope the process will develop further into 2010.&rdquo;<br /><br />ACCA believes that organisations are looking for CFOs to bring their knowledge to bear on the wider business, using their analytical abilities to understand and deal with risk, and help shape long-term strategy. It is a tall order, but the findings show that CFOs are more than equal to the task. Despite increasing demands on them, the last year has been a renaissance for the CFO, with their expertise extremely highly-valued and sought-after.<br /><br />Dr Priddy says: &ldquo;There have been tremendous pressures on company boards to take risks &ndash; unsustainable risks &ndash; so there is a role for the CFO in understanding and helping to develop the business model, understanding the returns that are being made and understanding the year ahead.&rdquo;<br /><br />The research also showed that finance chiefs are being given the opportunity to become more involved in strategic planning. According to the study, CFOs and their finance teams are more involved in shaping a business strategy than they were in 2008. Nearly three-quarters agreed that the finance department works more closely with business colleagues than 12 months previously, while two out of three say the CFO is now more involved in creating a medium-to-long-term business strategy &ndash; something which is taking up more of their time.<br /><br />The research also gave a sense of stalling with general investment decisions. Eighty-three per cent of the senior finance professionals surveyed admitted that their companies are delaying non-essential investment until economic conditions improve. While this is understandable, just over a third said their business is delaying investments that are essential for revenue growth. In this environment, the CFO is also being called upon to offer reassurance, to show that projects are affordable now and in the future.<br /><br /><strong>COMMUNICATION CHALLENGE</strong><br />The big challenge for the finance professional lies in a world some think they have little to do with &ndash; communication. The received wisdom is that the finance professional deals with numbers, while the words and images are the domain of traditional communication functions; but this line is becoming increasingly blurred, says Mears. Dr Priddy adds: &ldquo;This is not just about internal comms, but also how the finance professional communicates with key external stakeholders &ndash; shareholders, banks, analysts, suppliers, customers, journalists. Now is the time to communicate and not hide behind the parapets.&rdquo;<br /><br />This sentiment was backed up by eight out of 10 finance executives in the research, who said they have either increased, or plan to increase, the level of internal communication they carry out, while two-thirds reckon they have, or are about to, increase their communication levels with external audiences.<br /><br />An initial reaction to this might be that this is possibly the most uncomfortable area for CFOs. But Priddy disagrees, saying there is no reason to believe accountants are any better or worse at communications than other business unit heads. But he agrees there is a larger onus on finance to communicate, and in a non-financial way &ndash; it could be as simple as illustrating a presentation with a graph rather than a string of numbers, so long as the message is clear and understandable.<br /><br />Respondents to the research agree, with some adding that communication is a key to successful business planning, and that mistakes are made due to poor communication procedures. Encouragingly, the study finds that, even in these times of tight budgets, 95 per cent do not plan to decrease their level of external communication, while 92 per cent have the same attitude towards internal communications. The end game is that technical strengths are important, but effective communication is vital. Some finance bosses are proactively encouraging their teams to develop their communication skills. They want them to be at once technically strong and also capable of getting to the point quickly, articulately and persuasively.<br /><br />The research optimistically shows that there is much that CFOs and their teams are doing to help guide their organisations through troubled times. Risk management is firmly at the top of their agendas; they are making sure they have the right skills and abilities to understand the risks, but also to grasp the opportunities. An entrepreneurial spirit often thrives in a downturn, as Deloitte recently found in a research report.<br /><br />Wyn Mears concludes: &ldquo;CFOs have a balancing act to maintain in 2010. They need to continue to manage the details, to manage costs, analyse investments and maintain sound finances. And they must maintain their position at the heart of the organisation at this crucial time.&rdquo;<br /><br />Wyn Mears, director of ACCA UK and Dr Steve Priddy, director of technical policy and research, ACCA